PORTLAND, Maine — Chris Orestis has attracted millions in investment to Life Care Funding, the company he started in 2007, but the veteran insurance industry lobbyist is counting on old skills to grow the still-young venture nationally.
State legislators are the next battleground for the company, which buys life insurance policies primarily from middle-class people who, instead of supporting dependents after they die, need to cash out the policy to pay for long-term and end-of-life care.
A bill to encourage seniors to consider that option was tabled last year in Maine, after Maine’s Department of Health and Human Services and the American Council of Life Insurers said the matter required further study before law or regulatory changes are considered.
Orestis said his company is planning another push.
“We’re waiting to see what happens with the governor’s race and then trying to bring that back in the state of Maine,” Orestis said.
So far, Texas and Kentucky have passed such laws. Maine is one of 10 states where similar legislation has been proposed.
Perhaps the one thing less pleasant than thinking about end-of-life care is thinking about how to pay for it, but it’s a concern destined to be on the mind of more and more people and caregivers, especially in oldest-in-the-nation Maine.
“At midnight in 2011, the very first second of 2011, the first baby boomer turned 65 and they have since been turning 65 at a rate of about 10,000 a day,” Orestis said. “When the [stock] market collapsed and baby boomers just kept coming and coming — but running out of ways to pay for care — we were standing there with a way to access a massive pool of assets.”
The company buys life insurance policies for an average of 45 percent of the value of the death benefit, paid when the policyholder dies. On a $100,000 policy, that means the policyholder would have about $45,000 placed in a secured account to pay for care.
Orestis said that setup, opposed to getting cash for a policy through what’s called a life settlement, is more secure for the policyholder and helps prevent financial elder abuse.
Life Care then holds onto the policy, paying the required premiums, until the policyholder dies. All told, Life Care aims to make about 10 percent on each purchased policy.
Orestis said the benefit for policyholders is they have more options paying privately than going onto Medicaid.
“You’d have more options as a private-pay person,” said Rick Erb, president of the Maine Health Care Association, which supported the mandatory disclosure bill last year. “Even if the facility does accept MaineCare [Maine’s version of Medicaid], it might not accept [MaineCare] for all of the beds.”
That’s the case at Avita at Stroudwater, a Scarborough assisted living facility designed specifically for housing people with memory loss. The facility has 70 apartments, 10 of which are MaineCare beds and, accordingly, come with a longer waiting list.
Lea Rust, the facility’s marketing coordinator, said converting life insurance policies to pay for care is relatively new to caregivers, but provides another option she thinks has promise for patients looking at care where they’d pay privately.
“It’s our job to educate people because I don’t think that families are even thinking about it,” Rust said. “I think they’re just looking for money where they can find it.”
The demographic trend has coincided with economic factors, such as the crash of the housing market that contributed to a national drop in median net worth, and pressure on federal Medicaid spending to drive demand from people and policymakers for other payment options like assisted living, hospice or home care.
In the next year, Orestis hopes all of those forces will fuel “a viral spread” of legislation mandating disclosure that elderly residents can turn life insurance policies into a way to pay for long-term care.
That push has won the company national press in the Wall Street Journal, Fox Business News and other outlets documenting the Maine-based company’s influence on Medicaid policy across the country.
Beyond its legislative work, the company’s business has surged after being bought out last year by the $16.5 billion investment firm Resource America, which gave the Portland-based Life Care Funding access to a $100 million line of credit that’s supported its expansion growth to 24 employees with offices in Los Angeles and New York.
Seed funding for the business was about $1.5 million for the first three years, up to 2010. Since then, Orestis said the company’s steadily doubled the book value of policies it’s acquired and it has partnerships with more than 6,000 assisted care facilities that refer potential residents to Life Care, mostly in larger states like Texas and California, he said.
The business was born from his combined experience as a lobbyist for the life insurance industry and being the son of John Orestis, the owner of the largest nursing home company in the state, North Country Associates.
The younger Orestis said many people abandon their life insurance policies in order to fall under the income and asset limits to qualify for Medicaid.
“The insurance companies could collect premiums for two or three decades, and when a person walks away from the policy, they don’t have to pay the death benefit,” Orestis said. “That’s happening across the country.”
He estimates there are hundreds of billions of dollars held in about 153 million life insurance policies in the country. About a half million of those policies cover Maine residents, with a combined value of $98 billion. But his company serves a particular niche in that market, with policies worth $50,000 to $500,000.
“[Other companies] were looking for clients with a $5 million or $10 million life insurance policy… and we found those people don’t need help with long-term care,” Orestis said.
About 15 percent of the people who contact his company ultimately convert their life insurance policies to secured funds to pay for care, Orestis said.
Reaching into that market has required steep upfront investment to buy policies that may not generate any return for two or more years. After the new investment last year, it’s put the company on track for its first profitable year in 2016 or 2017.
“We’re not in a building or proving mode,” Orestis said. “It is scaling now. The model is proven and the pieces are built.”