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OPM to suspend applications for Federal Long Term Care Insurance Program

OPM will try to “establish sustainable premium rates” during upcoming two-year suspension on new applications to the Federal Long-Term Care Insurance Program.

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<em>Best listening experience is on Chrome, Firefox or Safari. Subscribe to Federal Drive’s daily audio interviews on </em><a href="https://itunes.apple.com/us/podcast/federal-drive-with-tom-temin/id1270799277?mt=2"><em>Apple Podcast</em>s</a><em> or <a href="https://www.podcastone.com/federal-drive-with-tom-temin?pid=1753589">PodcastOne</a>.</em>

Those looking to enroll in the Federal Long Term Care Insurance Program (FLTCIP) will soon have to wait a couple of years before applying.

The Office of Personnel Management said it will suspend all new applications to the program starting on Dec. 19. The suspension will last for the next two years, but those who apply ahead of the start date may still see their applications go through. During that time, current FLTCIP enrollees cannot apply to increase their coverage. The suspension will otherwise not affect the coverage of current enrollees.

OPM said the suspension will give the agency time to try to mitigate the increasing costs of FLTCIP premiums, which have risen at high rates over the course of many years.

Most recently, in 2016, premium rates <a href="https://federalnewsnetwork.com/benefits/2016/10/long-term-care-prices-soar-majority-accept-higher-premiums-cut-coverage/">rose 83% on average</a>, and up to as much as 126% for some enrollees. The average monthly increase amount was $111. The increase caused more than 96,000 FLTCIP enrollees to keep their premiums the same by reducing their insurance benefits, <a href="https://www.opm.gov/news/testimony/114th-congress/federal-long-term-care-insurance-program-examining-premium-increases.pdf">OPM said in 2016 testimony</a>. In 2009, FLTCIP enrollees saw their premium rates <a href="https://federalnewsnetwork.com/all-news/2009/10/opm-john-hancock-insurance-answer-long-term-care-premium-hikes/">increase by an average of 17%</a>, and as much as 25% in some cases.

Individuals’ premiums for FLTCIP are based on their age when they apply. But the premium rates at the time of applying are <a href="https://www.opm.gov/healthcare-insurance/flyers/long-term-care-overview.pdf">not guaranteed</a> for enrollees, and are susceptible to change in the future.

The contract for the insurance program, with John Hancock Life and Health Insurance Company, typically lasts seven years before getting a renewal. The program normally gets a premium hike each time the contract turns over. During the open period for new contract proposals earlier this year, only the current underwriter John Hancock submitted a bid. The current FLTCIP contract will expire on April 30, 2023.

The upcoming suspension on applications will allow OPM “to assess the benefit offerings and establish sustainable premium rates that reasonably and equitably reflect the cost of the benefits provided,” the agency said in a <a href="https://www.federalregister.gov/documents/2022/11/18/2022-24882/notice-of-federal-long-term-care-insurance-program-fltcip-suspension-of-applications-for-fltcip">Nov. 18 notice</a>. OPM added that it will only suspend applications when it is in the best interest of the program.

Many are eligible to apply for FLTCIP coverage, including federal employees, U.S. Postal Service employees and annuitants, as well as active and retired members of the uniformed services, and qualified relatives of feds. John Hancock has historically sponsored the program, and Long Term Care Partners, LLC, has administered it.

Currently, FLTCIP covers about 267,000 enrollees, and the program receives about 6,000 new enrollees each year. That’s less than 0.1% of the 11 million individuals eligible for the program, excluding spouses and other qualified relatives.

Because of the low percentage of new applications, OPM said it’s unlikely that FLTCIP would have a high demand for enrollments during the two-year suspension period. And eligible individuals can consider other options during the suspension, too. Those alternatives include investing in a long-term care annuity, buying a different product that combines a life insurance policy with long-term care insurance, or purchasing a short-term care insurance policy.

“OPM acknowledges that if FLTCIP is suspended for a period, this would prevent currently eligible and newly eligible individuals from applying for coverage during the suspension, and individuals may have to wait to apply after the suspension period or seek alternative coverage,” the agency said.

The announcement also came just a couple days after OPM referenced the pause on accepting new FLTCIP applications in <a href="https://www.federalregister.gov/documents/2022/11/16/2022-24849/enhancing-stability-and-flexibility-for-the-federal-long-term-care-insurance-program">a separate notice on Nov. 16</a>, which reviewed the requirements and authorities around suspending the program.

Some disagreed with OPM’s decision to suspend FLTCIP. A few comments from the public argued that OPM must continuously offer eligible individuals the opportunity to enroll in the program. But OPM disagreed with the assertion, pointing to a need for reviewing underlying program processes and premium rates that impact enrollees.

Others, like the National Active and Retired Federal Employees (NARFE) association, didn’t necessarily disagree with OPM’s decision.

“If they cannot provide a reasonable quote on what the cost of something will be, then they shouldn't be selling it,” John Hatton, NARFE’s staff vice president for policy and programs, said in an interview. “Until they can find and guarantee a price for people — so they can plan and look at that versus alternatives — they probably should be suspending coverage. We'll have to see what happens with the premium increases next year, how bad they are and what options people have.”

In another attempt to stabilize the premium increases, OPM launched a <a href="https://federalnewsnetwork.com/benefits/2019/10/opm-announces-new-long-term-care-insurance-plan-option/">new plan and rate structure</a> for the program in 2019, called FLTCIP 3.0. The new version of the program included a “premium stabilization feature” (PSF), intending to help reduce future premium increases in FLTCIP.

Despite these efforts, a <a href="https://www.oversight.gov/sites/default/files/oig-reports/OPM/1G-LT-00-21-013.pdf">Sept. 12 audit report</a> from OPM’s Office of Inspector General said FLTCIP is not currently funded to handle future anticipated claims at the current premium rates. The report added that FLTCIP enrollees will likely see a high premium hike next year to offset the deficit.

“If the program continues without a premium increase or benefit decrease, it is projected that the fund will be depleted by 2048, at which point the contractor would be obligated to pay future benefits under the fully insured arrangement,” the report said. “Our concern is that the contractor will likely seek another large premium increase to help eliminate its risk in paying future benefits, thereby creating another unexpected hardship for program participants.”

OPM took some actions to try to address concerns in the report, such as directing John Hancock to stop actively marketing to prospective applicants, and to notify enrollees of any possibilities of premium increases and benefit reductions in the near future, the report said. But it additionally recommended that the agency and the contractor improve communications to enrollees and develop a corrective action plan to mitigate the high premium increases.

During the audit of the program, OPM’s OIG found that John Hancock adjusts rates for its commercial clients every three years, rather than every seven years. The report said the contractor should use similarly short contract periods for OPM’s program, or adjust rates more frequently, to reduce the large premium increases and benefit reductions.

“We are open to other ideas on how to best stop these actions from reoccurring with each new seven-year contract period,” the report said. “OPM and the contractor are strongly encouraged to research this issue and come up with a better solution that helps mitigate the risk of significant rate increases every seven years.”

Your Turn

Answers to your long-term care questions

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<em>Best listening experience is on Chrome, Firefox or Safari. Subscribe to Federal Drive’s daily audio interviews on </em><a href="https://itunes.apple.com/us/podcast/federal-drive-with-tom-temin/id1270799277?mt=2"><em>Apple Podcast</em>s</a><em> or <a href="https://www.podcastone.com/federal-drive-with-tom-temin?pid=1753589">PodcastOne</a>.</em>

Those looking to enroll in the Federal Long Term Care Insurance Program (FLTCIP) will soon have to wait a couple of years before applying.

The Office of Personnel Management said it will suspend all new applications to the program starting on Dec. 19. The suspension will last for the next two years, but those who apply ahead of the start date may still see their applications go through. During that time, current FLTCIP enrollees cannot apply to increase their coverage. The suspension will otherwise not affect the coverage of current enrollees.

OPM said the suspension will give the agency time to try to mitigate the increasing costs of FLTCIP premiums, which have risen at high rates over the course of many years.

Most recently, in 2016, premium rates <a href="https://federalnewsnetwork.com/benefits/2016/10/long-term-care-prices-soar-majority-accept-higher-premiums-cut-coverage/">rose 83% on average</a>, and up to as much as 126% for some enrollees. The average monthly increase amount was $111. The increase caused more than 96,000 FLTCIP enrollees to keep their premiums the same by reducing their insurance benefits, <a href="https://www.opm.gov/news/testimony/114th-congress/federal-long-term-care-insurance-program-examining-premium-increases.pdf">OPM said in 2016 testimony</a>. In 2009, FLTCIP enrollees saw their premium rates <a href="https://federalnewsnetwork.com/all-news/2009/10/opm-john-hancock-insurance-answer-long-term-care-premium-hikes/">increase by an average of 17%</a>, and as much as 25% in some cases.

Individuals’ premiums for FLTCIP are based on their age when they apply. But the premium rates at the time of applying are <a href="https://www.opm.gov/healthcare-insurance/flyers/long-term-care-overview.pdf">not guaranteed</a> for enrollees, and are susceptible to change in the future.

The contract for the insurance program, with John Hancock Life and Health Insurance Company, typically lasts seven years before getting a renewal. The program normally gets a premium hike each time the contract turns over. During the open period for new contract proposals earlier this year, only the current underwriter John Hancock submitted a bid. The current FLTCIP contract will expire on April 30, 2023.

The upcoming suspension on applications will allow OPM “to assess the benefit offerings and establish sustainable premium rates that reasonably and equitably reflect the cost of the benefits provided,” the agency said in a <a href="https://www.federalregister.gov/documents/2022/11/18/2022-24882/notice-of-federal-long-term-care-insurance-program-fltcip-suspension-of-applications-for-fltcip">Nov. 18 notice</a>. OPM added that it will only suspend applications when it is in the best interest of the program.

Many are eligible to apply for FLTCIP coverage, including federal employees, U.S. Postal Service employees and annuitants, as well as active and retired members of the uniformed services, and qualified relatives of feds. John Hancock has historically sponsored the program, and Long Term Care Partners, LLC, has administered it.

Currently, FLTCIP covers about 267,000 enrollees, and the program receives about 6,000 new enrollees each year. That’s less than 0.1% of the 11 million individuals eligible for the program, excluding spouses and other qualified relatives.

Because of the low percentage of new applications, OPM said it’s unlikely that FLTCIP would have a high demand for enrollments during the two-year suspension period. And eligible individuals can consider other options during the suspension, too. Those alternatives include investing in a long-term care annuity, buying a different product that combines a life insurance policy with long-term care insurance, or purchasing a short-term care insurance policy.

“OPM acknowledges that if FLTCIP is suspended for a period, this would prevent currently eligible and newly eligible individuals from applying for coverage during the suspension, and individuals may have to wait to apply after the suspension period or seek alternative coverage,” the agency said.

The announcement also came just a couple days after OPM referenced the pause on accepting new FLTCIP applications in <a href="https://www.federalregister.gov/documents/2022/11/16/2022-24849/enhancing-stability-and-flexibility-for-the-federal-long-term-care-insurance-program">a separate notice on Nov. 16</a>, which reviewed the requirements and authorities around suspending the program.

Some disagreed with OPM’s decision to suspend FLTCIP. A few comments from the public argued that OPM must continuously offer eligible individuals the opportunity to enroll in the program. But OPM disagreed with the assertion, pointing to a need for reviewing underlying program processes and premium rates that impact enrollees.

Others, like the National Active and Retired Federal Employees (NARFE) association, didn’t necessarily disagree with OPM’s decision.

“If they cannot provide a reasonable quote on what the cost of something will be, then they shouldn't be selling it,” John Hatton, NARFE’s staff vice president for policy and programs, said in an interview. “Until they can find and guarantee a price for people — so they can plan and look at that versus alternatives — they probably should be suspending coverage. We'll have to see what happens with the premium increases next year, how bad they are and what options people have.”

In another attempt to stabilize the premium increases, OPM launched a <a href="https://federalnewsnetwork.com/benefits/2019/10/opm-announces-new-long-term-care-insurance-plan-option/">new plan and rate structure</a> for the program in 2019, called FLTCIP 3.0. The new version of the program included a “premium stabilization feature” (PSF), intending to help reduce future premium increases in FLTCIP.

Despite these efforts, a <a href="https://www.oversight.gov/sites/default/files/oig-reports/OPM/1G-LT-00-21-013.pdf">Sept. 12 audit report</a> from OPM’s Office of Inspector General said FLTCIP is not currently funded to handle future anticipated claims at the current premium rates. The report added that FLTCIP enrollees will likely see a high premium hike next year to offset the deficit.

“If the program continues without a premium increase or benefit decrease, it is projected that the fund will be depleted by 2048, at which point the contractor would be obligated to pay future benefits under the fully insured arrangement,” the report said. “Our concern is that the contractor will likely seek another large premium increase to help eliminate its risk in paying future benefits, thereby creating another unexpected hardship for program participants.”

OPM took some actions to try to address concerns in the report, such as directing John Hancock to stop actively marketing to prospective applicants, and to notify enrollees of any possibilities of premium increases and benefit reductions in the near future, the report said. But it additionally recommended that the agency and the contractor improve communications to enrollees and develop a corrective action plan to mitigate the high premium increases.

During the audit of the program, OPM’s OIG found that John Hancock adjusts rates for its commercial clients every three years, rather than every seven years. The report said the contractor should use similarly short contract periods for OPM’s program, or adjust rates more frequently, to reduce the large premium increases and benefit reductions.

“We are open to other ideas on how to best stop these actions from reoccurring with each new seven-year contract period,” the report said. “OPM and the contractor are strongly encouraged to research this issue and come up with a better solution that helps mitigate the risk of significant rate increases every seven years.”

Your Turn

What are your options with LTC premium hike?

[hbidcpodcast podcastid='4376296']

<em>Best listening experience is on Chrome, Firefox or Safari. Subscribe to Federal Drive’s daily audio interviews on </em><a href="https://itunes.apple.com/us/podcast/federal-drive-with-tom-temin/id1270799277?mt=2"><em>Apple Podcast</em>s</a><em> or <a href="https://www.podcastone.com/federal-drive-with-tom-temin?pid=1753589">PodcastOne</a>.</em>

Those looking to enroll in the Federal Long Term Care Insurance Program (FLTCIP) will soon have to wait a couple of years before applying.

The Office of Personnel Management said it will suspend all new applications to the program starting on Dec. 19. The suspension will last for the next two years, but those who apply ahead of the start date may still see their applications go through. During that time, current FLTCIP enrollees cannot apply to increase their coverage. The suspension will otherwise not affect the coverage of current enrollees.

OPM said the suspension will give the agency time to try to mitigate the increasing costs of FLTCIP premiums, which have risen at high rates over the course of many years.

Most recently, in 2016, premium rates <a href="https://federalnewsnetwork.com/benefits/2016/10/long-term-care-prices-soar-majority-accept-higher-premiums-cut-coverage/">rose 83% on average</a>, and up to as much as 126% for some enrollees. The average monthly increase amount was $111. The increase caused more than 96,000 FLTCIP enrollees to keep their premiums the same by reducing their insurance benefits, <a href="https://www.opm.gov/news/testimony/114th-congress/federal-long-term-care-insurance-program-examining-premium-increases.pdf">OPM said in 2016 testimony</a>. In 2009, FLTCIP enrollees saw their premium rates <a href="https://federalnewsnetwork.com/all-news/2009/10/opm-john-hancock-insurance-answer-long-term-care-premium-hikes/">increase by an average of 17%</a>, and as much as 25% in some cases.

Individuals’ premiums for FLTCIP are based on their age when they apply. But the premium rates at the time of applying are <a href="https://www.opm.gov/healthcare-insurance/flyers/long-term-care-overview.pdf">not guaranteed</a> for enrollees, and are susceptible to change in the future.

The contract for the insurance program, with John Hancock Life and Health Insurance Company, typically lasts seven years before getting a renewal. The program normally gets a premium hike each time the contract turns over. During the open period for new contract proposals earlier this year, only the current underwriter John Hancock submitted a bid. The current FLTCIP contract will expire on April 30, 2023.

The upcoming suspension on applications will allow OPM “to assess the benefit offerings and establish sustainable premium rates that reasonably and equitably reflect the cost of the benefits provided,” the agency said in a <a href="https://www.federalregister.gov/documents/2022/11/18/2022-24882/notice-of-federal-long-term-care-insurance-program-fltcip-suspension-of-applications-for-fltcip">Nov. 18 notice</a>. OPM added that it will only suspend applications when it is in the best interest of the program.

Many are eligible to apply for FLTCIP coverage, including federal employees, U.S. Postal Service employees and annuitants, as well as active and retired members of the uniformed services, and qualified relatives of feds. John Hancock has historically sponsored the program, and Long Term Care Partners, LLC, has administered it.

Currently, FLTCIP covers about 267,000 enrollees, and the program receives about 6,000 new enrollees each year. That’s less than 0.1% of the 11 million individuals eligible for the program, excluding spouses and other qualified relatives.

Because of the low percentage of new applications, OPM said it’s unlikely that FLTCIP would have a high demand for enrollments during the two-year suspension period. And eligible individuals can consider other options during the suspension, too. Those alternatives include investing in a long-term care annuity, buying a different product that combines a life insurance policy with long-term care insurance, or purchasing a short-term care insurance policy.

“OPM acknowledges that if FLTCIP is suspended for a period, this would prevent currently eligible and newly eligible individuals from applying for coverage during the suspension, and individuals may have to wait to apply after the suspension period or seek alternative coverage,” the agency said.

The announcement also came just a couple days after OPM referenced the pause on accepting new FLTCIP applications in <a href="https://www.federalregister.gov/documents/2022/11/16/2022-24849/enhancing-stability-and-flexibility-for-the-federal-long-term-care-insurance-program">a separate notice on Nov. 16</a>, which reviewed the requirements and authorities around suspending the program.

Some disagreed with OPM’s decision to suspend FLTCIP. A few comments from the public argued that OPM must continuously offer eligible individuals the opportunity to enroll in the program. But OPM disagreed with the assertion, pointing to a need for reviewing underlying program processes and premium rates that impact enrollees.

Others, like the National Active and Retired Federal Employees (NARFE) association, didn’t necessarily disagree with OPM’s decision.

“If they cannot provide a reasonable quote on what the cost of something will be, then they shouldn't be selling it,” John Hatton, NARFE’s staff vice president for policy and programs, said in an interview. “Until they can find and guarantee a price for people — so they can plan and look at that versus alternatives — they probably should be suspending coverage. We'll have to see what happens with the premium increases next year, how bad they are and what options people have.”

In another attempt to stabilize the premium increases, OPM launched a <a href="https://federalnewsnetwork.com/benefits/2019/10/opm-announces-new-long-term-care-insurance-plan-option/">new plan and rate structure</a> for the program in 2019, called FLTCIP 3.0. The new version of the program included a “premium stabilization feature” (PSF), intending to help reduce future premium increases in FLTCIP.

Despite these efforts, a <a href="https://www.oversight.gov/sites/default/files/oig-reports/OPM/1G-LT-00-21-013.pdf">Sept. 12 audit report</a> from OPM’s Office of Inspector General said FLTCIP is not currently funded to handle future anticipated claims at the current premium rates. The report added that FLTCIP enrollees will likely see a high premium hike next year to offset the deficit.

“If the program continues without a premium increase or benefit decrease, it is projected that the fund will be depleted by 2048, at which point the contractor would be obligated to pay future benefits under the fully insured arrangement,” the report said. “Our concern is that the contractor will likely seek another large premium increase to help eliminate its risk in paying future benefits, thereby creating another unexpected hardship for program participants.”

OPM took some actions to try to address concerns in the report, such as directing John Hancock to stop actively marketing to prospective applicants, and to notify enrollees of any possibilities of premium increases and benefit reductions in the near future, the report said. But it additionally recommended that the agency and the contractor improve communications to enrollees and develop a corrective action plan to mitigate the high premium increases.

During the audit of the program, OPM’s OIG found that John Hancock adjusts rates for its commercial clients every three years, rather than every seven years. The report said the contractor should use similarly short contract periods for OPM’s program, or adjust rates more frequently, to reduce the large premium increases and benefit reductions.

“We are open to other ideas on how to best stop these actions from reoccurring with each new seven-year contract period,” the report said. “OPM and the contractor are strongly encouraged to research this issue and come up with a better solution that helps mitigate the risk of significant rate increases every seven years.”

Your Turn

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