Legislative Tweaking of WA LTC

Important changes are coming to Washington State's new LTC program. Learn more and register for an upcoming webinar.

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​I originally wrote about Washington State’s Long Term Care (LTC) program in 2019 blog shortly after HB 1087 was passed by the legislature. The Act is now facing a couple of important changes with the 2021 legislative session, through HB 1323. With the effective date of the WA LTC tax fast approaching on 1/1/2022, and a slim window for employees to qualify for an exemption from the tax, time is of the essence. 

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Register for one of our upcoming information sessions
We will review the WA LTC program as well as a solution that you can implement for clients with 10+ employees by the upcoming deadline in June.

Thursday, March 25th at 1:00 P.m.

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A Quick Overview
The LTC Trust program will be funded through an employee payroll tax of 0.58% of salary, starting 1/1/2022. For someone earning $100,000, their annual tax would be equal to $580. Eligibility for the benefit may begin as early as January 2025, with the maximum benefit being $100 per day to $36,500 per lifetime. This is well under the cost of inpatient long term care, which averages $65,000 per year for those covered under Medicaid. While the benefit can be used for facility care, the main goal is to provide at-home services to help people age-in-place, which costs approximately $24,000 annually. Ultimately the LTC Trust’s creation is a way to lower Medicaid utilization of home care.
 
Exemption from the Tax
There is a provision in the LTC Trust Act that allows an employee to file for exemption from the payroll tax. In order to do so, they must attest that they purchased a comparable LTC insurance product.  Under the new changes under HB 1323 as currently written, the employee must have LTC insurance “purchased before the effective date of this act”.  Should this bill pass, the newly imposed deadline is estimated to be 7/24/2021.
 
Self-Employed Opt-In
Another change being proposed under HB 1323 will affect self-employed individuals. Previously opting in could begin as of 1/1/2022, without a future opt-in deadline applying. The new rule would require current self-employed individuals to opt-in before 1/1/2025, while newly self-employed individuals will have three years to opt in. Previously a self-employed individual would have been able to later opt out of the program if desired; however, new wording in HB 1323 will bar any self-employed person from opting out once they opt in, other than at retirement or upon no longer being self-employed.
 
A Timely Alternative
As I noted before, the regulations allow those with LTC insurance to opt out of the state’s LTC Trust program. But with the deadline now fast approaching, a solution is quickly needed.  I outlined an LTC insurance option in my prior blog. There is another option now on the table – offering LTC as a rider under a Life insurance policy through BJA. The benefits of providing this program to current employees:

• BJA has off-the-shelf carrier products ready to be implemented to meet the tight deadlines
• The plans are voluntary, so no additional employer cost is required, although an employer could pay the premiums if they desired
• BJA provides videos, communication materials, and premium vs. WA LTC tax cost comparisons for employee education
• BJA provides auto-enrollment technology as well as Certified LTC enrollers
• Guarantee Issue to Simplified GI available depending on group size
• The program provides a higher daily benefit and up to 25 or 50 months of LTC benefit compared to the State’s 12-month program
• Immediate coverage eligibility upon first payment, unlike the State’s plan with its minimum of 3 years of payments prior to being eligible
• The policy is portable, with the ability to not only continue self-payment of premiums, but also the ability to seek care both inside and outside Washington
• Includes life insurance coverage, payable in full or in part based on the LTC benefit remaining at the employee’s time of death
• Provides premium stability, unlike the WA State tax that will increase as an employee’s salary increases

Group Potential
​While this program is available to groups with as few as 10 enrolling employees, those with at least 75 applications will receive Guarantee Issue, with no health questions required.  Those with fewer than 75 applications would be eligible for Conditional Guarantee Issue (2 questions) or Simplified Guarantee Issue (4 questions) – note that negotiations are progressing to offer Guarantee Issued to groups under 75 employees.

​In order to receive an analysis of premiums vs. the WA LTC tax, only a minimal amount of information is required: employee names, dates of birth, genders, and current annual salary (prior W-2 salary can be used if easier).  Note that it appears total salary will be taxed, including commission, bonuses, and overtime pay.

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​The Bottom Line
The passing of HB 1087 was just the first step in the rollout of state-run LTC coverage in Washington State. It is expected that HB 1323 will pass, which will truncate the window of opportunity for employers to offer their current employees a very attractive alternative. Employers (and their agents) need to act quickly, especially since the closer we come to the deadline in July, the fewer resources will be available to onboard new groups. And for any employer who has been contemplating picking up the tab for the WA LTC tax, this Life/LTC program is a much more attractive alternative.

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