In 2019 Jay Inslee, the Governor of Washington state, signed SB 1323 into law. SB 1323 is legislation that creates a long-term care services and support program that is now known as the WA Cares Fund.
The WA Cares Fund, created to mitigate the increasing size of the state’s Medicaid program, will be funded by a .58% tax on the earnings of workers living in Washington state or those who live outside the state but receive income within the state.
Although this program might sound a lot like Social Security, don’t be fooled because the benefits from this program are finite.
In this article we’ll discuss long-term care costs, who will likely need benefits, and whether or not the government can do a better job providing these benefits than a private insurance company.
Long-term care as defined by the healthcare and insurance industries is when an individual with a chronic or severe condition, trauma, or other illness limits their ability to perform activities of daily living (ADLs) like bathing, dressing, eating, and cooking meals.
Long-Term care services are generally provided in the patient’s home or in a facility and can come with significant costs. However, a large amount of long-term care services are provided by family members and friends (informal care).
The number of U.S. citizens who will require long-term care has grown substantially over the last two decades and a significant reason for the growth is the number of baby boomers who are now 65 or older.
However, long-term care isn’t just for seniors since 40% of individuals receiving some type of long-term care services are working-age adults between 18 and 64-years old.
Consider these stats:
Sources:
1 National Clearinghouse for Long Term Care Information
2 Prudential Financial Inc. Newark, N.J. 2010 Long Term Care Cost Study
3 Prudential Research Report: Long Term Care Cost Study, 2010
4 Senior Living – Nursing Home Costs June 2021
As with any legislation passed by the state or federal government, there is a price-tag attached that is generally passed on to hard-working taxpayers (whether they need a particular service or not).
The WA Cares Fund is designed to pay individuals who qualify for the long-term care benefits up to $100 per day to help pay for long-term care expenses. The maximum lifetime benefit, however, is $36,500 which would likely cover less than 6 months of care in a long-term care facility.
It’s important to note that benefits are not available to non-residents of Washington state and do not cover the contributing employee’s spouse or dependents.
The Fund is paid for by the required contributions from W-2 employees who work within the boundaries of the state unless they choose to opt out of the program. To opt out of the program, an employee must offer proof that they have other qualified long-term care coverage.
Self-employed individuals can opt-in to the fund in order to take advantage of long-term care benefits when needed.
Finally, the contribution requirement that must be met to receive benefits is paying into the program for 10 years (at least 5 of the years must be consecutive) OR at least 3 of the last 6 years. The minimum hours worked per year to qualify is at least 500.
Qualified claims are based on the employee needing assistance with 3 activities of daily living (ADL) and the assistance can be delivered in-home or in a long-term care facility.
Younger employees who cannot afford traditional long-term care insurance or are disinterested in finding long-term care coverage either as a stand-alone policy or as a rider on a life insurance policy are likely to benefit the most from the WA Cares Fund.
However, each employee should consider that the benefits are not portable if the employee moves out of state and they must live within the state to collect benefits.
The WA Cares Fund was established to mitigate the growth in the state’s Medicaid program and as such, high-income employees will likely opt-out for various reasons such as:
Additionally, state and federal governments have a history of underestimating the cost of new programs and will generally make up any financial shortfall by increasing the tax rate that was originally established. Social Security and Medicare are prime examples of this.
There are two insurance options that will allow virtually anyone to purchase a more robust long-term care benefit package which, over the long term, will likely cost less than your contributions to the WA Cares Fund.
The first option is a traditional long-term care insurance policy.
With traditional plans, coverage for long-term care becomes available for a set period of time, up to a fixed dollar amount, and there is a required monthly or annual premium for the policy. However, this premium could change over time.
Since stand-alone long-term care policies are medically underwritten, it makes sense to purchase coverage when you are younger and have few, if any, medical issues that might complicate the underwriting process and cause higher premiums or disqualification of coverage.
The second option is a life insurance policy with a long-term care benefit rider.
Combination life/long-term care insurance is a new trend in the insurance industry stand-alone long-term care policies have become unaffordable for many applicants.
These policies are offered by some insurance companies and typically provide better benefits for a lower premium.
If you’re struggling with the idea of buying long-term care insurance, it might be because you’re not sure if you’ll use those benefits.
Combination policies allow policyholders to choose what to do with their benefits. They could use them for long-term care expenses or as a death benefit. The policy will specify how much of the death benefit can be used for long-term care.
Purchasing long-term care benefits is more affordable when you add a rider to a life insurance policy from a highly rated insurer.
These are the companies recommended for the Long-Term Care Rider:
| Company | Nationwide | Guardian | John Hancock |
| Rider Name | LTC Rider II | Long Term Care Rider | LTC Rider |
| Qalifications | Unable to perform 2 ADLs and/or needs substantial supervision due to cognitive impairment. | Unable to perform 2 ADLs and/or needs substantial supervision due to cognitive impairment. | Unable to perform 2 ADLs and/or needs substantial supervision due to cognitive impairment. |
| Products Available On | IUL Accumulator II IUL Protector II NLG-UL II VUL Accumulator VUL Protector | Life Paid-Up at 95 Protection UL Life Paid-Up at 99 Life Paid-Up at 121 10 Pay WL 15 Pay WL 20 Pay WL Life Paid-Up at 65 | All single life permanent products (DBO 1 & 2) |
| Issue Ages | Ages 21-80 | Ages 18-70 | Ages 20-75 |
| Underwriting Classes | All classes up to 5 Tables, no flat extras; rider based on morbidity | Same as product; no substandard ratings, temporary, or permanent flat extras; rider based on morbidity | Not available if rated higher than 200% or issued w/ a flat extra; rider based on morbidity |
| Elimination (waiting) Period | 90 calendar days | 90 calendar days | 90 calendar days |
| Type of Benefit | Cash Indemnity | Indemnity | Reimbursement |
| Benefit Amount | Mo. benefit: lesser of 2, 3, 4% of LTC specified amount or HIPPA daily amount times days in month. Lifetime max: = to lessor of LTC Specified amount and base policy Specified amount minus policy indebtedness. | Min. pool: $50,000 (WL), $90,000 (CAUL) Max pool: lesser of 90% of DB or DB less $25kMax. lifetime pool: $2,500,000 Max mo. benefit: lesser of 2% of pool or 60x's HIPAA per diem limit Benefit pool increases w/ Dividend Opt. I | 1%, 2%, or 4% Monthly Acceleration % Max monthly benefit: $50,000 Max amount: $5m (depending on Monthly Acceleration %) Benefit amount 1%-100% of initial DB |
| Benefit Uses | Home health care Nursing home Assisting living facility Adult day care center Other qualifying service | Home health care Adult day care Assisted care facility Long term care facility | Home health care Hospice center Assisting living facility Nursing home Adult day care center Stay at home services |
| Residual Death Benefit | After 100% of death benefit is used, 10% of original policy is death benefit is paid at death. | None | None |
| Additional Charge | Yes | Yes | Yes |
| Recertification Needed? | Annual review with recertification as reasonably necessary. | No | No |
This is who we recommend for a stand-alone Long-Term Care insurance policy:
| Mutual of Omaha | Secure Solution |
|---|---|
| Policy Limit | This is the initial maximum amount payable over the life of the policy. The policy limit is calculated using the benefit multiplier and monthly benefit you select. Your options include: • 24, 36, 48 or 60 months |
| Monthly Benefit | This is the initial maximum dollar amount your policy will pay each month. Your options include: • $1,500 to $10,000 |
| Elimination Period - Waiting Period | Your policy has a waiting period before policy benefits begin. The elimination period starts on the first day you are chronically ill and you receive a covered service. Once the elimination period has been satisfied, benefits for covered services are paid to you each month, up to the maximum monthly benefit you select. Your options include: • 90, 180 or 365 calendar days |
| Benefits Included | |
| Cash Benefit | Electing to receive policy benefits in cash may be a helpful strategy as you develop a permanent plan of care. There’s no elimination period to satisfy. No bills to collect and mail for reimbursement. You can simply use the cash to pay for services to support your plan of care. Your cash benefit equals: • 30 percent of the policy’s home health care benefit |
| Home Health Care | Home Health Care – Benefits are provided to help you stay at home as long as possible. These include: • Personal care services to assist with the activities of daily living • Homemaker services to provide help with grocery shopping, meal preparation and housekeeping • Professional services of a registered nurse, home health aide or therapist • Adult day care services |
| Facility Care | Sometimes, more care is needed than can be provided at home. Should this happen, your policy also covers assisted living and nursing home care, up to 100 percent of your monthly benefit. The policy even will pay to reserve your bed in a facility for up to 30 days per calendar year should you need to leave the facility for any reason. |
| Care Coordination | Finding long-term care services may seem overwhelming. So we give you access to the services of a care coordinator – a licensed health care professional who will assess your needs, develop an individualized plan of care and help you arrange for long-term care services. There’s no elimination period to satisfy for care coordination services, and use of a care coordinator makes you eligible for additional benefits designed to help you remain safely in your home, including: • Caregiver training • Durable medical equipment • Home modification • Medical alert system |
| Respite Care | Unpaid caregivers often need a break. So your policy provides short-term relief by including a benefit to hire a temporary replacement for up to one month per calendar year. No elimination period is required to receive this benefit. |
| Hospice Care | If you are terminally ill and not expected to live beyond six months, your policy will pay for hospice care received in any setting. No elimination period is required to receive this benefit |
| International Benefit | If you’re traveling outside the United States, Canada or the United Kingdom when the need for care arises, your policy will pay the maximum monthly benefit of your policy for up to 12 months for covered long-term care services you receive. |
| Waiver of Premium | We don’t want you to worry about paying premiums when you are receiving care, so we waive premiums while you are receiving the cash benefit or covered home health care services at least eight days in a month or assisted living or nursing home services. |
| Alternate Care | We know there may be long-term care services or treatments that don’t exist today yet may become standard practice in the future. Your policy may pay benefits for qualified treatments or services not specifically listed in the policy when recommended by your care coordinator. |
| Optional Benefits | |
| Inflation Protection | The cost of long-term care services is likely to be higher down the road when you need care. So you have the option to add an inflation protection benefit, which increases your maximum monthly benefit and remaining policy limit each year. • Lifetime: 3 percent, 4 percent or 5 percent compound • 20-Year: 3 percent or 5 percent compound |
| Shared Care | – If you run out of benefits but still need care, you can access benefits under your partner’s identical policy, providing you leave at least one year of benefits for your partner. In addition, if either partner dies while both policies are in force, the surviving partner receives the deceased partner’s remaining policy limit without having to pay the deceased partner’s premium. |
| Security Benefit | If your partner doesn’t have a longterm care insurance policy, the security benefit can help ensure he or she is cared for while you receive long-term care services. Your policy will pay an additional 60 percent of your monthly reimbursement benefit that can be used to help pay for care or living expenses for your uninsured partner. This will not reduce your policy limit. |
| Waiver of Elimination Period for Home Health Care | This allows you to begin receiving home health care benefits immediately with no elimination period to satisfy. Once home health care benefits begin, your elimination period for nursing home and assisted living will begin to be satisfied on a calendar-day basis. This means days in which the elimination period is waived for home health care or adult day care will be used to satisfy the elimination period for other benefits available under your policy. |
| Reduced Benefit for Home Health Care and/or Assisted Living Facility | Your policy will pay up to 100 percent of the maximum monthly benefit for home health care and assisted living facility care. However, if your primary concern is paying for nursing home care, you have the option to reduce your benefits for home health care and/ or assisted living services. Keep in mind that reducing your benefit for home health care also reduces your cash benefit proportionally. You have two reduced benefit options: • 50 percent or 75 percent of the maximum monthly benefit |
| Return of Premium Three Times Monthly Maximum | If you’re concerned about not using all your policy benefits, you can add a return of premium benefit that, upon your death, refunds up to three times the initial monthly benefit amount of your policy, as long as your policy has been in force for 10 years or more. This amount excludes claims paid by the policy and any inflation increases. If coverage is decreased, premium returned will be based on the decreased amount. |
| Non-Forfeiture Shortened Benefit Period – | If for any reason you stop paying premiums after your policy has been in force for three years, this allows for your coverage to continue on a reduced basis. |
Medicare considers long-term care as non-medical services and does not offer benefits for long-term care.
Expenses that you incur for long-term care for home health care or in assisted living facilities are not covered by Obamacare.
Washington state will begin withholding .58% of earnings from your paycheck. For example, if your gross earnings per year are $80,000 your annual deduction would be $464 (80,000 x .0058).
State residents can opt out of the fund from October 1, 2021 through December 31, 2022 if they can prove they have other long-term care coverage.
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