Preventive Planning to Avoid a Potential Healthcare Crisis

One thing that is not included in the FEHB plans is long term care insurance. The author offers considerations when exploring available options for covering a long term care event/illness as well as coverage options available to you.

One of the greatest benefits that federal employees have is the Federal Benefits Health Program (FEHB).  Federal Employees and annuitants can choose from among, fee for service, HMO’s, Consumer Driven Options and High Deductible Plans. If you find yourself not happy with your plan, you can make changes during the annual Open Season. While you are working you pay the premium with pre-tax dollars. FEHB costs are shared by the government and participating employee or annuitant.   If you are eligible, you can continue with FEHB in retirement.  The only thing that changes is your premiums are paid on an after tax basis.

While there are significant benefits available in the FEHB plans, one thing that is not included is protection if you have a long term care event.  Going through a long term care illness can devastate a family both emotionally and financially.  Why let that happen when there are things that you can do now that will protect your family and allow you choices in the type of healthcare that you receive.  Do you really want the alternative, which is to allow your state to dictate the type of healthcare they will provide after you spend-down practically all of yours and your family’s assets?

Now that the 2014 Open Season is behind us, why don’t you extend your healthcare planning and make a commitment to explore your options. and choose the best long-term plan for yourself and if applicable, your spouse.

Getting started:

Know Your Risks

  • What are your beliefs about long-term care (LTC)?
  • Do you think you will need it?
  • How much do you think it will cost you?
  • How long do you think you will need it?

Today’s Long-Term Care Averages

  • 7 in 10  – The number of Americans age 65 or older will need some type of long-term care*
  • $85,000  – The Average U.S. Annual Nursing Home Cost in 2011*
  • $184,500 – The Projected Average U.S. Annual Nursing Home Cost in 20 years*

Increasing Cost of Care

According to a 2013 survey conducted by Genworth, the cost of facility based care providers has steadily increased over the past 5 years.  In 2008 the median annual rate for a nursing home private room was $67,525, compared with the 2013 median rate of $83,950.  This is an average increase of 4.45% during that period.   In contrast, the rates charged by home health care providers for non-skilled services, have increased only slightly: $18.50 per hour in 2008 to $19.00 in 2013.**

Sixty percent of US claims start at age 80 and older  If we assume the average annual increase rate of 3.95%*, a 60 year old today could potentially pay 117% more for care at age 80.

Consider Your Options

Buy Traditional Long Term Care Insurance

The Federal Long Term Care Insurance Program (FLTCIP) offered through LTC Partners, LLC and underwritten by John Hancock Insurance Company.  Enrollees pay the cost of the premiums; there is no government contribution.  You can also go directly to other insurers to compare plans and rates.


  • Transfer risk of long-term care costs away from you to an insurance company
  • Increase funds you have available to help pay for long-term care expenses


  • Premiums are not guaranteed and could increase later
  • If you never need long-term care, the money you have paid for premiums is not refunded and remains at the insurance company

Self Insure (Pay for long-term care using your assets)


  • You maintain control of your assets
  • Not depending on an insurance company to accept your claim


  • You risk depleting your assets
  • You may not have the ability to get the quality and level of care you need, based on your savings

Alternative “Hybrid” Long-Term Planning Options

There are other alternatives that may meet your needs.  If you have a need for life insurance, a policy that has a Chronic Illness rider may meet a dual purpose: protection for your family if you pass away, especially during your income producing years, and a Chronic Illness benefit to use for yourself in the event you have a long-term health need.  In addition, there are other alternative “hybrid” plans available that may or may not be a better fit for your situation.  The purpose of this article is not to go over the intricacies of traditional long-term care and alternative hybrid options, but to get you thinking about putting a plan together that addresses this for this critical piece of your retirement and healthcare.


*2012 Sourcebook for Long-Term Care Insurance, American Association for Long-Term Care Insurance

About the Author

Carol Schmidlin, Certified Financial Fiduciary®, MRFC® is the President of Franklin Planning and has been advising clients on how to grow and preserve their wealth for 25 years. In addition to her financial planning practice, she is the founder of FedSavvy® Educational Solutions, which provides Financial and Retirement Literacy Programs for Federal Employees. She is passionate about helping families with all phases of Wealth Management and is a member of Ed Slott’s Master Elite IRA Advisor Group. Her practice maintains a home office in Sewell, NJ along with a satellite office in Washington, DC. Carol can be reached at (856) 401-1101.