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Long-term care premiums to jump up to 25%

As many as 155,000 civilian and military employees and retirees enrolled in the federal long-term care insurance program can expect their premiums to increase by as much as 25 percent later this year or early next year.

The increases will affect most of those who are enrolled in the program’s “automatic compound inflation protection” option. Under this option, enrollees’ benefit payments increase 5 percent annually, but premiums do not regularly increase. Under the new policy, however, a range of premium increases will go into effect, depending on the age at which an enrollee first signed up for coverage. Enrollees who first purchased coverage at age 65 or younger face a premium increase of 25 percent. Those who purchased coverage between the ages of 65 and 70 face smaller increases. Those who purchased at age 70 or older face no increase.

There will be no premium increase for 69,000 employees and retirees who enrolled in the “future purchase” option, in which benefits and premiums increase every two years. The size of the increase varies based on the enrollee’s age.
The Office of Personnel Management, which oversees the benefit, said the increase is needed to cover the program’s costs.

“The announced premium increase is necessary due to changes to certain key components underlying pricing, particularly the expected return on program investments and … the number of people expected to keep the coverage until they claim benefits,” OPM said in a statement to Federal Times.
Some are worried and disappointed by the premium increase.
“So much for OPM’s ability to keep a premium down,” said Mike Miles, a Washington-area financial planner who writes the Federal Times Money Matters column. “The idea was supposed to be that [the government’s] buying power and leverage would allow [it] to force insurance carriers to keep the premiums low and level.”

One federal employee, who enrolled in the long-term care program when it started seven years ago and asked that her name not be used, said she might leave in the face of a 25 percent increase. “The whole idea of buying in early is to keep your premiums at lower rate,” she said. “But if they raise them every seven years, what’s the advantage?” But she worries that because she’s now 56 and falls in a higher age bracket, she may not find a better deal elsewhere.
“I would have hoped OPM would have done a better job,” she said. The National Active and Retired Federal Employees Association plans to meet with OPM this week to discuss the hike. “There’s a lot of questions we have,” said assistant legislative director Dan Adcock. The hike is included as part of a new seven-year contract that OPM awarded to John Hancock Life and Health Insurance Co. to administer the long-term care benefit. OPM started the long-term care program in 2002. Until now, the benefit was managed by a partnership between John Hancock and MetLife. Under the new contract, which OPM announced May 1, MetLife will play no role. OPM would not comment on why it did not choose MetLife. MetLife issued a statement that said it thought it submitted a strong proposal when it bid on the contract.

The new contract also includes new options in benefits:

  • Higher home health care reimbursement. The program currently reimburses 75 percent of the daily benefit amount for care provided by a nurse, therapist, informal caregiver, health aide or other authorized provider at home, but the new contract will reimburse 100 percent of the daily benefit amount.
  • Higher caps on benefits that can be paid out in a single day. Enrollees can now choose daily benefit caps of $50 to $300, but the new limits will range from $100 to $450.
  • Higher caps on payments for family members, friends and other unlicensed caregivers who provide informal care. The program currently covers up to 365 days of informal care in an enrollee’s lifetime, but the new contract will provide up to 500 days of coverage.
  • A new option for a two-year benefit period. The benefit period is the length of time that the policy can be expected to pay benefits. The program already lets employees choose options of either three years, five years or a lifetime.

Enrollees will have time before rates increase to decide whether to stay with the current benefit structure at a potentially higher premium, cut their benefits to keep their premiums at current rates, or switch to the new benefit structure and its higher premiums without underwriting. The Federal Long Term Care Insurance Program is optional for federal civilian employees and retirees, military members and retirees, and qualified relatives. The insurance covers care at home, adult day care, assisted living facilities, hospices and nursing homes.

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