John Bullis: Weigh other options for long-term care

The Obama health care plan was passed into law about 18 months ago. One of the key provisions was for long-term-care insurance, known as Community Living Assistance Services and Supports, or CLASS.

Yes, I know some folks would like to repeal the entire health care plan. But it now looks like the department of Health and Human Services has sort of shut down the long-term-care provisions.

The Wall Street Journal reported that the office doing that work has been disbanded. The CLASS program career staffers were moved to other projects, and the program's chief actuary is no longer working on it. Sounds like it will not be implemented.

A big part of the program was that you sign up and pay premiums for five years before any benefits could be received. Those premiums, of about maybe $86 billion, would be treated as income, reducing other costs of the total Obama health plan. That was scored as income by the Congressional Budget Office, even if the estimates were not realistic.

Of course, mostly sick people would elect to participate in the program. It had been estimated that it could be solvent only if 230 million Americans enrolled. That does not seem realistic when you estimate the total number of workers in the U.S.

Front-loading (collecting five years of premiums before paying any benefits) is not new. Warren Buffett saw the benefits of that and got much of his start from buying insurance companies for the "free cash flow" that is realized. Then he used a lot of that "free cash flow" to buy other companies.

I do understand we are generally living longer, needing more medical care as we age. The possibility of needing financial help to pay those medical expenses is pretty high. That's why we encourage our clients to consider buying some long-term-care insurance. We suggest the lower premium while fairly young (say age 55 or so) and in good health is a good idea.

There are studies that indicate the total premiums paid for long-term-care insurance are about the same if you buy at a young age for low premiums or buy at age 65 or older and pay high premiums. The problem is, it's hard to predict when I might experience health problems that prevent the purchase of long-term-care insurance.

I guess the main idea is don't plan on CLASS insurance being a good alternative. Look into buying from regular insurance companies that have a history of providing that kind of insurance, a good history of paying claims, and that are rated as financially strong and likely to be around when you need the benefits.

Did you hear, "An optimist is a fellow who believes a housefly is looking for a way out?" By George Jean Nathan.

• John Bullis is a certified public accountant, personal financial specialist and certified senior adviser serving Carson City for 45 years. He is founder emeritus of Bullis and Company CPAs, LLC.