The Community Living Assistance Services and Supports Act begins to take effect on Jan. 1, 2011. Under the CLASS Act, which is part of the Patient Protection and Affordable Care Act, a public insurance option offering employees voluntary long-term care insurance will be an option for employees to consider.
The CLASS program will be run by the Department of Health and Human Services. It offers a basic level of coverage for working Americans, working like a "pay ahead" entitlement program, similar to Social Security, rather than an insurance plan.
After contributing for five years, participants who are disabled and meet criteria set by HHS will be eligible for a cash benefit of at least $50 a day.
Premium levels have not been set yet, although estimates run from the low $100's to $200 per month - depending on age and economic status, with the working poor being able to purchase for $5 per month.
Employee benefit consultants are now asking some important questions on employer knowledge of the CLASS Act. Let's provide some answers.
Do all employers have to know about the CLASS Act?
Yes and no. "Yes," in that their employees will be hearing about the CLASS Act and turning to their employers for details about the new program and recommendations on what they should do.
"No," if the employer has 50 or less employees. The employees are still eligible for the CLASS Act and will be treated in the same manner as the self-employed.
If an employer already offers private LTC insurance, may that employer offer CLASS Act coverage too?
Yes. The CLASS Act can still be offered to all employees - even those who have already purchased their own LTC insurance policy from a private carrier. An employer can add the CLASS Act program to an existing open enrollment offering, but it must then be prepared to fully educate employees on the differences between the CLASS Act program and private LTC insurance.
One exception to this policy would be trying to use the CLASS Act as part of an executive benefit platform - that will not be possible.
How hard will it be for employers to administer the CLASS Act?
One thing is certain: Employees will be asking their employers about the CLASS Act as the government begins its marketing campaign for this new offering. Experts agree that employers must make a decision as to how they are going to effectively communicate with their employees about long-term care.
Employers who do sponsor the program will need to alert employees that this is an opt-out program, or run the consequence of employees later asking for the return of deductions.
What happens when an employee wants CLASS Act coverage and their employer doesn't participate?
It should also be noted that even if an employer decides to not sponsor CLASS Act coverage, its employees still have the option to be treated as self-employed and can buy into the program without their employer's sponsorship.
This would allow employers to select a private LTC insurance option while still making CLASS Act coverage available to employees who might not be eligible for private coverage.
What options does an employee benefit consultant have?
There are basically four alternatives:
1) Wait until after the CLASS Act is mandated. The risk is that employees will have to wait five-plus years for benefits.
2) Don't recommend offering long-term care insurance. However, employees will be hearing about the CLASS Act and will be turning to their employers for information.
3) Offer an LTC education program, which is not necessarily a specific LTC insurance program. This might include information on the CLASS Act and other options, as well as local LTC resources.
4) Introduce LTC insurance to clients and prospects as a new employee benefit.
Which LTC platform best fits an employer's needs?
The two most common available options are the "true group" platform and the "multi-life" platform. In a true group platform, the benefit broker contacts several LTC insurance carriers with their clients' census and comes back with a recommendation based on the prices of three plan design options, carrier financial ratings and a roll-out process driven by the carrier's enrollment team.
The multi-life platform is based on an individual contract rather than a master certificate between the carrier and the employer.
The enroller is replaced with an LTC insurance agency, which can meet with employees and spouses as well as extended family members who are also eligible for carrier discounts and educational resources.
How does an employer manage an LTC offering?
The open enrollment period for LTC insurance is usually 90 days. During this period the carrier expects the employer to educate employees on the new benefit availability. This usually is done by the LTC insurance agency, working with guidance from the employee benefit consultant and the employer.
If the consultant and the employer want to extend simplified underwriting (where employees only have to answer five questions and no health interview is required), then a minimum number of employees - usually more than 10 lives - must enroll.
The payroll slot allocation for payroll deductions is only a requirement if the employer decides to not allow employees to direct pay.
Cahn is SVP of product development at LTC Financial Partners. He can be reached at Dan.Cahn@ltcfp.com or (425) 284-4824, ext. 1118.
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