As California considers establishing a statewide insurance program for long-term care (LTC) services and supports, employers should begin to consider the concept and benefits of a thoughtful LTC program.

An HHS Brief published in 2019 estimated that after age 65, 29% of adults will require severe long-term services and support (LTSS) and receive paid home care while 5% will receive residential care and 28% will receive at least 90 days of home nursing care. 

With the population aging, Californians are becoming concerned about the availability and affordability of long-term care and support.  As shown in the California Health Care Foundation (CHCF) Survey conducted in late 2022, 44% of Californians reported they are “not too” or “not at all” confident in having the financial resources to pay for any home-based support they or their family members will need as they age. 

California Long Term Care Insurance Task Force

In 2019, AB 567 (chapter 746) was passed establishing a task force to explore the feasibility of developing and implementing a statewide insurance program for long-term care services and supports. 

The task force was designed to:

1. Explore how a statewide long-term care insurance program could be designed and implemented

2. Explore options for the design of the program, including eligibility, enrollment, benefits, financing, administration and interaction with Medi-Cal and other publicly funded resources,

3. Evaluate how the benefits under the program would be coordinated with existing private health coverage benefits

4. Evaluate the demands on the long-term care workforce as the need for long-term care in California grows

5. Consider the establishment of a joint public and private system to make long-term care accessible to as many individuals within California as possible, and

6. Make recommendations related to key regulatory provisions necessary for the public to access existing long-term care insurance programs and participate in future long-term care insurance programs.

Results of the Feasibility Study

Program Design Recommendations

The five recommended program designs range from a $36,000 benefit over two years for supportive long-term care benefits to a higher range comprehensive program providing $144,000 over two years in comprehensive benefits. 

Most of the options under consideration will have benefits available at age 18 and have a 5-to-10-year vesting period. Benefits would be triggered with severe cognitive impairment or once the individual was unable to perform two of six Activities of Daily Living (ADL) – bathing, continence, dressing, eating, toileting, transferring. The Actuarial Report will determine cost and solvency of the different options.

Funding

The study is proposing a progressive payroll tax, perhaps split between employers and employees.  Contribution limits are being considered to ensure that benefit amounts are reasonable in relation to an individual’s program contributions. 

Program Opt-Out

An opt-out feature is currently under consideration. Individuals with eligible private insurance in place as of a date to be determined could be permitted to opt out of the program. Any new policies sold after this deadline would either be ineligible for program opt-out or the individual could receive reduced program contributions if the policy met certain standards (yet to be determined). 

Potential Implementation Timeline

The AB 567 Oliver Wyman Feasibility Report was submitted to the commissioner, the Governor, and the California Legislature on December 23, 2022. The options submitted are now undergoing financial analysis by Oliver Wyman and CDI. These findings will be presented in an actuarial report due to be released by January 1, 2024. 

According to the FAQs released with the Feasibility Report, once the Actuarial Report is released, legislation establishing a statewide program would need to be drafted, passed, and signed by the governor.   

Timing and Key Dates

Below are some important dates related to the enactment of LTC legislation in California.

• December 23, 2022: Task Force issued AB 567 Oliver Wyman Feasibility Report

• February 17, 2023: Last day for 2023 bills to be introduced in the California Legislature

• June 15, 2023: Presentation of preliminary actuarial results to the full Task Force

• August 24, 2023: Draft Actuarial Report update and input

• September 14, 2023: Last day for California Legislature to pass bills for the 2023 session

• September 21, 2023: Presentation of Draft Actuarial Report to Task Force

• December 14, 2023: Presentation of Final Actuarial Report to Task Force

Employer Considerations

Very little is known what the final program design and administration of a state mandated long-term care program will look like, or even if the legislation will pass. Much of the program still needs to be defined, including which private long-term care policies would be eligible for an opt-out, or if opt-outs would even be permitted. 

Employers who are considering adding a long-term care program to their benefit portfolio may wish to act sooner rather than later.  It is a possibility that, as with the Washington State WA Cares program, in order to receive an exemption, private long-term care insurance policies that meet the requirements will need to be in place prior to the start of the program.  

Information and Additional Resources

California Department of Insurance Long-Term Care Task Force

California Department of Insurance Glossary for Long-Term Care