A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Actuarially Sound Plans

10/14/2011

The above plan designs are not mutually exclusive. A plan combining these concepts can address the shortcomings of the individual design. According to the statute, the Secretary will present at least 3 actuarially sound plans to the CLASS Independence Advisory Council for review. The Council will recommend one of them to the Secretary for designation as the CLASS Independence Benefit Plan. For consideration, we propose the following 6 candidates for actuarially sound plans29, some of which are combinations of the plan designs presented above:

  1. Phased Enrollment as described above.

  2. Phased Enrollment with Temporary Exclusion for Individual enrollment.

  3. Phased Enrollment with Limited Initial Benefit for Individual enrollment.

  4. Temporary Exclusion as described above.

  5. Scheduled Increasing Benefits as described above.

  6. Pre-paid plan as described in the Adverse Selection section.

This proposal is tentative since we have not yet completed our plan development process which will include final premium determination and further legal clearance.

In order to ensure success of the CLASS Program, all designs will also need to pass the marketability criterion. For example, the pre-paid plan assumes that there is no barrier to prevent or discourage who might be attracted to the program. Such a plan can be made actuarially sound if we assume that virtually everyone enrolled will claim. Thus the premiums (estimated to be $3,000 per month) become that of a pre-paid arrangement. There will obviously be few enrollees.

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