 Lawmakers in Olympia passed another new program, this time to offer state-run long term care benefits. Here's what we know so far. They’ve been busy in Olympia! Yet another bill passed by the Washington State legislature this spring is HB 1087: The Long Term Care Services and Support Trust Act. In a nutshell, this program will provide up to $100 per day, to a maximum of $36,500 per person, in long term care benefits. While this can be for facility care, the main goal of the bill is to provide options for “care in place.” It is being estimated that delaying Medicaid-funded facility care will save Washington State’s Medicaid system approximately $470M by 2052. Funding The Long Term Care (LTC) Trust program will be funded through an employee payroll tax, starting in January 2022. The tax will be 0.58% of salary and will apply to all workers. Employees who can show they have LTC insurance can opt out of the tax. Self-employed individuals will be allowed to opt in, but not until January 2022. The details have not been flushed out yet and will be developed over the next few years (much like we have seen with the Washington State Paid Family and Medical Leave Act’s provisions). The bill notes that the $0.58 rate will be reviewed every two years once it is imposed on January 1, 2022. The legislature’s expectation is that the rate will not increase, and will most likely decrease in future years. Eligibility for Benefits Benefits could begin as early as January 2025. To be a Qualified Individual for benefits, the following must be met:
Benefits Benefits will be provided in “benefit units” of $100 each (adjusted annually). Benefits will be limited to one benefit unit per day, to 365 units maximum per lifetime. If benefits used in a day cost less than the “benefit unit”, the remainder will continue to be accessible to the QI under their lifetime benefit. This coverage amount is literally a drop in the bucket when looking at the cost of inpatient long term care, which currently 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. Our state’s Medicaid program pays approximately $24,000 annually per person receiving in-home care, but to be eligible a state resident must spend down the bulk of their net worth. Covered non-facility services under the new LTC bill include:
Benefits that a QI receives under this LTC program will not be considered income when determining their eligibility for other state programs. Caregivers LTC providers who wish to be paid by the LTC Trust will need to be registered with DSHS. The rules specifically outline how a person can become a registered provider in order to care for a family member. For example a spouse can qualify if they receive 15 hours of basic training plus an additional 6 hours of focused training based on their spouse’s specific needs within the first 120 days of registering with DSHS. This is imperative, since there is already a significant need to fill caregiver positions in most communities. The Stats The national statistics of Long Term Care cost and usage are interesting. Gleaned from Morningstar’s August 20, 2018 article: 75 Must-Know Statistics About Long-Term Care: 2018 Edition:
An Alternative As I noted before, the regulations allow those with LTC insurance to opt out of the state’s LTC Trust program. Now is the perfect time to start looking at options available to employers. I talked with Rob Morrow, of LTC Solutions, to find out more about the options currently available in the marketplace. A popular LTC program is an employer base/buyup, with the employer spending approximately $30 per month for base LTC coverage and the employee then being able to buyup to higher levels of coverage. According to Rob, all employer base-model plans available on the market today have coverage levels at or higher than the state’s LTC Trust benefits. Consider the numbers. An employee making $100,000 per year would incur a $580 annual payroll tax for the state’s LTC Trust program. An employer offering base coverage would pay approximately $360 annually in premiums. With some shifting of benefits from employer-paid to employee-paid (such as disability coverage), an employer could offer base LTC without an increase to their overall benefits budget. Here’s an example:
Of course, this is a simplified analysis. Tax amounts will be based on income, LTC insurance premiums will be based on age, etc. However, there are a few other provisions to consider with LTC offered on a group basis:
If an employer does not wish to offer a base/buyup LTC insurance program, they can still offer their employees a voluntary plan (although minimum participation may be required to retain Simplified Underwriting and “group” rating). The employee can then decide if they would like to pay premiums for higher coverage under LTC insurance or pay the payroll tax for the state’s LTC Trust program. The Bottom Line The passing of HB 1087 is just the first step in a very long road to the rollout of state-run LTC coverage. Over the three years of collected payroll taxes, it is estimated that the LTC Trust Program’s coffers will have $3 billion in funding by the time anyone will actually be able to file an LTC claim. Since anyone with current LTC insurance can opt out of paying the state’s LTC payroll tax, I predict more employers will want to look at LTC insurance options. Employers with 10 or more employees will be able to offer a voluntary LTC plan and let their employees choose: the insurance or the payroll tax. Or if they can move around employer dollars earmarked for benefits, they may be able to offer an employer base LTC plan, and let employees decide if they would like to purchase higher coverage. If nothing else, the next few years will be interesting! You may want to keep your trusty LTC broker on speed dial! Be Benefits Informed
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