Senator Mark Warner (D-VA) has joined the growing chorus of lawmakers questioning the Office of Personnel Management about the sharp increase in premiums for federal employees under the Federal Long Term Care Insurance Program.
Warner pressed OPM on the factors underlying its actuarial projections, how the premium increases were calculated, and what actions OPM is taking to ensure that enrollees understand all their options in response to the premium increase.
Other Members of Congress who have been asking the same questions include Barbara Comstock (R-VA), Gerry Connolly (D-VA) and Don Beyer (D-VA). The National Active and Retired Federal Employees Association (NARFE) has also criticized the premium increases, calling recently for a Congressional hearing into the matter.
A copy of Warner’s letter is included below.
August 1, 2016
Acting Director Beth F. Cobert
U.S. Office of Personnel Management
1900 E Street NW
Washington, DC 20415-1000
Dear Acting Director Cobert:
Since 2002, hundreds of thousands of Federal employees have enrolled in the Federal Long Term Care Insurance Program (FLTCIP), which provides coverage for care for individuals requiring assistance with activities of daily living or who have certain cognitive impairments. This coverage provides critical peace of mind to Federal employees, their families, and caregivers.
Under the Long-Term Care Security Act (Public Law 106-256) OPM is required to monitor the FLTCIP program, entering into contracts with private insurers. This July, OPM announced that individual premiums will increase up to 126%, with an average increase of 83%, or $111 monthly. Enrollees are responsible for the entire cost of their premiums, with no government contribution. With such enormous increases, these enrollees are now faced with three undesirable choices: dropping coverage entirely, reducing it substantially, or paying these dramatically higher premiums.
This is not the first time in the program’s history that FLTCIP premiums have increased substantially. In fact, a 2011 GAO report raised a series of issues about the oversight of the program, including concerns about program design that limited competition for the contract and its actuarial assumptions. I am deeply concerned about OPM’s oversight and stewardship of the program, and respectfully request your response to the following questions:
- The GAO report identified several issues that limited private carriers’ interest in FLTCIP, such as business strategies, program history, transition concerns, and a lack of home addresses for the eligible population. Yet, in the most recent competitive bid process, Solicitation Number: OPM35-15-R-0002, the sole bidder was the previous program provider. What steps did OPM take in response to the 2011 GAO report, and why was this recent bid unable attract multiple bidders?
- Actuarial projections seemed to be off again this year. While actuarial projections are inherently uncertain, factors such as demographic trends, the impact of adverse selection, and other factors are more predictable. Given the lessons learned from similarly flawed actuarial projections in 2009, what oversight policies and procedures does OPM have in place to ensure that these projections are sound?
- According to the 2011 GAO report, in 2009 the program carrier “revised the investment strategy to include considerable investments in public equities–such as stocks–which the carrier said have a higher expected rate of return.” What steps did OPM take to mitigate investment risk this year for FLTCIP funds?
- OPM is adjusting the impact of the premium increase on beneficiaries by a range of factors, such as age, current claim status, and date of enrollment, and in effect created a two-tiered enrollment structure. As a result, premium increases will vary from 0% to 126%. How did OPM determine these factors and why was this decision taken?
- While the “contingent benefit upon lapse” provision (also known as the “paid-up” provision) will allow approximately 60% of enrollees to maintain some benefits while suspending premium payments, benefits are significantly limited by a lifetime cap. What steps is OPM taking to ensure that enrollees are aware of this option, while clearly communicating the extent to which this is a reduction in benefits?
- Proper communication with enrollees about the variety of options they have in the program is critical. What steps is OPM taking to communicate and explain to enrollees changes to program? Are enrollees taking advantage of the Customer Service Center? How is OPM monitoring its customer service more broadly?
The FLTCIP program plays a key role for hundreds of thousands of Federal employees, and robust OPM oversight of the program is critical. I look forward to working to determine how we can ensure that this program best serves all enrollees. I look forward to your response.
Mark R. Warner
United States Senator