The Federal Long-Term Care Insurance Plan with 2011 Open Season Update

The largest employer-sponsored long-term care insurance program with eligibility estimated at 20 million people, was launched in March of 2002 with limited benefits, and expanded during Open Season (July 1 – December 31, 2002) with full benefits and abbreviated underwriting for active employees and spouses. The Office of Personnel Management (OPM) selected John Hancock and MetLife to offer The Federal Long Term Care Insurance Program (FLTCIP) and those two companies formed a new company, Long Term Care Partners (LTCP). Long-Term Care Partners is exclusively dedicated to serving the long-term care insurance needs of the Federal Family. The initial contract with John Hancock and MetLife was for seven years. The 2nd contract term was awarded solely to John Hancock and the transition occurred on October 1, 2009.

The first Open Season since the original offering is from April 4, 2011 through June 24, 2011. During this time, abbreviated underwriting (applicants answer fewer health questions) is available for actively at work Federal and U.S. Postal Service employees (civilian workforce members) and their spouses/same-sex domestic partners and active members of the uniformed services and their spouses who are not currently enrolled in the FLTCIP. Premiums are based on your age when your application is received. If your birthday is between now and April 4, you can apply for coverage now with full underwriting to take advantage of the rates at your current age.

A good rule of thumb is to realize that it is offered to anyone who is eligible for the Federal Employees Health Benefits Program – they don’t have to be enrolled in the FEHB, just be eligible for it, and they have to be eligible at the time they apply for FLTCIP. This means it’s not enough to just have FEHB because they could have FEHB due to a continuation of coverage provision and no longer be eligible for it. Two exceptions: 1) Tennessee Valley Authority employees are not eligible for FEHB but are eligible for FLTCIP and 2) Some District of Columbia employees and retirees are eligible for FEHB, but are not eligible for FLTCIP.

Agents were not involved in the sales process but were used through LTC Consultants (my agent training and consulting firm) to conduct 2,020 educational seminars in 210 cities in 43 states. We were in front of 88,449 members of the Federal family – all in 4 ½ months! So I do know something about this project. Those of you who are depending on the Veterans Administration to pay for LTC – ask yourself if the VA intended to pay for LTC, why would The Federal Long-Term Care Insurance Program be offered to veterans and active military personnel?

Here’s a quick overview of eligibility and benefits. I’ve kept the original 2002 offering so those who took advantage of that or whose relatives took advantage of it can see the original benefits offered. I’ve noted the 2011 Open Season offering in parentheses where appropriate. However, please use www.LTCFEDS.com as the final say on any aspect of the FLTCIP.

Eligibility

New applicants listed below are eligible to apply with abbreviated underwriting during the FLTCIP Open Season. All employees must be actively at work.

• Federal and U.S. Postal Service (USPS) employees in positions that
convey eligibility for the Federal Employees Health Benefits Program
(whether or not they are actually enrolled in FEHB)
• Active Members of the Uniformed Services who are on active duty
or full-time National Guard duty for more than 30 days
• Active Members of the Selected Reserve
• Tennessee Valley Authority employees (even though they may not
be eligible for FEHB coverage)
• D.C. Government employees first employed by the D.C. Government
on or before October 1, 1987
• D.C. Courts employees
• Navy Personnel Command (BUPERS) NAF employees
• Spouses of employees listed above
• Same-sex domestic partners of civilian workforce members who have
submitted (either directly or through their partner) a form affirming
this status to the partner’s employing agency

Note: Non-enrolled annuitants and other qualified relatives can apply for coverage at any time, but must complete a full underwriting application.

Benefits

Two plans are offered: Comprehensive and Facilities-Only (2011 Open Season: Comprehensive only)

Daily Benefits – $50 – $300, in $25 increments (2011 Open Season: $100 – $450, in $50 increments)

There is an option that I recommend on the Comprehensive plan to have benefits available on a weekly basis for home health care. This means that instead of a daily maximum, you can have a weekly maximum equal to seven multiplied by the Daily Benefit for an average additional premium of six percent, well worth it for the added flexibility. One hundred percent of the Daily Benefit applies to nursing home, assisted living, hospice (facility and home), bed reservations, caregiver training, respite services (facility and home). For facility benefits (nursing home, assisted living and hospice), the plan covers drugs, incontinence supplies, dietary supplements, personal medical equipment and laundry services.

Waiting Period – 30 or 90 days of eligible charges (2011 Open Season: 90 days)

The waiting period is met by actual dates of service and days do not need to be consecutive. The waiting period does not have to be met to receive benefits for hospice care, respite care and caregiving training. The waiting period can never repeat. Informal care counts toward the waiting period if received as part of an approved plan of care.

Benefit Period/Benefit Max — Three or five years or lifetime (2011 Open Season: two, three, five years or lifetime)

The three or five year benefit period is a “pool of money”, which means it is the daily benefit multiplied by 1095 days or 1,825 days. For any day the charge is less than the daily benefit, the difference stays in the pool and can extend the benefit longer than the three or five years. The lifetime benefit is unlimited and averages 35 percent more premium than the five year benefit period. Care coordination services continue after the benefit maximum is exhausted (see below for definition of care coordination).

Home Health/Adult Day Care– 75 percent of daily benefit, or optional weekly benefit (2011 Open Season: Paid same as nursing home and assisted living facility)

Home health care services do not have to be provided by a home health agency. The plan will pay for licensed professionals (RNs, LPNs, professional therapists – physical, respiratory, speech or occupational) who are freelancing, as long as they are operating within the scope of their license.

Informal care: If approved by an LTC Partners care coordinator, the plan will pay for a non-licensed caregiver who did not live with the insured at time of claim; however the person could move in after benefit eligibility is established. This benefit can include a homemaker not provided through a home health agency. Evidence of services must be submitted (caregiver name, social security number, number of hours, along with a charge for each service). For family members (parents, grandparents, siblings, adult children and respective spouses) this benefit is limited to a lifetime benefit of 365 days. (2011 Open Season: 500 days)

Home health care is optional. A Facilities-Only plan, which covers assisted living, hospice and nursing facilities, averages 30% lower premium than a Comprehensive plan.

Assisted Living – 100 percent of Daily Benefit

Access to Benefits – Tax-Qualified definition (includes standby assistance), as the FLTCIP is a tax-qualified plan. LTC Partners also has to agree in addition to the health care practitioner, and LTC Partners has to approve a written plan of care established by a licensed health care practitioner or an LTC Partners’ care coordinator. Benefit eligibility is reassessed at least once every 12 months but no more frequently than every 30 days. In the event of a dispute, the policyholder is entitled to an independent third-party review.

Inflation Options – Automatic Compound Inflation or Future Purchase Option

Automatic Compound Inflation Option: The Daily Benefit and the remaining lifetime maximum less any claims paid out that year will increase 5 percent, compounded annually. (Sixty-nine percent of the original 269,000 applicants for the Federal LTCI Plan made this choice.) 2011 Open Season is also offering 4% compound. Buy 5% if you can afford it.

Future Purchase Option: The Daily Benefit will increase based on the medical Consumer Price Index (or another index mutually agreed upon by OPM and LTC Partners) every two years on January 1st with no underwriting, unless receiving benefits or unless the insured has declined three times. (Underwriting will apply after the insured has rejected a FPO three times and wishes to resume receiving offers.) Notification will go out in the fall, and the insured has to submit a written rejection to stop it. (Coverage must have been in effect 12 months to get the first increase.) Increases due to the FPO are priced at attained age and premiums in place at that time, so with this option, premiums will increase every two years and will eventually surpass the ACI premium. With each FPO notice will come an offer to switch to the Automatic Compound Option. The premium for ACI will be at the insured’s age on the date of the switch, and the switch won’t be allowed if the insured is receiving benefits. (This offer to switch to Automatic Compound Option is no longer available.)

Some people who need an initial low premium due to pressing current financial obligations (i.e. college tuition for children) buy the Future Purchase Option to keep their premiums low in the first few years with the intention of switching to the Automatic Compound Inflation option as soon as possible in order to stabilize their premium. This can be a good strategy as long as they understand the risk that they won’t be able to switch if they start receiving benefits.

A March 1, 2010 premium increase for those with purchasing ages of 69 and younger who kept the 5% compound inflation benefit as follows.

Age at Purchase (Percentage Increase)
< age 66 (25%)
66 (20%)
67 (15%)
68 (10%)
69 (5%)

My advice? Keep the 5% compound inflation if you bought it and if you are just considering LTC insurance, buy it!! Costs have tripled in the last 20 years and that’s a growth rate of between 5%-6%. (Figure it for yourself: In 1988, semi-private nursing home care averaged $60 a day and in 2011, it’s about $200 a day, which will also pay for about 10 hours of home care at $20 per hour.)

Waiver of Premium – First day of the month following the date eligibility for benefits is established and the waiting period is met, unless that date happens to be on the first day of a month, in which case it would be the same day.

The premium waiver applies to hospice even though there is no waiting period for hospice benefits. Premium resumes on the first of the month following the month in which the insured is no longer eligible for benefits. Premium that has been paid is refunded for any time period paid after death or after the waiver of premium starts.

Pre-Existing Conditions – No exclusion for pre-existing conditions

Reimbursement/Indemnity – Reimbursement, including informal care

Coordination of Benefits – This plan will be secondary to Medicare, group medical benefits and any other employer-sponsored long-term care insurance plan.

The FLTCIP is secondary to any benefits for long-term care services received under any plans established by the Federal or a state government. It does not coordinate with individual or association long-term care insurance policies. The Coordination of Benefits provision doesn’t apply to international benefits (see below). The FLTCIP will not pay for care in a government facility, including a Department of Defense or Department of Veterans Affairs facility.

Nonforfeiture – Contingent nonforfeiture is built into the policy at no extra charge.

Rates – Rate increases must be approved by The Office of Personnel Management (OPM).

There is no spouse or preferred discounts as OPM spread the discounts equally in order to provide equal treatment for all. Premiums can be viewed by using the premium calculator on the LTC Partners website: www.LTCFEDS.com.

Portability – The policy is portable at no increase in premium if the policyholder is no longer a member of the Federal family.

If the group policy ends for any reason, OPM will replace it with another group policy with substantially same coverage and premium based on issue age under the old group policy. (Note: The claims reserve for this program does not belong to the insurance company or companies who administer the plan, nor is it available for any other lines of business or to creditors of the insurance company. If OPM selects another insurance company, the fund will move to the new carrier.)

Additional Benefits

Alternate plan of care: In the Facilities-Only plan, this benefit can mean an alternate facility, but nothing outside of a facility. In the Comprehensive plan, it can mean home modifications, durable medical equipment and emergency response system. Alternate plan of care benefits are subject to the waiting period and count toward the lifetime maximum. All alternate plan of care benefits must be authorized by the LTC Partners’ care coordinator. (2011 Open Season: some of these benefits have been transferred to a Stay at Home benefit such as Care Planning Visits; Home Modifications; Emergency Medical Response Systems; Durable Medical Equipment; Caregiver Training; and Home Safety Checks)

Bed reservations: 30 days per calendar year (includes assisted living and hospice facilities)

Caregiver training: The lifetime maximum is equal to seven multiplied by the Daily Benefit. The waiting period does not apply and Caregiver Training doesn’t count toward the waiting period. The Caregiver Training benefit is paid in addition to the daily or weekly maximum so it doesn’t figure into the daily or weekly benefit calculation.

Respite services: 30 multiplied by the Daily Benefit per calendar year. In the Facilities-only plan, the benefit is available in an assisted living facility, hospice facility or in a nursing home. The Comprehensive plan includes respite care by a formal or informal caregiver at home or in adult day care.

Care coordination: Free (does not reduce the lifetime maximum) and is required as the LTC Partners’ care coordinator is the person who approves benefit eligibility in addition to the insured’s health care practitioner. The care coordinators, all registered nurses, also develop a plan of care and assist with altering it as needs change, monitor ongoing benefit eligibility and provide access to discounts for long-term care services, when available. Care coordination is available to qualified relatives (single or couple), whether or not they are enrolled in the FLTCIP. This service package is also offered to any member of the Federal Family who is declined for a policy in the underwriting process.

Exclusions – No exclusion for mental disorders. No exclusion for war, except the benefit period may be shortened if the war is determined to be a Catastrophic Event as this could undermine the financial stability of the Federal Program (unlikely as Federal Program reserves grow, and this limitation isn’t mentioned in the 2011 Open Season offering).

International Benefits – 80 percent of the Maximum Lifetime Benefit is available for international coverage and payment is made at 80% of the domestic benefit amount. For those who choose a lifetime benefit period, the international Maximum Lifetime Benefit is ten years (3,650 days) multiplied by 80 percent of the Daily Benefit. If the policyholder returns to the United States, the benefits return to the full amounts. This means that any difference between what was paid outside the United States and the full benefit will be payable once the insured returns to the United States.

(The rationale for the 80 percent is that the 20 percent not paid compensates for the additional cost to cover higher claims expenses with provider verification and unknown utilization in another country, both of which protect the financial stability of the plan and guard against rate increases.)

The Office of Personnel Management is committed to both premium and benefit oversight of this plan to ensure rate stability and benefit modernization. For example, robotic care could be covered if that becomes an approved form of caregiving! Additional information is available on the LTC Partners web site at www.LTCFEDS.com or by calling 1-800-582-3337 (TTY: 1-800-843-3557) during the following times for a customer service representative:

Monday through Friday from 8 a.m. EST to 8 p.m. EST
Saturday from 9 a.m. EST to 5 p.m. EST
Closed on Sunday and all Federal holidays

An automated voice response system is available 24 hours a day, seven days a week.