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Washington State Long-Term Care Program Adventures

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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.

More on this topic

Issuers of Stand-Alone Long-Term Care Insurance: These insurers usually get a few hundred applications from Washington state in a year. Over the course of just a few weeks this year, they received almost 13,000 applications.

Issuers of Hybrid Products: These products combine LTC benefits with life insurance or annuities. Before the Washington state Cares Act payroll tax loomed, they would get five to 10 applications from the state per week. Application volume initially increased to 100 a week, and then ballooned to 1,000 a week.

A Confession

I’m involved in this myself, both as a mother and as an LTC specialist with ACSIA Partners.

In May, I received a panicked phone call from my younger son, who lives in Seattle. He had calculated his potential tax. He and his wife would be taxed on their salaries, bonuses and capital gains on stocks they recently sold. The solution for them was to opt-out of the text, by buying private coverage. They selected a hybrid policy.

In June, in connection with my role with ACSIA, I was asked to work on several Washington worksite cases.

Usually, I have about 12 client appointments per week.

This summer, I was averaging 66 appointments per week. The number of clients was overwhelming!

The Impact

Is this a boon for insurance companies? That is unclear right now.

What’s Next

Washington state is definitely not alone in this situation. Every state is expecting to see its Medicaid LTC expenditures soar.

Other states are watching the progress of the Washington Cares Act program closely.

Already, 30% of states have indicated that they are considering the idea of introducing a similar LTC benefits tax.

Here are some states that seem especially interested: Alaska, California, Colorado, Hawaii, Illinois, Massachusetts, Michigan, Minnesota, Missouri, New York, North Carolina, Oregon and Utah.

A Crystal Ball Project

I am working with Chris Petillo, an attorney with Faegre Drinker Biddle & Reath, a law firm that represents many LTC carriers. We both have a front-row seat, so we can stay on top of what is what is happening concerning this new development.

We will be monitoring the spread of this type of legislation to other states and how they are structuring their LTC program rollouts and requirements. Our research will include the impact on the insurance companies and on agents.


Margie BarrieMargie Barrie, an agent with ACSIA, has been writing the LTC Insider column since 2000. She is blogging about long-term care planning with Chris Petillo, and preparing to launch an LTC podcast series, at Faegre Drinker’s LTCi Summit website.