Many of the 264,000 active and retired feds with long-term care insurance policies are still dazed after learning premiums are going up an average of 83 percent in November. That’s $111 more per month they will be paying for the same coverage they have now. And it’s an average. Some will be paying a lot more each month for LTC coverage. The obvious question is why this big a hike and what, if anything, can be done to minimize it.
The why is both complex and simple. Most of us have some experience with a relative or friend whose mental or physical health failed yet he or she lived on and on. People are both living longer and lasting longer. And that is expensive. Since it was set up in 2002, the federal LTC program has paid out more than $700 million for long-term care for policyholders. Currently it pays just over $13 million each month in claims.
Many, if not most, major life insurance companies once offered LTC coverage. Most no longer do. In fact, only one company even bid on the federal LTC program this time around. It is John Hancock, which has managed the federal program since it started. Nobody else wanted to touch it because of its size and complexity. In the bidding process with the Office of Personnel Management, the insurance company “proposed significantly higher premiums” based on analysis of the current program and “updated assumptions based on identified trends and actual claims experience” and concluded that the current premiums levels could not support payment of claims down the road.
Most feds and retirees face some kind of premium increase based on the plan and options they are in.
If you are facing a premium increase, Long Term Care Partners will send you a 2016 Enrollee Decision Period package with personal plan change options starting in July 2016. Because the mailing s will be staggered, some LTC policy holders in your office may get them before, or after, you do. The enrollment period begins July 18 and runs through Sept. 30.
During the open enrollment period, you can make changes in your policy to decrease the premium hike as often as you like. The last option you pick will be considered your final choice.
If you do nothing, your premiums will go up as stated in your mailing package.
There will not be any premium increase (at this time) for:
Enrollees who applied for coverage on or after the new application rates were raised on Aug. 1, 2015.
Enrollees whose age at purchase was 80 or older.
Enrollees currently in the FLTCIP’s Alternative Insuance Plan.
Enrollees who are currently either eligible for benefits or are awaiting a decision on a pending claim.
A lot of people are going to have to make some hard decisions (such as downsizing benefits in their current plan) or coming up with the money to pay for the new, higher premiums. The pending 1.6 percent 2017 federal pay raise will help. But not much.
If it is any consolation the federal program is under scrutinty from lots of official sources and experts. It covers members of Congress too. If you want to see how good the federal program is compared to others being offered first try to find a company that offers LTC, then check out what their non-group rates are for people your age. Especially if you currently have medical issues.
The term “boondoggle” can be traced back to a 1935 New York Times article about $3 million in New Deal money paying for recreational activities for people without jobs. Among the activities were craft classes that taught how to make “boon doggles”, which were utilitarian items made of cloth and leather.