This update is intended for our community of LTC planning advocates and insurance practitioners to stay up-to-date on the latest legislative news that we are following at BuddyIns. This is not a comprehensive assessment, so please email us with any news from your neck of the woods.
Currently four states are actively considering legislation to address the high cost of long term care potentially through a payroll tax, with two of the most populous states, California and New York, among them. The reason these states are important:
- They are both actively moving toward a legislative solution
- The cost of care in these states is higher than average
- We don’t expect that either state will be able to provide a substantial benefit to pay for long-term care services, which speaks to the greatest challenge in trying to legislate a long term care benefit: overall cost.
This update seeks to clarify the current progress made in each state that has legislation pending and whether there will be an exemption to any payroll tax if a resident owns qualified long term care insurance. Product types available in each state are also included. There are other states that appear on several watch lists. We could not find any information on legislative drafts or anything pending in these states: AK, CO, HI, IL, MI, MO, NC, OR, UT. If you have any information on proposed legislation, please contact firstname.lastname@example.org.
BuddyIns recommends employers that are interested in offering LTC insurance and employees interested in purchasing coverage for the value of the product, begin the process earlier. If an exemption or incentive is allowed in a state to encourage private purchase, waiting may result in a rush to purchase products and limited capacity. In addition, we advise consumers to opt for more meaningful coverage rather than try to meet an exemption threshold.
Known as the Washington Cares Fund, this legislation, signed into law in 2019, provides access to a lifetime benefit amount that can be used on a wide range of long-term services and supports. W-2 workers are expected to begin contributing to the fund in July 2023 with the first benefits available in July 2026.
- Contributions: Washington workers pay $0.58 per $100 of earnings. Most employees will contribute, and employers are responsible for collecting the tax and remitting to the Washington Cares Fund.
- Benefits: Starting in July 2026, each person who is eligible to receive the benefit can access care costing up to $36,500 (adjusted annually for inflation) over their lifetime.
- Eligibility: To be eligible to receive the benefit, you must meet contribution requirements and need help with at least three activities of daily living.
Insurance Market Update:
- Approximately 480,000 out of the 3,800,000 employees (13%) opted out of the Washington Cares Fund through the purchase of group or individual LTC Insurance or Life Insurance with LTC riders. This was despite most carriers being overwhelmed by demand over a short period of time and exiting the marketplace. These carriers have since returned to the market.
- BuddyIns estimates that more policies were purchased through group solutions, but more premium was purchased from individual products.
- Despite only a limited time to purchase coverage and only in one state, the sales in Washington increased the LTC Insurance marketplace in the entire country by at least 200%. Premiums increased more modestly given the lower average premium per policy.
After Washington, California leads the way in considering a payroll tax that would fund a minimum long-term care benefit. A feasibility report is in development. Presentation of the draft feasibility report is scheduled for October 6, 2022.
The Task Force will recommend options for establishing a statewide long-term care insurance program and comment on the respective degrees of feasibility of those options in a final report submitted to the commissioner, the Governor, and the Legislature on or before January 1, 2023.
Early indications are that a proposed tax would be on earned income for W-2 employees. It is unclear yet if there will be an exemption if you own a qualifying long-term care insurance policy.
Insurance Market Update:
- There are approximately 16,500,000 employees in California or more than 4 times the number in Washington state.
- There are slightly fewer group and individual products and carriers in California than Washington mostly because product approvals from the state take longer. Carriers may accelerate new solutions to market depending on the results of the feasibility report.
- BuddyIns expects capacity of individual products in California to be limited, but group products with streamlined underwriting may have more availability.
In New York, there appears to be a draft plan in the Senate that is very similar to the Washington plan, with a tax on earned income giving the taxpayer $36,500 to pay for care and available five years after the plan becomes law. Again, until the legislation is finalized and ratified, it’s difficult to know how it will shake out. In the draft plan there is a proposed exemption if an employee owns long term care insurance prior to January 1st of the year in which the law is enacted. A link to the draft legislation can be found here.
Insurance Market Update:
- There are approximately 8,700,000 employees in New York or more than twice the number in Washington state.
- There are significantly fewer group and individual products and carriers in New York than Washington.
- BuddyIns expects capacity of individual products in New York to be extremely limited, but group products with streamlined underwriting may have more availability.
A draft of a bill that is similar to the Washington State legislation was introduced in 2021. There has been no known update. As drafted, the bill provides 365 Benefit Units of $100 each to eligible beneficiaries payable to qualified providers. This benefit is funded by a payroll tax and there is no known exemption. There was also recent momentum on legislation allowing for certain Hybrids that combine term life insurance and long term care insurance as a lifestyle plan, so it seems that many things are still on the table in the land of 10,000 lakes. A link to the draft legislation can be found here.
Insurance Market Update:
- There are approximately 2,700,000 employees in Minnesota.
- There is similar product availability in Minnesota as in Washington, so BuddyIns expects capacity of individual products in Minnesota to be similar to Washington.
In addition to the state updates above, we are often asked if there is any pending federal legislation. Please read the update below for information on what we were able to find while doing our research.
Long-Term Care Affordability Act
Introduced by Senator Pat Toomey, R-PA, this bill would allow the payment of long-term health care insurance to be paid using tax-exempt retirement plan distributions. Specifically, it would exclude such distributions from the gross income of an insured person up to $2,500 per individual in a taxable year. The bill also requires a description of long-term care insurance arrangements and establishes reporting requirements.
Well-Being Insurance for Seniors to be at Home (WISH) Act, introduced by Rep. Thomas Suozzi, D-NY, would amend Title II of the Social Security Act to provide long-term care insurance benefits. Individuals who have attained retirement age, have filed an application for long-term care insurance benefits, are insured for long-term care insurance benefits, and have a continual serious functional disability would be entitled to a long-term care insurance benefit for each month beginning with the first month in which the individual meets the criteria.
21st Century Long-Term Care Caucus
The bipartisan 21st Century Long-Term Care Caucus will address long term care needs and financial concerns of American families. Representatives Annie Kuster (D-NH) and Bryan Steil (R-WI) announced the creation of the caucus. The caucus will bring together members from both parties to identify and address long-term health care in the United States and implement solutions to ensure care recipients and their families have the support they need.
Additional legislation has been proposed at the federal level but is not expected to come up for a vote in 2022.
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