Why OPM is Suspending FLTCIP Applications
If you are not already participating in the Federal Long-Term Care Insurance Program (FLTCIP), any plans you may have had to apply for coverage are likely to be delayed.
The Office of Personnel Management (OPM) has announced it is suspending applications for coverage under this program.
According to OPM, the rationale for the suspension is to allow OPM and the FLTCIP carrier, John Hancock Life & Health Insurance Company, more time to assess benefits and premium rates that “reasonably and equitably reflect the cost of the benefits provided, as required under 5 U.S.C. 9003(b)(2).”
Rate Hikes Coming for FLTCIP
OPM called a halt to new applications when the John Hancock Life & Health Insurance Company warned OPM that the current premiums being charged are unsustainable and it likely would have to request significant rate hikes.
Who Is Impacted and How Long Will Suspension Last?
As of December 19, 2022, those who are not currently enrolled can no longer apply for coverage. Those who are currently enrolled will not be able to apply to increase their coverage under the program.
The suspension will remain in effect for 24 months unless OPM issues a notice to end or extend the suspension period. Newly eligible employees and newly eligible spouses of employees may apply with abbreviated underwriting until 11:59 p.m. (ET) on December 18, 2022.
Current enrollees’ coverage status will not change as long as they continue to pay the premium for the insurance. For those who have filed a claim, there is no change to coverage or the claims reimbursement process as long as benefits have not been exhausted.
Eligible federal employees submitting an application for FLTCIP prior to the start of the suspension period will have their application considered. If the application is approved, the individual will receive a benefits booklet and schedule of benefits with complete coverage information.
How Many Employees are Enrolled in FLTCIP?
This federal employee benefit covers about 267,000 people. It may be the largest group long-term care insurance program in the U.S.
Approximately 6,000 eligible individuals enroll in FLTCIP annually. This is less than 0.1% of 11 million eligible federal and military actives and annuitants (not including spouses and other qualified relatives who are also eligible). According to OPM, this low percentage mirrors the low uptake for purchasing long-term care insurance (LTCI) in the broader LTC market.
Premiums Have Doubled for Some Policies
Federal employees and others who have purchased long-term care insurance in recent years have experienced large price increases. Prices for some policies have more than doubled.
According to OPM, an overall average increase of 83% was implemented in 2016. The amount of the actual increase varied based on an enrollee’s age at the time of enrollment, the plan that was originally purchased, and the design of the plan. Here is a quick summary of the most recent increases:
- A 126% maximum increase was implemented for enrollees who originally
purchased FLTCIP 1.0 between 2002-2009.
- A 66% maximum increase was implemented for enrollees who originally
purchased FLTCIP 2.0 between 2009-2019.
Features of Federal Long-Term Care Insurance that Raise Prices
According to an analysis by Forbes, some features in the federal program have resulted in keeping these insurance premiums high.
For example, new employees have been allowed to undergo only limited underwriting before they can purchase.
While that feature makes coverage more accessible, it results in a riskier pool of enrollees and drives up premiums for everyone. By contrast, in recent years most long-term care insurers have been imposing stricter underwriting on perspective buyers so that one-third or more are unable to purchase coverage.
And even if OPM wants to resurrect the program, there also is the question of whether it can find insurance companies willing to sell the coverage. Hancock has been the sole carrier for years because OPM could not contract with other insurance partners. The current Hancock agreement expires in April and it is not clear whether the insurer and the government will agree to extend the contract.