The Health Insurance Portability & Accountability Act (HIPAA) of 1996 (also known as the Kennedy-Kassebaum Bill), successfully addressed three items that affect long-term care insurance. These included the following:

1. Tightening up Medicaid eligibility requirements
   
   
2. Setting state standards on long-term care insurance
   
   
3. Offering tax incentives for those persons who purchased long-term care insurance

HIPAA designated two types of long-term care insurance policies: tax-qualified (TQ) and non-tax qualified policies (NTQ). The tax-qualified policies are the ones that adhere to HIPAA criteria that standardized long-term care policies and offer tax incentives. The differences of the two are described in detail in the TQ vs. NTQ section.

Long-term care insurance policies that were purchased before January 1, 1997 (when HIPAA was implemented) were grand fathered in and are considered tax-qualified (TQ) for federal purposes. They will remain tax-qualified if there are no material changes made to them.

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Important Note: The information in this section is only intended as a general overview and is not intended to provide tax advice. There may have been changes in the tax law that may affect the information in this section. Please consult a tax-advisor for specific tax advice.