Whether California becomes the second state to pass a long-term care benefit likely rests on the same issue that threatens to kill the first state to pass a LTC benefit: taxes.
WA Cares, the Washington State program, lives on tenuously as lawmakers debate ways to overturn it before its taxes take effect in July. Meanwhile, in California, a long-term care task force continues to study a similar LTC benefit.
Consultants Oliver Wyman presented the task force with five options in a report delivered last month. They range from a low of $36,000 in benefits up to a high of $144,000.
The Washington model required residents to either purchase LTC insurance, or being taxed to pay for the new benefit. That resulted in a lot of residents purchasing spare LTC policies that critics say might be ill-fitting when the time comes to rely on them.
The Wyman report does not address the cost of the program for the nearly 40 million residents of California. But payroll taxes are the most logical means to fund public LTC benefits. Jesse Slome, executive director of the American Association for Long-Term Care Insurance, isn't sure Californians will accept more taxes.
"California is already one of the most heavily taxed states so only time will tell what happens when such a proposal is ultimately put in front of taxpayers," he said.
Task force work
Legislation to create the California task force passed in October 2019. A 15-member board is made up of various care providers, consumer advocates and one industry representative: Jamala Arland, vice president of LTCi in-force at Genworth.
Work has progressed steadily toward a goal of producing a final recommendation by the end of 2023. Insurance Commissioner Ricardo Lara's office cited opinion surveys in launching the task force.
Two-thirds of respondents in the research said that they are apprehensive about being able to afford long-term care. Sixty-three percent of respondents worry as much about paying for long-term care as they do for their future health care.
A majority of respondents could not afford more than three months of nursing home care at an average cost of six thousand dollars ($6,000) per month in California, the research found.
The biggest task before the task force remains public education, said Bonnie Burns, who has 30 years experience in the Medicare industry and lives in California. Burns is not a member of the task force.
"This is not going to be a trivial expense," said Burns, who has served as a consumer advocate for state insurance commissioners. "You'd have to do a huge amount of public education to avoid what happened in Washington. When people discovered that they were going to be charged a tax, they promptly went out and bought anything they thought would get them out of it."
$36,000 over two years for "supportive benefits." Examples of supportive benefits include caregiver support, adult day care, meal delivery, transportation, durable medical equipment, home assessment, and minor home modifications.
$110,400 over two years in "targeted benefits." In addition to the same services as in option one, this includes home care and residential care facility benefits.
$36,000 over one year in comprehensive benefits. Covered benefits are the same as in option two. This option is "inspired by the WA Cares Fund design with select updates," the report said.
$81,000 over 18 months in comprehensive benefits. Covered services include those covered in option three, along with care in a skilled nursing facility.
$144,000 over two years in comprehensive benefits. Covered services are the same as in option four.
The report lists the full benefits:
Burns called designing an LTC benefit "the easy part." Now comes the hard lifting, she added.
"They're reasonable designs," Burns said of the options. "People can debate which one is best, but again, it's gonna depend on the cost and what people are going to have to pay to participate. And California is already envisioned as a high-tax state. We've got a reputation all over the country."
The future of WA Cares
In Washington, the future of the WA Cares program remains very much in doubt. As the Jan. 1, 2022 tax increase date came closer, politicians panicked and backed away from the program, passing legislation to delay the tax date by 18 months.
Individual employees and unions raised concerns about the overlap with employer-provided insurance options and the amount of tax being withheld to fund the program. An advisory group is tasked with bringing recommendations to the 2023 Legislature to correct deficiencies in the program.
One issue is whether the program will maintain solvency, according to a late-summer report. Under current law, the payroll tax cannot exceed 0.58% and must be set at the "lowest amount necessary to maintain solvency."
A state-sponsored study in 2020 estimated that the 0.58% rate "will not be high enough to maintain solvency" and estimated the tax rate would need to be increased to 0.66% to maintain solvency.
With the delay and changes made by the Legislature in 2022, it is now estimated that the payroll tax rate will need to increase by 0.03%-0.06% to maintain solvency. To add more confusion, under current law, if the Legislature determines the payroll tax must be increased, the Legislature must notify taxpayers and describe how premiums will be restored to 0.58%.
Some legislators are not wasting any time trying to eliminate WA Cares for good. State Rep. Peter Abbarno filed legislation in December to repeal the program.
“The long-term care insurance program and payroll tax remains unpopular, insolvent, and regressive,” Abbarno said.
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.