The long term care insurance industry is gearing up to oppose a provision in a Senate health care reform bill that would create a new LTC services entitlement program.
Both the American Council of Life Insurers and the American Association for LTC Insurance immediately voiced opposition to the provision, and officials of America’s Health Insurance Plans are also privately indicating deep concerns over the proposal.
Specifically, the ACLI said the provision is misleading Americans by telling them it would be sufficient to meet their LTC needs.
In fact, the ACLI said it does not support inclusion of the provision because the benefits it provides “will not adequately protect Americans who are truly in need of long term care.”
Moreover, added Jessie Slome, executive director of the AALTCI, the LTC insurance industry can already provide more coverage for less cost to the average 55-year-old.
Slome said introduction of the proposal means “this is no time for the industry to be silent.”
He said that on the Internet, “millions of people will read that President Obama supports a federal LTC plan and will say ‘I’ll wait.’
“This is a time for the industry to speak out because we have over 8 million policyholders and several hundred thousand people who buy insurance every year and tens of thousands of insurance agents who also want to know what the future means for them.”
The provision is known as the Community Living Assistance Services and Supports Act, or CLASS Act. It was included in the committee print of health care reform legislation unveiled by the Senate Health, Education, Labor and Pension Committee on July 7. It is known as Section 191 of the HELP Committee version of the legislation.
The HELP Committee was scheduled to complete drafting its version of health care reform legislation last week.
Under the scenario outlined by congressional Democrats earlier this year, the HELP panel’s bill was supposed to be meshed with legislation being developed by the Senate Finance Committee this month, and work on both the Senate and House bills completed by early August. That was designed to meet President Obama’s goal to have a bill on his desk by October.
But, the chances of that happening are slipping rapidly. For example, Sen. Kent Conrad, D-N.D., said he doesn’t want the calendar to become the enemy of the legislation and that he believes there would be time after the August recess to come back and get a bill finished.
The LTC provision calls for limiting the average premium to $65 per month in 2011 and indexing it for inflation in subsequent years. Under the provision, the program would be administered by the Department of Health and Human Services.
But Slome says the $65 premium is actually is $780-a-year premium. “By contrast, we just issued our annual prime index, which shows that a 55-year-old would pay $723 a year for a $100 a day benefit.”
That is an average, he said, for a person who is married, where the spouse also buys the same contract, and who qualifies for the good health discount.
“So, in essence a large majority of consumers can get far more protection for comparable cost and the Congressional Budget Office said the federal plan is likely to be underpriced,” he said.
In other words, Slome said, this is “a legislator’s dream because you have money coming in from taxpayers for 5 years with zero expenses, and what legislator wouldn’t favor a plan that has the potential to bring in billions of dollars of income with zero risk of expenses guaranteed for a 5-year window?”
The problem, he said, “is that after 5 years, the claims are going to begin, and if it attracts people who have a likelihood of health conditions the claims will start immediately and will escalate exponentially.
“So what they are doing is creating an entitlement plan that will never be adequately funded and will burden future generations with an enormous tax liability,” Slome said.
Senate Republicans are also voicing skepticism, as is the Congressional Budget Office.
To qualify for benefits, an enrollee would need to have paid premiums for at least five years and been actively working for at least three of those years; the enrollee “also would have to be unable to perform at least two or three activities of daily living.”
The provision was added at the direct request of Sen. Edward Kennedy, D-Mass., chairman of the HELP Committee. It also has the backing of President Obama, and Kathleen Sebelius, HHS secretary, who sent a letter to the committee voicing strong support for it.
The HHS would have considerable authority to adjust premiums and benefits to maintain the solvency of the program.
Moreover, under the prodding of Republicans, the CLASS Act was amended during markup to require the HHS secretary to make annual adjustments to the program’s premium and benefit amounts to ensure the program’s solvency over the long term.
It did so at the request of the CBO, which is questioning the viability of the program. The CBO said in “scoring” the provision that while it would reduce the federal deficit during its first 10 years of operation, it would be potentially adding significantly to the deficit beyond that.
But, the CBO estimated that by raising the premium to $85 per month and capping benefits at the $50 daily maximum, the program could remain solvent through 2050.
However, in a letter to members of the committee, Frank Keating, president of the ACLI, said the trade group is concerned “about the confusion that would be created by offering a government-sponsored long-term care program.”
The letter further argues that the provision would only cover about 12% of the total cost of their potential around-the-clock home health needs.
Indeed, the provision only further misleads the more than 60% of Americans “who mistakenly believe that Medicare will help them pay for their long-term care needs,” Keating said
He also questions the basic concept of the plan. Keating explains that with the cost of a nursing home currently averaging $75,000 annually and home health services running as high as $46 per hour, “the daily benefit of $50 under the CLASS program would not be nearly enough to cover the cost of a full day of these services.”
In addition, he said, “the false sense of security created by $50 per day of inadequate coverage will cause people who can and should plan ahead for their long-term care needs not to take appropriate action.”