ATTENTION California Taxpayers! New Long Term Care Insurance Policy Requirement!
Both state and federal governments have encouraged the purchase of Long-Term Care Insurance (LTCI) through various tax incentives. Following the lead of Washington State, several states, including California, are now deciding on implementing a new tax on individuals who do not have a qualifying LTCI policy.
Here is what is important to know about the Washington State Model:
Washington State introduced a unique Long-Term Care Insurance program where residents who did not have a qualifying LTCI policy would be subject to a payroll tax of 58 cents for every $100 earned.
Initially, Washingtonians were given a brief window of opportunity to establish a qualifying LTCI policy to avoid this payroll tax. However, the game changed when Governor Inslee signed a law on January 27, 2022, delaying the program's commencement until July 1, 2023. Unfortunately, as of the tax's effective date, the state would no longer provide residents additional time to secure coverage to bypass the tax.
Supporters of this "LTC Tax" argue that the funds generated through the program will contribute to financing long-term care services, an essential and often expensive aspect of healthcare. However, detractors have voiced several concerns:
Insufficient Benefits: Critics argue that the provided benefits will have minimal or no significant impact on covering the costs of long-term care, potentially straining many taxpayers' finances.
Misconceptions: There is a risk that many residents may mistakenly believe they possess comprehensive long-term care coverage when, in reality, they do not. This misunderstanding can lead to financial hardship in the future.
The Heart of the Matter
The heart of the matter lies in the state-supplied benefit for those who do not own a qualifying LTCI policy. In Washington, this benefit amounts to $36,500 of lifetime benefits to pay for extended care needs. While this may seem like a substantial sum, it pales in comparison to the actual cost of long-term care in the state.
For instance, consider the cost of care in Seattle, one of the most expensive cities for long-term healthcare. The average cost of in-home care is around $6,900 a month, based on a 44-hour week. Nursing homes in Seattle average nearly $12,000 a month. Even more alarming is the projection that these costs will skyrocket to nearly $23,000 a month in twenty-five years. Clearly, the state plan falls significantly short of covering the actual expenses associated with long-term care.
As California and other states decide on implementing similar LTCI policies, it is crucial for residents to understand the potential impact on their finances and future care needs. What we can learn from Washington's experience serves as a reminder that relying solely on state-provided benefits may not be enough to safeguard your financial well-being in the face of rising long-term care costs.
It is advisable for Californians to explore their options for Long-Term Care Insurance policies that align with their financial goals and healthcare needs. Proper planning today can help secure a more financially stable and worry-free future for yourself and your loved ones when it comes to long-term care.
What To Do About It
Get informed about what your options are! I’m happy to share that I will be partnering with LaQuinta Berry, an experienced Long Term Care Insurance Spacialist, to co-host a live seminar on Retirment Readiness and the need for Long Term Care Insurance on Monday, November 13 at 6pm in Banning, CA. Bring a friend to this FREE event and RSVP today!
