The CLASS Act KAFL Insurance Resources

What is the CLASS Act? Community Living Assistance Services and Supports. The American Assoc. of Homes and Services for the Aging describe it as: New voluntary nationwide long-term services and supports insurance program for persons with disabilities and seniors with chronic illness.

The CLASS Act is part of the Patient Protection and Affordable Health Care Act that was signed into law 3/23/2010. There are several details of the CLASS Act that are not defined yet and will be developed through regulation. The Secretary of Health & Human Services predicts those regulations will be completed by 10/1/2012.

Some terms are set in statute… Enrollees will be offered coverage through their employers and will automatically be covered unless they opt out. They will be able to opt back in at a later time if desired. Enrollees will pay a monthly premium. This hasn’t been determined yet, but early indications show the average premium to be $180-$240/month and could be increased annually to ensure the CLASS fund is actuarially sound. Premiums will continue to be due while receiving benefits, unlike with individual LTC policies where the premium is waived while on claim.

Coverage is on a guaranteed-issue basis. Enrollees will be eligible for benefits for their long-term care needs after paying premiums for the first 60 months of coverage and will have had to work at least three of the five years. (Basically a 5 year waiting period) The benefit is paid over the individual’s lifetime in the form of cash, based on the degree of impairment. The average benefit is expected to be $50/day or $18,000/year.

Gov’t Plan vs. Ind. LTC Policy It will be at least 2 years before the Class Act goes into effect and 5 years from then until any benefits are provided. That limitation, along with the minimal daily benefit should make anyone want to consider other possibilities.

Gov’t Plan vs. Ind. LTC Policy With individual coverage: The individual is not required to be working The individual is not required to be working The policy is designed to meet the individual’s needs and is likely to cover more of the cost of care. The policy is designed to meet the individual’s needs and is likely to cover more of the cost of care. The policy includes care coordination services and provider discounts. The policy includes care coordination services and provider discounts.

2011 UPDATE On March 17, 2011 there was a CLASS Act debate. Participants included people from the House of Representatives, the Senate, the Secretary of Health & Human Services, as well as actuaries from CMS. CMS actuaries believe the CLASS Act will be in the red by 2025.

An employee benefits specialist suggested some ideas to avoid some the adverse selection of participants that is expected at this point. For example, requiring participants work a minimum of 20 to 30 hours. Putting restrictions on one’s ability to opt out, and then opt in at some other time. Another suggestion is to include an elimination period and to make the benefits pay on a reimbursement basis rather than cash. The CLASS Act could also include scheduled premium increases based on the CPI.

A member of the Social Security Advisory Board suggested that employers would need to consider if their employee’s paycheck’s could handle additional deductions of up to $200 or $250 per month. Keeping in mind, that deduction would most likely increase regularly.

MedAmerica Simply Business – Simplicity ii 5% Discount Simplified Underwriting Voluntary enrollment requires a minimum of 10 employee lives issued, then spouses actively working 30 or more hours per week outside the home can also receive simplified underwriting.

Simplicity ii $300,000 account, paying out $6,000/month, 90 day elimination, 3% compound inflation Couple, both age 35 $79/month each Couple, both age 45$119/month each

Prudential Employer Sponsored Program – ESP Evolution 5% Discount Simplified Underwriting Employer must contribute $250 for each participant per year. Minimum required is 7 employees (issued), then spouses working 25 hours or more per week are eligible for simplified underwriting.

Evolution $300,000 account Paying 80% of actual expenses 90 day elimination 90 day elimination GIF (Guaranteed Increase Feature) Couple, both age 35$53/month each Couple, both age 45 $80/month each

Unum Guaranteed Issue Up to $6000/month for 6 years Minimum of 15 lives Employer must buy minimum base plan Spouses go through full underwriting

A CLASS Act Disadvantage… The public already ignores LTC because they think the government is going to pay for it… The CLASS Act will only solidify that thinking. Do you think $50/day is going to be enough for care?

A CLASS Act Advantage… KAFL, along with other industry professionals do feel that this will increase awareness for Long Term Care Insurance, therefore increase sales for field agents.

For more information as it becomes available, continue to visit the KAFL Insurance Resources website