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Pros & Cons of the Federal Long-Term Care Insurance Program (FLTCIP)
by Jesse Slome, Executive Director, American Association for Long-Term Care Insurance
[Editor's note: Many federal employees have recently asked My Federal Retirement for more information about long-term care insurance, particularly in light of the upcoming open season of the Federal Long Term Care Insurance Program. As part of our broad coverage on this topic, this guest author provides an industry provider's perspective for a federal employee's consideration in making a decision.]
Open enrollment for the Federal Long Term Care Insurance Program (FLTCIP), the largest group long-term care insurance plan in the United States, begins April 4 and continues until June 24, 2011.
The 12-week enrollment period, the first abbreviated underwriting opportunity for non-enrolled applicants since 2002, provides many with an excellent opportunity to sign up for the program. Applicants will answer fewer health questions in order to be eligible for the program.
Before illuminating some of the important considerations, it is important to explain that the American Association for Long-Term Care Insurance (AALTCI) is a national trade group -- the only one with the sole focus on long-term care (LTC) insurance. We do not sell insurance (though admittedly many of our members do). If you would like a comparison quote from a member, there is a link at the end of this article.
As such, our goals are education and advocacy about long-term care planning. The Federal Long-Term Care Insurance Program has over 200,000 enrollees and our hope is that this doubles during the 2011 open enrollment season.
That said, there are important considerations for those eligible during the rather short 12-week period. My goal with this article is to provide information (the four most important pros and cons) to help you make a better decision. Who should act? Who should compare the FLTCIP with other providers before enrolling?
A "Group" Plan Has Pros And Cons
The FLTCIP, as a voluntary benefit, is structured as a "group" plan. There are important differences as compared to an individual insurance policy that one would traditionally buy from an insurance professional (agent).
To arrive at a price to charge (the premium) an insurer has to project the future claims that will need to be paid. A key component in determining that amount is the health of the group.
In order to make this benefit available to the widest number of potential eligible employees, the FLTCIP plan utilizes nine simplified health-underwriting questions that determine participant eligibility. These questions basically screen out those applicants who would immediately be eligible for benefits (or who would rather shortly become eligible).
This is a key component in understanding the most important pro and con -- cost.
Pro: A Significant Opportunity For Those With Health Conditions
The group nature of the program is a significant opportunity for those currently with health conditions. Simply stated, private long-term care insurance policies require applicants undergo health underwriting.
As a result, those with some existing health conditions and those who may take multiple prescription medications will find they pay more for protection. Each year a significant number of those who take the time to apply for coverage are declined by the insurer completely.
If you have ever applied for long-term care insurance and been declined or if you have health conditions such as type 1 diabetes, or type 2 with complications, take pain medication, have had joint replacement you should definitely consider applying for the FLTCIP. Smokers also won't qualify for the lowest rates available with private LTC insurance.
Pro: Very Competitive Rate For Singles
Every year, the Association gathers current insurance premiums from leading insurance companies and publishes an annual price index.
The FLTCIP pricing for a single individual is generally less than the current cost for comparable coverage from most of the leading insurers. The FLTCIP does not offer 'preferred health' discounts and those in very good health could pay less for a policy. So, while a comparison is always a good idea, chances are single individuals will find the FLTCIP is less expensive than comparable coverage.
Con: Married Couples Pay Too Much
The same cannot be said for couples. As a group plan, the FLTCIP does not offer discounts to couples. These discounts, which can equal as much as 40 percent off the cost, are standard with individual long-term care insurance policies.
The difference in cost can be significant. For example, AALTCI compared comparable plans for a couple where both husband and wife are age 55 ($150 per-day benefit, 3 year plan). Cost for the FLTCIP: $2,796.24 per year. Cost for comparable coverage on an individual basis: $1,985. Savings: $811 yearly.
It is important to note that available discounts and prices for individual long-term care insurance vary significantly from one insurer to the next. That's a reason to ask a knowledgeable professional with access to multiple leading companies.
Con: Lacks Significant Options For Couples
This is a significant benefit not available under the FLTCIP. Recognizing the budgetary limits of many families, insurers have devised a very attractive option available to couples. It's called the "Shared Care" option and simply stated, it allows two spouses to tap the others pool of benefits.
As an example, husband and wife each have a policy that would pay benefits for three years. If they have this option, either could tap the other's coverage. In essence, the first claimant could receive benefits for six years.
According to our 2011 Price Index, a couple able to qualify for spousal and good health discounts would pay $2,084 yearly for individual LTC insurance including the shared care option. By comparison, a comparable 3-year, $150-per-day benefit under the FLTCIP plan costs $2,796.
Bottom line: significantly more coverage for significantly less cost.
About the Author
Jesse Slome is Executive Director of the American Association for Long-Term Care Insurance. The national trade organization, established in 1998, advocates planning and education. The organization maintains the nation's most comprehensive online Long-Term care Insurance Consumer Information Center at http://www.aaltci.org/ To find a long-term care insurance professional or to request a comparison price quote from a member, visit: http://www.aaltci.org/federal.