MARK RANDALL2012

THE CLASS ACT -R.I.P. Or …

WHY THE CLASS ACT

LTCI* – DEMOGRAPHICS

• Demographics continue to change• Estimated 40 million Americans over 65• Over 10,000 turning age 65 daily• 2011 – First baby-boomers reach age 65• Estimated 70 million seniors by 2030

*Long Term Care Insurance

LTCI – SOCIAL PROGRAMS

• Social Programs continue to falter• Medicare and Social Security unfunded liabilities estimated at

$106 trillion!• Example: Reform cut about $500 billion

• Medicaid becoming one of state’s largest budget issues

• LTCI will be a critical social issue in the next decade

GOVERNMENT ACTION

• It’s beginning to happen

DEFICIT REDUCTION ACT OF 2005

• Expanded look-back period

• Increased penalties

• Closed Medicaid loop-holes

• Partnership Plans

FILIAL LAWS

• Up to 1965, enforced under Old Age Assistance

• 1991 South Dakota Court Decision• March 1994 Supreme Court ruling• No enforcement, but triggers legislation

• 30 states passing new laws

• Pennsylvania announces enforcement• Virginia enforcing – no documentation yet• New Jersey enforcing – no documentation yet

“OWN YOUR FUTURE”

• February, 2010, Massachusetts is the 25th state in the country to kick off the campaign 

• Financed by DRA, Federal pays, states admin this massive educational program encouraging people to plan for possible future long-term care needs

• As the United States population ages, and lives longer than ever, Medicaid spending on long-term care is growing, posing a threat to the financial stability of both states and the feds, since Medicaid is jointly funded by both

MEDICAID: MAJOR CHANGE IN 2011

• 2009 – federal share of Medicaid was expanded 67% from 57% • More in states with high unemployment

• Scheduled to expire December, 2010, it was extended for 6 months

• $135 billion extra was poured into Medicaid

June, 2011 - Reverted back to 57%

STATE MEDICAID MOVES:CALIFORNIA

• Cutting doctors and many other providers by 10% • Co-pays for services • Limit of 7 doctor visits a year

• Unless a doctor certifies a need for more

MEDICAID:WATCH RHODE ISLAND

• Changes recommended to Rhode Island's eligibility rules:• Extend the look-back period from 5 years to 10 years

(Germany)

• Reduce the home equity exemption from $500,000 to $40,000 (United Kingdom)

• Eliminate the use of trusts, annuities, promissory notes, "reverse half-a-loaf" strategy and other Medicaid planning techniques

MEDICAID:SUMMARY

• 46 states pass legislation either reducing benefits or tougher eligibility

• Health Care reform mandates increased beneficiaries in 2012/2013

• If economic situation continues, tougher cuts on the way

• It’s not just people…

MEDICAID OUTLOOK BLEAK FOR PROVIDERS IN 201212/15/2011, MCKNIGHT'S LTC NEWS

"The unreimbursed funds from Medicaid to nursing homes is [sic] projected to exceed $6.3 billion in 2011, which means an average per-patient shortfall of $19.55 per day, according to an annual study conducted by Eljay, LLC on behalf of the American Health Care Association. That's a jump from a $16.54 per day loss in 2009 . . . . And while many providers have relied on Medicare to subsidize Medicaid patients, they will lose that patch in 2012.

'The combined shortfall of both Medicare and Medicaid is projected to exceed $20 billion…"

JANUARY, 2010

CLASS ACT PASSED

TIMING

• There will be three plans submitted to the Advisory Committee who will bring the Secretary their opinion by mid-2012

• By October 1, 2012, the Secretary will publish the plan chosen for public comment

• It appears that the goal is to begin the plan in 2013 at the latest

• Without repeal, these deadlines are still in place!

ENROLLMENT

• Enrollment for the program will be handled by employers

• All employees will be enrolled unless they opt-out

DISENROLLMENT/ENROLLMENT

• There are penalties built into the law for employees who opt-out and later want to join the program• Basically the penalty will be a percentage and the fact

that they will have to pay the new premium based on re-enrollment date

• Once started there will be an annual disenrollment period

• There will be a biennial enrollment period

PREMIUMS

• The Secretary will set the plan premium starting the first year and every year thereafter based on a 75 year actuarially sound projection

• The goal is to have no premium increases for any enrollee during their lifetime

• This is the hang-up – can it be done?

PREMIUM INCREASES

• However, premiums can be increased based on certain guidelines for current enrollees:

• If current projections show the plan will become insolvent within 20 years

• However, premiums may not be increased for people over the age of 65, no longer working and if they have paid in for over 20 years

• This is area attacked most!

PREMIUM AMOUNTS

• In early stages, estimated premium would be about $60 per month

• However, with actuarial projections actually being debated, amount has been projected as high as $240 per month

• Range is now from $60 to $380

VESTING PERIOD

• There will be a five year vesting period for all enrollees

• This is why this is part of the health care reform bill

• It’s expected that this will build a budget surplus for this entire five year time frame which helps to cover the cost of reform

• This was reason It was passed – and it’s still around

BENEFIT ELIGIBILITY

• Appears that they will follow tax-qualified LTCi rules here

• The law does allow them to consider two or three ADL’s in determining eligibility

• I think the reasoning for this is that they might need it to keep the premium down to meet the 75 year soundness rule

• This is part of the reason premium range is so wide

BENEFITS

• The law stipulates that there be a minimum of two up to a maximum of six benefit levels

• The minimum benefit level is $50 per day adjusted by CPI

• Benefits will be paid weekly or monthly• There is no lifetime maximum benefit

• This is the reason premiums could be high

BENEFIT PAYMENT

a. The primary purpose of this law is to provide benefits for people to stay at home

b. The Cash Benefit is placed into a Life Independence Account which shall be used to purchase nonmedical services and supports that the beneficiary needs to maintain his or her independence at home or in another residential setting of their choice in the community

SUMMARIZE

• Employer enrollment unless opt-out• High penalties if need later

• Premiums estimated $160-240 monthly• Can be increased in future

• Benefit average of at least $50 per day• Five years before qualify for benefits• Benefits increase at CPI (3.15% historical)

PRIVATE INSURANCE COMPARISON

DIFFERENCES

• $1,500 a month PURE CASH• Up to $6,000 a month HHC• Up to $3,000 a month ALF/NH• No five year waiting period• 3.5% inflation versus CPI• Partnership Protection• Better insurance pool!• Contractual, not government run

FURTHER PRIVATE INSURANCE COMPARISON

Versus aPotential

$480Per Month?

BUT, LET’S PLAN BETTER…

LESS THAN HALF THE PRICE…

• $3,000 a month Pure Cash vs. $1,500• Up to $12,000 HHC versus $1,500• Partnership Protection up to $300,000• No five year waiting period• Good insurable pool• Contractual versus government-run

• Private insurance offers some distinct advantages

ADVANTAGE OF WORKSITE…

• Employees:• Better coverage for employees concerned about

LTC in future• Dramatic savings to younger employees

• Who face major penalties if they opt-out now and try to get back in later!

• Class Act can insure those in bad health

ADVANTAGE OF WORKSITE…

• Employer:• Chance for employer to be a hero by

pre-empting government plan• Avoid potential issues with employees

overextending themselves • Add a stable optional benefit to employees

outside of annual enrollment time frame

• Benefit is stronger for employees/executives/owners that are “planners”

POTENTIAL PROBLEMS CLASS HAD

• Pool – compare to Federal Plan• Potential spiraling effect

• May need to go to 3 of 5 ADL’s to keep premium reasonable

• Potential penalties to non-insured Americans since no excuse for no coverage after plan in force

OR DID IT?

CLASS ACT ENDS

CLASS ACTNational voluntary LTCi planAutomatic employer enrollment

Opt-out with substantial penaltiesPremium estimated at $240 per month – may

changeBenefit estimated at $50 per day

Five year waiting period for benefitsOpens door to future government moves

CLASS Act was stoppedAdministration stopping repeal

Issues: Bob Yee’s report

Supreme court ruling est. June, 2012

But, something could be up…

CLASS ACTNational voluntary LTCi planAutomatic employer enrollment

Opt-out with substantial penaltiesPremium estimated at $240 per month – may

changeBenefit estimated at $50 per day

Five year waiting period for benefitsOpens door to future government moves

Current Situation!The House of Representatives voted to repeal CLASS Senate did not go along• CLASS is not formally repealed and • DHHS Secretary Sebelius must present the

benefit plan required in October – THIS MONTH• If not, a court could find her in contempt

Then, she may be compelled to implement CLASS Act after all! 

YOUR ROLEWHAT SHOULD BE DONE?

• The problem hasn’t gone away – we still face a LTC crisis in America – coming to a head fast

• Fact Class was not repealed shows that it’s still considered a potential solution

• Potential problems if forced in – especially access to qualified benefit agents

• What’s the negatives in waiting• What’s the negatives in being proactive

INFORMATION IS THE KEY!

“I can’t predict future, I can only give you information on what’s happened

and happening” Mark Randall

Sponsored by

GoldenCare USAAmerica’s Home for Long-Term Care Insurance

800-842-7799