Washington lawmakers discuss impact voluntary payments would have on WA Cares program

By

Shane Ersland

|

Washington lawmakers discussed the impact a transition to a voluntarily-funded WA Cares program would have on its financial viability and participation rates this week.  

WA Cares is a public long-term care insurance program that requires Washington workers to pay 58 cents per $100 of their earnings from each paycheck to fund the program. The tax went into effect last year. Those who qualify for the lifetime benefit will be able to access long-term care services and supports costing up to $36,500—which could be adjusted annually for inflation—beginning in July 2026. 

Stay one step ahead. Join our email list for the latest news.

Subscribe

The program’s current financial structure would likely be stressed if voters approve Initiative 2124 in November. The ballot initiative’s passage would make paying into the WA Cares Fund voluntary. Chris Giese, principal and consulting actuary for Milliman, discussed the scenario of a voluntary WA Cares program during a Senate Labor & Commerce Committee meeting Tuesday.   

Milliman is a consulting firm that was contracted by the Washington State Office of the State Actuary (OSA) to conduct actuarial services for the WA Cares Fund, which it has done since 2015, when the program was in the feasibility study phase.  

“In August 2023, OSA requested that we perform high-level conceptual modeling of a structure where participation in the WA Cares Fund becomes fully voluntary, while all other program rules stayed the same,” Giese said. “Payment of the premium in the program would be completely voluntary, but program coverage would be guaranteed as long as someone met the requirements to become a qualified individual.”

Milliman’s analysis found that individuals who anticipate having high health needs may be more likely to participate in a fully-voluntary program, while high-wage earners may be less likely to participate. 

If WA Cares participation rates were to remain close to 100 percent under a voluntary structure, on a relative basis, premiums would stay relatively close to the program’s current estimated baseline, Giese said.  

“On the other hand, if participation was low, that would create a lot more uncertainty in the program’s premium rate, given the uncertainty around who might participate in the program. The premium rate would need to be increased significantly from the 2022 base plan premium estimate if that does occur. Ultimately, the premium rate could need to be increased perhaps 20 times what was included in the 2022 base plan premium.”

— Giese

Low participation rates could ultimately lead to insurance rates spiraling, Giese said.

“Let’s assume that under a voluntary structure, if individuals with lower claims risk or higher wages decide not to participate, remaining individuals left in the program will have increasing costs,” he said. “If that happens, now that we have a higher premium rate for the program, individuals would reevaluate their participation in the program. You might expect the next layer of individuals might decide they may not want to participate. You might even have a situation where you couldn’t charge a premium high enough to cover any of the program’s benefits and expenses.”

Sen. Steve Conway (D-Tacoma) asked Giese about Milliman’s basis for its analysis in relation to voluntary participation in WA Cares. 

“We don’t really have a playbook or an equivalent program to look at that we can say, ‘This is definitely what the participation would be,’” Giese said. “So what we did instead of trying to estimate what the participation rate would be was try to illustrate the potential range of results under different participation scenarios. 

As you potentially have less people participating, there’s more potential for the number of people remaining in the program to not be the average individual any more. Perhaps they have higher long-term care needs or are individuals with lower wages. As a result, the premium rate would need to change. And that’s what we’re trying to illustrate.”

Approximately $666 million was collected in premium revenues over the first two fiscal quarters of the year, WA Cares Fund Director Ben Veghte said. 

“If that trend continues, that would be about $1.3 billion in revenue for the first year. Thus far, premium collection is strong. It’s the first year of a 75-year program.”

— Veghte

More than 3.2 million individuals paid WA Cares premiums in the second quarter of fiscal 2024, Veghte said, while 537,783 individuals were exempt—481,901 of those who were exempt had private insurance—as of March 31.     

Henry Aaron, an economist at The Brookings Institution, said WA Cares is a well-designed, viable program that provides modest protection against the costs of long-term care that many people are going to need, but few anticipate or even want to think about. 

“It’s social insurance, available to everyone in a defined group,” Aaron said. “It is financed by a flat-rate tax and participation is mandatory. Let’s suppose the insurer starts charging a premium based on the community-wide average expected cost of care, and the purchase of coverage is voluntary. Those who aren’t sick or think they’re not prone to illness are just not likely to buy. 

Older people and worry-warts may voluntarily buy insurance, but their cost to be covered is going to be higher than a community-wide average premium could cover. So if they’re the only people who buy coverage, the insurer would have to raise the premium. As a result of raising the premium, even fewer people would voluntarily buy coverage.”         

1 thought on “Washington lawmakers discuss impact voluntary payments would have on WA Cares program”

  1. The plan is to help fund Medicaid. The problem is that it is barely enough to pay for care at $100 a day when so people will be self-pay the rest of the cost. The average for home care and assisted living in Washington is $6,000 a month. Nursing homes are over $10,000 a month. There are options for example traditional long term care insurance which also provides some protection from Medicaid (partnershipforlongtermcare.com) and there are life insurance policies that provide accelerated payouts for long term care (guidetolongtermcare.com). Whatever you choose the only choice we don’t have is getting older. Plan for tomorrow, today.

    Reply

Leave a Comment