Three leading long-term care insurance companies have changed rules for Washington state residents looking to exempt themselves from the pending new payroll tax according to the American Association for Long-Term Care Insurance (AALTCI).
“The new tax will cost Washington workers starting next year and many are looking into long-term care insurance as a way to avoid the tax,” explains Jesse Slome, director of the long-term care insurance organization. “Insurers realized that many individuals were likely buying low amounts of coverage and others intend to drop coverage once they achieve their goal of tax exemption.”
As a result, insurers have just issued new minimum levels of required protection and new procedures. “It generally costs an insurer between $600 and $800 to health underwrite and issue a policy,” Slome explains. “In addition, insurers pay commissions to the selling agent all of which are only recouped when a policy remains on the books for several years.”
According to Slome, Mutual of Omaha will automatically decline applications from individuals who have not been seen by a physician in the last 24 months. In addition, the company will do a chargeback on commissions paid on policies issued through November 1, 2021 that are lapsed within the first policy year.
“Increasingly agents are telling us they do not want to spend time with consumers looking for a policy explicitly to avoid the tax,” Slome notes. “While the State regulations do not currently require coverage be in place next year, I fully expect subsequent State-amendments will address this after legislators realize they left a loophole.”
A second carrier, National Guardian Life (NGL), has set the policy minimum Daily Benefit Amount at $100 for Washington residents. Applications with a $50-to-$90 benefit amount selected will not be accepted by the company. In addition, applicants must choose an inflation option and those opting for facility only benefits will not be accepted.
“NGL is also requiring that applicants have been seen by a physician within the past 24 month,” Slome notes. “That will limit younger applicants in their 30s and 40s who often do not get regular physical examinations.” The company will also chargeback paid commissions if premiums are not paid for the second year of coverage.
According to Slome, a 45-year old Washington male selecting a $100 daily benefit with no inflation growth would pay around $361 annually. “Adding the 3% inflation option raises the cost to $794 and selecting the 5% option takes it to $1,751,” he says. “For a 45-year old female selecting the 3% inflation option the annual premium cost will be $1,304.”
The new Washington tax adds an uncapped payroll tax of .58% on all wages beginning January 1, 2022. “Someone earning $150,000 yearly will pay $870 in added taxes,” Slome shares. “The new insurer rules have changed what we share with consumers. I would say that $125,000-to $150,000 in annual income is the minimum threshold where considering private long-term care insurance makes sense.”
Changes imposed by Thrivent include increasing the minimum issue age to 40 for Washington residents as well as increasing the minimum monthly benefit to $3,000. “In this case, a 45-year old male picking a $3,000 monthly benefit with 2 years of coverage will pay $351 yearly,” Slome explains. “Many agents are going to advocate for at least a 1% inflation growth option which raises the cost to $460 yearly.”
The American Association for Long-Term Care Insurance (AALTCI) advocates for the importance of planning and supports insurance professionals who market both traditional and hybrid LTC solutions. To obtain long-term care insurance costs from a Washington specialist call the organization at 818-597-3227 or visit their website.