Long-term Care Act: Worth it?

OVERVIEW

In 2019, the Democratic majorities in the Legislature approved House Bill 1087, which created a mandatory program, billed as the Long-Term Care Tax (LTC), funded by a 0.58% payroll tax. More accurately, this program is a bad deal for workers in Washington and other states. Under this program:

 

  • After paying into the program for 10 years (or three of the previous six years), an enrollee is eligible for a lifetime maximum benefit of $36,500, which can only be used if an enrollee stays in Washington.
  • From October 1, 2021, to December 31, 2022, individuals can apply for an exemption through the Employment Security Department by attesting that they have long-term care insurance purchased before November 1, 2021, in the private market. This is a one-time opportunity – no exemptions after December 31, 2022.

The fund will act as a state-provided insurance plan for extended care such as a nursing home, home health care, home-delivered meals and dementia support. The benefit is based on the lowest cost of hiring an in-home, part-time caregiver.

Beneficiaries will be eligible to begin collecting in 2025, and the program is expected to save $3.9 billion in state Medicaid costs by 2052. The fund is estimated to take in $1 billion per year from workers’ paychecks.

The benefits from this program are negligible to the employee relative to how much they’ll be paying, especially for younger workers. In fact, Washington ranks as one of the highest for long-term care costs in the nation. At the higher end, monthly costs for care in a nursing home can reach $10,000 to $15,000 per month.

 

The long-term care law passed in 2019 did not have a deadline for opting out. In 2020, SSB 6267 was passed, which limited the opt-out period to a 15-month window. However, the Long-Term Services and Supports Trust Commission, in its January 2021 report to the Legislature, recommended limiting opt-out to those who had private long-term care insurance prior to the enactment of the Trust on July 28, 2019. That position was supported by legislative Democrats in HB 1323 that was introduced in the 2021 session by Rep. Tharinger. During the House committee process, the alternative policy deadline was extended to July 24, 2021. Senate Republican Caucus members fought the timeline proposed in the House and were able to extend the policy purchase date to November 1, 2021.

In September, 23 state senators – 21 Republicans and two Democrats – wrote a letter to Gov. Inslee urging him to use emergency powers to suspend the law. The governor should “provide temporary relief to employees who face a major new tax and give time for the Legislature to work on a solution,” the letter said.

As of October 29th, nearly 280,000 workers had requested exemptions to the tax.

Read FAQs on the Long-term Care Act

Reasons to oppose the new Long-Term Care Act and the tax funding it:

    • Most importantly, the law allows current workers just one chance in their lifetime to exempt themselves from the new tax, yet many are unable to exercise that choice at the moment, through no fault of their own.
    • Currently, no insurance carriers are selling long-term care plans in Washington simply because of this one-time opt-out option. They are trying to avoid people purchasing policies to qualify for the exemption and then immediately canceling them.
    • The tax to pay for this program will be too expensive for many individuals and families. Many live paycheck to paycheck. If you are losing $60 or $80 a month because of this new tax, that is a big hit when your gas and food costs are going up, or your garbage, water or heating bill is going up. But are your wages going up? No.
    • It drives up the cost of private long-term care policies in Washington.
    • It only provides a maximum lifetime benefit of $36,500, payable at a maximum of $100 per day while care currently averages up to more than three times that.
    • The benefit is useless if someone can’t afford to make up the difference between the benefit and the cost of their care.
    • While the benefit will increase over time, there’s no indication it will match the rate of inflation.
    • This long-term care plan is not portable, so if you move out of Washington, you receive none of the benefit even if you’ve paid the tax for decades. That is unfair!
    • No future opt-out periods are provided for those under the age of 18 or those moving into the state — they will have to participate.
    • There is no opt-out provision for Washington’s home-of-record military members who are currently serving elsewhere but come back to Washington after leaving the service. Our military members deserve to be treated better.
    • If the state Employment Security Department is unable to process the forms by December 31, 2021, the tax will be taken out of paychecks for at least three months for those whose forms are sitting at ESD waiting to be processed.
    • This program taxes those living in border states who work in Washington but does not give them access to the benefit.
    • If someone paying this long-term care tax is within 10 years of retirement, they will have the money taken out and they will receive no benefit.
    • The fact that close to 280,000 people already have filed for an exemption is a clear sign that many people don’t want to be in this program and that it should be halted until better solutions are in place.
    • Even though the long-term care act might be well-intentioned, it has serious issues that can be addressed only by the Legislature. These problems should be addressed before workers begin seeing money taken from their paychecks.
    • Democratic leaders in the House and Senate have not shown interest in fixing these problems in a special session. That’s why we asked Governor Inslee to use his emergency authority to push the ‘pause’ button on the November 1st deadline for workers to purchase their own long-term care, and the tax collection that is to begin January 1st. In this case, we wanted the governor to use his emergency powers.
    • While the governor has said he doesn’t have the power to postpone the implementation of the program since it is not related to the COVID-19 pandemic, he has repeatedly used his emergency powers during the pandemic to suspend taxes and delay the implementation of new laws.

Feedback from constituents concerned about the Long-Term Care Act


What our members are saying…

Bipartisan group of state lawmakers ask Gov. Inslee to pause long-term care insurance tax (MyNorthwest) Sept. 24, 2021

featuring 23 state senators 

 

Washington Workers to Pay New Long Term Care Tax (560KPQ) Sept. 14, 2021

featuring Sen. Brad Hawkins

Sen. Brad Hawkins, R-12

Op-ed: New long-term care tax will affect Washington workers

by Sen. Curtis King

Sen. Curtis King, R-14

 

Watch: Senate Republican Caucus members speak against the Long-Term Care Act (HB 1087) during floor debate.


Contact your insurance company to find out if the product you’ve bought or want to buy complies with Washington law. You must purchase a private long-term care insurance policy from a company approved by the Office of the Insurance Commissioner (OIC) or the Insurance Interstate Product Regulation Commission (IIPRC).

Click here for the approved companies list. 

 


Learn more about the Long-term Care Act: