Do you live in Washington state? If so, you may have heard of the recent Long Term Care mandates that have just been implemented. What exactly does this mean for you? What if you work for a company that is in Washington state, but you work remotely out of state? Do you have to use the state provided long term care?
Let’s sit down with Kim Natovitz to find out.
Transcript Edited For Clarity
Scenario: “What are some of the results of the recent Washington long term care mandates? Are there other options besides those that are state provided?”
Enpo: Why good afternoon. This is Enpo calling on behalf of MFC – Live! series. Um, did I reach you alright Kim?
Kim: You did!
Enpo: Alright Kim. So, what we would like to do is we would like to invite our subject matter experts to talk about things that are happening in the world of financial services or around the topics that our subject matter experts are able to speak to, and from my understanding, there is a lot going on in the world of long term care. But, before we get into that topic, what I would like you to do for our listeners is to just kinda introduce yourself, your firm and maybe some of your background.
Kim: Sure! And thanks! So, I am an insurance advisor, and I have been working as an insurance advisor for over 20 years. And my firm, Tribridge Partners, is a full service insurance firm. Meaning that we work with both employers structuring employee benefit plans, as well as business owners and individuals to meet what their individual needs are. And, what I really enjoy about this field is helping clients really solve a lot of problems, and concerns that they have with regard to planning for their families.
Enpo: Alright excellent! Well Kim, thank you for that background. Kind of going into the topic that we want to focus on today, I understand that washington state has actually implemented a long term care insurance mandate, where if you do not have existing coverage, you are being penalized with the idea that you would be able to get that service later on from the state. For the purposes of this call, would you be able to give us some background on that, and from there, speak to the implications of what this could mean for some of our listeners out there?
Kim: Sure, absolutely! So, the Washington CARES fund is really the first mandatory long term care insurance program that we have seen and the plan is available for employees of companies in Washington state. What’s interesting is even if you don’t live in Washington state, if you are an employee of that company out of town, you are still going to pay payroll taxes into this program. The plan itself becomes effective Jan 1 of 2022, and it provides an initial maximum benefit of $36,500. What is interesting about this plan is it is something for employees only. There is no ability to add a spouse or partner. Also, it requires that in order to receive benefits, you have to actually live in washington state at the time. So, unlike other programs such as medicare or medicare supplements, where it doesn’t matter where you live, this is a program that really has some limitations. And I have talked to a number of my clients who have said “I don’t know where I am going to be living. Maybe not in Washington state. In many ways, it really determines on where my kids and hopefully grand kids will end up there. So it is a plan that is funded by a payroll tax. In order to qualify for benefits, you have to have worked at least 10 years, and paid into the program for 10 years without a break of more than 5 years of service within those 10 years. And, you have to work 3 of the last 6 years when you have applied for a benefit. The issue that I find fascinating is that you plan on retiring prior to the end of the next 10 years, you will actually pay for this benefit that you won’t be able to collect. Because if you don’t have 10 years of paying into this plan, you’re not able to collect benefits from there. It’s also a plan that provides fairly limited benefits, about a hundred dollars a day, and in the plan, it says that it could potentially be benefit increases to keep up with inflation , but it’s not promised. And, the premiums are not fixed at all, and the other thing that’s interesting is as compared to private long term care insurance policies. The eligibility for benefits is different than what was passed under HIPA a number of years ago which clarifies the tax treatment of long term care insurance, premiums and benefits. In this plan design, you have to have deficits with 3 out of 10 activities of daily living, and cognitive impairment is something that does not stand on its own. It requires 2 additional ADLs to qualify for the long term care benefits. And I think that’s very problematic because I see a number of my clients who have cognitive impairments whether it is related to alzheimers or dementia that for several years don’t need any physical assistance, but really just verbal cueing and supervision. So, I think in a lot of ways that this plan is not as comprehensive as people might think it will be. Limited provider choices, very limited benefits, the fact that it’s not portable for use in other states. It’s what I would call a one size fits all program which often is a one size fits none. You don’t have the ability to design plans that include spouses and so on from there. So I think in many ways, it is a plan that could give a lot of people a false sense of security about this long term care plan. That’s really one of my concerns. Residents of Washington state did have the ability to opt out of the program if they could demonstrate that they has long term care insurance enforced by November 1, just two days ago. Unfortunately, there really was not coordination between the insurance companies that write long term care insurance. Washington state has a population of about 7-8 Million, and they literally shut down the insurance industry. Carriers had to stop accepting applications from washington state residents several months ago because they just knew that they would not be able to underwrite and approve coverage in a short period of time. The other thing to know is that this is something that other states are considering. We understand that California for example is strongly looking at a plan in either late 2022 or late 2023. Well, what concerns me about that is the population in the state of california is significantly larger than the population in the state of washington.And, I hope that there will be substantially more notice about this state program so that individuals can really have time to make a decision about whether this is the right program for them, or whether they should consider alternatives from private long term care insurance carriers that would give them flexibility. Flexibility on where they want to live and when they want to receive care, how much benefit they actually need for their situation. Whether they can add a spouse, you know, things of that nature. I do believe that other states are going to be looking at what has transpired in Washington state. I know that they are looking to put together an offering, a plan similar to this, I just hope that they will learn from some of the lessons washington state has demonstrated with regard to how these plans are rolled out. And I think anyone who lives outside of washington state should really be aware of this trend and they should probably begin to investigate long term care insurance. Before they are enrolled in a plan that isn’t going to deliver what they want, when they want it before time runs out.
Enpo: Well kim, that was a very in depth exploration into this topic. It sounds as if you have done a lot of research. For the little bit of time that we have left, I just want to know, is their any other way for me to get long term care other than through traditional long term care insurance? For example, I know the state mandates us to get some sort of auto insurance policy, but some states allow you to do some sort of self insurance options such as putting an account inside of a trust or escrow, is there any other options other than buying long term care insurance?
Kim: You know what? That’s a great point! Traditional long term care insurance, or stand alone plans as we refer to them are really supplemental health insurance policies. But it’s just one of the ways that you can structure an insurance product that has long term care benefits. I mean, it can be part of a life insurance policy, that can be used to meet other needs, It can be part of an annuity contract. It’s possible to take money that’s in an existing insurance policy, and transfer it to another insurance policy that has a long term care rider. So, that’s a good point. There are literally dozens of different types of long term care insurance policies that are available, and that I think should be part of the due diligence that individuals undertake when evaluating what long term care insurance might make sense for them. Because while the traditional product was when long term care first started, one of the earliest products that was available, it certainly isn’t the only product available today, and i think it would make sense for individuals to really get a sense of what else is out there that might be a better fit for their situation. The other thing also is that planning for long term care is something that really should be done often in conjunction with estate planning. One of the reasons that people will purchase long term care insurance, is because, while they have some assets that could be used for long term care, they may not want to. And, structuring a life insurance policy with a long term care rider as an example can enable someone to plan for long term care, but also to plan for an inheritance, or legacy or other people that are important to them. So I think you know today, life insurance policies with long term care riders as an example can really perform double duty and address multiple needs simultaneously.
Enpo: well kim, thank you so much for that background, as well as some of the ways to think through this issue, I know that with longevity on the rise, this is something that our listeners are starting to think through. Thank you once again for taking my call. This is My Financial Coach Live! We hope that you all continue to follow along as we continue to get insight from industry leaders such as Kim.
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