There is no doubt that long term care insurance is important. According to the Kaiser Family Foundation, more than 10 million Americans need some form of long term care to help them with their activities of daily living. In the event that the same thing should happen to your client, long term care insurance (LTCI) can protect their income and the future of their family. And ever since he became president, Obama has been making an effort to make long term care more affordable for everyone.
The administration’s latest effort, the Community Living Assistance Services and Supports Act (CLASS), is a provision of both the House and the Senate health care bills that would create a voluntary national LTCI program. But what, exactly, does the program entail? And, more importantly, what would it mean for your business if it passes?
The CLASS Act, which was introduced by Sen. Edward Kennedy, includes the following provisions:
- Premiums. The program would be funded through monthly premiums in the form of payroll deductions. Premium payments would be placed in a “Life Independence Account” on behalf of each eligible beneficiary and managed by the Department of Health and Human Services (HHS) as a new insurance program. Monthly premium amounts would be determined after the program was established with respect to maintaining 75-year program solvency. Those below the poverty level, as well as full-time students, would pay nominal premiums.
- Enrollment. Working adults would be automatically enrolled in the program, unless they opted out. If an employer chose not to participate, an alternate method would be set up for those working adults who wished to enroll.
- Eligibility. To receive benefits, individuals must be 18 years old and have contributed monthly premiums to the program for at least five years. Benefit eligibility would be determined by the state and limited to individuals who were unable to perform two or more activities of daily living (e.g., eating, bathing, dressing, etc.) or individuals who had a cognitive disability requiring supervision or hands-on assistance to perform those activities (e.g., traumatic brain injury, Alzheimer’s disease, multiple sclerosis, mental retardation, etc.). Individuals would receive benefits when they demonstrated that their condition would likely last for a continuous period of at least 90 days.
- Benefits. Benefits would be paid out of a trust fund consisting of enrollees’ premiums and interest earned on its balances, and posted to a debit account for withdrawals. Those receiving benefits would receive an average of no less than $50 per day, depending on the severity of their impairment. Unused benefits could roll over from month to month, but not year to year.
- The CLASS Act would work in conjunction with other health services and support programs, such as Medicaid. Eligibility for CLASS would not affect eligibility for other programs.
So where does that leave you? One of the goals of the CLASS Act is to reduce the role of Medicare, which pays for 40 percent of all the personal care needs for seniors and the disabled. The legislation is gaining a lot of support from senior groups. But there is a fear, as there always is with untested legislation, that the program could repeat the flaws of previously well-intentioned programs. In fact, there are even several experts – including the chief actuary of the Centers for Medicare and Medicaid Services – who have claimed that the program simply won’t work as designed.
It is also important to remember that CLASS is not meant as a direct substitute for private LTCI; you can still sell LTCI policies to supplement the government program. If anything, all the recent media attention directed at LTCI might give you another opportunity to bring it up to your clients. For any prospect who says they would rather wait around for CLASS, try bringing up a side-by-side comparison of the government program and a policy that you would create for them. Show them why yours is stronger, and explain to them the benefits of acting now to purchase LTCI instead of waiting for Congress to pass legislation (which may or may not be practical).
Only time will tell whether the act will pass, and what kind of effect it will have on the long term care industry and your business. But if the legislation fails, there will be a lot more people who are aware of the need for LTCI, and they will be looking for viable options. If CLASS succeeds, and the program proves adequate, than at least people will have the coverage they need in the event of a health crisis.
Heather Trese is the associate editor of the Agent’s Sales Journal. She can be reached at [email protected] or 800-933-9449 ext. 225.