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Title VIII- Class Act

Title VIII- Class Act. Presented by: David Chamberlain, Dan Clark, Marjorie Jeannis, & Audra Lenczowski. What is the Class Act?.

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Title VIII- Class Act

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  1. Title VIII- Class Act Presented by: David Chamberlain, Dan Clark, Marjorie Jeannis, & Audra Lenczowski

  2. What is the Class Act? • The Community Living Assistance Services and Support Act (aka CLASS Act) is a voluntary, pre-funded, long-term care program that will be administered by the federal government. http://simplystatedhealthcare.com/2011/10/class-act-flunks-health-care-reform/

  3. Purpose of Class Act Title • The purpose of this title is to establish a national voluntary insurance program for purchasing community living assistance services support.

  4. Important Facts about the Class Act Program • It is a voluntary program • In order to enroll in the CLASS Act you must be working • In order to become vested in the CLASS Act program, you must work for at least 3 of the first 5 years that you pay premiums into the program

  5. Important Facts about the Class Act Program (cont.) • The legislation requires the program to be “actuarially sound” for a 75-year period • There are no health restrictions.  Anyone who is working can enroll in the CLASS Act regardless of their health history • The average premium for a 50-year old is projected to be about $125 per month.  The premiums are based upon age.  The younger you are when you enroll, the lower your premium.

  6. Theodore Roosevelt 26th president of the United States, took serious steps in his campaign to deal with the Affordable Care Act. Roosevelt’s campaign was the beginning of the fight for health reform in America, and the ACA is a major victory in the century-long fight for access to affordable health care. http://www.google.com/imgres?hl=en&biw=1365&bih=829&tbm=isch&tbnid=aevfR3mUBxbJLM:&imgrefurl=http://www.whitehouse.gov/about/presidents/theodoreroosevelt&imgurl=http://www.whitehouse.gov/sites/default/files/first-family/masthead_image/26tr_header_sm.jpg%253F1250880789&w=450&h=254&ei=gXM6UKPUH6qZiAK5tYDYCg&zoom=1&iact=hc&vpx=291&vpy=197&dur=2649&hovh=169&hovw=299&tx=90&ty=194&sig=102591790563466490464&page=1&tbnh=98&tbnw=173&start=0&ndsp=32&ved=1t:429,r:1,s:0,i:142

  7. Luke • Remember the past, plan for the future, but live for today, because yesterday is gone, and tomorrow may never come. (http://www.standrewsfulham.com/saints/images/stluke.jpg)

  8. Who’s eligible? • You must be 18 years or older • Currently employed • Receive taxable wages or self-employment income • Participating employers will automatically enroll employees and deduct premiums from employee wages unless an employee “opts out” of the program

  9. Who’s not eligible • A patient in the hospital, nursing facility, an intermediate care facility for the mentally retarded, or an institution for mental diseases and receiving medical assistance under Medicaid • Confined in jail, prison, or correctional facility, or by court order pursuant to conviction of a criminal offense

  10. How premiums are determined • Working, full time students up to age 21 and enrollees with income below the federal poverty level will pay a minimal monthly premium of approximately $5 (which is adjusted annually for inflation). • Initial monthly premiums for other enrollees are estimated to be $235-391.

  11. How Premiums are Determined • Individual premium levels cannot increase as long as he or she remains an active enrollee unless the Health and Human Services (HHS) determine premiums are insufficient to cover an upcoming 20 year period • 65 and older active enrollees who have paid premiums for at least 20 years and not actively employed are exempt from any increase • Premiums can be recalculated for individuals who drop out and re-enroll in the program

  12. How premiums are determined • Individuals who opt out may re-enroll every 2 years but pay a 1% penalty in addition to the monthly premium. • Individuals who drop out can re-enroll within 90 days at the same premium level and keep their vesting credit for prior coverage months. • After 5 years all credit for prior coverage is lost, and premiums will be recalculated based on current age and include a penalty for each month of non-coverage. • Status change for students will require premiums to be recalculated.

  13. How benefits are paid • Once the 5 year vesting requirement is met, an enrollee is eligible to receive cash benefits if he/she has a “qualifying level of disability.” • Unable to perform 2-3 daily living activities per the Internal Revenue Code of 1986 such as: • Bathing • Dressing • Eating • Toileting • Transferring • Continence

  14. How benefits are paid • A cognitive impairment that requires substantial supervision to protect the person from threats to health or safety • A certified licensed health care practitioner has determined the functional limitation will last at least 90 continuous days • Work for at least three of the initial five years they are enrolled • The minimum daily cash benefit will be $50, with annual adjustments for inflation. The Congressional Budget Office (CBO) figures the average daily benefit of $75.

  15. How benefits are paid • The Secretary will determine the maximum benefit amount which may be between two to six level amounts • Paid on a daily or weekly basis via debit card with no lifetime or aggregate limit • The Secretary of the Treasury will deposit into the CLASS Independence Fund a total amount equal to 100% of the premiums collected during that year. • Eligible beneficiaries are paid at the beginning of the approved month, but may defer payment of their daily or weekly benefit and to rollover any deferred benefits from month to month, but not year to year.

  16. How benefits are paid • Benefits paid into a Life Independence Account for an eligible beneficiary can be used to purchase nonmedical services and supports that are needed to maintain independence at home or other residential settings of their choice such as: • Home modifications • Accessible transportation • Assistive technology • Homeworker services • Respite care • Personal assistance services • Home care aides • Nursing support

  17. Why we need it • As the population ages, there is an increasingly urgent need to find effective ways to help Americans prepare for their individual long-term care needs • 7 out of 10 people turning 65 today at some point will need some help with daily living activities • 40% of long-term care users today are between the ages of 18 and 64

  18. A Cost of long-term care • The average monthly cost for a nursing home is $6,500 or $70-80,000 a year, (the median nationwide annual cost of a nursing home in 2010 was $75,000; assisted living facility, with no additional help costs on average $37,500) • The average monthly cost for long-term care at home is $1,800 • Home care aide, who may or may not dispense medications cost around $19 per hour • On average a 65 year old will spend $47,000 in a lifetime on long-term care spending, 16% will spend $100,000 and 5% will spend $250,000

  19. A Cost of long-term care • Long-term care insurance, by far the most popular private option available, can be costly and difficult to purchase due to pre-existing conditions or disabilities • Less than 3% of Americans currently have a long-term care policy

  20. A Cost of long-term care • Normal policy $164,000 immediate benefit ($150/day, 3 year benefit period, 3% inflation/per year) Single man or woman age 55 (per year) Low: $1,428 High: $2552 (Preferred Health) Low: $1,764 High: $3446 (Standard Health) • Couple age 60 (combined total per year) Low: $2,794 High: $5,637 (Standard health) Couple age 65 Low: $3,815 High: $7,129 (Standard health)

  21. (http://www.voluntarybenefitsmagazine.com/article/health-reform-and-the-class-act.html)(http://www.voluntarybenefitsmagazine.com/article/health-reform-and-the-class-act.html) Health Reform and the CLASS Act: Threat or Opportunity?

  22. WhyThe Class Act Will Not Work Now Many of the details of the CLASS provisions are not yet defined and will be developed through regulation, but as with all other aspects of this industry altering legislation, nothing will ever be the same – either for the consumers of health care or the law-makers who address this law

  23. October 2011 the Obama administration announced it was unworkable and would be dropped.

  24. Note: On October 14, 2011, Secretary Sebelius transmitted a report and letter to Congress stating that the Department does not see a viable path forward for CLASS implementation at this time

  25. Criticisms • Senator Kent Conrad called the CLASS Act a Ponzi Scheme (“financial gimmick”) as the projected premiums were counted as revenue during the first decade • During the second decade benefits would cost exceed the premiums

  26. Bad Math • When the CLASS act was first budgeted Democrats announced $70 billion expected to be raised in the first 10 years and counted this money as deficit reduction. • Democrats did not calculate the benefits this money was intended to finance would not materialize in the first 10 years, so they appear nowhere in the cost of the legislation. • In actuality, this program would generate deficits of $562 billion in the first 10 years.

  27. http://blog.heritage.org/2010/09/23/class-act-repeal-should-be-taken-seriously/http://blog.heritage.org/2010/09/23/class-act-repeal-should-be-taken-seriously/

  28. CLASS repeal • On February 2, 2012, the House of Representatives repealed the CLASS act citing the potential of it becoming a new entitlement program. It was predicated that enrollees requiring large medical payouts would be attracted to the plan, leading to the inability of the collected premiums to cover all costs.

  29. Basic Plan – review • Based on the most natural reading of the statute • Eligible enrollees must be 18 • Enrollees must be actively employed • Primary minimum benefit is $50 a day for a lifetime • 5 year wait after enrollment • Meet work and earnings requirements • Would cost enrollee $235 - $391.00/monthly

  30. Adverse Selection • The potential for those needing benefits (because they were already sick or disabled or soon would be) would enroll while the younger and healthier people would refrain from purchasing the plan.

  31. Proposals to balance adverse selection • All the below proposals were introduced in June, 2011. Although many may have been developmentally feasible, all these alternative plans were thrown out since they did not meet the fundamental requirements of the ACA. Many who attended the meeting argued that the wording in the ACA should be altered and a model further explored, but their voices fell on deaf ears.

  32. Modified class option • Work requirements were increased from 3/5 years to 5/5 years • Earning requirement was increased from $1,200/year to $12,000/year • Monthly premium is increased by a fixed percentage (2.8%) • Average cost to enrollee $114 – $160.00/month • Enrollee still receives a $50.00 per day benefit

  33. Enhanced Class plan with phased enrollment • Builds off the Modified CLASS plan • Offers $50.00/day cash for persons with 2-3 limitations in ADL’s • Offers $60.00/day cash for persons with 4+ limitations • After 5th year benefit declines by 80%

  34. Enhanced Class plan with phased enrollment • Beneficiaries would then receive $10 - $12.00/day • Initial enrollment would be limited to group settings such as employers. • Individual enrollment would begin after “group” enrollment • Cost would be between $99 - $106/month

  35. Family option • Based off the Modified CLASS Plan • Still offers: • Cash daily payment • 5 year vesting period • No underwriting except for age • Structured to offer one or two tiers of eligibility • Option to buy underwritten “wrap around” insurance

  36. Family Option • Benefits could raise from $20 a day when newly vested to $150 after 25 years. • Coverage is limited to 3 years • Monthly cost $112 - $154/month

  37. Temporary exclusion plan • Addresses adverse selection through the claims process rather than enrollment process • Anyone may join, but no benefits would be paid for the first 15 years in the program if limitations existed prior to enrollment. • This plan could be combined with the Phased Enrollment Plan

  38. Where do we go next? • The need for long term care insurance still exists even though CLASS ACT does not. • Favorite solutions • Optional insurance • Rewording and reissuing CLASS • Mandatory insurance • May be coupled with SSA • Wage based – with a ceiling and a basement • All are required to participate to claim benefits • Parents are responsible for children (e.g. $5.00 premium) • Unemployed (e.g. $10.00 premium) • Retired (e.g. $10.00 premium) • Maximum premium based on individual income (no higher than a fixed amount).

  39. questions

  40. Biblography

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