CLASS Act LTC Dead

On October 14, 2011, the Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced her recommendation to halt implementation of the Community Living Assistance Services and Supports (CLASS) Act.

Those of us who specialize in long-term care insurance (LTCi), including the Society of Actuaries and the head actuary of the US Dept of HHS, recognized from the outset that CLASS Act long-term care (LTC) was unsustainable as proposed. It was to be a voluntary program that was going to accept everyone in the workplace who applied, regardless of their insurability. This would have resulted in the most classic example of adverse selection ever. Had CLASS Act LTCi been enacted, there was budget to publicize the need for responsible planning. For healthy applicants who shopped, CLASS Act LTC would obviously not have been competitive with existing LTCi plans in either price or benefits. These two things would have been, in the short term, financially beneficial to advisors. However, in the long run, CLASS would have turned into one more giant government money-hemorrhaging entitlement program.

RIP, CLASS Act!