Federal Long Term Care Insurance Program

11/30/2016

Subcommittee on Government Operations House Committee on Oversight and Government Reform

Chairman Meadows and Ranking Member Connolly, thank you for providing the National Treasury Employees Union (NTEU) with the opportunity to present a statement on the Federal Long Term Care Insurance Program. On behalf of the National Treasury Employees Union (NTEU) and our more than 150,000 federal workers at over 30 government agencies, I am pleased that our August request for a hearing on this matter is finally happening.

As you know, since its establishment in 2000, FLTCIP has been the largest employer-sponsored long-term care insurance program in the nation, with approximately 274,000 enrollees as of the end of Fiscal Year 2015. NTEU worked actively with your Committees on the authorizing legislation to create the program, and throughout the last seven-year contract renewal period and associated premium rate increase, as well as on needed program transparency and consumer items.

When the last contract was awarded in 2009, NTEU members were stunned to find that there would be large premium increases in the FLTCIP. At a hearing on this subject that year before two Senate committees, NTEU urged the Office of Personnel Management (OPM) to examine the relationship between claims and assumptions so that future premium projections would be reasonable. Instead, once again, FLTCIP enrollees were notified that owing to poor actuarial assumptions in the areas of claims, morbidity, mortality, and investments, that they must bear the responsibility of absorbing massive premium increases. While enrollees face an average 83 percent rate increase, some individuals are experiencing increases as large as 126 percent. As an example, one NTEU member from Illinois who contacted me upon receiving his individual FLTCIP packet will see his monthly premium rise from $325.84 to $736.40. While the program must be able to support paying current and future claims, this type of premium increase is not viable, and frankly will not be doable on the part of the vast majority of enrollees going forward. While individuals were given personalized options for lowering premiums, it is important to note that these solutions required enrollees to immediately reduce coverage levels, particularly by trading away inflation protection, which is the chief reason policy-holders purchase this type of insurance and the key component needed for adequate long-term care in the view of financial planners. I believe that many federal employees were forced over the summer to trade away core coverage levels and inflation protection to remain in the program. And, at one point are these individuals simply left in a situation where they have paid a fortune for an insurance product that will no longer provide any benefits?

At an OPM briefing earlier this year, John Hancock discussed their inadequate actuarial assumptions that miscalculated longevity, the length of claims, as well as the underperformance of their investments, particularly low bond rates that they claimed resulted in these needed premium increases. What I find difficult to understand is how all of this happened again. What happened to the required status reports of actual claims experiences and investment strategy and performance from John Hancock to OPM? How is it that the insurer, a major financial institution, was surprised by very low interest rates? And at what point does that become their problem, and not individual federal employees and retirees.

NTEU is concerned that if premium increases such as these happen yet again, at the next contract renewal, that there may not be a FLTCIP. We appreciate the Committee’s attention in addressing needed oversight of FLTCIP on behalf of our federal employees, retirees, and their family members, and we ask that you insist on regular reports from OPM on the status of FLTCIP. We would also ask that you direct OPM to revisit the structure of the program and redesign it in a way that will bring back reasonable premiums and inflation protection.

Thank you for holding this important hearing.