Washington State’s New Mandatory Long Term Care Insurance Plan. Can you opt out?

The State of Washington is implementing an employee tax of .0058% or 58 cents for every $100 earned to help pay for long-term care coverage starting in 2022.  Claims may be filed as early as 2025 and is the benefit pool amount is $36,500 or $100/day for 1 year.  This is an automatic opt-in for W2 employees who are at least 18 years old and work in the State of Washington.

For those earning $50,000 per year the tax will equate to $290 annually.  Not a considerable amount for the benefit, but for those higher wage earners the tax could equate to a significant amount more.  For example, a household earning $400,000 this could be up to $2,320.  While some might argue that these higher earners can afford this extra tax, they should keep in mind that premium comparatively to the pool of benefits is extremely high and private insurance options might provide a better benefit for the tax aka premium amount.

Note, that you must also live in the State of Washington to receive these benefits.  For those planning on moving out of state this is certainly not a good deal.

State LTCi systems have been stressed and have had troubles in recent history.  Take California’s CalPERS opt in system for example.  In 2013, CalPERS notified policyholders they would be receiving rate increases of 85% in 2015/2016 and stated they may also do this again if needed.  New policy holder premiums have planned increase of 52% in 2021 and 25% in 2022.  This might not be the case for Washington since the benefit pool is very low, but we have seen rate increases amongst policyholders in other programs.

In my opinion the state is looking out for the best interests of its residents, but the program might not make sense for some individuals.  Luckily, Washington has given its residents a one-time opt out or exemption.

The window to apply for an exemption on the State’s LTCi program is small.  Individual’s wanting to purchase private insurance will be allowed to submit an exemption application beginning October 1st, 2021.

Here are the requirements for a permanent exemption of the State’s long-term care insurance program.

  • Apply and be approved for the exemption in the given time window.
  • Be at least 18 years old
  • You must purchase a private long-term care insurance plan before Nov. 1st, 2021.

Written by Bijan Noori

For information on the specific private plan options in the State of Washington please reach out to me by email: bnoori@baypointgroupllc.com