Flaws Found In Federal Long Term Care Insurance Plan

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Part of the proposed federal health plan being discussed by the U.S. Senate includes proposed long term care protection. The proposed Community Living Assistance Services and Supports Act (CLASS Act) would provide coverage paid by individuals who would have the ability to opt out.

According to Jesse Slome, executive director of the American Association for Long Term Care Insurance, the industry's professional organization, a just-completed study by the American Academy of Actuaries reveals the plan's significant flaws. "The plan's proponents believe a $65-per-month tax for individuals would be sufficient to provide a $50 average monthly benefit," Slome notes. "The study reveals that the sound monthly premium level would be closer to $110 a month or over $1,300 a year per-individual."

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The CLASS Act proposes a voluntary federal program that is sustainable and actuarially sound over a 75-year horizon. "Based on the current assumptions, the independent actuaries project the new government fund established to pay long term care claims will be insolvent by 2027. Sometime well before that date, taxpayers can expect the voluntary plan to become a new mandatory tax."

The report notes that part of the problem with the proposed plan is the increased likelihood of adverse selection. "Simply stated, those individuals in poorer health will sign-up for the plan and those who are in better health will likely opt-out," Slome anticipates. "Once claim payments begin after the five-year waiting period, one can expect an increasingly steady flow that will stretch the fund beyond what proponents expect."

The American Association for Long Term Care Insurance is the independent trade organization providing information on long term care planning to consumers and providing marketing and sales support to information. The organization maintains the industry's most comprehensive website on long-term care planning which can be found at www.aaltci.org/

Written by Jesse Slome

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