The CLASS ActThe CLASS Act

KAFL Insurance ResourcesKAFL Insurance Resources

What is the CLASS Act?What is the CLASS Act?

Community Living Assistance Services Community Living Assistance Services and Supports.and Supports.

The American Assoc. of Homes and The American Assoc. of Homes and Services for the Aging describe it as:Services for the Aging describe it as:

New voluntary nationwide long-term New voluntary nationwide long-term services and supports insurance services and supports insurance

program for persons with disabilities program for persons with disabilities and seniors with chronic illness.and seniors with chronic illness.

The CLASS Act is part of the Patient The CLASS Act is part of the Patient Protection and Affordable Health Protection and Affordable Health Care Act that was signed into law Care Act that was signed into law 3/23/2010.3/23/2010.

There are several details of the CLASS There are several details of the CLASS Act that are not defined yet and will Act that are not defined yet and will be developed through regulation.be developed through regulation.

The Secretary of Health & Human The Secretary of Health & Human Services predicts those regulations Services predicts those regulations will be completed by 10/1/2012.will be completed by 10/1/2012.

Some terms are set in Some terms are set in statute…statute…

Enrollees will be offered coverage through their Enrollees will be offered coverage through their employers and will automatically be covered unless employers and will automatically be covered unless they opt out. They will be able to opt back in at a they opt out. They will be able to opt back in at a later time if desired.later time if desired.

Enrollees will pay a monthly premium. This hasn’t Enrollees will pay a monthly premium. This hasn’t been determined yet, but early indications show the been determined yet, but early indications show the average premium to be $180-$240/month and could average premium to be $180-$240/month and could be increased annually to ensure the CLASS fund is be increased annually to ensure the CLASS fund is actuarially sound.actuarially sound.

Premiums will continue to be due while receiving Premiums will continue to be due while receiving benefits, unlike with individual LTC policies where benefits, unlike with individual LTC policies where the premium is waived while on claim.the premium is waived while on claim.

Coverage is on a guaranteed-issue basis.Coverage is on a guaranteed-issue basis.

Enrollees will be eligible for benefits for Enrollees will be eligible for benefits for their long-term care needs after paying their long-term care needs after paying premiums for the first 60 months of premiums for the first 60 months of coverage and will have had to work at coverage and will have had to work at least three of the five years. (Basically a 5 least three of the five years. (Basically a 5 year waiting period)year waiting period)

The benefit is paid over the individual’s The benefit is paid over the individual’s lifetime in the form of cash, based on the lifetime in the form of cash, based on the degree of impairment. The average degree of impairment. The average benefit is expected to be $50/day or benefit is expected to be $50/day or $18,000/year.$18,000/year.

Gov’t Plan vs. Ind. LTC Gov’t Plan vs. Ind. LTC PolicyPolicy

It will be at least 2 years before the It will be at least 2 years before the Class Act goes into effect and 5 Class Act goes into effect and 5 years from then until any benefits years from then until any benefits are provided. are provided.

That limitation, along with the That limitation, along with the minimal daily benefit should make minimal daily benefit should make anyone want to consider other anyone want to consider other possibilities.possibilities.

Gov’t Plan vs. Ind. LTC Gov’t Plan vs. Ind. LTC PolicyPolicy

With individual coverage:With individual coverage:

• The individual is not required to be The individual is not required to be workingworking

• The policy is designed to meet the The policy is designed to meet the individual’s needs and is likely to cover individual’s needs and is likely to cover more of the cost of care.more of the cost of care.

• The policy includes care coordination The policy includes care coordination services and provider discounts.services and provider discounts.

2011 UPDATE2011 UPDATE

On March 17, 2011 there was a CLASS On March 17, 2011 there was a CLASS Act debate. Participants included Act debate. Participants included people from the House of people from the House of Representatives, the Senate, the Representatives, the Senate, the Secretary of Health & Human Services, Secretary of Health & Human Services, as well as actuaries from CMS.as well as actuaries from CMS.

CMS actuaries believe the CLASS Act CMS actuaries believe the CLASS Act will be in the red by 2025.will be in the red by 2025.

An employee benefits specialist An employee benefits specialist suggested some ideas to avoid some the suggested some ideas to avoid some the adverse selection of participants that is adverse selection of participants that is expected at this point. For example, expected at this point. For example, requiring participants work a minimum requiring participants work a minimum of 20 to 30 hours. Putting restrictions of 20 to 30 hours. Putting restrictions on one’s ability to opt out, and then opt on one’s ability to opt out, and then opt in at some other time. Another in at some other time. Another suggestion is to include an elimination suggestion is to include an elimination period and to make the benefits pay on period and to make the benefits pay on a reimbursement basis rather than a reimbursement basis rather than cash. The CLASS Act could also include cash. The CLASS Act could also include scheduled premium increases based on scheduled premium increases based on the CPI.the CPI.

A member of the Social Security A member of the Social Security Advisory Board suggested that Advisory Board suggested that employers would need to consider if employers would need to consider if their employee’s paycheck’s could their employee’s paycheck’s could handle additional deductions of up to handle additional deductions of up to $200 or $250 per month. Keeping in $200 or $250 per month. Keeping in mind, that deduction would most mind, that deduction would most likely increase regularly.likely increase regularly.

MedAmericaMedAmerica

Simply Business – Simplicity iiSimply Business – Simplicity ii5% Discount5% Discount

Simplified UnderwritingSimplified Underwriting

Voluntary enrollment requires a Voluntary enrollment requires a minimum of 10 employee lives issued, minimum of 10 employee lives issued, then spouses actively working 30 or then spouses actively working 30 or

more hours per week outside the more hours per week outside the home can also receive simplified home can also receive simplified

underwriting.underwriting.

Simplicity iiSimplicity ii

$300,000 account, paying out $300,000 account, paying out $6,000/month, 90 day elimination, $6,000/month, 90 day elimination,

3% compound inflation3% compound inflation

Couple, both age 35 Couple, both age 35 $79/month each$79/month each

Couple, both age 45Couple, both age 45 $119/month $119/month eacheach

PrudentialPrudential

Employer Sponsored Program – ESPEmployer Sponsored Program – ESPEvolutionEvolution

5% Discount5% DiscountSimplified UnderwritingSimplified Underwriting

Employer must contribute $250 for Employer must contribute $250 for each participant per year. Minimum each participant per year. Minimum

required is 7 employees (issued), then required is 7 employees (issued), then spouses working 25 hours or more per spouses working 25 hours or more per

week are eligible for simplified week are eligible for simplified underwriting.underwriting.

EvolutionEvolution

$300,000 account $300,000 account

Paying 80% of actual expensesPaying 80% of actual expenses

90 day elimination 90 day elimination

GIF (Guaranteed Increase Feature)GIF (Guaranteed Increase Feature)

Couple, both age 35Couple, both age 35 $53/month each$53/month each

Couple, both age 45 Couple, both age 45 $80/month each$80/month each

UnumUnum

Guaranteed IssueGuaranteed Issue

Up to $6000/month for 6 yearsUp to $6000/month for 6 years

Minimum of 15 livesMinimum of 15 lives

Employer must buy minimum base Employer must buy minimum base planplan

Spouses go through full underwritingSpouses go through full underwriting

A CLASS Act A CLASS Act Disadvantage…Disadvantage…

The public already ignores LTC because The public already ignores LTC because they think the government is going to they think the government is going to

pay for it…pay for it…

The CLASS Act will only solidify that The CLASS Act will only solidify that thinking.thinking.

Do you think $50/day is going to be Do you think $50/day is going to be enough for care?enough for care?

A CLASS Act Advantage…A CLASS Act Advantage…

KAFL, along with other industry KAFL, along with other industry professionals do feel that this will professionals do feel that this will increase awareness for Long Term increase awareness for Long Term Care Insurance, therefore increase Care Insurance, therefore increase

sales for field agents.sales for field agents.

For more information as it becomes For more information as it becomes available, continue to visit the KAFL available, continue to visit the KAFL

Insurance Resources websiteInsurance Resources websitewww.kafl.com