The House of Representatives last week voted to repeal the long-term-care part of PPACA (Patient Protection and Affordable Care Act. The House's vote follows an October announcement from the Department of Health and Human Services (HHS) that the administration would shelve the legislation because it was financially unworkable. “[D]espite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time,” Kathleen Sebelius, the U.S.'s health secretary, wrote in a letter to Congress.
Lawmakers originally enacted the provision, known as the CLASS Act, to create a government subsidized insurance program that would cover the costs of care for people who became unable to perform daily tasks, such as bathing, without assistance. Now, with the legislation all but dead, Americans will have to find another way to handle these long-term care expenses.
“The elimination of the CLASS Act together with the recent actions of several private insurers to exit from the long term care market has created a need for employers, brokers and consultants to rethink their strategy on Long Term Care as an employee benefit,” said Craig Butler, Senior Vice President of Voluntary Benefits at Winston Benefits.
In her letter, Sebelius goes on to state that, “By 2020, we know that an estimated 15 million Americans will need some kind of long-term care and fewer than 3% have a long-term care policy.”
Butler goes on to add that. “The government’s decision to terminate the CLASS Act was an acknowledgement that the program could not support itself financially. The actions of private insurers to retreat from the market and/or raise premiums on new and exisiting policyholders shows the impact that spiraling health care costs and persistent low interest rates have had on these policies.” Despite the acknowledged need “traditional long term care coverage is quickly becoming unaffordable for the average American.”
One solution emerging from the marketplace comes in the form of “combo” products, which incorporate long-term care benefits into life insurance policies, often in the form of riders. Sales of such policies climbed 34% in 2009, and have continued to grow strongly in 2010 and 2011, according to LIMRA. “For some buyers, combination products are a more affordable alternative to stand-alone [long-term-care insurance],” LIMRA's Catherine Ho said in a release.
A life-insurance policy that includes long-term-care benefits as a rider makes for a straightforward option. “The simplicity of this policy is that the long-term-care rider uses the death benefit of the life-insurance policy to pay for long-term care in the event that the policyholder needs it,” Butler said.
Unlike with stand-alone policies, money paid toward these policies won't go to waste if long-term-care services are never needed.
“The fixed premium will pay for both a life insurance benefit and a long-term-care benefit if you need it,” he said. “In the event that you don't, you have the full value of your life insurance, but in the event that you do, you have a very clearly understood, easy-to-explain long-term-care benefit available inside of your life-insurance policy.”
Exactly what the rider will cover varies, according to a Wall Street Journal article. Some companies won't pay benefits until a policyholder receives a terminal diagnosis; other companies include far fewer restrictions.
Prior to the elimination of the CLASS Act, employers were taking a wait-and-see approach to long-term-care insurance, according to an Employee Benefit Adviser article. Now that it's clear that the act won't be able to swoop in to save the day, it's time to consider options such as life-insurance policies that include long-term-care riders.
Winston Benefits has more than 25 years of experience providing employers with technology solutions and high touch human services that streamline enrollment and benefits administration for core and voluntary benefit programs.