Awash in a tsunami of potential new customers, long-term care insurance companies have temporarily halted sales in Washington.
The sudden consumer demand for this relatively obscure form of insurance, and the resulting shutdown of the market, comes as a November 1 deadline looms for Washington residents to purchase a private long-term care plan in order to opt out of a new state-run program.
The WA Cares Fund, as it’s known, is a first-in-the-nation program that will initially provide eligible workers a maximum of $36,500 in long-term care benefits, ranging from in-home care to nursing home care, beginning in 2025.
To fund the program, which passed the Legislature in 2019, the state will impose a payroll premium of $0.58 per $100 in earnings beginning in January. That’s about $435 a year for someone making $75,000. Employees, not their employers, will pay the tax and it’s not optional.
However, earlier this year, the Legislature approved a one-time opt-out provision for anyone who obtains a qualified private long-term care insurance plan before November 1.
While many Washington workers are just awakening to the looming payroll premium, others have been keenly aware they have one shot to get out of paying it and pounced. The state’s Employment Security Department has estimated that as many as 310,000 people might apply for the exemption.
Insurance brokers and industry experts say interest in private long-term care policies shot up in recent months, so much so that the industry was quickly overwhelmed with inquiries and applications.
According to the Office of Insurance Commissioner (OIC), one unnamed company received 66,000 applications. By comparison, last year that same company sold just 8,000 long-term care policies.
Adam Couto, an Olympia-area health insurance broker, said he never sold a long-term care policy until this year, when he was suddenly inundated with requests.
“I’ve received more interest in this type of policy in the last few months, two or three months, than I had in the previous four years,” said Couto.
Currently in Washington, 10 companies are licensed to sell stand-alone long-term care policies and another 22 companies are approved to sell long-term care “riders” on life insurance policies, according to the OIC. But now most, if not all, of those companies have suspended sales in Washington.
“People just can't get a policy,” said Steve Valandra, an OIC spokesperson. “So, there is understandably a lot of frustration there.”
Valandra added that in his eight years with the office, he’s never seen an entire line of insurance suspend sales.
With the opt-out date looming and the new payroll tax just months away, the OIC has logged a record number of consumer complaints in recent months — including 1,200 calls to its consumer line in August and a 300 percent jump in consumer chats. In addition, the two most visited pages on the OIC website are "What qualifies as long-term care insurance?” and “Long-term care insurance companies approved to sell in Washington state” Both are averaging about 10,000 views a day, Valandra said.
While the OIC regulates insurance companies, it can’t force companies to sell policies. It’s also not responsible for launching the WA Cares program. That job is split between the Department of Social and Health Services, Employment Security and the state’s Health Care Authority.
Meantime, frustrated consumers are also calling and emailing the American Association for Long-Term Care Insurance, a national industry group and consumer clearinghouse based in California.
Executive Director Jesse Slome said it’s not surprising companies have suspended sales in Washington. He said the long-term care insurance market is relatively small — writing about 48,000 policies a year nationally — and the companies were simply overwhelmed with applications.
With the November 1 deadline approaching, Slome said the companies didn’t think they had enough time to approve any more applications, a process that typically takes 60 to 90 days.
Slome said the industry was also concerned that some people were purchasing minimal policies with the intent of canceling them once they were free and clear of the payroll premium.
“Unfortunately for Washingtonians [it’s] frustrating because everything that they read, or everything that they hear says to them ‘hey, you have until November 1st to do this’ and suddenly they’re calling and people are saying ‘no, you really don’t have any options left,’” Slome said.
State lawmakers are also getting an earful from their constituents.
“My own cousin called me and she too was very frustrated [by] the lack of availability in the private market,” said Democratic state Rep. My-Linh Thai of Bellevue.
Thai said she supports the WA Cares program but sees opportunities to improve it in the next legislative session. In the short term, she’s hoping to arrange a town hall forum with the OIC to help answer the constituent questions she’s getting.
Majority Democrats in the Washington Legislature created the long-term services and supports trust program — now branded the WA Cares Fund — in 2019 to create a safety net for the estimated seven in 10 adults over 65 who will need some sort of long-term care.
The legislation noted that Medicare and most health insurance plans don’t cover long-term care and private policies are not affordable for most people. In addition, Washington’s senior population is on track to double by 2040 as baby boomers age.
“Without access to insurance, seniors must rely on family care and spend their life savings down to poverty levels in order to access long-term care through Medicaid,” the bill’s legislative intent language read.
Under the WA Cares program, workers who need assistance with at least three activities of daily living, such as personal hygiene or toileting, can qualify for the benefit if they’ve worked at least 500 hours per year and paid into the program for a pre-determined number of years.
The $36,500 maximum benefit — equivalent to $100 of care per day for a year — will go up with inflation. Even so, critics have said it is inadequate given the high cost of long-term care. Others have criticized the fact the benefit isn’t portable if a person moves out of state. Another common complaint is that older workers close to retirement won’t have enough working years left to vest in the program and therefore won’t benefit.
The program is overseen by a commission, and state lawmakers are already considering legislative tweaks that could be passed in 2022. Others argue the law has fundamental flaws and shouldn’t be implemented next year. The Tri-City Regional Chamber of Commerce recently sent Gov. Jay Inslee a letter urging a delay in the start of the program.
“Now is not the right time to implement a new tax and place this added burden on workers — especially while dealing with the resurgence of COVID-19,” the letter said, a copy of which a Tri-Cities TV station obtained.
Meantime, the ability to opt out of the program has been something of a moving target.
The original legislation, passed in 2019, said workers who could demonstrate they have a private long-term care insurance policy would be exempt from paying the premium.
This year, House Democrats introduced a bill that, among other things, clarified that the exemption only applied to people with a private plan prior to the enactment of the 2019 legislation.
But an amendment on the floor of the state Senate changed that — allowing people until November 1 of this year to get a private plan. That amendment was sponsored by Republican state Sen. Ron Muzzall of Whidbey Island.
He said he wanted to give workers more time to understand how the program would affect them and have the chance to buy a private plan. However, he said, he did not anticipate the private market would be overwhelmed and shut down.
“I believed that the system could handle the number of people that were applying, so I was surprised when it didn’t happen,” Muzzall said. “I’m disappointed that the insurance industry can’t handle the rush.”
Democratic state Rep. Nicole Macri, a member of the Long-Term Services and Supports Trust Commission, said she wished the Legislature had not extended the opt-out deadline to November 1 and, in doing so, created the shopping frenzy.
“The Washington Cares program is not intended to compete with private market plans for long-term care,” Macri said. “It is intended to address a public policy challenge which is that ... most people are not prepared to be able to cover their long-term care expenses and the state is not prepared to cover those expenses through Medicaid.”
Macri added that social insurance programs, like WA Cares, need everyone to participate to remain solvent.
Experts expect the private market for long-term care insurance will return after the November 1 deadline passes. Even so, purchasing coverage is not for the faint of heart and favors higher-income earners. Policies can easily cost $1,000 a year or more.
And not everyone can qualify, especially if they have pre-existing health conditions. That’s what Angela Beade of Renton found out when she started shopping for a private plan months ago with the goal of opting out of WA Cares. Beade is pregnant and was told by several companies that they wouldn’t underwrite her until after she delivered her baby. The problem was that her due date isn’t until after the November 1 deadline.
“It’s an equity issue as far as I see, it’s a big equity issue,” Beade said.
Beade said she sent emails to state lawmakers in hopes the opt-out deadline could be extended for pregnant women, but to no avail. She also continued shopping around for a policy. As she made her inquiries, she could see the market was quickly retreating as insurers changed their eligibility requirements, raised the minimum age qualifications and stopped returning her calls.
“I was aware of the market shutting down because I was in deep,” Beade said.
Eventually, Beade found one company willing to sell her a policy while pregnant, but she said the coverage isn’t as good as what other insurers were offering. In the future, she thinks the state should allow another opportunity for people to opt out of WA Cares.
That’s not something Rep. Macri is willing to commit to at this point. She said she wants to wait until there’s more clarity about the full scope of the impact of the initial opt-outs, along with other factors, which could have implications for the solvency of the program down the road.
Adam Couto, the broker in Olympia, said he understands that people are frustrated. But he also said for most people the high cost of long-term care insurance wouldn’t pencil out anyway.
“The products we have are going to be more expensive [for most people] than paying the tax, that’s the reality of the situation,” Couto said.
In the future, he said, he hopes that people will be able to buy supplemental long-term care insurance to pair with the state benefit.
