LTC Bullet: Draft Legislation to Fix CLASS

Wednesday, June 23, 2010


LTC Comment: Everyone knows CLASS is problematical as is and must be fixed. Check out one fixer bill under consideration after the ***news.***

*** JBQ: CLASS ONLY A "DOWN PAYMENT." Nationally syndicated financial columnist Jane Bryant Quinn advises "If you’re in your 50s or 60s and have assets to protect, don’t wait for CLASS." Read "Will You Save Money By Buying the Government’s New Long-Term Care Insurance?" here. (Thanks to the CLTC Newsletter for May 2010 for this tip.) ***

*** MORE JBQ: "To protect your finances, each of you should agree to buy long-term care insurance," she writes in a column titled "Prenups Are Hard To Write: Trust Me, I Know." Read it here. ***

*** WHY FOLLOW JBQ's ADVICE?: "Jan's Story: A Love Lost to Alzheimer's." Watch the video here. While this touching story does not mention LTC financing, rest assured Medicaid doesn't pay for the kind of assisted living facility the story's protagonist occupies and her loving husband visits. Special thanks to Center supporter Ross Perloe of Atlanta, GA for tipping us to this moving video. ***

*** NAHU CEO BLASTS CLASS in "A Ticking Debt Time Bomb" but perpetuates this myth: "Starting in 2011, workers will be automatically enrolled in this new plan if their employer decides to participate." Not so; more likely 2013, if then. Here's a better sample from Janet Trautwein's article: "The [CLASS] program is open to all Americans, so it's likely that only those who foresee needing the benefits will enroll. So, if CLASS's subscribers are largely made up of high-cost individuals, then premiums for future beneficiaries will have to be even higher to compensate. That will cause healthier enrollees to drop their coverage, driving premiums up further. This cycle will repeat until premiums are unaffordable for everyone -- or until the government opts to lose money on each beneficiary." This is a no-brainer for anyone with common sense, much less knowledge of insurance principles, but somehow it evades CLASS activists. ***


LTC Comment: Sober minds assess the CLASS Act and find unrealistic its lack of underwriting; undefined premiums, benefits and triggers; and its unfulfillable promise of unlimited claims payments. The program is obviously unimplementable as signed into law March 23, 2010. So something has to be done. But what?

We've reviewed a "discussion draft" of legislation under consideration by Congressman Charles Boustany (R, LA). Read it here. Congressman Boustany's office requests your suggestions to improve the bill. If you have comments, email them to with the subject line: "Comments on CLASS Act Draft."

Following are some features of and quotes from the proposed bill:

Its purpose is:

"To amend title XXXII of the Public Health Service Act to require review and approval by law prior to collection of premiums or payment of benefits under the CLASS program, to replace the opt-out procedure for employer enrollment of employees with an opt-in procedure, to require termination of the program in the event of actuarial unsoundness, and for other purposes."

Requires establishment of a "CLASS Committee of Actuaries" to evaluate the program.

Allows no payroll deductions until Congress approves the CLASS Independence Benefit Plan with a Joint Resolution.

The report from the Committee of Actuaries must be received at least 60 days before a vote on such a joint resolution.

No employer can withdraw payroll deductions for CLASS nor can anyone enroll independently in CLASS until they receive these cautionary statements:

(A) The Chief Actuary of the Centers for Medicare & Medicaid Services has made the following assessment regarding the CLASS program: ‘In general, voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants. Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better than-average health. . . . [T]here is a very serious risk that the problem of adverse selection will make the CLASS program unsustainable.’

(B) The Chief Actuary estimates that the CLASS program will likely begin to run deficits in 2025 and continue to run deficits thereafter.

(C) The Chief Actuary further estimates that ‘an initial average premium level of about $240 per month would be required to adequately fund CLASS program costs.’

(D) The Federal Government will collect more than $70 billion in CLASS program premiums during the first 10 years of the program, according to the Congressional Budget Office. Although these premiums are credited as IOUs or United States Government securities in a ‘CLASS Independence Fund,’ the money, itself, must be used to pay for other Government expenses, including other programs under the health care law enacted in March 2010 that are unrelated to the CLASS program. There is no separate pool of money set aside for CLASS program purposes, and workers and retirees could be required to repay these IOUs in the form of higher taxes.

(E) Under section 3213 of the Public Health Service Act, the CLASS program will terminate immediately if an annual report of the Board of Trustees of the Class Independence Fund indicates that the CLASS program will not be actuarially sound over the 75-year period beginning with the fiscal year in which the report is submitted.

LTC Comment: These provisions in the fixer bill under consideration in Congressman Boustany's office are intended to reduce the risk of unwitting employees being enrolled in the program without their knowledge by requiring that they consciously "opt in" and by warning them, before they enroll, of the CLASS program's serious deficiencies and risks.