CLASS Act – A national long-term care insurance progran

What is CLASS Act?
The Community Living Services and Supports (CLASS) Act is a new national, voluntary long-term care insurance program; it was tucked into the Affordable Care Act passed by the United States Congress in 2010. It is federally administered but consumer financed. Its intent is to provide care for those unable to perform the activities of daily living.

How does the CLASS Act compare to the type of private long term care insurance that’s been available for many years? We asked Everett Lebherz, President of Evco Insurance Services, for his perspective as well as for a comparison to long term care insurance. Here’s what he told us.

Although long term care is very expensive, only about 5% of the U.S. population now has long term care insurance. For those who qualify, some of their long term care expenses will be covered by Medicaid. In fact, 60% of the cost of long term care for those currently enrolled in Medicaid is paid by the government. CLASS Act should change that.
What’s the purpose of the new CLASS Act?

The purpose of the CLASS Act is not to fix the problem with the majority of the private sector (who has no insurance or opportunity for government help). The purpose is to take a step towards turning long term care services and supports from a program funded largely by Medicaid (which provides approximately 60% of the money spent on eligible recipients each year) into one that is self-funded by having healthy participants pay for those participants in need of care. The plan is for any benefits under the CLASS Act to be supported solely by the premiums paid into the program.

Who qualifies?

• CLASS Act
  Everyone who is “actively at work”! The cost will vary only by age and concessions will be made for those who fall below the federal poverty income and for students under the age of 22. It is expected that this later group will pay only $5 until they no longer qualify for the concession at which point they will be charged the normal rates based on their age.
• Private long term care insurance
  Qualification is required but quite easy. If you are under the age of 70, you participate in a phone interview during which a cognitive test is given. Medical records are rarely ordered unless you have a pertinent pre-existing condition. If you are over the age of 70, medical records are ordered and a similar phone interview is conducted.

How can I enroll?

• CLASS Act
  Employers have the option to offer this program to their employees. If they decide to offer CLASS Act, every employee will automatically be enrolled in the program unless they decide to opt out. Premiums will be deducted from each employee’s paycheck.  If you work for a company that doesn’t choose to participate, there will still be a way for you to participate. However, the Secretary of State has yet to develop specific enrollment procedures.
• Private long term care insurance
  Any long term care insurance agent, such a Lebherz, can begin the application process. You can purchase this insurance on an individual basis and the government offers various tax credits to everyone who does so. When you contact an insurance agent, you will learn that there are spousal as well as family and group discounts if you can get your friends and family to apply with you. Employers also have the option to purchase private long term care insurance for their employees which can then be extended to family members.

When can I file a claim?

• CLASS Act
  You must be enrolled in the plan for five years prior to being able to file a claim. After that, you can qualify for long term care services if you are considered disabled. The law defines disabled for this purpose as having lost the ability to perform at least two activities of daily living such as bathing, eating, dressing and mobility. There is no mention of whether policy premiums will cease once a claim is being paid.
• Private long term care insurance
  Once approved, you can file a claim as soon as you need assistance with at least two activities of daily living. There is a waiting period, usually 30 – 90 days, during which you are responsible for the initial costs of the required services. Premiums typically cease as soon as the insured’s claim has been accepted.

 How solvent is long term insurance expected to be and how are premiums managed?

• Class Act
  By law, it is required to project 75 years of solvency. Many groups believe this project will prove incorrect; if that is the case, the Secretary of State has the ability to adjust premiums to ensure the solvency. In addition, the board of directors, appointed by the president of the U.S., will manage CLASS Act and may impose waiting periods for new enrollees if they find the fund estimates are incorrect.
• Private long term care insurance
  Rather than increasing premiums for current policy holders, it is likely that the insurance carriers will sell policies at a higher cost to new buyers. Once you have purchased a policy, it is expected that your premiums will remain level.

 What if I need long term care services now?

• CLASS Act
  Enroll in this program if you feel that you are in a financial position to pay five years’ worth of premiums…and expenses…prior to filing a claim. If you don’t think you’ll have enough assets to do this, some states have programs available so you can spend down your assets and file for Medicaid. For example, Medi-Cal in California will provide support if your assets are below $2,000.
• Private long term care insurance
  You should consult a private long term care insurance agent and determine the feasibility of a private plan.

What if I’m healthy and want protection?

• CLASS Act
  According to Everett Lebherz, the thing to do is to opt out. If you are healthy, there may be better options. The CLASS Act is new and has many kinks. Many people wonder whether it will ever completely roll out. If it does, it’s clear that those with pre-existing conditions or already claiming Medicaid benefits will enroll with hopes of assistance in five years. This leads some to believe that those currently in need of long term care will definitely file claims when the benefits are available, most certainly increasing the cost of policies for the rest of CLASS Act participants. As premiums increase, participation will probably drop. Since the program is self funded, this may cause the program to fail at some point, leaving people who were receiving care or had paid into the program for several years without the possibility of benefits.
• Private long term care insurance
  Plans can be designed to keep you in your home or to provide care in a facility. Plans can be adjusted to fit your budget and requirements. And premiums are more likely to remain level.

 What should I do?

The CLASS Act provides ample benefits for anyone who is unhealthy or already in need of long term care as long as they can wait five years for assistance and can accept the one benefit plan that CLASS Act provides everyone. If you are healthy, speak with a long term care insurance agent and explore the alternatives available on a private level. Look at all of your options before deciding what will work best for you.