Why getting long-term care insurance in Washington is nearly impossible — and has been for months

Editor’s Note: Washington House lawmakers voted on Jan. 19, 2022 to delay implementing the payroll tax until 2023.

George had been thinking about buying long-term care insurance for a while. 

George, who is 50 and declined to give his last name, said he is getting to the age where his parents and his friends’ parents have started needing help with daily activities like bathing and eating. His mother in-law had insurance which helped cover the assistance she needed due to Parkinson’s disease. 

“[Long-term care insurance] is something my wife and I are starting to talk about because we don’t want to be a burden on our kids,” he said. 

But there was another reason he was looking for coverage. 

Starting in January, most workers in Washington will see a 0.58% payroll deduction on their paychecks that will go toward funding the WA Cares Fund, the state’s first-in-nation public insurance program which intends to help older residents age in their own homes without having to spend down their savings.

However, workers can get out of the tax and apply for an exemption if they are 18 years or older and have purchased qualifying long-term care insurance before Nov. 1. Workers can apply for an exemption through next year. Once they opt out they are permanently excluded from coverage and benefits from the WA Cares Fund.   

In September, George looked up the list of companies that are authorized to sell long-term care policies in Washington and called a dozen of them. He talked to three insurance brokers and heard the same thing: no long-term insurance company was selling policies in Washington until after the Nov. 1 deadline.

The freeze has been in place for a few months now, said David Clemons, a Kirkland long-term care insurance specialist and broker. Since Washingtonians found out about the WA Cares Fund and its payroll tax, long-term care insurance companies have seen an extraordinary spike in demand. 

“I was selling 20 to 30 applications a week and that’s just unprecedented for me,” Clemons said. “It’s just huge. I did one year’s worth of production in three months.” 

Then in August, companies caught on and said they simply could not process the sheer volume of applications, especially for policyholders, who would likely cancel as soon as they were exempt from the WA Cares payroll tax, Clemons said. 

Companies also told brokers like Clemons that if a client canceled their policy within a year, they would charge back the commission they earned on the whole year, regardless of how long the person held the policy. 

People as young as 18 years old were seeking insurance for elder care they wouldn’t need for at least four decades, purely to get out of the tax, he said.

These days, Clemons guesses he receives about 40 to 50 emails a day, all from people desperately trying to buy insurance to avoid the tax. He tells them all the same thing: There will be no options for long-term care policies in Washington until after Nov. 1.

Even if companies were selling, the process of applying for long-term care insurance and having a policy in place can take around 90 days, he said. Agencies often require a lengthy application, medical records and in some cases, a phone or face-to-face interview.

One company saw 66,000 applications over the summer, an eightfold increase to the typical 8,000 they process in a year, according to Steve Valandra, spokesperson for Washington’s Office of the Insurance Commissioner. 

“It’s been like a tsunami of inquiries and complaints from customers about WA Cares, even though it’s not a program that we manage,” said Valandra. 

His agency has received around 1,200 phone calls and 2,000 live chats each month for the last three months. Typically, when insurance is not such a hot topic, the agency sees a fourth of that volume. The webpage with information on long-term care insurance has seen around 10,000 views a day, he said.

Long-term care insurance was affordable and underpriced when it was sold in the 1980s, Valandra said. But since then, health care costs have increased and many of those companies have gone bankrupt. There used to be more than 100 companies selling long-term care. Now, there are fewer than 20, he said.

“It’s no secret that long-term care insurance in this country is a mess,” Valandra said. 

People often seek long-term care insurance when they are between 45 and 65 years old, but not everyone can afford it or get approved, Clemons said. 

According to the American Association of Long-Term Care Insurance, a healthy and single 55-year-old in 2019 could expect to pay between $2,000 and $2,700 in annual premiums for long-term care insurance.

Clemons estimated that of the less than 20% of the population that seeks long-term care insurance, nearly 40% of applicants get rejected due to preexisting health conditions. Most people rely on savings or unpaid family members for assistance in old age.

“When people run out of money and they don’t have anybody to take care of them for free, they go on Medicaid and the state is paying the bill,” he said.

At the same time, private companies are struggling between low interest rates and a large share of policy holders claiming benefits, with around 70 to 80% of people ages 65 and older needing some form of long-term care assistance before they die. 

Currently, people who move out of Washington for retirement will not be able to claim benefits, despite paying into the WA Cares Fund. The same is true for people who work in Washington but live in neighboring states. People who intend to retire and stop working in less than 10 years will lose eligibility within a few years, despite paying into the fund.

While policymakers have said they are considering changes to the plan, the assurances seem to not be much relief for Washingtonians. At least 150,000 people have applied for exemptions, according to WA Cares Fund Director Ben Veghte.