Federal Long-Term Care Insurance Program is an insurance plan federal workers can opt into to help with costs of chronic medical conditions and disabilities. The Office of Personnel Management Inspector General recommended that the agency have a backup plan in place for FLTCIP. This comes after an audit of a bid process only produced one application to administer the plan.
OPM didn’t renew its contract in 2015 with John Hancock Life and Health Insurance Company after the company determined it needed to hike up premiums to fully fund FLTCIP. By the end of the bid process, John Hancock was the only bidder to administer the program and it received a new 7-year contract.
In August 2015, John Hancock rolled out new premium increases, and premiums for existing participants increased by an average of 83% in November 2016, after their new contract.
OPM IG said it found the agency followed all federal regulations during its year-long bidding process. It concluded that in the years since FLTCIP was founded in 2000, the market for long-term care insurance has all but evaporated. “In 2000, there were 125 insurers in the Long-term care insurance marketplace,” auditors wrote. “By 2014, there were only 12 insurers that were issuing at least 2,500 individual policies and only 5 insurers sold group policies.”
Only one firm continues to offer a group plan in the form of FLTCIP. John Hancock discontinued the sale of new group policies in 2010. Now, many insurance companies offer a hybrid product that provides long-term care insurance along with either life insurance or an annuity.
Future FLTCIP Challenges
Because of the shifting marketplace, OPM IG recommended the agency come up with a formal contingency plan in case the program becomes infeasible. John Hancock has stated it intends to “continue to bid on and service the current FLTCIP contract” while OPM noted a provision in the agreement allows the agency to extend the contract beyond its current expiration date and continue to provide service to existing enrollees.
“Considering the rapidly changing environment of the long-term care insurance industry, OPM should develop a contingency plan to prepare for future FLTCIP procurement challenges,” IG wrote. “Although some changes may require regulatory or legislative actions, OPM should be productive in planning for any changes that could arise in the future.”
However, OPM officials pushed back against the idea of developing a formal backup plan for administering FLTCIP, saying the program is contractually guaranteed to continue and that agency staff is in “regular contact with John Hancock to monitor the program and its funding status”.
“In short, OPM continually monitors the performance of FLTCIP through standards agreed upon in the contract,” the agency stated. “OPM recognizes the evolving state of the long-term care industry and has been proactive in monitoring the programs’ performance while engaging in meaningful dialogue and analysis to best position the program for the future.”
The IG said having a formal plan in place would ensure continuity for participants in case something unforeseen happens, especially given that Congress would need to sign off on any major change to the program.
“Although these are ‘what if’ scenarios, any potential changes to the product or discontinuance of the current product in the future would require significant planning and work with Congress to potentially change legislation,” the OIG wrote. “OPM should position itself with the ability to permanently suspend the enrollment to new enrollees, should the need arise. Preplanning and road-mapping potential future changes will ensure continuity for the FLTCIP enrollees.”