Another conspiracy theory: Why LTC premiums are jumping 83 percent

Federal workers and retirees are a diverse group. They come in all shapes, sizes, sexes, races and ethnic groups. Those who work in Utah mostly tend to vote like their neighbors. As do feds in Albany, Buffalo and New York City.

Some members of the federal family are Republicans, some Democrats, some independents and some confused — especially this year. But the one thing they have in common is that most of them — at least the ones we’ve heard from — think the pending increase in long-term care insurance premiums is an outrage, and unjustified.

Premiums are going up an “average” of 83 percent in November, which is $111 per month. Others will see their premiums rise as much as 126 percent. People who want to keep their current coverage will have to pay more. Some will downsize their plan reducing the daily rate it pays for care, the number of years it will pay benefits or reduce their automatic inflation protection.

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One thing policy-holders agree on — right or wrong — is that the premium hikes are a rip off. What they don’t agree on is who is to blame.

• Some say the problem is the Office of Personnel Management. As in it blew this one big time. OPM oversees the various in-house government insurance programs. It approved the new seven-year contract, and premium hikes. Aha!

• Others we’ve heard from blame the insurance company, John Hancock, for being greedy. It was the only insurance company to bid on the program this year. Aha!

• A few say the government has kept oil prices down, producing the “long-term shortfall” that backers of the program say, along with skyrocketing medical costs for long-term care, is the reason John Hancock and OPM say the self-financing program must raise rates to cover future anticipated costs. LTC Partners says that since 2002 the federal program has paid out more than $700 million for long-term care for policy holders. Right now, it says, John Hancock is paying about $13 million a month in federal LTC program claims.

• Some people believe the big premium jump is a combination of all of the above. The National Active and Retired Federal Employees, and some Washington area members of the House, have called for congressional hearings. But given the extended time-out Congress is on, any such hearings would probably take place AFTER the premiums have already gone up.

For others, it’s a little more complicated than the fix-is-in. Example:

Walton Francis, the foremost authority on the federal employee health benefits program, cites three things that led to the new, higher premiums. “Slow economic growth for reasons not clearly understood” which resulted in smaller earnings for insurance companies which invest premiums.” Congress made the federal LTC a self-funding program, meaning it has to cover current and future costs based on premiums and earnings in the program.

Francis said the second factor is “the Federal Reserve Board deliberately holding down interest rates on Treasury bonds for fear of provoking another recession” and thirdly, “The unforeseen decade of slow growth and very low interest rates starting a decade ago has played havoc with the actuarial assumptions under by insurance firms in projecting long-term asset growth in produces like life insurance, annuities and long term care insurance.”

What’s next? For the official word on why premiums are going up, what the company has paid out so far, click here, and your options, click here.

Nearly Useless Factoid

By Michael O’Connell

The song “One Thing Leads to Another” by The Fixx reached No. 4 on the U.S. Billboard Hot 100 in November 1983.

Source: Wikipedia

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