Thursday, July 21, 2011

Federal Long Term Care Insurance Plan Closer To Repeal

The deficit-reduction proposal released Tuesday by the reconvened Gang of Six would repeal the Community Living Assistance Services and Supports Act (known as the CLASS Act).

Created as part of health reform legislation passed last year by Congress political experts refer to the CLASS Act as one of the late Sen. Ted Kennedy’s most cherished programs. It is also a favorite target of Republicans.

"America is facing a future long-term care crisis as the aging population balloons," explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance, the insurance industry's national trade group. "CLASS has been highly controversial because on one hand it is at least some effort to address the problem though many see it as a very costly future new taxpayer-borne entitlement program."

The President-appointed fiscal commission led by former Senators Alan Simpson and Erskine Bowles singled the CLASS Act out as an “unsustainable” entitlement that would most likely saddle taxpayers with a major new liability, a finding that deficit hawks have latched on to in their attacks.

"Despite the fatal flaws of the CLASS Act, the Obama administration continues to push ahead in implementing this unsustainable entitlement program,” Sen. John Thune (R-S.D.) said in a statement last week. He added that the Department of Health and Human Services is ignoring “all of the red flags raised by the massive new entitlement program that is being created.”

CLASS establishes a voluntary long-term disability insurance program that would pay disabled enrollees a cash benefit for assistance with basic daily living activities such as dressing, bathing and eating. The insurance would be offered through the workplace, where employers who agree to participate would sign up their employees automatically — but also give them a chance to decline the coverage. If they keep the coverage, they’d be able to use the benefits after they’ve paid the premiums for five years.

CLASS Act critics including many leading industry actuaries with decades of experience in pricing and marketing long-term care insurance products argue that the voluntary CLASS program is vulnerable to adverse risk selection. "Critics expect that primarily health-challenged people will sign up for CLASS, those with expensive health problems which means CLASS would not be sustained by premiums alone," Slome explains. "Or, if they artifically price it too low in order to attract more healthy individuals, you face a serious shortfall when they ultimately go on claim."

Some of these problems were intended to be worked out before the Affordable Care Act was passed, but because of its unusual route to becoming law, that never happened experts acknowledge. "The nation definitely needs to discuss how to handle providing care for aging Americans," Slome concludes. "Kicking the can down the road isn't going to keep people from growing older and needing costly long-term care."

To learn more about the CLASS Act visit the American Association for Long-Term Care Insurance website at