June 11, 2009

M E M O R A N D U M

:       Federal Long Term Care Insurance Program

SUMMARY:  NTEU was briefed by the Office of Personnel Management (OPM) about changes in its Federal Long Term Care Insurance Program (FLTCIP).  Unfortunately, premium increases are expected for those enrolled in the Automatic Compound Inflation (ACI) option.

            OPM met with NTEU this week to give advance notice for changes that will take place in the FLTCIP.  The original seven-year contract with John Hancock Life and Health and Metropolitan Life expired in April of this year.  The current contract has been extended for 10 months to allow for an orderly transition to John Hancock as the sole insurer.  OPM is working on a plan that will offer more choices and greater coverage in some areas.  Current enrollees will have the opportunity this fall to change to the new benefit options.  Unfortunately, OPM also shared with us the news that premiums for the ACI feature could increase up to 25%, depending on your age at the time of purchase seven years ago.  If you have the ACI feature, you probably assumed that you would never see an increase in premiums.  Up until now, that was true, despite the fact that, according to OPM, benefits have increased 41% in that same time period. 

            NTEU is extremely concerned about premium increases.  Many chose the ACI in 2002 because they were led to believe they were protected against inflation when they later would receive benefits, and that premiums would not rise.  Even professional financial planners depicted ACI as the prudent choice.  OPM admits that they mistakenly led employees to believe that the premiums would not increase for those who chose the ACI option when enrolling, but in order to fund the program adequately, additional money is now required to ensure benefits. 

            The agency is now at work to figure out ways to change benefits in a way that will lessen the impact of premium increases.  I am told that OPM and Long Term Care Partners―the third party administrator of the plan—are developing so called “Landing Spots” or options to allow enrollees to avoid a premium increase by redesigning their current benefits.  All current enrollees will receive personalized packages by mail with options for this purpose sometime in the fall.  New benefit changes and premiums are expected to be effective in January 2010.

            While it is true that these increases are consistent with increases in other public sector long term care insurance programs and the long term care insurance industry as a whole, NTEU made it clear to OPM that our members who opted for ACI are not happy.  We certainly should not penalize those who made what was generally considered a prudent decision when the program began.  We urged OPM to find some way to keep enrollees’ premiums approximately the same as they are now. 

            This is an issue that will evolve over the next several months until all enrollees receive their personalized mailings with new enrollment options.  Meanwhile, NTEU is exploring congressional avenues because it seems to us that an overall analysis of the issue is needed.   Long-term care insurance is a relatively new field that has been available for only seven years for federal families.  With NTEU’s input, Congress and OPM need to get this right.  Additional information is posted on the Long-Term Care section of OPM’s web site at http://www.opm.gov/insure/ltc/index.asp.

            If you have any questions that relate to our efforts in this matter, please contact Gail Amidzich or Cathy Ball in the Legislation Department at 202-572-5500. 

                                                                                    Colleen M. Kelley

                                                                                    National President