The Rise and Fall of CLASS

Febuary 2013

The Patient Protection and Affordable Care Act (aka Obamacare), which was signed into law in 2010, included a provision creating Community Living Assistance Supports and Services (CLASS).


CLASS was a voluntary insurance-like program intended to provide a cash benefit for long term care.  It was the first government program that, in theory, would allow taxpayers to plan for long term care, much in the way they now pay into a government program for health care during retirement (Medicare), or for retirement income (Social Security retirement benefits).  Those who signed up for CLASS — and who needed long term care — would be able to collect under the program if they had met premium-payment and employment criteria.


From the beginning, CLASS was controversial.  Many employers wondered whether or not they should offer the program to their employees.  Although employer participation was described as “voluntary,” details on participation incentives or disincentives were never announced, nor were the program details.  Actuaries, and organizations such as the Congressional Budget Office, argued that it was impossible to set premiums that would not only be attractive to taxpayers, but at the same time would sustain the program financially (the law required that CLASS be fiscally self-sustaining).


As CLASS’ implementation schedule plodded along, it became obvious to many observers that those tasked with designing the self-sustaining program were increasingly perplexed by how to make it happen.  So, few were surprised in October 2011, when, Secretary of Health and Human Services, Kathleen Sebelius, announced that the program would not be implemented.


However, the law remained on the books.  That is, until January 2, 2013, when the American Taxpayer Relief Act of 2012 (ATRA) was signed into law.  Most people know ATRA as the piece of legislation that partially resolved the U.S. fiscal cliff.  However, benefits specialists, human resources professionals, and insurance agents also know it as the bill that repealed CLASS (section 642 of the bill).


Despite ongoing dire predictions regarding the ability to provide retirement and old-age benefits to the growing baby boomer population, with each passing year the lack of a government solution for long term care becomes clearer.  Now is the time for workplaces and individuals to seek an alternative solution — by taking a hard look at the variety of long term care insurance programs already available in the marketplace.