MORE ON THE CLASS ACT Government Long Term Care Insurance Plan

The CLASS Act is part of the recent controversial, omnibus health care act, recently passed by the US Congress and signed into law by the President.  Since the federal bureaucrats have not had time to implement the provisions of the CLASS ACT, is difficult to predict how all this is going to flesh out.  The CLASS ACT is the government’s version of long term care and will work like an entitlement program, whereby the user will pay ahead—like Social Security—and use it later in life if needed.  The program is still under development, so the following comments are the best educated guess as to where it will lead.

The plan can be offered by employers, but they can refuse to do so if they wish.  However, if your employer chooses he can require all employees to enroll.  Conversely, he can choose an option that will allow his employees to participate on a volunteer basis only.  For people who are enrolled the premiums would be paid through regular payroll deductions, such as your Federal income tax and Social Security. Employees could enroll or cancel participation only during specific periods.  If you are an employee who wants this coverage, but your employer does not offer it, you can enroll, but the payment method has yet to be determined.  The same applies to self-employed individuals.

How much this will cost you has not yet been determined.  Best estimates now are from $150 to $250 per month for older, initial enrollees, with students being able to get in for about $5 per month up to age 22.  Apparently the “working poor” could get in at this low rate also, but it’s not clear how all this would progress over time.  However, based on past experience with government programs, these fees would have to escalate to cover costs.  As an aside, private Long Term Care insurers can raise their fees over time, but they have generally chosen not to do so to remain competitive, most having raised the fees only once in the past 30 years.  This competition restraint will not exist in this government program, and since they will be insuring those citizens with the most health problems, we predict they will be forced to raise their rates much faster than the private insurers, who will be tending to insure healthier individuals.

Okay, suppose you’re enrolled in the CLASS Act LTC program, you then become disabled and need care.  What benefits will you receive?  That will depend on your loss of at least two to three of the following Activities of Daily living: bathing, dressing, toileting, transferring, continence, and eating.  If eligible you would then receive just $50 to $75 or more, based on your level of functional loss.  This compensation to you would come whether you receive services at home or in some type of nursing care facility.  As you can readily see, this level of compensation will not be adequate for most needed services, which leads us to believe that not many citizens will participate in this program.  However, the program’s compensation rate will be adjusted for inflation based on the consumer price index. Also, there is a provision for a benefit that will be payable for life if you remain disabled.

Probably one of the most disturbing aspects of this CLASS Act program is that you will have to have been enrolled for five years (vested) before any benefits can be paid on your behalf—no matter how seriously you become disabled! 

Summing up, it is our opinion that people who want Long Term Care insurance will be much better off by purchasing a plan from one of the established private LTC insurance companies.  Some reasons are you will be in a pool of healthier individuals, leading to lower risk and less cost to you and the carrier.  Also coverage will be more comprehensive and the payout to you better, should you become disabled. And you don’t have to wait five years—coverage starts the day you need it!  Plus the private long term care plans will probably save you money vs. the CLASS ACT plan.