Many Washington state residents are getting long-term care coverage in place in anticipation of opting out of the new, state-sponsored long-term care program WA Cares Fund (aka Long-Term Services and Supports Trust Program).
We have been helping a bunch of Washington residents explore options and get coverage in place so I wanted to take a few minutes to share what you need to know if you have not yet made a plan:
- Time is of the essence - to opt out if you are not already exempt you must purchase your own long-term care policy no later than October 31, 2021. It takes time to apply, get approved and sign to accept coverage, so you need to get started ASAP (source)
- Know what you need to do to opt out - you must provide proof of coverage that offers benefits at least as robust as the WA Cares Fund. Some policies qualify, while others do not. If you choose to get your own qualifying policy, you then need to file an exemption request and provide the exemption approval to your employer. You must file your exemption request sometime during 10/1/2021-12/31/2022 (learn more about opting out)
- Options are changing quickly - carriers are reducing the availability of policies but there are still some good options left. There is a crush of volume driven by the state mandate and some carriers have already suspended issuance of new policies because they simply cannot handle this volume. Exploring your options sooner reduces the risk that the policy you want will stop accepting new applications
What is the WA Cares Fund and what are the benefits?
Starting January 1, 2022, you will see a new deduction on your pay stub if you are not exempt and have not opted out: a 0.58% deduction of your total compensation (that includes base, bonus, RSUs, etc.) and there is no limit on the income that will be subject to this deduction. (This is different from Social Security, which taxes the first $142,800 of your income in 2021 but no income above that.)
What do you get for this deduction? WA Cares Fund offers a benefit of reimbursement for long-term care expenses for up to $100 / day for 1 year (= $36,500 maximum benefits) for long-term care if you are unable to perform 3 of the activities of daily living as defined by Washington state and live in Washington state at the time you need benefits. There will be some inflation-based adjustment to thie benefit amount in the future.
Importantly, you can only receive benefits if you are a resident of Washington state at the time that you qualify for long-term care benefits.
What policies qualify for opting out?
You need to get a policy that offers benefits that are at least as good as the WA Cares Fund, meaning long-term care benefits of more than $100 / day for 1 year.
There are broadly three types of insurance policies that can meet the exemption, when you make the right choices about benefit amount:
- Traditional long-term care insurance
- Hybrid life-LTC insurance
- Life insurance with an LTC rider
Importantly, accelerated death benefit riders and critical illness riders on life insurance policies do not qualify for exemption. (source)
How do I know if I should opt out?
The question of whether to opt out involves many different factors for each person, but some key questions to consider are:
- How likely is it that you will still be living in Washington state when you reach an age where it’s likely you will need long-term care, and could therefore be eligible to receive benefits? (For a currently healthy adult, assume “sometime after age 70”)
- Take your approximate annual income and multiply it by 0.58%. Multiply that by the number of years you expect to be working. Write that number down - it’s your rough estimate of how much you might pay into WA Cares Fund. (Some people might need to make an adjustment for expected big changes in earnings, like a resident becoming a full-fledged doctor.) Now compare that number to $36,500 maximum benefit. Does that feel like a good deal?
- Can you qualify for a private policy where you like the benefits and can afford the premiums?
Here at AboveBoard we can help you evaluate your options. Our revolutionary approach to insurance advice places clients’ best interests first. If your best option is to simply go for the WA Cares Fund, we’ll level with you and tell you that. If you have better options in the private market, we’ll hunt down the best one - as an independent, ethical insurance brokerage, we are relentlessly committed to finding the best policy for you. Sign up for a 15 minute call to discuss your options.
Want to learn more about long-term care insurance policies in general, not just in Washington state? Check out Long-Term Care Insurance: A Quick Primer.