CLASS Act update

By Peter Gelbwaks

Gelbwaks Executive Marketing Corp.

1) Is it really law?
Yes! As of March, 2010, we now have the Community Living Assistance Services & Supports (CLASS) provisions to deal with. However, the Health and Human Services Secretary has until October 2012 to finalize all the rules and terms of the program concerning this new legislation. So, take a deep breath and continue staying alert to any of the important news, as we still need to get clarity on concerning this program. (That deep breath may be for one to two years.)

2) What is the cost?
Final numbers are not yet determined, but many people, entities, and firms are guessing, and those "guesses" are all over the spectrum. For example, the Chief Actuary of the Center for Medicare and Medicaid Services (CMS) has estimated that "an initial average premium level of about $240 per month would be required to adequately fund CLASS program costs for this level of enrollment (2 percent); adverse selection and premium inadequacy for students and low-income participants."

A study by the Scan Foundation and the consulting firm, Avalere Health, figures that a CLASS-like policy will cost the average buyer about $115 monthly. The American Academy of Actuaries thinks that the premium should be more in the $160-$180 per month range, assuming an average daily benefit of $75. This is based on an approach that assumes premiums are level after enrollment (entry-age level). What's your guess? Better yet, don't tell me, because this is an exercise that makes no sense at this point. The Secretary controls this and has great latitude here, so let's just wait and see the real numbers and then discuss the best approach.

3) What is the benefit?
The benefit plan has not been fully defined as of yet, however, the law allows for a benefit as low as $50 per day, on average. Actual benefit amounts will be based on the degree of impairment, so the actual benefit could be lower or higher than $50. The benefit amount is varied based on scale of functional ability with not less than two and not more than six benefit level amounts.

4) Who is eligible to participate?
Anyone 18 years of age or older (no maximum) that receives wages or income that are subject to the Social Security tax and who are considered actively at work. They must also not be a patient in a hospital, nursing facility, intermediate care facility for the mentally retarded, confined in a penal institution or correctional facility, or be in an institution for mental disease.

5) How does one qualify for benefits?
First and foremost, participants must first pay premiums for a period of five years (the vesting period) before they are eligible to receive any benefits and must be working continuously for three of those five years. Then, a licensed health care practitioner must certify that the functional limitation is expected to last for a continuous period of more than 90 days. In addition, the participant must be determined to be unable to perform at least the minimum number (yet to be determined as either two or three) of activities of daily living without substantial assistance from another individual. or
The participant requires substantial supervision to protect the individual from threats to health and safety due to substantial cognitive impairment.
The individual has a level of functional limitation similar (as determined under regulations prescribed by the Secretary) to the level of functional limitation described above.

There is more that we don't know than what we do know.

Because there are so many "open issues" and we don't know if we will have all the answers prior to October 2012, we all should begin to formulate an action plan now and maintain a visible, credible position with our clients, third party relationships and the media. Here are my ideas on how to go about this on a step-by-step basis:

1) Stay alert and educated
There are a lot more articles, interviews and sound bites coming, and you will need to separate fact from opinion. In addition, there will be a huge government-funded marketing campaign unlike anything we have ever experienced before, promoting the need for long term care insurance.

This is something our industry has talked about for years, but we have not had the financial backing to complete the task. Long term care insurance will finally be a mainstream topic of discussion, and now is your time to be viewed as an expert.

2) Focus locally
As much as it is fun and good to be on the national scene, the great majority of business will still be conducted on a local basis. It will also be much easier, less expensive and less time consuming to become your local community expert by writing articles for your community newspaper and appearing at community forums.

3) "CLASS up" your Web site
Assuming you have a Web site, add a section for consumers and advisors to check on and read the latest happenings. Direct people there and keep it current. If you don't have a site, consider putting one up now.

4) Ring the chamber bell
Revisiting with Chambers of Commerce, local professional associations and higher education facilities makes a lot of sense over the balance of this year. Create a 30 minute talk built around what CLASS is and what it will mean to them. Be the educator, not the salesperson. Small business people will definitely need your assistance, and benefit brokers will be looking for an expert to partner up with very soon.

5) Segment, support and sell
There will be three distinct groups of Americans to consider and a separate game plan needs to be established for each group.

a) People that have been exposed to long term care insurance and have already purchased a plan from either you or someone else. You should consider taking a proactive position on notifying your existing clients before they read or hear about CLASS from someone else.

b) The group that was approached to buy private coverage and did not do so for whatever reason. This is obviously a much larger group than the previous buyer group, and an attempt to revisit with these people makes a lot of sense once more press begins to reach them.

c) The largest untapped group of prospects will be working Americans who have never been approached or have never considered long term care insurance in the past. Becoming your local community long term care insurance expert will help drive this group of people to have dialogue with you at this time.

For the last 15 years, I have said "it doesn't matter what you have done in the past because this year will be the best year ever to be in the long term care insurance business, but this year I really meant it!" So CLASS up your act and become an LTCI expert.

*For further information, or to contact this author, please leave a comment and your e-mail address in the forum below.