The Great CLASS Debate

At the 11^th 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).

Each 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.

We'll guess 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.

But rest 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 newest participants.

We'll pay back the IOUs in the trust fund by selling shares in our wonderfully profitable venture.

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 commitments.

After all, that's what the politicians backing CLASS are counting on too.

Thank you.

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 CLASS holds?

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 objections?

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 members?

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?