Long-Term Change

As you may have heard by now, the Office of Personnel Management has signed a new contract with John Hancock Life and Health Insurance Co. to provide insurance for the Federal Long-Term Care Insurance Program's second seven-year contract term. John Hancock has been a 50 percent joint insurer since the 2002 inception of the program, which now has nearly 250,000 enrollees. Long-Term Care Partners will continue to administer the program for the government.

The official Web site of the Federal Long-Term Care Insurance Program has some answers to frequently asked questions about the new agreement:

• If you already have long-term care insurance, your policy stays the same and costs the same price. Nothing will change until later. The current contract period has been extended for up to 10 months from April 30, 2009, to allow for a transition to the new contract.
• Policyholders will be able to retain their current benefits (subject to rate increases) or keep their premiums the same by changing their benefits. They'll have a one-time opportunity to switch to new benefit options without underwriting.
• An open season is likely to be held during the new contract term.
• The new contract includes a higher home health care reimbursement, a two-year benefit period (three-year, five-year and unlimited policies currently are available); higher daily benefit amounts (from $100 to $450, up from a present high of $300); and coverage for informal care by family members for up to 500 days (up from 365).
• On or about Jan. 1, 2010, premiums will increase for enrollees with the automatic compound inflation option who were under age 70 when they purchased the coverage and who choose to keep the same coverage they have now. The amount of the increase will depend on the person's age when the insurance was purchased, and will range from 5 percent to 25 percent.

Partnership Programs

Some people decide to rely on Medicaid for help in paying for long term care instead of purchasing insurance. But Medicaid requires individuals to spend down all but about $2,000 of their assets before receiving help. There are also strict guidelines for transferring assets to children or otherwise giving away money to qualify for Medicaid. This means someone with a fair-sized estate could end up leaving their heirs with nothing.

To encourage people to buy long-term care policies and to keep Medicaid costs down, many states have created Long-Term Care Partnership Programs. Here's the basic concept: People with long-term care insurance can protect their assets from the Medicaid spend-down up to the amount of their benefits. So, for example, if you have a policy worth $200,000, a "dollar-for-dollar" type of partnership program would protect $200,000 worth of your assets from the spend-down. That means you could qualify for Medicaid even if you had spent your long-term care insurance benefits and still had $200,000 in your Thrift Savings Plan account.

Partnership programs have been around on a limited basis since the early 1990s. Originally, only four states -- California, Connecticut, New York and Indiana -- implemented them. Congress allowed a nationwide expansion of the program in 2005. Here's a map of the states that currently participate, or are in the process of setting up a program.

Right now, it's not clear whether federal long-term insurance meets the requirements of any state's partnership program. If your state implements such a program, Long-Term Care Partners can examine your coverage and let you know whether you have partnership protection. Long-Term Care Partners is working on having the federal plan qualified across all states.

Tammy Flanagan is the senior benefits director for the National Institute of Transition Planning Inc., which conducts federal retirement planning workshops and seminars. She has spent 25 years helping federal employees take charge of their retirement by understanding their benefits.

For more retirement planning help, tune in to "For Your Benefit," presented by the National Institute of Transition Planning Inc. live on Monday mornings at 10 a.m. ET on federalnewsradio.com or on WFED AM 1500 in the Washington metro area.