By Bonnie Burns, Training and Policy Specialist
Have you been told you need to buy insurance with long-term care benefits to avoid a state tax on your wages next year? If so you’ve been told a lie. Some brokers and wholesalers of insurance are circulating false and misleading information to market and sell insurance with benefits that will pay for some long- term care expenses.
The California state legislation did create a task force, administered by the Department of Insurance, to develop several recommendations to the legislature for a state program for long-term care. However no state program has yet been created, no legislation has been introduced or enacted to begin such a program, and no legislation has passed and signed by the Governor to impose any kind of a tax. Any information that cites passage and implementation of state program funded by a new tax on wages is false and misleading, and a violation of the insurance code requirement §10234.85 pf the duty of honesty, good faith and fair dealing by anyone licensed to sell insurance in this state. The Department of Insurance can be contacted for more information.
How did this happen?
The task force created by AB 567 in 2019 met throughout 2022 and created a report outlining recommendations for five options for a state program to pay for some long-term care costs. The report was submitted to the legislature and the Governor at the end of 2022. But a financial analysis with recommendations for financing those options is still being developed and will be submitted to the legislature for consideration in the next few months.
Enabling legislation to create a state program has not been introduced, and could not be enacted until the 2024 session at the soonest. Any program and financing system approved by the legislature and signed by the Governor in 2024 could not begin until 2025 at the soonest. Legislation creating a new
program and a new tax would be likely to engender spirited discussion in the legislature and in the public. Any assumption of a new program and new tax with a starting date as early as 2025 is wildly optimistic given the political volatility of such a proposal and the complexity of the legislative process,
and well as the time necessary to construct a program.
Why did this happen?
Washington State created a long-term care program funded by a tax on wages that began July 1st this year. The original start date of that program was delayed several times to deal with unanticipated consequences of the legislation. Because Washington was the first state to create a state program for this kind of care it has generated interest by a number of states exploring ways to finance this care for a burgeoning number of seniors in their states. The California legislature created the task force to advise the legislature in part because seniors in our state will soon account for 24% of the state’s population. Long term care services in California could soon be overwhelmed by an increased number of seniors needing care. Some response to this public policy problem is certainly warranted, but no publicly financed response has yet been passed by the legislature and signed by the Governor. When that happens there is likely to be widespread media attention along with public information widely available from many state government sources.
In the meantime, recommendations have been made to the state legislature for several program designs that will soon be followed by an actuarial report detailing the costs of each of these designs and how each one can be financed. We await action by the state legislature on these reports. But it’s important to know that currently there is no such program scheduled to start and no new tax to fund such a program will be imposed in 2024.
