Long Term Care Insurance-Kennedy Proposal in Senate Committee Bill


If you thought automatic enrollment means enrolling in a 401(k) plan in a few years you may be wrong.   

The Senate Health, Education, Labor and Pensions (HELP) Committee approved the creation of a new national long-term care insurance program. This provision was previously introduced in the Senate as the Community Living Assistance Services and Supports (CLASS) Act (S. 697), sponsored by HELP Chairman Edward Kennedy (D-MA). An identical bill was also introduced earlier this year in the House of Representatives (H.R. 1721).  

Under the program, employees are automatically enrolled using the same process as under a 401(k) or similar plan.  Employers are responsible for collecting the premium payments, initially capped at $65 per month, but both the premium and the maximum benefit of $50.00 per day would be periodically adjusted for inflation. There is also a provision for collecting premiums on behalf of a spouse of an employee although enrollment would not be automatic which begs an interesting administrative issue for employers.  “I didn’t want coverage, get my money back.”  You forgot to take the deduction for my spouse.”  While the program may be “voluntary,” the government and private sector administrative costs are not.  

Given the lack of stellar performance for enrollment in the limited number of group LTC plans that exist, one can only wonder where a government run program is headed. 

Chances of this provision remaining in any final health care legislation seem pretty good given there is no measurable government cost and there is the Kennedy factor, but it is just another example of government creating more bureaucracy.   Dare we ask if the cost /benefit is there?  The fact is that if a person wants LTC coverage they can buy it now and if they buy it at an early age it is quite inexpensive, less than $65 per month in fact.  With the initial premium capped under the legislation at $65 per month it is a fair bet that the older the worker the more likely he or she is to retain the coverage which of course can lead to adverse selection.  The redeeming feature is that to collect a benefit premiums must have been paid for five years and the individual working for at least three of those five years. 


Bottom line, more administrative costs for employers with questionable overall benefits.

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