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November 03, 2021 at 10:33 AM
What You Need to Know
- The program is supposed to use a payroll tax to fund a public LTC benefit.
- Workers can get out of the tax by buying private long-term care insurance.
- The rush for workers to get just enough coverage, just long enough, to beat the tax has been interesting.
Implementation of the Washington Cares Act — legislation that calls for Washington state to use a payroll tax to a fund a new LTC benefits program— is definitely an unusual development in the long-term care industry.
Agents are asking me about the reasoning behind this legislation, and about the impact of the legislation on carriers and agents.
The short answer: For those of us who have been personally involved in the launch of this unprecedented effort, the last few months have been overwhelming, busy and stressful. This is true both for agents and for people who work for the carriers.
Washington Cares Act Program Basics
The act creates a payroll tax of 0.58%. There is no cap on the amount of income subject to the tax.
A worker who pays the tax will be entitled to public LTC coverage of $100 per day for a year. The benefit can be used only in Washington state.
Residents could opt-out of the tax if they bought a private LTC policy by Oct. 31.
The Reasoning
So, why did Washington state create this program?
Americans are aging.
The U.S. age 65-and-over population is projected to grow to 71 million in 2030, from 35 million in 2000.
Projections suggest that, in 2029, 60% of middle-income seniors will have mobility issues, and that 20% will have high health needs and functional needs.
About 54% of these middle-income, high-need seniors will lack the financial resources to pay for the needed care. That means they will be depending on Medicaid or welfare, if available, to pay LTC-related expenses. Medicaid could account for 12% Washington state’s operating budget in 2030, up from 6% today.
Other states face similar situations. The big question for state governments is how will they handle this rapidly approaching financial burden.
Washington state’s solution is to introduce a payroll tax to meet residents’ LTC needs.
Washington State’s Results
Washington state has about 5 million resident who are ages 15 through 64. As of Oct. 29, more than 280,000 had applied for exemptions from the state’s long-term-care fund.
Here’s how that wave of applications affected the carriers.
