Guest Article

(From the March 21, 2011 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)

HHS Moving to Implement New CLASS Program

With October 1, 2012 as the "go live" date set by the Patient Protection and Affordable Care Act (PPACA) for the new government-administered Community Living Assistance Services and Supports (CLASS) Program, a set of Frequently Asked Questions was released by the Department of Health and Human Services, while hearings were held by a House of Representatives subcommittee regarding the sustainability of the program.

The recently-released set of Frequently Asked Questions explains that the CLASS Program is a new, voluntary, Federally-administered insurance program that will provide long-term care benefits to enrollees who qualify. While the specifics of the program are still being worked out, the Department of Health and Human Services (DHHS) states that it intends to establish the program by the required statutory deadline of October 1, 2012, and enrollment will take place after that. Other notable features of the CLASS program include the following:

The President's Deficit Panel earlier identified serious concerns with the CLASS Program and recommended that it either be reformed or repealed. A March 17, 2011 hearing before the House of Representatives' Committee on Energy and Commerce Subcommittee on Health focused on the sustainability of the program. The DHHS's Assistant Secretary for Aging acknowledged shortcomings in the program, but urged that it be reformed rather than repealed. The DHHS has the statutory flexibility to strengthen the program and has targeted several specific areas, according to the testimony. These areas include partnering with employers to make enrollment as easy as possible, increasing the earnings and employment requirements, closing the loophole that allows enrollees to skip premiums and then reenroll without a penalty, indexing premiums with inflation, tailoring benefits to individuals' needs, attracting a broad base of enrollees, and developing robust waste and fraud detection and preventions procedures.

Testimony from the American Academy of Actuaries was not so positive. While commending the CLASS Program for wide inclusion, the testimony ultimately concluded that the program as currently configured was "unsustainable in the long term." Of primary concern was the potential for adverse selection, which could require significant future increases in premiums and reductions in benefits according to the testimony. Several changes were suggested: (1) an actively-at-work requirement with a minimum of 20 to 30 hours per week of scheduled work; (2) restrictions on the ability to opt-out then opt-back-into the program; (3) imposition of a benefit elimination period or duration limits; (4) providing benefits on a reimbursement rather than a cash basis; and (5) establishing a premium structure that includes scheduled premium increases according to a consumer price index or alternative rate.

The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations. If you have any questions or need additional information about articles appearing in this or previous versions of Washington Bulletin, please contact: Robert Davis 202.879.3094, Elizabeth Drigotas 202.879.4985, Mary Jones 202.378.5067, Stephen LaGarde 202.879-5608, Erinn Madden 202.220.2692, Bart Massey 202.220.2104, Tom Pevarnik 202.879.5314, Sandra Rolitsky 202.220.2025, Deborah Walker 202.879.4955. Copyright 2011, Deloitte.