HCW Benefits Blog

Enacted as a part of the new healthcare reform legislation, your business and employees will be faced with a new choice in long-term care insurance known as the Community Living Assistance Services and Supports Act, or CLASS.

While the CLASS Act becomes “effective” January 1, 2011, the Secretary of Health and Human Services must develop and finalize the details of the CLASS benefits before individuals can begin signing up to participate.  Reform law requires the Secretary to release the details of the CLASS plan no later than Oct. 1, 2012.  Individuals will be able to sign up sometime after the details are finalized – likely the end of 2012 or 2013.  It is also anticipated that around this time employers will have the ability to choose whether they will participate in the CLASS plan.

The CLASS Act is an attempt to fix the growing problem of uninsured and underinsured Americans for long-term care needs. If your business does not currently offer a group LTC plan, CLASS is an option that can be adopted at no cost and instantly provide a benefit to your employees.

However, it is recommended that you consider whether offering CLASS, either on its own or in conjunction with a group plan, would truly be a benefit. Depending on your company’s industry and employee makeup, an additional “payroll deducted” item may not be well-received, especially if the deduction is taken involuntarily due to employee inaction to opt out.

Additionally, employees may not be able to fully grasp the value that CLASS or a company-sponsored plan offers, and simply offering both plans may lead to more confusion.

As Mike Thompson, principal and head of the NY-metro health care practice in the PricewaterhouseCoopers Human Resource Services practice, suggests, “You probably wouldn’t want to offer both a private long-term care and the CLASS care because those two plans weren’t built to integrate with each other….” However, some LTC carriers tend to suggest that disabled persons will want to obtain as much coverage as possible, making an employer’s decision to offer the plan in-house that much more difficult.

For a more highly-paid employee workforce, CLASS alone may not offer enough coverage to meet their long term care needs — a realization that could damage your overall benefits package by not being competitive within the marketplace as it pertains to recruiting, retaining and rewarding top talent.

Some key questions that you will want to answer prior to deciding include:

1. What are the advantages and disadvantages of choosing the CLASS program or a private plan?
2. Is it practical for employers to simultaneously offer both the CLASS program and a private plan? If not, what is the better choice?
3. What are employees’ potential perceptions? Which plan will offer them a better value?

At the very least, your company will have a lot to communicate, especially if you offer the CLASS Act program. Employees will need to be alerted that CLASS is an opt-out program. According to Jesse Slome, executive director of the American Association for Long-Term Care Insurance, the government projects 5-percent participation which means that 95 percent of your work force will be educated by you but will still opt out.

By default, automatic enrollment is sure to increase participation. But, if your employees are not aware that your company is adopting CLASS as a benefit and their paycheck is hit with a premium payment, they will have to wait the minimum 5-year vesting period to recoup their investment.

The CLASS Act is sure to bring about a higher level of employee interest in long-term care insurance. How does your company’s LTC offering compare to CLASS? Will you offer the new benefit to your employees when available?

For more information on this topic, contact an HCW consultant.