How to Deal with the Latest Long Term Care Rate Hikes

You can keep premiums under control, but it means reducing benefits.

In late 2022, the Office of Personnel Management suspended new applications to the Federal Long Term Care Insurance Program to allow the agency and the FLTCIP carrier, John Hancock Life & Health Insurance Company, to assess benefit offerings and establish sustainable premium rates.

Now the premiums for many Federal Long Term Care Insurance Program policies are increasing significantly starting in January. No one is happy about paying more for benefits. But there are options that will allow participants to keep their policies and pay the same premium if they’re willing to accept less coverage or a lower inflation adjustment.

FLTCIP, administered by Long Term Care Partners LLC,  was created in 2000 to help federal employees pay for long-term care services and support. It currently has more than 260,000 enrollees. As of December 2022, FLTCIP has paid a total of $2.4 billion in claims for 26,700 claimants with an average claim of $90,000.

FLTCIP participants should have received a notice in the mail this month outlining their options relative to the rate hikes. Participants can also see the details by logging in to their accounts at the Long Term Care Partners website. If they choose to accept the increase, they can reduce their benefit to maintain their current premium or opt for a paid-up limited benefit. Under the latter option, there would be no future premiums, and a participant would receive benefits based on what they have already paid into the program. 

To keep their premiums at their current rate, participants can accept a reduction in the amount of their benefit, a cut in their inflation protection or a more limited benefit period of their policy. Participants must make their choices by Nov. 9.

Each individual’s decision will depend on their policy and situation. Those who don’t currently have a FLTCIP policy can’t get one due to the suspension of applications. But several private companies offer policies—although fewer than a decade ago. Those contemplating switching away from FLTCIP should be aware that a new policy would likely be more expensive, because they have grown older since getting their initial policy. Age is a significant factor in long term care insurance rates. 

Financing long term care policies is not an issue unique to FLTCIP. According to Kiplinger’s Personal Finance, premiums have risen steeply over the past several years due to several factors. Long term care is getting more necessary and more expensive. A Department of Health and Human Services report estimates that 70% of adults who survive to age 65 develop the need for long term care services and support before they die, and 48 percent receive some paid services over their lifetime. 

The Congressional Budget Office has reported that in 2010, U.S. spending on long term care services was about 1% of gross domestic product. By 2050 that is expected to grow to 3%. That adds up to a lot of money, and a lot of care.