HEALTH CARE REFORM AND CLASS PROVISIONS PRODUCER FREQUENTLY ASKED QUESTIONS (FAQ)

Transcription

1 HEALTH CARE REFORM AND CLASS PROVISIONS PRODUCER FREQUENTLY ASKED QUESTIONS (FAQ) This document includes the following information about the CLASS provisions: - General information - General information for benefits brokers - Eligibility - Premiums - Coverage details - Underwriting - Eligibility/Claims - Other considerations GENERAL INFORMATION 1. Does the recent health care reform bill, signed into law by President Obama, contain any longterm care coverage? Yes. The health care reform bill (now known as the Patient Protection and Affordable Care Act) includes the Community Living Assistance Services and Supports (CLASS) provisions, which are not expected to be fully operational before The CLASS provisions create a voluntary government program under which a participant, who must be employed at the time of purchase, could: pay a monthly premium be covered on a guaranteed-issue basis be eligible for cash benefits, which may be modest, for their long-term care needs after five years of paying premiums. 2. Who is eligible to participate in the CLASS program? Individuals are eligible to enroll in the CLASS program if they: are 18 years of age; receive wages or income that are subject to the Social Security tax; are actively at work; are not a patient in a hospital or nursing facility, an intermediate care facility for the mentally retarded, or an institution for mental disease and receives Medicaid; or are not confined in a penal institution or correction facility. Page 1

2 3. How soon will the CLASS provisions take effect? Now that the bill has been signed into law by President Obama, it will go to the Department of Health and Human Services (HHS), where the terms of the program will be worked through. The law calls for the benefit plan to be determined by October 1, 2012, to be followed by a public comment period. Once the program has been implemented, workers who enroll for coverage would need to pay premiums into the program for five years before they could be eligible for benefits. 4. I heard that CLASS becomes effective in January 2011, is that true? The effective date of the law is January 1, 2011, although it will not be operational by then. The Patient Protection and Affordable Care Act contains several dates by which its broad provisions are to take legal effect. The Department of Health and Human Services currently has until October 1, 2012 to design the CLASS benefit plan, and must issue regulations and develop a number of procedures as to how the program will operate. Given that there will be additional time needed for public commentary after that, we expect that it will be at least two to three years before the CLASS program is available for enrollment. 5. Will my clients current LTC insurance coverage be affected by the health reform bill? No. Your clients John Hancock LTC insurance policy/coverage will not be affected by this bill. 6. Are there advantages to my client keeping their John Hancock LTC insurance policy? Yes. The details of the CLASS coverage have not been developed yet, but from the information available in the law we do know: The cash benefit could be as low as $50 per day on average; the higher benefit level available under John Hancock s policies is better suited to address the high cost of care. The CLASS program requires a person to pay premiums for 5 years before they are eligible to collect benefits, even if they re otherwise eligible for benefits; John Hancock s LTC insurance coverage begins paying benefits once the policy s benefit trigger and elimination periods have been met without a 5 year vesting (waiting) period. John Hancock provides access to care coordination services and provider discounts. 7. Does my client have to give up their LTC insurance coverage before getting CLASS coverage? No. Having private LTC insurance coverage will not have any impact on their access to coverage under the CLASS program. Because the need for long-term care can arise at any time, it s important that they maintain their current LTC insurance coverage because it will likely be at least two years before the program goes into effect and another five years from that point before anyone is eligible for benefits. And, at this point, it is not known if the CLASS program will meet your clients needs when it does become available since details such as coverage and pricing have not been determined 8. Does the new health reform bill mean that John Hancock is going to stop selling LTC insurance? No. John Hancock believes that the CLASS provisions do not negate the need for private LTC insurance coverage in any way. In fact, proponents of the CLASS program have made clear that the CLASS provisions are not a substitute for private LTC insurance. We plan to continue to sell LTC insurance as well as support our more than 1 million LTC insurance policyholders. Page 2

3 9. Is John Hancock planning to introduce a long-term care supplement product that would provide interim coverage until CLASS benefits become payable? John Hancock has not made any decisions about potential future products to address gaps in CLASS coverage. We do believe that most people would be better served by a traditional individual or group LTC insurance product. 10. What does John Hancock see as the positives of CLASS for the LTC insurance industry? We believe there is still a need for private LTC insurance and that the program will help raise awareness about the issues surrounding long-term care and the need for people to be prepared for a long-term care event. 11. Will John Hancock be providing CLASS related marketing tools? Yes. John Hancock will be providing CLASS related marketing tools that can be used with other producers and consumers, including a side-by-side comparison as soon as more information becomes available. 12. What kind of marketing is the government going to do for the CLASS provisions? Are they going to market it aggressively? We do not have any information at this time. GENERAL INFORMATION FOR BENEFITS BROKERS 13. I have an employer who currently offers LTC insurance to their employees. Will their LTC insurance plan be affected by the health reform bill? No. Their John Hancock LTC insurance coverage will not be affected by this bill. 14. Are there advantages to retaining/introducing a Group LTC insurance plan? Yes. The details of the CLASS coverage have not been developed yet, but from the information available in the law we do know: The cash benefit could be as low as $50 per day on average; the higher benefit level available under John Hancock s policies is better suited to address the high cost of care. The CLASS program requires enrollees to pay premiums for five years before they are eligible to collect benefits, even if they are otherwise eligible for benefits; their John Hancock LTC insurance coverage will begin paying benefits once the policy s benefit trigger and elimination periods have been met without a 5 year vesting (waiting) period. John Hancock provides access to care coordination services and provider discounts. 15. Can my employer client/prospect offer employees a choice between both private group LTC insurance and the coverage provided by the CLASS provisions? If you have employer clients/prospects that offer John Hancock s LTC insurance coverage to their employees, they may want to consider whether also participating in CLASS is advisable due to the numerous unknowns at this time and extended time period before the CLASS program becomes operational. A decision about offering both can probably best be made once the details about the CLASS program and how it will be administered have been worked out, which will take upwards of two more years. In the meantime, we believe that our group LTC insurance is better suited to meet employer goals and employees needs. Page 3

4 16. Can my employer client/prospect offer an executive carve-out and still allow for enrollment in CLASS? Yes. You should keep in mind that employers who wish to offer an executive carve-out to key employees are often able to obtain underwriting concessions and attractive rates for the rest of the eligible population, so that John Hancock s group LTC insurance may be a good solution for all their employees. 17. Will an employer be required to participate in the CLASS program and offer their employees coverage? No. Employers will be permitted to opt out of the program. 18. What if an employer decides not to participate, will they be fined or otherwise penalized? No. Employers who choose to opt out will not be fined or penalized in any way. 19. If an employer decides to participate in the CLASS program, how will it be offered to their employees? Based on current information, all employees would be automatically enrolled and premiums payrolldeducted. Those employees who do not wish to participate would have to request to opt out. 20. Can employees get coverage if their employer doesn t participate in the CLASS program? Yes. The Secretary of Health and Human Services will issue the rules for signing up for the CLASS program over the next couple of years. ELIGIBILITY 21. Can retirees get coverage under the CLASS program? No. Our understanding is that the CLASS program is currently designed for actively working people. 22. Can a person enroll in CLASS while working, and retire shortly thereafter and remain eligible for CLASS benefits? An individual must pay premiums for at least five years, and must earn wages for at least three of those years before they could be eligible for CLASS benefits. The wages must be equal to a minimum amount to be determined by the Secretary of Health and Human Services (but enough to be subject to Social Security taxes). Although details have yet to be determined, we believe that someone could work for three years, then retire and continue to pay two more years of premiums to be eligible for CLASS. Of course, the individual would need to continue paying premiums thereafter to remain eligible for CLASS benefits. 22. Can a disabled person who is unable to work get CLASS program coverage? No. Our understanding is that the CLASS program is currently designed for actively working people. 23. Can an enrollee s family members access the CLASS program through the employee? No. The CLASS program does not extend coverage to enrollees family members. John Hancock s LTC insurance eligible group includes spouses/partners, parents/parents-in-law, grandparent/grandparents-inlaw, siblings and their spouses, and adult children and their spouses. Page 4

5 PREMIUMS 24. What will the CLASS program cost? Although final premiums have yet to be determined, the Chief Actuary of the Centers 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%], adverse selection, and premium inadequacy for students and low-income participants (who will be paying $5 per month) How will premiums be calculated under the CLASS program? Premium calculations for the CLASS program have not yet been determined. 26. Can premiums go up under the CLASS program? Yes. Premiums could be increased yearly to ensure that the CLASS fund is actuarially sound. 27. Will the introduction of the CLASS program have an effect on the premiums that John Hancock charges for its LTC insurance products? No. COVERAGE DETAILS 28. What does the CLASS program pay? The benefit plan has not been defined, although the law provides that the benefit could be as low as $50 per day on average. The benefit amount will be scaled based on the degree of impairment, so the actual benefit amount an individual receives could be lower or higher than the $50 minimum average. 29. Is that enough to cover most long-term care expenses? Although it depends on how much care a person needs and where they are receiving care, geographically and in what setting, $50 per day is considered relatively low for many types of care. Examples of the cost of care on a national average 2 Nursing home care (private) $202 per day Assisted Living Facility $97 per day Home Health Care $97 per day Adult Day Care $62 per day To find out costs in your area, we invite you to visit our Cost of Care map at How long does the CLASS program pay benefits? Benefits will be payable as long as the claimant remains disabled. 1 Richard S. Foster, Chief Actuary of the Centers for Medicare & Medicaid Services (January 8, 2010) Estimated Financial Effects of the Patient Protection and Affordable Care Act, as Passed by the Senate on December 24, 2009, pp Based on the John Hancock Cost of Care Survey, conducted by CareScout, Page 5

6 31. Does the CLASS program cover care in a nursing home, assisted living facility, adult day care center, and at home? Although the details haven t been developed, the law does provide for the cash benefit to be used to purchase non-medical services and support services needed to maintain independence at home or in another residential setting in the community. Cash benefits may also be used for assistance with making decisions about medical care. 32. Does the CLASS program include an inflation feature? Yes. Although details have yet to be determined, our understanding is that the CLASS program will include an inflation feature, based on the Consumer Price Index for All Urban Consumers (the same inflation feature offered on John Hancock long-term care insurance). 33. If a person has LTC insurance and also enrolls in CLASS, do they both pay or do they coordinate benefits? Details regarding the coordination of benefits have not been determined. 34. Can benefits be shared under the CLASS program? There is nothing in the law that provides for a feature that enables an individual to share benefits with a spouse, a partner, or another family member. However, the details of the CLASS program have not been developed. 35. Does the CLASS program qualify as a Partnership plan? We do not have enough details to be able to make that determination. 36. Will the CLASS program be tax-qualified? Yes. It will be treated in the same manner as LTC insurance contracts for qualified long-term care services. Therefore, for an individual who itemizes income tax deductions, medical expenses are deductible to the extent that they exceed 7.5% of the individual s Adjusted Gross Income (AGI). 37. Are premiums paid into CLASS tax deductible? Premiums paid to CLASS are treated the same as premiums paid for private qualified LTC insurance. UNDERWRITING 38. The new health care bill says insurance companies are not allowed to deny coverage to individuals with preexisting conditions. Does that also apply to private LTC insurance? No. The pre-existing condition clause mentioned in the health reform bill (now known as the Patient Protection and Affordable Care Act) only applies to health insurance, not LTC insurance. Page 6

7 ELIGIBILITY/CLAIMS 39. How is benefit eligibility determined under CLASS? After paying premiums for 5-years, a participant will also need to satisfy the benefit eligibility rules, which have not yet been determined beyond what is specified in the CLASS provisions. The provisions require a determination that a participant has one of the following functional limits, as certified by a licensed health care practitioner that is expected to last for a continuous period of more than 90 days: The participant is determined to be unable to perform at least the minimum number (which is to be determined later as either 2 or 3) of activities of daily living without substantial assistance from another individual. The participant requires substantial supervision to protect the individual from threats to health and safety due to substantial cognitive impairment. The participant has a level of functional limitation similar (as determined under regulations prescribed by the Secretary) to the level of functional limitation described above. 40. Would benefits be paid directly to the enrollee? Benefits would be deposited into a special account established for each enrollee by the Department of Health and Human Services. There are special rules for claimants receiving Medicaid. OTHER CONSIDERATIONS 41. What else should be considered? We suggest that you closely follow developments as the program is unfolded over the next few years. We do want to point out the following quote from a memorandum written by the Chief Actuary of the Centers for Medicare & Medicaid Services. You can find this memorandum on the Department of Health & Human Services website. In general, voluntary, unsubsidized, and non-underwritten insurance programs such as CLASS face a significant risk of failure as a result of adverse selection by participants. Individuals with health problems or who anticipate a greater risk of functional limitation would be more likely to participate than those in better-than-average health. Setting the premium at a rate sufficient to cover the costs for such a group further discourages persons in better health from participating, thereby leading to additional premium increases. This effect has been termed the classic assessment spiral or insurance death spiral. The problem of adverse selection would be intensified by requiring participants to subsidize the $5 premiums for students and low-income enrollees. Although Title VIII includes modest work requirements in lieu of underwriting, and specifies that the program is to be actuarial sound and based on an actuarial analysis of the 75-year costs of the program that ensures solvency through such 75-year period, there is a very serious risk that the problem of adverse selection would make the CLASS program unsustainable. 3 Individual long-term care insurance is underwritten by John Hancock Life Insurance Company (U.S.A.), Boston, MA (not licensed in New York) and in New York by John Hancock Life & Health Insurance Company, Boston, MA Group long-term care insurance is underwritten by John Hancock Life & Health Insurance Company, Boston, MA Richard S. Foster, Chief Actuary of the Centers for Medicare & Medicaid Services (January 8, 2010) Estimated Financial Effects of the Patient Protection and Affordable Care Act, as Passed by the Senate on December 24, 2009, p. 14. Page 7