Washington State LTC Program Poor Policy, NAILBA Panel Says

When Washington state passed the first-in-the-nation long-term care public insurance program, other state leaders were surely happy to see it.

Those other states would have a test case of sorts to monitor, agreed a panel at the National Association of Independent Life Brokerage Agencies' virtual annual meeting.

Starting in January, most workers in Washington will see a 0.58% payroll deduction on their paychecks that will go toward funding the WA Cares Fund, the state's public insurance program that intends to help older residents age in their own homes without having to spend down their savings.

Washington's program is an attempt to head off what many see as a looming long-term care crisis.

Long-term care insurance was affordable and underpriced when it was sold in the 1980s. But since then, health care costs have increased and many of LTCi carriers have gone bankrupt. At one time, more than 100 companies sold LTCi. Now, there are fewer than 20, according to industry statistics.

According to the American Association of Long-Term Care Insurance, a healthy and single 55-year-old in 2019 could expect to pay between $2,000 and $2,700 in annual premiums for long-term care insurance.

But there are at least three big mistakes with the Washington effort, the NAILBA panel said. They include:

Miscalculating opt outs. Washington allowed workers to get get out of the tax and apply for an exemption if they are 18 years or older and purchased qualifying long-term care insurance before Nov. 1. Workers can apply for an exemption through next year. Once they opt out, they are permanently excluded from coverage and benefits from the WA Cares Fund.

"The state really had no comprehension of how many people would opt out, and what the impact of that might be on the solvency of the program itself," said Jeff Reed, chief communications officer and chief information security officer, Advantage Insurance Network. "With this many people opting out, particularly the high-income earners that are really going to be the engine that drives this thing from a funding standpoint, the funding of this is in jeopardy. That's going to drive taxes higher over the long haul and could result in reduced benefits, or both, frankly."

As of the end of October, at least 150,000 people had applied for exemptions, according to WA Cares Fund Director Ben Veghte.

Under the law, Washington residents can cancel their private LTCi after they get the opt-out letter, explained Brian Ott, certified LTC planning specialist with 525 Advisors.

Not working closer with insurers. The insurance industry has dealt with LTC for decades and could have imparted plenty of additional wisdom to Washington, said Reed, who lives in the state.

"There was maybe a little bit of a missed opportunity in terms of involving or engaging the insurance community," he said. "Because there may be a way to integrate these benefits similar to what we see on the disability income side of things, where those public benefits are considered when you're designing the plan and ultimately, paying out benefits from those disability products."

Misleading residents on LTC needs. Ultimately, the biggest problem for the state and the beneficiaries is the skimpy benefits, the panel agreed.

State officials say the plan will pay up to a $36,500 benefit for individuals for home health care and an array of services related to long-term health care including equipment, transportation and meal assistance.

The plan is expected to save $3.9 billion in state Medicaid costs by 2052 and eligible beneficiaries will be able to begin collecting benefits starting in 2025.

However, $36,500 does not go very far in the LTC business, Reed noted.

"This is really a short-term care plan. Benefits will likely be exhausted in under a year," he said.

The is an opportunity and an onus on the insurance industry to pay attention to the Washington state experience and be ready to fulfill a societal need, Ott said.

"It's not meaningful long-term care coverage by any stretch of the imagination," he said. "So we've got a lot of education to do to the consumers, because I think there's going to be a whole group of people out there that think that they are covered and maybe they don't need to worry about it."

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

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