Federal CLASS Act elevates debate over long-term care insurance

U.S. Health and Human Services Secretary Kathleen Sebelius acknowledges that a long-term care insurance program tucked into the federal health care reform law is “far from perfect.” She vows to keep the CLASS Act on “firm footing” for years to come by re-engineering the financial risks and keeping down the program’s long-term care insurance premiums.

Despite Sebelius’ assurances, some congressional Republicans want to do away with the CLASS Act, which they complain will be too costly. In a Dec. 1, 2010, report titled “Moment of Truth,” President Obama’s bipartisan National Commission on Fiscal Responsibility and Reform recommended that the CLASS (Community Living Assistance Services and Supports) Act program be revamped or repealed.

“It would be irresponsible to ignore the concerns about the CLASS program’s long-term sustainability in its current form, and we haven’t done that,” Sebelius said in a speech Feb. 7, 2011, sponsored by the Kaiser Family Foundation. “But it would unconscionable to ignore the likelihood that without the CLASS Act, countless Americans will have to clear out their savings and leave their homes and loved ones in order to get the services they need.”

The CLASS Act, part of the federal health care reform law, sets up a program that lets Americans voluntarily pay premiums for insurance to cover long-term care needs down the road.

Sebelius emphasizes that federal tax dollars won’t be used to pay for CLASS benefits.

Brian Blase, senior policy analyst at the Heritage Foundation’s Center for Health Policy Studies, believes “an overabundance of unhealthy and disabled individuals” enrolled in the CLASS program will trigger huge premium hikes for enrollees or prompt a taxpayer-financed bailout.

What is the CLASS Act?

The CLASS Act, a key component of the health care reform law, is designed to meet the long-term care needs of an aging American population. Even detractors of the CLASS Act agree that growing need for long-term care is real.

According to the nonprofit organization LeadingAge, the CLASS Act is a voluntary, federally administered, consumer-financed insurance plan. The CLASS program provides those who participate with cash to help pay for long-term care assistance in settings such as independent living centers and nursing homes.

The nonprofit group Advance CLASS says the CLASS Act “will be able to provide greater dignity, greater hope and greater opportunity and self-direction to seniors and people with disabilities so they can maintain a job, a home and a family.”

While the CLASS Act took effect this year, the U.S. Department of Health and Human Services still is working on guidelines for implementing the program. The deadline for those guidelines is October 2012. That means Americans won’t be able to sign up for the program until 2012 or, more likely, 2013.

How does the CLASS Act work?

Any working American adult will be able to enroll in the CLASS program, as long as he’s not in a nursing home or a similar facility. No one can be excluded because of pre-existing conditions, according to LeadingAge.

Opponents worry that because no one can be turned away from the program, the pool of enrollees will be filled with many unhealthy people, thus driving up premiums. Another thorn in the side of CLASS opponents: The program’s benefits could last throughout an enrollee’s lifetime.

For people working for an employer that chooses to participate, the employer will sign people up automatically, according to LeadingAge. Premiums handled through a payroll deduction like many other benefits. Employees can opt out of the program, however. Individuals, such as those who are self-employed, also can elect to enroll.

How much will CLASS Act premiums be?

The CLASS plan will pay an average cash benefit roughly $50 a day. The benefit amount will be adjusted to keep pace with inflation. Currently, the average benefit paid by private long-term health insurance plans is $142.

One estimate indicates the average long-term care insurance premium for the CLASS program initially will be $123 a month. Cash benefits would help cover costs such as nursing home care.

The Congressional Budget Office estimates the average monthly premium for the CLASS program will be $123 at the outset, with nearly 10 million enrollees by 2019. The CLASS Act exempts three groups from premium increases, according to the Heritage Foundation: people over age 65, enrollees who’ve paid premiums for at least 20 years and people who no longer are “actively” employed.

The CLASS Act calls for subsidized premiums of $5 a month for full-time students as well as workers with incomes of less than one-fourth of Social Security coverage ($1,120 in 2010).

Steve Moses, president of the Center for Long-Term Care Reform in Washington, D.C., and an opponent of the CLASS Act, fears the premiums could climb as high as $240 a month.

Nonetheless, Jim Firman, president and CEO of the National Council on Aging, says he “has confidence that we will one day look back at the CLASS program as one of the great successes of health reform.”

The federal government estimates the CLASS program will contribute $70 billion of the $140 billion in projected savings from health care reform. However, a longer-term estimate raises the CLASS program’s cost to $76 billion by 2035. Blase notes that CLASS premiums will collected for five years before an enrollee can receive cash benefits.

What effect will the CLASS Act have?

Even if the CLASS Act winds up being axed, industry experts believe the debate over the program will boost knowledge about long-term care insurance and dispel myths about current long-term care coverage.

As the National Council on Aging points out, Medicare and employer-based insurance policies cover little or no long-term care. Many Americans are unaware of that, experts say.

Noting the rise in sales of long-term care policies after Congress enacted a program for federal employees, Jesse Slome, executive director of the American Association for Long-Term Care Insurance, says he thinks sales of private policies could double amid the CLASS controversy.

“While we have concerns about the long-term fiscal soundness of the CLASS plan, we are optimistic that the program will play a significant role in raising consumer awareness about the many issues surrounding long-term health care and the need to plan for the risk of needing this type of costly care,” Slome says on his organization’s website.

–Robert F. Dixon and John Egan