Attn: Current & Retired Fed Employees - LTC changes

[freebird5825]

So much for fixed premiums for the LTC inflation adjusted plan.
I must have missed the fine print that said the premiums were guaranteed for only the length of the original contract (7 years).

Premium Hikes, Benefit Options in New Long-Term Care Contract for Federal Employees

I'm not sure which option I will take for the conversion. I'll see what the letter from FLTCIP says first.

[ziggy29]

A LOT of LTC programs are jacking premiums WAY up this year. I know some going up 30-40%.

[samclem]

Quote:

Originally Posted by freebird5825 So much for fixed premiums for the LTC inflation adjusted plan. I must have missed the fine print that said the premiums were guaranteed for only the length of the original contract (7 years).

I, too, didn't know the rates were subject to renegotiation (= increase) every 7 years.

The article just talks about John Hancock. MetLife is the other company providing LTCI under this program, I suppose they will also match the changes.

There's still a lot of uncertainty about the long-term prospects for the LTCI business. I suppose it is better that the companies raise premiums than go out of business, but neither prospect should be something a policyholder should have to fret about.

[yakers]

I have not had my LTC premium increase *yet*, I suppose I should look out for that. Now AFAIK the premiums can be raised for inflation but the benefit amount must also be raised for inflation.

[freebird5825]

MetLife and John Hancock were the original co-insurers for FLTCIP.
I am closely watching for news of exact details of the new contract award, either to a single company (JH) as this article states, or MetLife, or both again.
I do not know the answer to that right now.

Has anyone else seen a press release from OPM besides this one? http://www.opm.gov/news/opm-awards-n...ract,1462.aspx

FLTCIP site is at http://www.ltcfeds.com/

[samclem]

Reading the linked article, it sounds like some of the enhancements to benefits might actually be worthwhile, and those changes might be worth paying for. It's not clear how much "apples-to-apples" premiums are really going up: if a policyholder makes no changes to his benefits, how much will his premiums rise?

Often we hear that health insurance premiums rise because the cost of medical care is going up, and this makes sense. It's not the same with LTCI--in some ways it shouldn't matter much if prices for providing care go up astronomically, since all you are insured for is a single maximum daily benefit dollar amount (which can go up with inflation-but so do the premiums). Are people making claims for LTCI benefits at a higher rate than was anticipated? Or, is it maybe the fact that John Hancock's investments are in the toilet (bedpan?) and this is a way to bring in more dollars from a bunch of clients who are unlikely to be able to shop around for a better deal, especially if they have developed medical issues.

[donheff]

Quote:

Originally Posted by freebird5825 So much for fixed premiums for the LTC inflation adjusted plan. I must have missed the fine print that said the premiums were guaranteed for only the length of the original contract (7 years).

Quote:

Originally Posted by samclem I, too, didn't know the rates were subject to renegotiation (= increase) every 7 years.

You just were not paying close attention. The sign-up materials were clear about the potential for premium increases.

Quote:

Originally Posted by samclem Are people making claims for LTCI benefits at a higher rate than was anticipated? Or, is it maybe the fact that John Hancock's investments are in the toilet (bedpan?) and this is a way to bring in more dollars from a bunch of clients who are unlikely to be able to shop around for a better deal, especially if they have developed medical issues.

I went with the Federal program rather than the competitors because I figured OPM had good negotiating clout and would keep costs down to the extent practicable. Other LTC companies have gone way up -- they didn't have good data to price these things at the outset.

[samclem]

Quote:

Originally Posted by donheff You just were not paying close attention. The sign-up materials were clear about the potential for premium increases.

I didn't read the sign up materials because I didn't get far enough down the track to do the detailed analysis. And I'm sure there are some words hidden on the web site that talk about periodic premium increases, but this language is certainly not prominent. Here are some things it does say:

Quote:

4. How long is OPM's contract with Long Term Care Partners? What happens when the contract term ends?The initial contract is for 7 years. By law, OPM cannot automatically renew the contract with Long Term Care Partners. OPM continually evaluates the performance of Long Term Care Partners against annual performance goals. Before the 7 years ends, an extensive review of Long Term Care Partners and the industry will be conducted. OPM will then determine whether it is in the best interest of enrollees to renew the current contract. If the answer is yes, OPM will renew the contract for another 7 years. If the answer is no, OPM will issue a new Request for Proposals and choose a new contractor. This process should be seamless to the enrollees. If there is a new contractor, the new contractor will automatically assume the responsibilities for the current enrollees and in the interim Long Term Care Partners would stay on until the transition to the new contractor is complete.

Hmm--so if everything is going okay with LTCP, OPM will renew the contract for 7 years. It doesn't say anything about LTCP renegotiating the contract, implying there's a provision for an automatic extension of the terms at the discretion of the government. It doesn't imply there will be likely premium increases every 7 years, or that the menu of benefits will change (as is happening now).

Quote:

Automatic Inflation Option An Automatic Inflation Option means that the value of your insurance will increase each year by a set rate (e.g., 5% annually). While the initial premium is higher with this option, you will not have to think about future inflation increases, as they are automatic, with no commensurate increase in premium.

Okay, hopefully OPM will soon tell the public why the premiums are going up. Apparently it's not due to inflation, as this paragraph makes clear that those who bought the inflation protection "don't need to think about future inflation increases."

[freebird5825]

Actually, I went over the details with a fine tooth comb. It is my nature. I was a contracts manager and knew what to look for. What I did not have in front of me was the original contract, only the literature distributed or posted online by OPM and FLTCIP.
It's water over the dam, and I will certainly continue the policy. That's a no brainer. It is a wonderful benefit and I am grateful to have eligibility to sign up for FLTCIP.
It is one of those expenses that I had figured as a constant, and now see it is a variable with a 7 year period.
We adapt and we go forward...

[donheff]

I distinctly remember reading (and telling DW) that the contract premiums could go up during the seven year period. I was worried that we might see an increase after one or two years after they learned what sort of client population they attracted. They haven't raised rates so far which is a good sign that the insurer was not trying to scam us.

[ziggy29]

Quote:

Originally Posted by donheff I distinctly remember reading (and telling DW) that the contract premiums could go up during the seven year period. I was worried that we might see an increase after one or two years after they learned what sort of client population they attracted. They haven't raised rates so far which is a good sign that the insurer was not trying to scam us.

I think the main thing is that this is a fairly new product and insurers are still learning how to price it.

And I also think that given the realities of health care costs and their inexorable march upward, it's pretty hard to offer something like this with a claim that premiums will be relatively fixed and predictable.

[samclem]

Quote:

Originally Posted by ziggy29 And I also think that given the realities of health care costs and their inexorable march upward, it's pretty hard to offer something like this with a claim that premiums will be relatively fixed and predictable.

Why? These policies promise to pay a fixed price per day for long term care. The amount they will pay goes up (typically 5% per year) to account for inflation, and this is already computed intot he premiums (if you buy the inflation coverage option). It seems to me that changes in the actual cost of care are irrelevant to the insurer--he's not bound to pay for what the care costs, he's required to pay $150/day or whatever level of coverage the insured bought.

The only things that I can figure would cause rates to rise would be:
1) People entering LTC at a rate higher than forecast
2) People staying in LTC longer than forecast. Some policies have a cap on the duration (e.g. 5 years, which really doesn't mean you are covered for 5 years inthe case of the federal program--if you didn't spend the max amount per day, the unused benefits carry forward and can be used beyond the 5 year point). The federal program also offers an "unlimited" option, which allows the beneficiery to get the daily coverege amount indefinitely. So, if the underwiters guessed wrong, I suppose the insurance companies could be experiencing higher than forecast benefit payments.
3) Poor investment performance. These insurers must have made some estimate of the rate of return they'd get on the invested premiums.

Given the recent market returns, I'm betting "#3" best explains why the insurance rates are going up. If so, this is something that should be disclosed in the advertising. "Even if we pay out less than anticipated, if we buy shopping malls and corporate securities that don't do very well, we'll be coming back to you with a request for more money. "


Disclaimer: I have no special knowledge of insurance products.

[Brat]

I think SamClem has identified the primary cause.

[freebird5825]

Another article with a bit more meat to it.
Long-term care premiums to jump up to 25% - Federal news, government operations, agency management, pay & benefits - FederalTimes.com

[freebird5825]

Some dates of changes to occur and a little more detail
Long-Term Change (5/15/09) -- www.GovernmentExecutive.com

FAQs are found here
http://www.ltcfeds.com/help/faq/second-contract.html
excerpt: OPM anticipates the new benefit options will be available for new applicants approved for coverage sometime this Fall. At that time, the current benefit plan will be discontinued for new applicants.

Current enrollees will also have the opportunity this Fall to change to the new benefit options or make changes to their coverage.

The new rates for current enrollees will take effect on or about January 1, 2010. We will communicate the schedule as soon as we can.

[Purron]

Quote:

Originally Posted by Brat I think SamClem has identified the primary cause.

Yep, me too. I'll be interested in updates on the Fed LTC situation since DH and I are both enrolled. Here's another article on the subject:

Federal News Radio 1500 AM: Navigating the LTC Minefield