Long-term care (LTC) insurance can be a tough sell to a limited market. Policies are often viewed as expensive thanks to well-publicized “average” costs, particularly as health care costs soar and companies raise premiums. Coverage is also often out of reach of buyers who wait too long and are locked out or priced out because of health and actuarial issues.
But some of that may change with a provision in the new health care reform law known as the Community Living Assistance Services and Supports (CLASS) Act. The CLASS Act, the provisions of which are still largely undefined, aims to put at least a modicum of long-term care coverage within reach of the working disabled by means of affordable premiums. People cannot be turned down because of pre-existing conditions, so even those with poor health will be able to get coverage.
So does this mean that private LTC insurance is a thing of the past? Not by any means. Not only are the bugs not worked out of the system yet, even when they are, coverage will not take the place of a private policy. Daily benefits of $50 to $75 will not go far at a nursing home or assisted living facility. People will have to wait quite a while for coverage even if they sign up as soon as possible; although some provisions take effect in 2011, details on how the plan will work are not required until the final months of 2012, and most experts don’t expect actual coverage to be available until 2013. And it remains to be seen whether premiums will indeed be affordable–or will stay so past the program’s inception.
Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), says the CLASS Act is “the legislative elephant in the room.” While the two defining factors–premium size and benefits offered–are still being worked out by the Department of Health and Human Services (HHS), “basically every insurance or financial professional who works with businesses of any size is going to have to become familiar with the CLASS Act, because their [business-owning] clients will be asking questions and . . . as early as 2012 will have to make some kind of decision–about offering it to their employees, or explaining why they are not offering it to them.” Slome sees three critical elements for business owners: price, benefits, and administrative requirements. Of the three, he says the last is actually the most important, because currently, although discussions are still ongoing, the CLASS Act is an opt-out plan. “If you have a hundred employees or a hundred thousand, you’re going to have to thoroughly educate them,” says Slome. “If they have not opted out [and did not want the coverage], you will have payroll deductions and a large number of unhappy employees.”
Some of the rules and regulations still to be determined are such questions as whether employees who neglected to opt out will be forced to remain in for a full year, and whether they can get their money back. While “it’s just too premature to even evaluate,” Slome adds, “I do believe that, because of the way the plan is supposedly going to take shape, an employer could say no [to providing CLASS Act coverage], but tell employees, ‘Since we declined to participate, you’re eligible to sign up on an individual basis.’”