Baby boomers should be paying close attention to the long term care insurance provisions of the recently passed health reform legislation. The Community Living Assistance Services and Support Act, a/k/a the Class Act, is the first national plan to help working Americans insure themselves for future long-term care.
1. Effective Dates. The Class Act was part of the health care reform bill passed in March 2010. The law takes effect in January 2011. However, the Department of Health and Human Services has until October 2012 to create and implement all of the rules. Therefore, most observers do not expect enrollment in this new long term care insurance plan to begin until 2013.
2. Plan Eligibility. The key requirement for eligibility to participate in the long term care plan is that you must be working, either full or part-time. More specifically, plan participants must pay premiums for a five-year vesting period they are eligible to receive benefits. Moreover, they have to continue working for three of those five years. This means that folks who are already retired (and not working part time), non-working spouses, and the unemployed may not participate.
3. Pre-Existing Conditions. Most private long-term care insurance companies will not issue policies to applicants with substantial pre-existing health problems, such as diabetes. Under the Class Act, a pre-existing condition will not disqualify you, as long as you meet the five-year vesting period, with three of those years being working years.
4. What it Will Cover. The long-term care coverage from the Class Act will be provide a daily cash benefit. The dollar amount of the benefit is yet to be determined. The plan drafters and Congressional Budget Office expect the long term benefit will be in the range of $75 a day, with an average minimum benefit of $50/day.
To receive the benefit, a participant will have to require help with two -three activities of daily living, e.g., eating, bathing, dressing, using the bathroom, transferring from bed to chair to wheelchair, and continence care. ) Equivalent cognitive impairment will also be covered. An important feature of the plan is that after you qualify to receive a long term care benefit, that benefit will continue for as long as you require care. Furthermore, the benefits will increase with inflation, another key feature.
This benefit amount will not cover all long term care costs but it was not designed that way. A $75/day benefit can cover as much as 3/4 of the national average cost of an assisted living facility. That could be huge for many middle class baby boomers.
5. What it Will Cost. The cost factor is another present unknown. An expert panel is working on this issue now. The Class Act requires that it be self-supporting from premiums with no tax dollars used. The CBO estimated an average age-adjusted monthly premium of $123. This assumes that just 5 or 6 percent of eligible will workers will join the plan. Some experts think that the participation rate will be higher because Class is an “opt out” program. If a larger percentage join, premiums will be lower.
The issue of concern for baby boomers is timing. If enrollment does not begin until 2013 and vesting takes five years thereafter, the public long term care insurance may not help us much. For example, that would force a 60 year old baby boomer today to work at least until 2016 and not become eligible for benefits until age 68.
My intention is to keep our private long term care policies in force for now but I will definitely be following and taking a close look at the new public long term care insurance plan.