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PPACA: Sebelius Ponders CLASS Fix

By Allison Bell

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U.S. Health and Human Services Secretary Kathleen Sebelius says regulators are coming up with ideas for keeping the new federal worksite long term care (LTC) program stable.

Sebelius, a former Kansas insurance commissioner and former president of the National Association of Insurance Commissioners, Kansas City, Mo., talked about the Community Living Assistance Services and Supports (CLASS) component of the Patient Protection and Affordable Care Act (PPACA) today at a briefing organized by the Washington office of the Henry J. Kaiser Family Foundation.

The CLASS Act program can help provide security and dignity for Americans with Kathleen Sebelius - CLASS Actsevere health problems and disabilities, Sebelius said, according to a written version of her remarks provided by the U.S. Department of Health and Human Services (HHS).

“That said, President Obama and I have also recognized that the CLASS statute wasn’t perfect,” Sebelius said. “Many of the changes proposed to the Senate health reform bill that would have improved the CLASS program’s financial stability were not included in the final legislation.”

But Sebelius said she believes the PPACA provisions that created the CLASS program give HHS officials the flexibility and authority to put the program on firm footing for years to come.

THE CLASS ACT

The CLASS Act is supposed to create a voluntary worksite LTC benefits program. Insurance groups and actuaries at the Centers for Medicare & Medicaid Services have criticized the program and argued that it will be actuarially unsound.

Budget analysts say the CLASS Act would reduce the cost of implementing the Affordable Care Act up until 2014 but then would add $76 billion to the deficit from 2015 to 2020.

The leaders of a presidential deficit commission argued in December 2010 that the CLASS Act program must be reformed or repealed..

SEBELUS’S IDEAS

Sebelius acknowledged that the deficit commission had criticized the program but said some of the challenges could be addressed to by taking steps to avoid antiselection.

CLASS program managers cannot engage in the kind of underwriting

found in private insurance, but program managers can spread risk as broadly as possible by making sure the program is attractive to workers and easy for employers to administer, Sebelius said.

Program managers can make the program more appealing to employers by calculating workers’ premiums, so employers don’t have to, Sebelius said.

“Another option would be to change the employment and earnings requirements for the program,” Sebelius said. “The CLASS program was designed to protect the workers of today against future needs. That’s why it included a requirement that people earn a certain amount of money in order to participate. But if that standard is set too low, we may have too many enrollees who will quickly claim benefits thereby threatening CLASS’s financial viability. That’s not the intent of this program, so we will look closely to make sure we’ve picked the right cut-off.”

HHS officials also are looking for ways to keep workers from skipping premium payments and then re-enrolling in the program without paying any penalty, Sebelius said.

Sebelius also talked about program premiums.

Instead of setting the initial premiums very high, making it difficult to attract a broad base of enrollees, or setting initial premiums too low to support the promised benefits, program designers are “looking at options for indexing premiums so they would rise along with benefits,” Sebelius said.

“And because we know that many Americans have had their confidence shaken by large premium hikes over the last few years, especially in the long-term care insurance market, this indexing system would have to be completely transparent,” Sebelius said. “That way, people could plan ahead without being surprised by sudden large rate increases.”