CLASS Act not viable

October 2011

The government announced on October 14 that the CLASS Act — the portion of health care reform that was intended to provide long term care benefits for Americans — will not be implemented in its current form.

Health and Human Services Secretary Kathleen Sebelius sent a letter to congressional leaders on Friday, October 14, noting that she did not see a way to implement the program. “...Despite our best analytical efforts, I do not see a viable path forward for CLASS implementation at this time,” Sebelius wrote. “...The challenge that CLASS was created to address is not going away. By 2020, we know that an estimated 15 million Americans will need some kind of long-term care.”

Why the national plan was dropped

Many people are curious about the decision not to implement the CLASS Act, because they have heard the CLASS Act could actually save the U.S. billions of dollars.

Although the CLASS Act was projected to generate a large surplus of funds over the first five years of each policy, government actuaries determined there was no way to maintain those surpluses when claims became payable.

However, the Department of Health and Human Services recently acknowledged publicly that under the law as written, it could not guarantee with a high degree of confidence a CLASS Act plan that was both actuarially sound and “consistent with the statutory requirements.”¹

Impact on employees:

• The CLASS Act raised awareness among American workers over the essential need for this coverage. Many will now look to employers for access to long term care coverage at work.
• Since most employees live paycheck to paycheck², it’s unlikely they will be able to accumulate the savings needed for long term care, which can cost up to $80,000 or more per year.³

Impact on employers:

• Employers who have not included long term care in their benefit offerings in the past may now choose to add this voluntary coverage to meet a workplace need while helping to attract and retain employees with the critical skills necessary for their business needs.
• Employers who were considering the national plan to provide coverage for their workers will need to redirect their focus to private long term care plans, which can offer affordable plan designs through the workplace.