Washington state's effort to set up a public long-term care insurance program has shown U.S. life insurers just how enormous the long-term care planning market could be.
Washington state let consumers use private long-term care insurance policies and life insurance policies that offer LTC benefits to escape from a new public LTCI program payroll tax. Consumers could avoid the payroll tax if they bought a life-LTC hybrid policy by Nov. 1, 2021.
Because of state residents' rush to use life-LTC hybrids to opt out of the payroll tax, the number of individual life insurance applications submitted in Washington state soared in 2021, according to a new MIB Group video on state-level life insurance application activity data.
The number of applications then plunged 44% in 2022, after the rush to escape from the payroll tax ended.
What It Means
A program that gave people like your clients a choice between buying their own LTC planning products or paying a payroll tax could lead to a huge surge in LTC planning activity.
WA Cares Fund
The WA Cares Fund program would require affected workers to pay up to 58 cents per $100 of earnings for a program that would provide up to $36,500 in lifetime LTC benefits.
The program, which is more like a short-term care insurance program than a true long-term care insurance program, would adjust the benefits limit early.
The state now says it will begin collecting the payroll taxes in July and offering benefits to program participants in 2026.
For now, residents cannot move to opt out of the looming payroll tax by buying private LTC planning products, but lawmakers could eventually choose to bring that provision back.
The MIB Data
MIB is a Braintree, Massachusetts-based group that helps life insurers share some of the data used in the life insurance policy underwriting process.
It uses its own underwriting system activity data to generate U.S. individual life market application activity reports.
MIB data did not provide the raw Washington state policy life application numbers or the actual size of the application activity increase recorded in 2021.
