As part of the recently passed healthcare reform bill signed into law by President Obama, an act to address the long term care funding crisis in our country was included. The Community Living Assistance Services and Support (CLASS) Act provides a voluntary long term care benefit for participants that elect to participate.
To participate, you must enroll through your company or a self-employed pension plan and pay a monthly premium for five years to qualify for the benefit in the future. CLASS will not be active for two more years, so the soonest someone will begin collecting the benefit is at least seven years from now. As with any new government program, there are still details to be worked out through regulation and comment periods which will happen over these next two years.
Some details about the program have emerged making it clear this is not going to be a magic bullet cure for the massive funding crisis impacting seniors and their families requiring long term care. First of all, the benefit paid out will be in the range of $50-$75 per day which falls far short of the actual costs of daily care (and those costs will continue to rise annually over the next seven years). Also, the benefit will be limited to the costs of at home care and will not cover assisted living or nursing home care. Further issues around rolling over the benefit year to year, opt-in / opt-out penalties and the effects of adverse selection will all prove a challenge for participants.
Although CLASS Act alone is not enough for an individual or our nation to deal with the massive costs of long term care, it is a positive first step for the government in acknowledging the hardships faced by Americans trying to meet these obligations. If nothing else, it will do much to educate people that they must prepare now for the financial challenges that lay ahead in their future.
To read an analysis on CLASS by UNUM, click below