Image result for Long-Term Care Insurance PlanThe Community Living Assistance Services and Supporters Act (CLASS Act) signed into law by President Obama is a very exciting development in terms of helping more Americans plan for the risk of needing costly long-term care.
Many details regarding the CLASS Act are not yet defined and will be developed through Government regulation but here are some known facts that can help you decide if this is a good option for you. While the following may seem primarily negative, CLASS offers an excellent benefit for those who are disabled and are low-income wage earners.
First, while some reports talk about the program beginning in 2011, this is very unlikely. Work on the CLASS Act began well before health care reform. It was actually first started in 1993. It is far more likely that important details will not be determined until late 2012. Employers will start offering the plan in 2012 and 2014. The first benefits won’t be paid until one pays into the plan for at least five years (so 2018 at the earliest).
While many reports talk about CLASS as a voluntary plan, every worker is involuntarily and automatically opted into the program. Each employee or self-employed person must willfully opt out to avoid the program’s large premiums that will otherwise accrue by default.
CLASS is not insurance and it is not really designed for healthy people who want to prepare responsibly for the relatively small possibility they may become disabled or chronically ill. CLASS is more accurately described as pre-payment of care subsidized by the insurable for the benefit of the uninsurable.
The program will be promoted as a program for chronically ill seniors as well as for the working disabled. CLASS benefits, even if they are paid at something approaching the most optimistically anticipated rates, hardly will make a dent in the cost of long-term care for the elderly.
The government program has no underwriting, which means there is no price put on the level of risk each participant brings into the program. Some will pay more than their level of risk would otherwise require so others can pay less and take out more than their level of risk objectively justifies.
CLASS has subsidized premiums, as little as $5 per month for the poor. The non-poor will pay higher premiums to make up the difference. This is not true with insurance where income has no relationship to the cost.
Finally, the program is not a contractual agreement. The costs and rules for receiving benefits can be changed at any point by the Department of Health and Human Services. CLASS joins a long chain of unfunded entitlement programs as its weakest link. Medicare is under water $89 trillion and Social Security $17 trillion, not to mention the unfunded liabilities of federal, state, local and private-companies’ pension systems.
Everything in CLASS depends on a final decision by whoever is secretary of the Department of Health and Human Services when CLASS claims come due. If CLASS is broke, the secretary can change virtually anything and everything to fit the funds available.

Post Comment