The Great CLASS Debate
At the 11th
Annual Intercompany Long-Term Care Insurance Conference in Atlanta,
Georgia on March 7, 2011, the following debate took place.
Steve Moses of
the Center for Long-Term Care Reform and John Greene of the National
Association of Health Underwriters (anti-CLASS) versus Connie Harner of
Advance Class and Rhonda Richards of AARP (pro-CLASS).
participant was allowed a three-minute opening statement. This was mine:
Steve Moses's Opening Statement
It's no secret
that I have opposed CLASS.
But I've had an
epiphany. A complete turn around.
Hey, if it's
good enough for government, then it's good enough for the private sector.
So I've decided
to start my own insurance company based on the same principles as CLASS.
I call it
"Steve's Insurance, LTC for You" or SILY for short.
We'll have no
"policies" or "contracts." They just complicate things.
We'll have no
underwriting. That makes it so hard for the people who really need the
insurance to qualify.
about premium levels, benefits, and triggers until we can figure out what
our program can afford.
You'll pay in
for five years before you're entitled to anything, but then we'll give you
cash straight to a debit card for the rest of your life with no limit.
We'll spend all
receipts as soon as they come in on other company priorities and profits.
Of course, we have many responsibilities.
We'll fill our
trust fund with IOUs . . . uh, I mean . . . bonds.
assured, our new program is fully funded with participants' premiums and
backed by the full faith and credit of Steve Moses.
Now you might
ask, if you spend all the premiums that come in on other things, how will
you pay claims when the time comes?
That's the best
part of all. When claims begin in seven or eight years, our program will
be so popular we'll pay the trickle of claims with the premiums of the
We'll pay back
the IOUs in the trust fund by selling shares in our wonderfully profitable
Thank you CLASS
for showing us this way to help the uninsurable while scoring big profits
for our new company.
If and when we
run into a solvency problem, I'll have retired long ago. I'm confident
whoever takes over in the future will find a way to meet our company's
that's what the politicians backing CLASS are counting on too.
Following are the questions Steve Moses posed to the proponents of CLASS:
- Why would a smart consumer buy a
product like CLASS which has no contract or "policy" enforceable in law
and no guarantee regarding triggers, benefits or premiums which the HHS
Secretary will establish?
- Easy access to Medicaid after the
insurable event occurs has desensitized the public to LTC risk and cost
and crowded out a market for private LTC insurance. Won't CLASS have
the same problem?
- How do you justify allowing CLASS
premiums to be spent by the federal government, replaced by Treasury
bonds, and still counted as budget savings?
- The CLASS authorizing legislation
requires the program spend no "tax-payer" funds, but who else besides
taxpayers will have to repay the interest and principal on the bonds
- With its subsidized premiums for
"self-attested" students and the poor, lack of medical underwriting, and
guaranteed minimum benefits, isn't CLASS really a welfare program based
on wealth distribution rather than social insurance?
- With its cash benefit payable daily
or weekly with no aggregate or lifetime limit for services rendered even
by non-professional family caregivers, won't CLASS attract unscrupulous
people and encourage abuse?
- How receptive are employers to
managing automatic enrollments for CLASS and what are their major
- Won't the low employment income
required by CLASS of $1,120 per quarter invite systematic abuse by
organizations seeking to gain benefits for their aged or disabled
- The CLASS legislation "authorized
to be appropriated . . .such sums as may be necessary for fiscal year
2011 and for each fiscal year thereafter" for development and
implementation of the program. Isn't this source of funding vulnerable
to termination by the House of Representatives?
- How do you justify the CLASS
program's one-size-fits-all structure?
- How do you respond to critics who
say CLASS invites adverse selection and moral hazard?
- Senator Kent Conrad and others have
called CLASS a "Ponzi" scheme and President Obama's "Debt Commission"
recommended its repeal as actuarially unsound. How to you respond?