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More on the FED PLAN

Posted by Steve Eads, CLU on March 30, 2002 at 13:26:46:

Here's an article I thought might help shed more light on the potential shortcomings of the Fed Plan, from Harry Crosby, noted author of "Long Term Care Insurance, The Complete Guide," 2nd edition, 2001.

The Office of Personnel Management (OPM) has overall responsibility to set up the long-term care insurance program for government employees, which is supposed to be up and running by October 1, 2002. (Actually, if you check the site they are planning a special enrollment starting March 25 -May 15. Open season will start July 1 and run thorough December 31.) At this time February 9, 2002 there are more questions than answers concerning the program. What is known can be discovered at their web site http://opm.gov/insure/ltc/faq/cost/htm. One thing is clear. The federal government, by law will not contribute a portion of the cost of this coverage. By law the initial contract with the LTC partners will expire in 7 years when the contract will be extensively reviewed and OPM will decide whether or not they will issue a new Request for Proposals and choose a new contractor who would then assume the responsibilities for the current enrollees. OPM estimates that between 300,000 to 500,000 people will purchase LTC insurance when they are first offered. The potential the policyholder pool could exceed 20 million people. Compare that the largest provider to date, GE Capital Assurance Company, who has just over 1 million policyholders cumulated over a 27 year period. In the words of John R. Miller, CFP, Director Contract Services & Marketing for TROA, The Retired Officers Association in a letter to several members on Jan 30, 2002, "One thing that makes us cautious right now is the discussion about underwriting standards. For instance, the 20% to 25% of members (as well as every one else seeking LTC insurance) who are turned down for heath reasons will be quick to sign up for the new government plan if underwriting standards permit. This situation could result in major premium increases for existing policyholders several years down the road when claims start to increase at a rapid rate." It is anticipated by OPM that some employees with disabilities will be able to enroll depending on whether those employees can meet the underwriting requirements described at http://www.opm.gove/insure/ltc/desogmj/imderwriting.htm. Quoted from the OPM web site, "All employees who apply will be offered some form of benefit. However, due to health reasons, a small minority will be offered non-standard coverage or a package of services (e.g., care coordination and discount arrangements)." On the same OPM web page, "If we guaranteed standard insurance to all employees who applied, our insurance carriers would have added the expected cost of those in poor health to the premium. With no Government contribution, many healthier employees who could pass underwriting would find less expensive premiums and purchase private insurance, requiring even higher premiums to cover the risks of those remaining in our program. This kind of cycle would almost guarantee that the program would fail."

As of today, (February 9, 2002) the specific diseases or conditions that will exclude people from receiving the governments long-term care insurance is unknown. "Even through we've signed a contract, we don't have the details ironed out. This is one of the details we can't answer yet." The Question and Answers site continues and states that there is no guarantee of premiums and the rates are still yet undetermined. There is so much missing information about the Federal Long Term Care Insurance Program (including what the premiums will be). When it comes to underwriting could the program be between a rock and a hard place? Check the site out for yourself and heed the advice in the John Miller's letter to TROA members in January 2002, "My advice to members who want to purchase LTC insurance now is "don't wait." First, health conditions might change between now and the open enrollment period, and second if the government plan turns out to be all we hope it will be, you can stop paying premiums for the old plan and switch to the new plan, assuming continued good health."

More on this subject later,

Steve Eads, CLU
seads@eadsassociates.com

Follow Ups:

Re: More on the FED PLAN : Here's an article I thought might help shed more light on the potential shortcomings of the Fed Plan, from Harry Crosby, noted author of "Long Term Care Insurance, The Complete Guide," 2nd edition, 2001. : The Office of Personnel Management (OPM) has overall responsibility to set up the long-term care insurance program for government employees, which is supposed to be up and running by October 1, 2002. (Actually, if you check the site they are planning a special enrollment starting March 25 -May 15. Open season will start July 1 and run thorough December 31.) At this time February 9, 2002 there are more questions than answers concerning the program. What is known can be discovered at their web site http://opm.gov/insure/ltc/faq/cost/htm. One thing is clear. The federal government, by law will not contribute a portion of the cost of this coverage. By law the initial contract with the LTC partners will expire in 7 years when the contract will be extensively reviewed and OPM will decide whether or not they will issue a new Request for Proposals and choose a new contractor who would then assume the responsibilities for the current enrollees. OPM estimates that between 300,000 to 500,000 people will purchase LTC insurance when they are first offered. The potential the policyholder pool could exceed 20 million people. Compare that the largest provider to date, GE Capital Assurance Company, who has just over 1 million policyholders cumulated over a 27 year period. In the words of John R. Miller, CFP, Director Contract Services & Marketing for TROA, The Retired Officers Association in a letter to several members on Jan 30, 2002, "One thing that makes us cautious right now is the discussion about underwriting standards. For instance, the 20% to 25% of members (as well as every one else seeking LTC insurance) who are turned down for heath reasons will be quick to sign up for the new government plan if underwriting standards permit. This situation could result in major premium increases for existing policyholders several years down the road when claims start to increase at a rapid rate." It is anticipated by OPM that some employees with disabilities will be able to enroll depending on whether those employees can meet the underwriting requirements described at http://www.opm.gove/insure/ltc/desogmj/imderwriting.htm. Quoted from the OPM web site, "All employees who apply will be offered some form of benefit. However, due to health reasons, a small minority will be offered non-standard coverage or a package of services (e.g., care coordination and discount arrangements)." On the same OPM web page, "If we guaranteed standard insurance to all employees who applied, our insurance carriers would have added the expected cost of those in poor health to the premium. With no Government contribution, many healthier employees who could pass underwriting would find less expensive premiums and purchase private insurance, requiring even higher premiums to cover the risks of those remaining in our program. This kind of cycle would almost guarantee that the program would fail." : As of today, (February 9, 2002) the specific diseases or conditions that will exclude people from receiving the governments long-term care insurance is unknown. "Even through we've signed a contract, we don't have the details ironed out. This is one of the details we can't answer yet." The Question and Answers site continues and states that there is no guarantee of premiums and the rates are still yet undetermined. There is so much missing information about the Federal Long Term Care Insurance Program (including what the premiums will be). When it comes to underwriting could the program be between a rock and a hard place? Check the site out for yourself and heed the advice in the John Miller's letter to TROA members in January 2002, "My advice to members who want to purchase LTC insurance now is "don't wait." First, health conditions might change between now and the open enrollment period, and second if the government plan turns out to be all we hope it will be, you can stop paying premiums for the old plan and switch to the new plan, assuming continued good health." : More on this subject later, : Steve Eads, CLU : seads@eadsassociates.com

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