Long-term care is a "problem every-body will face and no one wants to talk about." But with the shelving of the CLASS Act by Congress, planning for long-term care is becoming part of the national conversation - and that presents an opportunity for brokers.
The Act
The Community Living Assistance Services and Supports Act, part of the health care reform law, would have created a national voluntary insurance program to give working adults the opportunity to plan for future long-term care needs by providing a cash benefit, says Jhamirah Howard, a policy analyst at the Kaiser Family Foundation.
While it was not designed to supplement basic insurance, it was intended to help individuals once they become disabled to remain in the community, Howard says.
On October 14, Health and Human Services Department Secretary Kathleen Sebelius sent a letter to Speaker of the House John Boehner saying that, "despite our best analytical efforts, I do not see a viable path forward [for CLASS.]" Among the reasons she cited in the letter was a lack of funding.
The bill was not repealed, but rather shelved and has no staff working on it. "Who needs to repeal it if there is no staff, nobody pricing it, nobody [paying] attention to it? It's as good as dead," explains Jesse Slome, executive director of the Westlake Village, Calif.-based American Association for Long-Term Care Insurance. "It's like having a magazine and no one writing for it. Yes, the magazine still exists, but does it really? I would say they've moved on.
"All of that said, the problem of LTC hasn't disappeared."
What went wrong?
Sebelius said in her letter that CLASS sought to address the "critical need that Americans have for affordable long-term care service. The current market does not offer viable options for those unable to [purchase] private long-term care insurance."
So what went wrong? Those who have followed the Act say it was a mix of a few things.
"I believe it was fatality of the bad economy which is hurting the president's re-election chances," Slome says. "At the end of the day, the CLASS Act was really something that the Democrats put into health care reform because it was something Sen. [Ted] Kennedy wanted.
"It wasn't this burning desire of the Obama administration, in fact I never heard them utter the words long-term care," he adds.
Slome believes HHS was saddled with a plan that couldn't work financially. "In light of a difficult re-election and every actuarial report saying this won't work, they decided to put in on the back shelf, which is not uncommon," he says.
Howard Gleckman, the author of Caring for Our Parents, believes that the Act was "flawed from the beginning." It failed, he says, due to a combination of "poor design and political ill will."
While Gleckman believes the CLASS Act is dead for good and will never come back, Larry Minnix, president and chief executive of Washington-based LeadingAge, says his organization is "not sure what 'shelved' means," and is encouraging Congress not to repeal it.
"A few years ago no one wanted to talk about how you pay for LTC, today it's a controversial part of PPACA," he says. "We like to think the controversy brings a lot of public interest. . . . If not CLASS, what?"
Slome notes that even with the shelving, the problem of long-term care hasn't disappeared and a solution must be found because "Americans are not getting younger. Tomorrow we will all be a day older; tomorrow we will all be closer to needing long-term care."
The fact that CLASS has been essentially ended, is "disturbing to anyone who works in LTC or is thinking about LTC," adds Maribeth Bersani, senior vice president for public policy at the Alexandria, Va.-based Assisted Living Federation of America.
Broker's opportunity
The added interest with the shelving of CLASS equals a big opportunity and possibly big business for brokers, Gleckman, who is a resident fellow at Washington-based The Urban Institute, says. "Now a broker can say, 'Listen we all would like the government to come riding to the rescue and pay for what we need,'" he says. But "the cavalry is not over the horizon, if you are age 50-65, you really need to plan to for LTC."
Only 7 million Americans have long-term care insurance, and of those in LTC facilities, only 6% have some sort of insurance, according to Bersani. Also, according to the HHS website, in 2008, 21 million people required long-term care services and about 70% of people over age 65 required some type of long-term care services during their lifetime. The cost is enormous - HHS estimates that in 2010, one would pay more than $19,000 on average for a home health aide to assist three times a week.
In early October, before the discussion hit the national stage, employers would have had three choices: Wait for the CLASS Act; do private long-term care; or do nothing, American Association for Long-Term Care Insurance's Slome says. "It was easy for a HR person to say it makes logical sense to wait for the CLASS Act."
"Everyone was sitting there waiting because [CLASS Act] benefits sounded so good and aspiration for low premiums made it sound like [you would] basically get wonderful coverage and it would cost so little," he adds.
With one of those choices removed, you only have two options when thinking of offering long-term care to your employees, Slome says. - "The impediment to act has been removed."
Minnix agrees that companies may now be more receptive to brokers putting long-term care on the table. "It needs to be on every corporate agenda and we have an education job to do," he says.
Bob Vandy, vice president-marketing of Clifton Park, N.Y.-based National Long Term Care Brokers says that while it is too early to draw a direct connection to the shelving of CLASS, his company has seen a marked increase in the interest level for LTC products, "clearly due, in part, to client and prospect reaction to the news of CLASS's demise."
His company has also experienced double-digit growth this year, and "there is little doubt the end of CLASS has played a role in that growth," he says. "In a larger sense, it may also have to do with the increased awareness of the need for LTC planning CLASS helped bolster over the last 12 [to] 18 months," he adds. "Prospectively, I would predict that CLASS being dismissed will result in more recognition of the lack of adequacy of any public program to mitigate the LTC planning needs our clients and prospects - individual or business - face."
Time to act
Minnix says that there is a $17 billion annual impact to businesses because of care giving responsibilities, including lost time at work and stress-related injuries.
"It's a problem everybody will face and no one wants to talk about. . . . It's hard to do, you don't want to think about you or your family; you don't want to think about your 22-year-old who [dove] off the wrong balcony in Daytona and will be paralyzed for the rest of his life."
Minnix believes that brokers should start pushing long-term care to their clients. They should "get beyond their silk stocking products that many people cannot afford or don't qualify for," he says.
"It's the single biggest exposure that every family has for which we do not have insurance of any kind," he adds. "We want to use CLASS and contrive around it to get in on the public agenda."
Yet, Bersani worries that the Act may not wake up a lot of people due to them not wanting to think about long-term care; not realizing how expensive LTC is; and simply, being afraid of the cost. "I'm not sure if the death of CLASS will wake up a lot of people [who] may buy some LTC," she says. "Which is too bad. It could make a difference in quality of life when you get older."
However, she remains optimistic. "It's back to the drawing board," she adds. "[The] need is not going away. It's very disappointing for a lot of people who thought this was a great fit. . . . I think the momentum is there that we will all carry on and try to solve the problem."
The act's greatest gift
The CLASS Act's greatest gift may have actually been in its shelving, says Slome. "In the years ahead, the greatest gift of the CLASS Act has been to really increase the level of consumer awareness and the death of [the Act] has really made it clear to intelligent individuals and business owners that the government is not coming to the rescue," he concludes. "It's evermore clear that people have to act and that's what you are seeing and will continue to see."
What happens next with CLASS?
"I think that a number of advocacy groups, both senior and disability groups, realized that something has to be done. We will all go back to the drawing board, [and maybe] offer tax incentives for people who purchase LTC."
Maribeth Bersani
Senior Vice President, Public Policy, Assisted Living Federation of America
"I'm afraid that it's dead for good. . . . It's conceivable that if the political environment changes, it could be fixed, [but] I don't see it. I'm afraid that because the Obama administration is not especially interested in this, I don't that any Republican candidates have any interest in this. . . . It's probably going to find its way back into the policy closet and not surface for a while."
Howard Gleckman
Author, Caring for Our Parents
Resident Fellow, The Urban Institute
