Today’s Long Term · 7702B – defined QLTC (accident & health insurance / tax-free benefits) 162 – ability to deduct accident & health insurance (c-corp owners are treated as

Today’s Long Term

Care – What Every

Advisor Needs to

Know

Bob Saylor, LTCI

Partners

Presented By:

INTERNAL USE ONLY. Not for public distribution. 2012 NFP SCHOOL OF EXCELLENCE

Agenda

The New Reality of Long-Term Care Planning 1

Retirement Planning & Long-Term Care 2 Marketplace Update 3 Dissecting the Sales Process 4 Planning Strategies for Affluent Clients 5 Group LTC Opportunities 6 Q&A 7


Extended Healthcare is a Reality


Long-Term Care: A Risk Management Issue

* Genworth Cost of Care Survey, 2011.


Marketplace Update

Individual LTC sales up 15% in 2010

Individual LTC sales up 4% in 2011

Group Sales through Q3 2011 were up 20%

Low lapses and low interest rates have hurt in-force profitability for traditional LTCI

-- Resulting in in-force rate increases by more carriers

-- Additional carriers exiting the business (e.g., UNUM, MetLife, Prudential)

Life-LTC combination product sales increased to over $800M in 2009 and $1.2B in 20101

Product design changes (more CPI, 3% Compound and GPO options vs. 5% Compound)

Current pricing for new products based on more conservative assumptions

1 LIMRA


You know what long-term care is

You understand

-- The likelihood of needing care

-- The cost

-- The price of inflation

-- Impact on caregivers

You are the best hope of helping Americans cope with

this financial risk

For Today‘s Discussion, Let’s Assume


Retirement Planning & Long-Term Care



Top Retirement Financial Worries

Source: Genworth/Age Wave, “Our Family, Our Future: The Heart of Long Term Care Planning”, Nov. 2010



The top reasons for planning ahead for long-term care are:

-- not being a burden on others

-- being able to afford quality care in the setting I choose

-- protecting my spouse’s/loved ones’ quality of life and future security

Respondents were most concerned about protecting their families from the financial pressures of providing for their long term care.

The vast majority of families have not had a comprehensive discussion regarding long term care.

Source: Genworth/Age Wave, “Our Family, Our Future: The Heart of Long Term Care Planning”, Nov. 2010



How Retirees Pay for Current Health Care and Future LTC Expenses

Study by the Journal of Financial Service Professionals

Respondents between the ages of 55-75, with investable assets of $100K or more

Nearly 43% plan to use personal savings to self insure

Of those that chose “Spend Down”

-- 17% have assets of $1-2 million

-- 13% have assets of $2 million or more

Methods of Paying for Long-Term Care

Personal Savings 42.5%

Private Policy 32.2%

Spend Down 21.0%

Medicare 16.3%

Sell Home 14.9%

Haven’t thought about it 14.9%

Access HELOC 8.2%

Family 2.2%

Source: Journal of Financial Service Professionals, “How Retirees Pay for Current Health Care and Future LTC Expenses”, Jan. 2011


Long-Term Care Planning Strategies

Client Strategy

Portfolio Reallocation

Asset Based (Annuity/LTC)

Asset Based (Life/LTC)

LTC Insurance

Traditional or Corporate Plan

Social Insurance


Emphasis on Planning vs. Product

Planning Option

Premium Plan Design Present Value

Future Value (age 85)

Features

Annual Pay Traditional LTCI

$3,770

$6k per month 5 year benefit 5% compound infl. 90 day deductible

$360k LTC Over $1.5M • May be partnership eligible • Immediate access to benefits • Subject to rate increases • Other assets can be invested more aggressively

10-Pay Traditional LTCI

$11,272 $360k LTC Over $1.5M • Substantial investment • Business may be able to deduct entire premium • Low risk of premium increases

Single Pay Traditional LTCI

$98,505 $360k LTC Over $1.5M • Fully paid up policy • No possibility of rate increases • 1035 Exchange potential

Life/LTC Combo

$125,492 $6k per month 6 year benefit 5% compound infl.* 90 day deductible

$432k LTC $144k DB $129k ROP $14.4k Res. DB

Over $1.8M LTC $144k DB $129k ROP $14.4k Res. DB

• Ability to insure life and LTC concurrently • Up to 6x premium leverage for LTC • Flexible • Premium always returned (DB, LTC, ROP)

Annuity/LTC Combo

$217,000 $6k per month 5% compound infl. 90 day deductible

$434k LTC $217k -Any LTC benefits reduce AV

Over $1.8M LTC or $338,480 AV (guaranteed)

• Not partnership eligible • No corporate tax deductibility • Ambiguous tax consequences on non-LTC money • Waiting period required before claim • Up to 3x premium leverage for LTC

Self Insure n/a Assets are self- directed

variable unknown • Liquidity risk • Taxes on investment gains • Lack of professional plan of care

Information provided by LTCI Partners and is for illustrative purposes only. * 2% compound years 1-2, 5% compound years 3-6


Dissecting the Sales Process

Aside from cost, reasons for not purchasing LTCI

It is difficult to understand the costs and what is paid for by Medicare or Medicaid, long term care insurance, and other insurance

People would rather believe they will never need long term care

They are unsure if they will be able to rely on a long term care insurance company when they need them

It is too unpleasant to think about becoming ill and needing long term care

Source: Genworth/Age Wave, “Our Family, Our Future: The Heart of Long Term Care Planning”, Nov.2010


One Size Does Not Fit All Learning Styles

Visual learners

Auditory learners

Hands-on learners






“Framing” the Illustration (sending via email)


Strategies for Affluent Clients

Yes – your client can self-insure and handle a LTC event financially…but this is about healthcare

LTC is not a vehicle for asset protection for wealthy clients…the planning can be considered concierge healthcare

Before and during a claim, the insurance contract provides the insured access to team of advocates who can assist in designing, developing and managing a plan of care

These advocates are RNs, LVNs or geriatric care managers (not employed by the insurance company) who will come to your home for an assessment, negotiate provider discounts on your behalf and help you interview home healthcare agencies or perform site-visits at facilities to help you determine the right fit

These clients might be sufficiently liquid in the event of an extended healthcare need, but who is going to manage, monitor and adjust their plan of care (with their physicians & caregivers)?


If your clients self-insure…do they have a bona-fide plan for an extended healthcare event? Who is going to manage the “stuff” that comes along with a loved one with a chronic ailment?

Considerations when self-insuring – timing (never know when it might happen), liquidity (is their money tied up into their business, real estate or the stock market? Will there be a state and federal capital gains event) and the lack of a bona-fide healthcare plan

Most HNW clients are entrepreneurial – they can deduct the LTC premium if written through their business (tax treatment/ incentives)

This coverage can be viewed as an estate planning tool vs. reimbursements for nursing care

24-hour care can cost up to $500/day at home for HNW clients

Strategies for Affluent Clients (continued)


On October 14, 2011, the Department of Health and Human Services released a report that said there was “no viable path forward” to implementing the CLASS Act.

CLASS was included in the Patient Protection and Affordable Care Act, and contained provisions for a federal long-term care insurance program

Voluntary plan to be made available on a guaranteed issue basis

To pay cash benefits and impose no lifetime benefit limits

The elimination of CLASS dramatically changes the math on the Affordable Care Act.

The projected near term “positive” from the CLASS Act was estimated by the CBO at $86 billion, or about 40% of deficit reduction projected for the entire health reform package.

Medicaid still remains the largest funder of LTC expenses, paying for more than 40% of all care provided

The Super Committee tasked with finding at least $1.5 trillion in budget cuts over the next 10 years

Restructuring and cuts to Medicare and Medicaid funding is expected to be a major element of their plan

This may compounded by the recently enacted an 11.1% reduction in reimbursements for LTC expenses in 2012 by the Centers for Medicare & Medicaid Services (CMS)

CLASS Dismissed


Group & Multi-Life Opportunities

Employers Offering LTC Insurance (by size of firm)

< 100 employees 7% (5.9 million businesses)

100+ employees 25%

100-499 employees 17%

500+ employees 33%

National Compensation Survey 3/10, Bureau of Labor Statistics


IRS Code Sections:

7702B – defined QLTC (accident & health insurance / tax-free benefits)

162 – ability to deduct accident & health insurance (c-corp owners are treated as employees)

213 – age-based deductibility for pass-through entities (s-corps, LLCs or LLPs)

106 – premium is not included /counted as imputed income

Treasury Regulation 1.105-5 – employer can create a class of select employees to offer this coverage to (ability to carve-out or “discriminate”)


The Tax Treatment of LTC Insurance




More and more of our clients are asking about Long-Term Care planning. What do you know about this issue?

We are finding that more and more of our clients are asking us about Long-Term Care planning…and we have listened.

What do you know about Long-Term Care and the potential impact on your retirement plan?

How would you handle an unexpected extended healthcare expenses?

Let’s talk about post-retirement disability planning…

Have you considered LTC Insurance as an executive or employee benefit?

Conversation Starters


Wholesale & Retail Brokerage Report

Internal Sales Support Point-of-Sale Support Case Management

Dedicated account management

Advisor training (live, calls or web- based)

Advisor CE and appointment “check”

Field underwriting support (with advisors

or with clients directly)

Pre-sale strategy discussions

Competitive analysis

Policy audits (individual and group)

Conference calls with clients

Proposal support and preparation

Application & collateral material fulfillment

Tele-application support

Facilitate study group meetings

Conduct monthly educational

conference calls

(includes all internal sales support functions)

Internal call center sales team (staffed by

salaried W2 employees of LTCI Partners)

Screen-sharing technology utilized for

education and completion of applications

(individual and group)

All calls (inbound and outbound)

recorded and saved to client record

Network of approved distribution

partners (1099 LTC Insurance specialists)

nationally available for face-to-face meetings

Access to Group and Private Client LTC

Insurance consultants

Application fulfillment (tele-application

support)

Advisors can upload applications online

(submit into LTCI Partners new business

unit)

Dedicated case management team

Application compliance “check”

LTCI Partners order necessary

underwriting requirements

Status provided online (real-time)

Status emailed weekly

Ongoing policy service

Robust reporting capability


Sale & Underwriting Support

Underwriting Partner: Our experts will prescreen your client for you, either over the phone or via secured web-based survey.

Application Partner: A special staff of credentialed experts will take the application for you over the phone reducing cycle time and helping to increase the opportunity for placement.

Policy Review: Our team can review existing policies to make recommendations for replacement or wrap around policies as needed.

Policy Design: Tell our experts what you are trying to accomplish for your client and they will design the best plan to meet those goals, whether it is target premium or underwriting niche.

Client Consultation: Did LTC unexpectedly come up during a conversation with your client? A member of our team is always available to help answer questions on a consult call.

Proposal Preparation: Let us prepare the documentation you need to review this important issue with your clients, as well as make recommendations on carrier marketing pieces.

Easy Appointment Process: Our pre-populated paperwork and guidance on education and licensing requirements helps to keep our processes as easy as possible.

Market Expertise: With an average tenure of 11 years our associates can answer questions on everything from tax treatment to product nuances and industry-related legislation.


Contact Information

You can contact LTCI Partners by calling us toll-free at 1-877-949-4582 and asking for an associate’s extension or choosing the following workgroup options: Helpful Extensions National Sales Office: Option 3 New Business/Case Management: Option 4 Contracting and Licensing: Option 5 Commissions: Option 6

Bob Saylor x 236 Vija Navarro x 109 www.ltcipartners.com


Dedicated Account Management


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Documents

Today’s Long Term · 7702B – defined QLTC (accident & health insurance / tax-free benefits) 162 – ability to deduct accident & health insurance (c-corp owners are treated as