How The Premium Increase for Federal Long Term Care Insurance May Impact You

A number of readers have been surprised, and at least some are angry or upset, over a premium increase in the federal long term care insurance program for some participants. Here is an explanation of how the increase will work and how much of an increase you may be facing.

A number of federal employees have had reactions ranging from upset, angry or irate to perplexed, befuddled and bewildered over premium increases in their long term care insurance policy.

The rate increase is moving ahead and those who are impacted by the rate increase may need to make decisions about how to proceed in the federal long term care insurance program (FLTCIP).

The program is reasonably complex and applies to different people in different ways depending on your situation. You would be wise to discuss potential changes in long term care insurance with your agency’s benefits counselor or with the customer care consultants that will be available to current participants in the program. You may also want to peruse this website on the program before making a decision about how to proceed with your federal long term care insurance.

Some readers have received a letter about the federal long term care insurance program. This letter states that:

“The U.S. Office of Personnel Management (OPM) awarded a new seven-year contract to John Hancock Life & Health Insurance Company (John Hancock) to provide insurance coverage to all FLTCIP enrollees. We have enclosed formal documentation regarding this change and encourage you to save it with your benefit booklet and schedule of benefits.”

The content of the letter was not the same for everyone. As some readers already know, a premium increase is in the works for some program participants. The letter for some people said:

“OPM and John Hancock have determined that a premium rate increase is necessary for enrollees with the Automatic Compound Inflation Option (ACIO) whose age at purchase was 69 or younger. This premium increase will take effect on January 1, 2010. It will not apply to enrollees with ACIO whose age at purchase was 70 or older or to enrollees who have the Future Purchase Option (FPO).”

OPM says that the transition to John Hancock as the sole insurer of the second contract term for the federal program will occur on October 1, 2009. Until that date, insurance will continue to be provided by the John Hancock and MetLife consortium that provided insurance for the Program during the first contract term.

The premium increase for the federal program will begin in January 1, 2010. The amount of the increase depends on the person’s age when the insurance was purchased.

Age at Purchase Percentage Increase
65 and Younger 25%
66 20%
67 15%
68 10%
69 5%
70 No Increase

Special Decision Period

All participants in the plan will will be able to make a couple of choices:

  1. Keep your current benefit levels and accept any applicable premium increase. If this is your preference, you will not have to take any action as this is the default option. If you do not take any action to request a different option, this is the option that will automatically occur.
  2. You can change your current benefit levels to a specified level of benefits in the new long term care plan with updated premiums.

If you are facing a premium increase, you will have a third option:

You can downgrade your coverage to a specified level of benefits in order to keep their premiums approximately the same as they are currently paying.

Limitations on Special Decision Period

The Special Decision Period is only for people who are enrolled in the federal insurance program. It is not a general open season for all employees and annuitants to elect FLTCIP coverage. The Office of Personnel Management expects to hold a FLTCIP Open Season for all individuals eligible to apply in late 2010.

You may want to also review this OPM benefits memorandum on the program for more information.

Finally, for readers who are wondering if this premium increase will impact the COLA for Social  Security recipients or for retired federal employees in 2010, you can stop wondering: You will have to absorb the extra cost or take action to reduce your potential benefits under the federal long term care insurance program. This increase is not directly related to the COLA determination for 2010. (For more information, wee Your 2010 COLA: Why Your Costs May Be Up But Your Income Goes Down.)

About the Author

Ralph Smith has several decades of experience working with federal human resources issues. He has written extensively on a full range of human resources topics in books and newsletters and is a co-founder of two companies and several newsletters on federal human resources. Follow Ralph on Twitter: @RalphSmith47