Florida Bill would Allow Policyholders to Use Viatical Settlement Proceeds to Pay for Medicaid-Covered Long-Term Care
On January 24, 2013, Florida Representative Jimmy T. Patronis (R) filed House Bill 535 (the “Bill”), which, among other things, would allow owners of certain life insurance policies to use viatical settlement contracts to cover the cost of Medicaid long-term care services. If adopted, the Bill would alter existing law, which requires exhaustion of a person’s assets, including allowing any in-force life insurance policies to lapse, before paying out Medicaid benefits.
Specifically, the Bill would allow an owner of a policy with a face value in excess of $10,000 to enter into a viatical settlement contract, pursuant to Chapter 626 Part X of the Florida insurance law governing viatical settlements, in exchange for guaranteed periodic payments to the viator’s health care services provider to cover Medicaid-covered long-term care services. Any such viatical settlement contract must reserve 5% of the policy value, or $5,000, as a death benefit payable to the viator’s estate or beneficiary, and provide that any payments available under the contract not paid to a health care services provider be paid to the viator’s estate or designated beneficiary. The contract must include a schedule setting forth the total amount payable to the viator, the number of payments, and the amount of each payment. Furthermore, it must state that all monies will be held in an irrevocable state or federally insured account.
Marketing materials used in connection with these contracts, including benefit projections, sales brochures, and all contracts used by viatical settlement providers, must filed with the Florida Office of Insurance Regulation (“FOIR”). Pricing and valuation materials must also be filed, and the FOIR will be granted the authority to conduct periodic market examinations and financial audits of viatical settlement providers issuing contracts to cover long-term care benefits.
In addition to the provisions allowing payment of Medicaid long-term care with viatical settlement proceeds, the Bill also provides that the value of an in force life insurance policy will not be considered an asset in determining Medicaid eligibility if the policy owner: (1) irrevocably names the State as a beneficiary of a life policy not to exceed the amount of Medicaid costs provided the recipient plus premiums and other costs incurred by the agency to the issuing insurer, (2) collaterally assigns ownership of the policy to the State pursuant to a written agreement submitted to and recorded by the issuing insurer, or (3) irrevocably assigns ownership of the policy to the State. Upon the insured’s death, any amounts not used to cover Medicaid benefits will be paid the designated beneficiary. Note, however, that any designation of the State as a beneficiary or assignment to the State will be void if Medicaid benefits are denied.
If adopted and signed into law, the Bill would go into effect July 1, 2013.Click here for a copy of the Bill