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States Ease use of Life Insurance Policies to Pay for Elder Care

By Stephen Tweed

In this morning’s Wall Street Journal (6/17/13), there’s an article in the Money and Investing Section about how a number of states across the country are passing new laws making it easier for residents to use their existing live insurance policies the pay for long term care.  This can be a huge opportunity for private duty home care companies to find funding for potential clients who need money to pay for home care services.

In the WSJ article it says, “State lawmakers are encouraging elderly residents to use life insurance as a way to pay for long term care – and lower the Medicaid tab in the process.”

The strategy marks an endorsement of life settlements, a program in which elderly people with life insurance policies sell their policies at a discount to a company that takes over paying the premiums.  When the person passes away, the company that has bought the policy files a claim and receives the life insurance benefit.

The state of Texas passed a bill that was signed into law by the Governor this past Friday. Other states that are working on similar laws include:

  • New York
  • California
  • Florida
  • Kentucky
  • Louisiana
  • Maine
  • New Jersey

The states hope to stop people from dropping their life insurance policies in order to qualify for Medicaid.  To keep policy holders from spending their settlements frivolously, the new laws require that the money go straight into an irrevocable bank trust that can only be used to pay for long term care.  

I first learned about this program this past spring at the National Association for Home Care and Hospice march on Washington.  I was getting in a cab to return to the hotel from our meeting at the Russell Senate Office building, and met a guy from the same meeting who was going back to the hotel.  We shared the cab, struck up a conversation, and I was intrigued by his business.

Don Poole is a principal in a company called Life Care Funding, LLC, based in Lewiston, Maine.  As I learned about Don’t business, I was intrigued by how this might help home care companies grow their businesses by providing services to potential clients with limited funds.  The more we talked, the more intrigued I became.

Don and I have several follow up conversations and I did some due diligence on the company.  Then I invited Don and Life Care Funding to become Resource Associate for The Academy for Private Duty Home Care.  Life Care Funding is a company that we can recommend to our readers, Academy Members, and clients.

Back to the WSJ article, Chris Orestis, the CEO of Life Care Funding was quoted as saying, this program “focuses on middle class policyholders with term insurance coverage worth $100,000 on average. They are not wealthy enough to pay for long term care for a long time, and they’re not poor enough to quality for Medicaid right now.”

Adult children facing immediate long term care bills for their parents are often willing to accept an amount smaller than the face value of the insurance policy to pay for care now, rather than getting a larger inheritance later.

As a home care company owner, one question you will want to ask all of your prospective clients is,

“Do you have a life insurance policy?” 

 If so, you can then help them explore using the services of Life Care Funding, LLC to pay for home care services. You may find that a number of prospective clients who don’t think they can afford private pay home care will use this program to pay for their care.

If you accept Medicaid Waiver, you may also want to use this program to help potential clients qualify for Medicaid by selling their insurance policy and using the proceeds to pay for care.  Then the money is used up, then they can receive home care through Medicaid. 

For more information on how Life Care Funding can help you find finances to help your clients pay for home care, check them out in the Resource Associates Section of the Academy for Private Duty Home Care. 

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