Sebelius on CLASS, Read Bait and Switch

By Ross Schriftman, RHU, LUTCF, ACBC, MSAA

Starting sometime toward the end of next year, American workers will be asked to put their hard earned money into a new government program for long term care called the Community Living Assistance Services and Supports (CLASS) Program.  The CLASS Act is part of Obamacare and is supposed to generate $70 billion in revenue to the Federal government from the voluntary contributions of participants.  The likelihood that Americans will make a conscious decision to send their money to a government that is $14 trillion in debt with the expectation that sometime five years AFTER they start contributing they may be eligible for a benefit of as little as $50 per day to help pay for their long term care services is doubtful.

In addition, both well respected Actuary Associations have called the program unsustainable because of its poor design and lack of underwriting for participants.  The President’s own Fiscal Commission also called the program unsustainable and recommended reforming it or repealing it entirely.

In its original form when first proposed the average premium was to be around $60 per month per worker.  Both the government and the reports by the Actuary Associations now peg the expected average premium needed to sustain the program at more than $160 per month.  The actual amounts will be determined by the Department of Health and Human Services (HHS) through its regulatory authority given to it by the Act.

Realizing that no one in their right mind would voluntary give up $160 per month of their personal funds with the expectation of getting some vague promise from the government that they might get some funds for long term care services no sooner than five years down the road, HHS Secretary Sebelius is now doing what regulators claimed private long term care insurance companies have done in the past; bait and switch.  She is proposing that premiums start out lower and increase as “benefits increase.”  Don’t take the bait.  This is just a blatant attempt to make Obamacare’s numbers come out closer to what the Democratic Leadership put into the bill in order to try and convince us that the entire program will not add to our national debt.  If people don’t contribute $70 billion to the CLASS Act, that is less money for all the new expensive stuff contained in the rest of the legislation.  They consider your contributions “revenue” to the Federal government and not reserves to pay future claims.

Sebelius now suggests that she may be “looking at options for indexing premiums so they would rise with benefits.”  Although she claims that this information would be “transparent” to the buyer she doesn’t say that the legislation allows the government to raise the premiums whenever they decide that the program is not financial sound.  Before passage of Obamacare I wrote to members of Congress and asked them to include a full disclosure statement for Americans concerning enrolling in Class.  The disclosure would include the expected premiums over the first five years when the participant receives no benefits, information about the current and expected future cost of long term care services and the fact that Class participants do not have the rights and benefits of real insurance.  They do not get a policy or even a coverage certificate.

Here is the speech Sebelius recently gave concerning the Class Act
Here is the article published in The Hill:

I predict that the average premium that HHS will come up with will be around $100 per month.  That way the Administration thinks they can attract more of us to participate. They will then guarantee that rates will rise over time.  If government gets enough people to contribute and then drop out of Class before they become eligible for benefits then that $70 billion doesn’t all have to be used to pay claims.  It just remains with the government to pay for the rest of Obamacare.  What a concept!

The alternative for most Americans to this new government program is a privately owned long term care insurance policy purchased while a person is still in general good health with rights and benefits spelled out in the contract with the insurance company.  It is true that premiums can be increased but only on a class basis and only with the approval of State Insurance regulators. The Class Act does not provide this kind of protection.  It is not insurance as there will be no policies issued and the government can change the rules and premiums at will.  Imagine any long term care insurance agent trying to sell a client such a poorly designed program like Class.

Here is James Capretta’s article on the subject appearing in the National Review.