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CLASS forces healthy middle-class buyers to pay unduly-high prices to subsidize (hidden tax) the cost for unhealthy people and for some religious orders, for people hired at $1120/year by disease-specific non-profits to do fund-raising and for other people below the poverty level.
CLASS is exposed to a classic adverse selection rate spiral due to inadequate risk management principles. The CMS actuary estimates that only 1.5% of the eligible people will buy because most won’t pay an uneconomic price for something that might never happen and others will opt for private insurance which can offer much greater benefits priced according to an individual’s true risk profile.
The rate spiral will exacerbate. CLASS is required to be priced such that if everything happens according to HHS’s actuarial assumptions, today’s babies would pay their entire career only to find the fund would have $0 to pay their claims in 75 years. The resultant significant future rate hikes are unfairly distributed because some classes are protected.
The Congressional Budget Office scored CLASS favorably in the early years by ignoring the need to set premiums aside to pay future CLASS claims, but projected tens of billions in deficits each decade beginning in the 2030s. This type of accounting will create massive underfunding in the future for this program and jeopardize its existence at the very time its subscribers need financial assistance for long-term care needs. That’s why the Bi-Partisan Debt Commission called for repeal of CLASS.
CLASS burdens states with unfunded administrative mandates. At the same time, it will reduce state revenues because private long-term care insurance pays state premium taxes but CLASS does not. State and Federal governments would receive reduced tax revenues.
If employers agree to collect premiums for CLASS, they MUST deduct large premiums from any employee who fails to specifically opt out in advance. Once enrolled, employees must wait for 5 years before becoming eligible for any benefits.
RESULT: Ultimately the program will attract very few buyers, lose money, and not achieve its intended goals. It will create another “third rail” and burden states and their budgets, which they can ill-afford. To “save” the program, advocates will urge increased benefits and reduced prices. Their already-stated “solution”: mandatory participation with employers paying half the cost (using Social Security, Medicare and Germany’s LTCi program as precedents). CLASS should be repealed.
