The Advisor's View of Long-Term Care Planning

Why is a major LTC carrier ending sales of Partnership plans in California?

Posted by LTCI Partners | Aug 19, 2013 9:29:00 AM

The concept behind LTC partnership plans is simple - for those who take responsibility and plan ahead by buying LTC insurance, each dollar the policy pays in benefits entitles the policyholder to retain a dollar of assets if they need to apply for Medicaid.

Most LTC buyers will never be in a position to qualify for Medicaid because they will have income and assets that can be drawn down.  However, for extended claims or for middle income buyers, partnership plans can give a great sense of security.

Why, then, did John Hancock recently announce they will no longer sell the California Partnership plan even though they are continuing to sell their regular LTC plans?  The reason is that in California it is required that a partnership product come with 5% automatic inflation protection, which makes coverage extremely expensive.  In fact, according to the AALTCI premiums for comparable initial benefits are more than twice as expensive. Source: 

In other words, someone can buy non-partnership coverage and use more popular inflation options such as CPI or 3% compound protection and save a lot of money.  That option is available in many other partnership states.

California should revisit its partnership regulations or else just join the national partnership program.  Otherwise, there may be no partnership products available in California one day.


Topics: For financial professionals

Written by LTCI Partners

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