The last several months this column has danced around a number of potential State and Federal initiatives which potentially could reorder the nature and content of our industry’s custodial care enhancement responses to what remains America’s most exposed personal emotional/financial risk.
In an effort to not step too forcefully on any political toes, left or right foot, this column’s thoughts shall try valiantly to remain insurance oriented. What is happening on the West Coast must however be viewed in some degree of political context. This is a rich royal blue state near other populous states of similar minded political views. The predominant party in Washington State has made it publicly crystal clear that this is a new Social Insurance Program. Meaning it will arrive with a well-recognized laundry list of required components:
- As evident in the name a “new” state run hopefully sacred Trust Fund will be established for that purpose. Medicaid expense offset will occur, and a substantial reserve should build up before substantial claims will appear.
- As much mandatory no-opt-out participation as possible will define the battle lines.
- All monies sourced perpetually by additional payroll taxes forever subject to political review and alteration (read increase).
- Benefits vested over time with limitations now and in the future remaining part of a political process.
- Exclusive control of all components of benefit eligibility and limitations, hereinafter referred to as “managed care.”
This one of a kind (for now) historic legislation was passed in 2019 and is at the time of this writing still scheduled for payroll implementation on January 1, 2022. The legislature meets again in January and we must all pray that common sense may yet prevail and a better crafted social experiment may be attempted. Today, in mid-December, there is substantial interest in revising the original structure. The Seattle Times may be your best source of current information. From what I can discern from current press, implementation of this program is expected to at least be delayed a year. There are a substantial number of impediments to a launch next month. The Governor is in favor of a pause in implementation but apparently cannot take unilateral action. A formal delay is now in the hands of the new legislative Trust Committee.
On their plate:
- In 2020 something less than 50,000 individuals bought a stand alone long term care health insurance policy across America. The dust is still settling from the avalanche of applications tempered by eligibility and underwriting to qualify for an exemption to otherwise permanent, mandatory participation. Regardless of the final head count, somewhere between 250,000 and 400,000 may have successfully rushed to hopefully own a private insurance alternative. Fear of either coerced cost or coerced public managed care triggered a fire sale that took insurance distribution’s breath away and caused the full retreat of product alternatives by the few remaining carriers.
- Permanent exemptions are possible if policies were bought prior to November 1, 2021, and approved by year end. The State has promised that all exemptions submitted by December 1, 2021, will be processed by month’s end. The problem: Apparently if you miss these deadlines and an employer begins withholding taxes, you are stuck forever.
- That forever tax will begin as .058 per $100 of income creating a potential benefit of $100 per day for 365 days—both will be subject to ongoing COLA adjustments. Benefits vest after 10 years with no more than a five year interruption or three of the last six years before they apply for benefits.
- Suggested reforms are clustered around three issues: 1) no portability, with benefits restricted to Washington residents; 2) No mechanism for new workers to participate or withdraw; and, 3) Older workers would pay with insufficient time to vest and receive any benefits.
- There is a citizen’s initiative to make participation optional (I-1436).
- There is a Class Action lawsuit declaring the law to be unconstitutional, discriminates based on age, and violates ERISA and multiple State laws.
Let’s speculate:
- Suspicions are that this social insurance experiment is under consideration particularly in many traditional blue states.
- The still pending federal proposed “Build Back Better Act” Medicare HHC recommendations have apparently been scaled back from $400 billion to $150 billion. Home care reform will continue to abhor a vacuum.
- You absolutely must ask yourself what does the precipitous carrier retreat from Washington State mean?
- The fear that those who did buy fire sale coverage in defense will simply lapse coverage as soon as the law goes into effect. Are the structural integrity of both companies and the new Washington State Trust Fund in jeopardy?
- Our long term care/chronic illness market is fragile at best. The companies are unprepared, unable, and unwilling at this point to respond to additional fire sales.
- We must ask ourselves what was the shape and dimensions of the thrown rock that shattered the glass of denial? A sustained future production windfall is highly unlikely. When our opportunity to protect the many is finally at hand, will we retreat from the battlefield?
Please tell me: Which social insurance institution, once established, was ever walked back? Fiscal temptation in any market is dangerous. Medicaid budgets will remain a hot spot in any budget discussion. Trust funds without immediate expense are extremely hard to ignore. Pointing fingers as to why this is happening is moot. The repercussions of this process will alter the future permanently. The British are coming—one if by land, two if by sea. Please keep your powder dry.
Other than that I have no opinion on the subject.
