State of Indiana Getting into Life Settlements

[lifesettlementadvisor]

Indiana General Assembly

 

[VolAgent]

Interesting. It does limit the amount of the assignment to the value of benefits received.

That said, I'm not sure that I would want the person responsible for approving and paying my medical bills in a position to financially benefit from my death.

 

[Newby]

This might be smart.
Once people go on Medicaid they just lapse or surrender huge life insurance policies once they learn that it will not go to the beneficiaries.

Some of these policies have tiny premiums and the insured is very terminally ill so the states could make out like bandits.

I was assisting a family last week to cash surrender a life policy on mom who is in a nursing home on Medicaid. The policy had $13,000 cash value and $75,000 death benefit. Premium was minimal like $40 monthly. We did a funeral trust for $11,000, put $2,000 in mom's checking account and no one in the family saw any reason to keep the $40 payment going just to give the state the remaining $62,000 in death benefit when mom dies.
Happens every day on every Medicaid case.

 

[VolAgent]

This might be smart.
Once people go on Medicaid they just lapse or surrender huge life insurance policies once they learn that it will not go to the beneficiaries.
Some of these policies have tiny premiums and the insured is very terminally I'll so the states could make out like bandits.
I was assisting a family last week to cash surrender a life policy on mom who is in a nursing home on Medicaid. The policy had $13,000 cash value and $75,000 death benefit. Premium was minimal like $40 monthly. We did a funeral trust for $11,000, put $2,000 in mom's checking account and no one in the family saw any reason to keep the $40 payment going just to give the state the remaining $62,000 in death benefit when mom dies.
Happens every day on every Medicaid case.

The state can't receive more in death benefit then it spent through Medicaid to support the individual. Still, do you really want a third party to benefit from your death? The sooner you die, the less the state spends in premiums...

 

[lifesettlementadvisor]

I doubt the state would be that personal on the case. You have to assume there is a decent size staff and different people will be running the life settlement portfolio compared to the claims department for medicaid.

 

[Newby]

The state can't receive more in death benefit then it spent through Medicaid to support the individual. Still, do you really want a third party to benefit from your death? The sooner you die, the less the state spends in premiums...

The state will very quickly pay out more in Medicaid assistance than most people have in life insurance.

No, I don't think it will be accepted very well if the state starts "profiting" off people who died and paid life insurance premiums for years and years. But that's how MOST people think it already works. How many times has someone said to you "If you go in a nursing home, the government takes all your life insurance."

In reality, the states are not taking people's life insurance in most cases because the people cash out the policies when they apply for Medicaid. There is no incentive to keep the policy going if Medicaid is going to be the beneficiary of the death benefit.

If the states would just split the death benefit 50/50 with the families it would give the families incentive to keep the policies active and keep the premiums going on terminally ill people. The premiums are generally very low (old,old policies) and the life expectancy is usually very short (2-years or less on most nursing home residents).

There is money being lost here by the states AND the families that could be partially recovered if the people making the laws would use their heads. And if it's the family's (beneficiary's) decision if they want to keep the policy active, it wouldn't be so distasteful as the government just taking it over.

 

[tampaloan08]

nice post.i am really impressed.

 

[VolAgent]

The state will very quickly pay out more in Medicaid assistance than most people have in life insurance.

No, I don't think it will be accepted very well if the state starts "profiting" off people who died and paid life insurance premiums for years and years. But that's how MOST people think it already works. How many times has someone said to you "If you go in a nursing home, the government takes all your life insurance."

In reality, the states are not taking people's life insurance in most cases because the people cash out the policies when they apply for Medicaid. There is no incentive to keep the policy going if Medicaid is going to be the beneficiary of the death benefit.

If the states would just split the death benefit 50/50 with the families it would give the families incentive to keep the policies active and keep the premiums going on terminally ill people. The premiums are generally very low (old,old policies) and the life expectancy is usually very short (2-years or less on most nursing home residents).

There is money being lost here by the states AND the families that could be partially recovered if the people making the laws would use their heads. And if it's the family's (beneficiary's) decision if they want to keep the policy active, it wouldn't be so distasteful as the government just taking it over.

That's just hilarious!

But yes, there has to be a better way. And I'm sure management of the life insurance portfolio will be different from the claims department. And yes, the state recovering some of the money is a good thing. But this is exactly why we don't like STOLI. A third party that suffers no loss at the death of the insured stands to benefit financially. In fact, the state benefits twice. Claims stop and the death benefit comes in.

Just to be clear, I seriously doubt the state would do anything to speed up a senior's departure. But why give them one more reason to benefit?