CLASS Could Be A Boon

For many in the long term care insurance business, the passage of the Community Living Assistance Services and Support Act was another setback.

In a period of declining sales, it’s easy to see why the industry largely viewed the arrival of a competing government-run LTC plan as ill-timed and poorly conceived.

CLASS, enacted in March as part of the Patient Protection and Affordable Care Act, may, however, turn out well for the industry.

The principal reason people aren’t buying LTC insurance is because they are not aware they need it, as Scott Olson, an LTC agent, pointed out in a letter to the editor of NU in November. The CLASS Act would make it difficult to ignore that need for 150 million American workers, noted Olson.

Those workers would be automatically signed up for the government plan in their place of work, starting in 2013.

Sure, the vast majority will opt out of this LTC plan, because it could take an estimated $123 average monthly premium out of their paycheck, depending on age, according to the Congressional Budget Office.

Yet the idea would be firmly planted in the mind of the typical worker that they truly must plan for future LTC needs. Otherwise, why would the government require employers to offer it as a voluntary benefit?

The benefits in the government program are clearly inadequate for most LTC events,. But therein lies the opportunity for LTC carriers and producers.

CLASS would provide only an estimated $75 a day in benefits (again, a CBO projection), a fraction of typical at-home LTC costs today. Those average $20.50 per hour, according to the American Association for Long Term Care Insurance, while Genworth Financial Inc.’s most recent survey of LTC costs found typical outlays for a licensed home health care aide now average over $43,000 a year.

Precisely because CLASS would cover just part of such costs, it creates openings for LTC carriers and producers to sell products that could be woven into the government plan.