A Report on the Actuarial, Marketing, and Legal Analyses of the CLASS Program. Reasons for CLASS

10/14/2011

There is an unmet need to protect working Americans against the high costs4 of long-term care services5. Few of them have financial protection against the significant risk of eventually using the services6. This is especially true for workers with modest income who are vulnerable to become future Medicaid beneficiaries.

Insurers have been exiting or curtailing their long-term care insurance business. Recent development in the interest rate environment, accounting standards and regulation on the use of genetic information suggest a dim future. Well publicized significant premium increases have shaken consumers’ confidence in the product. Currently only three major insurers7 are actively offering group long-term care insurance. Opportunity is therefore limited for working Americans in seeking cost-effective protection against the risk of high long-term care costs.

CLASS is designed to be a voluntary, affordable long-term care insurance program for the American workers. It will provide a modest level of benefits to help qualified beneficiaries to live independently in the community. Beneficiaries will have considerable freedom to dictate the appropriate services and supports for themselves. Benefits are paid entirely through enrollees’ premiums without any taxpayer subsidy. Compared to private insurance, the CLASS Program has been transparency and accountability because of its certification process.

Long-term care is as much a problem for the young as it is a problem for the old. With most working Americans unprotected, Medicaid will continue to be the payer of last resort for their future long-term care services. This is an escalating burden particularly for our future generation of taxpayers who are becoming fewer in number compared to the older generation8. Enrollment in the CLASS Program could delay and reduce future dependence on Medicaid. Thus the CLASS Program promotes individual responsibility and less reliance on government for support.

The Class Program has the potential to have a seminal effect on long-term care financing in this country. It could significantly increase public awareness of the risk of long-term care. Future Medicaid spending could materially be reduced if more Americans seek insurance protection, whether through CLASS or the private market. Tight controls on Medicaid long-term care spending become more acceptable when programs such as CLASS are available as an alternative. The CLASS Program could be the catalyst for a much needed national aging policy to improve the quality of life for older Americans.

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