A delay in launching a state-run, long-term care insurance program has brought private insurance carriers back into the Washington market. 

Signed into law last April, the Long-Term Services and Supports Trust Act, also known as the Washington Cares Fund, had caused high demand for private long-term insurance carriers in the months leading up to the deadline for opting out of the state’s policy. 

As previously reported by the Journal, some carriers ceased offering long-term care policies in the state — many suspected the clients who rushed to get plans were doing so for tax avoidance purposes, and would therefore later drop their coverage, as the original legislation didn’t specify whether workers who opted out would be required to keep their private insurance. 

New laws that have delayed the Cares Fund have brought some private carriers back to the Washington market, says David Wolf, president and owner of Spokane-based insurance agency Wolf & Associates Inc., but they’re wary of changing conditions as several other states propose similar state-run programs. 

Wolf says most private long-term care insurance companies with a Washington presence have finished processing the influx of applications received before the original November 2021 exemption deadline. Now, they’re waiting to see how the state’s program evolves.

Insurance companies also are waiting to see what happens in other states that have proposed similar legislation, Wolf says, before they make their next moves.

“I don’t see carriers jumping quickly to develop new kinds of plans to wrap around Washington’s plan, unless other states started to head down this track, as well,” Wolf says.

According to industry publication LTC News, as of November 2021, 12 states had begun the process of creating long-term care tax programs: Alaska, California, Colorado, Hawaii, Illinois, Michigan, Missouri, Minnesota, North Carolina, New York, Oregon, and Utah.

On Jan. 27, Gov. Jay Inslee signed into law two bills. HB1732 delays implementation and collection of payroll tax deductions for premiums for the state’s long-term care insurance plan, called the Washington Cares Fund, until July 1, 2023. HB1733 requires the Washington state Employment Security Department to begin accepting and approving applications for voluntary exemptions beginning Jan. 1, 2023.

The delay is a response to a class-action lawsuit filed in November 2021 which alleged that the Cares Act discriminated against employees based on residency and age, among other allegations. The delay also could address a proposed citizens’ initiative which, while it failed to garner enough signatures to appear on the 2022 ballot, recommended that the state allow workers to opt-in or opt-out of the state program at any time. 

Rolled into the laws are resolutions to some complaints Washingtonians voiced last year, says Jennifer Hanson, legal counsel with Associated Industries of the Inland Northwest. 

“Both bills affected who can be exempt from the program, and made some modifications in that respect,” Hanson says. 

Many workers are now eligible for exemption from the state’s mandatory long-term insurance plan who weren’t eligible under the previous iteration of the law, Hanson says. Those groups include people who work in Washington but live elsewhere, military spouses and registered domestic partners, workers on non-immigrant visas, and veterans who are at least 70% disabled.

The laws also create some benefits for those who are nearing retirement age, Hanson says. Workers born before Jan. 1, 1968, who pay into the state program for at least one year are eligible to receive 10% of the maximum benefit for each year that they meet minimum premium payments.

Hanson says that because legislators have more time to make additional modifications, many are waiting expectantly to see what other aspects of the law could change.

“I definitely expect that there will be continued developments related to this program between now and 2023,” she says.

Joel Ferris, Jr., owner of Spokane-based Ferris Long Term Care Insurance, says the industry is lobbying for inflation protection to be included in changes to the Cares Act. Currently, the state program provides a lifetime benefit of up to $36,500 for 12 months of long-term care services.

“The problem is, the average cost of care in the Spokane area right now for in-home care is about $60,000. What’s it going to be like in 10 years or 20 years?” Ferris asks.

Hanson says some employers had already begun collecting premium deductions from employees’ paychecks. The original legislation required employers to begin withholding a $0.58 payroll tax on every $100 earned beginning Jan. 1, 2022.

“There were employers who did choose to withhold the premium amount, because there was no guarantee that the Legislature was going to take action,” she says. “Those premium deductions weren’t supposed to be contributed to the state until April.”

Those employers are required to refund premium payroll tax deduction amounts to employees within 120 days of withholding the original amount.

Hanson says it’s possible that the Legislature could create a way for people who have opted out of the state’s program to opt back in, especially if other changes make the program more competitive with private plans.