A new state-run insurance program designed to help residents pay for long-term care as they age has been met with questions and concerns.
In January, workers will face a new payroll tax to fund the state’s new program, called the WA Cares Fund.
Workers will pay a premium of 0.58% of their wages — 58 cents per $100. A worker earning $50,000 a year would pay $290 in annual payroll deductions.
Those who are self-employed can opt in to the program.
Starting in 2025, eligible workers will be able access program funds to pay for long-term care services such as in-home care, nursing home stays, equipment, home modifications, rides to the doctor, and to pay family caregivers.
The maximum benefit a person can access over their lifetime is $36,500.
When the Legislature established the program in 2019, the state was the first in the nation to create a public long-term care insurance program.
Seven in 10 people will need long-term care as they age, and most can’t afford private long-term care insurance, according to a fact sheet from the state Department of Social & Health Services. The department notes that the program will help reduce the state’s Medicaid spending.
The program includes an option for people to opt out of paying the payroll tax if they purchase a qualifying long-term care insurance plan on the private market. Those who choose to opt out will be permanently ineligible for state benefits.
The deadline to purchase a private plan is Nov. 1. On Friday, the state opened the application period for people to apply for an exemption, and will accept applications through Dec. 31, 2022.
The website to apply for an exemption crashed on Friday, but was working again on Saturday.
Some have raised concerns that the state’s deadline does not give people enough time to secure a private plan, and that plans are no longer available because of an increase in demand.
There are also questions about who is eligible to receive benefits. One issue is that workers who pay the payroll premium will lose access to benefits if they move to or retire in another state.
With the new payroll tax looming and many questions remaining about the program, a group of 23 state senators — 20 Republicans and three Democrats — asked Gov. Jay Inslee last week to pause implementation of the program.
“Your intervention to suspend the tax and insurance purchase deadline would provide temporary relief to employees who face a major new tax and give time for the Legislature to work on a solution,” the senators’ Sept. 22 letter states.
State Sen. Keith Wagoner, R-Sedro-Woolley, who signed the letter, said he has heard from many constituents about the program. He said many have been unable to find a private plan that meets the state’s guidelines in time for the Nov. 1 deadline.
“When the bill went into effect, I don’t think very many people knew about it,” he said. “It started getting attention, and we got lots of feedback. I don’t know how many hundreds of emails have come in on long-term care.”
In a Sept. 9 letter to Inslee, the Association of Washington Business (AWB) raised similar concerns, arguing that the state’s private-plan purchase deadline resulted in a “collapse” in the private insurance market and resulted in companies no longer selling coverage.
Dozens of businesses, chambers of commerce, and labor unions signed onto the AWB letter.
The letter also brings up eligibility issues, such as if “near-term retirees” or those who work in Washington but live in border states are eligible for benefits.
Wagoner, who did not support the 2019 legislation, said he believes the private insurance market is better suited to meet residents’ long-term care needs.
His concern now is that people will pay into the state’s system without ever seeing a benefit.
He said Inslee should use his emergency powers to suspend the program to allow more time to address these concerns.
“It’s nothing more than a pause to give people relief during the (pandemic) and find more ways to opt out of this,” he said. “There are so many details that we haven’t figured out.”
Democrats agree that policy tweaks are needed, but have no interest in pausing the program.
State Rep. Alex Ramel, D-Bellingham, said the state’s program is needed to provide long-term care insurance as the population ages.
He said without the program, people would have to spend everything they have in order to qualify for Medicaid, and that the private long-term care market is insufficient.
Ramel said pausing the program would not only delay the collection of payroll premiums, but delay when residents can access benefits.
Ramel, who was not a state representative when the legislation passed in 2019, said he understands the concerns about paying into the system and not receiving any benefits.
“When the system first starts up, it needs to collect revenue for a couple of years before they are able to provide benefits to people,” he said. “That’s unfortunately just how finances work to make the system financially solvent.”
Ramel said he would like to see a national system of long-term care insurance so those who work here and move away wouldn’t lose benefits.
The state’s Long-Term Services and Supports Trust Commission is working on ways to improve the new program.
State Sen. Karen Keiser, D-Des Moines, a commission member, said the group plans to make proposals to the Legislature during the session that begins in January.
The goals are to address issues such as allowing workers who live in border states but work in Washington — and those who work in Washington and move away — to access benefits.
“We are working on solutions to those oversights,” Keiser said. “They are really technical fixes.”
Some have raised the question of whether the $36,500 maximum benefit is enough to cover a person’s long-term care needs.
Keiser said the benefit is designed to cover at-home care, “aging in place,” rather than to pay for more costly nursing home care.
She called private long-term insurance a “failed market” that has had large rate increases in recent years.
Rate increases have been known to fluctuate between 20% to 79% in a year, according to the state Office of the Insurance Commissioner.
There are other differences between the state’s program and what you can get on the private market.
Keiser said an advantage of the state’s program is that you can use benefits to pay a family caregiver.
In addition, those with private plans have to continue paying premiums in order to receive care. Under the state’s program, those who retire and no longer contribute to the WA Cares Fund can access benefits anytime, as long as they meet eligibility requirements.
To qualify, workers must work and contribute to the fund for at least 10 years, with a break of no more than five years in that time period; or have worked at least 500 hours a year during three of the past six years at the time they apply for the benefit.
As for concerns about the opt-out process, Keiser said when the 2019 legislation passed, the idea was to allow those who already had private insurance to opt-out so they wouldn’t be “double billed.”
During the 2021 legislative session, a Republican-sponsored amendment passed to extend the deadline to purchase a private plan from the bill’s effective date to Nov. 1.
“The opt-in/opt-out amendment created this incredible ‘feeding frenzy’ and real concerted effort by the insurance industry to sell plans,” Keiser said.
State Sen. Curtis King, R-Yakima, also a member of the long-term care commission, said he proposed further extending the deadline to buy a private insurance plan.
He agreed with other Republicans that the program should be paused so legislators can make adjustments.
Without a pause, workers will pay the payroll tax starting in January, even if changes are implemented later.
“Right now they would not get that money returned to them, and I don’t think that’s right,” King said.
Mike Faulk, spokesperson for Inslee’s office, said the governor supported and signed the legislation in 2019. He said the governor’s office is aware of concerns about the program and monitoring the progress of the long-term care trust group.
“The governor has said he does not intend to delay the implementation date as set out by the Legislature and we don’t believe he has that authority,” Faulk said.
There may be larger questions about the long-term funding of the program.
At the planned 0.58% payroll tax rate, the program is set to run out of money to pay scheduled benefits by 2075, according to a December 2020 study commissioned by the state.
The report also describes the impact of different scenarios, such as allowing people who leave the state to access benefits. That scenario would require more revenue and a higher tax rate.
Keiser said there are ways to better fund the program and allow more to participate. One idea is for the state to invest long-term care tax funds in private stocks. To do so, the state must pass a constitutional amendment.
A ballot measure that would have allowed the state to invest long-term care funds in stocks was rejected by voters in 2020.
More information about the program can be found at wacaresfund.wa.gov.