Commentary by Jesse Slome, November 5, 2021

Many long-term care insurance professionals (and many others) are closely watching what’s taking place in Washington State.  For those just hearing about this for the first time, the State has initiated a universal program that will provide some home care benefit coverage paid for by a tax on individuals.

The tax begins January 2022.  The benefits become available down the road.

I too am watching.  Having been involved with the long-term care insurance marketplace since the late 1980s, I have seen quite a bit.  And, like so many others, I have opinions and keep in touch with a variety of industry thought leaders.

Many are very enthusiastic about the fact that other states (such as California) are considering an initiative that they believe could generate enormous sales of LTC insurance.

When it comes to long-term care insurance rate increases, I often tell reporters that “the past doesn’t equal the present or the future”.  So, I guess, the same can be true when it comes to legislation like the Washington program.  However, it is difficult for me to forget the CLASS Act which passed Congress, was signed into law by President Obama, was staffed … and then silently walked away from with nary a whisper.

 WASHINGTON PROGRAM UPDATE: November 5, 2021

I personally want to acknowledge Steve Forman of LTC Associates who really does a yeoman’s job of sharing interesting and relevant program news.  Here’s some relevant information and my commentary.

As of November 2, the State has received 339,078 requests for exemptions and approved 127,886 (another 1,392 were incomplete). 

Commentary:  The State of Washington has about 3.7 million employed individuals according to the Bureau of Labor Statistics.  That means about 10% (presumably the higher earning workers) have requested an exemption.  Wonder what Milliman anticipated when pricing and what the potential revenue loss will be.  Bottom line, it clearly is concerning some …

The LTSS Trust Commission is ‘concerned’.  They are proposing regular certification and more.

Commentary:  My belief is that they will realize that imposing a request like this on policyholders will be both cumbersome and will require a huge number of State staff and cost.  What I believe the State will do is place the burden on insurers (who of course will also have to staff up and/or add systems).

Washington House Republicans are calling on the legislature to repeal the state’s new long-term care insurance program scheduled to begin next year.  Several Republicans have filed bills seeking to change or repeal the new program.

Commentary:  This is the fun one to watch.  Currently Democrats control the State Senate (29 to 20) / House (57 to 41) with elections coming in 2022 (primaries in May/General in November).  There was a lot of ‘big money’ behind the initiative that created the LTSS program … but as we have seen in the past, pocketbook issues can capture an electorate.  Will Republicans seize on this as a way to raise funds and win seats?  Will the past = the present?  Will what happened this week in Virginia and New Jersey scare enough Democrats to back away or delay the effort?

This is why I’m watching.  Keep you posted.

The post Washington State Long-Term Care Insurance Update appeared first on American Association for Long Term Care Insurance.

“The new tax will cost Washington workers starting next year and many are looking into long-term care insurance as a way to avoid the tax,” explains Jesse Slome, director of the long-term care insurance organization.  ”Insurers realized that many individuals were likely buying low amounts of coverage and others intend to drop coverage once they achieve their goal of tax exemption.”

As a result, insurers have just issued new minimum levels of required protection and new procedures.  “It generally costs an insurer between $600 and $800 to health underwrite and issue a policy,” Slome explains.  “In addition, insurers pay commissions to the selling agent all of which are only recouped when a policy remains on the books for several years.”

According to Slome, Mutual of Omaha will automatically decline applications from individuals who have not been seen by a physician in the last 24 months.  In addition, the company will do a chargeback on commissions paid on policies issued through November 1, 2021 that are lapsed within the first policy year.

“Increasingly agents are telling us they do not want to spend time with consumers looking for a policy explicitly to avoid the tax,” Slome notes.  “While the State regulations do not currently require coverage be in place next year, I fully expect subsequent State-amendments will address this after legislators realize they left a loophole.”

A second carrier, National Guardian Life (NGL), has set the policy minimum Daily Benefit Amount at $100 for Washington residents.  Applications with a $50-to-$90 benefit amount selected will not be accepted by the company.  In addition, applicants must choose an inflation option and those opting for facility only benefits will not be accepted.

“NGL is also requiring that applicants have been seen by a physician within the past 24 month,” Slome notes.  “That will limit younger applicants in their 30s and 40s who often do not get regular physical examinations.”  The company will also chargeback paid commissions if premiums are not paid for the second year of coverage.

According to Slome, a 45-year old Washington male selecting a $100 daily benefit with no inflation growth would pay around $361 annually.  “Adding the 3% inflation option raises the cost to $794 and selecting the 5% option takes it to $1,751,” he says.  “For a 45-year old female selecting the 3% inflation option the annual premium cost will be $1,304.”

The new Washington tax adds an uncapped payroll tax of .58% on all wages beginning January 1, 2022.   “Someone earning $150,000 yearly will pay $870 in added taxes,” Slome shares.  “The new insurer rules have changed what we share with consumers.  I would say that $125,000-to $150,000 in annual income is the minimum threshold where considering private long-term care insurance makes sense.”

Changes imposed by Thrivent include increasing the minimum issue age to 40 for Washington residents as well as increasing the minimum monthly benefit to $3,000.  “In this case, a 45-year old male picking a $3,000 monthly benefit with 2 years of coverage will pay $351 yearly,” Slome explains.  “Many agents are going to advocate for at least a 1% inflation growth option which raises the cost to $460 yearly.”

The American Association for Long-Term Care Insurance (AALTCI) advocates for the importance of planning and supports insurance professionals who market both traditional and hybrid LTC solutions.   To obtain long-term care insurance costs from a Washington specialist call the organization at 818-597-3227 or visit their website.

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