Update: On December 18, 2023, the LTC Insurance Task Force presented the Actuarial Report to be used by legislators to introduce a bill that would create a State LTC program, if passed.
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 of such a program. To ensure the program’s solvency, specifics on cost and financial viability were recently assessed in an Actuarial Report presented by the Task Force on December 18,2023. California lawmakers will use the Feasibility Report and Actuarial Report to help determine whether to pass any legislation that would create a public LTC program, if passed.
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.
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 Task Force presented the Actuarial Report on December 18, 2023, and while it provided actuarial estimates to assist legislators in evaluating the feasibility of establishing a new public LTC program, there are still numerous unknowns (including specific design elements, administration, and coordination with other programs).
The Task Force has proposed continuing to meet to establish working groups and to further define any implementation steps (including which legislators should be used to introduce the bill).
While the timing of any bill is unclear, it seems unlikely that a bill will be introduced in 2024. We will continue to provide updates on this topic as they become available.
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.
Employers should also consider the intent of offering an LTC policy, as employees (not employers) would have to opt-out of the program on an individual basis (it is unlikely there would be an employer-level opt out). Also, because there is not enough information on what kind of private plan would be permitted to opt-out of that state program (if permitted) employers should be mindful of any communications to employees and make it clear that details are lacking at this time.
- California Assembly Bill 567
- California Assembly Bill 567: Oliver Wyman Feasibility Report – December 14, 2022
- AB 567 Feasibility Report Frequently Asked Questions
- California Assembly Bill 567: Oliver Wyman Actuarial Report – December 18, 2023
- California Department of Insurance Long Term Care Task Force
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