Federal Long-Term Care Premium Spike Isn't Scaring People Away

Many federal employees and retirees with long-term care insurance will see their premiums spike significantly beginning next Tuesday.

The new Federal Long-Term Care Insurance Program premium rates, announced in July, kick in on Nov.1, and amount to an average increase of 83 percent, or $111 more per month, for many enrollees who opt not to change their coverage. For those paying premiums from their retirement benefits, the first payment with the increase will be reflected in the Dec. 1 annuity payment.

An Office of Personnel Management spokesman said on Tuesday that more than 96 percent of FLTCIP enrollees who had responded as of Oct. 19 either accepted the increase, or reduced their current coverage. “Less than 4 percent have chosen to discontinue coverage or receive the ‘paid-up’ option,” the agency spokesman said by email. OPM also has not seen a decline in the number of new applications since the start of the enrollee decision period, he said.

Enrollees had until Sept. 30 to view the new rates and make changes to their coverage. The rate increase, which will affect most enrollees, will vary widely between nothing and 126 percent, depending on an enrollee’s option under the FLTCIP. Prospective enrollees can use the FLTCIP premium calculator to view current rates for new participants.

Of the approximately 274,000 current FLTCIP enrollees, about 10,000 will not be affected by the new premium increase. That group includes those who applied for coverage on or after new application rates went up on Aug. 1, 2015; enrollees who purchased FLTCI at age 80 or older; current enrollees in the FLTCIP’s alternative insurance program; and enrollees currently eligible for benefits or awaiting a decision on a pending claim.

OPM’s announcement this past summer of the significant rate increase sparked outrage from enrollees, their advocates, and lawmakers. In September, a House Democratic aide said Republican leaders on the Oversight and Government Reform Committee indicated they would have a hearing on the issue in November or December during the lame-duck session. Members of the committee requested and are now reviewing several documents and reports related to the program contract and the financial health of the FLTCIP from contractor John Hancock.

OPM announced a new, seven-year contract in April that retained John Hancock, which last received the contract in 2009. (OPM has to issue a new contract every seven years for the Federal Long-Term Care Insurance Program.) The insurance company was the only one to place a bid for the contract, which remained open for one year. News of the 2016 premium spike added insult to injury: In 2009, FLTCIP enrollees saw their premiums jump by as much as 25 percent.

“John Hancock proposed higher premiums because recent analysis of the program, using updated assumptions based on identified trends and actual claims experience, indicated that the current FLTCIP premiums would not be sufficient to meet the future, projected costs of the benefits,” said a July 18 letter from John O’Brien, OPM’s director of health care and insurance, to enrollees.

“At least one of the options will allow the enrollee to reduce coverage in order to maintain the current premium at or below the current level,” the letter continued. “In general, enrollees will be able to choose: a premium-neutral option to fully offset the premium increase; a partial increase, accepting roughly half the premium increase along with moderate coverage reductions; or the full premium increase to retain the current benefits and inflation protection.”