Advisors should be aware of the new Federal Long Term Care Insurance Program (FLTCIP), because the eligibility list is wide: federal employees, members of the armed forces, and many dependents. This is a pool of some 20 million people, according to the government Office of Personnel Management (OPM). Insurance companies are excited; it may stimulate long-term care plan sales to other employers and educate much of the population about LTC insurance in general.
Long Term Care Partners LLC, a joint venture of John Hancock Financial Services Inc. and Metropolitan Life Insurance Co., was formed to handle the program and will administer it for the first seven years, as specified on OPM’s Web site (www.opm.gov/insure/ltc/faq/contract.htm).
Though employer-sponsored, FLTCIP is more comparable to a private policy. It offers benefits usually found in private plans, such as informal home care (75% of daily benefit; some policies do offer 100%), international coverage at 80% (few offer it at all), the option to switch from additional purchase protection to inflation protection, unlimited lifetime benefit, and no waiting period for hospice care or caregiver training. It is also tax-qualified.
Some things it does not offer. Says Paul Forte, second VP at John Hancock’s Group Insurance Division, and CEO of LTC Partners, “Some companies offer preferred rates for people in super health, and discounts to married people. It was OPM’s belief that it was more equitable to rate the policy for a diverse group [and] not to do that.” OPM’s goal, says Forte, was for the policy to cost about 15% below an individual policy. He concedes that married, healthy consumers might do better. “On average, we think this is very competitive.”
Not necessarily, says Robert Davis, president of Long Term Care Quote Inc. in Chandler, Arizona (www.ltcq.net). “The best advice,” he says, “is don’t just take the federal program without comparison shopping.” He says that the marital discount and good health discount can be pretty costly. But there’s no cap on issue age on the high end (low end must be at least 18), says Davis. For other standard features, he says, the federal program “stacks up very well.”
John Ryan, an independent insurance broker, mentions two other caveats. FLTCIP has a mandatory care coordinator, an insurance company employee. This could be an advantage, he says, because “they [care coordinators] deal with claimants every day, and can negotiate discounts with providers so that the claimant’s benefits last longer; they’re not using them up as fast.” But someone working for the insurance company may not be objective.
Then there’s the catastrophic coverage limitation: “If a catastrophic event occurs, an event or series of events affecting a significant number of enrollees, that threatens to undermine the financial stability of the program, benefits received could be reduced.”