Obamacares New Trillion Dollar Entitlement Goes into Effect 1/1/2011
Hidden back in section 8002 of ObamaCare is a new Long Term Care insurance entitlement that every American that collects or issues a pay check will be affected by in the coming months. It was placed in the ObamaCare program to make ObamaCare look almost a $100 Billion Dollars cheaper than it really is. The program is called the Community Living Assistance Services and Support Program or (Class Act for short). Even the Chairman of the Senate Budget Committee (Senator Kent Conrad D-ND) called it "a Ponzi Scheme of the first order, the kind of thing that Bernie Madoff would have been proud of"
The Obamacare Budget Tricks.
The program creates a trust fund, called the CLASS Independence Trust Fund. However premiums paid will not be deposited into the fund at all. Instead, our government will use the money it collects on other un funded programs, essential borrowing the money from the trust fund just like the Social Security Trust Fund (It will be pact full of IOU's) but no real money. For the first five years (2012-2016), the program will collect premiums, but pay no benefits because you have to be in the program for 5 year to be vested and receive any kind of benefit. Therefore Incoming premiums will be greater than the benefits paid out because there can't be any claims in the first 5 years; this allowed the CBO to reduce the 10-year projected cost (2010-2019) of Obamacare by almost $100 Billion Dollars. However, these cost savings are factious because the premiums cannot be saved to fund future benefits and also used to pay for health insurance subsidies and Medicaid expansion. I know I can't budget the same dollar twice but apparently Obamacare can. Even the Center for Medicare Services is estimating that the benefits will exceed premiums as soon as 2025. Everyone look forward to another bailout!
Government Price Setting
The CLASS act directs the Secretary of Health and Human Services (HHS) to come up with three separate benefit plans. The secretary then will choose one of the plans for everyone, (yep one size fits all) which will be called the Independence Benefit Plan. An analysis will then be conducted to estimate the costs necessary to maintain the program for 75 years. The Costs will be looked at annually and the premiums will then be adjusted (which means go up). The goal is to finance the program from premiums a lot like the free and open market does. However Underwriting and risk adjustment are prohibited in the federal program, and initial premiums will vary by age at time of enrollment. All Employers will be asked starting in January 2011 to participate in the program and if they chose to be part of the program all employees will automatically be enrolled into the program unless they opt out. The initial problem with this is no one really has an idea of what the federal program is going to cost. Currently the estimates are running from a $150 a month to over $350 a month. Right now you can get a quote from every LTC company in the nation on the open market at almost half of what the government's estimated premiums are.
After being in the program for 5 years a person can receive CLASS benefits if he or she has a functional limitation that is expected to be for a period of at least 90 days and has been confirmed by a licensed health care practitioner. The HHS Secretary will determine the minimum standard: which means what that functional limitation is and how much money the insured could collect. Benefits will be paid in cash and are allowed to vary based on the limitation which means whatever the HHS Secretary decides are appropriate. The program's minimum daily cash benefit is $50, indexed to the Consumer Price Index. So far we have learned that the HHS will determine what the cost will be that can vary by the year and then when an insured makes a claim the HHS will determine after the fact what if any benefit is actually paid. Well this sure doesn't sounds like any insurance contract I have ever read and I've read thousands.
Better Alternatives. Private LTC insurance plans will offer smaller premiums for individuals who are a bit healthier. Programs offered in the private insurance market will be better than the federal program for many reasons. First, the government will offer only one plan, while in the private insurance market an individual can choose between hundreds of plans and options. Secondly, an individual does not have to work for five consecutive years for private LTC insurance. The CLASS Act also does not say what will happen to an insured's contributions if they become disabled before paying the 5 years of premiums required to qualify for benefits. Third, an individual in the private insurance market does not have to be employed to purchase coverage. The CLASS Act is also ambiguous at best about what will happen if an individual pays premiums for many years, but then becomes unemployed for any period of time. Fourth, unlike the federal program in which unused benefits terminate at the end of every year, in most private insurance plans unused benefits are carried over year after year and there are even some who offer the return of premiums if benefits are not used . Lastly because the federal program does not meet the minimum benefit criteria set by the State Long Term Care Partnership plans the total amount of any benefits purchased will not exempt the insures assets from the Medicaid spend down laws thus allowing Medicaid to still take control of the insured's assets for reimbursement. In comparison, I ran a few quotes at StopObamaCare101.com and the average daily benefit in the private LTC insurance market is ($150) which is three times higher and does not vary by limitation like the federal plan.. The majority of private LTC insurance plans offer benefit far exceeding the class benefits at a fraction of the cost
Below is an example of a client quote I ran on 10/18/2010
66 year old couple and the cost was $258 a month guaranteed for 10 yrs and $400,000 of LTC benefits at $140 a day. And the best part of all the couple qualified for a tax deduction of 100% or their premiums totaling $3096.00