After much debate on the merits of the state’s new long-term care benefits program, the Legislature passed two bills on January 26 delaying implementation of the troubled WA Cares Fund program by 18 months and providing for new exemptions for certain classes of employees that work in Washington. Both bills were signed by Gov. Inslee on January 27. Employers that began collecting the tax in January are now required to refund those monies to employees.

As a reminder, the WA Cares Fund is a first-in-the-nation public long-term care benefit program that provides up to $36,500 in benefits used to pay for long-term care services. Premiums are assessed by a 0.58% payroll tax paid by employees, and an employee must pay at least 10 years' worth of payroll taxes, be at least age 18, and be a current resident of Washington to be eligible for benefits. Controversy surrounded the rollout of the program in 2021 as the state geared up for the January 1, 2022 start of the payroll tax. The program faced questions about long-term solvency, adequacy of benefits, unfairness in premiums assessments, and public anger over a rushed and confusing opt-out process that crashed the private long-term care insurance market. More than 450,000 employees have permanently opted out of the program, with more expected to trickle in until the original exemption period ends on December 31, 2022.

Delaying WA Cares Fund

The final version of HB 1732 delays implementation of the WA Cares Fund program for 18 months. The bill delays the start of the long-term care payroll tax until July 1, 2023, delays the start date for benefits payments until July 1, 2026, and requires employers to issue refunds to any employees that have already paid into the program. It also allows “near-retirement” workers that were born before January 1, 1968 (i.e. people who will turn age 65 before they have paid 10 years' worth of premiums) and who don’t meet the program’s vesting requirements before retiring, to receive a pro-rated amount of long-term care benefits based on the number of years they did contribute to the program. The bill has an emergency clause, so it went into effect immediately after the Governor signed it into law.

HB 1732 passed with bi-partisan support (91-6 vote in the House, 46-3 vote in the Senate), though not before legislative Republicans, who generally oppose the current WA Cares Fund, made repeated attempts to repeal or make more sweeping changes to the program.

New WA Cares Fund exemptions

The other WA Cares Fund bill, HB 1733, creates new voluntary exemptions to the program that address several (though not all) of the issues of concern identified by the LTSS Trust Commission in December. The bill allows employees to apply for an exemption from the program and payroll tax if they are:

• A veteran of the U.S. military who has been rated by the U.S. Department of Veterans Affairs as having a service-connected disability of at least 70%;
• A spouse or registered domestic partner of an active-duty U.S. military service member;
• Working under a non-immigrant visa for temporary workers and employed by a Washington employer; or
• Employed by a Washington employer but have a permanent address and primary residence out of state.

HB 1733 does not require any of the above categories of employees to carry alternative long-term care coverage to qualify for the exemption. The bill also provides for pulling an exempted employee back into the program (and the payroll tax) if they no longer meet the requirements of one of the new exemptions. If an employee loses eligibility for their exemption (for example, if they divorce their military member spouse, move to Washington from out of state, apply for permanent residency/citizenship, etc.), the employee will have 90 days to inform their employer of the change and begin paying premiums. HB 1733 passed the House on a 67-29 vote and the Senate on a 38-11 vote, also after repeated attempts to expand exemptions or further change the program by legislative Republicans.

Looking ahead

It is unclear what effect the delay of the program and the new exemptions will have on the class action lawsuit filed against the program in November, though many of the complaints seem to be addressed by the new legislation and could result in the suit’s dismissal. A planned ballot initiative challenging the WA Cares Fund did not get enough signatures to make it on the 2022 ballot.

Neither bill addresses several other key areas of concern identified by the LTSS Trust Commission, including portability of benefits for people who move out of Washington, requiring exempted employees to regularly recertify that they still carry alternative coverage, and addressing program solvency by allowing program funds to be invested by the State Investment Board like other state trust funds. Additionally, neither bill provided for new generally applicable opt-out periods, so only employees that were able to acquire alternative long-term care coverage by November 1, 2021 remain eligible for an exemption, unless they qualify for one of the new exemptions included in HB 1733. It is possible that these or other issues with the WA Cares Fund program could be addressed by future legislation, either in the remaining 2022 session or in 2023.