LTC: Ripoff or Reality?

Senior Correspondent Mike Causey runs down what we know, so far, about the new long term care contract

Personality wise, are you a glass-half-full or glass-half-empty type? Take this test using the pending 5 to 25 percent hike in premiums for some folks in the Federal Long Term Care insurance program.

News of the premium hikes, the first in seven years, infuriated many.

Most e-mails we got said Uncle Sam or somebody is guilty of breach of contract or gross stupidity or indifference. The 7-year contract which guaranteed no premium hikes expired earlier this year. It has been replaced by a new 7-year contract of which details are still coming out.

But a number of policy-holders note that premiums held firm (as promised) during a 7-year period when inflation was going up, up, up. In January of this year, CSRS federal retirees, military retirees and people who get Social Security got a 5.8 percent cost of living adjustment to keep pace with 2007 inflation. Those COLAs are based on the Consumer Price Index. But medical inflation during that period was much higher.

So is the new contract, which we haven’t seen in detail yet, a ripoff or does it simply reflect reality?

Here’s what we know now.

Roughly 224,000 federal workers, retirees and dependents enrolled in the federal LTC program since it was launched seven years ago. During the initial sign-up period, people could get policies without underwriting. That was a blessing for older individuals and people in bad health who otherwise might not make the cut.

The new contract provides a variety of options and premiums that will do the following:

  • Nobody who was age 70 or older when their LTC policy was issued will be in line for any premium hike under the new contract.
  • There will be no premium increase for those who have the Future Purchase Option for inflation. Many older workers and retirees have that option. The no-new-premium pledge for them is good news and it contradicts what I heard, and reported, earlier this week.
  • For others it will be possible to avoid, or minimize, any premium increase if they are willing to make changes in benefits, or in the inflation option. For example you might be able to avoid a premium increase by switching from a promised lifetime benefit, to an option where benefits are guaranteed for 1, 3 or 5 years. And you might be able to avoid (or minimize) a premium hike if you make changes in the inflation option.
  • The new contract will include a benefit option to increase home health care reimbursement, as well as the option to purchase higher daily benefit payments as well as new benefit periods. Someone who purchases a short-term (3 or 5 year) benefit would pay less than someone who opted for a lifetime benefit payment.
  • The 5 to 25 percent premium increases will apply to those who have ACI (automatic compound inflation) protection. Many experts say that the ACI is essential, particularly for people who purchase LTC at younger ages.
  • There will be a special sign-up period, similar to an open season, when individuals can change options (to pick up more benefits or minimize or escape premium increases). During this decision period (dates to be announced) individuals will have the chance to switch to the new plan without underwriting. This means they won’t have to undergo a review of their current health status for the purpose of coverage.

Some federal union leaders, and officials familiar with the LTC program, say the changes and the price hikes (for some) are unfortunate but consistent with similar changes in private sector LTC plans. Those changes generally must be approved by state insurance commissioners whereas those under the federal program are subject of OPM review.

Nearly Useless Factoid
by Suzanne Kubota

From Fun trivia about deodorant by MentalFloss via CNN, “Be thankful for your foul body odor. According to anthropologist Louis Leakey, it might be responsible for early man’s survival. Leakey’s theory claims that most predators avoided feasting on humans because our body odor was ‘too repugnant.'”

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