Can the CLASS Program Be Saved?
The controversial long-term disability insurance program, known as the Community Living Assistance Services and Supports program or CLASS, had a rough month in September. But the Obama administration hopes a report, expected out this week, might clear some of the bad air.
The insurance program, established under the 2010 health reform law, is on an indefinite hiatus. Staff at the CLASS office within HHS were reassigned last month. Senate Democrats removed all funding for CLASS in the Labor-Health and Human Services 2012 spending bill because program "implementation has been delayed." The program was originally intended to start collecting premiums in October 2012.
Assistant Secretary on Aging Kathy Greenlee said the report would include "recommendations about how to proceed."
Do you think the CLASS program can be saved? Is it possible to tweak the voluntary program so the premiums collected can cover the cost of benefits?
If not, what is needed for the estimated 10 million Americans that need long-term support services not covered in traditional health insurance plans?
October 13, 2011 4:59 PM
Heritage Foundation: No Saving CLASS
By Meghan McCarthy
Health Reporter
(These comments were submitted by Kathryn Nix, a policy analyst in the Center for Health Policy Studies at The Heritage Foundation.)
Health and Human Services will not be able to fix CLASS. The program’s poor design makes it unsustainable, and only significant changes by Congress can address this. Broad eligibility requirements allow almost anyone to enroll, with students and those below the poverty line paying just $5 in premiums. Combined with the policy of guaranteed issue and the program’s voluntary nature, CLASS will experience severe adverse selection.
One solution put forth by Secretary Sebelius is to index premiums to inflation. But the premiums required to cover CLASS’ high costs are likely to be unaffordable for most Americans. Increasing premiums even further would exacerbate adverse se...
(These comments were submitted by Kathryn Nix, a policy analyst in the Center for Health Policy Studies at The Heritage Foundation.)
Health and Human Services will not be able to fix CLASS. The program’s poor design makes it unsustainable, and only significant changes by Congress can address this. Broad eligibility requirements allow almost anyone to enroll, with students and those below the poverty line paying just $5 in premiums. Combined with the policy of guaranteed issue and the program’s voluntary nature, CLASS will experience severe adverse selection.
One solution put forth by Secretary Sebelius is to index premiums to inflation. But the premiums required to cover CLASS’ high costs are likely to be unaffordable for most Americans. Increasing premiums even further would exacerbate adverse selection. Sebelius could cut benefits to make the program more affordable. However, the level of benefits that the CMS Actuary estimates will be offered are already below what is available in the private market at lower cost.
The substantial reforms needed to improve CLASS require congressional action. Another proposal Sebelius has made is to increase the minimum earnings requirement, but the legislation only allows her to make eligibility standards less restrictive—not more so. Varying premiums according to health status would alleviate the impact of adverse selection, but would again require congressional action. Finally, Congress could mandate participation, but the CMS Actuary has indicated that this would require enrollment of 230 million people, more than the United States work force.
All of these options are either impractical or politically unviable. Left untouched, CLASS is certain to require a taxpayer bailout. Statute prohibits using general revenues to fund the program, but Congress could overturn this requirement. Instead, members should repeal the program.
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