Analyst’s advice for Washingtonians who got private long-term care insurance

With the State House of Representatives passing a bill to delay the WA Cares tax by 18 months, there are more questions than answers for those who bought private long-term care insurance instead.

About 450,000 people opted to avoid the 0.58% tax on income — about $300 a year for someone earning $50,000 — by getting a qualifying long-term care insurance plan as an alternative.

Amy Anderson, government affairs director for the Association of Washington Business, said many of those who rushed to buy insurance plans before the deadline last fall likely planned to drop their coverage as soon as they got their opt-out letter from the Employment Security Department.

Legislator says WA Cares tax needs ‘some common sense’

Under the new circumstances, though, Anderson advises those people to think again.

“In the current law, there is not a process by which the Employment Security Department will come back and ask you to re-certify,” she said. “However, that does not mean that it won’t happen in future.”

She said that other than the action that has already been taken, lawmakers plan to table the long-term care discussions until next year. However, the Long-Term Services and Supports Trust Commission has already recommended mandating another check-in process by ESD to make sure that people are still current with their insurance plans — so Anderson said that people may want to hang onto those plans a bit longer.

In the meantime, the long-term care insurance industry is not expecting a high number of dropouts.

“They have not necessarily looked at that as, ‘This is going to completely decimate the insurance industry,'” Anderson said. “Are people going to drop it? Sure. Is that rate higher than what they would normally expect? That’s hard to say.”

Those insurance companies, she said, are counting on many people deciding that because insurance is smart to have — and because private is generally “a more robust product” than public in terms of what is covered — they will keep their plans.

But the road has not been smooth for the insurance providers. Anderson said that the effects of the WA Cares tax completely disrupted the market in Washington last summer and fall, as insurance companies realized that they would be selling plans to customers who planned to soon get rid of them.

“The way the law is currently written, you have the ability to drop that product. That is why the long-term market in the state collapsed … Carriers stopped selling long-term care insurance in Washington state,” she said. “It became apparent that … it became a tax-avoidance tool.”

In early September — two months before the deadline — the Office of the Insurance Commissioner told KIRO Newsradio that none of the state’s insurance companies were selling long-term care insurance for this reason.

That is why Anderson and the AWB would like to see future changes with the law include a grace period for people who still would like to buy private plans and opt out, but did not have the chance last year when the market collapsed. They would also like to see the tax include benefits for people who pay in, but then move out of state.

As the law is currently written, a person who pays in for more than 10 years and still lives in Washington state can draw a lifetime maximum of $36,500.

“This is a policy that does not address the actual long-term care needs in the state of Washington. It was originally meant to be a bridge product for folks, to get them from a current situation to where they qualify for Medicaid,” Anderson said. “It is a very limited benefit, only $36,500 one time, which does not get you much long-term care. Long-term care is extremely expensive.”

The AWB is hopeful that the likely delay for the tax will give lawmakers time to take a second crack at their work and make some improvements.

“The fact that we have an 18-month pause, from the business community perspective, we’re looking at this as, let’s really dig down and start to address what are the long-term care needs for Washingtonians, and how do we effectively address that,” Anderson said.

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