There’s a recent major development in the insurance world you may not have heard of yet: Washington just became the first state in the nation to develop legislation that makes long-term care affordable for its workers. Called “WA Cares,” this program also impacts companies outside of Washington that have employees in the state.
- Beginning in 2022, all employees in the state of Washington will pay a certain cost per hundred dollars of earnings into the fund.
- Beginning in 2025, eligible residents can receive benefits and access services.
If residents are self-employed, they can choose to opt in and protect themselves with the same benefits available to other Washington workers.
The Role of Long-Term Care Insurance
Most would agree that long-term care is an important consideration, especially as the median age of our population increases.
But discussing long-term care with employees can be tricky because they’re often facing what’s happening with care today. For example, studies have found that one in five adults in the United States provides unpaid caregiving to an adult. Conversely, most long-term care products pay for the policyholder’s long-term care needs tomorrow.
As someone who’s been in the insurance industry for years, I applaud the state of Washington for trying to build a better future for its residents and businesses in the state. The only problem? There’s a better way.
Advantages of Employer-Offered vs. State-Funded Plans
Generally speaking, state-funded plans aren’t nearly as comprehensive as individual policies (especially those offered through employer plans). For example, once Washingtonians meet the contribution requirements, they’re insured against the need for long-term care up to $36,500 over their lifetime.
In contrast, under an individual or employer-offered plan, lifetime benefit limits can easily reach into the hundreds of thousands of dollars (which may be necessary given the cost of care—more on that later). In addition, the state-funded plan is a one-size-fits-all solution. With an employer-offered plan, there are all kinds of added features and benefits employers might be able to offer in addition to higher long-term care benefits. For example, they might be able to bundle life and long-term care benefits together for a two-in-one product, or they could offer a portable product, one employees can take with them even if they leave Washington state. While the state plan offers 12 months of coverage for long-term care, employer-offered plans may be able to cover a longer period of care. Most importantly, employers would have more options to choose the right coverage for their employees rather than being restricted to the state plan.
Viable long-term care protection is critically important when you consider that the national median annual cost of care is:
- $102,200 for a private nursing home room
- $93,075 for a semiprivate nursing home room
- $54,912 for a home health aide
- $19,240 for adult day healthcare services (based on 5 days per week per year)
These numbers are based on a 2020 Cost of Care Survey by Genworth Financial.
Employees Can Opt Out and Go Their Own Way
Benefit limits and the cost of care are just a couple reasons I’m glad Washington state residents can apply for an exemption from the WA Cares tax if they have a qualifying individual or an employer-offered long-term care policy.
This presents an opportunity for employers to differentiate themselves in the marketplace by shoring up their long-term care offering and communicating with employees about why theirs is a better solution.
For example, if you were to launch a new long-term care product for your employees, you’d probably get some level of participation. But imagine the participation you’d get if you offered this new benefit and explained how employees could apply for an exemption to a new payroll tax because of it. Then, you’d likely see an even stronger participation rate, not to mention the increased benefits appreciation for offering an alternative to paying more in taxes while improving protection.
Today, Washington. Tomorrow … Who Knows?
According to LongTermCare.gov, someone turning age 65 today has almost a 70% chance of needing some type of long-term care, and 20% of people will need it for longer than 5 years. So, while this new long-term care legislation is only happening in the state of Washington, I believe it’s only a matter of time before we see other states take similar measures.
Collectively, we will have to address the issue of long-term care.
That’s why now is the time to look at your long-term care benefit and ensure it provides your employees with the best coverage possible. If you need more incentive, think about how offering more robust long-term care options than state-legislated plans could become a talent attraction and retention driver for employers in the future.
Matt DiPietro is a Regional Sales Director with Trustmark Voluntary Benefits.