If you didn’t hear about the rising costs of your federal long-term care insurance premiums in August, you probably will soon.
Most of the more than 274,000 federal employees and retirees who pay for federal long-term care insurance face a significant increase in costs in 2016. Some federal employees and retirees are exempt from increases, such as those people over 80.
The Office of Personnel Management awarded a new contract April 5 to the incumbent provider John Hancock Life and Health Insurance Company to run the federal long-term care insurance program.
“While details about the rates for current enrollees are still being finalized, it is expected that rates will increase as is occurring across the industry,” said OPM spokesman Sam Schumach in a statement. “To address the expected increases, OPM is working with John Hancock to ensure that whenever possible, policyholders will be offered different policy options to help mitigate or offset the effects of any increase they may experience. The new rate change will take effect no earlier than fall 2016.”
OPM said some federal employees were alerted about potential rate increases for FLTC insurance premiums in August. But with the award of the new contract, the increase is assured.
The last time OPM awarded a contract for these services to John Hancock, premiums rose on average by 17 percent, and as much as 25 percent.
OPM said this year’s expected increase can be attributed to several factors, including longer life expectancies, the lower rate of return of the investment in the trust fund of premiums and basic inflationary increases.
OPM said it will have more details in the coming weeks about how much the premiums will increase.
OPM said it’s working with John Hancock to offer different policy options to help offset the increase in premiums or make other options available to policy holders that are more affordable. OPM also said federal employees and retirees can sign up for long-term care insurance at anytime.
Despite the increase in premiums, enrollment in the long-term insurance continues to grow, up from 225,000 in 2011.
John Hancock was the only bidder to provide long-term care insurance services to the federal market despite the fact OPM had the solicitation on the street for almost seven months.
“Since 2002, federal law has required the Office of Personnel Management to provide federal long-term care insurance to federal employees, members of the uniformed services, and civilian and military retirees. This program provides coverage to help pay for costs of care when enrollees need help with activities they perform every day, or if they have a severe cognitive impairment, such as Alzheimer’s disease. Enrollees pay for the full cost of premiums under the program,” Schumach said. “Per federal law, OPM must issue a new contract term every seven years for this benefit to federal employees.”