I-2124 would make WA Cares optional. What happens next?

Oct. 28—Washington made history five years ago when it became the first state to pass a program meant to help people pay for care as they age or in case of a disability.

It's called WA Cares, and chances are you're one of about 3.9 million workers in the state who pays 58 cents into the program for every $100 you earn.

Enter Initiative 2124. Voters will decide Nov. 5 whether people should be allowed to drop out of WA Cares, which is mandatory (unless you bought a private long-term care insurance plan before Nov. 1, 2021).

Benefits — including coverage of home nursing, medical equipment, transportation and other needs — aren't slated to begin until 2026. That means if the initiative passes, nothing would immediately change. But advocates for WA Cares say an opt-out provision could lead to the collapse of the program that took effect, after a delay, last year.

The initiative is one of a slate of GOP-backed initiatives on ballots this November that could deal a blow to policies passed by majority Democrats in Olympia. Washington's choice could also have effects nationally, as other states increasingly debate how to care for aging generations and who's responsible for paying.

Here's what could happen if the measure passes.

You could save money

If the initiative passes, you could stop participating in the program. And that would mean no longer having to pay the tax.

For instance, if you earn $65,000 a year, that could mean $377 in annual savings.

Opting out would also mean you're not entitled to benefits. But critics have pointed out the maximum lifetime benefit of $36,500, while adjusted for inflation, pales in comparison to the average cost of assisted living or a nursing home.

If Initiative 2124 passes, the money workers have been paying into the system won't be returned to them if they opt out, said Ben Veghte, director of WA Cares.

For people who had private long-term care plans by November 2021, and who were granted an exemption from WA Cares before the program went into effect, no changes are expected regardless of the initiative's outcome.

WA Cares could face a "death spiral"

Initiative 2124 does not technically halt funding for WA Cares. Brian Heywood, the Redmond hedge fund executive leading the way for this group of ballot initiatives, wants that to be clear.

"Nobody's getting this money right now," Heywood said. "No one's hurt if this thing goes away — and we're not trying to get it to go away."

He doesn't think of the measure as a repeal of WA Cares. Instead, the initiative adds an "opt-in, opt-out option that doesn't exist right now," he said.

But five long-term care and economics experts from around the country, who spoke last week on a panel organized by the "No On 2124" campaign, agreed that WA Cares would eventually fall apart if participation became optional.

"The point is really clear — making it voluntary (would) kill the program," said Alicia Munnell, a Boston College professor of management studies who founded the university's Center for Retirement Research.

Under the current system, where most workers are required to pay in, the system is expected to be solvent for 75 years, Veghte said.

But if WA Cares becomes optional, a February third-party analysis suggested the program could become insolvent as soon as 2027. Actuaries said they didn't know how many people would stay in the program if it became voluntary. But they looked at a potential range, finding that if anywhere from 65% to 91% of people opted out, the program would go underwater in three years.

WA Cares would likely head toward what health insurers call a "death spiral," or what happens when the number of sick people becomes too high within an insurance plan's covered population, panelists said. The change creates a doomed cycle of higher premiums, leading to more opt-outs, leading to further hiked premiums.

"The people who are most likely to buy it are the people who are most likely to need it," said Howard Gleckman, a senior fellow at the Urban-Brookings Tax Policy Center in Washington, D.C.

He continued, "And when you have a large number of people in a risk pool who need the benefit, the program has no choice but to raise the premiums to have the revenue to pay those benefits. ... If it's a public program, it just becomes so expensive that it's untenable."

Back to the private market?

It's not quite clear how, if at all, private health insurers might change what types of plans they offer if the initiative passes, but economic experts last week said they worried about forcing Washingtonians back to the private market when looking for long-term care coverage.

Heywood sees that as a good thing — "if you had a truly free insurance market, I think we'd have 10 to 15 options," he said.

In general, private health insurance plans only cover certain long-term care needs, and can deny care based on some preexisting conditions. In 2023, about 69 companies, mostly life insurance companies, sold individual and small group long-term care plans in Washington, according to the state Office of the Insurance Commissioner, which regulates about 20% of health care plans here.

Office spokesperson Aaron VanTuyl said he didn't know how many people bought policies, but that about 40% of the companies brought in about $1 million in premiums last year, while about 30% brought in less than $100,000.

Medicaid and Medicare, both government health programs, do not cover most long-term care.

"If you can afford private long-term care insurance, more power to you, because there are some great plans out there," said Cathy MacCaul, AARP Washington's advocacy and policy director. "But the challenge is that (most of us) cannot afford those."

With WA Cares, you don't have to pay into the program once you retire — you only contribute in your working years. Private plans typically require you to keep paying premiums until you need the benefit.

Elizabeth New, director of the Centers for Worker Rights and Health Care at the Washington Policy Center, a critic of WA Cares, hopes that if the initiative passes, lawmakers consider repealing the program altogether.

"I think they really need to ... instead focus on spreading awareness about the possible need for long-term care, creating a healthy marketplace for the insurance market, and also reforming Medicaid," she said.

Medicaid is meant to cover people in need, but people are treating it like it's long-term care insurance by spending down their assets, she said.

"We need to shut down misuse of the program," New said. "The state could save money in their budget."

Changes could be afoot

The members of the state's Long-Term Services and Supports Commission, the "stewards" of WA Cares, Veghte said, could work on the issue and potentially make recommendations to the Legislature on how to cope with the new risks to the program if the initiative passes.

But it's unclear what kind of changes the Legislature could actually make. Lawmakers would be barred from amending the initiative for two years without a two-thirds majority vote in each chamber.

That may only apply to the voluntary aspect at the heart of the initiative. Lawmakers don't have clarity yet on what aspects of the program they could change, said Rep. Nicole Macri, D-Seattle, a member of the Long-Term Care Services and Supports Commission.

A LTSS commissioner work group is looking at what could be done if the initiative passes, but Macri is doubtful the program could be salvaged. Lessening benefits, for instance, could drive more people out of the program and worsen the "death spiral."

She also said it's unlikely the commission would recommend raising the 0.58% tax rate. If many people opt out, the rate would have to leap to make up the difference. For example, if only 25% remain, the rate could be two or three times as high, the February analysis found.

"There's not been really any serious contemplation of raising the premium," Macri said.

Other states could follow suit

As Washingtonians try to muddle through the process of figuring out public long-term care insurance options, at least seven other states are looking at building their programs, many similar to ours.

"They're all watching and waiting for what happens," said MacCaul, of AARP Washington. "And this initiative could be the thing that's most destructive in terms of actually advancing long-term care nationwide."

At MIT's Department of Urban Studies and Planning, some researchers are closely tracking state-by-state efforts to advance long-term care programs. Several states, like California and Massachusetts, have embarked on actuarial studies or formed commissions, but no other programs have been approved.

Each state's system would be set up in its own way, but urgency is growing around figuring out how to pay for long-term care, MacCaul said. The "age wave" is coming.

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