Republicans Conclude CLASS Act Should Be Repealed

The Joint Economic Committee comprised of Republican Senators issued a report last week referring to the CLASS Act as “a Ponzi scheme of the first order” a quote attributed to Senator Kent Conrad (D-ND).

CLASS, which stands for Community Living Assistance Services and Supports, was included within the health care reform legislation recently signed into law. The new voluntary federal payroll deduction long-term care program will provide a cash benefit to disabled or memory-impaired adults who need help with activities of daily living.

While Congress passed the law including the CLASS provisions, certain key program details including price and benefits have been left to the Secretary of Health and Human Services. In addition, the program start date that many believe won't happen until 2013 has been left to the Secretary's discretion.

The Committee report’s conclusion: “As currently designed, CLASS will not be able to sustain itself without subsidies from taxpayers or from all workers in the form of mandatory enrollment. ”

The report continues, “In addition to being unsound, the program is unnecessary. Americans already have an array of private long-term care insurance options to choose from; many are more economical than CLASS, most offer richer benefits.”

The report ends stating that “The best remedy for the unsustainable, unaffordable CLASS program is to repeal it.”

“This is the first time we've heard the word ‘repeal’ when referring to the CLASS Act,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance (http://www.aaltci.org). “I actually wish the federal government would finalize the pricing and benefits for the CLASS plan as soon as possible because employers and consumers are confused by the lack of details."

The CLASS program is designed to be offered primarily through employers. Workers will then be auto-enrolled with the right to opt out. The Congressional Budget Office (CBO) estimates that only 3.5 percent of the adult population, or 10 million people, will enroll by 2019.

"Individuals and especially employers need to know as soon as possible how much CLASS will cost and whether it will provide only a $50-per-day benefit or one that is higher," Slome adds. "It shouldn't take that long to figure this all out."

NOTE: IF you would like a PDF of the Joint Economic Committee report, send me an E-mail. Request: "Joint Report CLASS" and I will be glad to send to you. Write to: jslome @ aaltci.org .

Long Term Care Insurance Trade Organization Applauds Baucus Proposal

The American Association for Long-Term Care Insurance, the industry's national professional organization, commended Senate Finance Committee Chairman Max Baucus (D-Montana) for including a proposal to allow cafeteria plans to offer qualified long-term care insurance as part of his health care reform package.

The proposal was part of the Senator's "America’s Healthy Future Act," health care reform legislation which the Senator notes is intended to lower costs and provide quality, affordable health care coverage.

The health care reform proposal will make it easier for families and small businesses to buy health care coverage including long-term care insurance, ensure Americans can choose to keep the health care coverage they have if they like it and slow the growth of health care costs over time. The Finance Committee will meet to begin voting on the Chairman’s Mark next week.

The proposal recommends creation of a Simple Cafeteria Plan – a vehicle through which small businesses can provide tax-free benefits to their employees. This change would ease the participation restrictions and include self-employed individuals as qualified employees. The proposal also exempts employers who make contributions for employees under a simple cafeteria plan from pension plan nondiscrimination requirements applicable to highly compensated and key employees.

Finally, the proposal allows for qualified long-term care insurance to be provided under a cafeteria plan to the extent the amount of such contributions does not exceed the eligible long-term care premiums for the contract. This proposal is effective beginning on January 1, 2011.

The full text of the America’s Healthy Future Act is available at http://finance.senate.gov/sitepages/leg/LEG 2009/091609 Americas_Healthy_Future_Act.pdf

Long Term Care Insurance News You Never Hear

Increasingly, we get calls from reporters who are doing more in-depth stories about long term care planning and the role of long-term care insurance.

First, it is a great feeling to help them get the portray a correct story since their words, whether written or oral can influence so many prospects and potential buyers. Friday, a national editor who I have worked with before called the American Association for Long-Term Care Insurance's offices. At this point, I won't reveal the story being working on but in the ensuing research I did - two pieces of information emerged. They are examples of when long-term care insurers go beyond what is required. You may not be familiar with them.

The first involves Genworth's new policy being offered to AARP members. The policy offers a 60-day return policy. In simple terms, the consumer can return the policy within 60 days for a refund of monies paid. As most insurance agents know, the standard "free look" required by law is 30 days. Now, it bears stating that the State of Washington just passed a law mandating the 60-day provision. Who knows whether other states will follow.

And, in speaking with a long-time Genworth producer, it was noted that in an effort to provide outstanding customer service the company has not held rigid to the 30-day cut off. But clearly there was someone who thought this was a customer-friendly provision ... and agreed to make it available.

The second story involves John Hancock. In recognition of the weak economy, the company allows (or allowed, I am not sure if the practice continues) policyholders who lose their jobs and fail to pay premiums for a certain period of time, to reinstate their policies without the typically-required health underwriting. What a recognition of going the extra mile to help the people who showed the good faith and sense to buy your product.

Having worked with the media for most of my life, every reporter will tell you it is not their job to "shill" for a company. So don't ever expect to read about these items in the news.

But, in the current environment we are in -- and with the news media focusing so much attention on negatives surrounding the insurance industry, it's good to know there are insurers doing well because they do good. That's a message the American Association for Long-Term Care Insurance is proud to help convey.

If readers have others to share, feel free to send them to me. I'll gladly pass them along. Mail to: jslome @ aaltci.org

Study Reveals Federal Long-Term Care Insurance Plan Flaws

The proposed federal health plan being discussed by the U.S. Senate includes proposed long-term care protection. The Community Living Assistance Services and Supports Act (CLASS Act) would provide coverage paid by individuals who would have the ability to opt out.The goal of the American Association for Long-Term Care Insurance, the industry's professional organization, is to serve as an advocate for sound long-term care planning that ensures the future of all Americans -- those who can afford private long-term care insurance, and those who can not.

That said, the proposed CLASS Act (Senator Kennedy's new tax on Americans) is not the solution and a report released today by the American Academy of Actuaries reveals the plan's significant flaws. The plan's proponents believe a $65-per-month tax for individuals would be sufficient to provide a $50 average monthly benefit. The study reveals that the sound monthly premium level would be closer to $110 a month or over $1,300 a year per-individual.

The CLASS Act proposes a voluntary federal program that is sustainable and actuarially sound over a 75-year horizon. Based on the current assumptions, the independent actuaries project the new government fund established to pay long-term care claims will be insolvent by 2027. Sometime well before that date, taxpayers can expect the voluntary plan to become a new mandatory tax.

The report notes that part of the problem with the proposed plan is the increased likelihood of adverse selection. Simply stated, those individuals in poorer health will sign-up for the plan and those who are in better health will likely opt-out. Once claim payments begin after the five-year waiting period, one can expect an increasingly steady flow that will stretch the fund beyond what proponents expect.

The American Association for Long-Term Care Insurance is the independent trade organization providing information on long-term care planning to consumers and providing marketing and sales support to information. The organization maintains the industry's most comprehensive website on long-term care planning which can be found at http://www.aaltci.org/

If you would like to receive a PDF copy of the American Academy of Actuaries letter to the U.S. Senate Committee on Health, Education, Labor and Pensions, please click here to send an E-mail to Jesse Slome, Executive Director.