Long-term care insurance can be an important safety net for individuals and families. Maybe it’s a good idea for you. Maybe not. Like other financial decisions, it should be your choice.
Unfortunately, Democrats in the state Legislature and Gov. Jay Inslee are making this financial decision for you, and it isn’t a good investment for many Washington workers.
As a result of House Bill 1087, most workers will be swept into a new long-term care insurance program (WA Cares Fund) administered by the state and funded through a regressive payroll tax. Workers will be eligible for a limited lifetime benefit up to $36,500 to assist with future long-term care costs.
No other state has such a system, and for good reason.
Beginning Jan. 1, 2022, workers will be required to pay $0.58 per $100 of their earnings to fund the program. While this might not sound like much, it is for someone living paycheck-to-paycheck. It makes more financial sense for someone to take this money, invest it, and have greater returns and flexibility over time. But, again, financial decisions should be your choice based on your unique circumstances.
Workers were allowed to opt out if they secured a qualified, private long-term care insurance policy by Nov. 1. From there, they have to apply for an exemption. So far, more than a quarter-million workers have applied to escape this program. However, many have had trouble finding a policy in time or are unaware of the new mandate altogether.
Aside from the regressive payroll tax, there are fundamental problems with the program. The Seattle Times editorial board recently highlighted some of these flaws. It also called on the governor to temporarily suspend the payroll tax and extend the deadline for exemptions.
Imagine being a few years from retirement, or even nine years from retirement, and having to pay into a system you won’t ever be able to access. Or paying a tax for the expectation of long-term care, but the limited benefits only provide short-term care. Or just entering the workforce, missing the opt-out deadline, and facing a career-spanning payroll tax.
Imagine living in another state while working in Washington and never having access to the benefits. Or, worse yet, paying the tax for 20 years but getting nothing when you retire to another state.
These are real situations facing workers.
In addition to fairness, another flaw with the program is solvency. The Office of the State Actuary told us in June that in later years it expects annual program expenditures to exceed annual premium collection. It also said the program will likely either have to decrease future benefit expenditures or increase future premium rates to remain solvent.
To avoid breaking promises, the state needs to be honest with people that this scheme is not built on a solid foundation.
It’s also not clear who wants this program. In November 2019, nearly 63% of voters said House Bill 1087 should be repealed through Advisory Vote No. 20. We believe this reflects a growing resentment for intrusive mandates and a tone-deaf majority party in Olympia.
A prominent Democrat is also quoted as saying she hasn’t heard from any constituents who are excited about the program. That doesn’t surprise us.
House Republicans have already drafted legislation to repeal this troubled program and regressive payroll tax. That is our preferred outcome. However, we will also consider introducing a bill to make the program opt-in only. If people believe the policy is good for their health and financial needs, they will opt in.
We assume our Democratic colleagues will spend significant time and tax dollars on salvaging this sinking vessel. House Republicans will be at the table, offering real solutions, but are clear-eyed in understanding that myriad fixes likely will not rescue the program.
Encouraging people to explore the benefits of long-term care insurance is a good idea. Forcing workers into a new program and payroll tax is a bad idea.
The Legislature should be incentivizing long-term care planning rather than penalizing people in the short term. State lawmakers also need to look for ways to lower the cost of long-term care. Finally, the private sector needs to continue to respond and offer more sustainable and beneficial insurance products.
Let’s hit the reset button and do this the right way.