Due to the number of inquiries I’m having about the rate increase that is happening now on the Federal Long-Term Care Insurance Program (FLTCIP), I’m writing an article which will hopefully benefit many people. The decision to accept the rate increase or reduce benefits must be made by September 30th. Now, if you are just reading this for the facts and not the entertainment, you can skip to the bottom of this post, and you can also see the great FAQ on the FLTCIP website.
You can see elsewhere on this site that my consulting company LTC Consultants did the employee education for the Federal government when that plan was rolled out in 2002 to 4 million employees, 4 million retirees which with all the eligible family members, amounted to a universe of 20 million. What a wild ride! I accepted the assignment after much thought to deliver 1,000 employee education meetings around the country. When I called back to accept it, the person who had asked me said the insurance companies had made an error. The project required 2000 meetings, not 1000! Gulp. Moby Dick looks great in the water but when he lands in your boat, it’s a different story. After a deep breath, I accepted the biggest project before or since in the long-term care insurance industry.
When I think back on it, I realize we beat Donald Trump to The Apprentice. Sitting on the plane, I carefully analyzed the map of the United States in the airplane magazine and calculated we needed 13 more people besides me plus a couple of floaters to take up any slack. I had to use that map because my dad’s work moved us a lot and I never had geography.
The next step was to hire a diverse group instead of all insurance professionals. Why? Because the Federal family consisted of civilian workers, military and postal employees. We invited people from the military and from social work organizations and long-term care providers to apply with a written statement of qualifications and a video of why they wanted the job. After sifting through hundreds of applications, we selected those who looked good for a personal interview with me. I would pop questions to them like “What do you do when you are angry?”
The selections from that group were invited to Nashville for a three-day extremely intense training…well, there might have been one night of line dancing at The Wildhorse Saloon…
Besides the background training on all the topics related to paying for long-term care, they had to learn the presentation and do it in front of a video camera. I remember one girl was running a fever on the first day because she was so nervous. We sent a couple of people home from that training and half had to come back for remedial training a couple of weeks later.
In the remedial training, one girl with a social work background burst into tears in front of the camera and that was it for her, plus a couple more were sent home. At the end of the process, none of the non-insurance people made it because they just couldn’t learn the presentation without some background already in paying for long-term care. Even with insurance professionals, there were many hair-raising as well as comical moments.
- The presenter from Oklahoma City had to do his first week of meetings in Philadelphia and the traffic spazzed him out. He was scheduled to do 24 postal meetings in Chicago, starting the following Monday at 8:30 AM. He called at 5:30 p.m. on Friday and quit. I remember interrupting him and saying “I can’t talk anymore because I have 48 hours to find a replacement for you” and terminating the call. My husband Bill and I were flying out the next morning to do two weeks of meetings in Hawaii (who else could do them?) We grabbed an employee who had made the mistake of working late that night and told her she would be on a plane Sunday afternoon to Chicago to do those postal meetings. She went postal…but got the job done!
- We watched the news reports and prayed fervently for the safety of one of our Washington DC presenters who was doing meetings three blocks away from a sniper who wasn’t caught for days.
- When Fred Thompson requested someone to do the presentation in his office, I hopped on the next plane (who else could do it?) His staff was very interested and took copious notes. Fred focused at the end of the presentation when he finally managed to catch the horse fly that had been buzzing around his head for 30 minutes.
- The Hawaii meetings were incredible. One 30 year old soldier told me he was at the Pearl Harbor meeting because people in Hawaii believe in taking care of their families, and they saw long-term care insurance as the way to keep that promise. So many retirees came that we had to do six meetings, not two as planned. They were lined up, waiting to get into one of the two rooms assigned to us that only held 70 people. Only one man complained about the wait so we gave his money back. [Kidding]
When it was all said and done, we wound up doing 2,020 meetings in 43 states and 210 cities in four and a half months.
After all that oversharing, you can see why I have an affinity for the Federal program. The benefits are fantastic, especially the home care benefits that allow informal caregivers for an unlimited time and even family members for a certain amount of time. Unlimited benefits are still available, almost unheard of in today’s market. Inflation options are 5% and 4% compound, when today’s plans emphasize 3%. So in other words, it’s still a great program. Unfortunately, many people don’t realize they are eligible for it, especially adult children of living Federal civilians, military or postal workers annuitants. You can see the long list of eligibles here.
The program is having its second rate increase now, averaging 83% which is only a monthly average of $111, because the premiums have been well under today’s plans. No one who bought a policy age 80 or older is receiving a rate increase. [This is a correction from my original post.] The increase is mainly due to a better understanding of how many people use long-term care insurance and for how long, and the FLTCIP wants to be sure that future claims can be paid. The low interest rate environment we continue to be in hasn’t helped, because that means claims reserves have to be increased.
A 54 year old woman contacted me recently who has had her plan since she was 49. Her increase will be 30% to keep her benefits the same with an unlimited benefit period and 5% compound inflation, which has made her daily benefit grow from $150 to $191 today. Her biweekly premium is $95. Her premium can stay the same if she decreases the 5% compound to 2.95%. Here’s my answer:
Hi Doris, I’m so glad you contacted me. Please do not decrease your inflation at all. You are so young and 5% compound is a good number, especially for the “country club” assisted living facilities that work out so well for so many people, especially women. You aren’t limited to the options in your letter. Ask what the premium is to decrease from unlimited to 5 years. If you need to shave a little more off, ask them for 4% compound instead of 5%. Try to stay at that level for now. To see the value, multiply your new premium times 26 X 30 years, which is what you will pay in 30 years without another rate increase. Your daily benefit is now at $191 a day and at 5% compound, when you are 84, it will have grown to $825 a day, which is $25,094 a month! With the 5 year plan, that’s at least $1.5 million in benefits. It will be more actually as it continues to grow each year while you are receiving benefits, even though you aren’t paying your premium. Even with future rate increases, I think you can see that your premium is very tiny compared to the benefits you receive when you keep the 5% compound inflation.
Even if your premium doubled to $190 biweekly, you would pay $148,200 in 30 years vs. the benefits in 30 years of at least 5 years. Per the Society of Actuaries’ 2015 claims study, women who need care longer than a year tend to need care about 4.5 years so that’s why I’m suggesting not reducing below 5 years. This also leaves you room to decrease a little more if you ever need to in the future.
However, if you have Alzheimer’s in your family history, be very sure you want to let the unlimited plan go, because you can’t get it back. The average time someone has Alzheimer’s is 8 years but can be 3-20. A massive stroke can also lead to many years of care. My cousin just passed away at 75 after a major stroke at 61, which left her paralyzed on one side and unable to speak intelligibly.
Just remember, you can call LTC Partners at 800-582-3337 and ask for any combination of benefits, not just the ones in your letter. You can also go to the www.LTCFEDS.com site and use the secure email form. Hope this helps. Phyllis Shelton
Her premium is only increasing 30%, not doubling, so my guess is she will accept the increase this time. The last paragraph in my reply to her is the important takeaway. The insurance companies have to provide options to reduce premium when a rate increase is implemented with any plan, not just the Federal program, but you aren’t limited to those options. Also, PLEASE DO NOT ACCEPT THE OFFER TO STOP PAYING YOUR PREMIUM AND HAVE BENEFITS PAID EQUAL TO THE PREMIUM YOU HAVE PUT IN AT ANY POINT IN THE FUTURE. This is a very bad deal for you as your benefits will likely last only a few weeks if you just get paid back your premium.
In closing, please allow me to reiterate that the original Federal employee education presentation made it clear that the premiums could go up on the entire group of policyholders if approved by The Office of Personnel Management (OPM) and the Government Accountability Office (GAO). The FLTCIP Benefit Booklet says it now. John Hancock doesn’t think another increase will be necessary based on current information, but of course they can’t guarantee it.
See if this helps your perspective. When you consider that home health aides can cost anywhere from $18-$25 an hour, the really nice assisted living facilities average $5000-$6000 a month, and nursing homes can cost $8000-$12,000 a month, my experience is that most long-term care insurance premium paid in usually amounts to about 10% of a three to four year claim.*
*when the premium is waived for home care