Most federal employees know someone who has required long-term care at some point in their life. Whether a family member or a friend, we’ve seen how some individuals need support with daily tasks due to chronic illness, injury, disability, or simply the aging process. In fact, a 2019 U.S. Department of Health and Human Services report found that 70% of adults who survive to age 65 will need long-term care at some point before they die and that 48% will receive paid care.
Due to this widespread need and the ballooning cost of long-term care services, the Office of Personnel Management (OPM) contracts with private insurers (currently John Hancock) to provide the Federal Long Term Care Insurance Program (FLTCIP) a voluntary, premium-based long-term care insurance option for eligible federal families.
Eligibility
Most Federal and U.S. Postal Service employees and annuitants, active and retired members of the uniformed services, and their qualified relatives can apply for FLTCIP. While you may be eligible to apply, certain health conditions can prevent you from being approved for coverage.
Comprehensive Coverage
The FLTCIP helps pay for long-term care in several settings, ranging from at-home services to assisted living facilities, inpatient hospice care, nursing homes, and adult daycares.
While the FLTCIP helps to cover the cost of care provided by informal caregivers such as friends or family members, care provided by spouses, domestic partners, or anyone living in your household when you become eligible is not covered.
It’s important to note that when non-family members provide informal care, it is covered for the period of coverage selected (two years, three years, or five years). However, when family members provide the care, it is only covered for up to 500 days (a lifetime limit).
Some of the other features include:
Portability & Guaranteed Renewable: Meaning that if you continue to pay your premiums, your coverage cannot be canceled.
International Benefits: The FLTCIP provides benefits for covered services received outside of the United States.
Waiver of Premiums: Once care is needed and you begin receiving benefits, you do not have to pay premiums.
Respite Care: Paid benefits are provided for a temporary caregiver if your primary caregiver needs time off. The benefit is up to 30 times your daily benefit amount per calendar year.
Bed Reservations: If you’re in an assisted living facility, a nursing home, or a hospice facility and need to leave that facility for any reason (i.e., hospitalization), this feature will pay up to 100% of your daily benefit amount for up to 60 days per calendar year to reserve your bed.
Qualifying For Benefits
You become eligible to start receiving benefits from your FLTCIP coverage if a licensed health care practitioner certifies, and FLTCIP agrees, that:
• “You are unable to perform, without substantial assistance from another person, at least two activities of daily living for an expected period of at least 90 days due to a loss of functional capacity, or
• You require substantial supervision to protect yourself due to a severe cognitive impairment, such as Alzheimer’s disease.”
The six activities of daily living are:
- Bathing
- Dressing
- Toileting
- Continence
- Eating
- Transferring (from bed to chair)
Note: Benefits will begin after a waiting period. The waiting period is the time you must wait after you become eligible before benefits start to be paid. Costs incurred during the waiting period are typically not covered. You can think of the waiting period as a type of deductible.
Plans
When selecting FLTCIP coverage, you have the option of choosing between four prepackages plans or customizing your plan by selecting the daily benefit amount (DBA), benefit period, and inflation protection options.
Prepackages Plans
The four prepackages plans consist of the following options:
Plan A: Is the lower-cost option and may be the best option if you will be living in an area with low long term care costs or if you plan on paying a portion of your long-term care expenses using another funding source (cash, life insurance, home equity, etc.).
• Daily benefit amount: $150
• Benefit period: 2 years
• Maximum lifetime benefit: $109,500
• Waiting period: 90 calendar days
• Inflation protection options: 3% automatic compound inflation option or future purchase option
Plan B: Similar to Plan A but with a longer benefit period closer to the average stay in a nursing home.
• Daily benefit amount: $150
• Benefit period: 3 years
• Maximum lifetime benefit: $164,250
• Waiting period: 90 calendar days
• Inflation protection options: 3% automatic compound inflation option or future purchase option
Plan C: This plan provides benefits near the national average cost for long-term care.
• Daily benefit amount: $200
• Benefit period: 3 years
• Maximum lifetime benefit: $219,000
• Waiting period: 90 calendar days
• Inflation protection options: 3% automatic compound inflation option or future purchase option
Plan D: This plan provides benefits near the national average cost for long-term care but with a longer benefit period.
• Daily benefit amount: $200
• Benefit period: 5 years
• Maximum lifetime benefit: $365,000
• Waiting period: 90 calendar days
• Inflation protection options: 3% automatic compound inflation option or future purchase option
Custom Plans
If customizing a plan, you have the option of selecting from the following:
Daily Benefit Amount: This is the maximum amount paid for long-term care on any single day. The FLTCIP offers eight daily benefit amounts (DBAs) ranging from $100 to $450 in $50 increments. When selecting your DBA, you should consider the average daily cost of long-term care in your area.
Benefits Period: This is the length of time benefits will be paid if you receive benefits equal to your DBA each day. You can select from two-year, three-year, or five-year benefit periods.
Note: If less than your DBA is received or if you don’t receive services every day, the length of your benefit period will be extended.
A key consideration when selecting your coverage is the total benefit pool or lifetime benefit available to pay for your long-term care. You get the total benefit amount by multiplying the DBA by the benefit period (in days). For example, if your DBA is $150 and you chose a three-year (1,095 days) benefit period, your lifetime benefit amount is $164,250. Meaning lifetime benefits up to $164,250 are available, and coverage will end with no further payments once this amount is spent.
Inflation Protection Options: The costs of long-term care services will likely continue to increase and have done so at a pace greater than consumer price inflation. To help ensure that your FLTCIP benefits keep pace with the rising cost of long-term care, you have the option of selecting from two types of inflation protection: the Automatic Compound Inflation Option or Future Purchase Option.
- Automatic Compound Inflation Option: With this option, your DBA and any remaining portion of your maximum lifetime benefit will automatically increase by three percent compounded every year.
- Future Purchase Option: With this option, you can increase your DBA and maximum lifetime benefit every two years with a corresponding increase in the premium. Any increases are optional, and you may decline the increase up to three times before you no longer receive an offer to increase.
Note: Increases to the DBA are based on the U.S. Department of Labor’s Consumer Price Index for all Urban consumers (CPI-U).
Costs
Although the FLTCIP is not cheap, with monthly premiums ranging from roughly $20 to $900, when compared to the cost of having a long-term care event without coverage (with average nursing home cost around $100k annually per person), it could be a bargain.
Unlike other long-term care programs, FLTCIP has one pricing schedule based solely on your age when you apply. The other factors that will impact your premiums are the daily benefit amount, benefit period, and inflation protection options selected.
An important point to make is that the FLTCIP is not subsidized by the federal government, meaning you are paying 100% of the premiums, and there are no refunds if you never use your benefits.
Note: FLTCIP provides a Premium Calculator on their website.
Premium Increases: Long-term care premiums industry-wide have risen substantially in the past, including those for FLTCIP enrollees. Thus, your FLTCIP premiums are not guaranteed. However, your premiums will not change due to your age or any changes specific to solely you. Premium increases must be approved by OPM and will only increase if you are among a group whose premiums are determined to be inadequate. If your premiums are set to increase, you may reduce your benefits to keep your premiums from increasing.
Final Thoughts
As with other areas of financial planning, there is no one size fits all answer and whether or not to enroll in the FLTCIP depends on your financial situation, risk tolerance, and goals. Whether you decide to enroll in the FLTCIP, another insurance program, rely on Medicaid, self-fund, or use a hybrid long-term care insurance policy, what’s important is that you have a plan. The last thing any of us want is for long-term care expenses to empty our hard-earned retirement nest egg, nor unexpectedly create a financial burden for our loved ones. So, set aside some time to put a plan in place long before any health issues warrant care. If you are not confident selecting and implementing your long-term care plan, consult a qualified financial planner.
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