August 23, 2016

Cardin, Mikulski Relay Employees’ Shock, Request Urgent Hearings on Major Cost Increases for Long-Term Care Insurance for Federal Workers

Senators write that OPM either fell victim to classic bait-and-switch or simply “got it wrong”

BALTIMORE – U.S. Senators Ben Cardin and Barbara A. Mikulski (both D-Md.) have written to the leadership of the U.S. Office of Personnel Management (OPM) to convey the shock and anger of federal employees who have been informed of a dramatic increase in their premiums for the Federal Long Term Care Insurance Program. The senators also called on the Senate Committee on Homeland Security and Governmental Affairs to hold hearings on the issues as soon as Congress returns to session in early September. Senators Cardin and Mikulski wrote:

“We were flabbergasted to learn that Federal Long Term Care Insurance Program (FLTCIP) premiums will increase by 83 percent, on average, and by as much as 126 percent for some individuals, in November. Federal annuitants and employees pay the full cost of the premiums.  Many of them are on fixed incomes or coming off a three-year pay freeze and substandard pay raises since then. They are being asked to pay an additional $111 per month, on average. This is unacceptable, and so are the alternatives: a reduction in coverage to keep premiums at their current level, taking a ‘contingent benefit upon lapse’ for those who are eligible, or dropping coverage altogether.

“ … How could professional actuaries, financial advisors, risk managers, and other experts be so wrong?  We are left to wonder whether the issuer, which has no competition, has engaged in a sort of classic ‘bait-and switch’ by luring customers with what appears to be affordable coverage and then jacking up the premiums.  In either instance, the Office of Personnel Management (OPM) has failed to meet its oversight responsibility.

“ … Premium increases of this magnitude threaten the health, well-being, and retirement security of thousands of hard-working current and former federal employees. And the justifiably negative press coverage of the premium increases probably will dissuade prospective customers from buying coverage, which will exacerbate so-called ‘adverse selection.’

“As you may know, a similar situation occurred in 2009 when the last long-term insurance contract was negotiated, and premiums increased by up to twenty-five percent. The U.S. Senate Committee on Homeland Security and Governmental Affairs’ Subcommittee on the Federal Workforce and the U.S. Senate Special Committee on Aging held a joint hearing on the increase, and found that OPM ‘got it wrong.’

“OPM has once again gotten it wrong, at the expense of our constituents who will now face either increased premiums or decreased service.” 

Full text of the letters can be found here for OPM and here for HSGAC