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(YES, You Still Need Long-Term Care Insurance!!)

The Community Living Assistance Services and Supports (CLASS) Act is a provision in the new health care reform bill (Public Law 111-148) that is supposed to provide a small cash benefit of $50 - $75 a day with a lifetime benefit period depending on the level of impairment (needing help with 2 Activities of Daily Living vs. 4 ADLs). The anticipated implementation year is 2013, and all employees will pay through payroll deduction unless they opt out. Premium must be paid for at least five years before benefits could be claimed. Earlier discussions of this legislation suggested low monthly premiums such as $40 a month. The final version says in Sec. 3203 that the premium is yet to be determined and that it will be based on keeping the program solvent throughout a 75 year period. Premiums can start as low as $5 a month for people below poverty level and workers who are also full-time students under age 22. People who drop out for more than 90 days will have to re-enter at attained age. Even so, the premium can be recalculated in the future and rate increases applied except to enrollees who are age 65 and have paid premium for at least 20 years.

The concern about this program is two-fold: that it will cost much more than is projected and that it will lull Americans into a false sense of security that they are truly protected for long-term care. A $50-$75 a day benefit seems very small vs. current costs of $150+ per day for 8 hours of home care, the cost of which could triple in the next 20 years due to the extreme shortage of caregivers. The inflation index for the CLASS Act daily benefit is Urban CPI, which averages around 3.5% per year. [Sec. 3205 (b) (1) (B)] Also, employers don’t have to offer it and even when they do, employees can opt out per the “Alternative Enrollment Procedures” section as follows:

Sec. 3204 Enrollment and Disenrollment Requirements

(2) Alternative Enrollment Procedures - The procedures established under paragraph (1) shall provide for an alternative enrollment process for an individual described in subsection (c) in the case of such an individual--

(A) who is self-employed
(B) who has more than 1 employer; or

(C) whose employer does not elect to participate in the automatic enrollment process established by the Secretary.

Premiums will vary by age at enrollment and by year of enrollment. However, the head actuary at CMS (the government branch that runs Medicare and Medicaid) thinks that the average premium for the entire program should be more like $240 per month, although premiums will vary by age at enrollment and by year of enrollment.* I just can't see employees accepting a high level of premium for so little benefit. We know how hard it is to educate employees to buy private long-term care insurance for much less premium than that. $15 million over the next five years was approved for what we thought would go to continue the Own Your Future program. Now it looks like those dollars may be used to provide consumer education about the CLASS Act.

Finally, a really big reason it passed is because people have to pay into it 5 years before they can collect benefits. Employees are guaranteed acceptance, including employees who already need help with activities of daily living; i.e. wheelchair-bound employees. They still have to pay into the program five years before collecting benefits. Non-working spouses do not appear to be eligible at all.

Because it requires premiums to be paid for the five year time period before any benefits can be paid out, Congress looked at it as a revenue generator to help fund the overall health care reform bill. I think they will be sadly disappointed when they see how few employees will accept it. The head actuary at CMS thinks the participation will be only 2%.* Most of them will likely be people who have health issues, which will drive up the number of claims which ultimately leads to the program being underfunded. Therefore I think it will fall way short of the revenue generator it is expected to be.

*Foster, Richard S. “Estimated Financial Effects of the “Patient Protection and Affordable Care Act,” as amended, Department of Health and Human Services, CMS Office of the Actuary, April 22, 2010 memorandum, pp. 14-15.


Click here to see the final version of the CLASS Act.

- Revised 05/07/10 -


LTC Consultants provides long-term care insurance training to agents and educates consumers with information about long term care insurance. This website contains reports and articles about caregiving, assisted living, nursing homes, aging, senior living and elder care, home health care and other long-term care related articles. Order Phyllis Shelton’s Protecting Your Family with Long-Term Care Insurance with articles about whether or not to self-insure or buy combo life insurance and annuity policies or a traditional LTC insurance plan. The book also contains ideas for people who don't qualify for LTC insurance such as Medicaid, life settlements, reverse mortgages, critical illness and also contains in-depth information about Medicare, Medicare Advantage and Medicare Supplements.


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