I read with interest “Buyer Beware” ( JofA, Aug.99, page 27), but I believe the author’s arguments against tax-qualified long-term-care insurance plans are outdated.
Based on my experience in the long-term-care industry, I present the following arguments for tax-qualified plans, which were not mentioned in the article:
- The IRS considers premiums paid for a tax-qualified plan as an unreimbursed medical expense. Unreimbursed medical expenses that exceed 7.5% of adjusted gross income are deductible. Married couples can include their tax-qualified LTC premiums with other unreimbursed medical expenses up to certain limits based on each spouse’s age. Neither the IRS nor Congress has ruled on the deductibility of a non-tax-qualified LTC plan’s premium.
- Tax-qualified plan benefits are not taxed, except for per diem tax-qualified plans that pay benefits in excess of certain limits defined by the Health Insurance Portability and Accountability Act of 1996. The tax status of non-tax-qualified plan benefits is uncertain.
- The way benefits are paid under a tax-qualified plan is time-tested. Clinical research indicates that assessments of an individual’s ability to perform activities of daily living and of his or her cognitive functions are the most reliable and objective measures of the need for care.
- The 90-day physical impairment requirement discourages duplication of coverage.
- Tax-qualified plans meet extensive consumer protection measures. HIPAA provides federal long-term-care consumer protection provisions that non-tax-qualified plans do not have to meet in all states.
The bottom line is that most would not dispute the advantages of tax-qualified long-term-care insurance. This product is meeting the needs of consumers. While I know the debate isn’t over, I think it is important to hear both sides of the issue.
Northwestern Mutual Life