On November 5, Washington State voters cast their ballots on Washington Initiative 2124, also known as the Opt-Out of Long-Term Services Insurance Program Initiative. The vote determined if employees and self-employed individuals could opt out of a mandatory payroll tax that funds the state's long-term care (LTC) program, WA Cares. The program, which began in July 2023, imposes a payroll deduction to provide LTC benefits, but concerns over benefit sufficiency and solvency remain.
Voters rejected the ballot initiative that would have allowed employees and self-employed individuals to opt out of the mandatory payroll tax deduction. As the country's first state-operated LTC insurance program, WA Cares is funded by a payroll tax deduction of $0.58 per $100 of earnings, meaning an employee earning $50,000 a year would contribute $290 annually.1 Washington employees had a narrow window to avoid the payroll deduction by purchasing or proving existing private "exempt" insurance. Over 475,000 workers provided proof of other coverage during this window and became exempt.2
Supporting and opposing arguments
While there's general acknowledgment that the program needs adjusting (including the $36,500 lifetime cap on benefits per individual, widely viewed as insufficient), opponents of the initiative reasoned that allowing individuals to opt-out could make the fund insolvent by 2027 (the first year the program provides benefits), absent any corrective actions. Supporters believed a Yes vote would give consumers a choice and force the state to improve the value it offers those who choose to participate.
Early on, the state made some adjustments, including making the payout portable, given that many people relocate after retirement. In response to questions regarding workers who hadn't paid into the fund long enough to be fully vested but needed LTC services, Washington allowed workers born before 1968 to access up to 10% of the full annual amount paid ($3,650).2
Remaining concerns include the ability to transfer the benefit upon death, the continuity rule (the impact of leaving the workforce for five years or more and then re-entering), the process for accessing benefits if an employee moves out of the state and a lack of clarity around what constitutes a qualified home healthcare worker.
Program adjustments and remaining concerns
Before the November 5 election, the state announced plans to make additional program adjustments to address program shortfalls. Voters' rejection of Initiative 2124 gives the state a little breathing room. Still, it doesn't negate the need to pursue program improvements or educate and inform state residents about the program's need and value.
Learning from Washington's model
Other states are watching Washington's approach closely. As of October 2024, 11 other states are in varying stages of exploring legislative options. Kentucky, New York and Pennsylvania have introduced legislation (currently in committee), and California had a task force consider multiple program options. Other states are considering a similar program but not offering an exemption period due to the significant number of Washington residents who applied for an exemption with private insurance, which created pricing and risk (feasibility) concerns for the WA Cares Act.
Those using the Washington model are working to introduce language to address its shortfalls. State governments recognize the need for more robust benefits than WA Cares provides. These benefits will require funding beyond what an employee payroll tax can cover. Employers may also be asked to pay into the program, likely a percentage of the employee's salary. State approaches will vary, with some pursuing more progressive policies, e.g., California has discussed the possibility of international portability.
The federal government acknowledges the need for elder care solutions, evidenced by Vice President Kamala Harris's campaign proposal to broaden Medicare to cover home healthcare for the first time, in addition to Donald Trump's suggestion that the government offer a tax credit for family members who are taking care of seniors.
Down the road, expect some combination of state and federal funding that includes a mix of employer and employee dollars.
Why long-term care solutions are important
Long-term care numbers to know
- More than 57 million people in the US are age 65 or older.4
- The average 65-year-old is expected to live another 18.9 years.5
- 70% of people will need LTC at some point.6
- The median income for those 65 or older is $29,740.4
- 83% of households don't have a plan to address LTC needs.7
According to an analysis by the Bipartisan Policy Center, a record number of Americans will turn 65 in 2024, roughly 4.1 million or 11,200 per day.3 By 2040, the government projects the 65+ community will reach nearly 79 million (more than double since 2000).4 Adding to the challenges associated with an aging population, a small segment of the workforce has prepared for long-term future healthcare needs, making this a growing priority for states and, increasingly, for employers.
Medicaid has been a solution to help finance LTC services. However, the growing number of seniors means that Medicaid cannot meet the future needs of the population without additional funding sources.
Long-term care solutions as a voluntary benefit
Employers are helping identify and deliver sensible solutions. A 2024 Gallagher survey of employers found that LTC solution options are the fastest-growing voluntary benefit offering, based on changes in employer offerings from 2000 to 2024. Yet, LTC benefits aren't among the top 10 offerings in 2024.8
Various recent industry polls cite that 30% to 40% of employees are interested in employer-provided LTC insurance, with interest projected to grow due to economic concerns and demographic shifts. In 2023, only 20% of employers offered LTC insurance, according to the Society for Human Resources Management (SHRM) annual employee benefits survey.9 Yet, in a Gallagher survey, two-thirds of employers reported plans to review LTC solution options in 2024, with LTC being the top-ranked voluntary benefit of interest at 18%, among large employers.8
Employers champion innovative long-term care benefits amid rising costs
Various stakeholders, including employers, are fueling the rise in innovative solutions as a voluntary benefit. The LTC "umbrella" typically covers long-term health care, home health care, adult day care and assisted living. Like states, employers see the population data and anticipate what's coming. They're also aware of the high cost of healthcare including skilled nursing facilities and home healthcare, which many employees cannot afford, whether for themselves or aging parents.
With families increasingly smaller and more geographically dispersed, converting a home office to care for an elderly parent isn't a viable solution for most families. Gallagher estimates that LTC expenses can reach $100,000 or more per year, with the average need lasting roughly three years — placing a significant financial burden for most employees.10 Providing solutions to help employees manage the complex challenges and costs of LTC is vital to the organization's overall wellbeing strategy.
Interest in portable, permanent benefits is also rising, especially among younger employees. In a 2024 Gallagher survey, Gen X (ages 44 to 59) ranked "long-term care readiness" as their second-highest valued benefit.8 This group represents the largest portion of the workforce for most organizations.
Many employees, regardless of age, already rely on home healthcare services, often in conjunction with long-term disability benefits.11
Employers are stepping up to address employee financial wellbeing
Employers are well positioned and ready to help solve their employees' pending financial crisis while supporting employees' long-term wellbeing. In a 2024 Gallagher survey, 72% of employers reported they were likely to address financial wellbeing in 2024, and half reported plans to review LTC options,8 a significant increase compared to 2022 survey data.
Today's innovative solutions offer value to employees at all stages of their careers and lives. As employees age, benefits conversations become more nuanced but no less essential to employee and organizational wellbeing.
Gallagher long-term care resources
Our voluntary benefit consultants assist organizations in identifying best-in-class solutions based on their employee population and organizational resources. They also support employers in designing education and information programs that reflect the needs and interests of the organization's workforce.
Gallagher advisors draw on agnostic relationships with more than 70 national and global carriers. Together with our holistic view of employer organizations, these relationships enable our advisors to apply our expertise and experience to support organizational wellbeing.
To discuss long-term care solutions for your workforce, contact the Gallagher Voluntary Benefits Consulting team.
