The Community Living Assistance Services and Support plan (CLASS), a long-term care insurance plan sponsored by the government and passed as part of President Obama’s health care law, faces some new challenges, some from the president’s own deficit commission, which has recommended repeal or reform of CLASS.
Critics have charged that CLASS is not financially sustainable and will pose a long-term threat to efforts to reduce the deficit. Health and Human Services Secretary Kathleen Sebelius has said that her department will address issues of sustainability as it works to finalize regulations ahead of the 2013 rollout of CLASS.
At present, 40 percent of LTC is provided by Medicaid, which generally requires beneficiaries to spend down assets to qualify. In contrast, CLASS would be offered mainly as an option in employer-sponsored benefit plans. After paying premiums during a five-year vesting period, CLASS would provide an LTC benefit of not less than $50 per day.
Sebelius acknowledged that from an actuarial point of view there are sustainability problems with CLASS. Because of adverse selection, in which the applicant pool is skewed toward high-risk policyholders, not to mention the plan’s lack of a lifetime cap or the fact that insurers could not reject applicants due to preexisting conditions, after the five-year vesting period, CLASS would add to the deficit “in a large and growing fashion,” according to the Congressional Budget Office.
Furthermore, say others, CLASS would not attract the number of enrollees necessary to make it sustainable, in part because of high premiums. As Steve Schoonveld, an actuary who has studied CLASS, pointed out, “Most Americans haven’t dealt with the more basic issues of retirement saving and income — long-term care is nowhere near the top of their agendas.”