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Life After CLASS

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A memorandum issued on Oct. 14th by Kathy Greenlee, administrator of the CLASS program, to Department of Health and Human Services Secretary Kathleen Sebelius concludes that, “I do not see a path to move forward with CLASS at this time. I recommend that we work together with Congress and stakeholders, including consumers, insurers and employers, to continue exploring all of the options to address the critical long-term care needs of Americans.”

However, the cessation of efforts to implement the CLASS Act does not eliminate the financial long-term care tsunami about to impact American families and taxpayers who already bear much of the cost.

In a sense, CLASS was overly ambitious, especially considering the current economic climate. But ignoring the problem will not make it disappear. What we need are more realistic approaches that can help Americans face and address this issue.

For those who market private long-term care insurance, the shelving of the CLASS Act is in a way anti-climate. That’s because the private long-term care insurance industry will benefit significantly with the government clearly unable to address the issue.

Some insurance professionals anticipated that CLASS would have a positive impact, believing the projected $90-million CLASS awareness program would propel private LTCI sales.

Others, myself included, predicated short-lived positive growth, but we had serious concerns that CLASS would morph private LTCI into more of a supplemental product, similar to Medicare Supplement, and rapidly close down the employer marketplace.

No Plan B

The Obama administration has no Plan B and clearly shows no interest in addressing the issue despite pleas from those who originally advocated the federal program. Advocates keep proposing initiatives that require a new universal or mandated plan. Yet President Obama received much heat for health-care reform; therefore, there are probably not enough votes to make him step on this third rail at this time.

This could be good news for agents. They can capitalize on the demise of CLASS by emphasizing that the government is clearly not going to address the issue of long-term care financing for years to come. The end of CLASS makes the choices very clear for consumers: Either they can plan for their own long-term care or risk that a government program will exist in the future when you are likely to need care.

What’s more, the demise of CLASS will be especially positive for agents selling to businesses. CLASS created a third option and a reason for many employers to delay taking action until details regarding the government program were available. Now, an employer has only two alternatives: offer a long-term care insurance benefit to their employees or ignore the issue entirely. With CLASS off the table as an option, we expect enormous growth in employer-offered plans.

Jesse Slome is executive director of the American Association for Long-Term Care Insurance.


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