Arranging and financing long-term care is an issue everyone will face yet no one wants to talk about. However, following the Health Department's move to table the Community Living Assistance Services and Supports Act, planning for long-term care is becoming part of the national conversation - and that presents opportunities and challenges for employers.
CLASS, part of the Patient Protection and Affordable Care Act health care reform law, would have created a national voluntary insurance program to give working adults the opportunity to plan for future long-term care needs by providing a cash benefit. On Oct. 14, 2011, Health and Human Services Secretary Kathleen Sebelius sent a letter to House Speaker John Boehner (R-Ohio) saying that "despite our best analytical efforts, I do not see a viable path forward [for CLASS.]" Among the reasons she cited in the letter was a lack of funding.
Although the bill was not repealed, it's been shelved indefinitely and has no staff working on it. In other words, "it's as good as dead," says Jesse Slome, executive director of Westlake Village, Calif.-based American Association for Long-Term Care Insurance. Still, Slome reminds, "the problem of LTC hasn't disappeared."
Adds Steve Cain, executive vice president and sales leader for LTCI Partners, a brokerage general agency specializing in LTC: "Over the last 14 years, there's been growth in it offered as a benefit," noting that half of Fortune 500 companies offer LTC. "As you go downstream, it's wide open. The CLASS Act, while I applaud the intent, wasn't going to work. But the problem isn't going away."
What went wrong?
Sebelius said in her letter that CLASS sought to address the "critical need that Americans have for affordable long-term care service. The current market does not offer viable options for those unable to access private long-term care insurance."
So what went wrong? Those who have followed CLASS say it was a mix of few things.
"I believe it was a fatality of the bad economy," Slome says. "At the end of the day, the CLASS Act was really something that the Democrats put into health care reform because it was something Sen. [Ted] Kennedy wanted. In light of a difficult re-election and every actuarial report saying this won't work, they decided to put it on the back shelf, which is not uncommon."
While the general consensus is that CLASS is dead for good, Larry Minnix, president and chief executive of LeadingAge, says his organization is encouraging Congress not to repeal it.
"A few years ago, no one wanted to talk about how you pay for LTC; today it's a controversial part of PPACA," he says. "We like to think the controversy brings a lot of public interest. If not CLASS, what?"
Bob Klein, vice president of voluntary benefits for SunLife, agrees. "No one is excited that CLASS went down, but it raised the level of awareness." He adds that "a lot of what will happen will depend on the employees and what kind of feedback they're giving the employer about the types of benefits they want. Given the aging of the population, we'll hear that they want this insurance more and more. We feel like there's absolutely an unmet need and that we as the carriers need to bring the right solution to the employee."
Will people wake up?
To say there's an "unmet need" in the LTC market is an understatement, according to enrollment statistics. In 2009, 15% of firms offered long-term care insurance, with 41% of employers with 5,000+ employees offering it and just 11% of employers with 10 to 19 employees offering it, according to LIMRA.
Only 7 million Americans have long-term care insurance and of those in LTC facilities, only 6% have some sort of insurance, according to Maribeth Bersani, senior vice president of public policy at the Assisted Living Federation of America. Also, according to the HHS website, in 2008, 21 million people required long-term care services and about 70% of people over age 65 required some type of long-term care services during their lifetime.
The cost also is enormous: HHS estimates that in 2010, the average cost for a home health aide to visit three times per week was $19,000.
Before Sebelius' letter last October, employers had three choices: Wait for the CLASS Act, offer private long-term care insurance benefits or do nothing, Slome says. "It was easy for an HR person to say it makes logical sense to wait for the CLASS Act [because] benefits sounded so good and aspiration for low premiums made it sound like [you would] basically get wonderful coverage and it would cost so little."
With CLASS now out of the picture, LTC once again is the elephant in the room that can no longer be ignored.
"Everyone is aware that changes have to be made to be better able to pay for caregiving needs. The reality is we'll all need at least two years of caregiving services. It brings to light the cost of care and the need to plan ahead," says Julie Northcutt, CEO and founder of caregiverlist.com. "[LTC coverage] should be a natural part of a benefit package. Americans born today will live to be 100 years old. It makes sense that our retirement planning needs to adapt to it. It's a competitive item to offer [that] should go hand-in-hand with a 401(k) program. When you're educating employees about the benefit and saving for retirement, doesn't it make sense to tell them about what the retirement costs could be?"
Minnix bluntly adds: "It's the single biggest exposure that every family has for which we do not have insurance of any kind."
Yet, Bersani worries that the Act's demise may still not wake up a lot of people because they do not want to think about long-term care, don't realize how expensive it is or are simply afraid of the cost. "I'm not sure if the death of CLASS will wake up a lot of people [who] may buy some LTC - which is too bad," she says. "It could make a difference in quality of life when you get older."
However, she remains optimistic. "It's back to the drawing board," she adds. "It's very disappointing for a lot of people who thought this was a great fit ... I think the momentum is there that we will all carry on and try to solve the problem."
The CLASS Act's greatest gift may have actually been its shelving. "In the years ahead, the greatest gift of the CLASS Act has been to really increase the level of consumer awareness and the death of [the Act] has really made it clear to intelligent individuals and business owners that the government is not coming to the rescue," Slome concludes. "It's evermore clear that people have to act and that's what you are seeing and will continue to see."
Cain concurs: "Leading up to this decision, the CLASS Act was an incredible catalyst for the long term care discussion in the workplace. It's gotten it onto the radar screen for benefit managers. Now that we have clarity that they're not implementing it, it sends a clear message to Americans and to benefits managers that the responsibly is on us: The federal government is not going to provide an option, so we better take personal responsibility."
Sebelius' letter to Congress
An excerpt of HHS Secretary Kathleen Sebelius' Oct. 14, 2011, letter to Congress regarding the CLASS Act:
" ... The challenge that CLASS was created to address is not going away. By 2020, we know that an estimated 15 million Americans will need some kind of long-term care and fewer than three percent have a long-term care policy. These Americans are our family, our friends and our neighbors. If they are to live independent lives, we need to make sure that they have access to the long-term care supports that make that possible. ... left unaddressed, long-term care costs to taxpayers will only increase. ... The current market does not offer viable options for those unable to access private long-term care insurance."
The full text of the letter and accompanying report are available at www.hhs.gov/secretary/letter10142011.html.
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