Lawmakers might close a window on workers who would rather choose their long-term care plan than be taxed for a publicly financed one

By ELIZABETH HOVDE  | 
Mar 25, 2021
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You may not know about this tax yet, but it’s going to cost Washington workers hundreds of dollars a year beginning in January. Paychecks will be going down because of yet another payroll tax to finance yet another socialized program — one that might never benefit them and that a private plan could outdo. 

Passed by the state Legislature in 2019, the Long-Term Care Trust Act created a publicly funded, long-term care benefit for most Washington workers. Taxing workers in this way is being sought to help control state Medicaid costs associated with long-term care. 

The fund that gets built on these new payroll taxes that the state is calling “premiums” will provide an extremely basic level of long-term care. The Washington benefit is $100 a day toward qualifying long-term care needs, with a maximum of $36,500. Individuals currently receiving long-term care or providing it for their parents know how tiny this amount is. 

Workers who pay into the fund for the required number of years will be eligible for the benefit. What will it cost them? The 2019 law signed by the governor mandates that beginning in 2022 workers pay 58 cents for every $100 of income. So someone making $50,000 a year would pay $290 a year for this tax. Someone making $100,000 annually would pay $580. Each worker, of course, would be eligible for the same small, long-term care benefit. 

People who pay for their own long-term care insurance can apply for an exemption from the tax during the first year. That is part of what Substitute House Bill 1323 deals with. The bill would amend the law to limit the number of people who will try to opt out. It will receive a Senate committee vote Friday and could then be passed onto the full Senate. It has already cleared the House.  

Under the current law, no purchase date is dictated for allowing a person with a long-term care plan to opt out of the payroll tax. A timeframe does exist to apply for an exemption, however. A Senate staff member explained Wednesday that SHB 1323 would keep the exemption-application timeframe intact but only consider exemptions for people who purchased a qualifying long-term care plan before July 2021. 

There are several reasons people might want to opt out of the fund, and many workers are just learning about this payroll tax that will lower their paychecks. 

  • The benefit is not portable, so people planning to move out of the state after retirement won’t receive it, despite paying in for years. 

  • Long-term care insurers told the Senate Health and Long Term Care Committee that people who plan to retire in the next decade won’t see the benefit, because of certain eligibility requirements. 

  • Opting out and purchasing an individual policy makes more monetary sense for many incomes.

This new piece of legislation is sought this legislative session because lawmakers fear a mass exodus of workers who will soon find out this payroll tax isn't a good deal for their long-term care needs. And the fund needs as many people paying in as possible, so it stays solvent and doesn’t require further tax increases or benefit decreases. 

SHB 1323 would place bad policy on top of bad law. Taking away workers’ choices, rewarding a lack of individual planning, and having the state become a long-term care insurer is not appropriate or wise. Working to lock people into the long-term care law, instead of providing a reasonable “no thanks,” makes the long-term care fund even less desirable.