The Federal Long-Term Care Insurance Program (FLTCIP), which covers about 267,000 civilian federal employees and military members, has announced plans to increase its premium rates by as much as 86% starting from January 1, 2024. The news has sparked outrage and frustration among the enrollees, who have to choose between paying more or reducing their coverage.
Why are the premiums rising?
According to the Office of Personnel Management (OPM), which oversees the FLTCIP, the premium hike is necessary based on recent analysis of the program. The FLTCIP website states that many factors are considered when setting the premium rates, such as the frequency and duration of claims, expected lifespan of enrollees, cost of care, estimated returns on investment and overall program expenses.
“As the FLTCIP matures, these factors can change over time,” the website says.
The FLTCIP is a voluntary opt-in program that provides long-term care benefits for nursing homes, assisted living facilities, hospice care and other services. The program is operated by John Hancock Life & Health Insurance Company, which has a seven-year contract with OPM that was renewed in May 2023.
The premium rates are reviewed every seven years and may be adjusted if they are deemed inadequate to cover the projected costs of the program. The last time the FLTCIP increased its premiums was in 2016, when some enrollees faced hikes as high as 126%.
How are the enrollees affected?
OPM has sent individualized letters to the FLTCIP enrollees, detailing their options moving forward. Enrollees can choose to keep their current coverage and pay the higher premium, or reduce their coverage and pay a lower or unchanged premium. They can also cancel their coverage altogether and receive a paid-up limited benefit equal to the amount of premiums they have paid into the program.
However, many enrollees are unhappy with these choices and feel betrayed by the program they trusted. Some have invested thousands of dollars into the FLTCIP over the years, hoping to secure their future long-term care needs. Now they face the dilemma of either paying more than they can afford or losing their coverage when they may need it most.
The National Active and Retired Federal Employees Association (NARFE), which represents about 200,000 current and retired federal workers, has expressed its strong opposition to the premium increase and called it a “classic bait-and-switch scheme”.
“FLTCIP enrollees took the bait when they purchased insurance at lower-quoted price, and now are forced to switch to a higher cost product or lose their investment,” NARFE National President William Shackelford said in a statement.
NARFE has also criticized OPM for its lack of transparency and communication with the enrollees and urged it to provide more information and assistance to help them make informed decisions.
What are some alternatives to the FLTCIP?
The FLTCIP is not the only option for federal employees and retirees who want to plan for their long-term care needs. There are other alternatives that may offer more flexibility and affordability, such as:
- Health savings accounts (HSAs): These are tax-advantaged accounts that can be used to pay for qualified medical expenses, including long-term care services. However, they are only available to those who have a high-deductible health plan (HDHP) and meet certain eligibility criteria.
- Long-term care riders: These are optional features that can be added to some life insurance or annuity policies that provide long-term care benefits in addition to death or income benefits. However, they may have limitations on the amount and duration of coverage and may affect the tax treatment of the policy.
- Hybrid policies: These are policies that combine life insurance or annuity with long-term care insurance in one product. They offer guaranteed benefits and premiums, but they may be more expensive than standalone policies and may have less flexibility in choosing providers and services.
- Self-insurance: This means saving and investing enough money to pay for long-term care expenses out of pocket. This may be feasible for those who have sufficient income and assets and low risk of needing long-term care. However, it also involves uncertainty and opportunity cost.
Before choosing any alternative, it is advisable to consult a financial planner or an insurance agent who can help compare the costs and benefits of different options and find the best fit for one’s situation.