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Long-term care insurance rates go up for new federal enrollees — with no warning

(Andrew Harrer/Bloomberg)

Premiums in the long-term care insurance program for federal and military personnel, retirees and certain family members have increased, with no prior notice, for those newly buying coverage.

The Office of Personnel Management has said that rates rose as of Aug. 1 for new enrollees in the Federal Long Term Care Insurance Program, which offers in-home and nursing home care benefits for those with certain physical or mental incapaciites.

The FLTCIP program is a voluntary benefit whose costs are borne by enrollees. The insurance is offered through an OPM contract with the John Hancock Life & Health Insurance Co.

In a notice to agency benefit officers Monday, OPM said that it and John Hancock “have determined that premium rates for new applicants under the Federal Long Term Care Insurance Program should change to ensure they are adequate to cover projected benefits for new enrollees. The new premium rates are effective August 1, 2015, for applicants who apply for FLTCIP coverage on or after that date.”

The new premium rates do not apply to those enrolled before that date but do apply to those who had rates quoted to them before then but who had not formally enrolled, OPM added.

FLTCIP enrollees may choose among different maximum daily payment amounts, length of coverage and inflation protection, all of which affect the premiums — as does the individual’s age at enrollment.

The announcement did not specify by how much rates have increased, but in response to an inquiry, OPM said the increases apply to all options but vary according to the purchaser’s age and choices.

It gave as an example an employee buying three years of coverage with a $150 maximum daily benefit and 4 percent annual inflation protection. At age 40, that package of options now costs $42.68 biweekly, $15.45 more than if bought before Aug. 1. At age 50, it’s $50.29 biweekly, up $8.08, and at age 60, it’s $75.62, up $6.87.

The John Hancock company did not respond to a request for further information.

Imposing an immediate premium increase — effectively, a retroactive one since the change took effect Saturday but wasn’t announced until Monday — is highly unusual if not unprecedented in federal employee insurance programs.

Premium rates in the health insurance and vision-dental insurance programs typically are announced each September in advance of an open season that starts in November, with new rates taking effect in January. The life insurance program rarely changes its rates, but when it does, it similarly holds open seasons for coverage at a future date.

The last premium increases in the FLTCIP program occurred in late 2009 but had been announced months earlier, after OPM and John Hancock reached a new contract agreement. In that case, certain benefit offerings changed, affecting rates of those newly purchasing policies starting in October 2009. In addition, rates were increased effective in March 2010 for some existing policy holders, who were given a chance to restructure their policies to keep premiums roughly the same if they wished.

In an e-mailed comment, OPM said it “did not announce the rate change in order to limit the confusion for current FLTCIP enrollees. Federal family members were and are able to apply for FLTCIP coverage at any time.  This is consistent with long term care insurance industry practice; the new rates are communicated as soon as they become effective. This avoids the potential for individuals to make a rush decision to purchase without full consideration of their needs and the product options.”

Story has been updated