Filed Under:Health Insurance, Ltci

Sebelius: Current CLASS Structure Not Viable

“The challenge … is not going away.”

(AP Photo/J. Scott Applewhite, File)
(AP Photo/J. Scott Applewhite, File)

U.S. Department of Health and Human Services (HHS) Kathleen Sebelius has written to Congress to acknowledge that her department could not figure out how to make the Community Living Assistance Services and Supports (CLASS) program make sense.

“Despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time,” Sebelius says in a letter to House Speaker John Boehner, R-Ohio.

The CLASS Act section of the Patient Protection and Affordable Care Act of 2010 (2010) (PPACA) is supposed to create a voluntary, worker-funded long-term care insurance (LTCI) program. Defenders say it is desperately needed; critics have argued that the program would be actuarially unsound.

The CLASS program would probably pay out more in benefits than it would collect in premiums, and any younger, healthier enrollees would seen bail out, the critics have argued.

In September, reports surfaced that the Obama administration had reduced the size of the CLASS program implementation office at HHS. Around that time, an HHS representative denied that the CLASS office had closed.

PPACA calls for the CLASS program to sustain itself with premium revenue.

Sebelius notes in the letter to Boehner that HHS experts and outside experts spent 19 months trying to determine how to make the CLASS program self-sustaining.

As early as 2009, the chief actuary at the HHS Centers for Medicare and Medicaid Services (CMS) had raised concerns about CLASS program viability.

“Because of such concerns, the law passed by Congress required me to design a plan that would be actuarially sound and financially solvent for at least 75 years,” Sebelius says in the letter “The provision protected both taxpayers and beneficiaries. After all, if CLASS failed, no one would be hurt more than those who would pay into it and would be counting on it the most.”

Although the CLASS program does not appear to be sound in its current form, the analyses conducted to assess the program’s viability could help lead to the development of other sustainable, affordable LTCI options, Sebelius says.

“The challenge that CLASS was created to address is not going away,” Sebelius says. “By 2020, we know that an estimated 15 million Americans will need some kind of long-term care, and fewer than 3% have a long-term care policy. These Americans are our family, our friends and our neighbors. If they are to live productive and independent lives, we need to make sure that they have access to the long-term care supports that make that possible.”

Jesse Slome, executive director of the American Association for Long-Term Care Insurance, voiced concern that the death of the program, which he had strongly criticized throughout the drafting process as unviable, should not impact efforts to deal with products aimed at helping people who need long-term care.

"The cessation of efforts to implement the CLASS Act does not eliminate the financial long-term care tsunami about to impact American families and taxpayers who already bear much of the cost," Slome said.

"The CLASS Act was overly ambitious especially considering the current economic climate,” he said.  But, Slome cautioned,  “ignoring the problem will not make it disappear and we look forward to more realistic approaches that can help Americans face and address this issue.”

Robert Miller, president of the National Association of Insurance and Financial Agents, lauded support for the decision to abandon what he said was an  “unsustainable” program.

He said  NAIFA continues to support the goal of achieving financial security to cover long-term care services, but said there are better ways to help people plan for their long-term care needs, “including the offer of quality insurance products at their place of employment.”

Miller said NAIFA suggests that the following efforts are better suited to address the long-term care financing needs:

  • Increase awareness of long-term care planning needs including increased funding for the Long-Term Care Clearing House run by HHS.
  • Expand State Partnership Program that allows participants to keep some or all of their assets if they apply for Medicaid after they use their long-term care insurance benefits.
  • Allow long-term care insurance to be included in employer-sponsored cafeteria plans and flexible spending arrangements so premiums could be paid for using pre-tax dollars, making long-term care insurance more accessible for all Americans.
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