LTC Expert Critiques CLASS Act

The passage of the CLASS Act as part of the health care reform package recently enacted by Congress may make more Americans aware long term care is an overlooked gap in their retirement planning, an expert says.

"However, we are alarmed that too many individuals may be seduced into thinking that CLASS will indemnify their estates against the catastrophic expenses associated with a chronic illness or accident," said Stephen D. Forman, senior vice president of Long Term Care Associates, Bellevue, Wash.

He points out that CLASS-- the Community Living Assistance Services and Supports Act--has a 5-year vesting requirement, which means buyers of this government-backed LTC insurance would have to pay premiums for 60 months before they can apply for benefits, explained Forman. "But few are aware of the 2-year deferral requirement imposed on CLASS beneficiaries who lapse more than 90 days," he said.

This provision is a way to prevent sick individuals from flocking back into the program after they have let their policies lap. It "means such individuals may have to pay for their own care for the first 24 consecutive months before CLASS would pay," he said.

Some also may not realize that if they opt out after just 1 payment and later opt in more than 5 years in the future, they would pay "a massive penalty," Forman said. So if a young worker who has just 1 deduction from her paycheck at age 38 later decides to opt-in when she's 59, her premiums would be higher than they would have been had she stayed in the program. In the example given, "the rate increase will be no less than 250% on each payment, which is CLASS's penalty for opting back in."

CLASS also provides that the life independence accounts, as they are called, may not be used to pay for assisted living or nursing home care, but rather for long term care received at home, Forman said.

"Adding insult to injury, CLASS beneficiaries who fail to claim their 'rolled over' benefits by the end of each year will find that the government has recouped them in a use-it-or-lose-it fashion," he said.

He noted, too, that while the law states that benefits set under CLASS may not be less than $50 a day, "the average cost of a Medicare-certified home health aide in 2009 was $46.22 per hour."

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