Fla. legislature passes life insurance conversion study bill to fund long term care

By Chris Orestis

Life Care Funding Group


A study bill passed in March 2012 by the Florida legislature will examine tax dollar savings from converting life insurance policies into long term care benefit plans for Medicaid eligibility. The legislative action establishes a taskforce and timeframe to examine the cost savings for Florida tax payers derived through the conversion of existing life insurance policies into long term care benefit plans as part of a required Medicaid spend-down eligibility regimen.

An earlier bi-cameral bill about life insurance policy conversions, HB 1055/S 1756, was introduced in January by Rep. Burgin in the state House and Sen. Negron in the state Senate. Because of the importance and complexities of this critical subject area, the legislature chose to conduct a study in 2012 which shall report back to the legislature with proposed legislation for the 2013 session.

HB 5001, the Florida state budget, contains the following in Section 224:

“Establish a technical advisory workgroup by August 1, 2012, to examine methods to allow an insured under a life insurance policy or the contract holder of an annuity, to convert the policy or annuity to a long term care benefit. The agency shall submit a report of findings and activities of the workgroup, including recommendations and proposed legislation, no later than Jan.15, 2013.”

The Center for Economic Forecasting and Analysis of Florida State University analyzed the tax savings impact of converting life insurance policies into long term care benefit plans on the Florida Medicaid budget. In their analysis released in January, CEFA “scored” the annual savings for Florida’s tax payers at approximately $150 million. The savings come from extending the time Medicaid applicants with a life insurance policy can remain private pay, delaying entry onto Medicaid by first converting their policy to a private, long term care benefit account.

In addition to Rep. Burgin and Sen. Negron, I applaud the Florida Health Care Association and its members for their tireless efforts in support of this bill and the financial relief it can bring to the state of Florida.

Following on the heels of the National Conference of Insurance Legislators’ unanimous passage of The Life Insurance Consumer Disclosure Model Law in Nov. 2010, this is another positive step forward to bring consumer protection and education to the owners of life insurance searching for the financial means to pay for the expensive costs of long term care. Conversion of a life insurance policy into a long term care benefit plan is the legal right of every policy owner in the United States.

NCOIL Past-President Rep. Rob Damron (KY) said of the model law, “it is intended to be a strong stand for life insurance policy owners and would empower consumers through education about their options"; and numerous states have passed or are now considering similar consumer protection and disclosure measures.