Congressional report highlights flaws in CLASS long-term care insurance program

Mark Henricks

The portion of the federal health care reform law that would create a national long-term care insurance program is in peril following a harshly critical report from members of Congress and a key vote by a U.S. Senate committee. In addition to revealing the depth of the political opposition to the Community Living Assistance Services and Supports (CLASS) program, the report highlights what may be fatal problems with the initiative, at least as originally envisioned.

If the CLASS program happens, “it’s going to look very different than what the health care law called for,” says Jesse Slome, executive director of the American Association for Long-Term Care Insurance, a trade group.

CLASS is designed to be an optional long-term care insurance program that would pay benefits to enrolled subscribers who became unable to dress themselves, prepare meals and perform similar daily activities. Subscribers would pay premiums for the coverage, but the government would back the plan.

Members of Congress continue to raise concerns over the CLASS long-term care insurance program, which would cover expenses such as nursing came.

On Sept. 21, the U.S. Senate Appropriations Committee voted to provide no funding for carrying out the CLASS program. U.S. Senate John Thune, a South Dakota Republican, called the vote “a victory for the American taxpayer.” Thune reiterated his call for congressional repeal of the CLASS program.

Too expensive to afford?

The primary question with CLASS is financial. When passed as part of the Patient Protection and Affordable Care Act in 2010, the CLASS Act required a five-year vesting period for subscribers to get benefits. Largely because it then would collect premiums for five years without paying any benefits, the program was supposed to generate $70 billion in deficit reduction during its first 10 years.

But Slome says that approach now is seen as flawed.

“The problem is if they price it to meet all the requirements the health care law called for, it’s going to be too expensive for anybody to afford,” Slome says. “If they price it too cheap, they’re going to take on the wrath of the Republicans, who are going to say the Democrats never met an unsustainable entitlement program they weren’t willing to foist on taxpayers.”

Hidden agenda?

The congressional report by a group of Republican senators and representatives led by Thune repeats the well-supported and widely recognized facts about the CLASS program’s financial underpinnings. It goes further, alleging that the law’s financial issues were recognized by the U.S. Department of Health and Human Services (HHS) long before the Class Act’s passage, and suppressed by members of President Obama’s administration to win support for health care reform.

One part of the report says: “As a result of this investigation, it is now clear that some officials inside HHS warned for months before passage that the CLASS program would be a fiscal disaster. Within HHS the program was repeatedly referred to as ‘a recipe for disaster’ with ‘terminal problems.’”

HHS studies the options

There’s little expectation of CLASS happening as initially described. The Department of Health and Human Services was supposed to set premiums by the fall of 2012 and begin collecting premiums in 2012 or 2013. The department so far has issued no guidelines. A department official tells InsuranceQuotes.com that the agency still is studying options.

The department “is firmly committed to implementing the CLASS program only if it is financially solvent, actuarially sound and consistent with the statute,” says the official, who declined to be identified.

Elsewhere, options that could salvage CLASS include extending the vesting period beyond five years, reducing benefits below those called for in the law and adding employer incentives to participate. The Republican congressional report alleges federal officials considered making employer participation mandatory, either as part of the original legislation or as an option to be mandated later if needed.

‘Hot potato’

Slome doubts that the Obama administration is eager to try to make the CLASS program a reality.

“Basically, it’s a hot potato,” he says. “My personal guess is if Health and Human Services could get rid of it, they would.”

That, however, is politically risky, Slome says, because it opens the door to possibly yanking or drastically altering other provisions of the federal health care reform law.

The ultimate fate of the entire reform law probably depends on what happens during the elections in the fall of 2012. Should a Republican win the White House and other Republicans gain seats in Congress, the law may well be repealed, at least in part. Meanwhile, the portion of the Class Act dealing with long-term care insurance increasingly is looking like an early casualty.

What now?

Slome suggests that consumers planning for eventual disability, as well as businesses that are contemplating long-term disability benefits for employees, not put CLASS into their insurance equations.

“Anybody who is in their 50s will be making a terrible mistake waiting to see if the CLASS Act is implemented and what it looks like,” he says.

Consumers who are able to meet the health qualification requirements for private long-term health care insurance should consider buying that insurance, Slome suggests. However, he notes that private plans offered by members of his organization are not likely to be available to as many consumers as the CLASS Act would enable because these plans have higher premiums and more stringent health qualifications.

“If you cannot health qualify for private long-term health insurance,” Slome warns, “you’d better hope that CLASS Act gets implemented.”