Bruce Beckett | Actuarial studies add uncertainty to Washington’s long-term care program

In 2019, the Legislature passed HB 1087 authorizing a Long-Term Care Program (LTCP) funded by a 0.58% tax (called "premiums") on employee earnings. The payroll tax funds the Washington Cares Fund, which is intended to provide financial assistance for long-term care.

Under the original legislation, workers had the ability to opt-out of the program, and payroll tax, at any time. In 2021, however, the law was amended to require all workers to contribute into the program unless they could show proof of private long term care insurance by Nov. 1, 2021. Unlike Social Security, Unemployment Insurance and Paid Family and Medical Leave programs, there is no cap on taxable earnings.

The 0.58% payroll tax was scheduled to take effect on Jan. 1, 2022. Employer organizations (including the Wenatchee Valley Chamber of Commerce), many large and small employers, and employee groups (including unions) surfaced numerous issues about eligibility, benefit levels, and residency requirements.

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. In response, the Legislature swiftly adopted legislation delaying the program, and payroll tax, until July 2023. 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. Under current law, the payroll tax cannot exceed 0.58% and must be set at the "lowest amount necessary to maintain solvency." Recently, the Washington Research Council reported on two actuarial studies examining this issues. See the report at researchcouncil.org.

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%.

If the Legislature fails to modify and reform the program in the 2023 session, then the program, and payroll tax, will take effect "as is" in July 2023. The emerging actuarial analysis suggests that the current 0.58% payroll tax will not be sufficient to maintain program solvency, thereby forcing the Legislature to either amend the program to lower costs, increase revenues or some combination of both.

Bruce Beckett is a contract lobbyist specializing in labor and human resource issues and legislation for the Wenatchee Valley Chamber of Commerce. He is a principal of The Beckett Group of Gig Harbor.