We would love to hear from you. Click on the ‘Contact Us’ link to the right and choose your favorite way to reach-out!

wscdsdc

media/speaking contact

Jamie Johnson

business contact

Victoria Peterson

Contact Us

855.ask.wink

Close [x]
pattern

Industry News

Categories

  • Industry Articles (21,155)
  • Industry Conferences (2)
  • Industry Job Openings (35)
  • Moore on the Market (414)
  • Negative Media (144)
  • Positive Media (73)
  • Sheryl's Articles (800)
  • Wink's Articles (353)
  • Wink's Inside Story (274)
  • Wink's Press Releases (123)
  • Blog Archives

  • March 2024
  • February 2024
  • January 2024
  • December 2023
  • November 2023
  • October 2023
  • September 2023
  • August 2023
  • July 2023
  • June 2023
  • May 2023
  • April 2023
  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • November 2010
  • October 2010
  • September 2010
  • August 2010
  • July 2010
  • June 2010
  • May 2010
  • April 2010
  • March 2010
  • February 2010
  • January 2010
  • December 2009
  • November 2009
  • October 2009
  • August 2009
  • June 2009
  • May 2009
  • April 2009
  • March 2009
  • November 2008
  • September 2008
  • May 2008
  • February 2008
  • August 2006
  • How Hybrid Annuities Might Fit Into LTC Reform

    June 25, 2015 by Linda Koco

    Hybrid insurance products, such as deferred annuities with long-term care (LTC) riders, would be eligible for a LTC subsidy program proposed in a paper released this week by The Hamilton Project at Brookings, Washington, D.C.

    The paper also proposes modifications to the Employee Retirement Income Security Act (ERISA). These modifications would allow for penalty-free withdrawals from 401(k) and 403(b) retirement accounts as well as from individual retirement accounts (IRAs) to pay for LTC coverage purchased through the subsidy program.

    The potential need for LTC exposes Americans to catastrophic financial risks, Yin wrote. “While the wealthiest individuals can pay for these expenses through savings, most Americans do not earn and save enough to comfortably pay for LTSS, if needed.”

    LTSS stands for long-term services and supports, and is a term Yin used in the paper to refer to institutional care, community-based assistance and home-based assistance with daily living activities.

    In theory, private LTC insurance could fill some of this gap in coverage, he allowed. But as things now stand, few buy private LTC policies, he said, and “most” middle-income households risk having to spend down assets to qualify for Medicaid coverage.

    For a remedy, he proposed creation of what he called a “voluntary LTC Advantage program.” This program would pay a cost-sharing subsidy to insurers (in lieu of claiming future Medicaid benefits for an individual’s LTSS). The insurers would use the subsidy to offset future LTSS claims, thus lowering an individual’s effective LTCi premium, the professor wrote.

    All individuals aged 55 or younger would be guaranteed coverage in the voluntary program, except those with current or immediate LTSS needs, he said. Those aged 56-65 would receive a slightly reduced cost-sharing and subsidy, and would be subject to underwriting approval.

    That design would provide an incentive to enroll at younger ages in addition to helping insurers protect against age-specific risks, Yin maintained.

    Role of the hybrids

    Hybrid annuities are among the products that Yin said would qualify for this subsidy. It is doubtful that originators of hybrid annuities ever envisioned the products’ being used in this way, but Yin makes a case for exactly that.

    The LTC Advantage program would include a wide variety of plans, the professor wrote. These include not only the lower-cost home- and community-based service plans and the traditional LTC plans, he said, but also “hybrid insurance products that combine LTC insurance with longevity annuities.” The longevity annuities generally do not start payments until an advanced age such as 80 or 85, he pointed out.

    The hybrids in this plan would provide insurance “against two of the primary risks faced in retirement,” he said.

    They would provide retirement security at a “reasonable” cost, too, he maintained. Beneficiaries needing LTC are typically less likely to receive longevity payments, he explained, so “the offsetting nature of these risks allows insurers to offer the combination product more cheaply than they could if selling the products separately.”

    The ERISA modification

    Yin’s proposal to eliminate the ERISA restriction that bars penalty-free distributions from retirement accounts for LTCi premiums also aims to spur purchase of “subsidy-eligible LTC plans” from private sector insurers.

    This too is probably not what the developers of ERISA had in mind, but Yin makes the case for it on the grounds of available assets, pressing need and tax recovery.

    Between 2000 and 2014, savings in defined contribution plans and IRAs more than doubled from $5.5 trillion to $12.6 trillion, he said, citing 2014 figures from the Investment Company Institute. That’s a 38 percent real increase, he said. It is also money “that can be used to self-insure against LTSS risks in retirement (and should be protected against LTSS risks).”

    If the restriction were modified, people still would have to pay taxes on the amount withdrawn before age 59½ , he pointed out, but they would not be subject to the 10 percent penalty for early withdrawals.

    As for early distributions from Roth 401(k) and Roth IRA accounts for LTCi premiums, these would not be taxed and they also would be penalty-free, he said.

    To accomplish this, Congress would need to modify ERISA, Yin said. But he maintained that this would be “particularly beneficial, given the importance of encouraging earlier financial planning and enrollment into LTC coverage.”

    In addition, he said, such modification “would likely have minimal budget consequences as the policy would simply allow taxable withdrawals at an earlier date.”

    A subsidy plan? Really?

    The concept of “subsidy” may send chills up and down the spines of those who prefer private-sector solutions without government subsidies.

    However, Yin contended the proposals “do not necessarily require more overall financing.”

    “Rather, they require a financing system that redirects much of what is currently spent in aggregate out-of-pocket expenditures, informal care and public programs toward the cost of more-complete insurance protection.”

    Details of how he sees this working are available in the paper, Strengthening Risk Protection through Private Long-Term Care Insurance.

    Originally Posted at InsuranceNewsNet on June 24, 2015 by Linda Koco.

    Categories: Industry Articles
    currency