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Federal Long-Term Care Premiums
Old 07-20-2016, 07:38 PM   #1
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Federal Long-Term Care Premiums

A recent announcement that the premiums for the FLTCIP are going up and in some cases by triple digits.

"The Enrollee Decision Period runs July 18 through Sept. 30. The new premiums take effect Nov. 1. Enrollees can make changes throughout the decision period, however, the “last election submitted will be used,” the fact sheet advised.

Federal long-term care premiums rising by triple digits


I believe that I will be canceling my policy as the new increases don't appear to justify the value along with the many stories of members here who have had difficulty using benefits of long-term care insurance.
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Old 07-20-2016, 07:55 PM   #2
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I just got my notice today and the increases are indeed steep. I'm going to have to do a lot of thinking about this.

Does your comment regarding difficulty in using the benefits refer to LTC in general or the Federal program in particular? If the latter, do you have links to any specifics?

I'm interested in how others analyze this issue.
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Old 07-20-2016, 08:29 PM   #3
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Quote:
Originally Posted by friar1610 View Post
I just got my notice today and the increases are indeed steep. I'm going to have to do a lot of thinking about this.

Does your comment regarding difficulty in using the benefits refer to LTC in general or the Federal program in particular? If the latter, do you have links to any specifics?

I'm interested in how others analyze this issue.
My comment about difficulty using LTC was in general. Several years ago Nords started a thread detailing what he went through getting the insurance company to pay the benefits for his Dad who is in a long term care facility. They make it difficult in any way they can. I also have some family friends who have had lots of difficulty getting the LTC insurance payments for his parents.

Can't find Nords post on this board, but he did a writeup on his military blog - Why I Won't Buy Long-Term Care Insurance - Military Guide
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Old 07-21-2016, 05:33 AM   #4
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I was surprised at how steep the change is. It looks like an inflation escalator that exceeds changes in the industry is killing the carrier. I will likely change my plan from unlimited days/total with a 4%/yr escalator to unlimited and 2.6%. That still entails a substantial increase in costs. I would like to hear others reactions and choices.

As for ease of use, we tapped Federal LTC for my FIL's last year and it was seamless. I have heard other reports that it works pretty well as long as you notify the carrier as soon as you start using services that trigger the initial waiting period for benefits. I went with the Federal program rather than choose comparable offerings that were a little cheaper (at the time - many out of the business now) because I trusted OPM to police the program to make sure it is broadly delivering on its promise. They won't arbitrate individual cases but they will look into abuses and hold the carrier's feet to the fire for adherence to the contract to some degree.
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Old 07-21-2016, 09:18 AM   #5
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I have not received my notice yet. I have been paying for it for the last 14 years for my DH and myself. Most of the employees in my office did not sign up for it. I believe that I am the only one who signed up for it, still has it. I have read all of the discussions regarding long-term care insurance on this forum and keep wondering if I am doing the right thing or not. I don't know of any of my relatives that have ever had it. I will be following this thread and people's reasoning very closely. Thank you for starting it.
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Old 07-21-2016, 11:08 AM   #6
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I read the Nord article. And although, the level of effort he had to put out was high, the fact is expenses were paid. How would his family have fared without it? My dad has a policy that is now being used for my mom. I need to ask him how it is working out. I do know it ends up only covering about half of what it costs for the facility that she is in.
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Old 07-21-2016, 03:31 PM   #7
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Originally Posted by Chris7 View Post
I read the Nord article. And although, the level of effort he had to put out was high, the fact is expenses were paid. How would his family have fared without it? My dad has a policy that is now being used for my mom. I need to ask him how it is working out. I do know it ends up only covering about half of what it costs for the facility that she is in.
I had the same reaction when I read the article (and let me add that I have the highest regard for Nords' analyses and insights.) Also, thanks to powerplay for posting the link.

When I took the policies out I realized they would cover only a portion of the bills and I opted for a fairly high deductible (based on my perceived ability to eat some of the costs without destroying our nest egg.) So I had never envisioned full coverage.

I've also noted the graphs that came with the premium notice which show the growth in benefit amounts based on various inflation rates. Obviously, the differences in amounts are disproportionately greater the further out you go in years. So one benefit of growing older (I'm 71; spouse soon to be 70) is that I don't have to account for as many years into the future.

Still haven't done any hard-core math yet.
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Old 07-21-2016, 03:40 PM   #8
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I went to the feds LTC web page and looked at the breakdown, but have not received my package in the snail mail yet.

One thing DW and I consider is that LTC is not for just old people. It is for anything that disables you to the point of needing that particular type of care. Like a car accident, etc. Consequently my 58 year old DW, who has a policy with a different carrier, is keeping her's a little higher until she is older without 'that many years left'. I'll probably drop mine to the lower inflation rate and 5 years.

I checked what the average nursing home care is in places I live or will live, and my current benefit is just below that average. So already the LTC does not cover everything, and that gap will probably increase in the future. But something is better than nothing.
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Old 07-22-2016, 06:36 PM   #9
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Originally Posted by donheff View Post
I was surprised at how steep the change is. It looks like an inflation escalator that exceeds changes in the industry is killing the carrier. I will likely change my plan from unlimited days/total with a 4%/yr escalator to unlimited and 2.6%. That still entails a substantial increase in costs. I would like to hear others reactions and choices.

As for ease of use, we tapped Federal LTC for my FIL's last year and it was seamless. I have heard other reports that it works pretty well as long as you notify the carrier as soon as you start using services that trigger the initial waiting period for benefits. I went with the Federal program rather than choose comparable offerings that were a little cheaper (at the time - many out of the business now) because I trusted OPM to police the program to make sure it is broadly delivering on its promise. They won't arbitrate individual cases but they will look into abuses and hold the carrier's feet to the fire for adherence to the contract to some degree.
How much does unlimited days with the 4% inflation adjustment currently cost you monthly? I have 5 years/with 4% inflation adjustment at $102 monthly. I suspect your premiums are a multiple of what I and my wife pay. I'm leaning towards going with the 5 year/2.6 inflation adjustment they are offering me, which increases premiums at 60%. I'm disappointed that FedLTCi is not offering more options to choose.
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Old 07-23-2016, 05:20 AM   #10
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Originally Posted by ChrisC View Post
How much does unlimited days with the 4% inflation adjustment currently cost you monthly? I have 5 years/with 4% inflation adjustment at $102 monthly. I suspect your premiums are a multiple of what I and my wife pay. I'm leaning towards going with the 5 year/2.6 inflation adjustment they are offering me, which increases premiums at 60%. I'm disappointed that FedLTCi is not offering more options to choose.
Currently $179.60, I am 67 YO. DW is $148.77 and 63.
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Old 07-23-2016, 05:39 AM   #11
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If you have had your LTC policy for many years you should think long and hard before totally canceling it. A better alternative if you cant afford the higher premiums may be to accept continuing your policy but with reduced coverage.

One sanity check you can easily make is to get a quote for a totally new policy with either full or reduced coverage. If your existing policy has been in effect for many years you will be surprised at how much cheaper it is than a new policy.

On an actuarial basis your existing policy if in effect for a long time is quite favorable to you most likely.

Case in point. I bought a LTC policy in 1990 when i was 25 for ten bucks a month (hard to believe but true). I am now 51 and have the same policy with inflation additions for increased coverage for about 22 a month for over 400k of total coverage and a generous daily limit. I dont plan to ever give this policy up if i can avoid it.
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Old 07-23-2016, 08:44 AM   #12
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I just started a post about Ric Edelman's recent change in opinion about this topic, in specific reaction to these increases.

Edelman - Change in thinking about LTC insurance
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Old 07-23-2016, 03:47 PM   #13
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I'm sure many people who follow this web site also follow Bogleheads. There is also a discussion on this subject going on there for those who may be interested:

https://www.bogleheads.org/forum/vie...89896#p2989896
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Old 07-23-2016, 10:24 PM   #14
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Thanks for letting me know about this thread, Friar! I'm on travel with limited bandwidth but I'm happy to discuss the issues.

Quote:
Originally Posted by Chris7 View Post
I read the Nord article. And although, the level of effort he had to put out was high, the fact is expenses were paid. How would his family have fared without it? My dad has a policy that is now being used for my mom. I need to ask him how it is working out. I do know it ends up only covering about half of what it costs for the facility that she is in.
Yes, the expenses were paid-- and in the most excruciatingly administratively and bureaucratically painful (and stressful) way possible for a caregiver to tolerate. John Hancock had (and perhaps still has) some of the most cumbersome systems I've ever encountered from an enterprise-level corporation. My father had to spend nearly $4000 on a neuropsych evaluation to even get Hancock to agree with the Denver probate court that his Alzheimer's was severe enough to no longer live independently. It was 18 months before they even offered electronic payments. I was faxing monthly bills to Hancock because they couldn't seem to figure out how to upload documents to a secure website.

Let's remember that they also couldn't keep track of their own payout math and tried to short my father's policy by $6175. It's less than a month of reimbursement, but it really scales when you do that to a few hundred stressed-out caregivers per year. I'm a fairly smart & persistent guy, and my caregiver stress has been extremely far below the average, but it was still painful and frustrating. I can only imagine how many others have just given up.

My father won the long-term care lottery with more than a 25:1 payout on his premiums. If I remember correctly (away from my spreadsheet) it paid for over three years of his care. It gave me time to work on his portfolio (and the rest of his finances), and it insulated him from a potential bear market.

But if it was so painful to deal with the world's best LTC policy from one of the world's most financially stable insurers, then how much nastier will it be to get a LTC payout today? If Hancock has to keep jacking up the premiums when we're in our 50s or 60s, then how survivable will the payouts be in our 70s or 80s?

Traditional LTC policies are only financially sustainable when the premiums are much higher. How much longer are you going to subsidize Hancock's business model? Would it be better to go with a hybrid life-insurance/LTC policy, or to trust that care needs will be shorter (as shown by recent research), or to invest in your own high-equity passive index portfolio instead of Hancock's bond portfolio? These questions don't have easy answers.

I don't want to inflict this caregiver pain on a third generation of our family. My spouse and I have the assets (and cash flow from our military pensions) to self-insure.

Those retirees with a low net worth (or low cash flow) will probably be unable to pay years of LTC premiums and will spend down to Medicaid. The real gray area for LTC insurance considerations is probably in the $1M-$2M range of net worth, or perhaps around $5000/month retirement income. At those numbers, rising LTC premiums extract a high price for the peace of mind.

Those who are considering keeping their policies because "we've paid so much already" need to review the behavioral financial psychology behind the sunk costs fallacy. Be sure that you understand how it impacts your ability to make the best decision for your situation.
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Old 07-24-2016, 04:01 AM   #15
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Thanks to all, as I did not realize the Fed LTC rates were increasing. Logged on to my account and sure enough it was a hefty increase. I went "hybrid" to keep the premiums the same. Our net worth has increased substantially since we started the coverage 11 years ago at age 50. More premium increases in the next round will push me toward self-insurance.

We're going through the drill to get my FIL's LTC payments started right now. Nord's right, it's a PIA.
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Old 07-24-2016, 07:41 AM   #16
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Quote:
Originally Posted by BeachOrCity View Post
If you have had your LTC policy for many years you should think long and hard before totally canceling it. A better alternative if you cant afford the higher premiums may be to accept continuing your policy but with reduced coverage.

One sanity check you can easily make is to get a quote for a totally new policy with either full or reduced coverage. If your existing policy has been in effect for many years you will be surprised at how much cheaper it is than a new policy.

On an actuarial basis your existing policy if in effect for a long time is quite favorable to you most likely.

Case in point. I bought a LTC policy in 1990 when i was 25 for ten bucks a month (hard to believe but true). I am now 51 and have the same policy with inflation additions for increased coverage for about 22 a month for over 400k of total coverage and a generous daily limit. I dont plan to ever give this policy up if i can avoid it.
I hear you, BUT: in my DW's case, the proposed premium increase amounts to 230% (she signed up in 2001 at age 42). That's massive! I don't yet know what we will do - yes we could keep current premiums and darn near forgo inflation adjustments, but that will mean SERIOUSLY underfunded benefits in 30 years. What I'm even more concerned with is that I we can be virtually assured that this isn't the last "adjustment" we will see. In fact, the pace of adjustments will very likely increase over time.
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Old 07-26-2016, 02:38 PM   #17
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Here is a link to NARFE: FLTCIP Premium Increases: What You Need to Know

National Active and Retired Federal Employees Association (NARFE)
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Old 07-27-2016, 09:15 AM   #18
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More fallout: Congress is involved https://federalsoup.com/articles/201...=FD_270716&m=1

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Old 07-29-2016, 10:50 AM   #19
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Tammy Flanagan's take on the FLTCIP situation

Long-Term Care Insurance: What Should You Do About Rate Hikes? - Retirement Planning - Pay & Benefits - GovExec.com
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Old 08-01-2016, 04:15 PM   #20
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After giving it some thought, I reduced my annual inflation kicker from 4% to 2.3% for no annual increase.(The last time rates increased I took a reduction from 5% to 4%.) The option offered to my wife if she kept a level premium was a reduction of the inflation adjustment to 0.9%. We opted for a reduction to 2.6% which added about $100 to her premium. Ages 71/almost 70.
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