The CLASS Act: Facts and Myths About Long-term Care Insurance

The CLASS Act: Facts and Fallacies About Long Term Care Insurance

There has been a great deal of information – and some false information – circulating about the long term care insurance portion of Healthcare Reform.

The Community Living Assistance Services and Supports Act (CLASS Act) is Title VIII of the Affordable Care Act.  The law specifies that it is “a national voluntary insurance program,” the key word being “voluntary.” Although the law requires employers to enroll workers automatically, workers may choose to waive coverage “at any time.”

There was a chain email being passed around earlier this year with false information claiming that everyone will be subject to a new tax of $150 to $250 per month to pay for this new coverage.  This is not true.  Here is a quick look at what is true. . . and what is not.

Facts about the CLASS Act:

  • It is a national, voluntary insurance program.
  • Anyone who is over age 18 and active at work is eligible to enroll in the plan.
  • The plan provides a modest cash benefit of at least $50 per day to help pay the cost of assistance with daily living activities such as bathing, dressing, eating, etc.
  • There is a five year waiting period before benefits can be paid.
  • Even though the provisions are effective January 1, 2011, the Secretary of Health and Human Services (HHS) must develop the plan an implement it by October 1, 2012.  Until the plan details are made available, most will not enroll until 2012 or 2013.

What the CLASS Act does not include:

  • There is no tax to fund coverage. It will be funded only by the premiums paid by participants, which can be increased at any time to keep the plan solvent.
  • It does not provide disability insurance or any income replacement – it covers only care for help with basic daily living activities.
  • It does not provide a benefit amount sufficient to cover the high expense of long term care.

Obviously, this new insurance coverage is only meant to cover the very basic necessities of long term care.  Similar to Social Security benefits for retirement income, it’s not meant to be a total replacement for your own savings or other long term care insurance products available.  It’s also not clear how exactly premiums will be calculated, so it remains to be seen whether the premiums are worth the $50 daily benefit.

Updated: The Class Act was repealed on January 1, 2013

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