State actuary: Here’s how to keep WA Cares solvent

Washington State Actuary Matt Smith made three preliminary recommendations Thursday morning regarding the solvency of the state’s first-of-its-kind universal long-term care insurance program to be funded by worker contributions.

Smith’s remarks came at a virtual meeting of the Long-Term Services and Supports Trust Commission and were based on a study published last month by actuarial research firm Milliman. The study concluded the program, known as WA Cares, is projected to be fully funded under most scenarios through June 30, 2098.

Milliman’s claim that WA Cares is on solid financial ground as it prepares to launch next July is a welcome news for the state regarding a program that was delayed 18 months by legislative action this year.

The WA Cares payroll tax — 58 cents on every $100 earned — was supposed to kick in Jan. 1, but that plan was derailed by, among other things, lawmakers concerned about people paying into the program who would not be eligible to receive benefits.

The delay means access to benefits that pay for things like in-home care, home modifications for wheelchair access, and transportation to medical appointments has been pushed back from Jan. 1, 2025, until July 1, 2026.

Each person who is eligible to receive benefits can access care costing up to $36,500 — adjusted annually for inflation — over their lifetime.

• “The first recommendation might sound familiar to you: Clarify key program parameters to ensure that actuarial modeling is aligned with expected program administration,” Smith said.

That, he explained, is a continuation of a recommendation made last year.

“Work continues on solidifying the benefit eligibility trigger,” Smith said.

He added, “However, rulemaking will be happening down the road, and I think that will solidify the definition. We recommend that there will be actuarial review of the benefit eligibility rules throughout the rulemaking process.”

• Smith’s second recommendation was reassessing WA Cares’ financial outlook after next year’s legislative session.

“You’re considering potential changes,” he told the commission. “The Legislature might consider making changes that could significantly change program projections. Updating the analysis to reflect any of those changes in any early program experience, that’s going to provide more current outlook than Milliman’s 2022 study.”

A “full-blown assessment” might not be required, he noted, but some form of evaluation will be necessary.

“But I think it will be important to update those projections,” Smith said.

• His third recommendation involved making sure the program stays fully funded.

“The final recommendation is a conditional one,” he said.

If the program’s funded status falls below 100% based on an updated analysis, Smith said, then a response must be developed to return the program to its 100% funded status.

Key takeaways from the Milliman study include:

“Under most scenarios evaluated, including the best-estimate, base plan scenario, the program’s premium assessment of 0.58% ($0.58 per $100 of earnings, or about $24/month for the typical covered earner making $50,100/year) is projected to keep the WA Cares Fund solvent over the entire projection period (through June 30, 2098).”

“The report considers a broad range of potential scenarios. In some of those scenarios it is possible that, without corrective action, the premium rate required to fund the program over the long term could exceed the current statutory premium rate of 0.58%. It is also important to note that actual results will vary from the projections in the report. The Long-Term Services and Supports Trust Commission, the WA Cares Fund oversight body, utilizes a Risk Management Framework that requires the Office of the State Actuary and the LTSS Trust Commission to continuously monitor the program’s finances. This ensures that any risks are identified promptly, giving the Commission and the Legislature ample time to adjust the program as needed to stay on course.”

Not everyone is buying into Milliman’s report.

“An avalanche of nearly 500,000 people opting out of the program, given a now-expired timeline, hurt the fund’s solvency,” Elizabeth Hovde, health policy expert at the free market Washington Policy Center think tank, wrote in a Nov. 1 blog. “But the 18-month delay of the law and tax collection helped solvency predictions, given that wages are expected to continue to rise but the already inadequate lifetime benefit will stay the same.”

She concluded, “Whether WA Cares is deemed solvent or not after numbers get crunched in different ways, solvency doesn't change the reality that this is a harmful tax that needs to be repealed. The tax penalizes workers to create a program that isn't patient-centered and that shouldn’t be offering workers the ‘peace of mind’ the state is peddling.”