Designing the WA Cares Fund

Ten years ago, the Washington State Legislature recognized that as our society ages, more people will need long-term care, meaning they will need help with activities of daily living like preparing meals, getting dressed, bathing and getting around.

More than 70% of Washingtonians age 65 and older will need long-term care at some point, but few people are financially prepared.

Long-term care costs are not covered by Medicare or health insurance and few people can afford private long-term care insurance, particularly on a fixed income throughout retirement. Before WA Cares was created, less than 3 percent of Washingtonians under 65 had private long-term care coverage.

That leaves Medicaid, which requires people to spend down their life savings to just $2,000 to qualify, or paying out of pocket. But most Washington seniors don’t have enough money saved for a comfortable retirement, much less to be able to afford the costs of long-term care. Families are forced to fill the gap by leaving the workforce to provide unpaid care or using their own retirement savings, both of which can be financially devastating.

2014: Joint Legislative Executive Committee on Aging and Disability began a search for solutions.

The JLEC began working with a broad group of stakeholders and policy experts to design a policy to better prepare families to cope with their long-term care needs. The goal was to find a way to offer affordable long-term care coverage broadly to the middle class in a financially sustainable way, while also reducing reliance on Medicaid.

2015: Actuarial firm began analysis of potential solutions.
The legislature directed the state Department of Social and Health Services to contract with an actuarial firm to conduct an independent feasibility study of options that could assist individuals in paying for long-term services and supports. DSHS contracted with the actuarial firm Milliman.

The firm explored the extent to which different policy approaches identified in the stakeholder process could meet the goal of providing affordable coverage to the broad middle class. Both public and private insurance approaches were explored.

Ultimately, two specific approaches were modeled:

• A public long-term care benefit for workers: Like WA Cares, this model would expand coverage to workers throughout the state, funded through a payroll deduction.

• A public-private reinsurance or risk-sharing model: This model would expand coverage through private insurance. Private insurers would receive ongoing reimbursement for a portion of their catastrophic long-term care losses so they could offer additional private insurance capacity in the state.

2018: Actuarial firm completed their report. Milliman conducted two feasibility analyses on these options, completing its second report to the legislature in October 2018.

A primary question Milliman’s work addressed was whether a public-private reinsurance model could lead to a broad expansion of population coverage through private long-term care insurance. The report’s conclusion was definitive: it could not.

This finding was consistent with other research at the national level on how to protect the middle class against the risks of becoming impoverished by the need for long-term care. Multiple actuarial studies have concluded that no voluntary insurance program, whether public or private, would be affordable.

Voluntary private insurance failed to cover a broad population due to both affordability and underwriting, where insurers may deny coverage to people who have pre-existing conditions that put them at high risk of needing long-term care in the future.

Voluntary public insurance with guaranteed issue (meaning no one can be denied coverage due to pre-existing conditions) is actuarially unsustainable because it is highly vulnerable to adverse selection. Adverse selection happens when people who have health problems, have functional limitations, or are experiencing cognitive decline are much more likely to purchase voluntary insurance than people who are healthier. This drives up premiums sharply over time, which in turn prompts healthier people to opt out, leading to a sicker risk pool and driving up premiums further.

By contrast, according to Milliman’s findings, a near-universal public insurance program like WA Cares could achieve the goals of protecting the broad middle class from the financial risks associated with needing long-term care at an affordable premium and in a financially sustainable way. With this type of program, virtually all employees are covered at a low premium, no one is denied coverage due to pre-existing conditions, everyone pays in, and everyone can benefit when they need help with activities of daily living.

2019: The Legislature passed the Long-Term Services and Supports Trust Act, creating WA Cares. 

Based on years of stakeholder input and actuarial analysis, the Legislature passed the Long-Term Services and Supports Trust Act, creating the WA Cares Fund, and Gov. Inslee signed the bill into law.

2022: The Legislature added a pathway to partial benefits for near-retirees and established voluntary exemptions for certain groups of workers.

Rarely is any important innovation perfect from the beginning. As the first state in the nation to create an affordable long-term care benefit, it’s to be expected that the program would need some fine-tuning and the Legislature is already working to make improvements.

In 2022, the Legislature created a pathway for near-retirees to qualify for partial benefits and granted exemptions to certain groups of workers who are unlikely to be able to access benefits. This included people who live outside Washington, military spouses and domestic partners, workers on non-immigrant visas and veterans with a 70% or greater service-connected disability rating.

In the same year, the LTSS Trust Commission made recommendations to the Legislature for additional program improvements, including making benefits portable.

2023: Workers began earning WA Cares benefits.

In July 2023, more than three million Washington workers began earning WA Cares benefits. While it can be hard to put money aside today for our future needs, especially for people struggling in a tough economy, when workers need care down the road, they will be able to access it. This will make Washington families more resilient as our society ages and give them more choices to help them live with dignity and independence as they age.