The Federal Long Term Care Premium Increase
Nov 13 2009
I have received a number of calls and a couple of faxes from members upset about the premium increase in the Fed LTC program. The premium increase applies to the plan with the inflation protection. Members remember being told that under the inflation protection plan there would never be a premium increase. The faxes I received were copies of contracts that indicated no premium increase. Well, not exactly…
In the case of the Fed LTC plan, the guaranteed premium rate was for the contract period. The contracts are for 7 years. There was no guarantee that premiums would never go up—ever. Don’t be surprised if there is another premium increase in the next round of contract talks. If you get the inflation protection option when you re-up, which I highly recommend, you can be secure in knowing you will have no premium increase in the next 7 years even though your benefit amount will increase.
So why did the premium increase so much? According to Mike Causey’s Insight column in the Federal Employees News Digest, there were a couple reasons. One is the age of the applicants increased. This is a standard reason for higher premiums. The other reason, the use of the benefits was much greater than anticipated. LTC insurers don’t expect large payouts until people reach their 70s and above. The Fed plans are paying a larger number of beneficiaries in their 50s and 60s. Now why this occurred cannot be known. Were there more unfortunate Fed workers than the general population? Maybe more Feds applied for LTC knowing they had conditions that would one day require LTC. Either way, that the way it is.
So what about commercial LTC plans? Before working at MOAA, I was a financial adviser with a firm and I sold LTC policies when appropriate. I can state that no policies from any company ever stated there would never be a premium increase. All policies have contract provisions that allow premium increases on ‘classes’ of customers. Premium increases in LTC policies are not unusual and will probably become more common as we age and use the policies. If you have a policy with a smaller insurance company, your premium is more likely to be increased.
