On Oct. 14, 2011, the U.S. Department of Health and Human Services (HHS) announced in a letter to Congress that the 2010 health care reform law's program to provide long-term care insurance through the workplace was unworkable and would not be implemented.
The Community Living Assistance Services and Supports (CLASS) Act program, part of the Patient Protection and Affordable Care Act, was intended to provide a basic lifetime benefit of at least $50 a day in the event of illness or disability. Critics charged that the program, intended to be self-funded, was financially unsustainable without major government subsidies in addition to premium collections.
“At this point, we do not have a viable path forward to implement the CLASS Act,” said Kathy Greenlee, HHS assistant secretary for aging.
The financial challenges facing the CLASS Act program were detailed in an October 2011 HHS report. "While the report does not identify a benefit plan that I can certify as both actuarially sound for the next 75 years and consistent with the statutory requirements, it reflects the development of information that will ultimately advance the cause of finding affordable and sustainable long-term care options," HHS Secretary Kathleen Sebelius said in her letter to Congress.
"The challenge that CLASS was created to address is not going away," added Sebelius. "By 2020, we know that an estimated 15 million Americans will need some kind of long-term care and fewer than 3 percent have a long-term care policy."
Republicans charged that the program's unraveling was the first step in dismantling the entire health care reform law, while Democrats contended that the CLASS Act stood apart from the rest of the health care overhaul.
On Oct. 17, 2011, The Hill reported that while HHS has indefinitely suspended implementation of the CLASS Act long-term care program, the administration announced it will oppose congressional efforts to formally repeal the CLASS Act.
Long-Term Care as an Employee Benefit
Access to long-term care insurance (LTCI) —typically as an employee-paid voluntary benefit with premiums deducted through salary deferral—can be an important addition to the benefits mix. According to the Society for Human Resource Management's (SHRM) 2011 Employee Benefits survey, access to LTCI was made available by 29 percent of responding SHRM members' organizations.
Large employers often can provide access to LTCI under a group plan with lower premiums than employees would pay for individual policies, whereas small employers are more likely to negotiate with an insurer for at least a small discount on individual policies purchased by employees.
Unlike medical insurance, premiums on LTCI provided through a section 125 cafeteria plan are not excludable from the employee’s taxable income. However, tax-excluded funds from an employee's health savings account (HSA) can be used to pay LTCI premiums up to certain annual limits, even if the HSA is offered through a cafeteria plan. LTCI premiums cannot, however, be reimbursed under a health care flexible spending account (FSA).
(To learn more about LTCI, see the SHRM Online article "Planning for the Future: Long-Term Care as an Employee Benefit" and the articles and video listed below.)
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Death of CLASS Act Won’t Solve Long-Term Care Concerns, SHRM Online Legal Issues, October 2011
What Is Long-Term Care Insurance?, SHRM Online Tools and Templates, November 2009
Planning for the Future: Long-Term Care as an Employee Benefit, SHRM Online Benefits Discipline, October 2008
Long-Term Planning, HR Magazine, May 2007
Voluntary Employee Benefits: Long-Term Care Insurance, SHRM Research Articles, December 2005
Long-Term Care: Why HR Should Care, SHRM Online Benefits Discipline, May 2004
CLASS Long-Term Care Insurance Is Dead, but What Comes Next?, The Henry J. Kaiser Family Foundation, October 2011
Four Ways to Fix Long-Term Care, Washington Post, October 2011
SHRM Online Benefits Discipline
SHRM Online Health Care Reform Resource Page