Currently, more than 12 million people in the United States need some kind of long-term care, with costs ranging from $20/hour for home health care to over $3,000/month for assisted living.
To address the growing need for affordable solutions to long-term care, the Patient Protection and Affordable Care Act created the first national voluntary program through the Community Living Assistance Services & Support Act.
Under the CLASS Act, which took effect in January 2011, participants enrolled in the public long-term care program will pay a monthly premium for insurance, will be covered on a guaranteed-issue basis and will be eligible for benefits expected to range from $50 to $75 per day after five years of premium payments.
But while the CLASS Act offers an option for long-term care insurance needs, it’s important for employees to fully understand how the plan will work and whether private LTC – or no insurance – would be better for themselves and their families.
Here are a few key questions employers and their employees should consider.
Q: Since the Act will not be fully implemented until 2012 or 2013, what risks do employees face by waiting to plan for their long-term care needs?
A: The CLASS Act provisions created the public long-term care insurance program, but Americans still lack details on the exact costs and benefits. Plus, it will be at least two years before the program is operational and another five years after that before benefits can be paid.
For many aging adults who want, or need, to consider their future care now, it might make more sense to lock in to a private insurance option at a lower rate than delay in making a decision, since premiums rise with age.
Younger Americans may want to wait and see what the CLASS program entails before deciding between the options.
Q: How does the five-year minimum premium payment for eligibility under the CLASS Act compare to waiting periods with private insurance?
A: Under most private long-term care insurance plans, participants must wait 90 days before they can collect benefits, significantly less time than the waiting period under the public option.
Moreover, in addition to paying premiums for five years before being eligible to receive services and support under the public plan, employees must also have worked for at least three of those five years.
As a result, the health status, age and retirement goals of participants are important considerations that may impact their preference for the private or public option.
Q: Will the public option benefits cover the full cost of future long-term care services, including home care?
A: Currently, the cost of long-term care can run upwards of $100,000 per year for a room in a private nursing home, and experts believe prices will continue to rise.
While details on the CLASS Act program benefits haven’t been issued yet, it’s expected that the insurance will pay enrollees $50 or more per day (according to a scale of their inability to perform normal daily activities), which can be used for care in the home or a community residential setting.
These benefits are in addition to any Medicaid benefits and do not have any effect on eligibility or continued eligibility for any federal, state or locally funded assistance program.
Q: If we advise employees to consider private LTC protection now, could they later decide to enroll in the public plan as well, for extended mbenefits?
A: Employees who decide today to enroll in a private long-term care plan are not precluded from taking advantage of the public program in the future, assuming they follow all applicable enrollment procedures.
However, if an employer decides to offer private long-term care insurance in addition to the CLASS Act program and an employee wants to enroll in both, it remains unclear on how, if at all, the benefits will coordinate.
To give employees more choice, insurers may develop wrap-around products to supplement the public plan benefits or add a coordination of benefits provision that would enable employees to benefit from both options for extended coverage.
Q: Why – and how – would an employee opt of the public plan?
A: Employees need to consider a variety of factors – from premiums and eligibility requirements to enrollment policies and future solvency – before deciding which, if any, long-term care insurance option is right for them. And, not all Americans will have access to the public program through their work, even if they want it.
Employers must decide whether to offer it and, if they do, employees will be automatically enrolled – with monthly premiums deducted from their paychecks – unless they opt out.
Individuals who opt out when first eligible will have a chance to re-enroll in the plan every two years. Because of the growing risk long-term care poses, the debate over public versus private insurance is a good one, regardless of the outcome.
If nothing else, the CLASS Act will play a significant role in raising employee awareness about the need to plan for their long-term care, and more and more companies will likely begin offering long-term care insurance as an employee benefit as a result.
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