Demographic and administrative concerns are some of the factors that scare insurers away from bidding on the Federal Long Term Care Insurance Program contract, according to officials at the U.S. Government Accountability Office (GAO).
The GAO reviewed the federal long term care (LTC) program at the request of members of Congress who have concerns about the program, which started up in 2002.
The program offers LTC insurance to federal workers and their relatives on a voluntary, employee-paid basis. Active workers and spouses who apply during open enrollment face little underwriting; other applicants face underwriting similar to what they would face in the individual market, John Dicken, a GAO director, writes in a report summarizing the GAO’s findings.
The federal Office of Personnel Management (OPM) held one LTC program bidding process when the program started and a second one in 2009. John Hancock Life Insurance Company, Boston, a unit of Manulife Financial Corp., Toronto (TSX:MFC), started out sharing responsibility for the program with another company.
In 2009, after OPM ran another bidding process, Hancock took over full responsibility for the program. Hancock soon notified 66% of the enrollees that they would face a 25% rate increase to compensate for differences between program experience and actuarial projections, Dicken says.
GAO investigators reviewed the program by interviewing executives at 6 large LTC insurance carriers.
When the second bidding process came along, many insurers had concerns about the program’s history, the need for the premium increase, and the difficulties involved with shifting enrollees from one carrier to