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Life Health > Long-Term Care Planning

Fed workers keep LTCI despite rate increases: GAO

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One of the misconceptions about LTCI is that many potential buyers are turned off by possible rate increases. Not so, says a report from the U.S. Government Accountability Office (GAO).

The GAO examined what participants in the Federal Long-Term Care Insurance Program (FLTCIP), the largest private long-term care insurance program in the country, did after they were told their premiums were to increase.

About 146,415 enrollees, or two-thirds of the program’s participants at the time, were notified in 2009 of a premium hike of up to 25 percent. All of those enrollees had previously selected the 5 percent automatic compound inflation option (ACIO).

Despite the rise in premiums, 46 percent, or 67,511 individuals, maintained their coverage with the 5 percent compound inflation option and opted to pay the premium increase. An equal percentage chose to reduce their future inflation growth protection benefits (ACIO) to 4 percent by either switching to a new plan with enhanced coverage for home care (26 percent) or retaining the original plan (20 percent). Only 1.6 percent, or 2,344 enrollees, decided to forego coverage altogether.

Jesse Slome, executive director of the American Association for Long-Term Care Insurance (AALTCI), pointed out that the GAO study is a good representation of attitudes toward LTCI because the federal program is voluntary and consists of “typical employees.”

The results indicate that “the majority of consumers understand the value of their long-term care insurance protection and do not drop out or reduce their coverage even when faced with a rate increase,” Slome said in a release on the study.

Further, Slome, who was interviewed by the GAO staff preparing the study, said that people realize the risk they face when purchasing LTCI and how valuable it is as one ages.

Slome also noted that 23 percent of policyholders in the study saw their premium decrease by up to 5 percent.

As of June, FLTCIP had 268,200 enrollees. In 2009, a seven-year contract for the program was awarded to John Hancock Life Insurance Co.

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