When I speak with agents regarding their struggles with long-term care insurance sales success, individual or multi-life, the tried and true consumer objections regarding cost generally arise:
It doesn?t fit into my budget.
I have two kids in college.
My health/worker compensation/etc. insurance premiums just went up again.
Don?t talk to me about spending more money on insurance!
I?m worried about my adjustable rate mortgage.
I?m insurance poor. Talk to me next year (or not!).
So regardless of your expertise and ability to present the value proposition of long-term care insurance you hit the road block of ?I?m strapped for cash.?
One strategy you may want to employ is working within their existing insurance premium budget and finding ways for them to save on their current cost of coverage. Several ideas come to mind but there are two in particular that seem to make a great deal of sense.
High Deductible Health Plans + Health Savings Account
Review of Exiting Disability Insurance Coverage
Today I would like to focus on the first of these two ideas. High deductible health plan + HSA are something I know about personally since Susan and I have participated in this program since the old days of Medical Savings Accounts. The metrics on this are pretty amazing for us. At our age (please, don?t? ask!) a $500 PPO health plan with one of the Blues would cost us about $1,200 per month. Our high deductible plan runs $420 per month; a $9,360 annual savings. The individual deductible on this plan is $3,500 per person and the maximum family out-of-pocket is $8,000.
Because we have a high deductible health plan, in 2008, we will be allowed to fund our HSA to the tune of $5,800. This is a pre-tax contribution which means it is written off above the line thus saving us our applicable tax bracket percentage; for example purposes let?s say 30%. My annual tax savings is $1,740 and my total savings between premiums and taxes is $11,000. This will, under a worst case scenario cover our maximum annual exposure and allow me to save money for future health care costs within my HSA plan.
The money in my HSA plan grows tax deferred and we can use the money for any IRC ?213(d) medical expense including long-term care insurance premiums now or in the future, subject to the following IRS limits:
v Age 40 or Younger $310 ($620 per couple)
v Age 41 to 50 $580.00 ($1,160 per couple)
v Age 51 to 60 $1,150.00 ($2,300 per couple)
v Age 61 to 70 $3,080.00 ($6,160 per couple)
v Age 71 + $3,850.00 ($7,700 per couple)
These annual allowable amounts for long-term care insurance premium are adjusted upwards by about 5% annually.
Group Health Savings Accounts are beginning to come into their own as well. According to Cora Tellez, President of Sterling HSA, her group business in Northern California is booming because of the premium disparity that has developed between HMO rates and high deductible plan rates. She expects this divergence to arrive in Southern California soon which means that group high deductible health plan + HSA may take hold here as well. Incidentally, one of our top LTCi brokers in West Los Angeles tells me that when he has a company that is paying 100% employee and family costs high deductible plans + HSA are already his program of choice.
How does this tie in with long-term care insurance. As you know we now have simplified issue long-term care insurance for as few as three employer paid lives. Average premiums are running as low as $30 per month per employee. Step one is to help your employer save money by installing a high deductible health plan. The $30 per employee per month for key or all employees will seem like a pittance compared to the savings you have created. Employees can then ?buy-up? on their employer provided LTCi using money that they are putting aside in their HSA.
Don?t forget, the benefits from tax qualified long-term care insurance are received tax free regardless of who or how premiums are paid.
We are pleased to be working locally with Morgan Anthony morgan.anthony@sterlinghsa.comof Sterling HSA. She?s a real pro and can help you work through the specifics of any high deductible + HSA program.