Inslee signs bills to delay, expand exemptions in WA Cares

Gov. Jay Inslee signed bills Thursday to delay the WA Cares payroll tax on Washington workers and expand the number of people who can seek permanent exemptions to avoid paying into the first-of-its-kind long-term care program.

The governor signed House Bills 1732 and House Bill 1733 just one day after Senate lawmakers voted them out of that chamber. The bills passed the House last week.

“By pausing and improving this important program, we’ve really made progress here in just the last few days in Olympia,” Inslee said Thursday in a regularly-scheduled news conference. “We do have to get this right, because this is so important to so many people.”

The 0.58% payroll tax on employees in Washington — which amounts to $290 per year for someone making $50,000 annually — was set to begin Jan. 1.

But amid questions and criticism about the nascent program, Inslee announced late last month that the state would hold off on collecting the tax from employers until lawmakers explored changes.

Sen. Judy Warnick, R-Moses Lake, initially supported the program when it was first drafted, but said it became something she can no longer stand behind as is. The program puts too many demographics at a disadvantage and its potential insolvency is a risk for the state.

“We’re not looking at all the exemptions or all the pieces that we should,” Warnick said, “to make this sustainable.”

The program was intended to provide long-term care to Washington’s aging population and other residents in need. All Washingtonians who pay the tax and vest in are eligible for benefits of $36,500 annually.

To vest into the program, a person must pay the premium for at least 10 years at any point without a break of five or more years within those 10 years, or three of the last six years and at least 500 hours per year during those years.

Rep. Joe Schmick, R-Colfax, questioned whether the program was a false hope for Washingtonians. He said long-term care fees often exceed the $36,500 annual benefit; if people rely on this program and it becomes insolvent, they will see an impact.

Sen. Mark Schoesler, R-Ritzville, questioned the reliability of the legislation due to lack of portability. The legislation does little to address employees who work in Washington but live out-of-state in Oregon or Idaho. Those people would pay the tax but reap no benefit.

Schoesler nicknamed the WA Cares Fund the “short-term care program.”

The tax is now delayed until July 2023. Any premiums collected so far by private and public employers are to be refunded within 120 days.

The delay also means that approximately 450,000 Washington residents who opted out of WA Cares by securing long-term care insurance through their employers or the private market are now making payments that they were told were necessary to avoid the payroll tax and the state program.

Passed by Democratic lawmakers and Inslee in 2019, WA Cares is styled to be a social insurance program to help people pay for needs in sickness and old age. That could include things like transportation and meal preparation, nursing care, assisted living and respite for those giving care to family members.

Under the bills, eligible beneficiaries in July 2026 could begin claiming up to $36,500 to pay for those needs. The benefits were originally designed to start in January 2025.

But as the program got underway, a slew of concerns emerged from people who will pay into the program but never be eligible to receive benefits or get care under other programs.

That includes about 150,000 people who work in Washington but live in another state, like Idaho or Oregon; military families rotating through Washington; and some disabled veterans.

Under the legislation signed Thursday, people in those categories will have the opportunity to get a permanent exemption from the program.

Meanwhile, about 477,000 Washingtonians are near retirement age and may not become fully vested in the program as it is currently structured and claim full benefits.

Residents born before 1968 who won’t be fully vested can receive partial benefits calculated by the number of years they ultimately pay into WA Cares.

Republican lawmakers voted against the legislation in 2019, and over the past year, have called for Inslee and Democrats to repeal the program.

As questions began to circulate about the program last year, scores of businesses, unions and other organizations — including Amazon, Microsoft, Alaska Airlines and more than 40 local chambers of commerce — called for a delay of WA Cares.

In a statement Thursday, Kris Johnson, president of the Association of Washington Business, cheered the delay. But lawmakers and the governor must look at other issues with the program, he said, such as its long-term solvency.

“Delaying the start of the program and allowing for some additional populations to opt out is a good start, but it’s not the full solution,” Johnson said in prepared remarks.

In a statement, WA Cares Director Ben Veghte hailed the passage of the bills, saying that lawmakers listened to concerns and took action.

“WA Cares will protect many Washingtonians from being driven into poverty by the need for long-term care and serve as a model for the rest of the nation,” Veghte said in prepared remarks. “The program will make it easier for all of us to age with dignity and independence in the setting of our choice.”

WA Cares Fund Concerns

By TIMOTHY FAIRBANKS-CLOUSER, Herald Legislative Writer

People usually rely on their agent for the most up-to-date information when purchasing long-term care insurance, said Gary Morgan, a Morgan Insurance agency principle in Moses Lake. If the state is providing coverage, as in the WA Cares Fund, it’s likely the consumer will be poorly informed on the options available.

By purchasing private LTC insurance, Morgan said, consumers can pick the best option for their needs instead of having to rely on the state’s limited annual benefit. Private plans value portability too, which the WA Cares Fund lacks.

“If Washington state would allow (private Insurers) to write workman compensation insurance, we could save employees and the state a lot of money,” he said.

Unlike Oregon and Idaho, Washington workers’ compensation is only administered by the state. Morgan said allowing private insurers to participate and compete would lower rates for consumers and increase service, yet the Legislature rejected the option a few years ago.

Sen. Judy Warnick, R-Moses Lake, said Washington’s paid family leave program could become insolvent as early as March after only being implemented in 2020. No other state has a program like the WA Cares Fund; the state lacks the prior knowledge to ensure the program remains solvent, she said.

Based on current estimates of the people expected to apply for exemptions, she said the program could run out of money in a few years unless the premium increases with time.

A Milliman’s 2020 study estimated the program needs a premium of 0.66% to pay full benefits over the next 75 years, said Luke Masselink, state senior actuary, during a work session on Monday.

The state’s current statute caps the premium at 0.58%.

Rep. Joe Schmick, R-Colfax, said he wants the Washington State Office of the State Actuary to do more studies to ensure this program remains solvent. The premium needed is already higher than the state statute; this program will become more expensive over time.

Amy Anderson, Association of Washington Business government affairs director, testified in support of House Bill 1732 during a public hearing on Monday. The Legislature needs more time to address the inadequacies created over the past two years.

Elizabeth Hovde, Washington Policy Center, said she had been swamped by concerns over this program this past year. There are better ways to help the state than imposing another tax.

“This move to delay the law is an admission that this is not the solution,” Hovde said.

House Bill 1732 helps guide employers on collecting the tax but not much else to address the problems at hand, she said. She said she hopes the 18-month delay allows the Legislature to see the amounting faults in the program and repeal it.