A Pennsylvania congresswoman is among several sponsors of a bill to include long-term care insurance in employer-sponsored cafeteria plans and flexible spending accounts that has been introduced in Congress.

Allyson Schwartz

Rep. Allyson Schwartz (D-Pa.) joined Reps. Earl Pomeroy (D-N.D.), Charles Boustany (R-La.) and Ginny Brown-Waite (R-Fla.) in authoring the bill, enabling people to pay long-term care insurance premiums using pre-tax dollars.

“With this plan, we in Congress are moving forward in providing hard-working American families with the tools they need to make responsible choices and plan for their future,” Schwartz said in a statement.

A similar bill (Senate Bill 702) was introduced March 26 by Sens. Charles Grassley (R-Iowa), Blanche Lincoln (D-Ariz.), Lindsey Graham (R-S.C.), Susan Collins (R-Maine), Olympia Snowe (R-Maine), Amy Klobuchar (D-Minn.) and John Ensign (R-Nev.).

“The Long-Term Care Affordability and Security Act” (House Resolution 2096) will make long-term care insurance more accessible for people planning for retirement, according to the American Council of Life Insurers, which applauded the bill’s introduction.

“This bill reflects the importance of long-term care insurance as a retirement security product,” said ACLI President and CEO Frank Keating in a statement.

The bill also requires new consumer protections that are consistent with the most recent National Association of Insurance Commissioners’ Long Term Care Insurance Model Act and Regulation.

Among Americans who are 65 years old, nursing homes will provide long-term care for 44% of them.  The average cost for a private room in a nursing home is $75,000 a year, and by 2030, the cost will rise to nearly $207,000.

“The high and rising costs of long-term care represents a looming threat to Americans’ financial and retirement security,” Keating said.

Medicare does not generally cover long-term care costs and Medicaid only covers them for those who are impoverished and provides far fewer quality care choices than are offered through typical long-term care insurance plans.

“Many Americans,” Keating added, “mistakenly believe that Medicare and health insurance will cover these costs. That is not the case.”

Cafeteria plans allow employees to pay for benefits such as life insurance, disability insurance and other voluntary benefits by reducing their pay, pre-tax, by the premium amount.

In FSA plans, employees set aside predetermined amounts in an account to cover eligible out-of-pocket expenses most often related to health, dental and dependent day care. Dollars are deducted from an employee’s payroll on a pre-tax basis. As needed, the employee receives reimbursement from the account, also tax free, for eligible expenses throughout the year.

Current law excludes long-term care insurance from being included in cafeteria plans and FSAs.

The ACLI said passage of the bill could help Medicaid, which accounts for as much as 49% of long-term care spending, primarily for nursing home care. If three-quarters of individuals between the ages of 40 and 65 who can afford long-term care insurance were to purchase and maintain policies throughout their senior years, by 2030 the annual savings in Medicaid nursing home and out-of-pocket expenses would total $36.6 billion, according to the ACLI.

“H.R. 2096 is a win for Americans’ retirement security and a win for our nation’s public policy,” Keating said.