Long Term Care

Two Ways Employers Can Use
Endorsed Group
Long-Term Care Insurance Plans

For many years now those who study and evaluate the performance of government entitlement programs such as Medicare and government welfare programs such as Medicaid have recognized that these programs were in a critical financial state with crisis looming just over the horizon.

This message is not new, what is new is that our legislators have had to take action and publicly acknowledge this crisis. One of the first actions was the passage of the Health Insurance Portability and Accountability Act (HIPAA) in 1996, effective January 1, 1997.

Many issues were addressed in this legislation, but those of particular interest to this subject sent a very clear message.  Citizens of this country must prepare for the needs they will experience as they age.  The "limited" benefits for long-term health care provided under Medicare will not be improved, Medicaid will continue to cover the indigent with increased safeguards to prevent abuse and there will be no new entitlement programs to provide the care so often required by the elderly population.

Although some of the message is implied, it is very clear! You must plan and prepare for the probability of needing long-term care.  The best time to formulate your plan and put it in place is well before retirement and while you are still healthy. The solution to this problem is not the same for everyone, however one excellent solution for many is long-term care insurance. HIPAA clarified the future and created incentives to encourage responsible action of the people.

What does this mean to an employer?  First HIPAA defined long-term care insurance (LTCI) as health and accident insurance making it eligible for favorable income tax treatment.  Participants in an employer-paid LTCI plan may exclude from income any premium paid by the employer, employer expenses for LTCI premiums are deductible as a business expense, and benefits payable under the policy are excluded from taxable income to the extent such amounts reimburse for actual expenses incurred.  Plus all of this is permitted even if the plan is discriminatory in favor of highly compensated employees.


  1. Premium is tax deductible!
  2. Premium paid by an employer is not taxed as income!
  3. Benefits received are not taxable as income!
  4. Employers can discriminate by class!

This creates an opportunity for corporations to provide this valuable benefit for officers or other key employees with Uncle Sam subsidizing the cost.

HIPAA creates only half of the opportunity however.  The other half comes from insurance companies who offer key features and flexible plan design. With unique features found in several of the top rated companies Corporate Insurance Concepts, Inc. represents, we can design a plan to provide a "Walk Away Executive Fringe Benefit". These plans provide excellent coverage with tremendous flexibility and a payment option providing for a paid up policy after ten years. By using a limited payment plan the policy can be paid up by, at or near retirement (depending on age at issue).  Effectively this protects retirement income and personal assets from the devastating cost of long-term health care. This frees up retirement income since there will be no LTCI premiums to pay. Plus we can offer these plans at a significant savings due to the availability of Endorsed Group Discounts. Endorsed Group Discounts are 15% for applicants 64 and under and 10% for applicants 65 and over.

Simply stated, the Corporation can:

  1. Cover officers and key employee(s) only
  2. Deduct premium costs as a business expense
  3. Premium paid by the corporation for the employee is not included as income to the employee
  4. Benefits when received are tax free
  5. Flexible plan design
  6. 10-Pay premium allows for paid up policy at retirement
  7. Premiums are discounted with Endorsed Group Plan
  8. Discounted rates can be extended to family members (children, parents and grandparents of the insured)

Endorsed Group Plans can also be offered on a voluntary basis to all employees not eligible for the employer paid plan. Agreeing to sponsor an LTCI plan on a voluntary basis does not obligate the employer to anything more than an opportunity for the LTCI professional to contact and meet with your employees. If the employer elects, a voluntary plan can be payroll deducted and list billed or it can be billed to each individual applicant without employer involvement. The voluntary plan offers the same flexibility of plan design, but allows the employee the opportunity to take care of the risk at a reduced premium. The premium savings are the same described above and the discounted premiums can also be offered to parents, grandparents, and children of the employee.

C-Corporations receive the most favorable tax treatment with premiums generally being fully deductible.  Self-employed Individuals (Including Partners and greater than 2% Shareholders of S-Corps) are subject to the premium limits applicable for individuals and the same percentage allowed for health insurance premiums.  The balance of eligible premiums (not deducted by the business) may be deducted as an itemized medical expense.  We will be happy to provide you detailed information if your company falls into one of these classes.

Whether an Executive Fringe Benefit plan interests you, a voluntary plan, or both, please contact us for more information. We will be happy to answer any questions and discuss your needs in detail.

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