Health Reform Creates New Voluntary Long-Term Care Insurance Program

Health Reform Creates New Voluntary Long-Term Care Insurance Program

A new federal long-term care insurance policy was created through the Patient Protection and Affordable Care Act (PPACA, P.L. 111-148, March 23, 2010), the health care reform legislation signed by the President. PPACA includes the Community Living Assistance Services and Supports (CLASS) Act, and is a part of the legislative legacy of Senator Ted Kennedy. The Act establishes a national voluntary long-term care insurance program for actively employed individuals through a payroll deduction system, and will give beneficiaries about $50 or more a day to pay (depending on one’s ‘functional’ assessment’) for long-term care expenses. People who pay into the program and later require benefits will have a wide range of options on how to spend them. For example, they can choose whether to spend their benefits on cooking and transportation help or rent in a long-term care facility.

The Secretary of Health and Human Services will issue regulations to spell out the details of the CLASS Act no later than October 1, 2012, with a period for public comment. Those regulations will then explain the program’s method of operation, the premiums for each population group, how people will qualify for and obtain benefits, how decisions can be appealed, and a host of other program details.

Our updated summary on the CLASS Act, by CHA’s Training and Policy Specialist, Bonnie Burns, reviews the CLASS Act provisions – what’s in the law that will become this new long-term care benefit program. Below is a highlight of some of the summary details.

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 will 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.

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.

Enrollment
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.

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). 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.

Delayed Enrollment, Re-Enrollment and Disenrollment
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. 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.

The law also calls for the Secretary to enter into agreements with public and private groups in each state to provide advice, assistance and counseling services on this new benefit.

For more details, please see our updated summary report, Community Living Assistance Services & Supports (CLASS) Act Passed with Health Reform Legislation.

Our blogger Karen J. Fletcher is CHA's publications consultant. She provides technical expertise, writing and research on Medicare, health disparities and other health care issues. With a Masters in Public Health from UC Berkeley, she serves in health advocacy as a trainer and consultant. See her current articles.