Washington is the first state to sign a Long Term Care Act into law. Governor Inslee has signed the LTC Trust Act into law, following approval in the House (55-41) and Senate (26-22). While there are certainly benefits to the idea of long term care insurance, since estimates say 70% of us will need it, this program has significant limitations.
The LTC provides a stopgap for those who are unable to qualify for private solutions due to existing health issues.
It also encourages Washingtonians to plan for long term care.
It can be used all at once, or as needed.
Not transferable out of state. You could pay into this program for years, but if you retire in Arizona, you cannot receive the benefits.
Benefits are limited to $36,500. Though this will be adjusted annually, it equates to about $3,000 per month for 1 year.
According to Genworth, in 2019 the average cost of long term care in an assisted living facility was $5,500 per month. That cost increased to over $9,100 per month in a semi-private room in a nursing home facility. At these rates, the LTA would cover just 4-7 months of care. In contrast, the Administration on Aging estimates that those needing care will need it for an average of 3 years.
Qualifying factors limit recipients. Even those who pay into the program and eventually need long term care may not qualify to receive benefits. Long term plans typically kick in with two qualifying daily living needs such as bathing, dressing, eating, or medication management. The Washington plan requires three. And, of course, that would mean that daily rates would be higher for care.
Additionally, Washington residents who move out of state for 5 or more years are disqualified.
To vest in the program and to receive benefits, employees must work and pay into the program for at least 10 years (without a break of 5 consecutive years) OR pay premiums for 3 of the last 6 years.
Categories of people not covered: homemakers, retirees, those who retire in the next 10 years, those who are already disabled
What does the long term care act mean for business?
Employers do not pay into this plan for their employees. However, they will be responsible for collecting it and remitting it to the state. Unfortunately, it won’t be as easy as simply collecting the 0.58% of their salaries. Businesses will need to keep track of changes, as the percentage is adjustable.
Can I opt out of the Long Term Care Act
Yes, for a limited time. If you have your own long term care policy, there is a short window for opt out. Currently it is set for October 1st, 2021 until December 31st, 2022. It is worth noting, however, that the state is set to start collection of this payroll tax in January 2022. If you opt out in Dec. 2022, you will have already paid a year’s worth of the payroll tax.