Of the 274,000 people who are covered by the federal long-term care insurance program, it is probably safe to say 264,000 of them are stunned, scared or fighting mad about the upcoming increase in premiums. That’s because only about 10,000 policyholders will not see any change in their premiums for now. But the majority, the unhappy 264,000, will. The increase will “average” 83 percent, and be as high as 126 percent for some policyholders with the best coverage.

The question de jour in many federal offices is why? And how? With inflation low and gasoline prices down, how could their premiums be going up so much?

Some people believed — or said they were told when they signed up — that premiums would never go up. In fact, this is the second increase on enrollees since the program began in 2002. At that time, there were 102 life insurance companies that offered long-term care coverage. Today that number is down to 14. This change is apparent when you consider that the seven-year LTC contract expired this year and only one company — John Hancock — even bothered to bid on it.

Actuaries back in the day missed the boat big time when they estimated the future costs of long-term care, in facilities or at home, and the manner in which people would receive care (how long, how much, at what time in their lives). People are living longer and they are under long-term care longer than expected at the turn of this century.

Since the program started, the federal LTC program has paid out more than $700 million in claims reimbursements. It is now paying around $13 million a month. Those benefits must be paid from premiums received. Congress set up the program to be self-sustaining. Unfortunately, in the end, this rate hike is necessary to continue to be able to pay claims in the future. Unless Congress changes the law it wrote, special appropriations to pay for current and future benefits can’t be made.

Members of Congress are calling for congressional hearings on the premium increase. Nice, but then what? If that happens, the question is, what will they do? Other than chew out some top federal officials, maybe the insurance company, what are they going to do?

Here’s an email from a typical policyholder who wants to know what next? She says: “Fourteen years ago, at the age of 64, I took out a long-term care policy with the federal government. The package I chose was one where the fee would remain the same unless OPM approved an increase. It was raised once. My monthly fee was $352.92, and now will be $797.60. According to my doctor, I am in ‘excellent’ health so don’t know how many more years I’ll be paying such an outrageous fee. Don’t the insurance companies have actuaries?”

An official of Long Term Care Partners, which administers the program, said it’s the responsibility of the company (John Hancock) to set the premiums with the approval of the Office of Personnel Management. Joan S. Melanson, director of Program Promotion at LTC Partners, said actuaries develop pricing and consider many factors “including the frequency and severity of particular medical conditions, expected lifespan of enrollees, length of time an enrollee is expected to keep his/her coverage, cost of care and estimated returns on investment.” She said OPM approved the new higher premiums, and that John Hancock “does not make additional profit on the rate increase … any surplus remains in the Experience Fund, which can only be used for the benefit of plan participants.” In the unlikely event costs drop in the future, she said, “the resulting surplus ultimately will be used to reduce premiums or enhance benefits.”

Nearly Useless Factoid

By Michael O’Connell

Americans eat more than 2 billion cookies a year. That breaks down to 300 cookies per person.

Source:  Food Reference

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