Understanding Your Future Long-Term Care Needs — Part II

One way for paying for long-term care expenses is having long-term care insurance. The first column of this three-part series discussed individual long-term care insurance. This column discusses the Federal Long-Term Care Insurance Program (FLTCIP) which is available to federal employees and annuitants.

The FLTCIP is a group-sponsored long-term care insurance plan. The Long-Term Care Security Act (PL 106-265) authorized the Office of Personnel Management (OPM) to offer a long-term care insurance program designed exclusively for members of the federal family. OPM also regulates the FLTCIP and plays an important role in ensuring that the FLTCIP remains up-to-date and competitive.

The FLTCIP started in 2002. At that time, OPM signed a seven-year contract with John Hancock Life and Health Insurance Company (John Hancock) and Metropolitan Life Insurance Company to provide the long-term care insurance for the FLTCIP’s first seven years. In 2009, OPM renewed the seven-year contract with John Hancock only. OPM renewed the contract with John Hancock for the third 7-year contract term beginning May 1, 2016 and continuing through April 30, 2023.

Who is Eligible to Enroll in the FLTCIP?

Federal and U.S. Postal Service employees and annuitants, active and retired members of the uniformed services, and their qualified relatives are eligible to apply for coverage under the FLTCIP. Individuals in the following groups are eligible to apply for coverage under the FLTCIP.

Federal Employees

· Federal employees in positions that convey eligibility for the Federal Employee Health Benefits (FEHB) program, whether or not they are actually enrolled.

· U.S. Postal Service (USPS) employees in positions that convey eligibility for the FEHB Program, whether or not they are actually enrolled.

· Active members of the uniformed services who are on active duty or full-time National Guard duty for more than 30 days, including active members of the Selected Reserve. Members of the Individual Ready/Reserve are not eligible to apply.

· Other employees, including Non-Appropriated Fund (NAF) employees, TVA employees, and D.C. Courts employees.

Annuitants

· Federal or U.S. Postal Service

· Retired members of the uniformed services who are entitled to retirement or retainer pay

· Other eligible annuitants:
-deferred CSRS or FERS annuitants
– separated employees with title to a deferred annuity, even if they are not receiving that annuity
– Tennessee Valley Authority annuitants
– D.C. Court annuitants
– NAF annuitants
– Surviving spouses receiving a survivor annuity and domestic partners of deceased workforce members receiving an insurable interest annuity.

Qualified relatives

A qualified relative (as listed below) can apply even if the federal employee/annuitant the relative is related to does not apply, or even if the employee/annuitant applies but is not approved for FLTCIP coverage.

· Current spouses of eligible employees.

· Current spouses of annuitants but not former spouses (even if the latter are receiving a portion of a CSRS or FERS annuity through a divorce settlement),

· Parents, parents-in-law and stepparents of living eligible employees, but not annuitants.

· Adult children at least 18 years old, including adopted children and stepchildren of living eligible employees and annuitants.

· Domestic partners of eligible employees and annuitants. A Declaration of Domestic Partnership form must be submitted to the employee’s agency or annuitant’s retirement system before applying. Visit https://www.ltcfeds.com/program-details/eligibility for details.

Description of the FLTCIP Program

The FLTCIP provides comprehensive long-term care coverage, whether the long-term care is at home, in an assisted living facility, in a nursing home, or in an inpatient hospice care environment. Additionally, the FLTCIP covers long-term care provided in the home by friends, family members and other unlicensed caregivers. Informal caregivers cannot be a spouse or domestic partner or live in the employee’s or annuitant’s home at the time the employee becomes eligible for benefits. When informal care is provided by an employee’s or annuitant’s family member, it is covered for up to 500 days.

Up to 100 percent of a FLTCIP policyowner’s daily benefit amount is available for:

· Home care provided by a nurse, home health aide, therapist, or other authorized provider
· Care provided in the community such as adult day care
· Care, room and board and other services provided in a facility setting, including assisted living and nursing home facilities
․For long-term care incurred by individuals living outside the United States

The FLTCIP covers approved care provided at home by informal caregivers such as friends, family members, and other unlicensed caregivers. When informal care is provided by non-family members, it is covered for the benefit period that the employee or annuitant has selected (two years, three years or five years). When informal care is provided by family members, it is covered for up to 500 days of care during the employee’s or annuitant’s lifetime. Informal caregivers cannot live with the employee or annuitant at the time the latter becomes eligible for benefits. But they can live in the home after the employee or annuitant becomes eligible for benefits.

FLTCIP-sponsored long-term care insurance coverage is guaranteed renewable. This means that the coverage can never be cancelled by the FLTCIP insurance carrier as long as the employee or annuitant or an eligible family member (the “insured”) pays the premiums. Coverage cannot be canceled due to the insured’s age or change in health. But coverage will cease on the date the insured has exhausted his or her maximum lifetime benefit (see below, for the definition of maximum lifetime benefit). Premiums are not guaranteed to stay the same. Sometimes – and this happened in 2008 and 2016 when OPM renewed its contract with the federal LTC insurance provider – premiums increased “across the board.” But FLTCIP policyholders were allowed to decrease their benefits in order to keep their premiums the same or perhaps to decrease their premium.

Applying for the FLTCIP and Required Benefit Choices

Anyone eligible to apply for the FLTCIP may do so at any time. One does not have to wait for an “open season” to apply. In fact, FLTCIP “open seasons” are extremely rate. An application for the FLTCIP may be downloaded from https://www.ltcfeds.com/signup/eligibility/start.

Since there is no “one-size-fits-all” when it comes to long-term care insurance, the FLTCIP allows an applicant to choose among options in three areas: (1) daily benefit amount; (2) benefit period; and (3) inflation protection amount.

Below are the options:

· Daily benefit amount. This is the maximum amount the insurance company will pay reimburse for long-term care in any single day. The FLTCIP offers eight daily benefit amounts (DBAs) from $100 to $450 in $50 increments. In choosing a DBA, an applicant needs to find out the average daily cost of long-term care in the area he or she will at the time of the need for long-term care services.

· Benefit Period. This is the length of time benefits will be paid if the insured receives benefits each and every day equal to the DBA. Choices are a two-year, three-year or five-year benefit period.
Note that if the insured receives services that cost less than the insured’s chosen DBA or if the insured does not receive services every day, then the insured’s benefits will last longer than the chosen benefit period.

The benefits period is used together with the DBA to calculate the “maximum lifetime benefit” or the “pot of money” to be used to pay, or to reimburse for the long-term care of the insured. To calculate the maximum lifetime benefit, one multiplies the DBA by the benefit period (in days). The following example illustrates: DBA of $200 and three-year (1,095 days) benefit period.

$200 times 1,095 days equals $219,000 maximum lifetime benefit

· Inflation protection options. To help ensure that an FLTCIP insured’s benefits keep pace with inflation and the rising cost of long-term care, the FLTCOP offers two types of inflation protection, namely: (1) automatic compound inflations and (2) future purchase option.

With the automatic compound inflation option, the DBA and remaining portion of one’s maximum lifetime benefit will automatically increase by three percent compounded every year.
With future purchase option, the insured ins given the opportunity to increase his or her DBA and maximum lifetime benefit every two-years with a corresponding increase in the premium. Premiums are not guaranteed. The insured may decline, the increase a maximum of three times before the LTC Partner will stop making an offer. The increase in DBA is based on the U.S. Department of Labor’s Consumer Price Index for all Urban consumers (CPI-U).

The FLTICP also offers four prepackages plans that an applicant can choose from. Premiums, once an inflation option is selected, can be found on the FLTCIP Web site by downloading the booklet, “The Federal Long-Term Care Insurance Program 3.0” at https://cdn.ltcfeds.com/planning-tools/downloads/Book-1.pdf, and checking pages 12 through 15.

Any applicant who chooses to customize a plan, choosing the DBA, benefit period, and inflation protections option, may find out he amount of premium due by visiting https://www.ltcfeds.com/tools/premium-calculator to use the Premium Calculator.

Options for Paying FLTCIP Premiums

Note the federal government does not contribute anything towards FLTCIP enrollee premiums. FLTCIP enrollees pay 100 percent of the FLTCIP premiums. The FLTCIP offers three convenient options for paying FLTCIP premiums.

These options are:

(1) payroll or annuity deduction. Premiums will be deducted from one’s salary or annuity;

(2) This option is available to most enrollees: automatic bank withdrawal. If this option is chosen, premiums will be deducted automatically or the third business day of every month from the checking or savings account the enrollee specifies: and

(3) direct bill. IF this option is chosen, the enrollee will receive a monthly bill at the enrollee’s designated mailing address the month before the premium is due.