April 15, 2024

Your Money: The Changes to Save a Big Idea

In fact, he spent about a decade working on it, finally succeeding when the Class Act, short for Community Living Assistance Services and Support, became law as part of last year’s landmark health insurance package.

The Class Act promises a lot: eligibility for most people, no matter their health status, as long as they are working at least a little; a benefit of at least $50 or so a day that lasts until death if necessary; and a premium structure that will offer big discounts for lower-income people but still won’t require any federal money.

This all turned out to be a bit too optimistic. In recent months, Kathleen Sebelius, the secretary of health and human services, has said that it will be difficult to make the offering both affordable and actuarially sound without some alterations.

She and her staff are making some changes, and the law gives them a certain amount of leeway. Their ultimate challenge is to make sure that the premium is not so low that there won’t be enough money to pay claims. But it also cannot be so high that it will scare off the young, healthy people who could subsidize all of the infirm people attracted to the plan’s generous eligibility rules (or frighten the employers of younger adults, who might encourage them to sign up).

Plenty of politicians are furious about the fact that something like this became law without the long-term numbers adding up. The far more interesting question, however, is why Senator Kennedy felt this law was necessary in the first place.

Here’s the blunt truth: Medicare generally won’t pay for as much nursing home or in-home care as many people think it will. Your cash savings may well be insufficient, especially if you want to leave plenty of money for a spouse who may outlive you. Your family may not be willing or able to take care of you. And if you do spend all of your assets to qualify for Medicaid, there’s no guarantee Medicaid will pay for the quality of care you want and do so close to friends or family.

So we better hope that the Class Act works and helps lots of Americans. Because if it doesn’t, plenty of people will be right back in denial-land again.

That said, there are some people who have already purchased long-term care insurance from a commercial company. Limra, a market research firm, figures there are about seven million of them.

Some buy it out of an abundance of caution, while others do it because their employers offer subsidized premiums as a benefit. Many others have seen family members spend hundreds of thousands of dollars on care or struggled to provide care themselves when there was no money left.

Even so, the insurance companies can make this a tough product to love, given their unexpected price jumps or occasional outright abandonment of the business.

How can the federal government possibly hope to do better? There are at least three ways.

First, it can enlist the help of employers, who could each make the government plan available to many thousands of employees.

According to an Aon Hewitt survey of over 1,300 large employers, 50 percent already made long-term care insurance available in 2010. But would those employers really want to replace what they have with a government program that would probably offer a lower level of benefits? Or would they offer it alongside their current plans?

As for the half of employers who do not offer any plan now, will their wary human resources executives really be first in line for a new government program?

The second way to potential success here is through automatic enrollment: getting those employers who do sign on to put every employee in the government plan and let individuals opt out later if they so choose.

The Class Act specifically mentions this possibility, though it does not seem to require it. The idea comes straight from the 401(k) playbook. According to an estimate from David L. Wray, president of the Profit Sharing/401k Council of America, which represents the interests of employers, about 38 percent of employees who have access to 401(k) plans work for employers who automatically enroll new workers.

Nobody, however, currently makes their employees buy long-term care insurance, according to Guy Bertsch, vice president for long-term care operations at Unum, which claims to sell far more policies through the workplace than any other company.

The authors of the Class Act were clearly worried about what would happen if employers did not sign everyone up automatically, though. Indeed, at employers that do not provide long-term care insurance free to everyone but still make it available for employee purchase, voluntary buy-in tends to be below 10 percent, Mr. Bertsch said.

Finally, there’s the possibility of rebranding the product to make it more relevant to young adults. Connie Garner, a former member of Senator Kennedy’s staff who worked closely with him on the Class Act, says she believes long-term care insurance has an image problem. “People think it’s for the lady with the blue hair in a wheelchair,” she said.

Ms. Garner, who is a nurse practitioner and now runs an advocacy group called AdvanceClass, speaks to groups about the fact that young adults who see themselves as invincible are only one dive into shallow water away from needing in-home care for the rest of their lives. That, she said, often moves parents in the audience to volunteer to pay for any premiums for their children, given that they would be discounted in the Class Act’s plan.

Article source: http://feeds.nytimes.com/click.phdo?i=f6e0c512afc72f56645e8a9c3c89f8ad

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