The Next Frontier in Employee Benefits: Supplemental Private Long-Term Care Insurance in the WA Cares Era

Introduction: A New Chapter in Long-Term Care Planning

Washington State has fundamentally reshaped the conversation around long-term care (LTC) planning in the United States. With the implementation of the WA Cares Fund—the nation’s first publicly funded, universal long-term care insurance program—employers, employees, insurers, and policymakers alike are navigating a new and evolving benefits landscape.

While WA Cares represents a significant step forward in addressing the long-standing gap in LTC preparedness, it also highlights a critical reality: public benefits alone are not sufficient to meet the full financial burden of long-term care. This gap has created the foundation for a rapidly emerging market—private supplemental long-term care insurance designed specifically to complement WA Cares benefits.

For HR leaders and benefits professionals, this moment presents both a challenge and an opportunity: how to educate employees, enhance financial security, and differentiate benefits offerings in a competitive labor market.

Understanding WA Cares: A Baseline, Not a Complete Solution

The WA Cares Fund is a mandatory, state-administered long-term care insurance program funded through employee payroll contributions. Workers contribute 0.58% of wages and, in return, earn access to a lifetime benefit of up to $36,500 (indexed to inflation) for qualifying long-term care services.

To qualify, individuals must:

• Meet contribution requirements (10 yrs minimum for lifetime access; 3 of the last 6 yrs for temporary access; access to pro-rated benefits for those born before 1/1/68)

• Demonstrate a need for assistance with at least three activities of daily living (ADLs) which is expected to last at least 90 days

• Apply for benefits, first usable after 7/1/26

The program addresses a critical societal issue: on average, "an American turning 65 today will incur $138,000 in future LTSS costs." (source: "Long-Term Services and Supports for Older Americans: Risks and Financing" revised 2/16, ASPE)

The Intent Behind WA Cares

WA Cares was designed to:

• Reduce reliance on Medicaid

• Help individuals remain in their homes longer

• Provide a universal, guaranteed benefit regardless of health status

• Protect middle-class families from catastrophic care costs

Washington became the first state to implement such a system, signaling a broader national trend toward public-private LTC solutions.

The Coverage Gap: Why Supplemental Solutions Are Necessary

While WA Cares provides a meaningful foundation, it was never intended to fully fund long-term care needs.

The Reality of Long-Term Care Costs

The cost of long-term care services in the Washington can be substantial (source: CareScout 2025 Cost of Care Survey):

• In-Home Care: $45 – $70 / hr

• Community and Assisted Living: $5,400 - $7,600 / month

• Nursing Home Care: $13,000 - $16,000 / month

At these rates, the WA Cares initial lifetime benefit of $36,500 may cover only a few months of care in many scenarios.

Structural Limitations of WA Cares

Key limitations include:

• Uniform benefit regardless of income or need

• Limited maximum benefit

• No out-of-state or international coverage until 2030

• No coverage until benefits are vested (minimum of 3 years)

• No coverage for at-home spouse

• Must meet contribution thresholds

• No protection from Medicaid spenddown or recovery

These constraints create a clear need for additional financial protection—particularly for middle- and higher-income employees who may face significant uncovered expenses.

Legislative Evolution: Opening the Door to Supplemental Coverage

Recognizing these limitations, Washington lawmakers took a pivotal step in 2025 by passing legislation that explicitly enables the development of private supplemental long-term care insurance products.

The law:

• Allows insurers to design products that complement WA Cares

• Expands consumer choice

• Encourages innovation in benefit design

• Reinforces the role of private carriers in filling coverage gaps

This legislative shift effectively created a new product category—one that sits between public benefits and traditional standalone LTC insurance.

Defining the New Market: Supplemental LTC Insurance

Supplemental LTC insurance is not simply a rebranded version of traditional long-term care insurance. It is a purpose-built solution designed to integrate with WA Cares.

Core Design Principles

Emerging supplemental products will be structured around several key principles:

1. Coordination with WA Cares

• Benefits are designed to follow the state benefit, activating after WA Cares has exhausted. As WA Cares dollars are paid out, they will count against the policy's deductible.

• Policies must continue to cover the same providers as under WA Cares, unless a beneficiary's care and safety needs are not being met

2. Minimum Protection

• Policies must cover at least 12 months of care

• Must offer inflation protection (with exception)

• Must offer nonforfeiture protection (with exception)

• Consumers must be given options to reduce benefits (with exception)

3. Flexible Care Coverage

Comprehensive coverage includes:

• Home health care-- supplemental policies must cover family caregivers

• Assisted living and adult day care

• Skilled nursing

• Support for informal caregivers

Many modern policies pay benefits on an "indemnity" (cash) basis, in which no restrictions are placed on how the money is spent.

4. Affordability and Accessibility

Products are being priced and structured to be accessible to a broader population than traditional LTC insurance, which has historically suffered from low adoption rates.

Why the Worksite Is the Ideal Distribution Channel

The emergence of supplemental LTC solutions aligns closely with the evolution of employee benefits. WA Cares is first and foremost a benefit for Washington workers, paid out of each worker's paycheck. WA Cares communicates with employers directly, at scale.

Advantages of Worksite Distribution

1. Improved Access and Participation

Employer-sponsored programs:

• Increase awareness

• Simplify enrollment

• Reduce barriers to entry

2. Group Underwriting Advantages

Where available, employees may benefit from:

• Reduced medical underwriting

• More favorable pricing

• Broader eligibility

3. Payroll Deduction Simplicity

Premiums can be conveniently deducted from paychecks, aligning with the WA Cares contribution model.

4. Trusted Decision Environment

Employees are more likely to consider complex financial products when presented within the context of employer-sponsored benefits.

The Employer Value Proposition

For employers, offering supplemental LTC insurance is not just about adding another benefit—it’s about addressing a growing workforce risk.

1. Financial Wellness and Productivity

Employees facing caregiving responsibilities often experience:

• Reduced productivity

• Increased absenteeism

• Higher stress levels

Providing LTC solutions helps mitigate these risks by:

• Offering financial preparedness

• Supporting caregiving planning

• Reducing crisis-driven decision-making

2. Competitive Differentiation

In a tight labor market, benefits matter more than ever. Offering supplemental LTC coverage:

• Signals long-term commitment to employee well-being

• Differentiates employers in Washington’s unique regulatory environment

• Enhances total rewards packages

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3. Aging Workforce Considerations

As the workforce ages:

• More employees will face caregiving responsibilities

• Retirement planning becomes more complex

Supplemental LTC benefits align directly with these demographic trends.

4. Cost-Neutral Implementation

Supplemental LTC insurance in the worksite has the capability to be:

• Employee-paid (voluntary)

• Offered with low administrative burden

• Integrated into existing benefits platforms

This creates a high-value, low-cost opportunity for employers.

The Employee Perspective: Filling the Protection Gap

For employees, the combination of WA Cares and supplemental LTC insurance creates a more comprehensive financial safety net.

1. Enhanced Financial Protection

Supplemental coverage helps:

• Extend the duration of care coverage

• Reduce out-of-pocket expenses

• Protect retirement savings and assets

2. Greater Choice and Flexibility

Employees gain:

• More control over care settings

• Access to higher-quality or preferred providers

• Flexibility in care planning

3. Peace of Mind

Knowing that both baseline and supplemental coverage are in place allows employees to:

• Plan proactively

• Reduce anxiety about future care needs

• Focus on long-term financial goals

Market Dynamics: Why This Category Is Emerging Now

Several converging factors are driving the rapid development of this new market:

1. Public Awareness Has Increased

WA Cares has brought long-term care into mainstream conversation. Employees who previously ignored LTC planning are now:

• Aware of the risk

• Engaged in benefits discussions

• Open to supplemental solutions

2. Regulatory Support

The 2025 legislative changes provide a clear framework for insurers to innovate, reducing uncertainty and encouraging market entry.

3. Employer Demand

HR leaders are actively seeking:

• Relevant, high-impact benefits

• Solutions aligned with state programs

• Offerings that address real employee concerns

Designing an Effective Supplemental LTC Benefit Strategy

For employers considering adding supplemental LTC coverage, success depends on thoughtful implementation.

Key Considerations

1. Education First

Employees need clear, simple explanations of:

• What WA Cares covers

• Where gaps exist

• How supplemental coverage works

2. Positioning Matters

The benefit should be framed as:

• A complement—not a replacement—for WA Cares

• A proactive financial planning tool

3. Enrollment Strategy

Effective approaches include:

• Integration within annual open enrollment

• Decision support tools

• Personalized benefit illustrations

Looking Ahead: A Blueprint for Other States?

Washington’s approach may serve as a model for other states exploring long-term care solutions.

If similar programs emerge nationwide, the implications are significant:

• A broader shift toward public-private LTC partnerships

• Expansion of supplemental insurance markets

• Increased role of employers in facilitating LTC planning

For insurers and benefits professionals, Washington represents a testing ground for scalable innovation.

Conclusion: From Foundation to Full Protection

The WA Cares Fund marks a historic step forward in addressing the long-term care crisis—but it is only the beginning.

By establishing a universal baseline benefit, Washington has:

• Raised awareness

• Created infrastructure

• Catalyzed innovation

The emerging supplemental LTC insurance market is the natural next phase—one that transforms a foundational benefit into a comprehensive solution.

For employers, the opportunity is clear:

to lead, educate, and empower their workforce with benefits that address one of the most significant financial risks employees will face in their lifetime.

For employees, the message is equally clear:

WA Cares provides a start—but supplemental coverage may be the key to true long-term financial security.