Dispelling the Myths: The CLASS Act

Dispelling the Myths: The CLASS Act

The Community Living Assistance Services and Supports (CLASS) Act is a provision in the new Health Care Reform bill (Public Law 111-148) that is supposed to provide a small cash benefit of between $50 and $75 a day for long term care services. It is intended to be a voluntary plan primarily offered by employers and paid for by employees. Provisions of the CLASS Act become effective in 2011. However, there are so many details yet to be worked out, that the plan will more than likely not become available until 2013.

There is a five year vesting period in which premiums must be made before benefits can be claimed.

Premiums have yet to be determined. In November, 2009 the Congressional Budget Office assumed an average monthly premium of $123 (less for young enrollees and more for older ones). Independent actuaries expect the costs to be higher.

There are no health qualifications. The program is available to working Americans on a guaranteed issue basis. While this is good news for currently impaired employees who will likely not qualify for private long term care insurance, it creates the problem of adverse selection.

The program will not be available for retired or non-working individuals.

The concern about the program is two-fold: It will cost much more than is projected; and it will lull Americans into a false sense of security that they are truly protected for long term care insurance.

Both Richard Foster, the Chief Actuary at the Centers for Medicare and Medicaid Services, along with the American Academy of Actuaries have concluded: “There is significant risk that the program will be both financially unsustainable and affordable for participants”.

Perhaps the biggest impact that CLASS will have is that it will draw much-needed national attention to the important fact that we have a rapidly aging population that may be unprepared to face the high expenses related to long term care services. Only through private long term care planning can our clients be assured that they and their families are properly prepared.