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Insurers Try to Avoid Collision With State LTCI Program

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What You Need to Know

  • Mutual of Omaha is suspending LTCI sales in the state.
  • Thrivent is suspending sales through independent agents and outside advisors.
  • National Guardian Life has set tough new minimum standards.

Private insurers are deciding to opt out of dancing with Washington state’s new WA Cares Fund universal long-term care (LTC) benefits program.

The carriers say they want to make sure Washington state residents aren’t simply buying private coverage to avoid paying a new 0.58% payroll tax that’s supposed to cover the cost of the public LTC benefits program. The new tax is set to take effect Jan. 1, 2022.

Residents can opt out of the public program, and the tax, if they can show they have had private coverage in force before Nov. 1, 2021, under current program rules.

National Guardian Life Insurance Company — a relatively small carrier based in Madison, Wisconsin — has responded to the birth of the state’s LTC program by requiring applicants to buy richer LTCI policies and meet tougher underwriting standards.

Thrivent Financial for Lutherans  has cut off new LTCI policy sales through independent agents and outside advisors. The Minneapolis-based carrier is still selling LTCI policies in the state through its own agents.

Mutual of Omaha has suspended new LTCI sales in the state. The Omaha-based carrier says it hopes to resume LTCI sales there in November.

National Guardian Life, for example, told agents in a memo that it has started to see a surge in applications, and that most of the applicants are seeking the minimum amount of coverage needed to avoid paying the payroll tax.

Thrivent and Mutual of Omaha said they want to see that customers are using its LTCI policies in a manner consistent with the original intent to protect clients against the risk of LTC expenses.

WA Cares Fund History

State lawmakers created the new LTC benefits program three years ago, by passing the Washington State Long-term Services and Supports Trust Act.

The act requires many residents to either have long-term care insurance (LTCI) coverage from a private insurer or else pay a 0.58% tax on wages and stock-based compensation to the state, to pay for a public long-term care (LTC) benefits program.

Lawmakers are hoping the new universal LTC program will help reduce pressure on the state’s Medicaid program, which pays for nursing home care for poor state residents, and for other state residents who meet Medicaid nursing home benefits eligibility requirements.

In 2019, state voters voted 37% to 63% against the idea of paying the tax needed to fund the WA Cares Fund program. The ballot measure was nonbinding. State officials ignored the results of the advisory measure vote and kept on setting up the LTC benefits program.

The program is on track to pay up to $36,500 in benefits, starting in 2025, for eligible LTC program participants who need long-term care services.

Why Not Just Accept the New Applicants?

Jesse Slome, director of the American Association for Long-Term Care Insurance, said in a commentary on the WA Cares Fund program that the payroll tax-avoidance LTCI business could be bad business.

“Insurers realized that many individuals were likely buying low amounts of coverage and others intend to drop coverage once they achieve their goal of tax exemption,” he said.

Slome said Washington state may soon find a way to stop residents from buying a minimum amount of LTCI coverage simply to avoid the new payroll tax.

Stephen Moses, president of the Center for Long-Term Care Reform — a Seattle-based organization that promotes efforts to protect LTCI coverage from being crowded out by public LTC benefits programs, said in another commentary that the Washington state program belongs in “the government LTC insurance Hall of Shame,” along with the Medicaid nursing home benefits program and a program set up for public employees in California.

“The drafters of the WA Cares Fund should go back to the drawing board before they ruin the LTC insurance market in Washington state entirely,” Moses said.

The Seattle skyline. (Photo: happycreator/Shutterstock)


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