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Texas moving toward new life settlements rule change

Life Settlements
by Finn Knox-Seith
Experts agree on need for long-term care financing overhaul
Experts agree on need for long-term care financing overhaul

The state of Texas may soon allow its residents to use life settlement transactions to help cover the cost of services related to long-term care, within certain parameters.

The Texas House and Senate recently passed a bill that would allow state residents to sell life insurance policies with face value of at least $10,000 in order to cover long-term care costs, according to a report from Life Health Pro. Proceeds of the sale will not be considered in determining eligibility for Medicaid nursing home benefits. The bill moved through both houses relatively quickly and with overwhelming support; the Senate voted to approve it 26-5, and the House went 134-5 in favor of its passage in a period of just three days. The legislation now awaits the signature of Gov. Rick Perry.

According to the report, sellers would be required to keep the lesser of five percent of the life insurance's face value or $5,000 to cover funeral expenses.  Purchasers would also be prohibited from mandating choice of long-term care providers, allowing sellers full freedom in caregiver selection.

However, the director of the state's Legislative Budget Board, Ursula Parks, notes that while the bill may be well-intentioned, it would be nearly impossible for state agencies to put it in place at all, the report said. This is because there is a concern that letting recipients choose their own long-term care providers would increase costs for the state's Medicaid program, which has been a point of contention among lawmakers there for some time. Currently, there is a requirement that the state's health commission cannot implement any rules if they would not be cost-effective or feasible within the current framework of the state's Medicaid program.

Meanwhile, those in the life settlement business say that the legislation, if passed, could potentially be extremely beneficial, the report said. In fact, they note that these payouts may actually make it easier for states to offset rising Medicaid costs in general.

Companies issuing life settlements should consider the ways various states allow them and their customers operate. This  will give them greater flexibility to take advantage of potential benefits of plans available to them.

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