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.  (href="http://www.govexec.com/story_page.cfm?articleid=43801" target=_blank>Click

here to read the full column)