October 15, 2009

A 25 percent premium increase in the Federal Long Term Care Insurance Program (FLTCIP) could have been mitigated had earlier warning signs been heeded, said National Active and Retired Federal Employees Association (NARFE) President Margaret L. Baptiste yesterday to the Senate Aging Committee and the Senate Subcommittee on the Federal Workforce.

"Lower-than-expected lapsed rates, which increase the number of individuals likely to submit claims, and low interest rates, which reduce the expected return on investments, were already an industry problem in 2003, according to the nonpartisan Government Accountability Office," Baptiste said.  "We have to ask: 'when did these shortfalls become apparent in the FLTCIP' and 'when did Long Term Care Partners [the program's third party administrator] and the Office of Personnel Management (OPM) consider whether rates should be adjusted in response?'"

NARFE's president described the outrage and anger she has heard from FLTCIP enrollees since the rate hike was announced. 

"Many of them have invested tens of thousands of dollars in their policies and are confronted with choices that go from bad to worse," Baptiste testified.    She said that so-called "landing spots" developed by OPM and Long Term Care Partners to help enrollees avoid paying the premium increase should allow the insured to trade the automatic compound inflation (ACI) option for an increased benefit amount.   "Indeed, when coverage was first offered, some financial planners suggested to certain clients that they buy a benefit amount in excess of current costs as an alternative to the compound inflation protection's hedge against inflation.  In fact, those who took this advice are not facing a rate hike," she said.

Baptiste testified that Congress must take steps to restore confidence in the program.  "It is our understanding that fewer insurance carriers competed for the FLTCIP contract this year.  Many of us are concerned that the downturn in the industry and further consolidation could make matters worse in 2016 when the contract is re-bid.  Consolidation means there is less competitive pressure on carriers to offer the best possible product.  For that reason, now may be the time for Congress to consider whether the FLTCIP should self-insure," she remarked.

Today, GovExec.com reports Senators blasted the long-term care insurance premium hikes in yesterday's hearing, and that lawmakers said the promotional materials for the FLTICP were misleading.  (Click here to read the full column)