Written By: Karen Dacek & Connie Carroll, Principals
Pillar International Insurance Advisors | Seattle
Article Dated: March 2, 2023
Financially preparing for your own or a loved one’s long-term care event has touched most of us. According to the U.S. Census Bureau, every day until 2030, 10,000 baby boomers will turn 65 years old. Regardless of age, many have contributed either financially or physically to the care of parents or grandparents. Others have added long-term care insurance as a cornerstone of their retirement protection. Most recently, for those who live and work in Washington state, we, with little exception, are now participants in a fledgling long-term care program sponsored by the state.
But first, what is long-term care (LTC)? It’s the care you may need if you are unable to perform daily activities on your own. That means things like eating, bathing, dressing, transferring, and using the bathroom along with nonmedical or custodial care. The goal of long-term care is to help you maintain your lifestyle as you age. Medicare, Medicare supplement insurance, and the health insurance you may have at work rarely pay for long-term care.
Washington State Gets into the LTC Game
In 2019 the Washington “Trust Act” was quietly passed, later establishing the WA Cares Fund. The program would be funded by a $.58 per $100 of earnings payroll tax, with no cap. The Act included an exemption for sole proprietors or individuals who owned private LTC insurance dated prior to the effective date of the Act.
In early 2021, state lawmakers opened a small window for individuals to obtain private insurance to avoid the tax and individualize their own plans. The spring and summer of 2021 brought an avalanche of applicants for LTC policies – plans that typically take months to underwrite. National insurance carriers were paralyzed by the onslaught of business, and many bowed out from taking new applications from Washingtonians in the summer of 2021.
If you obtained a policy by Nov. 1, 2021, you did the hard part. The state’s exemption process only required a couple of clicks in your Secure Access Washington account attesting to the fact that you had obtained the appropriate long-term care product. Applicants were given until Dec. 31, 2022, to opt out. Despite many rumors, the law is still active and the first payroll deduction was delayed from January 2023 to July 2023.
After the WA Cares Fund was established, the Legislature created the Long-Term Services and Supports Trust Commission, consisting of legislators, administering agencies and stakeholder representatives. The Trust Commission’s purpose is to develop recommendations to update and improve the WA Cares Fund, including a potential recertification requirement for individuals who received an exemption due to private coverage. The WA Cares Fund oversight body uses a risk management framework that requires the Office of the State Actuary and the Trust Commission to continuously monitor the program’s finances.
What Now?
Employers are now required to obtain a copy of an employee’s opt-out letter or apply a payroll tax beginning July 1, 2023. Starting in July 2026, Washingtonians who have paid into the WA Cares Fund may begin accessing the limited benefit if they are certified with qualifying conditions.
In an updated study by actuarial research firm Milliman, findings show the fund will be fully funded through June 30, 2098, under most scenarios evaluated. The program’s current premium rate, 0.58% of earnings, is projected to keep the fund fully solvent for 75 years, the full period evaluated in the report. Of course, projections will vary.
With the growing numbers of Americans over age 65 and the rising cost of long-term care, challenges continue for businesses, families and individuals nationwide. According to the U.S. Department of Health and Human Services, seven out of 10 people will require long-term care in their lifetimes so addressing this need is essential.
Following in Washington’s footsteps, more than 15 state legislatures are currently exploring options for state financed long-term care plans. Businesses may want to incorporate voluntary programs to provide access to long-term care benefits or as a retention strategy for valuable employees. Historically, long-term care has been an enduring component of prudent retirement planning. Now, regardless of where you live or your age, long-term care has become an ongoing financial consideration for all.
Please reach out with questions or comments.
Karen Dacek | Seattle Pillar International Insurance Advisors | (206) 736-0511 office | karen.dacek@pillarintl.com
Connie Carroll | Seattle Pillar International Insurance Advisors | (206) 736-0508 office | connie.carroll@pillarintl.com
Shannon Hahn | Chicago Pillar International Insurance Advisors | (312) 300-3216 office |shannon.hahn@pillarintl.com