New state-run program will not fix long-term care crisis, nor should it offer peace of mind to workers forced to fund it
1. Washington state’s long-term care law, HB 1087, passed in 2019 but has yet to begin because of many recognized flaws. It created WA Cares, a mandatory social program funded by workers in the state with a payroll tax of 58 cents for every $100 earned.
2. The state-imposed program will not give workers financial security promised. An inadequate lifetime benefit of $36,500 is not enough for most people’s care, should they require it. And many workers won’t qualify for the benefit, regardless of how much they pay. Telling people this fund brings them “peace of mind” is not only false, it’s dangerous.
3. The regressive tax in the law means some low-income workers will be forced to hand over a portion of their income to benefit others with higher incomes and who may not need assistance. This program expands a safety net far too wide.
4. The Legislature placed a constitutional amendment, Engrossed Senate Joint Resolution 8212, on the ballot to create additional funding for the program. It was defeated 54 to 46 percent, impacting program solvency. State Actuary Matt Smith wrote in an analysis that the WA Cares program will face a $15 billion shortfall.
5. There is already legislative discussion that the 58-cent tax will need to increase or the benefit amount of $36,500 decrease to keep the program viable.
6. A program exemption included in HB 1087 (2019), and then limited in HB 1323 (2021), was not well-publicized. It seemed Washingtonians were intentionally kept in the dark. Still, nearly 500,000 people learned of the exemption in time to opt out of the program.
7. The long-term-care insurance market in the state was temporarily shut-down, overwhelmed by people looking for a private plan to avoid the payroll tax and the inadequate, insurancelike product the state was mandating.
8. More voluntary exemptions carved out in 2022 are misleading, as they require action on the part of an “exempt” person. The new exemption categories also increase concern about the fund’s solvency.
9. WA Cares will allow some caregivers, including family members, to be paid with taxpayer funds if they have state-required training. Service Employees International Union 775 lobbied for and supports this law.
10. Instead of imposing this program and tax on Washington workers, lawmakers should repeal the law, create awareness, encourage savings, protect Medicaid, cut the tax on insurance products and remove limits on purchasing.
In 2019, the Legislature passed a law to create a new payroll tax and impose a mandatory long-term-care (LTC) entitlement program on Washington workers. Gov. Jay Inslee signed the bill, HB 1087, on May 13. The program was later designated the WA Cares Fund.
The new payroll tax was initially planned for collection starting Jan. 1, 2022. Public opposition and glaringly unfair details in the long-term-care law, however, caused Inslee to ask the Legislature to delay collecting the tax and make some changes to the law. Lawmakers implemented a delay until July 1, 2023, beyond the 2022 election. They also created a partial benefit for some near retirees and additional exemption categories. These changes were made in House Bills 1732 and 1733. These pieces of legislation were fast-tracked in the first weeks of the session, and the governor signed the bills into law on Jan. 27, 2022.
Voluntary exemption, voluntary opt-in
The entitlement program created is mandatory for all W-2 employees, representing the vast majority of workers in the state. Original legislation that passed included an opt-out provision if workers could show they had private long-term-care insurance (LTCI) and applied to opt out between October 2021 and December 2022. The rush of exemption applications caused the state website to overload for a time when the opt-out window opened. Insurance brokers were swamped with requests for affordable private coverage, as workers learned about the coming program and payroll tax.
So far, during the months Washingtonians have been able to apply for exemption attesting that they have LTCI, nearly 500,000 people have sought to opt out. The Employment Security Department told me the current number represented about 11 percent of those with recent employment.
Seeing more financial trouble than was already expected on the horizon, the Legislature limited this voluntary opt-out provision with House Bill 1323 in 2021. HB 1323 specified that the exemption to the program for employees who had LTCI applied only to those who purchased their coverage prior to Nov. 1, 2021. At this time, many people still did not even know about the payroll tax coming their way.
With the opt-out limiting legislation, lawmakers also made a way for non-W2 workers and tribes to opt into the program, hoping to help the program’s finances. Officials at the Employment Security Department have since announced that based on experience with other state programs, they anticipate few, if any, workers will ever join WA Cares voluntarily.
Critics, including Washington Policy Center, pointed out that workers who live out of state and temporary workers would have to pay in but would receive no benefits in the original legislation. Hearing the outcry — and receiving a ceaseand-desist letter from Idaho — the Legislature further amended the law in 2022. The Legislature created new categories of exemption that would apply to workers living out of state, non-immigrant visa holders, military spouses and some disabled veterans. Their exemption is not automatic, however. Individuals in these new categories must apply for exemption and be approved by the state.
They can start applying after Jan. 1, 2023. It is not yet clear what will be required in that application process.