Americans are more fearful that they’ll be devastated by long-term care expenses than by outliving their money.

A recent survey of investors with at least $250,000 in investable assets found that 57% listed future health/long-term care (LTC) expenses as their greatest retirement concern, according to the Lincoln Financial Group. That outdistanced the 37% of investors who listed "outliving their savings" as their greatest concern.

Getting affordable, useful LTC policies into more Americans’ financial plans is the driving force behind a Treasury Department inter-agency task force on LTC insurance reforms.

The rapid aging of America is fueling policy and funding concerns. The number of Americans age 65 and older will nearly double from 52 million in 2018 to 95 million by 2060, and the 65-and-older age group’s share of the total population will rise from 16 percent to 23 percent.

To make long-term insurance more affordable for more people, the American Council of Life Insurance told Assistant Secretary of Economic Policy and Chairman of the Task Force Michael Faulkender in a new letter that tax and policy reforms can accelerate LTCI purchases.

“Millions of Americans’ financial and retirement security are at risk from exposure to unfunded LTC events. Access to additional options to meet and finance the need for long-term services and supports will enable consumers to address those needs without eroding other assets or imposing on family and friends,” said Charles Piacentini, vice president, Insurance Regulation & Associate General Counsel, at the American Council of Life Insurers (ACLI), which advocates for 280 insurance companies nationwide.

The ACLI’s recommendations for expanding consumer access to LTCI coverage include:

 • Providing tax incentives to expand consumer access to LTC coverage through workplace and retirement plan options: 

• Making LTC coverage available through Internal Revenue Code (IRC) Section 125 cafeteria plans and Flexible Spending Arrangements (FSA);

• Allow tax-free premium payments for LTCI policies from or within their 401(k)s, 403(b)s, IRAs, and other retirement plans;

• Permit employees to make additional contributions to their Health Savings Accounts (HSA) to pay for LTCI premiums.

• Support legislation or regulatory guidance to allow the payment of LTCI incidental benefits that enhance care options and provide access to benefits, including those intended to support healthy, independent living and aging in place, prior to satisfying the current eligibility requirements of a severe cognitive impairment or substantial assistance with the requisite activities of daily living. This allowance should not cause the policy to forfeit its tax qualified status;

• Revise current federal requirements surrounding inflation protection for LTCI policies to encourage policy design innovations that would meet the needs of consumers more effectively.

• Launch a national educational campaign to help consumers understand both the need for and benefits of LTC coverage.

“We believe these recommendations align with our mutual goals to expand consumer choice and access to quality LTCI coverage, reduce LTC costs faced by consumers, manage LTCI premiums, and improve health outcomes for LTCI policyholders in the most cost-efficient manner possible,” said Piacentini, who co-authored the recommendations with America’s Health Insurance Plans (AHIP), the national trade group for health insurers.

The Treasury task force is expected to meet to discuss LTCI reforms this fall. Investment advisors are watching developments closely.

“Obviously any tax incentive would be helpful insofar as they reduce the effective cost to the consumer,” said Chris Chen, an advisor with Insight Financial Strategists LLC, Waltham, Mass.

Chen said that expanding the LTCI deductions that business owners already get to employees would definitely be helpful to planning.

Creating Medicare supplemental LTCI policies or riders would also incent more Americans to purchase coverage, the veteran advisor said.

“Another possibility not often discussed is adding a Medicare LTC option,” Chen said. “Currently, if you run out of money, Medicaid will pick up the costs of LTC. Having a Medicare option—Part LTC if you will—to help accumulate funds for LTC, at least on a partial basis, could motivate people to think in terms of how to pay costs not paid for by Medicare. it could be a stimulus for supplementary LTC insurance,” Chen added.