The CLASS Act

Presented by:

Stephen A. Moses

The Center for Long-Term Care Reform

What is the CLASS Act?

• CLASS - Community Living Assistance Services and Supports

• Title VIII Of the Patient Protection and Affordable Heath Care Act – signed into law March 23, 2010

What is the CLASS Act? (cont.)

• Defined by the American Association of Homes and Services for the Aging (AAHSA):

New voluntary nationwide long-term services and supports insurance program for persons with disabilities and seniors with chronic illness.

http://www.aahsa.org/classact.aspx

Note contradictions in terms:

• “Voluntary”

• “Insurance for disabled and chronically ill”

No: real insurance is for healthy people in case they become disabled or ill

Definitions & Provisions

http://democrats.senate.gov/reform/patient-protection-affordable-care-act-as-passed.pdf

– Actively employed: reporting for work or on active military duty

– 6 ADLs: ‘‘(A) Eating. ‘‘(B) Toileting. ‘‘(C) Transferring. ‘‘(D) Bathing. ‘‘(E) Dressing. ‘‘(F) Continence

Definitions & Provisions (cont.)

• Eligibility: – enrolled in CLASS– paid premiums for 5 years (vesting period)– have earned in 3 of the 5 years income at least

equivalent to Social Security requirement– have paid premiums for at least 24 consecutive

months if a lapse has occurred

Definitions & Provisions (cont.)

• Secretary of Health and Human Services decides almost everything– CLASS Independence Advisory Council– CLASS Independence Benefit Plan: Not later

than October 1, 2012– CLASS Independence Fund

Definitions & Provisions (cont.)

• To be invested like the Medicare trust fund, i.e. in Treasury bonds

• Board of Trustees will examine and report to Congress– Report immediately if actuarially unsound– Consult regularly with the Secretary

Definitions & Provisions (cont.)

• No taxpayer funds to be used to pay benefits (just to pay back the bonds when CLASS has to pay benefits)

• Annual report by Sec. beginning Jan. 1, 2014

• Annual report by DHHS Inspector General on fraud in program

Premiums

• Nominal premiums for the poor (poverty line): $5/mo plus CPI

• Level premiums unless the Secretary decides they're "insufficient"– No increase if over 65, unemployed or paid

premiums for 20 years– Premium recalculated if 90 day or more lapse– Penalty for re-enrollment after a five-year lapse

Premiums (cont.)

• After 10 years, decide on future premiums

• Administrative costs not to exceed 3% in determining premiums

• Payment by– Payroll deduction– Alternative: TBD if employer does not

participate

Triggers

• 2 or 3 ADLs– requires “substantial supervision”

• Seems to mirror “federal tax-qualified” requirements

Cash Benefit

• No less than $50 per day increasing with CPI

• Variable on a scale of functional disability with between 2 and 6 benefit levels

• Paid daily or weekly

• No lifetime or aggregate limit

Cash Benefit (cont.)

• Coordination of benefit with insurance exchanges created by the Patient Protection and Affordable Care Act

• Benefits go into a Life Independence Account to pay for among others:– Home modifications, assistive technology,

accessible transportation, homemaker services, respite care, personal assistance services, home care aides, and nursing support.

Cash Benefit (cont.)

• Institutionalized beneficiaries keep 5% of their benefit above personal needs allowance under Medicaid, the remainder going to offset Medicaid's cost

• HCBS recipients keep 50% of their benefit with the remainder offsetting cost to the state

Cash Benefit (cont.)

• Cash benefits received are disregarded in determining eligibility "under any other Federal, State, or locally funded assistance program," i.e. Medicaid, etc.

• OK to use benefits to pay a family member to provide the care.

Underwriting

• No underwriting, except based on age to determine:– Premiums

– Eligibility for the program

Enrollment

• Automatic by employer

• Alternative enrollment for the – Self-employed– More than one employer– Employer who does not automatically enroll

• Opt Out Election– Anytime

Enrollment (cont.)

• Qualified individual– 18 years or more– Receives taxed wages or taxed self-

employment income– Is "actively employed"– Is not . . .

• A patient in a hospital, NH or ICFMR and receiving Medicaid

• In jail

Benefits & Tax Treatment

• Benefits– Sec. establish Elig. Assessment System nlt

January 1, 2012

• Tax Treatment– same as tax qualified LTCI plans

Issues & Problems• JH says effective in two years; first benefits

five years later

• One size fits all

• Guaranteed issue

• No underwriting

• Anti-selection or Adverse Selection

• Pay five years before coverage begins

Issues & Problems

• Moral hazard

• Phony "trust fund" used to offset health reform deficit

• Indeterminate premiums– Expensive: $100 or more per month premium

depending on Sec. of DHHS– Latest estimates: $180 to $240 per month

Issues & Problems (cont.)

• Minimal benefit: guaranteed $50 per day or more depending on Sec. of DHHS– Advocates say expect average benefit of $75 or

$27,000 per year

• Must remain employed

• Indefinite triggers: 2, 3 or 4 ADLs depending on Sec. of DHHS

Issues & Problems (cont.)

• Guaranteed eligibility, guaranteed benefit, guaranteed lifetime coverage, but . . .

• Actuarially unsound

• Sec. of DHHS can change everything if funding falls short

• CMS actuary says only 2% will enroll despite "opt out" system

• Billed as LTC benefit but more for working disabled

Who’s for it?

• Senior advocates

• LTC providers desperate for revenue (AAHSA, AHCA)

Who challenges it?

• Deficit hawks worried about unfunded liabilities

• Advocates for responsible LTC planning

• Actuaries

Likely impact on private LTCI industry

• Why some think it will help LTCI– Raise awareness

– Great comparisons for private LTCI

– Safer risk pool to jump into

• Why some think it won't help– Public already asleep about LTC

– CLASS is one more reason to ignore the problem

– Extra anesthesia to the body politic

Current Status

• Passed into law

• How do we make the most of it is the big question now

• Lemonade from lemons

• So don't look back; forge ahead

• But be ready to shift course if and when CLASS is repealed

The real LTC problem and the real solution

• Public ignores LTC because government already pays for most of it

• But that can't and won't continue much longer

• CLASS diverts attention from the real risk– Unfunded liabilities of Social Security,

Medicare and Medicaid– Now add CLASS

For more information• Center VP, Damon Moses interviews Claude Thau:

Part 1 http://www.youtube.com/ltctv#p/a/u/2/Nb9BnFcZzjw   

Part 2 http://www.youtube.com/ltctv#p/a/u/1/fL_jARY1wsM

• LTC Bullet: "CLASS Dismissed" for Broker World

, Thurs, Feb. 11, 2010

• LTC Bullet: DéCLASSé, Wed, Dec. 9, 2009

• LTC Bullet: CLASS Consciousness, Wed, Oct. 21, 2009

• LTC Bullet: CLASSified, Mon, Oct. 19, 2009

For more information (cont.)

• LTC E-Alert #9-076--A CLASS Half Full, LTC E-Alert #9-104--Will CLASS Pass?, and LTC E-Alert #9-123--CLASS Dismissed, LTC E-Alert #10-032: SSA and LTC in NYT, OMG! (Translation Follows)

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For more information (cont.)

• Al Schmitz and Steve Schoonveld, "Health Reform's CLASS Act," Broker World, February 2010 (subscription required)

 • Summary of the CLASS Act, Affordable Health

Choices Act (Title XXXII): http://www.aahsa.org/classact.aspx