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New Federal Long-Term Care Insurance Offering Available

Foreign Service Money Matters

The following was reposted from NARFE:

New Federal Long-Term Care Insurance Offering Available

The Federal Long Term Care Insurance Program (FLTCIP) is offering a new plan, FLTCIP 3.0, which includes a premium stabilization fund (PSF) to reduce the potential need for future premium increases, though it limits the level of inflation protection available compared to previous versions.

Previous FLTCIP offerings were designed to have stable premiums for the enrollee's life. Unfortunately, flawed actuarial assumptions led to steep premium hikes, like those common in private-sector offerings. In November 2016, premiums increased by an average of 83 percent, and by as much as 126 percent for some, as well as a 25 percent average increase in 2009. NARFE testified before Congress in response to these increases, suggesting a variety of policy options with the goal of providing price stability and affordability. We're heartened that OPM responded to the challenge and worked with Long Term Care Partners on a solution designed to avoid the failures of the past.

This is a promising development for future enrollees who apply for coverage on or after October 21, 2019, but it will not apply to the roughly 270,000 federal and military personnel, retirees and family members already enrolled in other FLTCIP plans. While these individuals could drop their current policies and re-enroll in FLTCIP 3.0, premiums would be based on their current age rather than their age at enrollment - in other words, they would lose the accrued value of years of premium payments.

For new enrollees, the PSF is not just set aside to protect against future premium increases; it also allows for reduced premiums after age 85 and/or a potential death benefit. The amount of each would be based on total premiums the enrollee has paid, a PSF percentage that varies based on annually updated actuarial assumptions, and benefits amounts paid out. In this way, each enrollee is guaranteed to get some financial return from their premiums, whether in the form of long-term care benefits, a death benefit or reduced premiums at a later age. Meanwhile, there's flexibility in the design to make future premium hikes much less likely (though there is still no guarantee they won't occur).

For more information, please visit the Long Term Care Partners website.