The CLASS Act – The Federal Health Care Law and Long-Term Care

On March 23, 2010, President Obama signed the historic federal health care bill into law. The 2400 page bill is filled with complex provisions that are difficult to dissect. Certain provisions received national attention and were discussed daily on the evening news. For example, we all know that children will be able to remain on their parents’ health care plans until the age of 26, and we know that come 2014, people cannot be denied health coverage because of pre-existing conditions.

What many people do not know, however, is that buried deep within the legislative health care maze is a section that not even President Obama himself mentioned when he signed the health care legislation. The Community Living Assistance Services and Supports Act, better known as the CLASS Act, creates a voluntary program under which individuals pay a monthly premium and will be eligible for modest benefits for their long-term care needs after five years of paying premiums.

The CLASS program does not take effect until 2011 (realistically 2013), and therefore many of the details have yet to be defined. Over the next few years, the US Department of Health and Human Services will further develop the program. Until then, there exists some helpful information that can assist you, whether you are planning for long-term care or are currently receiving it.

1. Eligibility: Only full-time and part-time employees or self-employed individuals may enroll in the CLASS program. Part-time employees, however, must earn enough annually to pay Social Security taxes, which amount to roughly $1200.

2. Pre-Existing Conditions: Unlike traditional long-term care insurance, the CLASS program does not contain health qualification requirements. Instead, the program will be guaranteed to those who choose to enroll.

3. Waiting Period: Following implementation in 2011, there is a five-year waiting period during which premiums must be paid before the participant becomes eligible to receive benefits. As a result, the earliest anyone could be receiving CLASS benefits may be as late as 2018.

4. Payments and Cost: Money will be withheld from individual paychecks similar to the way taxes are withheld from paychecks. Those who are self-employed may also take advantage of the program, but these provisions will be defined in the coming years. The monthly premium has not yet been determined, however in November, when the Congressional Budget Office analyzed the CLASS program, it assumed a $123 average monthly premium (less for young enrollees, more for older ones).

5. Age: If you are 55 in 2010, you’ll be 58 when CLASS finally starts enrolling participants. You’ll have to be employed for at least three years (to age 61) and then pay until you are at least 63. Remember that the plan calls for payments for five years in order to ultimately be eligible to receive benefits (after meeting the qualifications).

6. Benefits: In November, the Congressional Budget Office assumed a cash benefit of $75 a day, available once a participant needed help with two to three ADL’s, or activities of daily living (eating, bathing, dressing, using the toilet, transferring from bed to chair to wheelchair, continence care), or the equivalent amount of assistance needed because of cognitive impairment. The law says the average minimum benefit must be at least $50 a day.

7. Opting Out: The CLASS program contains an extremely important “opt-out” provision that will be included as part of your employer’s annual employee benefits enrollment period. You will have the choice to decline participation or “opt-out.” If you choose neither, it will be considered that you have said “yes” and premium amounts will automatically be withdrawn. The Department of Health and Human Services is expected to work on this issue to avoid confusion.

My View: If you currently have existing long-term insurance coverage, I recommended that you remain on your current plan. Because the premiums are expected to be quite high, the CLASS program will likely not be attractive to those who already have qualified for individual or employer-based sponsored long-term care insurance. The CLASS Act is clearly a work in progress and will be beneficial to some. However, if you are 50 or older, now is the time to act on long-term care insurance if you haven’t already.

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