GAO Says 5% Of Federal Employees Signed Up For LTC Plan

In its first three years, the Federal Long Term Care Insurance Program has had less participation than originally projected, but claims submitted under the program also have been lower than forecast, a new report says.

Only 5% of eligible federal employees have taken the insurance, or about 219,000 people, which is roughly the same rate in the private sector, according to the report from the Government Accountability Office released March 31.

Long Term Care Partners LLC, the consortium that runs the program for the Office of Personnel Management, originally projected federal participation 36% higher than actually achieved.

Partners had estimated enrollment would reach more than 343,000 for new policies sold from March 25, 2002, through March 31, 2005.

Partners is a joint venture formed by John Hancock Life Insurance Company, Boston, a unit of Manulife, and Metropolitan Life Insurance Company, New York.

On the other hand, the federal program paid out only 39% of the claims that Partners originally projected. But GAO noted most LTC claims are not submitted for many years after the initial signup.

Paul Forte, CEO of Partners, says he considers enrollment acceptable and predicts it will climb.

“We write about 1,000 policies a month, and I don’t think that’s poor or unsatisfactory. If you net out the young people in the military for whom long term care insurance is not appropriate and also postal workers, who are not accustomed to voluntary benefits because they’re unionized, 5% is in the ballpark,” he says.

[Looking solely at active federal civilian employees, the percentage of enrollees was 10% of those eligible, the study found.]

Average premiums received were actually higher than expected, Forte adds.

“We got 68% of people electing the automatic compound increase [inflation protection] option,” he says. “That’s never been done in group enrollment before. It suggests people understood what they were doing and were making a serious commitment.”

The GAO report suggested the Office of Personnel Management might want to update claims experience and premium-setting information when its contract with Partners expires. The contract, signed in December 2001, runs until December 2008.

In the first year of the program, the amount paid for claims per enrollee was 40% of what Partners expected, while the number of claims per enrollee was 4% of projections. By the third year, the amount paid for claims per enrollee had remained level, while the number of claims per enrollee had increased to 48% of what was expected.

The report raised the possibility OPM might want to negotiate lower premiums later. However, it also noted that claims experience is just one aspect of premiums charged. In fact, insurers often project claims on the high side rather than risk underestimating them and then having to raise premiums later, it noted.