The Office of Personnel Management (OPM) released a letter with some important reminders regarding the suspension of FLTCIP.
A few months ago, in mid-December, OPM suspended the Federal Long Term Care Insurance Program (FLTCIP). The only company to bid on administering the program, John Hancock, called for an extensive review of the insurance as it was becoming apparent that premiums would need to be significantly raised like in 2016, when participants saw their cost go up 83% - on average. The contract John Hancock signed expires in less than three years, which is why it was decided to pause enrollment while an extensive review of the insurance program’s financial situation is conducted.
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The root of the problem with FLTCIP boils down to two issues: there is little interest from potential participants and, bound by rules imposed by Congress, FLTCIP is unable to stay competitive. The private long-term care (LTC) insurance market has moved to mostly “hybrid” products where LTC coverage is tied to either an annuity or a life insurance policy. Despite FLTCIP 3.0, which was introduced in late 2019 and included “enhanced features” like premium stabilization and more international coverage, the LTC offering for federal employees wasn’t able to attract new applicants.
OPM’s Recent Reminder
A week or so ago, OPM sent out a notice to clarify some items related to the recent suspension. For example, although new applications are not being accepted during the pause, existing participants are still covered – assuming that their premiums have been paid. OPM also noted that requests for increased coverage are not allowed while FLTCIP is evaluated. The letter also reminded feds that the 24-month break could be extended or even shortened. Although it would be tough to permanently cancel the LTC insurance program without Congress’ help, it is believed premiums will be much higher for enrollees when FLTCIP is resumed.
Also contained in OPM’s recent reminder was clarification about new hires, who used to be able to apply for an FLTCIP policy with shortened underwriting within 60 days of their start date. This little perk for newly acquired federal employees and their eligible family members has officially been eliminated. However, there might be a “special application period” when the FLTCIP suspension is over. OPM explains in their recent correspondence that this will not be called an “open season” as to not get confused with FEGLI and FEHB open seasons.
Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠ The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.