State House passes pause to long-term care tax

OLYMPIA — Nearly three years ago, Washington became the first state in the nation to establish a defined benefit to help offset the costs of long-term care. Now, lawmakers are quickly moving to delay implementation amid concerns about long-term solvency of the program and criticism of the timing of the payroll tax that pays for it.

The lifetime maximum of the benefit is $36,500, with annual increases to be determined based on inflation, and the program is funded by workers, who pay a premium of 0.58 percent of total pay per paycheck.

On a 91-6 bipartisan vote, the Democratic-led House passed one measure that would delay the tax — which was supposed to start being collected by employers this month — until July 1, 2023, and would refund any premiums that were collected before that date. Collection of the benefit to pay for things like in-home care, home modifications like wheelchair ramps and rides to the doctor would be delayed from Jan. 1, 2025, until July 1, 2026.

Additionally, people born before Jan. 1, 1968 who do not become vested in the program because they do not pay the premium for 10 years could qualify for partial benefits under the bill.

Democratic House Majority Leader Pat Sullivan said that the pause was necessary “to ensure that the program is as effective and efficient as we can make it, so that we can guarantee those benefits to our residents throughout the state.”

Republicans, who note that the delay comes as Democrats look at a potentially tough election year, have argued that the state should focus on working to make private industry plans more affordable for those who want to buy them.

Republican lawmakers attempted to pull a few of their bills out of committee to the floor, including a bill that would repeal the underlying program out of committee and to the floor, but the motions failed.

Several Republican amendments offered on the floor, including one that would require voter approval of the program in order for the payroll tax to take effect in July 2023, were either ruled out or order or rejected.

Republican Rep. Joe Schmick said that he still had multiple concerns, including the lack of portability of the benefit for those who pay in for years but may retire out of state. But he said he was voting for the delay with the understanding that “we need to fix some of the problems that are associated with this bill and if we’re going to do it we need to do it correctly.”

Under an update to the law passed by the Legislature last year, people who wanted to opt out of the state-managed program had to have a private long-term care insurance plan in place before Nov. 1, 2021 and then apply for an exemption.

Modeling by the consulting firm Milliman in December 2020 showed various scenarios of opt-out structures, with the baseline one finding that 3 percent of wage earners responsible for about 10 percent of wages in 2022 would opt out at the start of the program. Under that scenario, a premium assessment of 0.66 percent would be required to keep the program solvent through 2096.

More than 460,000 people — or approximately 13 percent of the state’s workforce — have opted out of the program.

In December, Gov. Jay Inslee announced the state wouldn’t collect the assessments from employers before April, and employers were encouraged to not collect the tax before lawmakers figured out a plan.

His announcement came a few weeks after Senate Democratic leaders sent him a letter asking for the delay while expressing continued support for the intention of the program, called WA Cares Fund.

In addition to the concerns raised about exemptions and portability, the lawmakers said the program needs to be looked at “through the lens of the pandemic.”

“As our state and nation continue to grapple with Covid-19 and support a healthy financial recovery for everyone, now is not the time to add a payroll deduction, even for a critical need,” they wrote. “We know Washingtonians face challenges with housing, childcare and other costs during this recovery and we do not want to add another at this difficult time.”

Another bill passed Wednesday would allow people who work in Washington but live in other states to opt out, along with spouses or partners of active military members and temporary workers with nonimmigrant visas. That bill passed on a 67-29 vote, with some Republicans arguing that if the law is going to stay on the books, solvency issues need to be addressed before more people can opt out.

Both measures now head to the Senate, which is expected to pass them as early as next week.

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