Washington LTC Trust Act Opt-Out

by | Apr 15, 2021

Washington LTC Trust Act Opt-Out – Are exclusions allowed?

The State of Washington passed the Long-Term Care Trust Act on July 28, 2019 in hopes of reducing the Medicaid budget.

What is it?

It is a payroll tax: $.58 for every $100 earnings or.58% or gross earnings.

What do you get?

Not much, but at least it’s something. Beginning in 2025, those eligible for benefits will receive $100 per day which will be paid to one of the approved care providers. Using current costs of care $100 per day would pay for less than 4 hours of home care. Industry estimates show that by 2025 $100 per day will pay for less than 3 hours of home care. The average long-term care insurance policy purchased today has roughly $5,000 of monthly benefit (about $170 per day).

The Benefits Are Short, Not Long

Contrary to the program’s name, the benefits are short, not long. The program will pay benefits for only one year. The average duration of coverage for long-term care insurance is just over five years. (5.3 years to be exact.)*

*Source: The Benefits of Long-Term Care Insurance and What They Mean For Long-Term Care Financing (see page 5)

 

It Excludes Retirees

If you are disabled, retired, or if you will retire before December 2024, you canNOT participate in this program. In order to participate in the program, you must work for at least three years and pay the tax. The people who are at the greatest risk of needing long-term care are excluded from this program. It takes 10 years to be fully vested (without a break of 5 consecutive years). Or, you need to pay premiums (AKA: tax) for 3 of the last 6 years from the date of application of benefits. If you plan to retire within ten years, and you hope to not need long-term care for another 10 years, then you won’t have any benefits.

 

Details of the Washington LTC Trust Act Opt-Out

The Washington LTC Trust Act Opt-Out date has evolved over the last few weeks. Just this week the House and Senate voted and the new opt-out date is November 1, 2021. You must own a long-term care insurance policy with an effective date before November 1, 2021 to qualify. The Washington LTC Trust Act Opt-Out will be through an application process. Initially, you may not have to provide evidence of other long-term care coverage, but the state reserves the right to request proof of coverage at any time. This should not be considered something that is once and done. At any time in the future, you may need to provide evidence that you own a long-term care insurance policy with an effective date prior to November 1, 2021.

WHICH TYPE OF POLICY IS RIGHT FOR YOU?


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What does this mean?

If you are an employee, then this law applies to you. Beginning January 1, 2022 you will begin paying this tax of .58% on your gross earnings unless you own a long-term care insurance policy. It is estimated that 45% of the state’s wage earners could receive comparable coverage on the private market for equal or less money.

The Washington LTC Trust Act Opt-Out provision means you should apply for private coverage now, to ensure you can opt out of this program. You’ll receive better benefits that you can use anywhere in the US or Canada and be fully vested from day 1, possibly for about the same amount of money.

We’re ready to help.

 

Here is a link to the text of the law that was signed by Jay Inslee.