The Obama administration on Friday pulled the plug on a voluntary long-term care program that was part of the health care reform law. “We have not identified a way to make CLASS work at this time,” Health and Human Services Secretary Kathleen Sebelius said.
Because the program was voluntary, critics say it would have resulted in adverse selection, a point Ms. Sebelius conceded. “This could have led to a vicious cycle where premiums would have to be set higher and higher to cover the likely costs of the benefits, leading fewer and fewer healthier people to sign up for the program,” she said.
Employer groups welcomed the decision. “Since employers did not have to offer the plan, it didn’t really affect them directly, but if the government set it up, employers might have had to waste time explaining it and answering questions. Plus, if the government put it in and it failed because of the poor insurance design—which it certainly would have—the taxpayers would get stuck with another bailout. Employers might have been taxed for a program that made no sense,” said Helen Darling, president of the National Business Group on Health in Washington.
