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SD 656

An Act to increase the Medicaid life insurance exemption

194th Legislature (2025-2026) Introduced by Peter Durant and 1 co-sponsor

Raises Medicaid asset protections by exempting up to $10,000 of combined permanent life insurance face value from asset tests (inflation-adjusted); term life stays excluded.

House concurred
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WeVote Research Nonpartisan
Bill Summary · SD 656

Summary: Senate Bill SD 656 — An Act to increase the Medicaid life insurance exemption

Overview

SD 656 proposes to modify Massachusetts Medicaid eligibility rules by increasing protections for life insurance with cash value held by applicants or recipients. The bill adds new provisions to Section 25 of Chapter 118E and creates a distinct framework for how permanent life insurance is treated in asset tests, while continuing to exclude term life insurance from Medicaid calculations.

Key provisions

  • Definitions added (new subsection 6):

    • Cash Surrender Value (CSV): the cash amount available if a policy is canceled before death or maturity.
    • Term Life Insurance: coverage for a fixed period with no cash value; excluded from Medicaid asset calculations.
    • Permanent Life Insurance: policies such as whole life or universal life that accumulate cash value.

  • Exemption amount:

    • Life insurance policies with cash value are exempt up to $10,000 in face value. This exemption applies to the combined face value of all permanent life insurance policies (whole life, universal life, etc.) held by the Medicaid applicant or recipient.

  • Inflation adjustment:

    • The face value exemption will be adjusted for inflation every five years based on the Consumer Price Index (CPI). Adjustments are to be rounded to the nearest $100.

  • Term life insurance:

    • Term life policies remain excluded from Medicaid asset calculations (they do not accumulate cash value).

  • Reporting requirement:

    • Every three years, the Office of Medicaid shall report to the Senate and House Committees on Ways and Means on the financial impact of the increased exemption. The report will cover effects on beneficiary access to life insurance and on funeral costs covered by these policies.

Who is affected

  • Medicaid applicants and recipients who own permanent life insurance policies with cash value (e.g., whole life and universal life) will be impacted, as up to $10,000 of their combined face value of such policies may be exempt from asset calculations.
  • Individuals with term life insurance remain unaffected in terms of asset calculation, since term policies continue to be fully excluded.

Financial and programmatic impact

  • The exemption could reduce the Medicaid asset value of some applicants, potentially enabling continued eligibility or recovery of eligibility for those with modest permanent life policies.
  • The CPI-based inflation adjustments could expand the exemption over time.
  • The mandated biennial and biennial-ish reporting will inform lawmakers about broader effects on program costs, beneficiary access to life insurance, and funeral cost coverage.

Procedural timeline and status

  • Introduced: February 27, 2025
  • Referred to: Committee on Financial Services
  • Status: House concurred
  • Legislative actions date: 2025-02-27 (referred) and 2025-02-27 (House concurred)

Notes

  • The bill clarifies terminology around cash value versus face value and aligns Medicaid calculations with a defined exemption for permanent policies while preserving existing exclusions for term policies.

Compiled from official sources — confirm details with the bill’s official record.

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