Congress Passes a CLASS Act

According to the AARP report Beyond 50: A Report to the Nation on Independent Living and Disability, the lifetime possibility of requiring assistance with at least two activities of daily living¹ ("ADL") or being cognitively impaired is 68% for people age 65 or older. In 2000, 10 million Americans were in need of long-term care and support. That number is expected to increase to more than 15 million by 2020².

With the passage of the Community Living Assistance Services and Supports ("CLASS") Act, as part of the Patient Protection and Affordable Care Act, signed into law by President Obama on March 23, 2010, Congress has taken a small step to address this growing long-term care problem. Although the law was enacted in 2010, the Department of Health and Human Services will not begin to implement it until 2012.

Contrary to popular belief, Medicare provides very little custodial coverage for those needing assistance with ADLs. As a result, most Americans without private long-term care insurance must exhaust their savings or rely on Medicaid for assistance in paying for custodial care. Under CLASS, eligible participants will pay monthly premiums in return for a long-term care benefit if they require assistance with performing ADLs in the future. Each participant's benefit will be based on his or her difficulty in performing one or more ADLs. Because the benefit will be limited, CLASS is not intended to replace private long-term care insurance. Rather, it provides a benefit to those persons who may not be eligible for or able to afford a private long-term care insurance policy. The most appealing part of CLASS is that it does not require screening applicants for health problems (prior or existing) and allows anyone to enroll - even those who might not otherwise qualify for private long-term care insurance.

Participation in the CLASS program will require: (1) a monthly premium payment (subject to annual increases) through employer payroll deduction; and (2) five years of premium payments and employment during at least three of those five years. In return, the participant will be entitled to a lifetime cash benefit, based upon his or her degree of impairment, for as long as the claimant remains disabled.

Like with Social Security, employees will automatically be enrolled in CLASS unless they opt out. Employees who opt out of CLASS may later opt back in subject to higher premiums and requirements. Self-employed individuals or those whose employers do not offer CLASS will also be able to join CLASS through a government payment mechanism.

It is anticipated that monthly plan premiums will not be increased for participants who remain active enrollees in the program. A monthly premium increase will also not apply to active enrollees who: (1) have attained age 65; (2) have paid plan premiums for at least 20 years; or (3) are not actively employed.

Participants will become eligible to receive plan benefits upon a determination that they have a functional limitation, certified by a licensed health care practitioner, expected to last for a continuous period greater than 90 days. The determination must find that the participant: (1) is unable to perform a minimum number (which may be 2 or 3) of ADLs; or (2) requires substantial supervision to protect him or her from threats to his or her health and safety due to substantial cognitive impairment (such as dementia or Alzheimer's disease). There will be no cap on the lifetime benefit a participant can receive.

A CLASS participant who resides in a hospital, nursing facility, intermediate care facility, or other health care institution will only be able to retain five percent of his or her cash benefit. The balance will be applied toward the facility's cost of providing the participant's care, with Medicaid serving as the secondary coverage. In contrast, a plan participant who subsequently receives medical benefits under Medicaid will be able to retain fifty (50%) percent of his or her program cash benefit. The balance will be paid to the State providing the assistance. Benefits received under CLASS will be disregarded for purposes of determining eligibility for government benefits such as Supplemental Security Income (SSI) and Medicaid. Program benefits will also have no impact on a participants use of cash benefits paid into a Life Independence Account.

The legislation does not set specific benefits. The Secretary of Health and Human Services is tasked with developing premiums and benefits that are actuarially sound. Many organizations, including the Congressional Budget Office, have developed estimates of potential premiums and benefits:

Again, although the law was enacted in 2010, the Department of Health and Human Services will not begin to implement it until 2012.

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