{"id":42617,"date":"2009-11-15T12:55:00","date_gmt":"2009-11-15T17:55:00","guid":{"rendered":"7e116ddb-2132-48fd-bcdd-75e2a22c44f5"},"modified":"2009-11-15T12:55:00","modified_gmt":"2009-11-15T17:55:00","slug":"will-people-buy-government-long-term-care-insurance","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/42617","title":{"rendered":"Will People Buy Government Long-Term Care Insurance?"},"content":{"rendered":"

The CLASS Act\u2014the far-reaching proposal to create a national long-term care insurance program\u2014is in the House health reform bill, and is still in the mix as Senate leaders struggle to design their own version of reform. But the key question about the CLASS Act remains: How many will buy the coverage even if it is broadly available?<\/p>\n

The answer is significantly more than currently purchase private insurance, but not enough to truly solve the nation\u2019s severe long-term care financing challenges. With some changes, however, it could cover even more.<\/p>\n

It is a critical issue. The program\u2019s success will be measured by the number of buyers it attracts. But the economics of insurance makes a large pool of purchasers imperative. The reason is the chicken-and-egg relationship between the number of buyers and the rates they pay: The fewer who buy, the higher the rates, and the higher the rates, the fewer will buy.<\/p>\n

In a phenomenon called \u201cadverse selection,\u201d the people most likely to purchase insurance are those most likely to need it. So insurers keep rates down by selling to many consumers who turn out to never require benefits. It is no different for a government plan. Thus, for CLASS to offer attractive rates, lots of people would have to buy.<\/p>\n

So how many would purchase CLASS policies? The insurance industry says almost no one. In July, the American\u00a0Academy of Actuaries and the Society of Actuaries looked at an early version of CLASS and concluded that only about\u00a0five percent would participate, about the same percentage who currently purchase group long-term care policies. The Congressional Budget Office also assumes a participation rate of about\u00a0five percent at an average monthly premium of about $120. On Nov. 13, Medicare chief actuary Richard Foster predicted that only\u00a0two percent of potential participants would buy and that premiums would average $180 per month. <\/p>\n

The industry actuaries insisted CLASS policies would be far too expensive\u2014averaging as much as $160-a-month\u2014to attract many buyers. While the proposal has changed from the version they studied last summer, insurance executives say their estimate has not. An industry-funded poll released on Oct. 28 reported that while three-quarters of those surveyed favored CLASS, only about 10 percent would pay premiums of $85 while just\u00a0three percent would pay $160.<\/p>\n

Supporters of CLASS point to focus groups and insist enrollment would be far higher. But they won\u2019t say what they think the participation rate would be.<\/p>\n

Privately, industry insiders and other experts think if average CLASS premiums can be held below $100, about 20 percent of workers would buy\u2014roughly 30 million people. That\u2019s four times the number currently insured. The latest version of the bill would allow the Secretary of Health and Human Services to set both benefits and premiums.<\/p>\n

All this uncertainty is driven by the design of CLASS. Workers would be enrolled automatically, but they\u2019d be allowed to opt-out if they chose. And employers would not be required to deduct premiums from wages. Since nothing quite like this has ever been tried before, no one really knows what will happen.<\/p>\n

But there are some models to look at. For instance, many employers now automatically enroll all their workers in 401(k) retirement plans, but give them the option to opt out if they choose. Compared to the old system, where workers had to decide whether to participate before they could sign up, enrollment has nearly doubled among some employees. <\/p>\n

Long-term care insurance is not a 401(k). But inertia is a powerful thing, and many workers won\u2019t bother to stop their long-term care premium deductions. Some may even come to learn how important it is to prepare for this risk: Two-thirds of those over 65 are likely to need some care in their lives, and 20 percent will need it for five years or more.<\/p>\n

Could the CLASS Act be changed to keep premiums low and attract even more buyers? I think so. In an ideal world, I\u2019d make coverage mandatory, even though that\u2019s not in the cards this year. Even if workers are going to be allowed to opt-out, I\u2019d at least require all large employers to offer coverage. I\u2019d impose tough penalties on both workers and employers who do not participate.<\/p>\n

I\u2019d also do more to encourage participation by young people. For instance, in the House bill, initial premiums would be set by age, but once you enroll, your monthly payments generally would never increase, although your benefits would. A better design would permit small annual premium hikes. This would permit extremely low initial monthly payments and encourage the \u201cindestructible\u201d 20-somethings, many of whom won\u2019t even buy health insurance, to enroll.<\/p>\n

Government could also give employers financial incentives to partially match worker contributions, either for CLASS coverage or for private insurance to supplement the government insurance.<\/p>\n

With some tweaking, CLASS can do what its backers intend\u2014provide long-term care insurance for millions who are now totally unprepared. <\/p>\n

\n Howard Gleckman, a resident fellow at the Urban Institute, is author of “Caring For Our Parents” and a frequent writer and speaker on long-term care issues.<\/em> <\/p>\n

<\/p>\n","protected":false},"excerpt":{"rendered":"

The CLASS Act\u2014the far-reaching proposal to create a national long-term care insurance program\u2014is in the House health reform bill, and is still in the mix as Senate leaders struggle to design their own version of reform. But the key question about the CLASS Act remains: How many will buy the coverage even if it is […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-42617","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/42617","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=42617"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/42617\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=42617"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=42617"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=42617"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}