A number of judicial opinions have addressed the impact that the existence of a secondary market for insurance products can have on a person who is seeking government benefits.
Lopes v. Starkowski, Civil Action No. 3:10-CV-307 (JCH), 2010 WL 3210793 (D.Conn. Aug. 12, 2010), is one such opinion. There, the question was whether Mr. Lopes qualified for Medicaid coverage of his nursing facility expenses. Income to Mrs. Lopes would put Mr. Lopes over the qualification threshold - if her income was defined to income payments from an annuity that she purchased. If not, then he would be within the limit, and qualify.
This is where the secondary market question comes in. As the court said:
[Supplemental Security Income Program] regulations provide that, 'if an individual has the right, authority or power to liquidate the property, or his or her share of the property, it is considered a resource.' 20 C.F.R. § 416.1201(a)(1). . . . Therefore, while Mrs. Lopes may be capable of assigning her right to receive payments under the annuity, if such an assignment would require her to breach her legal obligation [under the annuity] to [The Hartford] [which issued the annuity], the ability to make such an assignment is not a sufficient basis to characterize the income stream of her annuity as an asset (or 'resource') under SSI.
Mrs. Lopes provided the court with a letter from The Hartford stating that the annuity was not assignable. The defendant Connecticut Department of Social Services also produced a letter, from secondary market company Peachtree Financial Services, where Peachtree stated it would be willing to purchase the annuity.
The Court noted, however, that Peachtree indicated only its willingness to purchase the annuity if the purchase would be accepted by The Hartford, and that The Hartford's letter "makes clear that no such change would be acceptable (or even permitted) under the terms of the annuity."
A copy of the Starkowski decision can be found here(via sharinglaw.net).