John O'Connor illustration
McKnight’s Editorial Director John O’Connor

During industry trade shows in the ‘90s, it wasn’t uncommon to see 10 or more long-term care insurance companies on the exhibit floor.

My, how times have changed. These days, you’d be lucky to find one.

The drop off can be attributed to several factors. But one major gaffe rises above the rest: Many insurance company actuaries dramatically underestimated future demand and costs. That’s what’s known in the business as a multi-billion dollar mistake.

Not surprisingly, policies these days cost much more, cover less and are larded with escape hatches for the few insurers who are still around.

That the private-insurance funding spigot has essentially been turned off is truly unfortunate.

My view has always been that this funding source should play a much larger role in this sector. If that were the case, more operators would have easy access to a reliable funding stream and fewer residents would need to worry about losing all they own. Call me crazy, but those seem to be pretty good outcomes.

Luckily, it appears long-term care insurance just might get another chance. As we reported this week, the Long Term Care Affordability Act was introduced last week by Rep. Ann Wagner (R-MO), chair of the House Suburban Caucus.

The measure would let people withdraw funds from their 401(k), 403(b) and individual retirement accounts to pay for long-term care insurance. The legislation also would exclude the withdrawal from income tax to the extent it is used to pay for long-term care insurance — up to $2,500 annually — and exclude the withdrawal from the 10% early withdrawal penalty tax.

Sen. Pat Toomey (R-PA) introduced companion legislation in the Senate last year.

“Retirement can be expensive enough for seniors, and we should be using every tool we have to make their lives easier and more affordable,” Wagner said. To which, I can only add this: Amen.

Her bill has gained enthusiastic support from numerous aging-related organizations, including Argentum, the American Seniors Housing Association, the Alzheimer’s Association, America’s Health Insurance Plans, Edward Jones, Long-Term Care Insurance Partners, the National Association of Insurance and Financial Advisors, the National Association of Insurance Commissioners and the National Association of Health Underwriters.

With a little luck, the measure won’t just die in committee. If passed, it will provide money to help cover the expenses related to long-term care. And it’s a pretty safe bet we’re going to need a lot more of that kind of funding in the years ahead.

John O’Connor is editorial director of McKnight’s Senior Living and its sister media brands, McKnight’s Long-Term Care News, which focuses on skilled nursing, and McKnight’s Home Care.

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