Legislators deeply concerned about CLASS Act sustainability

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A group of state legislators has said that it has “grave concerns” about the long-term sustainability of the controversial CLASS Act.

Members of the National Conference of Insurance Legislators wrote a Aug. 4 letter to Department of Health and Human Services Secretary Kathleen Sebelius, in which it said the Community Living Assistance Services and Supports program,  “fails to apply the principles of risk management that are essential to any financially sound insurance program.”

As a federally-backed long-term care insurance option, the CLASS Act was intended to be self-supporting through premiums and let elderly and disabled individuals remain in their own homes. Federal government officials have said the program won't move forward unless it is solvent. The NCOIL, a lobbying group that comprises state-level legislators and officials whose goal is to closely monitor insurance initiatives, said it still has misgivings.

“The CLASS program risks being under-capitalized on the front end, paying more in benefits than it collects in premiums,” the letter states. “This will drive rates up and cause adverse selection, as young and healthy consumers will not participate in the market. Also, the plan as currently configured offers little incentive for agents, brokers, and human resources professionals to encourage the enrollment needed to create a broad and stable risk pool.”