Simply stated health care

A provision of the health reform law flying under some individuals’ radar is the Community Living Assistance Services and Supports Act (CLASS Act-see Title VIII, Section 8001-8002). It goes into effect on January 1, 2011 and provides employees with a voluntary, federal program that offers long-term care (LTC) insurance.

Background Information

The late Senator Ted Kennedy (Democrat-MA) and Congressman Frank Pallone (Democrat-NJ) introduced the original CLASS Act in March 2009. A longtime supporter of a national healthcare system, Senator Kennedy’s work on the legislation was one of his last acts before leaving the Senate.

The CLASS Act provides functionally limited individuals with support so they can maintain their independence. Rather than replacing private LTC insurance or Medicaid, the CLASS Act supplements those programs. Enrollment is voluntary and employers have the option of providing automatic enrollment with payroll deductions.

What’s Different About the Federal Program

The CLASS Act differs from conventional group LTC programs. The following are a few of those differences:

• Enrollment – As noted, employers may offer automatic enrollment in the federal program with an opt-out feature for employees. Individuals enroll though a process established by Health and Human Services (HHS) during a specified enrollment period. Individuals not enrolling in the federal program, when they are first eligible, must wait for the next enrollment period. Many group LTC programs allow enrollment before the next enrollment period, provided the individual produces evidence of insurability.
• Benefit Eligibility - With the federal program, the participant must have paid premiums for 5 years and worked at least 3 years with earnings that are the equivalent of one quarter of Social Security coverage. Typically, traditional group LTC programs provide immediate coverage.
• Premiums - For the federal program, HHS determines the premium rates based on actuarial analysis of the costs of the program. The CLASS Act does allow minimal rates (not to exceed $5) for low-income individuals or employed, full-time students under age 22. Adjustments to the rates occur when the student is no longer full-time or if there is a lapse in the individual’s participation. For current group LTC programs, rates are based on selected benefits, risk factors, age and marital status.
• Paid Benefits – Traditional LTC group programs offer a contracted schedule of benefits. The benefits for the federal program have not been determined yet by HHS, although there are certain guidelines, including the following:
  • Benefits will be no less than $50 per day
  • Benefits will vary by functional ability
  • There can be no lifetime or aggregate limit on benefits
  • Benefits are a cash benefit paid daily or weekly
• Family Members - At least so far, the federal program does not include coverage for an employee’s dependents. Typically, subject to evidence of insurability, most group LTC programs allow dependents to access coverage through the employee.

The premiums for the federal program are treated the same as a qualified long-term care policy, where benefits are non- taxable and premiums may be eligible for deduction, provided the Internal Revenue Service requirements are met (refer to Publication 502).

The Aging Generation

The oldest of the baby boomers turn 65 in 2011. By 2050, the over 65 projection increases to 88.5 million people and represents 20 percent of the total population – a 150% increase from 2000.

Long-term care is a reality many baby boomers are already experiencing with their own parents. Whether or not the CLASS Act fulfills the anticipated demand is something this baby boomer plans on watching.

Notice of Disclaimer –Cathy Miller is not an attorney and cannot provide legal advice. The information provided is for your general background only, and is not intended to constitute legal advice as to your specific circumstances. We recommend you review legislation with legal counsel.

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