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            State Long-Term Care Partnerships

Congress recently took a step towards expanding long term care partnership programs to states that previously were prohibited from creating them under the Omnibus Budget Reconciliation Act of 1993 (OBRA '93).  The Deficit Reduction Act of 2005, commonly referred to as the DRA, was signed by President Bush on January 8.  Among other provisions, it allows states to create partnership programs by filing a state Medicaid plan amendment (SPA) with the Department of Health and Human Services.  Long term care partnership programs allow consumers to purchase private LTC insurance while protecting their personal assets, and were originally implemented through grants from the Robert Wood Johnson Foundation in the early 1990s as demonstration projects in four states:  California, Connecticut, Indiana, and New York.

LTC Advisors, Inc. believes LTC partnership programs serve an important role in encouraging consumers to plan for their LTC needs by addressing affordability.  As the baby boom generation creeps closer to retirement age, providing and financing LTC will become even more important.  Eight out of 10 individuals are not insured for the future LTC expenses.  As a result, Medicaid has become the primary payer for these types of expenses.

HOW DOES A PARTNERSHIP POLICY WORK?

The DRA specifies that the new partnership programs must us the "dollar-for-dollar model" currently being used byCalifornia and Connecticut, two of the demonstration states.  Under this model, a policyholder is able to keep personal assets equal to the benefits paid by the policy.  Policyholders with $200,000 in assets may become Medicaid eligible once their $200,000 policy has been exhausted.  A person with a lifetime benefit may also qualify for Medicaid once the nexus between what the policy pays and assets protected meet.  At that point, the beneficiary becomes Medicaid eligible and the state continues to draw down those dollars, thus continuing to reduce state outlays. Medicaid will be the last payer of care instead of the first, thus saving the program billions of dollars over time.

The success of existing partnership programs is demonstrated by the number of policyholders who have actually accessed Medicaid.  According to the U.S. Government Accountability Office, of the nearly 150,000 LTC partnership policies in force in the four states, only 119 individuals nationwide have accessed the Medicaid safety net. 

State Activity on Partnership Programs
The DRA grandfathered existing state partnership programs that had been implemented prior to the impediment in OBRA '93.  That means that Connecticut, California, Indiana and New York can continue to run their partnership programs as they were prior to the passage of the DRA.  Further, this allows Indiana and New York to continue to offer total asset-protection plans, which all other states are prohibited from offering.  Iowa is also grandfathered because, although no program was ever officially implemented and no policies were sold, the state had a SPA approved prior to May 14, 1993.  Iowa is currently in the process of filing an additional plan amendment with HHS.

Idaho was the first state to file a SPA under the new legislative authority.  Its partnership program began accepting applications on November 1.  The Centers for Medicare and Medicaid Services released guidance and a template for states to file their SPAs on July 27.  Since then, Georgia, Florida, Minnesota and Virginia have submitted and are awaiting approval for their SPAs.  These states hope to have partnership policies available to consumers by January 1.  New Hampshire and South Carolina are also close to filing their SPAs.  At least 22 other states are pursuing SPAs for 2007.  NAHU continues to work with other industry representatives, state departments of insurance and state Medicaid agencies to ensure that the rollout of LTC partnership programs is done consistently with the DRA. 

At least 10 states will have to take an additional step to be able to offer partnership policies.  Prior to the passage of the DRA, many of these states had taken action in their legislatures in attempts to create partnership programs, so their laws are now inconsistent with the federal statute. Colorado, Massachusetts, Missouri, Montana and Washington are among the states that need to make changes.  Most can fix any prohibiting statutes by going through the state department of insurance or through an executive order by the governor.  However, Illinois and Maryland both need to pursue legislation in their respective 2007 sessions to clear up any discrepancies in their statute before filing their SPA.  Michigan is the only state that still has legislation relative to LTC partnerships still alive for 2006.  New Jersey and Pennsylvania had introduced legislation that failed to pass prior to the adjournment of their session, but similar language will be reintroduced in the new legislatures.

How Can Producers Assist States in the Implementation Process?
Many NAHU members are eager to get involved with the partnership implementation process.  The first step for any member or chapter that would like to help should be to contact your state chapter's legislative chair or the NAHU director of state affairs for your state to determine where your state is in the implementation process and what has already been done to date.  The NAHU government affairs team is actively involved with many states. 

States basically fall into four broad categories relative to their partnership program implementation status: grandfathered states, states that simply need to file a SPA, states that are already in the process of SPA filing, and states that have existing statutory impediments that need to be resolved before a SPA can be filed.

If you are in a state that does not have any statutory barriers but has not started the SPA process, a good step for your chapter to take would be to set up a meeting between your state's Medicaid administrator and insurance regulator to make sure they are aware of the possibilities and advantages of creating a partnership program.  The goal of this meeting should be to get the ball rolling in filling out the CMS template for filing a SPA.

If your state has been determined to have a statutory impediment or authority needs to be promulgated to the Medicaid agency to file a SPA to allow for LTC partnership products to be sold there, a little more work may be required.  After getting in touch with your chapter's legislative chair as well as your NAHU state affairs director, make appointments with both the Medicaid agency and Department of Insurance to see what impediments may exist and what options there are for removing them.  Examples of some impediments in older statutes include inflation protection limits, barriers for policy benefits based on age, or requiring the exhaustion of policy benefits before being able to protect your assets.  Once you have determined what the barriers may be and if either legislation or regulation is required for removal, your chapter can work with your NAHU state affairs director to come up with a plan to remove the barriers as quickly and efficiently as possible.

If your state is already in the midst of filing its SPA, that doesn't mean you can't still be involved.  Every state, except for those that are grandfathered, needs to file a LTCI education program and continuing education for LTCI producers that includes partnerships.  You can also help get this program approved in your state.

Education Requirements
The DRA requires that all producers who sell, solicit or negotiate LTCI partnership products receive training and demonstrate an understanding of partnership policies and their relationship to public and private LTC coverage.  The carriers are responsible for maintaining a record of the training for the departments of insurance, and agents will have one year to complete the training upon approval of the SPA.  The law also requires that producers receive supplemental training every two years. 

To help facilitate this process, the National Association of Insurance Commissioners developed a model regulation for states to use in creating their LTCI education process.  NAHU was very involved in the drafting of this model regulation.  In addition, NAHU, along with AHIP and AHIA, created a training program to educate producers on LTCI partnerships that is compliant with the NAIC partnership training requirements.  Our training will be eligible for continuing education in every state upon its approval.  The NAIC model regulation requires producers selling partnership plans to have eight hours initial training and four hours of continuing education every 24 months.  The new NAHU training program will include four hours of general training on long-term care insurance, two hours on ethics and two hours of training on state Medicaid information.

The training program will be offered in three different venues (all options require an exam):

»  Self Study - a traditional learning program using books (available January 2007)
»  Workshop - attractive option for carriers to deliver program to their agents in a single setting (available late February 2007)
»  Online - through a secure website, a self-paced program allows greatest flexibility (available spring 2007)
 
NAHU members can help with the education requirements in two ways.  First, work with your state legislative chair and your NAHU state affairs director to see if your state plans to adopt the NAIC model regulation on producer training.  You can also help educate your insurance regulators and Medicaid administrators about the existence of NAHU's training program.   Some states may not be aware of it and may feel that they need to reinvent the wheel and create their own program.  NAHU recently sent a letter to each state Medicaid administrator relative to the federal and NAIC regulations on producer training and the existence of our program.  Follow up with your Medicaid agency to ensure they understand the education aspect for those who sell, solicit or negotiate LTC in your state.

Regulatory Effects
All the details have still not been completed relative to LTC partnerships.  In accordance with the federal statute, HHS is working to review and develop guidance on important issues such as reciprocal treatment of policies among states, as well as reporting requirements for carriers issuing partnership policies, which are crucial components to ensure the success of partnership programs.  Provisions of the DRA permit LTCI policies that were previously approved by state departments of insurance as tax-qualified LTCI policies to become partnership-eligible as well.  The federal statute further states that states may not impose any requirements to partnership policy benefits that it does not impose on all other LTC products.  NAHU's government relations team is carefully monitoring the guidance development process at HHS and will keep our chapters apprised as to its progress as the guidance is drafted and released.

The goal of partnership polices is to provide additional incentives for consumers to purchase LTCI.  Therefore, the DRA attempted to make all current LTC products being sold to be easily adapted to partnership policies.  How an existing policy is "exchanged" to become partnership-eligible is to be determined by each state's insurance regulator, and this is an issue that each state chapter will need to watch. 

Next Steps
NAHU will be working with state and local chapters to roll out a public relations campaign and membership blitz to ensure consumer awareness and success of partnership programs.  Look for details forthcoming, as the rollout is scheduled to begin in early February.