Demise of the CLASS Act and Some Important Long-Term Care Considerations

A program designed to provide long-term care insurance for working Americans has been dropped.

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Very little press coverage was given to the demise of the Community Living Assistance Services and Support program known as the CLASS Act. This program was part of the massive healthcare reform bill passed in 2010 and was designed to provide long-term care (LTC) insurance for working Americans. The CLASS Act was supposed to address the two major obstacles that prevent many people from buying LTC insurance: costly premiums and good enough health to pass underwriting. For premiums estimated to be $120 per month, working Americans (retirees would not be eligible) could buy the insurance with no underwriting requirements and be fully vested after paying premiums for five years. The program was dropped last October when the Department of Health and Human Services determined it could not remain solvent for 75 years.

Nursing home care is expensive. The Genworth 2011 Cost of Care Survey found that the national median daily rate for a private room in a nursing home was $213 per day. The study also concluded that nearly two-thirds of people over age 65 will need long-term care at home or through adult day health care. This is a risk that you should prepare for while you are healthy and can afford the premiums. According to the AARP, after the age of 50, a person can expect to pay $1,982 a year for long-term care insurance coverage. At 60, premiums jump to $2,249. Expect to pay over $3,000 per year if you wait until the age of 70 to arrange coverage, assuming you are still healthy enough to pass the underwriting requirements.

Start by determining your financial capacity to take on this risk. If you have sufficient financial assets you may not need LTC insurance. Determine the amount of risk you want to transfer to insurance and shop for a policy that meets your needs.

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