In October 2019, California enacted Assembly Bill 567 (AB 567) after research on public opinion indicated Californians are concerned about the costs of growing older. AB 567 established a Long Term Care Insurance Task Force (Task Force) within the California Department of Insurance to examine the feasibility of designing and implementing a mandatory state-wide long-term care (LTC) insurance program. The Task Force’s Feasibility Report was finalized on December 14, 2022. This report summarized the Task Force’s recommendations and outlined the administrative, financial, and political feasibility considerations. To ensure the program’s solvency, specifics on cost and financial viability of the feasibility considerations will be assessed in an Actuarial Report to be completed on or before January 1, 2024. California lawmakers would then determine whether to pass any legislation.
Key Program Design Considerations
In their Feasibility Report, the Task Force proposed a progressive payroll tax that may be split between employers and employees, as well as five different program design options that range from $36,000 in supportive LTC benefits to $144,000 in comprehensive long-term care services and support (LTSS). Most options set the benefits eligibility age at 18 and have a 5- or 10-year vesting period. Benefits would be triggered consistent with private LTC insurance and HIPAA rules but would be more restrictive than Medi-Cal benefit triggers. Upon completion of the Actuarial Report, refinements may be made to these program design recommendations.
Opt-out Provision
In conjunction with the proposed benefit designs, the Task Force also recommended a private insurance opt-out provision with various pros and cons to be considered. For example, while an opt-out provision provides individuals with choices that could increase public support for the program, it may negatively impact the program’s viability, as high-income individuals that can afford private insurance are more likely to opt-out.
Under the proposed opt-out provision, individuals that have eligible private insurance as of the program’s effective date would be allowed to opt-out of the program. Individuals who purchased eligible private insurance after the program’s effective date would be ineligible to opt-out of the program but may qualify for reduced program contributions. The determination around reduced contributions, the program effective date, and the deadline for purchasing eligible private insurance will be part of the actuarial evaluation released on or before January 1, 2024.
Implementation Timeline
Currently, final program design details are unknown. According to the AB 567 Feasibility Report FAQs, the Task Force will make final recommendations in the upcoming Actuarial Report by January 1, 2024. Note, this is not an effective date, as legislation would still need to be passed to implement a state-wide program. The last day for the California Legislature to pass bills for the 2023 session was September 14, 2023.
As of now, the enactment timeline seems to be as follows:
- September 14, 2023 – Last day for California legislature to pass bills for 2023 session
- January 1, 2024 – Presentation of Final Actuarial Report to Task Force and Legislature
- Potential deadline for obtaining private plan insurance that qualifies for program opt-out
- January 3, 2024 – Legislature reconvenes
- January 1, 2025 – Target program effective date
- Potential deadline for obtaining private plan insurance that qualifies for program opt-out
Other hypothetical dates mentioned in the Feasibility Report for the program opt-out deadline included a Governor approval date of October 1, 2024, a Senate pass date of September 1, 2024, and an Assembly pass date of August 1, 2024. Note, these proposed opt-out deadlines would offer individuals motivated to opt-out of the program a significantly limited window to purchase eligible private insurance.
Employer Considerations
Employers that are considering adding LTC to their benefits offering may want to do so sooner rather than later, as private LTC plans will likely need to be in place prior to the effective date of the state-wide program (if not sooner) for employees to opt-out of the state program (if opt-outs will be permitted). There also may be some concern over carrier capacity if there is a rush to implement a private plan, similar to what happened with the Washington Cares Fund. Employers should note that there is no requirement for employers to offer LTC coverage to employees.
Additional Resources
- California Assembly Bill 567
- California Assembly Bill 567: Oliver Wyman Feasibility Report – December 14, 2022
- AB 567 Feasibility Report Frequently Asked Questions
- California Department of Insurance Long Term Care Task Force
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