Chicago Tribune financial columnist Terry Savage has some good basic information on LTC insurance and why to buy.
Click here for the link to go to the article: http://www.huffingtonpost.com/terry-savage/long-term-care-is-not-a-l_b_8050032.html
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The LTC insurance business was never for sale, and I see this as good news for policyholders as Genworth refocuses on its core business strengths. Even though the market knocked Genworth down after the announcement, remember that there is a difference between being a sharholder and a policyholder. Short-term changes like these in the stock price are often at the cost to shareholders, but are a benefit to policyholders. From an article today in the Richmond Times Dispatch: “Genworth Financial Inc. confirmed Wednesday that it reduced about 220 positions in the first six months of this year as the [Virginia-based] insurer looks to cut costs... And Genworth executives told analysts that the company is no longer looking at selling its life and annuity insurance businesses..." Consumer advocate David Horowitz shares his LTC advice with millions of Costco customers in the March 2015 edition of The Costco Connection. You can read the complete article on-line by clicking this link:
http://www.costcoconnection.com/connection/201503/u1=issues#pg18 Genworth is selling one of its life subsidiaries (not LTC company) and the CEO got a big pay cut.
CEO pay tied to performance is a good thing for shareholders & policyholders. It's a sign of honest struggles as he brings a new, deeper understanding of and financial discipline to the LTC business. As I said last fall, part of the financial "loss" - a good 1/2 or more - was attributable to the company putting over a half-billion into policy reserves. Shareholders lost value, but policyholders gained value. The CEO's lower comp now is a result of the decisions made last year, not a sign of more, new problems. This article notes, and others are highlighting GW's attempt to sell one of its life/annuity companies. That is NOT the LTC business. At this point it appears the company is working to focus on and shore up its biggest business, LTC. The sale of a different life & annuity subsidiary will give the company more money to use to stabilize and improve its core businesses: LTC insurance and private mortgage insurance. Again, policyholders are secure with very strong reserves. Shareholders are suffering. Importantly-different perspectives. Many wonder if Genworth will, or should, stop selling LTCI. That won't solve any of their problems. New biz rates are higher, right-er priced for actual historical experience and equal to its peer competitors, if not on the high end of new rates. New sales are not the problem, it's the 35 years of old, under-priced business that continues to challenge as they work to bring those rates up closer to the new, more-experienced, "correct" rates in order to sustainably pay claims. Another reality: no one is buying LTC blocks of biz, so GW must own what it has and manage it to the best on-going value and protection for policyholders and shareholders. Again, currently, this is an investor/shareholder problem, not a policyholder problem. LTC policies are guaranteed renewable, the reserves are mandated to meet regulatory minimums to pay claims now and in the future, and the money now in reserve (including the new $500-million+) cannot be taken back out or used for anything other than policyholder claims. This NY Times article highlights a potentially-abusive way that nursing homes can force families into court to pay even disputed bills. Families with solid legal documents and financial resources could be at risk of this heavy-handed practice. Unlike "filial responsibility" laws in 29 states that allow a creditor to go after other family members to pay a senior's bills, using guardianship as a financial tool seeks to take over the disabled individual's own financial resources. "... one day last summer, after [her husband] disputed nursing home bills that had suddenly doubled Mrs. Palermo’s copays, and complained about inexperienced employees who dropped his wife on the floor, Mr. Palermo was shocked to find a six-page legal document waiting on her bed. "It was a guardianship petition filed by the nursing home, Mary Manning Walsh, asking the court to give a stranger full legal power over Mrs. Palermo, now 90, and complete control of her money. "Few people are aware that a nursing home can take such a step." A well designed and funded long-term care plan is a crucial part of every retirement plan.
"Medicare in 2015: The Huge Healthcare Expense It Won't Pay"An excellent article from the folks at The Motley Fool about long-term-care, how Medicare only pays for limited, short-term services, and why LTC insurance is a critical purchase for retirement.
"Most traditional insurance, including medical and disability insurance, follow Medicare's rules in limiting coverage to those whom are medically necessary and involved skilled, short-term care. Even supplemental Medicare policies typically only cover the $157.50 copayment for covered services and provide nothing for long-term care." [Emphasis added] Click this link to read the full article... http://www.nasdaq.com/article/medicare-in-2015-the-huge-healthcare-expense-it-wont-pay-cm429193 Long-term care insurance policyholders who qualify will be able to deduct more of their premiums in 2015. The IRS has increased by about two-percent the amount of Tax-Qualified LTC insurance premiums considered an Eligible Medical Expense. The age-based, "Eligible", deductible premium limits for tax years 2014 and 2015 are:
Individual taxpayers must itemize deductions on Schedule A in order to deduct any LTC insurance premiums. Only the lesser of the age-based, Eligible premium or the actual premium is included as a deductible medical expense. And then all medical expenses must exceed 10% (7.5% if age 65+) of Adjusted Gross Income to get any actual deduction. Individual taxpayers with a Health Savings Account can withdraw money from their HSA tax-free to pay LTC insurance premiums, but only up to the age-based, Eligible premium limits. Self-employed business owners get an "above-the-line" deduction, they do NOT have to itemize. LTC insurance premiums up to the Eligible limits - for the owner and a spouse - are included as part of the "Self Employed Health Insurance Deduction". (Form 1040, page 1, line 29 (2013)) Tax-Free Benefit Payments The per-diem (or "indemnity") tax-free benefit payment limitation for 2015 remains at the greater of $330 per day, or actual expenses paid (no change from 2014). Benefits paid as a "reimbursement" of actual expenses are received tax-free. Source: IRS Revenue Procedure 2013-35 (2014 limits) and 2014-61 (2015 limits) This information is a summary only and should not be considered as tax advice.
Not to be used in a specific tax situation. Please consult with a qualified tax advisor before implementing any tax strategy. Another company takes an earnings loss on adjusted longevity assumptions. Transamerica is a leading underwriter of traditional LTC insurance. While the article doesn't specifically mention LTC insurance, longevity assumptions are an important aspect of LTC insurance pricing and the ability to pay future claims. "Each year in the third quarter the company reviews its assumptions o how long people live, which form the basis for estimates on future payout obligations on life insurance policies and retirement products." Analysts' opinions are just that, opinions. Yet more and more are suggesting that the market grossly over-reacted to Genworth's charge against earnings to bolster LTC policyholder reserves. I strongly believe that LTC policyholders - and those who still need to buy LTC insurance - should see Genworth's actions as GOOD NEWS, and that policyholder security should be evaluated differently than an investor's returns. But it's also helpful to recognize - both insurance buyers and stock investors - that news and short-term market swings need to be taken in context with long-term goals. Read the Barrons report about Raymond James' upgrade by clicking the following link: http://online.barrons.com/articles/genworth-stock-can-rise-42-1415909893 This information is not intended to be investment advice, nor a solicitation to buy or sell any particular stock or investment, but is presented as information about LTC insurance.
Click the story title to link to an excellent article putting Genworth's stock decline and policyholder security in a broader context:
"Long-Term-Care Insurance: What Policyholders Should Know" The Wall Street Journal TotalReturn Personal Finance Blog |
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