WA State Public LTC Insurance

[MasterJedi]

Might have missed this getting discussed but it’s wonderful, hope we get it nationwide. I know the insurance companies are pissed. My employer is no longer selling LTC insurance effective immediately in WA state.

https://www.forbes.com/sites/howardgleckman/2019/05/15/what-you-need-to-know-about-washington-states-public-long-term-care-insurance-program/

[GP270watch]

Might have missed this getting discussed but it’s wonderful, hope we get it nationwide. I know the insurance companies are pissed. My employer is no longer selling LTC insurance effective immediately in WA state.

https://www.forbes.com/sites/howardgleckman/2019/05/15/what-you-need-to-know-about-washington-states-public-long-term-care-insurance-program/

This makes sense and should also compensate family members that do a significant amount of work taking care of their family members that need care. Keeping people with their families and cared by their families is usually the highest quality care they can get.

 Does this program offer that?

[GeneralMacArthur]

I live in WA and this law is a disaster.  I'm sorry because I know you all think this is a nice idea, but in practice it's an absolutely abysmal law.

First of all, the insurance is s--t.  There's a lifetime cap of $36,000, which is only enough to cover a couple months of long-term care.  And if you go out of state, you lose it.  So you've paid into this system your whole life and for what?  A couple months of care covered by the state, so long as you decide to retire in WA?  It's also not clear to me what's preventing seniors from other states from coming to WA for their long-term care so they can pick up a $36,000 check.

Secondly, the program is horrendously underfunded.  Everyone who's looked at the bill agrees that they will need to dramatically raise the tax to pay for it, and the costs will only continue to grow as the U.S. population gets older and this entitlement provides incentive for elderly folks to move to WA.  It's 0.58% now, but could grow as high as 2-3% by some estimates.

But the biggest and dumbest issue with the tax is the opt-out.  If you have your own long-term care insurance already, then you can opt out of the tax.  But WA residents only have one chance to do this -- and they must have their insurance policy in place by November 1.  Since long-term care insurance is generally pretty inexpensive ($40-50 per month), this has led to a massive run on LTC insurance companies, because everyone wants to opt out of the tax.  If you don't get your policy by November 1, you're trapped forever, paying this tax that could arbitrarily increase.

As a result, it's impossible to get LTC insurance in WA now.  You can call around all you like, but nobody will give it to you.  And many insurance companies are pulling out of WA entirely due to the mayhem.  Most of them are suspicious that people are going to get insurance just to meet the November 1 deadline, and then drop it afterwards, since there's no enforcement mechanism in the bill to make sure people actually keep their insurance.

I was one of the lucky ones because I was proactive about this and managed to get LTC insurance.  But I got absolutely gouged, and I knew it.  When I called, the guy asked me to send my W2, and then he calculated 0.58% of my annual income right there on the phone and said "I'll talk to our people, but we can promise you one thing, you'll pay less with us than you will with the tax."  And sure enough, he was right.  But I'm still paying way more than the average.  And it's for insurance I'll never use, because I'm a healthy guy in my early-20s.

This creates another problem with the bill.  If you're young, you're going to be trapped paying the tax for a very long time.  If you're a high-income individual, since there's no income cap (unlike social security), you could get trapped paying an extraordinary amount of money every year under the new tax.  And high-net-worth individuals have no use for the insurance whatsoever since they won't have trouble paying for LTC in their old age.  So these groups are the most likely to go the extra mile to opt out of the tax.  Take young people and rich people out of the pool, and it suddenly gets a whole lot less solvent, which means they'll have to raise the tax dramatically, further punishing anyone who didn't opt-out.

So what do you have at the end of the day?  A huge windfall for unscrupulous LTC insurance companies, as they can tremendously upcharge young people and high-income people desperate to escape the tax, and rest assured that there's zero risk of any of them actually using that insurance.  Enormous pressure on LTC facilities that are now going to be slammed since WA is incentivizing people to get LTC care.  A disaster for anyone who legitimately wants to get LTC insurance in this state since even if you're lucky enough to get a quote, you're gonna get gouged.  A completely unjust status quo where your future financial status will depend significantly on whether you were lucky enough to get a policy before Nov. 1, 2021.  And lastly, a financially ruinous, obviously insolvent state entitlement that will become a huge drain on the state economy as the input pool shrinks and the output pool grows.

[GeneralMacArthur]

In my opinion, the law is totally unconstitutional anyway.

The WA state constitution prohibits any income tax.  Our 0% state income tax is part of why we have so many rich people and high-paying corporations up here.  The law creates an 0.58% income tax, but it tries to justify it by saying that if you already have insurance, you don't have to pay, so it's really the state providing you a service that you can opt-out of.

Except, you only have one chance to opt out.  November 1, 2021.  I you miss the deadline, you're stuck paying the tax for the rest of your life.  At that point, how is it functionally different from an income tax?  If you move to WA state in December, and there was no way you could have avoided the tax, isn't it basically just an income tax?

I don't see how this will hold up in court.

Also it's worth noting that we had an advisory vote on our ballot in the last election cycle for this program, and 2/3 of Washington state residents were against the bill.  Thanks to Tim Eyman, we have these advisory votes anytime the legislature introduces a new tax, which happens multiple times a year, and Washingtonians are usually against the new taxes.  But this was one of the highest "against" votes in the history of these measures.  And I'm sure if you held another advisory vote today, more like 3/4 of Washingtonians would be against it.

[Indy Texas 🇺🇦🇵🇸]

There's a certain regressive aspect to discussion of public provision of long-term care insurance, given the segments of the population most and least likely to live long enough to need to live in such a facility.