The waiting game gamble with long-term care legislation 

Tracking the long-term care (LTC) legislative landscape is a bit like “Who’s On First?” — one minute, you’ve figured out the order of events; the next, you’re back to asking what and when? As states keep unveiling their LTC proposals, with few certainties and moving timeline targets, you might ask yourself, “Can we just wait it out?” It’s a fair question, but answering yes comes with risk. The waiting game could result in two possible outcomes: one being states pass payroll deduction-funded LTC legislation and employees have no opportunity or a narrow window  to opt out; and two, with insufficient state LTC benefits, employees need private LTC coverage in addition to the public program in order to achieve adequate protection.

Gaps in proposed LTC legislation leave something to be desired

The LTC benefits enacted in Washington, and proposed in New York and Pennsylvania, only amount to a $36,500 ($100/day) lifetime maximum (adjusted annually for inflation). Currently, California legislators and regulators are also reviewing how to construct a state-based LTC plan (although substantive legislation has not yet been introduced). For comparison, the national annual cost of care for a private nursing home room is $108,408 (Genworth 2021 Cost of Care Survey, 2021). This potential sticker price of LTC is astounding, and similar care provided at home (where we want to be) is even more expensive.

The glaring gap between state-mandated and private LTC plans highlights the financial risk to consumers. State-based programs, like those passed in Washington and being considered in other states, create future risk that may not be contemplated today. Employees who will not qualify for the Medicaid safety-net face increasing LTC program taxes for the duration of their careers — leaving them responsible for paying a high price across all forms of compensation (base salary, bonuses, commissions, etc.) for minimal state-provided LTC coverage focused on relieving Medicaid liability versus adequately addressing long-term employee needs. 

Another major gap with LTC legislation is the state-by-state approach, rather than with a broad-sweeping federal mandate. Recall that the Affordable Care Act originally included a Community Living Assistance Services and Supports (CLASS) Act provision that offered a voluntary LTC program. That program was official repealed by a 2013 law.

The states are already juggling LTC program options and debating issues, such as residency requirements at the time of claim. The Washington Cares program passed with a residency requirement at the time of claim, making retirees who live out-of-state ineligible never receive/claim. Employees within Washington are limited if they move out of state to retire (assuming they want/need to file a LTC claim through the state program they contributed to over the course of their careers). Washington recently published additional regulations that clarify early 2022 amendments to their LTC law as initially proposed. A recent state-initiated actuarial report estimates the LTC program will be fully funded through June 30, 2098, provided the assumptions used for the study prove accurate or unless additional future changes to the law are made.  This will require time to see how this develops.

These examples highlight what’s at stake, if employees don’t evaluate private LTC options. Would employees rather be potentially taxed and at risk due to limited state coverage or buy private LTC coverage with more protection elsewhere?

Private LTC solutions — the best defense in a dynamic legislative environment

With so much focus on the ever-changing LTC legislative landscape, it’s easy to lose sight of the value private LTC solutions bring. But, having private LTC coverage as part of a financial portfolio allows employees to feel more confident to plan for the future and protect their assets — while also bypassing the issue of LTC legislation variability. The value of these solutions is undeniable:

• Guaranteed issue or reduced underwriting. This is available to some employer plans, while all options in the individual market typically require full underwriting (rejection rate of more than 30 percent of applicants).
• Flexibility to manage individual risk. Individuals select coverage amounts based on their needs or budget.
• Age of entry pricing. Level premiums apply (some products with guaranteed rates).
• Broad benefits scope. LTC services typically include care in a facility, community or home (upon attainment of two activities of daily living [ADL] claim triggers). For example, all recently passed or proposed LTC legislation to date requires three ADL triggers to be eligible for claim (e.g. bathing, etc.).
• Reduced claim-filing intensity. Some products offer indemnity benefit payments not requiring reimbursement of expenses paid, advancing monthly or lump sum payments once the need for LTC is established.
• Dual benefits from Life combination products. A growing marketplace of carriers is broadening the way to use benefits (allowing either a death benefit, LTC benefits or in some cases both).
• Traditional LTC. With a shrinking carrier marketplace, limited options remain for those who pass full underwriting, creating significant LTC event leverage (commonly includes benefits for home modifications and durable medical equipment needed during an LTC event).

There is no crystal ball for predicting what will happen next with LTC legislation, but rest assured, we anticipate that more states will consider enacting legislation similar to the Washington model. While so much in this LTC journey is unpredictable, the concern is that the primary focus of proposed state LTC programs is to reduce state Medicaid costs, not employee financial vulnerability. In the meantime, the only surefire way employees can gain adequate LTC protection is through the private market, and the sufficiency and cost of coverage will be better with employer involvement.

Mercer Voluntary Benefits has a long-term commitment and focus on leading LTC strategy — helping make sense of marketplace trends and legislation. Led by Steve Ginsburg, our Voluntary Benefits product expert with more than 30 years of industry experience, we are well positioned to help navigate these rapid, fluid changes, keeping you apprised of the latest information to support your employees through dynamic legislative activity.