Decision Time

By Tammy Flanagan

June 10, 2011

There are two weeks left in the first open season for the Federal Long-Term Care Insurance Program since its introduction in 2002. This means that employees and their spouses or same-sex partners have until June 24 to take advantage of enrolling in the FLTCIP through abbreviated underwriting -- by filling out a form that includes only seven health-related questions (nine for spouses and partners).

Although employees, retirees and qualified family members have been able to enroll at any time since 2002, the open season is a unique opportunity for abbreviated underwriting, as opposed to answering the 40 or so questions on the long-form application. If you haven't considered this type of benefit for you or your family, now would be a good time to do so.

If you opt to purchase long-term care insurance, you'll have three decisions to make:

How much of a daily benefit do you want? Consider the cost of care for nursing home, assisted living and in-home providers. Also, consider how much you would be willing or able to pay out of pocket for these expenses. The higher the daily benefit, the more expensive the policy. The choices range from $100 to $450, in $50 increments.

How long of a benefit period do you want? The choices are two years, three years, five years or unlimited (which is very expensive and usually not necessary). Multiply the daily benefit by the benefit period to compute the pool of money you'll have available to pay for long-term care. For example, a $200 daily benefit for a three-year benefit period would work out to $219,000. You could spend $200 a days and use up your coverage in three years, or spend less than that over a longer period. What level of inflation protection do you want? The choices are:

The 4 percent automatic option will double your daily benefit every 18 years (4 percent compounded annually). The premium is designed (but not guaranteed) to stay level. The 5 percent option will double your daily benefit every 14.4 years.

For example, if you purchase a $200 daily benefit at age 50 with the 4 percent automatic compound inflation option, when you're 68, you'll have a $400 daily benefit. When you're 86, it would increase to $800. If no rate increases were imposed, you would be paying the same premium as you were when you purchased the policy. Keep in mind, though, that there was a significant rate increase in 2010 and there's no guarantee there won't be another one. Under the future purchase option, premiums will increase every two years when you receive an offer to purchase a higher daily benefit. The increased coverage will be priced at your age then, not the age you were when you purchased the policy.

There are four prepackaged plans available:

FLTCIP offers an online premium calculator to help you price the policy that's right for you.

Who's Buying What

During the June 6 broadcast of the "For Your Benefit" show I co-host on Federal News Radio, our guests were Paul Forte, chief executive officer of FLTCIP, and Beth O'Brien, its manager of program promotion. They reported that the FLTCIP website has had more than 325,000 unique visitors since March 1. (Open season began on April 4.) The abbreviated application form has been downloaded more than 48,000 times, and the rate quote calculator has received more than 320,000 hits. Forte and O'Brien also reported that 40 percent of those who have purchased coverage so far in the open season opted for the $150 daily benefit, with another 40 percent choosing the $200 option. Thirty-nine percent chose a three-year benefit period, while 30 percent opted for five years. Another 19 percent picked a two-year period. The 4 percent inflation protection option was the most popular, selected by 56 percent of enrollees. The average applicant is 51 years old. For more information, see my columns from 2006 on long-term care insurance:

They remain a good overview of the issues you should weigh when considering long-term care insurance.

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 or on WFED AM 1500 in the Washington metro area.

By Tammy Flanagan

June 10, 2011