[Congressional Record Volume 155, Number 51 (Wednesday, March 25, 2009)]
[Senate]
[Pages S3793-S3794]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Mrs. Lincoln, Ms. Snowe, Mr. 
        Ensign, Ms. Collins, Ms. Klobuchar, and Mr. Graham):
  S. 702. A bill to amend the Internal Revenue Code of 1986 to allow 
long-term care insurance to be offered under cafeteria plans and 
flexible spending arrangements and to provide additional consumer 
protections for long-term care insurance; to the Committee on Finance.
  Mr. GRASSLEY. Mr. President, at 2:30 today, the Senate Finance 
Committee, Subcommittee on Health Care, held a hearing entitled The 
Role of Long-Term Care in Health Reform. In conjunction with the 
Subcommittee hearing, my colleagues Senators Lincoln, Snowe, Ensign, 
Collins, Klobuchar, Graham and I wanted to take the opportunity to 
introduce the Long-Term Care Affordability and Security Act of 2009.
  Our Nation is graying. Research shows that the elderly population 
will nearly double by 2030. By 2050, the population of those aged 85 
and older will have grown by more than 300 percent. Research also shows 
that the average age at which individuals need long-term care services, 
such as home health care or a private room at a nursing home, is 75. 
Currently, the average annual cost for a private room at a nursing home 
is more than $75,000. This cost is expected to be in excess of $140,000 
by 2030.
  Based on these facts, we can see that our Nation needs to prepare its 
citizens for the challenges they may face in old-age. One way to 
prepare for these challenges is by encouraging more Americans to obtain 
long-term care insurance coverage. To date, only 10 percent of seniors 
have long-term care insurance policies, and only 7 percent of all 
private-sector employees are offered long-term care insurance as a 
voluntary benefit.
  Under current law, employees may pay for certain health-related 
benefits, which may include health insurance premiums, co-pays, and 
disability or life insurance, on a pre-tax basis under cafeteria plans 
and flexible spending arrangements, FSAs. Essentially, an employee may 
elect to reduce his or her annual salary to pay for these benefits, and 
the employee does not pay taxes on the amounts used to pay these costs. 
Employees, however, are explicitly prohibited from paying for the cost 
of long-term care insurance coverage tax-free.
  Our bill would allow employers, for the first time, to offer 
qualified long-term care insurance to employees under FSAs and 
cafeteria plans. This means employees would be permitted to pay for 
qualified long-term care insurance premiums on a tax-free basis. This 
would make it easier for employees to purchase long-term care 
insurance, which many find unaffordable. This should also encourage 
younger individuals to purchase long-term care insurance. The younger 
the person is at the time the long-care insurance contract is 
purchased, the lower the insurance premium.
  An aging Nation has no time to waste in preparing for long-term care, 
and the need to help people afford long-term care is more pressing than 
ever. I look forward to working with Senators Lincoln, Snowe, Ensign, 
Collins, Klobuchar, Graham and all of our Senate colleagues toward 
enacting the Long-Term Care Affordability and Security Act of 2009.
  Mr. President, I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the text of the bill was ordered to be 
printed in the Record, as follows:

                                 S. 702

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Long-Term Care Affordability 
     and Security Act of 2009''.

     SEC. 2. TREATMENT OF PREMIUMS ON QUALIFIED LONG-TERM CARE 
                   INSURANCE CONTRACTS.

       (a) In General.--
       (1) Cafeteria plans.--The last sentence of section 125(f) 
     of the Internal Revenue Code of 1986 (defining qualified 
     benefits) is amended by inserting before the period at the 
     end ``; except that such term shall include the payment of 
     premiums for any qualified long-term care insurance contract 
     (as defined in section 7702B) to the extent the amount of 
     such payment does not exceed the eligible long-term care 
     premiums (as defined in section 213(d)(10)) for such 
     contract''.
       (2) Flexible spending arrangements.--Section 106 of such 
     Code (relating to contributions by an employer to accident 
     and health plans) is amended by striking subsection (c) and 
     redesignating subsections (d) and (e) as subsections (c) and 
     (d), respectively.
       (b) Conforming Amendments.--

[[Page S3794]]

       (1) Section 6041 of such Code is amended by adding at the 
     end the following new subsection:
       ``(h) Flexible Spending Arrangement Defined.--For purposes 
     of this section, a flexible spending arrangement is a benefit 
     program which provides employees with coverage under which--
       ``(1) specified incurred expenses may be reimbursed 
     (subject to reimbursement maximums and other reasonable 
     conditions), and
       ``(2) the maximum amount of reimbursement which is 
     reasonably available to a participant for such coverage is 
     less than 500 percent of the value of such coverage.

     In the case of an insured plan, the maximum amount reasonably 
     available shall be determined on the basis of the underlying 
     coverage.''.
       (2) The following sections of such Code are each amended by 
     striking ``section 106(d)'' and inserting ``section 106(c)'': 
     sections 223(b)(4)(B), 223(d)(4)(C), 223(f)(3)(B), 
     3231(e)(11), 3306(b)(18), 3401(a)(22), 4973(g)(1), and 
     4973(g)(2)(B)(i).
       (3) Section 6041(f)(1) of such Code is amended by striking 
     ``(as defined in section 106(c)(2))''.
       (4) Section 26(b)(2)(S) of such Code is amended by striking 
     ``106(e)(3)(A)(ii)'' and inserting ``106(d)(3)(A)(ii)''.
       (5) Section 223(c)(1)(B)(iii)(II) of such Code is amended 
     by striking ``section 106(e)'' and inserting ``section 
     106(d)''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to taxable years beginning after December 31, 
     2008.

     SEC. 3. ADDITIONAL CONSUMER PROTECTIONS FOR LONG-TERM CARE 
                   INSURANCE.

       (a) Additional Protections Applicable to Long-Term Care 
     Insurance.--Subparagraphs (A) and (B) of section 7702B(g)(2) 
     of the Internal Revenue Code of 1986 (relating to 
     requirements of model regulation and Act) are amended to read 
     as follows:
       ``(A) In general.--The requirements of this paragraph are 
     met with respect to any contract if such contract meets--
       ``(i) Model regulation.--The following requirements of the 
     model regulation:

       ``(I) Section 6A (relating to guaranteed renewal or 
     noncancellability), other than paragraph (5) thereof, and the 
     requirements of section 6B of the model Act relating to such 
     section 6A.
       ``(II) Section 6B (relating to prohibitions on limitations 
     and exclusions) other than paragraph (7) thereof.
       ``(III) Section 6C (relating to extension of benefits).
       ``(IV) Section 6D (relating to continuation or conversion 
     of coverage).
       ``(V) Section 6E (relating to discontinuance and 
     replacement of policies).
       ``(VI) Section 7 (relating to unintentional lapse).
       ``(VII) Section 8 (relating to disclosure), other than 
     sections 8F, 8G, 8H, and 8I thereof.
       ``(VIII) Section 11 (relating to prohibitions against post-
     claims underwriting).
       ``(IX) Section 12 (relating to minimum standards).
       ``(X) Section 13 (relating to requirement to offer 
     inflation protection).
       ``(XI) Section 25 (relating to prohibition against 
     preexisting conditions and probationary periods in 
     replacement policies or certificates).
       ``(XII) The provisions of section 28 relating to contingent 
     nonforfeiture benefits, if the policyholder declines the 
     offer of a nonforfeiture provision described in paragraph (4) 
     of this subsection.

       ``(ii) Model act.--The following requirements of the model 
     Act:

       ``(I) Section 6C (relating to preexisting conditions).
       ``(II) Section 6D (relating to prior hospitalization).
       ``(III) The provisions of section 8 relating to contingent 
     nonforfeiture benefits, if the policyholder declines the 
     offer of a nonforfeiture provision described in paragraph (4) 
     of this subsection.

       ``(B) Definitions.--For purposes of this paragraph--
       ``(i) Model regulation.--The term `model regulation' means 
     the long-term care insurance model regulation promulgated by 
     the National Association of Insurance Commissioners (as 
     adopted as of December 2006).
       ``(ii) Model act.--The term `model Act' means the long-term 
     care insurance model Act promulgated by the National 
     Association of Insurance Commissioners (as adopted as of 
     December 2006).
       ``(iii) Coordination.--Any provision of the model 
     regulation or model Act listed under clause (i) or (ii) of 
     subparagraph (A) shall be treated as including any other 
     provision of such regulation or Act necessary to implement 
     the provision.
       ``(iv) Determination.--For purposes of this section and 
     section 4980C, the determination of whether any requirement 
     of the model regulation or the model Act has been met shall 
     be made by the Secretary.''.
       (b) Excise Tax.--Paragraph (1) of section 4980C(c) of the 
     Internal Revenue Code of 1986 (relating to requirements of 
     model provisions) is amended to read as follows:
       ``(1) Requirements of model provisions.--
       ``(A) Model regulation.--The following requirements of the 
     model regulation must be met:
       ``(i) Section 9 (relating to required disclosure of rating 
     practices to consumer).
       ``(ii) Section 14 (relating to application forms and 
     replacement coverage).
       ``(iii) Section 15 (relating to reporting requirements).
       ``(iv) Section 22 (relating to filing requirements for 
     marketing).
       ``(v) Section 23 (relating to standards for marketing), 
     including inaccurate completion of medical histories, other 
     than paragraphs (1), (6), and (9) of section 23C.
       ``(vi) Section 24 (relating to suitability).
       ``(vii) Section 27 (relating to the right to reduce 
     coverage and lower premiums).
       ``(viii) Section 31 (relating to standard format outline of 
     coverage).
       ``(ix) Section 32 (relating to requirement to deliver 
     shopper's guide).

     The requirements referred to in clause (vi) shall not include 
     those portions of the personal worksheet described in 
     Appendix B relating to consumer protection requirements not 
     imposed by section 4980C or 7702B.
       ``(B) Model act.--The following requirements of the model 
     Act must be met:
       ``(i) Section 6F (relating to right to return).
       ``(ii) Section 6G (relating to outline of coverage).
       ``(iii) Section 6H (relating to requirements for 
     certificates under group plans).
       ``(iv) Section 6J (relating to policy summary).
       ``(v) Section 6K (relating to monthly reports on 
     accelerated death benefits).
       ``(vi) Section 7 (relating to incontestability period).
       ``(vii) Section 9 (relating to producer training 
     requirements).
       ``(C) Definitions.--For purposes of this paragraph, the 
     terms `model regulation' and `model Act' have the meanings 
     given such terms by section 7702B(g)(2)(B).''.
       (c) Effective Date.--The amendments made by this section 
     shall apply to policies issued more than 1 year after the 
     date of the enactment of this Act.
                                 ______