The Next Generation of Long Term Care Insurance

FLTCIP 3.0 changes the landscape.

Are you one of the many people who have thought about long term care insurance, but haven’t figured out if it’s worth the risk of rising costs in the future and the possibility that you might not use the benefits you paid for? If so, you’re not alone. Now there’s a new version of the Federal Long Term Care Insurance Program that seeks to address some of these concerns.

According to the Office of Personnel Management, at the end of fiscal 2018, FLTCIP had nearly 270,000 enrollees, making it both the largest group and employer-sponsored long term care insurance program in the country.  Every month, FLTCIP policy holders receive a total of $21 million in claims reimbursements. Over the life of the FLTCIP program, $1.3 billion has been paid in claims with an approval rate of 95 percent.

The program is designed to provide a resource to pay for care needed if you are unable to perform without substantial assistance at least two activities of daily living (such as bathing, dressing, transferring into or out of a bed, or eating) for at least 90 days, or you require substantial supervision due to severe cognitive impairment. 

Now, there’s a new version of FLTCIP, known as FLTCIP 3.0, that provides a premium stabilization feature. That’s an adjustable amount computed as a percentage of the total premium paid for the policy that’s designed to reduce the potential need for future premium increases.

The provision provides for a potential 50 percent decrease in premiums at age 85 if there is a sufficient amount of money available in the premium stabilization fund and if you have been enrolled in FLTCIP 3.0 for at least 10 years. Depending on the experience of the FLTCIP in the future, the amount of the decrease will vary.

FLTCIP 3.0 also provides for a potential refund of a portion of premiums at the time of death. The refund would be subject to a reduction of any claims that were paid while the policy was in effect.

More details about the premium stabilization feature can be found on the FLTCIP website.

The change is designed to address concerns about the potential for future rate increases, which have plagued the long term care insurance industry since its inception. Future increases are still a possibility under FLTCIP 3.0. But it’s important to note that you can’t be singled out for a premium increase because of your advancing age, declining health, claim status, or any other reason related solely to you. Premiums go up when you are among a group of enrollees whose premium is determined to be inadequate. OPM must approve such increases. Your premium also may go up if you decide to increase your benefits.

One of the ways the long term care insurance industry has sought to reduce the cost of insurance is to eliminate features that were the most costly to provide, such as an unlimited benefit period and a 5% inflation option. FLTCIP 3.0 does not include either of these features. 

Premiums under FLTCIP 3.0 are based on your age at the time you purchase your policy, the amount of your daily benefit and the length of your benefit period. FLTCIP offers $100 to $450 daily benefit amounts in $50 increments, and includes two-, three-, or five-year benefit periods.

The last factor that affects your premium is the inflation protection feature you select. FLTCIP 3.0 offers an automatic compound inflation option under which your daily benefit amount will increase by 3% compounded every year. Or you can choose the future purchase option, under which every two years you will be offered an increase to your daily benefit amount based on a calculation derived from the change in the Consumer Price Index.

If you’re considering whether to purchase long term care insurance, here are some first steps to take:

  • Determine if you’re a good candidate for long term care insurance. Some people don’t qualify for this type of insurance for medical reasons, and for others it may simply not be financially wise. For more information, visit the Health and Human Services Department’s  long term care insurance website
  • Learn more about the FLTCIP program on its website, which includes a premium calculator.
  • Don’t wait too long to act. I purchased an FLTCIP policy 14 years ago, at age 47. It currently has a daily benefit amount of $187, a five-year benefit period and a 3.9 percent automatic compound inflation option with a maximum lifetime benefit of $345,500. My premium is currently $148 per month. If I were to purchase a similar policy under FLTCIP today at age 61, it would cost $428 a month.

One of the reasons to consider buying long term care insurance is to relieve yourself and your family of financial burdens that could come as a result of an illness, a fall, or other emergency. It may not be enough to cover the full cost of care, but it can help.

Disclosure: Tammy Flanagan is under contract with Long Term Care Partners, which administers the FLTCIP,  to provide informational webinars on retirement planning issues.