Gov. Jay Inslee announced a delay to the start of a mandatory payroll tax to fund Washington state’s new long-term care program.
The Washington Cares Fund was originally set to begin collecting taxes in January 2022 to help pay for long-term care expenses as the state's population gets older.
“Legislators have identified some areas that need adjustments and I agree," Inslee said in a news release. "We need to give legislators the opportunity to make refinements to the bill. Therefore, I am taking measures within my authority and ordering the state Employment Security Department not to collect the premiums from this program from employers before they come due in April."
'Gauging Consumer Anger'
But Jesse Slome, director of the American Association for Long-Term Care Insurance, said lawmakers are afraid of constituent anger.
“The stated reasoning is a desire to give legislators the opportunity to make refinements to the new program,” Slome explained. “However, I’ve seen this play before and I’d say they are gauging consumer anger at being taxed.”
Slome noted that a national long-term care insurance program was included and passed in 2010 as part of the federal Affordable Care Act.
“While it was passed and signed into law, it basically vanished from existence virtually overnight,” Slome said. “Will the WA Cares Act suffer from the same fate? Only time will tell.”
A Washington state employee earning $100,000 would be taxed $48 monthly, Slome said. “That doesn’t sound like a huge sum but for someone in their 20s and 30s, it’s money for a benefit they don’t think they’ll ever need,” he added.
Slome advised those agents who have sold policies to individuals in Washington to maintain active communication with clients during this time.
“Cancelling a policy could result in voiding their exemption from the tax,” Slome cautions. He notes that insurers have indicated they will charge back commissions should individuals not maintain their policy in force for a certain period of time.
Most workers were to see a 0.58% payroll deduction on their paychecks that would 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.