Washington Cares Fund Doesn’t Care

As one financial advisor commented this week, most Washingtonians haven’t a clue about this new tax. And they won’t until they see it in their paychecks.

As Steve Moses of the Center for Long-Term Care Reform has so aptly opined, the WA Cares Fund is what happens when the Keystone Kops design a long-term care insurance plan.

Many have written about the ineptness of the legislators who designed what I call a “tax grab.” I’m waiting for the class action suit to be filed. Does anyone have the guts to file?

The legislation was meant to heighten awareness about the risk of needing long-term care and the cost of care in hopes that WA residents would purchase private insurance rather than rely on Medicaid to pay for their care. It is Medicaid not Medicare that pays for long-term care services. This was thought to be a way to shore up the state’s Medicaid funds.

Medicaid is the fastest growing line item on most states budgets

So, what does this ill-conceived legislation do? For starters, if you are a W2 employee and have not purchased private long-term care insurance (LTCI), you will be taxed at a rate of .58%. 

Think about this. You are 17 and a W2 employee at your local bodega. You don’t have LTCI and you can’t buy it. Insurance carriers won’t sell a policy to a 17-year-old. Most won’t sell to anyone under 35 or 40. 

Now, if Washingtonians have a policy and file for an exemption by November 1 they can opt out of the tax. The exemption is a one-time requirement. Additionally, self-employed or 1099 independent contractors can also opt out – or in for that matter, but why would they?

The maximum coverage is $36,500 and you won’t have access to it for years if you qualify.

So, what have we seen in the market? Carriers have been bombarded with applications for minimum coverage just so the applicant can get the exemption. Premiums in many instances are less than the tax. And applicants plan to quit the policy as soon as they get their one-time exemption.

Should I stay or should I go

This totally inadequate coverage is not portable. It’s only good in WA.

Whether or not inflation will apply to the benefit is undefined.

The program does not qualify for Partnership status which protects assets and income from Medicaid spend-down requirements.

The triggers to eligibility are three of 10. LTCI triggers to eligibility are two of six.

And to top it all off, the legislature can make changes to benefits and eligibility triggers twice a year. 

What will the benefit be when you need care? No one knows. Or, how much it will have cost beneficiaries.

Would it surprise you that no LTCI experts or carriers were consulted by the legislature?

What to do

Check to see if your employer offers an employee LTCI program. These programs may insure those 18 and older.

See if you can legally be paid as a 1099 (independent contractor) versus a W2 (direct employee).

Figure out what you will pay in taxes. Does it make sense to go along with the tax grab? For some it will. For some there will be no option.

Move to another state.

Do meaningful long-term care expense planning now. The deadline is November 1 to have a policy in force. 

Carriers are experiencing huge surges of new applications. These applications are medically underwritten. People can be declined based on health history. It can take 60 days for an underwriting decision to be made.

It can take that long for you to learn what you need to know to make a prudent decision about this insurance. How much do you need? How much can you afford?

We tend to think about long-term care as an end-of-life issue for the elderly. Today, 43% of those receiving care are working age adults between the ages of 18 and 64. The primary reason for their care is motor vehicle accidents followed by spinal injuries.

What’s my point? The need for long-term care could develop at any time. And the younger you are the least costly this insurance will be.

Getter done!