Washington, who adopted the nation’s first state-run long-term care (LTC) insurance program for Washington residents, is finding that the first is not always the best place to be.
Lawsuits, long-term solvency issues, and practical considerations has led to a highly anticipated postponement.
On January 27, 2022, Governor Jay Inslee signed House Bill 1732 that delayed implementation of the WA Cares Fund plan by 18 months, from its original date of January 1, 2022. As to logistics for employers and employees, premium collection have been kicked to July 1, 2023.
1. What if my employer collected LTC taxes for January 2022?
Short answer, the employer should return the money to the employee. According to Washington’s unemployment agency, the Employment Security Department (ESD), employers should:
- Stop withholding WA Cares premiums from employee earnings.
- Reimburse employees for WA Cares premiums deducted within 120 days of collection.
- Continue to maintain copies of exemption approval letters for workers who provided them.
2. Are there any exemptions?
The WA Cares Fund is to be supported by a premium paid by employees only. The premium had been set by state law at 0.58% of gross wages, or $0.58 per $100. Since the plan is set up to self-fund, the opt-out options were limited:
- An employee who attests they have LTC insurance purchased prior to November 1st, 2021 had the option to apply for an exemption from the premium tax.
- Once the employee is determined to be exempt, they may NOT later opt in.
- As of November 17, 2021, a total of 383,996 exemption applications had been received by ESD. That’s a lot to process – and that’s a lot of potential revenue removed from the Fund.
3. Are there other changes to the law?
As stated above, HB 1732 delayed the start of premium assessments eighteen months, or until July 1, 2023, and expanded eligibility for those individuals close to retirement age (born before 1968) so that they may be able to receive prorated benefits based on the number of years they contribute to the fund.
HB 1733 expanded the criteria for those eligible for exemptions to opt out of the plan to include workers who live out of state and work in Washington (remember: you must live in Washington to receive the benefit), military spouses, workers on non-immigrant visas, and certain veterans with disabilities.
4. Does this mean that WA finally got the plan right?
Not exactly. These two bills are a start, but they fail to address other fundamental concerns with the overall plan. For example, Washington residents who pay assessments would lose benefits if they move to another state. More fundamental concerns are whether the fund itself would be able to sustain itself and whether the maximum lifetime benefit would accomplish the legislature’s goals of providing a sufficient benefit for those in need.
5. What is the benefit?
Individuals can receive up to $100 per day to cover long-term care costs, with a maximum lifetime benefit of just $36,500, which is for one year’s worth of care.
Benefits are only available for approved long-term care needs. Here, the list is rather broad and includes nursing facilities, assisted living facilities, adult family care homes, home healthcare, medical supports (e.g., wheelchairs, ramps), transportation, caregiver support, and memory care.
6. How does that benefit compare to the costs of care?
Genworth Financial sponsors an annual Cost of Care Survey, conducted by the CareScout research team, to determine the cost of nursing homes, assisted living, and related care costs throughout the U.S. For 2021, in Washington, the annual costs are:
- Home Health Aide $78,936 (9.07% increase from 2020)
- Assisted Living $72,000 (4.35% increase)
- Nursing Home, Semi-Private $113,150 (-1.59% decrease)
- Nursing Home, Private Room $125,597 (-4.42% decrease)
As you can see, the Washington plan can only go so far, and should be considered as part of an overall “aging strategy.”
7. Can I terminate my Long Term Care Policy now that I have received my exemption certificate?
The ESD is proposing a re-attestation provision, which requires that the LTC policy is maintained and recertified (meaning that you must provide proof that you still have the policy). Recertification is the only logical way to keep people enrolled – which is the idea behind the exemption, that people have a way to provide for their long-term care needs apart from participation in WA Cares.
One likely scenario is that if you have opted out of the tax with your own LTC policy and then terminated the policy, you will be brought back into the system for the tax WITHOUT the benefit.
8. If I didn’t get LTC insurance before, will I get a second chance to get out of the tax?
That does not appear to be on the table. Keep in mind, the plan needs to figure out its costs and option going forward; another “open enrollment” would topple the apple cart, which seems to be on shaky ground right now.
9. What should I do with the LTC policy that I just purchased?
Many policies that were purchased were small policies to get out of the tax. This was a boon for LTC insurance providers, though likely did not resolve LTC needs that people may have in the future. Now with time to catch your breath, you may want to evaluate whether there are better options for LTC than the policy you just bought.