Bonnie Burns, CHA Training and Policy Specialist Consultant
The Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, March 23, 2010), the health care reform legislation signed by the President, includes the Community Living Assistance Services and Supports Act, known as the CLASS Act, and is part of the legislative legacy of Senator Ted Kennedy. This Act establishes a national voluntary long-term care insurance program for actively employed individuals through a payroll deduction system. What follows is an explanation of the provisions of the Act after passage of PPACA. Regulations that spell out the details of CLASS will be issued by the Secretary of Health and Human Services no later than October 1, 2012, with a period for public comment. Those regulations will spell out the method of operation of the program, what the premiums will be for each population group, how people will qualify for and obtain benefits, how decisions can be appealed, and a host of other program details. Until then, there is likely to be much public speculation about whether people will or will not participate in the program, and how much premium will be needed for the program to be successful. This summary is intended to clarify what is in the law that will become the CLASS long-term care benefit program.
Background
Individuals age 85 and older are at the greatest risk of needing the kind of care provided by CLASS. As the U.S. population ages and baby-boomers reach age 80 and older, the number of people needing this type of care will increase substantially. The number of people with disabilities needing long-term care services is also increasing. Growth in both populations will create an unprecedented demand for services, caregivers, service workers, and a funding source to pay for care.
As mentioned, the CLASS Act establishes a national voluntary long-term care insurance program for actively employed individuals through a payroll deduction system. While working individuals can opt out of this voluntary premium deduction program, premium penalties would apply to any later enrollment. Individuals enrolled in the program must pay premiums for a minimum of 60 months, known as a vesting period, before becoming eligible for benefits.
CLASS Act benefits are intended to help individuals maintain their independence and support an impaired person living at home, in the community, or in an institutional setting of their choice. The program will pay a sliding scale cash benefit averaging $50 a day that can be used to purchase typical home and community based long-term care assistance, and other non-medical services. The actual daily benefit amount an individual receives will be based on an assessment of the functional limitations of a covered individual.
CLASS benefits are in addition to any Medicaid benefits, and cannot supplant or replace those benefits. CLASS Act benefits also cannot have any effect on eligibility, continued eligibility, benefits or services provided by any federal, state, or locally funded assistance program.
The CLASS Act creates a Board of Trustees and the Independence Advisory Council to advise the Secretary of Health and Human Services. It gives the Secretary broad authority and discretion to choose a benefit structure, establish premiums, and set up structural and operating rules for the program. The Secretary and the Board are responsible for constructing and maintaining adequate premiums, ensuring the ongoing solvency of the program each year and in 20-year projections, and the long-term solvency of the program over a 75-year period.
Premiums
Premiums will be the exclusive funding source for the program and legislative language specifically prohibits the use of taxpayer funds. Premiums can be based on the age of an individual when enrolling in the program but not on any health conditions they might have. Actual premium amounts will depend on a number of factors including initial and ongoing projections of how many people are likely to enroll and stay in the program, the anticipated health status of those enrollees over time, the kind of care enrollees are likely to need, and the amount and cost of the services they use. Up to 3% of program funds can be used annually for the program’s administrative expenses.
Premiums and benefits of the program are treated in the same manner as a tax qualified long-term care insurance contract for qualified long-term care services, making premiums, deductible and benefits non-taxable under the same standards as commercial tax qualified insurance products.1
Like any insurance program, the success or failure of the program will depend on the balance between those enrolled in the program and those using the benefits. There must be enough healthy people in the pool of enrollees to offset the number of people who will use the benefits, and enough premiums collected and continuing to be paid to maintain a balance between premiums coming into the program and benefit payments going out.
NOTE: The details of all of the following information will be developed by the Secretary of Health and Human Services between now and when the final regulations are published by October 1, 2012.
Creating the Program
Two official bodies created by the Act will advise the Secretary on certain aspects of the program such as a CLASS Independence Benefit Plan (or Plan), the ongoing operation of the program, and the solvency of the CLASS Independence Fund (or Fund).
The Independence Advisory Council (IAC) will be composed of 15 non-federally employed individuals serving overlapping 3-year terms who will be appointed by the President and serve a maximum of 2 terms. These individuals must represent people covered or likely to be covered by the program, caregivers, individuals with disabilities, older and younger workers, experts in long-term care or disability insurance, economics, actuarial science, and other relevant disciplines. The President will periodically appoint a Chairperson from the group.
The Secretary of Health and Human Services, in consultation with appropriate actuaries and other experts, is charged with developing at least 3 actuarially sound benefit plans to submit to the IAC for consideration. The IAC, in turn, will recommend 1 of the 3 plans to the Secretary that in their judgment best balances price and benefits in an actuarially sound manner with long-term sustainability. The Secretary will take the recommendations of the IAC under consideration before designating 1 benefit package as the CLASS Independence Benefit Plan no later than October 1, 2012. The Secretary is required to publish a regulation in a final rule for public comment.
The IAC will also advise the Secretary on the general policy of the program, the formulation of regulations in regard to the development of the final benefit package, and the financial solvency of the program.
The Board of Trustees of the CLASS Independence Fund will be composed of the Secretaries of Health and Human Services, Treasury, and Labor, all ex-officio, and 2 members of the public from different political parties who are each appointed by the President for a term of 4 years. The Board meets at least annually, with the Secretary of the Treasury acting as the Managing Trustee of the Fund.
The Board reports to the Congress each April on the operation and status of the Fund during the preceding fiscal year. It also reports on the expected operation and detailed financial status for the next 2 fiscal years with projections over the next 20 and 75 years. The report must include an actuarial opinion from the Chief Actuary for the Centers for Medicare and Medicaid Services that the methods, assumptions, and cost estimates are those that are generally accepted within the actuarial profession. The Board is also required to immediately report to the Congress whenever the Fund is projected to be actuarially unsound over an immediate 20-year period.
The Board also reviews and recommends changes to the policies and management of the Fund, including advising Congress of any necessary changes to the law. The Secretary of the Treasury is required to deposit into the Fund an amount equal to all of the premiums collected each year.
Benefits
Benefits are based on a daily cash benefit of “not less than an average of”2 $50 adjusted annually for inflation.3 The Plan’s daily benefit amount increases annually based on the Consumer Price Index (CPI).4 Benefits, when payable, will be paid into a “Life Independence Fund” established for each eligible beneficiary.5 The Fund is required to have electronic capability and a debit card function. The rules for transferring these electronic funds, payments, and billings must be adopted by July 1, 2012. Documentation of services purchased with CLASS benefits have to be kept by the beneficiary or their representative, and reported when required.
The actual amount of benefits paid into an individual’s Fund will be based on a sliding scale tied to an assessment of an individual’s current and expected future functional impairment.6 Benefit payments can be paid into an individual’s Fund on a daily or weekly basis, or deferred and rolled over from one month to the next.7 Any unused benefits can be collected in an aggregate amount during a benefit year, but benefits can’t be rolled over from one benefit year to the next. The daily benefit amount during a year can increase or decrease with changes in the assessed functional status of the individual. Any underpayments due to a change in an individual’s functional status during a benefit year can be paid into the individuals Fund, while any overpayments can be recouped. There is no aggregate or lifetime benefit limit, and benefits are payable for as long as an individual remains eligible for benefit payments.
The cash benefit can be used to pay for typical home and community based services for long-term care, and other non-medical services and supports that assist an impaired person living in a residential or institutional setting of their choice. The benefit includes assistance choosing care and care providers, as well as making decisions about accepting or rejecting care. Services also include home modification, assistive technologies, accessible transportation, homemaker services, respite care, and personal assistance.
The Act specifically prohibits benefit denials for compensation to a family caregiver, ensuring that family members can provide care and receive some compensation for their services.
Legislative language specifically allows benefits from coverage obtained through the exchange to supplement CLASS Act benefits.8
Medicaid Eligible Beneficiaries: Beneficiaries in an institutional setting will be allowed to keep 5% of their daily or weekly CLASS cash benefit in addition to their monthly needs allowance. The remainder of their daily benefit will be applied to the cost of their care. Beneficiaries receiving PACE or home and community based services under Medicaid can keep 50% of the daily or weekly benefit from the CLASS Act program, with the remainder applied to the cost of their care. No state claim for federal matching funds can be made.
A state can only receive the remaining 50% of the CLASS Act benefits for home and community services if the state provides statewide home and community based benefits under a Section 1115 waiver or state plan amendment, and offers at a minimum, case management services, personal care services, habilitation services, and respite care under a federal waiver or state plan amendment. Authorized representatives have to comply with standards of conduct established by the Secretary including conflict of interest standards requiring that representatives provide quality services, do not misuse benefits paid on behalf of these beneficiaries, or engage in fraud or abuse.
CLASS Act benefits cannot have any effect on eligibility for other federal benefits, and benefits paid under the CLASS Act cannot supplant or replace Medicaid or any other federally funded program that provides health care benefits or assistance, and are in addition to any of those benefits. The Act prohibits any effect on the eligibility, continued eligibility, benefits or services provided by any federal, state, or locally funded assistance program.
Benefit Eligibility and Assessment
When a claim for benefits is requested, the Act provides for an assessment process to determine whether benefits are payable, the degree of impairment that exists, and the amount of benefit that will be paid. Periodic recertification for continued receipt of benefits is required. The Secretary will issue regulations to develop an “expedited nationally equitable eligibility determination process” that includes appeals and redetermination processes and conflicts of interest policies.
The Secretary will establish procedures to ensure that entities selected to perform the expedited nationally equitable eligibility determination process comply with certain requirements.
Entities selected to perform the eligibility determination process are required to have operating procedures to avoid or minimize conflicts of interest between that entity and an active enrollee or beneficiary; to make available all information about services and potential resources; and assist the beneficiary in obtaining desired services from any provider. These entities must report the number of active enrollees and beneficiaries they assist by age, disability, and the services received from them or any other entity.
Eligibility to receive benefits will be based on the same eligibility criteria used for federal tax qualified long-term care insurance benefits.9 A person must be unable to do 2 (or 3)10 Activities of Daily Living (ADL) from a list of 6 ADLs, or need substantial supervision due to cognitive impairment that includes threats to health and safety of the individual. (A 3rd benefit trigger is possible if the Secretary of Health and Human Services develops a similar benefit trigger in the future.) Presumptive eligibility is given to active enrollees who have applied for the maximum cash benefit, are receiving long-term care services in an institutional setting, and are discharged or preparing to discharge within 60 days of becoming eligible for benefits.
An individual’s need for care must be certified by a health care professional, and must be expected to last for 90 continuous days. These are the same standards required for tax qualified long-term care insurance policies. Functional assessments will be made using an entity established by the Secretary.
Program Enrollment and More On Premiums
Before benefits can be claimed, an individual must have been actively employed for at least 3 of the first 5 years of enrollment in the program under the same standards used by the I.R.S., and by the Social Security Administration to qualify for a quarter of earnings under Social Security rules for retirement or disability, or be in the uniformed services on active duty.11 Enrollment is automatic through a payroll deduction system for active workers age 18 and older, although individuals are allowed to opt out, and employers can opt not to participate. There is no provision for non-working spouses or other non-working individuals to enroll.12 However, an enrollee can continue their enrollment once they are no longer working, but they must have been actively employed for a minimum of 3 years during at least the first 5 years of enrollment.
Low-income individuals who meet the requirements for active employment, and full-time students who are working can enroll in the program. These individuals pay a nominal monthly premium of $5, with annual increases based on the Consumer Price Index (CPI).13 A nominal premium must be maintained for low-income and full-time students who are actively employed.
Full-time students who stop working can stay enrolled in the program and pay a premium based their age when they first enrolled in the program. Both low-income individuals and working students are required to self-certify their status annually, which will be verified through government data matches.
As mentioned previously, premiums will be established by the Secretary of Health and Human Services and based only on the age of the applicant, and not on any current or past health conditions. Medical conditions cannot be used to establish or influence the monthly premium or discourage enrollment in the program. Premiums will be withheld through a voluntary payroll deduction system, although the Secretary will have to establish an alternative system for the following enrollees: those who are self-employed, whose employer does not participate in the program, who work for more than one employer, or who are no longer working. The Secretary will also have to ensure that premiums are not deducted by more than one employer for the same individual.
Premiums are intended to remain level, but there are provisions for both premium increases and reductions based on the projected solvency of the program from year to year and over spans of 20 and 75 years, with a full re-evaluation of the program 10 years after implementation.
Individuals over age 65 who have paid premiums for 20 years and who are not actively employed will be exempt from any premium increases.
Disenrollment and Re-enrollment
Individuals who choose not to enroll by opting out when eligible to enroll have a chance to re-enroll every 2 years. When they re-enroll, a late enrollment penalty of 1% will be added to their monthly premium. Individuals disenrolling will have a 90-day window to re-enroll at the same premium and retain their vesting credit equal to their prior months of coverage. After 90 days, but within 5 years, an actively working individual can re-enroll at the premium for their current age. However, the Secretary will determine the amount of vesting credit for prior months of coverage.14 Five years after disenrollment an individual will not receive any credit for prior months of coverage, no vesting credit, and premiums will be based on their current age plus a premium penalty for each month of non-coverage.
An individual will only be allowed to disenroll during a disenrollment period to be established by the Secretary of Health and Human Services and the Secretary of the Treasury. While disenrollment for non-payment of premium can occur at any time, re-enrollment that occurs after 90 days or later would trigger a late enrollment premium penalty and perhaps result in the loss or reduction of their vesting credit.
Counseling and Assistance for CLASS Act Enrollees
The Secretary is required to enter into agreements with the Protection and Advocacy System15 in each state for advocacy services, and with public and private groups to provide advice, assistance and counseling services.
Protection and Advocacy: The Secretary is authorized to enter into agreements with the Protection and Advocacy System for each state and require the assignment of an advocacy counselor as needed to each eligible beneficiary that is covered by such an agreement. Each beneficiary must receive information about how to access the appeals process of the Plan, assistance with annual certification, and any other such services the Secretary requires by regulation.
Advice and Assistance Counseling: The Secretary is authorized to enter into agreements with public and private entities to provide advice and assistance counseling. Such entities are required to assign an advice and assistance counselor as requested by an eligible beneficiary to provide information on accessing and coordinating services and supports in the most integrated settings, as well as information about eligibility for other services and benefits, service and support plans, and assistive technology.16
Counselors will also assist with decision-making about medical care, advance directives and other written instructions concerning medical care, and any other services the Secretary requires by regulation. These entities will be required to give active enrollees and beneficiaries a list of available service providers that meet their needs, and disclose any financial interest the entity may have had in any of the recommended providers.
The Secretary will establish procedures to ensure that both these entities, Protection and Advocacy and Advice and Assistance Counseling described above, will comply with certain requirements that foster the best interests of the beneficiaries; have operating procedures to avoid or minimize conflicts of interest between the entity and an active enrollee or beneficiary; make all information about services and potential resources available; and assist the beneficiary in obtaining desired services from any provider selected by the beneficiary. These entities will be required to report the number of active enrollees and beneficiaries they assist by age, disability, and services received from them or any other entity.
Conclusion
The CLASS Act is a new approach to financing some of the costs of long-term care services and could draw public attention to the need to prepare for these costs. How such a program will affect the existing long-term care insurance market remains to be seen. Some experts think private insurance could become nothing more than supplemental coverage while others see the deficiencies in the federal plan as a marketing tool to sell broader coverage with larger benefits. Some see the potential of developing specific insurance products designed to wrap around CLASS benefits and pay additional benefits, or fill specific gaps in the program. Which direction the private market takes would depend in large part on how these benefits coordinate with existing or future benefits contained in privately purchased insurance products.
The CLASS Act establishes a framework for the regulatory details that must be worked out within the federal government, its agencies, and the federal rulemaking process. California Health Advocates continues to closely follow the progress of this innovative program and the details as they emerge.
For information about this summary contact:
Bonnie Burns
831-438-6677 (Office)
408-497-8403 (Cell)
Footnotes
- Pursuant to the Internal Revenue Code of 1986 in the same manner as a qualified long-term care insurance contract for qualified long-term care insurance benefits.
- This terminology relates to the different sliding scale benefit levels that would be established, and to the total number and amount of claims being paid during a fiscal year.
- While benefit triggers would include cognitive impairment, benefit level determinations focus on functional status.
- It is unclear whether the inflation adjusted daily benefit amount would increase for those who are already on claim, or only for those who have not yet filed a claim.
- There is no language that clarifies whether premiums must continue to be paid once benefits have begun. Most private long-term care insurance policies waive premium payments after benefits have been paid for a certain period of time, usually 90 days.
- Sliding scale benefit levels established by the Secretary would consist of at least 2 but no more than 6 benefit levels.
- This might occur if an individual incurred costs less than their daily benefit amount, or did not receive a service each day for which a benefit was paid.
- This is the only mention of benefit coordination. The order of payment is not addressed in either bill. CLASS Act benefits however, are clearly in addition to any benefits provided by Medicaid or other public benefit programs. But it is not clear how CLASS Act benefits would coordinate with any other benefits for similar services, such as a benefit of an existing insurance product or one developed in the future to supplement or fill in the gaps of CLASS benefits, nor how other insured benefits might coordinate with CLASS Act benefits.
- There is no mention in either bill that clarifies the issue of whether premium payments continue or are suspended when benefits are being collected.
- There is no explanation of when 2 or 3 ADLs may be used. This very likely relates to the benefit levels that will be established later by regulation with greater levels of impairment qualifying for a higher daily benefit payment.
- Active workers are defined in each bill as people with earnings similar to those required by the Social Security Administration for Social Security credit for retirement or disability and as actively employed individuals as defined by the IRS, or a member of the uniformed services on active duty and physically able to perform their duties. Individuals in hospitals and other institutions who are covered by Medicaid, or are in correctional facilities are excluded from enrollment.
- The Secretary is required to promulgate regulations specifying exceptions to the minimum earning requirements, and this might be the vehicle for inclusion of non-working spouses and other qualified individuals.
- It is not clear whether these individuals’ premiums are inflation adjusted over time or if they continue to pay the initial $5 each month, or whether new enrollees in these 2 categories are charged the inflation adjusted minimal premium at the time they enroll.
- The Secretary may calculate an actuarially sound amount, or apply 1% of the applicable age adjusted premium for each month of lapsed coverage.
- The system established by each state under section 143 of the Developmental Disabilities Assistance and Bill of Rights Act of 2000 (42 U.S.C. 15043).
- Programs established under the Assistive Technology Act of 1998.