By Irene M. Walton

To address the crisis of unfunded long-term health care expenses, Pennsylvania state Rep. Ed Neilson (D-Philadelphia) introduced House Bill 2779, known as the Long-Term Care Trust Act. The bill proposes funding long-term care in the state through an additional payroll tax of 0.58% per $100 of gross wages.

The Pennsylvania bill is modeled after Washington State House Bill 1087, designated as the WA Cares Fund, which will implement the country’s first social insurance program for long-term care. The WA Cares Fund surprised many in Washington who were unaware of the mandatory tax and the short amount of time given to opt out. To opt out, individuals were required to purchase or have existing ownership of long-term care insurance. What unfolded was a surge in demand that left insurance carriers reaching their financial and physical capacity, unable to accept and underwrite all the applications. They began placing restrictions on policies sold, and several long-term care carriers stopped offering coverage in the state.

The same or worse could happen in Pennsylvania. The same criteria for the opt-out exemption requires the purchase/ownership of long-term care insurance. As the bill is currently written, though, the deadline for the exemption is Dec. 31, 2022. Of course, we don’t know if or when the bill might pass. If it passes in 2023, will the deadline for exemption remain Dec. 31, 2022? By establishing an opt-out date prior to the bill’s implementation would avoid anti-selection, but it would also deny the opportunity for anyone who may have wanted to purchase coverage to avoid the payroll tax.  

The level of benefit being offered and the length of time required to be eligible for benefits are a couple reasons why some will want to opt out. Under the Pennsylvania proposal, the benefit maximum would be $100 per day, not to exceed 365 benefit units, otherwise a total lifetime benefit of $36,500. To qualify, an individual must be 18 years of age or older, reside in Pennsylvania, and not be disabled before 18 years of age. A recipient must also meet the minimum level of assistance with activities of daily living. Individuals would need to support the premiums for a total of 10 years without interruption of five or more consecutive years, or three years within the last six years, and have worked at least 500 hours during each of the aforementioned periods.

For those individuals nearing retirement, would they have an opportunity to apply for this benefit? There also does not appear to be any provision for beneficiaries to be able to take earned benefits with them if they moved out of state.

House Bill 2779 is pending consideration in the Pennsylvania House Aging and Older Adult Services Committee. With the 2021-2022 state legislative session ending and a new General Assembly starting in January 2023, the legislation will have to be reintroduced. It is likely that the bill will go through some modifications, such as the effective date, once reintroduced.

However, reintroduction of this legislation is possible next session. Getting ahead of this possible change and purchasing long-term care insurance now would allow you to design and choose the benefits that are best for your needs without the time crunch pressures witnessed in Washington state and would allow you to opt-out of a new payroll tax if this legislation becomes law in its current or similar form.

Irene M. Walton is area vice president, affinity manager, with Gallagher Affinity in Mount Laurel, N.J. She can be reached at irene_walton@ajg.com.  

Gallagher Affinity is a PICPA sponsor and offers long term care insurance through its partner, LTC Global.

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