A class-action lawsuit filed in federal court attempting to block the first-in-the-nation tax on those who do not own Long-Term Care Insurance was dismissed by a judge.
Judge Thomas Zilly of the U.S. District Court for the Western District of Washington ruled the court did not have jurisdiction since it was a state tax.
Opponents of the mandatory payroll tax to fund the state's long-term care program claimed the state program violates federal law forbidding any state from passing any law requiring employees to participate in a plan that provides sickness or medical benefits.
The court ruled it was a tax, and therefore the court had no jurisdiction. The State of Washington set up a tax to support its "Washington Cares Fund" to provide a minimal long-term care benefit for anyone who did not own a qualified Long-Term Care Insurance policy. The tax was targeted at those with earned income.
Changes Made with Washington's LTC Law
Washington's long-term care benefit program provides state residents with up to $36,500 in benefits to pay for care at home and other services. To qualify for these benefits, you first must need assistance with everyday activities of daily living like eating, bathing, toileting, or even with assistance with medications.
The program, ruled as a tax by the court, is funded with a payroll tax of 0.58 percent on employees with earned income. The state won't begin collecting the tax until July of 2023 and won't start paying benefits until 2025.
Washington Governor Jay Inslee ok'd a proposal delaying the program's implementation until July 1, 2023. Employees who have already had premiums deducted from their paychecks will get refunds. Changes were made to the original law that allows those who live out of the state and work in Washington, military spouses, and some veterans with disabilities can opt-out of the tax.
State residents who purchased Long-Term Care Insurance to opt-out of the tax will need to continue their coverage to maintain their ability to opt-out of the tax.
Other States to Follow Washington's Lead for LTC Tax
Now that Washington has taken this action and the courts have blocked legal attempts to stop it, other states are getting close to implementing their own long-term care tax programs. Likely, California will be next in line to add a tax if you don't own a Long-Term Care Insurance policy.
California established a task force to explore, develop and implement such a tax plan. According to several sources in Sacramento, the rollout could be as soon as 2023.
In addition to California, the other states that are considering a long-term care tax include:
- North Carolina
- New York
The State of Washington gave residents a small window to purchase Long-Term Care Insurance to avoid the tax; however, it is unclear whether California or other states will do the same or allow a continual opt-out by purchasing independent coverage.
A source close to one California state senator who spoke on the condition of anonymity told LTC NEWS that the state is more interested in the money to fund overwhelming Medi-Cal (Medicaid in California) expenses for long-term care.
In Washington, many residents ran out of time to get approved for Long-Term Care Insurance coverage, which requires full medical underwriting. It usually takes six to eight weeks for the application process to be completed. Whether other states will provide more time or even no time for residents to get private coverage is yet unknown.
Some People Not Happy About the Tax
Social media comments on the LTC NEWS Facebook page and Twitter feed have been vocal about states considering a long-term care tax. Many taxpayers are not happy about paying another tax or being forced to purchase insurance.
Yet, long-term health care is a significant concern for many families due to the consequences on family caregivers and finances. About half of us who reach the age of 65 will need some long-term health care before we die, and those costs are expensive.
Increasing Long-Term Health Care Costs in Focus
The LTC NEWS Cost of Care Calculator has recently been updated, reflecting even higher costs for in-home care due to increased demand, labor shortages, and higher labor costs. If you have a loved one who needs care services now, you understand how quickly these expenses can adversely impact income and drain assets.
Many people are unaware that most long-term health care expenses are not covered by health insurance, including Medicare. Medicaid will pay for this type of care but only if the care recipient has little or no income and assets.
Unless you own a Long-Term Care Insurance policy, you will pay out-of-pocket for the costs of professional care. Some individuals depend on their adult children to be caregivers for a job they are untrained and unprepared to complete. Plus, family caregiving is demanding physically and emotionally.
Medicaid Budgets Pressured
Medicaid becomes the payer of last resort for long-term care for anyone will little savings or those who have exhausted their assets paying for care out-of-pocket. Medicaid is the primary payer for long-term services and supports, and an aging society means more people will need help with daily living activities or supervision due to dementia. This pressure on Medicaid budgets has the states and the federal government scrambling for resources to pay for these costs.
Long-Term Care Insurance is typically purchased in your 50s, yet the Washington tax is one for everyone with earned income age 18 and older. Some insurance companies will not consider applicants under age 40. There are options available, and the costs for LTC Insurance vary dramatically between insurance companies.
Pay LTC Insurance Premium or a Tax?
Premiums for Long-Term Care Insurance are based on the policyholder's age at application, health, family history, and total benefits within the policy. For some people, the tax will be more expensive than a policy, but an LTC Insurance policy wasn't designed to help avoid a tax, according to experts. Interestingly enough, there are federal tax incentives available for some people if they purchase Long-Term Care Insurance. Some states also offer tax breaks. Proceeds from LTC Insurance are always tax-free.
People obtain coverage to access their choice of quality care, protect income and assets, and reduce the burdens that come from the consequences of declining health and aging.
Unless science finds a way to stop aging, the issue of long-term care will remain in focus for policymakers and American families for decades to come.
About the Author
Contributor since April 22nd, 2021
Planning for future long-term health care has become a vital part of retirement planning. However, in states considering a tax, obtaining coverage may become a priority right away.
Generally, people obtain LTC Insurance in their 50s as part of their retirement planning. Is Long-Term Care Insurance appropriate for you? It depends. If you have enough income and savings to protect, the answer is yes. What if you are younger and have not yet saved much money or maximized your income potential? The answer is less clear.
Seek the assistance of a qualified Long-Term Care Insurance specialist who works with the top companies. They will review your situation and help you determine what action, if any, to take.
One thing is for sure, aging happens, and the consequences on your family and finances can be life changing. Being prepared will reduce family stress and ensure your access to your choice of quality care options while safeguarding assets.
Get Expert Assistance in Planning
Long-term care is a very specialized area, and few insurance agents and financial advisors have the expertise. Seek the help of a specialist who represents the top companies.
Experts recommend seeking the help of a qualified and experienced Long-Term Care Insurance specialist to help you find the right coverage. A specialist will match your age, health, and family history with the right coverage at the right price.
Top specialists will often have over 500 clients with Long-Term Care Insurance, some in the thousands. This experience is necessary as every company has its own underwriting criteria. Plus, premiums can vary over 100% between insurance companies.
A specialist will save you money, and you will have peace of mind knowing they are making the appropriate recommendations - Work With a Specialist | LTC News.
LTC NEWS Offers Many Planning Tools and Resources
Planning for the future is never easy, but long-term health care planning can be very complicated and comes with many emotions. Getting the right tools and resources will make the process much easier.
One of the goals is to reduce the stress and anxiety usually placed on your family at the time of crisis. LTC NEWS can be beneficial in providing you with important information for you to consider.
LTC NEWS has put in place several resources, including:
- The LTC NEWS Cost of Care Calculator will show you the current and future cost of long-term health care services where you live. Plus, each state has vital state-specific information you should know - Cost of Care Calculator - Choose Your State | LTC News
- The Ultimate Long-Term Care Guide is an outstanding read to help you get a good overview of the topic area.
- Compare the major insurance companies that offer Long-Term Care Insurance products here - Top Insurers for Long-Term Care Insurance | LTC News.
- A detailed tax guide that includes available tax incentives can be found by reviewing the Long-Term Care Tax Benefits Guide.
Find all the resources on LTC NEWS - Resources for Long-Term Care Planning | LTC News.
Finding Quality Care for Mom or Dad
If your family is already in crisis and you need to find help for mom or dad, LTC NEWS can help. We have put together several comprehensive guides to help you in your process.
Start by reading our four guides -
- Finding Quality In-Home Care | LTC News
- Adult Day Care Centers (ADCCs) | LTC News
- Assisted Living and Memory Care Facilities | LTC News
- Finding a Quality Nursing Home | LTC News
If your loved one is lucky enough to own a Long-Term Care Insurance policy, be sure they use it. Sometimes families wait, thinking they can save the benefits for a rainy day. Waiting on using available Long-Term Care Insurance benefits is not a wise idea.
Get Help in Filing a Long-Term Care Insurance Claim
Many insurance companies have issued Long-Term Care Insurance policies over the years. Filing a claim can sometimes be complicated unless you know what to do or get expert help and assistance.
Don't allow the claim process to stop you from using the benefits available in an LTC policy. Quality care obtained early will help provide a better quality of life and reduce the risk of a deep decline and facility care.
If you need help in starting the process of a Long-Term Care Insurance claim, LTC NEWS can help. LTC NEWS provides free assistance with no obligation to help you, or a loved one complete the claims process with a Long-Term Care Insurance policy. We have teamed up with Amada Senior Care, who will do all the work - free with no obligation.
Get help finding quality caregivers or long-term care facilities and get recommendations for a proper care plan, whether a person has a policy. - Filing a Long-Term Care Insurance Claim | LTC News.
Benefits of Reverse Mortgages
Today's reverse mortgages for those aged 62 and older could be an ideal resource to fund a Long-Term Care Insurance policy OR even provide money to pay for care if you, or a loved one, already needs help and assistance. You might be eligible at younger ages as well.
Some people have much of their savings invested in their homes. With today's reverse mortgages, you can find ways to fund care solutions, care itself, and even help with cash flow during your retirement.
Learn more by asking questions to an expert. LTC NEWS columnist and host of the TV Show "62 Who Knew" will answer your questions regarding caregiving, aging, health, retirement planning, long-term care, and reverse mortgages.
- Just "Ask Mike." - Reverse Mortgages | LTC News.
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You can write a story or ongoing column for LTC NEWS. You can write about many topics, including aging, caregiving, health, lifestyle, retirement planning, and long-term care, to name a few.
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Learn more about how LTC NEWS can help you market your business, drive traffic, and improve SEO - Advertise With Us | LTC News.
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