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Automatic enrollment in 401(k) retirement savings plans has succeeded in increasing enrollment to more than 90 percent at some companies. But people can more easily picture themselves retiring than becoming incapacitated by illness, and they know they can get their savings back — if the stock market cooperates — when they do retire and start withdrawing from their 401(k).
Long-term care insurance may look like a gamble because any individual may never need the benefit.
The easier it is for people to sign up, the more people will sign up, said Jeremy Pincus of Forbes Consulting Group, a private company specializing in applying psychological theory to business problems.
“The question is,” Pincus says, “is it a good thing to basically trick people into getting something that’s good for them?”
The long-term care insurance program is detailed in the CLASS Act, or Community Living Assistance Services and Support Act, which is part of both the House and Senate bills.
It would work like this:
Any actively working American could participate, but would have to pay premiums for at least five years before being eligible to make a claim. Premiums would be stable over a person’s life, unless the government had to raise them to keep the program solvent.
Benefits would be at least $50 a day once a person became seriously cognitively impaired or unable to perform at least two or three daily activities, such as dressing and eating, without assistance. Students and the poor would be able to enroll for $5 a month, which would mean other participants would subsidize them.
The program is meant to be self-supporting, without government subsidies. But some worry too few healthy people would enroll, leaving a group of enrollees at higher risk for needing long-term care — and not enough money in the program to care for them.
“If premiums are $2,000 a year, some people are going to look at that and say, ‘Boy, that’s pretty steep. … I’ll worry about that risk some other time,”‘ said Allen Schmitz, an actuary with the independent consulting firm Milliman Inc.
