OPM Will Suspend Long Term Care Insurance Applications as a Sizeable Premium Increase Looms

In preparation for a significant increase in premiums, the Office of Personnel Management (OPM) has decided to initiate a two-year hiatus on the acceptance of new applicants for the Federal Long Term Care Insurance Program on December 19.

The unusual action was disclosed by OPM in the Federal Register a month ago. It was stressed that federal employees submitting applications by the deadline will still be considered for participation in the program. The Florida Long-Term Care Insurance Program (FLTCIP) was established in 2002. It provides financial assistance to individuals with severe cognitive impairment who require help with daily personal responsibilities or need home care, nursing facility care, or assisted living amenities.

OPM is suspending applications for coverage in FLTCIP to allow OPM and the FLTCIP carrier to assess the benefit offerings and establish sustainable premium rates that reasonably and equitably reflect the cost of the benefits. 

Current participants in the program will not be able to apply to increase their coverage; nonetheless, the program will continue to function as usual for these participants. The Office of Personnel Management (OPM) typically only gets a few thousand enrollment applications each year, even though there are now over 267,000 federal employees and retirees participating in the insurance plan.

The contractor that administers the program informed the Office of Personnel Management (OPM) that it is likely that there will be a premium increase sometime in the next year, which prompted OPM to decide to suspend applications for the program.

In recent years, the long-term care insurance market has been plagued by significant premium increases. This is partly because people are living longer and partly because long-term interest rates have been at historic lows since the aftermath of the financial crisis in 2008. 

According to policy and programs for the National Active and Retired Federal Employees Association, OPM will likely investigate whether there is anything they can do administratively to improve the program’s stability or propose legislation to alter the program. OPM will likely investigate whether there is anything they can do administratively to improve the program’s strength.

The implementation of a suspension of applications demonstrates that there needs to be more faith or trust that it’s built in a way that can be sustainable.

The initial rise in premiums was around 25%, and the second increase was as high as 125%, with an average increase of 83%. These premiums were estimated to maintain their level throughout the coverage, which is the entirety of an individual’s life. And it isn’t only the cases of federal employees. They needed to be priced appropriately from the very beginning.

After the last round of premium increases, the Office of Personnel Management (OPM) implemented “FLTCIP 3.0,” which enables currently enrolled individuals to lower the amount of coverage they get to mitigate the effect of rising rates. Despite this modification, the OPM made the correct decision by pausing the application process.

It should be open-ended if you can provide someone with an exact figure of the cost for a product; these premiums are going up because prices are very high, and people have to figure out how to plan for long-term care costs. There’s no public option other than Medicaid, which only provides catastrophic coverage if you’re entirely impoverished.

Therefore, the Office of Personnel Management will have to request legislation from Congress to make the necessary reforms to sustain the program.

OPM has done, within the program’s structure what they can do. They hired an independent actuary to examine the assumptions and ensure they were right. They hired a consultant to look at various options, and we’ll see where that goes and what flexibility they have in the statute or whether they’ll need Congress to provide some flexibilities. 

We’ll see where that goes and their flexibility in the statute. But at the end of the day, the alternative that would emerge may be linked more to price and certainty but also to those that provide less coverage.

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Bio:
Stuart Hunsicker is a managing partner, retirement specialist and federal employee benefits specialist here at Purpose Driven Financial Services. As firm co-owner with Zar Razack, the two have a natural chemistry that allows them to work together effortlessly. “Once we decided to really commit to pushing the firm forward, we knew that we could be effective,†Stuart says. “We work very well together and complement each other’s strengths and weaknesses.â€

Stuart considers himself more of the “analytical and numbers†half of the duo. With more than 20 years of experience in the financial services industry, he has become an expert at assessing each individual person’s situation and deducing how much they might need in retirement. Once he arrives at the target number, Zar steps in as a specialist to design a plan that includes specific elements that will help clients reach that number.

A VCU-Richmond graduate with a degree in finance specializing in business, Stuart has seen nearly every side of the financial industry. Early in his career, he worked for smaller firms and was in charge of trading and investment portfolios. He also held a Series 24 license and signed off on variable business within the firm. “I wore a lot of hats,†he says. “I focused on the investment side, but when the markets crashed, I just took too many phone calls with crying voices on the other end.â€

Those tough phone calls led him into the insurance side of the business. He now considers “retirement surety†his focal point and believes in making sure that each client is prepared for retirement before they move to the next step. Once the retirement plan is put into place, the rest is icing on the cake, helping give the client financial freedom.

PDFS certainly isn’t exclusive, but Stuart is extremely passionate about working with teachers and federal workers. His beautiful wife of nearly 20 years, Andrea, is a teacher, so he’s very familiar with the issues they face and tends to gravitate toward clients who serve and assist. He has also experienced many of the hypothetical scenarios he raises to clients. What if a spouse passes away suddenly, or what if you’re forced into retirement early? Stuart has been there, and he knows how to navigate those rocky waters.

He and Andrea have one son, one daughter and eight cats. “We’re the crazy cat house,†he says. His oldest cat is almost 20 years old and was the first to join the Hunsicker family, even before Stuart and Andrea married. The first cat needed a friend, of course, so they adopted one more. Andrea always loved tabby cats, so when her colleague told her that a stray tabby gave birth to a litter of kittens in the backyard, the family loaded into the car to have a look. “When we arrived, there were three kittens. My wife fell in love with the tabby, and my daughter took to a different one, then we couldn’t just leave the third one behind,†Stuart says. “At that point we were known for being the cat people, and it was at that point that three more found their way into our family.â€

Stuart is a massive college basketball fan, even making a trip to the 2022 Final Four. Though he doesn’t have much free time, he and Andrea love to attend sporting events. Stuart also enjoys spending time with family, and they often go shopping, to the beach or to try new local restaurants. He says, “We’re just a normal family that loves being around each other.â€