Spike expected in LTC policies written due to new Washington state program

Long-term care insurers will likely see an increase in new policies written in Washington as workers opt to buy their own coverage instead of participating in the state's new long-term care fund.

The passage of a bill in 2019 set up the WA Cares Fund, a public long-term care fund into which Washington workers must pay. Up to 58 cents for every $100 in wages Washington workers make will be earmarked for the fund, beginning in January 2022. Eligible individuals will then be able to receive benefits and access up to $36,500 in services and support starting in 2025.

Residents can apply to opt out of the income deductions by obtaining their own long-term care policies by Nov. 1, a path that many chose.

Insurers have now mostly ceased writing long-term care policies in the state even though the deadline to obtain a policy is still months away. Those decisions are "totally understandable," according to Jesse Slome, executive director of the American Association for Long-Term Care Insurance.

Slome in an interview said insurance companies probably did not anticipate so many consumers would seek out coverage and did not have enough staff to handle the demand.

Insurers could record a bump in long-term care sales for the year due to the Washington program, Slome said, but it will probably be a one-time event. Somewhere between 48,000 and 49,000 long-term care policies are sold in a typical year, according to Slome, a relatively low number when compared to policy counts of other business lines like health and life insurance. Even just an additional 5,000 policies written would represent close to a 10% rise in take-up.

Every long-term care policy has to be "health underwritten," otherwise there would be an "enormous liability" for insurers, Slome said. This takes time and is part of the reason insurers do not want to continue accepting applications and risk notifying individuals too late if they do not qualify for the policies they choose.

Profitability may have also played the decision to stop selling new policies, as some might not be worth writing.

"If you have people that are buying small policies with the goal of just getting the exemption, they're going to drop the coverage," Slome said.

A spokesperson for the American Council of Life Insurers in an email said life insurance companies remain committed to helping people address their financial and retirement security needs, including dealing with the prospect of long-term care costs.

Once Washington state residents obtain exemptions from the fund, they will be permanently disqualified from receiving the benefits it provides, according to the WA Cares Fund website.