““WealthCareWealthCare””By Pampel & Associates, Inc.By Pampel & Associates, Inc.

Eric J. PampelEric J. PampelPortfolio ManagerPortfolio Manager

Pampel & Associates, Inc.Pampel & Associates, Inc.

We do not think that Social Security is the We do not think that Social Security is the biggest issue facing Americans. We think biggest issue facing Americans. We think the biggest issue is the cost of healthcare.the biggest issue is the cost of healthcare.

Pampel & AssociatesPampel & AssociatesPresents:

What You Should Know About Long Term CareWhat You Should Know About Long Term Care

Living A Long Life Is A Near CertaintyLiving A Long Life Is A Near Certainty

Planning For A Long Life Is Now A NecessityPlanning For A Long Life Is Now A Necessity

June 19 2008

Risks and Costs

Risks of needing long term care:

For persons who turn 65 in 1990, 43% will enter a nursing home at some point in their lives. Women are at higher risk than men, with slightly more than half entering a nursing home at some point in their lives.

Single persons are five times more likely to need nursing home care than are married persons.

Of those who enter a nursing home, 55% will need care for at least one year. One in five will need care for five or more years.

Risks and CostsCost of long term care:

The average cost of nursing home care in Indiana is $126 per day or $46,892 per year. With an average length of stay of 2.5 years, the average cost for a nursing home stay is more than $110,000.

Medicare pays less than 10% of nursing home costs.

Medicare was not designed to pay for long term care. Therefore strict requirements exist in order to qualify for Medicare coverage for nursing home care.

(a) be in a hospital 3 days prior to discharge before being admitted to the nursing home

(b) be admitted to a Medicare-certified facility

(c) be placed in a Medicare-certified bed

(d) need daily skilled care (care provided by a licensed nurse or therapist)

Risks and Cost

Risks of needing long term care: (cont.)

Should a person meet these requirements, Medicare will pay 100% for the first 20 days of nursing home care. From day 21 to day 100, Medicare pays everything except for $124 per day in 2007 (this figure usually increases each year) which the person must pay. Medicare stops paying after day 100.

More than one-third of all nursing home care is paid for by individuals directly out-of-pocket.

Risks and CostRisks of needing long term care: (cont.)

Although half of all nursing home care is paid for by Medicaid, an individual must “spend down” his/her assets to the poverty level ($1,500 in Indiana) to qualify for assistance.

Over 8.26 million long-term care insurance policies have been purchased through December, 2001.

The most frequently cited reason for an individual purchasing long-term care

insurance is to maintain independence and choice.

Three Ways To Pay

• Out of pocket

• Public Funds: Medicare Medicaid

• Insurance / Private

What is the Indiana Partnership?

State of Indiana Initiative

1987 Enabling Legislation

Public – private partnership

One of 4 programs nationwide

Who are the “Partners”?

Indiana Department of Insurance

Indiana Long Term Care Insurance Program (Insurance Dept/OMPP)

Private Insurance Companies

Insurance Producers

What is its Purpose

Incentives to purchase LTCI

Containing Medicaid LTC Expenditures

Improved, More Affordable Products

Public Education

Indiana Long Term Care Insurance Program Special Program Features

Indiana Residents

Policy Types

Inflation Protection

Standardized Eligibility (Benefit Triggers)

Consumer Protection Features

Tax Breaks

Indiana Resident

Only Indiana Residents may purchase a Partnership policy

A resident is an individual who has an Indiana address

Policy Types

Comprehensive

Facility Only

Minimum Benefits

Benefit Triggers

Tax-Qualified

Non-Tax Qualified

Consumer Protection Features

Win-Win-Win

Required Minimum Benefits

Pot of Dollars

Case Management

Contact Designee

Step Down Coverage Protection

Portability

Reciprocity

Other Partnership Policy Features

A. Indiana Residents Indiana Partnership policies may only be sold to

Indiana residents. However, insurance policy benefits will be paid regardless of the state in which the policyholder is receiving care.

The exception is the Medicaid Asset Protection feature.

Other Partnership Policy Features

B. Two Policy Types

All participating insurance companies must offer a “comprehensive” policy containing nursing home and home & community-based benefits.

Insurance companies may choose to offer a “long term care facility” policy. This type of policy provides coverage primarily for institutional care.

There are also federally tax-qualified versions of both policy types available.

Other Partnership Policy Features

C. Inflation Protection Feature

All Indiana Partnership policies contain an inflation protection feature.

With the inflation protection feature, both the daily benefit and the maximum benefit within the policy increase annually at a 5% compounded rate.

Other Partnership Policy Features

D. Benefit Triggers

In Indiana Partnership policies, participating companies must use the benefit triggers and definitions selected by the State.

With all Partnership policies paying out benefits for the same event, it makes it easier for the consumer to comparison shop.

Other Partnership Policy Features

THIS POLICY QUALIFIES UNDER THE INDIANA LONG TERM CARE INSURANCE PROGRAM FOR MEDICAID ASSET PROTECTION. THIS POLICY MAY PROVIDE BENEFITS IN EXCESS OF THE ASSET PROTECTION PROVIDED IN THE INDIANA LONG TERM CARE INSURANCE PROGRAM.

Indiana Partnership Companies and Agents

Any company can participate as long as it obtains approval from the Indiana Department of Insurance for a policy that meets the Indiana Partnership standards.

All participating companies offer both traditional long term care insurance policies and Indiana Partnership policies.

Before an agent can market an Indiana Partnership policy, he/she must have first completed a 7-hour course about the Indiana Partnership Program.

Indiana Partnership Statistics(through December, 2006)

Sales 47,000 applications received

39,774 policies purchased32,616 policies in force

Purchasers56.9% female78.3% married94.7% first time buyerAverage age: 61Age range: 18 - 89

Indiana Partnership Statistics(Through December, 2006)

Policy Features

89.1% of policies purchased include home health care

77% of policies qualify for total asset protection

Common daily benefits chosen: $120 nursing home; $120 home health

Common elimination periods chosen: 30, 90, or 100 days

FEATURES TRADITIONAL LONG TERM CARE INSURANCE POLICIES

(LTC)

INDIANA LONG TERM CARE PARTNERSHIP PROGRAM

POLICIES ( ILTCIP)

Agent Training Agents must have (a) a health insurance license; (b) 8 hours of continuing education (C.E.) in LTC to begin selling LTC insurance; (c) 5 additional hours of C.E. in LTC every 2 years.

Agents must meet all the requirements for selling traditional LTC policies PLUS must complete a one time only 7-hour C.E. course on the ILTCIP before ever selling or talking about these policies.

Asset Protection These policies do not provide the Medicaid asset protection benefit.

Policies provide permanent asset protection through the State-added benefit known as “Medicaid Asset Protection.”

Benefit Triggers The company decides which benefit triggers (what has to occur before the policy starts paying benefits) to use and how to define the terms within the triggers.

The State determines which benefit triggers that all participating companies must use and how to define the terms within the triggers.

Daily Benefits Can buy any amount of daily benefit the insurance company chooses to offer.

Can buy any amount of daily benefit the insurance company offers. A company must offer a minimum daily benefit of $110/day (state-determined for 2005)

Inflation Protection Inflation protection must be OFFERED. Inflation protection must be INCLUDED. (Companies are using 5% compounded interest annually.)

Maximum Benefits Company decides how the maximum benefit will be offered-in days, in dollars, one pool of money for all benefits, or separate maximum benefits for nursing home and home health care. Can buy any amount of maximum benefits the company offers.

State decided that maximum benefit would be one pool of money for all benefits available in the policy. Can buy any amount of maximum benefits the company offers. However, the company must offer the option of purchasing a maximum benefit equal to one year of nursing home coverage.

FEATURES TRADITIONAL LONG TERM CARE INSURANCE POLICIES

(LTC)

INDIANA LONG TERM CARE PARTNERSHIP PROGRAM

POLICIES ( ILTCIP)

Portability The policy will pay benefits in any state. The policy will pay insurance benefits in any state. However, the State-added benefit of Medicaid Asset Protection can only be honored by Indianan’s Medicaid program*. This means the person must be in Indiana when applying for and while receiving Indiana Medicaid assistance. (*Due to reciprocal agreement between IN and CT, Connecticut’s Medicaid program can also honor the asset protection earned in a partnership policy. Asset protection honored under a reciprocal agreement is on a dollar-for-dollar basis only.)

Tax Deductions for Premiums *Tax-Qualified policies are available for federal tax deduction. There is NO state tax deduction for traditional LTC policies.

*Tax-Qualified policies are available for federal tax deduction. Premiums paid for an ILTCIP policy qualify for an Indiana State Tax deduction.

Types of Policies Can buy policies covering:

(a) Nursing home care only

(b) Nursing home & home health care

(c) Home health care only

(d) Life insurance that will pay a portion of the

death benefit early for LTC.

Can buy policies covering:

(a) Nursing home care only

(b) Nursing home and home health care

All participating companies must offer policy

type (b).

*Tax-Qualified LTC Policies: premiums (up to certain limits) may be deducted on a federal tax return AS PART OF the standard medical expense deduction. The benefits received from (federally) Tax-Qualified LTC polices will not be considered taxable income. Federal law requires Tax-Qualified policies to offerthe option of purchasing a non-forfeiture benefit (a guarantee of some amount of benefit should the policyholder cancel the policy after owning it for a minimum number of years). This law also provides some guidance to the companies in determining the benefit triggers to use in their policies. “Medical Necessity”cannot be used as a benefit trigger in Tax-Qualified policies.

Note: Indiana Law and Insurance Regulation require ALL types of long term care insurance policies in Indiana to offer a 30-day free look, prohibit the requirement of prior hospitalization in order to receive benefits in policies sold after July 1991, prohibit waiting periods of longer than 6 months for pre-existing conditions, and require policies to be either guaranteed renewable or noncancellable.

To Learn More:

Call toll-free 1-866-234-4582 for a free information packet on Indiana Partnership policies.

Visit www.longtermcareinsurance.IN.gov.

For specific company or policy information, schedule an appointment with an Indiana Partnership certified agent.

Savings vs. buying LTC insurance

Example: Married couple, both age 55, purchase a Generation protector ll policy

$150 daily benefit 5 year benefit period 90 calendar day elimination period

5% compound COLA 100% Home Care Benefit Preferred Risk Class Spousal discount

Age Total annual Premium

Joint lifetime pool

Savings Interest rate 5%

55 $2,944.60 $547,500 $2,944.60 $3,092

65 $2,944.60 $891,820 $2,944.60 $43,925

75 $2,944.60 $1,452,680 $2,944.60 $110,438

85 $2,944.60 $2,366,263 $2,944.60 $218,780

Totals (55-85) $91,282.60 $2,366,263. $91,282.60 $218,780

Break Even Analysis

       

Valued Client Years Premium Days To Recover Individual Annual

  Paid Premiums Paid Premiums

Age 70 Male      

  1 29  

Standard 5 116  

Benefit Period 5 years 10 181  

Facility Care $130 daily 15 213  

  20 222  

  25 218 $3,832.75

Age 70 Female  

  1 29  

Standard 5 116  

Benefit Period 5 years 10 181  

Facility Care $130 daily 15 213  

  20 222  

  25 218 $3,832.75

Break Even Analysis

       

Valued Client Years Premium Days To Recover Individual Annual

  Paid Premiums Paid Premiums

Age 65 Male      

  1 23  

Standard 5 90  

Benefit Period 8 Years 10 140  

Facility Care $170 daily 15 165  

  20 172  

  25 169 $3,889.01

Age 65 Female  

  1 23  

Standard 5 90  

Benefit Period 8 Years 10 140  

Facility Care $170 daily 15 165  

  20 172  

  25 169 $3,889.01

Break Even Analysis

       

Valued Client Years Premium Days To Recover Individual Annual

  Paid Premiums Paid Premiums

Age 55 Male      

  1 17  

Standard 5 68  

Benefit Period Lifetime 10 107  

Facility Care $170 daily 15 126  

  20 132  

  25 129 $2,971.25

Age 55 Female  

  1 17  

Standard 5 68  

Benefit Period Lifetime 10 107  

Facility Care $170 daily 15 126  

  20 132  

  25 129 $2,971.25

Break Even Analysis

       

Valued Client Years Premium Days To Recover Individual Annual

  Paid Premiums Paid Premiums

Age 45 Male      

  1 14  

Select 1 5 53  

Benefit Period 5 Years 10 84  

Facility Care $150 daily 15 98  

  20 103  

  25 101 $2,045.37

Age 45 Female  

  1 14  

Select 1 5 53  

Benefit Period 5 Years 10 84  

Facility Care $150 daily 15 98  

  20 103  

  25 101 $2,045.37

Break Even Analysis

       

Valued Client Years Premium Days To Recover Individual Annual

  Paid Premiums Paid Premiums

Age 45 Male      

  1 9  

Preferred 5 36  

Benefit Period 5 Years 10 56  

Facility Care $150 daily 15 66  

  20 69  

  25 67 $1,363.58

Age 45 Female  

  1 9  

Preferred 5 36  

Benefit Period 5 Years 10 56  

Facility Care $150 daily 15 66  

  20 69  

  25 67 $1,363.58

Break Even Analysis

       

Valued Client Years Premium Days To Recover Individual Annual

  Paid Premiums Paid Premiums

Age 60 Male      

  1 25  

Select ll 5 96  

Benefit Period 3 Years 10 151  

Facility Care $130 daily 15 177  

  20 185  

  25 181 $3,189.89

Age 60 Female  

  1 25  

Select ll 5 96  

Benefit Period 3 Years 10 151  

Facility Care $130 daily 15 17  

  20 185  

  25 181 $3,189.89