CLASS Act – New Federal Long-Term Care Insurance Plan
President Obama signed into law comprehensive healthcare reform legislation that contains a program known as the Community Living Assistance Services and Supporters Act (CLASS Act).
The passage of CLASS does not negate the need for private long-term care coverage in any way. Many of the details regarding the CLASS program are not yet defined and will be developed through Government regulation. The following is designed to address what is known currently and to answer the most common questions being asked.
What are the general provisions of the CLASS Act?
The most of the important details for the CLASS program have not (yet) been defined. They will be developed by the Department of Health and Human Services over the next few years.
But, simply stated, CLASS creates a new voluntary government program under which participants will pay a monthly premium and will be eligible for modest benefits for their long-term care needs after five years of paying premiums.
While CLASS is often characterized as a long-term care program, it is primarily designed as a program to provide future assistance to the working disabled. Traditional long-term care insurance requires that applicants meet certain good-health requirements. CLASS will not have such health qualification requirements. The plan will be available on a guaranteed-issue basis.
When will the CLASS Act begin?
While provisions of the CLASS Act become effective in 2011, there are so many details to be worked out that most experts don’t expect the plan will become available until 2013.
For example, not only do costs have to be determined but employers must be given sufficient time to educate employees and prepare to start withholding premiums from employee paychecks.
Following implementation and withholding of the first payments from employees’ paychecks, there is a five-year waiting period during which premiums must be paid before the participant becomes eligible to receive benefits. As a result, the earliest anyone could be receiving CLASS benefits may be as late as 2018.
Who will pay?
CLASS is intended to be a voluntary plan primarily offered by employers and paid for by employees. Or simply stated, money will be withheld from paychecks — similar to the way Social Security (FICA) payments are withheld from paychecks.
There are provisions to make the offering available to others who may be self-employed or who may not have access to the plan through an employer.
Congress made CLASS an “opt out” plan. This is an important point that people need to be aware of. Unlike Social Security or Medicare that are mandatory, CLASS is a “voluntary, opt-out” plan. If that sounds confusing, it is. Read the question below regarding “opt out”.
What will the insurance coverage cost?
The monthly premium that will be charged by the government and deducted from paychecks has yet to be determined. There have been a wide range of estimates – and we will not speculate on the final cost.
Congress required that the CLASS plan should be fiscally sound for a 75-year period. Simply stated, the goal was to have the amounts paid by participants ultimately be sufficient to pay future benefits without the need for taxpayer support.
Because of the “guaranteed (health) issue” nature of the CLASS plan, many experts explain that those most likely to apply for CLASS policies will be those in poorer health. This will likely create more people requiring benefits in future years. A fiscally sound plan will mean initial premiums could be high (as much as $1,500 to $2,500 a year per-person. Some say they could be higher. But we’ll have to wait for the Department of Health and Human Services (HHS) to set the rates people will pay.
Premiums can be increased yearly to ensure that the CLASS fund is actuarially sound.
Remember that CLASS is not a contractual obligation. Future provisions (from costs to benefit eligibility) can be changed. And, of course, while the intent of the law is to avoid taxpayer funds, CLASS could inevitably find itself underfunded the way Social Security and Medicare currently find themselves.
Explain the five-year waiting period before benefits begin.
Once enrolled, participants must pay premiums for five years, after which they will be eligible to receive certain benefits for their long-term support and service needs. They must also have worked for at least three of those five years.
What coverage or benefits will be provided?
While the exact benefits to be provided under the CLASS program are yet to be determined, here is some general information.
Remember that to be eligible for benefits, you must pay premiums for five years to be eligible to receive certain benefits for long-term support and service needs. The participant must have a functional impairment expected to last more than 90 days and which requires substantial assistance with two or three Activities of Daily Living, or has substantial cognitive impairment.