ACLI concerned about disability insurance program

The American Council of Life Insurers is worried about efforts to establish a voluntary disability in-surance program.

The Community Living Assistance Services and Supports Act, sponsored by Senate Health, Education, Labor and Pensions Committee Chairman Edward Kennedy, D-Mass., was included in the health care reform bill approved July 15 by the committee. Last week, the House Energy and Commerce Committee approved similar legislation.

Under the proposal, all workers would automatically be enrolled in a disability insurance program unless they chose to “opt out.”

Monthly premiums averaging $65 would be charged as a payroll tax. Daily benefits would average about $50 but could run as high as $100.

The program wouldn’t fully cover the costs of long term care, the Washington-based ACLI said.

The cost of nursing home care is about $203 a day, while skilled-home-professional care can run as high as $46 an hour, according to the ACLI.

The group argues that the proposal runs the risk of leading workers into thinking that their participation in the program would assure that their LTC needs would be met.

FALSE CONFIDENCE

“There will be a level of confusion as to the intent of the program,” said Alane Dent, vice president of tax and retirement security at the ACLI. “The 60% of Americans who already believe that Medicare will take care of their long term care will be further disincentivized from planning for their long term care by this program.”

John Rother, executive vice president of policy and strategy for AARP in Washington, disagrees.

“They are looking at this in a shortsighted way,” he said of the ACLI’s stance. “This will open up that market, as opposed to replacing it.”

In fact, the program would likely encourage more workers to think about LTC planning. Few people buy LTC insurance today, and the voluntary program wouldn’t likely be-come a substitute for people with assets, he said.

“For regular working people who can’t afford to buy private long term care insurance, this will be welcome,” Mr. Rother said.

AARP, which represents 40 million seniors, supports the provision.

A staff aide to the Senate health committee, who spoke on the condition of anonymity, said that the program wouldn’t compete with LTC insurance.

“This is not the same as long term care,” the aide said.

In a letter sent to members of the committee July 10, ACLI president and chief executive Frank Keating wrote: “Congress should continue to let private insurance work for the elder-care population.”

He noted that the ACLI supports a state partnership program in effect in 26 states under which residents who buy LTC policies are allowed to shelter a portion of their assets for heirs. Mr. Keating added that the ACLI also supports federal legislation that allows LTC insurance to be offered in employer-sponsored cafeteria plans and flexible spending accounts.

“These initiatives provide a more stable and secure method for ensuring that Americans are able to access the resources they need to help protect themselves against a long term care event,” Mr. Keating wrote.

The disability insurance provision wasn’t included in health care reform legislation approved July 17 by the House Ways and Means Committee.

The Senate Finance Committee is expected to mark up health care reform legislation by the end of the month, and it isn’t yet known if the disability insurance provision will be included in that bill.

Last year, the life insurance industry collected about $9 billion in LTC insurance premiums, according to ACLI spokesman Whit Cornman.

E-mail Sara Hansard at [email protected].