Washington companies are warning their employees of a new state tax that will be levied on their paychecks starting the first of next year. This tax will raise money for a new government long-term care plan called WA Cares.
Beginning in 2025, the plan will provide benefits to registrants who require assistance with non-hospital health care expenses.
There is little to no debate among Washington lawmakers about the need for better and more affordable long-term care insurance. Even WA Cares opponents, like former Senator Maureen Walsh [R-Walla Walla], admit it.
“For my part, I am going through this problem with my family at the moment. My parents just switched to assisted living, never having dreamed that they would live to age 86 and 87, ”she said during a Senate debate in 2019.“ God thanks, they have resources to help them and i understand them. . I believe people need long term care insurance.
Long term care insurance is one of those things that people think they never need. But the AARP says 70% of people 65 and over need financial assistance to live on their own.
This help has not been easy to find over the past four decades. Insurance Commissioner Mike Kreidler said the first forays of companies with long-term plans were limited and expensive and failed to attract the public. He says most companies have stopped offering coverage.
“There were something like 150 companies that were marketing long-term care products in the late ’80s and early’ 90s and today there are only a dozen companies that are actively marketing,” did he declare.
Even these policies are too expensive for most families. With no one to share the cost of parenting and grandparent care, families themselves pay the full bill for things like assisted living and home care. Many spent their assets and then applied for Medicaid, the joint state-federal program for the poor.
Washington lawmakers have been troubled by the trend. As more families have applied for Medicaid, they have seen a larger share of future state budgets go to health care spending. Thus, in 2019, the legislature, including Senator Annette Cleveland [D-Vancouver], chose to put the state in the long-term care sector.
“This bill helps middle-class families have peace of mind knowing that they will receive long-term care benefits if and when they are able to need long-term care.” , she said.
The WA Cares program is administered by Ben Veghte.
“The way this program is designed is that it is a universal program like Medicare,” he said.
It’s funded by a payroll tax that employees will start paying in early 2022. Your employer will take 58 cents for every $ 100 you earn. That’s $ 290 per year if you earn $ 50,000.
“You pay a premium every year until you retire. So let’s say you’re 40 today, you would pay for maybe 25, ”Veghte said.
After you have contributed to the fund for several years, you can start withdrawing money, with a lifetime maximum of $ 36,500. It would only save you a few months in a long-term care facility.
Veghte says most people in the program will never need this level of care, and the state’s benefit would cover all of their needs.
If you prefer to purchase your own private plan, WA Cares has a mechanism by which you can opt out.
“You can request an exemption from the Employment Security Service. You can do this through our website at WACaresFund.gov. But then you are definitely exempt from the benefit. This means that you will never have access to the benefit. You will never be able to come back to it, ”he said.
However, to get an exemption and avoid payroll deduction, you need to act quickly. You will need to prove to the state by November 1 that you have a private long-term care plan. That hardly gives you time to step back, says Elizabeth Hovde, who writes about it for the right-wing Washington Policy Center blog.
“Even if you find a plan that works best for you, sold in the private market, you hit the deadline around this time. Subscription takes time, ”she said.
She says people in the insurance industry tell her companies are limiting their policies because they fear people will buy plans and abandon them immediately after getting state exemptions.
To stay or to refuse?
Here are some of the factors to consider when deciding whether to stay in WA Cares or choose private insurance. [or both].
WA Cares is an opt-out program, which means you are included unless you provide proof to the state that you already have your own plan.
“If you had coverage before this law was enacted or if you were to purchase coverage before November 1, you would be grandfathered,” Veghte said.
To apply for an exemption, you must prove that you have private long-term care insurance. If the state grants your waiver, your employer will stop withholding tax, but this will make you permanently ineligible for the state program.
So, should you stay in WA Cares or should you purchase private coverage?
“I think this is a great proposition for the bottom 50% of our state’s economic demographics,” said Scott Olson, long term care insurance agent in Camano Island, Washington.
But he says it doesn’t make sense to everyone.
“Someone who earns $ 1 million a year, for example, pays $ 5,800 a year for the program. That’s a lot of money to pay for a very small amount of benefits. Someone who earns $ 15 an hour will pay very little in payroll taxes while enjoying the same benefits as someone who earns hundreds of thousands of dollars a year, ”he said.
Olson suggests other factors to consider. He says if you are near retirement you might consider opting out because the state requires you to contribute for 10 years before you can collect benefits and you stop contributing when you retire.
“Additionally, anyone considering retiring from Washington state or leaving Washington should likely opt out of the program as benefits are only payable here in Washington,” he said.
While Olson supports WA Cares for some, Elizabeth Hovde of the Washington Policy Center says the lifetime benefit, $ 36,500, will be woefully insufficient for many people.
“You know, low income workers don’t even win in this scenario. These are people who sometimes would end up on Medicaid anyway, and right now they’re getting money taken from their paychecks for a benefit that won’t last them very long and immediately handing it over. to Medicaid, ”she said. .
Hovde believes WA Cares will be difficult for the state to manage and may even become insolvent in the future. She says that instead, lawmakers should encourage insurance companies to offer more policies that are cheaper and offer better benefits.
Veghte, the administrator of WA Cares, says the state is doing it, working with businesses to create policies for people who want to purchase both public and private coverage.
But time is running out. As the November 1 deadline approaches, Insurance Commissioner Mike Kreidler said consumers looking to purchase private insurance don’t have much time to complete the underwriting process.
“It’s an area where businesses are nervous, but there are businesses out there. Do your homework. Call the companies. Talk to your broker. Talk to your financial advisor and find out if it is possible to have a replacement that you can sign up for who would relieve you of your responsibilities for the Washington Cares program, ”he said.
The state will begin accepting WA Cares exemption requests on October 1. It will stop accepting applications at the end of 2022.
Kreidler’s agency has a list of companies that sell long term care insurance on its website. In the meantime, you can also find out more on the WA Cares website.
