CLASS Act - Health Reform’s Most Daunting Challenge

The recent federal health care reform legislation includes a little noticed provision that creates a voluntary national insurance program for long-term care. Known as the Community Living Assistance Services and Supports program, or CLASS Act, it is according to the Kaiser Foundation, the "sleeper" in health reform.

In discussions on health reform, CLASS is rarely heard. House Republican Leader John Boehner marked the 90-day anniversary of health care reform with a 43-page report on Obamacare and didn't even mention CLASS Act. The lack of attention is not indicative of the tremendous potential for transforming health care that CLASS holds. As it is unlikely to begin enrollments until late 2012 at the earliest, and benefits won't start until 2017, it seems that more pressing health reform issues have pushed attention away from CLASS for the time being. That will soon change.

CLASS has two wars to fight--the typical partisan battle between Democrats and Republicans, and another between the insurance industry and the government. It has a chance to make an enormous change in our society--but the odds makers seem to be betting against it.

The Class Act, as with all of healthcare reform, was born out of a practical need for change, not an ideological mandate. Class Act was a mission of the late Sen. Ted Kennedy and was probably born of true ideals; yet it wasn't altruism, but the financial imperative that spurred its passage. Long-term care costs are rising at a terrifying pace, the aging population is booming, and the problem simply could no longer be ignored.

Access to long-term care insurance in our country is an area where discrimination and inequality have been the norm. Health insurance in all its forms has specifically been built around the concept that those with serious health issues are excluded from access to coverage. To blame the insurance industry for this discrimination is too simplistic. The natural forces of a free market drove the carriers to be competitive. That meant limiting risk, and unfortunately for those individuals with high risk conditions, that meant they were left out. This model has worked pretty well for many years, creating a market that served the healthier of those among us and excluding those who didn't make the grade.

If an insurance carrier had made the decision to include those high risk cases, the result would have been higher benefits paid out requiring higher premiums, and they would have quickly been unable to compete with the other carriers who only covered the healthier, lower risk customers. From a business perspective, there was no choice but to maintain the status quo.
 
It would be very gratifying to say that we citizens, recognizing the inequality of this system, rose up and demanded a change. Of course that would mean higher premiums in order to add the high risk individuals, and needless to say, that didn't happen. We are a good people, but maybe not that good.

Not only did the private long term-care insurance industry deny coverage to the unfortunate unhealthy, but it also failed to adequately capture the market of the more fortunate healthy. Only about 7-8% of the aging population have purchased long-term care insurance. In spite of the fact that the likelihood of using long-term care insurance far exceeds the chance of needing homeowners insurance to cover the loss of your home, the latter is considered a necessity whereas buying long-term care insurance is the exception. Your nest egg is more likely to disappear due to the need for care, but the insurance industry hasn't convinced the masses.

One reason for this lack of success is that the cost for care can be tremendously expensive, and thus the coverage for that care is not cheap. Another explanation is human nature's belief that we are invincible and will never be old, much less need care.. Denial is a powerful de-motivator.

So, our country faced a huge exposure. Baby boomers were storming in on old age and huge numbers have inadequate assets to pay for their care. Congress, seeing the stampede heading their way, took action and the CLASS Act was passed.

As it stands, the financial gurus must figure out how to make the plan sustainable without any tax dollar support. October 1, 2012 is the deadline for Ms. Sebelius, Secretary of the Department of Health and Human Services, to publish the details of the CLASS benefit plan. A key feature of CLASS is that if you are working, you cannot be excluded for health problems. Projections are being figured and CLASS seems destined for adverse selection, a term where an unattainable number of participants will be needed to balance out the high risk unhealthy who will be most likely to find the plan appealing.

Another problem that should keep Secretary Sebelius busy is the "opt out" method of enrollment. Businesses are not required to offer CLASS to their employees, but if they do, the employees have the option of "opting out." Thought to be a way to encourage greater participation, especially among young workers, it has a few hurdles in the way.

Just think. If Social Security suddenly became an "opt out" plan, there would be an exodus of biblical proportions. The younger set might believe SS is a fabulous program, but with the new house and the baby on the way, if "out" were an option, SS would take a back seat beside savings accounts. And SS leads one to think about retiring, having a little extra income for some fishing and travel. Signing up for CLASS is like investing in Depends futures.

And then there is that nasty little feature of CLASS that requires paying into the plan for five years before you can qualify for coverage. Obviously, this was a feature needed for the actuaries to figure out how to fund CLASS. Let’s just say that selling that idea will be a marketing nightmare.

Conservatives are opposed to CLASS, are hoping it will fail, and will certainly have a flood of negative PR ready, encouraging the exodus and providing GPS directions on opting out. This is going to be one tough sell!

So, if the plan will surely fail unless it has huge participation, the answer must be to have huge participation. Some tweaking of the law needs to happen before any hope of success is possible, but in the end, it will come down to extraordinary marketing for CLASS to succeed. What is needed is an iPhone type of anticipation. A pink ribbon kind of groundswell. A World War II war bonds level of commitment. Quite a challenge for the CLASS implementation team! Too bad, because we really need this one to succeed.

About the Author

Donna Ruppert is a CLASS Act Advocate and an Independent Long-Term Care Insurance Broker.  Recognizing the strengths and limitations of private LTC insurance, Ms. Ruppert supports a dual system where private insurance and a government option could work side by side for a more effective national outcome.

Fifteen years of marketing for IBM gave Ms. Ruppert an understanding of the innovation that will be required for CLASS to succeed and the magnitude of this project.  As past Executive Director of Familial Dysautonomia Hope Foundation, her primary focus was on the formation of a coalition of similar foundations to work together for common goals and the necessity of team building, and sees this a critical to CLASS.  A decade as a caregiver for family members contributed to Ms. Ruppert's personal appreciation for the value of long-term care coverage. These life and career experiences resulted in a passionate advocate for both the CLASS Act and long-term care insurance.

Donna Ruppert

CLASS Act Advocate and
Independent Long Term Care Insurance Broker
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donna.ruppert@att.net