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Big Divisions Over Pending CLASS Act

The insurance industry is stepping up its opposition to a long-term-care proposal included in two major health care reform measures.

The Senate Health, Education, Labor and Pensions Committee package and the House health care reform bill include the Community Living Assistance Services and Supports Act, which would set up a government-run insurance program to provide seniors or disabled people with about $75 per day to help pay for home care or expenses for assisted living or nursing homes.

Introduced by HELP Chairman Edward Kennedy (D-Mass.), the CLASS Act would automatically enroll participants and charge them premiums averaging around $65 a month. Participants would be 18 years or older, but anyone could opt out of the plan.

Supporters say such a plan is a necessary part of health care reform and would not interfere with private insurers.

But companies that currently have a stake in the private long-term care insurance market argue that the government should stay out of that business.

“Long-term care insurance should remain in the private sector,— said Frank Keating, president and CEO of the American Council of Life Insurers. “We don’t view it as part of health care, but as asset preservation. The government should not be in the long-term care business.—

Larry Minnix, president and CEO of the American Association of Homes and Services for the Aging, supports the CLASS Act. Private long-term care insurance plans are great products for the people who can afford them and who aren’t disqualified because of pre-existing conditions, Minnix said.

“This is all about helping older people and young people with disabilities,— he said. “What the insurance companies are saying is, We’ve got a Mercedes if you’re rich enough and can qualify. Otherwise, we don’t want you to have a Volkswagen because you should take the bus.’—

Rep. John Dingell (D-Mich.), former chairman of the House Energy and Commerce Committee, introduced the House CLASS Act, along with Rep. Frank Pallone (D-N.J.), chairman of the panel’s Subcommittee on Health.

“For those functionally disabled who can work and maintain independent lives, this legislation will create incredible opportunities,— Dingell said in a statement e-mailed from his office. “This bill is both a reflection of America’s decency and its core belief that anyone who wants to work hard and contribute to our society should be able to do so.—

A Senate aide working on the bill draws a distinction between private long-term care insurance and the bill’s intention to cover “long-term services and supports.— This aide, speaking on background, added that the CLASS Act is not designed to put insurers out of business.

“This bill was never intended to compete with the insurance industry,— said this Senate aide, who added that the private long-term care insurance market has remained flat, at about 7 percent, over the past 30 years. “But it is intended to jump-start their flat market. It would allow the insurance companies to develop entrepreneurial wrap-around products.—

Minnix added that insurance companies, “if they’re smart, they’ll figure out how to start thinking, How do we start selling supplemental products that build on that $50, $75 a day?’—

But Keating, who this week sent a letter to Health and Human Services Secretary Kathleen Sebelius opposing the CLASS Act, said in an interview that long-term care insurance in the private market is competitive and that there is no reason for the government to intervene.

He added that even the $75-a-day government benefit would be just a fraction of the amount of money that’s needed to provide home care or nursing home care. Round-the-clock home care, he said, costs upward of $1,100 per day.

“The government would just continue to dramatically increase costs,— Keating said. The government plan also could result in pushing out private insurers from the market. “Any time the government gets into a business, it tends to crowd out the competition,— he said.

The Senate aide working on the measure said many seniors who need nursing home care or specialized home care first must use all their assets and then go on Medicaid, which will pick up the costs. The CLASS Act would allow adults of any age to keep working or keep their assets while helping cover some costs of care.

The Congressional Budget Office has said the CLASS Act would result in Medicaid savings in year six of the program, according to the aide. The CBO also scored the program as saving nearly $60 billion over 10 years.

Groups like United Jewish Communities, which back the measure, say their side is also stepping up its push.

“UJC is very enthused by the momentum that we have seen thus far in Congress, particularly in light of the Congressional Budget Office score,— said Jonathan Westin, assistant director of legislative affairs for the Jewish group. “We are hopeful that the Senate Finance Committee will incorporate the CLASS Act provisions within their own proposal when it’s released.—

But while America’s Health Insurance Plans wrote to Kennedy in a July 23 letter that the group agrees “that we need a national strategy that addresses our country’s [long-term care] needs,— the group also raised its concerns with the measure. AHIP CEO Karen Ignagni wrote that AHIP members fear “that the CLASS Act creates a program with a premium structure that is not adequate and promises benefits that cannot be maintained.—

AHIP cited a recent analysis by the American Academy of Actuaries, which said the CLASS Act would require premiums that may exceed affordable levels for many people.

Jesse Slome, executive director of the American Association for Long-Term Care Insurance, represents independent insurance agents and financial planners who do long-term care policies. He said the government plan is a bad idea.

“They’re doing a very good job of packaging a bill so that it sounds good in a 30-second sound bite, but if you really start to peel it back, that’s where the stink really comes out of it,— he said.

Participants would have to pay into the insurance fund for five years before any benefits could be paid out. “All of a sudden the claims will start, and the claims will rapidly escalate, depleting the pool,— Slome said.

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