Can State Long-Term Care Plans alone solve the Long-Term Care Problem?


The Long-Term Care (LTC) community knew this was coming — a time where the impact on state Medicaid programs due to the aging population, and lack of knowledge of the responsibility for personal LTC planning, would drive actions for employers and individuals to purchase long-ter m care insurance. Why? To sustain Medicaid.

Let’s explore what happened in Washington State, what is be ing contemplated in California and what employers are doing to assist their employees.

In 2019, Washington State legislature passed an employee LTC payroll tax — the first of its kind law to help fund the state dollars paid out to nursing homes and alike for long-term care. The tax itself is not a penalty, rather it is an upfront payment towards a state LTC fund. The goal is to reduce overall Medicaid spending on LTC services through private insurance or public and private combined.

The WA Trust Act established a state LTC plan ( funded by employees in Washington from their paycheck at 0.58% of total wages, uncapped. Although the tax collection has been delayed until 7/1/23, the requirement to purchase a LTC plan prior to 11/1/21 to file for a tax exemption did not change.

Additional highlights of the WA Care Fund & requirements:

  • A one-time opportunity to opt out of the payroll tax by completing two steps:
    1. Proof of a private LTC plan purchased prior to    11/1/21.
    2. Submission of Request for Tax Exemption Application to the state website
    (wacaresexemptions@esd. to be approved or declined by the state.
  • The application for tax exemption must be submitted between October 1, 2021 and December 31, 2022.
  • Purchasing coverage after 11/1/21 does not meet the tax exemption requirement and the resident would be responsible for the payroll tax.
  • A proposed re-attestation every year or three years to prove the qualifying coverage remains active.
  • The WA Cares Fund pays for care provided in Washington State only.
  • The policy lifetime benefit is $36,500.
  • Inflation protection is built into the long-term care plan.
  • Qualifying for the benefit requires a vesting period based on how long the employee has paid into the plan. Full benefits require 10 years of payments (tax) into the program without an interruption of five or more consecutive years. In addition, for individuals born before Jan. 1, 1968 with a contribution for at least one year, a partial benefit for lifetime coverage is available.

Washington State’s bold step started a national conversation among states. California has a task force exploring a government-funded long-term care plan. The timeline for the CA Task Force is to deliver a feasibility report by 1/1/23 and an actuarial report on recommendations by 1/1/24. Once the two reports are approved, state lawmakers will work through the legal process to adopt or deny the recommendations.

As the CA Task Force is designing a LTC plan, they are taking into consideration challenges with the WA Trust Act to avoid problems and deliver a truly valuable program for all constituents within the state.

As the CA Task Force works through their process, many other states are watching and considering an effort like Washington State. To name a few — Alaska, Colorado, Hawaii, Oregon, Illinois, Michigan, Minnesota, New York and Utah — are carefully watching WA and CA.

In this new era of financial planning and advice, consideration by employers to help employees get ahead of this trend is important for several reasons:

Providing education on long-term care. What is LTC, the cost and risk of needing care. What are the devastating effects a LTC event can have on an employee’s savings, investments, home, and family?

Communicating key options and benefits of private long-term care. Employers’ LTC plan can provide employees a comparison to a state-sponsored plan. This allows employees to decide which plan is best suited for their needs.
Explore LTC insurance now. Have enough time for thoughtful research of LTC products and appropriate timing to successfully implement a LTC plan, in advance of a state plan. This will remove the concern of the carrier’s ability to provide quotes and enrollment dates.

Employers offering a plan and employees already enrolled in long-term care plans are commended for their efforts and actions to help reduce Medicaid payouts and for protecting individuals’ assets. Moving forward solving the overwhelming long-term care funding issue will take a collaborative effort between the state and private sector.

Establishing an acceptable tax rate and designing a plan providing value for residents will be impactful. Providing the tools and education for private long-term care policies is equally important for residents with significant assets and potential care needs. The challenge remains to encourage and motivate employers and employees waiting on the sidelines to take action.

CHRISTINE MCCULLUGH is the founder and president of LTC Solutions, Inc. established in 1996. LTC Solutions, Inc. celebrates 26 years in the industry and holds a certification of Women Owned and WBENC (Women’s Business Enterprise). Christine is recognized by insurance companies, benefit brokers and employers as a national expert in LTC insurance. She is a speaker and consultant helping shape the future of LTC insurance.

She provides expertise with the utmost relative and current data regarding the LTC market. She has been actively involved with the WA State Trust Act and in March 2021 she testified at the WA Senate Health and Long-Term Care Committee HB 1323 supporting an amendment to extend the opt out to 12/31/21. In 2021, Christine provided WA Trust Act educational webinars to hundreds of employers and brokers in Washington State. She closely follows the CA Task Force as they work on designing a plan for California. Christine is also a member of the National Association of Insurance and Financial Advisors (NAIFA)-LTC Study Group.