| Full title | Title VIII of The Patient Protection and Affordable Care Act. |
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| Acronym | CLASS Act |
| Enacted by the | 111th United States Congress |
| Effective | March 23, 2010 |
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The Community Living Assistance Services and Supports Act (or CLASS Act) is a U.S. federal law, enacted as Title VIII of the Patient Protection and Affordable Care Act. The CLASS Act would have created a voluntary and public long-term care insurance option for employees,[1][2][3] but in October 2011 the Obama administration announced it was unworkable and would be dropped.[4]
Under the Act the Department of Health and Human Services was to set the terms prior to implementation, but determined the program was not viable and could not go into effect.[5][6][7]
The CLASS Act had been "a key priority" of the late Senator Edward "Ted" Kennedy.[8][9]
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Most of the terms were to be developed by the Department of Health and Human Services over several years. However, certain terms were set in statute:
According to Barbara Manard, a health economist with LeadingAge, the act would have created "a national insurance trust" with a potential "daily cash benefit on the order of about $50 to $75 a day, depending on your level of disability."[11]
The Congressional Budget Office estimated the program would have resulted in $2 Billion in Medicaid savings in the first ten years because of individuals receiving benefits under the CLASS Act that they could have received under Medicaid.[12]
Premium rates were to be determined by the Department of Health and Human Services with subsidies for low-income individuals and students. Premium rates would have varied by issue age. The CLASS program contained an implicit redistribution tax to subsidize lower income and full-time student participants.[2]
The legislation did not set specific benefits. The Secretary of Health and Human Services was tasked with developing actuarially sound premiums and benefits.[11]
Many organizations, including the Congressional Budget Office, developed estimates of potential premiums and benefits:[13]
| Analyst | Average Daily Benefit | Estimated Monthly Premium | |
|---|---|---|---|
| ACLI | $90/day | $140/month | |
| CBO (June 25, 2009) | $75/day | $65/month for initial decade, rising to $100/$110 for subsequent cohorts | |
| CBO (July 6, 2009) | $75/day | $65/month for initial decade; after 2019, benefits dropped to $50/day and premiums for new enrollees raised to $85/month | |
| AAA/SOA | $75/day | $125/month | |
| Mercer Group | About $75/day [2-3 ADLs = $50/day; 4+ ADLs= $100/day] | $61/month to $123/month, depending on participation rate and disability trends | |
| ACLI | $50/day | $107/month to $117/month | |
| AAA/SOA | $50/day | $86/month | 0 |
Benefits would have varied by severity of functional limitation, with the average being at least $50 per day. The benefit schedule could have been adjusted in future years by the Secretary.[2]
Employers would have auto-enrolled employees through payroll deduction, a negative election similar to some 401(k) plans.[2]
Tax treatment would have been the same as for tax-qualified long-term care plans (i.e., benefits would not have been taxable and premiums might have been eligible for medical expense deduction).[2]
Participation would have been limited to employees actively at work, and required a five-year vesting period (including three working years) prior to benefit eligibility.[2]
The CLASS program did not extend coverage to an employee’s family members. It was not clear how non-working spouses could enroll in the program or receive benefits due to the requirement that the beneficiary must have had sufficient earnings to be credited with income quarters under the Social Security Act.[2]
The statute says, "No taxpayer funds shall be used for payment of benefits under a CLASS Independent Benefit Plan... the term ‘taxpayer funds’ means any Federal funds from a source other than premiums.... and any associated interest earnings."[14][15]
Administrative expenses, including advocacy and assistance counseling, were to be limited to three percent of premiums.[2]
On April 4, 2011 senators John Thune and Lindsey Graham introduced the Repeal the CLASS Entitlement Act citing the potential of it becoming a new entitlement program. It was predicted that enrollees requiring large medical payouts would be attracted to the plan, leading to the inability of the collected premiums to cover all costs.[16]
On July 19, 2011 the Senate so-called Gang of Six, a bipartisan group of senators proposed to repeal the CLASS act as part of a proposal for a balanced budget legislation[17]
On October 14, 2011, HHS Secretary Kathleen Sebelius announced that the Obama Administration would not attempt to implement the C.L.A.S.S. Act stating “I do not see a viable path forward for Class implementation at this time.”[18]
Republican opponents of the plan called it "a financial gimmick" to manipulate the Congressional Budget Office deficit projections for the PPACA, while Democratic Senator Kent Conrad called it a "Ponzi scheme," because (a) projected premiums during the vesting period were counted as revenue during the first decade but promised spending would have begun in the second decade, so the CBO's 10-year estimates included the revenue but not the spending, and (b) benefits would cost more than premiums.[19]
Timothy Carney of the Washington Examiner wrote that the Act would have encouraged revolving door behavior, calling the Act "an 'unsustainable' subsidy to companies whose former executives helped write it, and which are now hiring the congressional staff that helped write it."[3]