Texas House Bill Allows Residents to Cash in Life Insurance Policies

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Many governors around the country have chosen to opt out of Affordable Care Act Medicaid expansions, which are meant to allow an increased number of citizens to qualify for government health insurance. Texas governor Rick Perry is among those who chose not to make an expansion in the state.

In exchange for opting out of the expansion, Perry promised residents that he would find his own way to care for aging baby boomers who are going without federal help. His promise was delivered in a unique House bill that would allow residents to cash in their life insurance policies.

Texas Finds Alternative to Affordable Care Act Medicaid Expansions

Upon the signing of the Affordable Care Act in 2010, the option to expand current Medicaid coverage became available to state governors.

The expansions would make it so that individuals between the ages of 19 and 65 with incomes up to 138 percent of the Federal Poverty Level (based on modified adjusted gross income) would qualify for coverage, effective January 1, 2014.

After a long battle between parties on the constitutionality of the Affordable Care Act, which resulted in the law taking a trip to the Supreme Court, justices agreed that Medicaid expansions would not be mandatory. States could choose to expand their programs or not.

Gov. Rick Perry made the choice to bypass the expansion in his state, but promised to help residents afford expenses associated with illness or other issues, particularly for baby boomers who don’t yet qualify for Medicare.

The solution was to allow residents to cash in their life insurance policies.

How Cashing in Life Insurance Policies Impacts Texans

[relatedposts]House Bill 2383 allows owners of life insurance to turn their coverage into life settlements that provide the cash value of policies to policyholders. The money from the policies is to be used for long-term care services like home health care, assisted living and nursing home services.

The bill allows owners to enter into life settlement agreements when their policies carry values in excess of $10,000. In order to cash in the policy, however, the bill stipulates that the lesser of 5 percent of the policy or $5,000 must be reserved for the final expenses of the policyholder.

Also, if the settlement beneficiary dies before the value is exhausted, the remaining balance must go to a beneficiary or the estate of the deceased.

The House bill was signed into law on May 27 and has already taken effect in the state. It is the first of its kind in the nation.

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