California Task Force Plows Ahead With Long-Term Care Insurance Effort

What You Need to Know

The state task force wants to have a proposal ready by Jan. 1, 2023.
Members are talking about a program that would be funded with a combination of public funding and enrollee premiums.
One goal is to avoid the problems that cropped up in Washington state.

A California Department of Insurance panel is trying to develop a new long-term care insurance program — without duplicating the problems that crippled Washington state’s LTCI program launch.

The California Long Term Care Insurance Task Force has been meeting to sketch out a program that could involve a combination of government funding, enrollee premiums and private LTCI coverage.

Task force members hope to deliver a proposal, with a discussion of feasibility, by Jan. 1, 2023, and an actuarial report on the task force recommendations by Jan. 1, 2024.

What It Means

The Washington Cares Fund program may have had a fatal case of the hiccups, but state lawmakers still want to do something about the baby boomer long-term care cost crisis heading toward their Medicaid programs.

Anyone involved with retirement income planning, retirement health cost planning or long-term care planning needs to participate in professional groups or other organizations that can help them track and influence the changes.

A Long-Term Care Finance Primer

Medicare pays for skilled nursing home care and home health care for people who are seriously ill, or recovering from acute illnesses.

It does not pay for long-term care for people who simply have problems with the activities of daily living or who need supervision because they are coping with dementia.

Medicaid pays for nursing home benefits for people who qualify for state Medicaid nursing home benefits, based on state income and asset limits. In 2013, Medicaid paid about 51% U.S. long-term care bills; Medicare and other public health insurance programs paid 21%; and patients, patients’ families and private insurers paid the remaining 27%.

Private insurers once objected to the idea of Medicaid and other public programs competing with private insurers by paying for long-term care.

In recent years, many insurers have changed course and expressed support for well-designed programs that split long-term care costs between private insurers and public programs.

AB 567

The California Department of Insurance set up its LTCI task force in response to AB 567.

The California Long Term Care Insurance Task Force

Task force members have been discussing the possibility of creating a program that would provide $3,000 to $6,000 per month in LTCI benefits for eligible participants for a period of up to two years.

Participants would likely to have to pay premiums during a vesting period to qualify to receive LTCI benefits.

Task force members are still making many decisions about matters such as how long the vesting period might last, whether vested enrollees could file claims if they needed long-term care before age 65 and whether vested enrollees could use their benefits for care outside California.

The Washington State Shadow

Washington state tried to create a program that would use a 0.58% payroll tax to provide up to $36,500 in long-term care benefits for enrolled workers.

Workers could opt out of the program by getting private LTCI coverage.

Because of the way the opt-out rules were set up, workers who objected to the idea of paying the payroll tax rushed to get private coverage.

LTCI issuers believed that the new applicants would likely drop their coverage at the first opportunity. All significant issuers suspended sales in Washington state, at least temporarily, and the state’s LTCI is just starting to recover.

The state ended up delaying the start of the contribution pay-in period until at least mid-2023.