KOHL, AKAKA HOLD JOINT HEARING ON FEDERAL LONG-TERM CARE INSURANCE PROGAM'S UNEXPECTED RATE INCREASES
WASHINGTON - Today Senators Herb Kohl (D-WI) and Daniel Akaka (D-HI) held a joint hearing of the Special Committee on Aging and the Homeland Security and Governmental Affairs Subcommittee on Oversight of Government Management, the Federal Workforce, and the District of Columbia on the federal long-term care insurance (FLTCI) program, meant to help enrollees prepare for the cost of long-term care later in life. When the program began in 2003, the Office of Personnel Management (OPM) launched a major campaign to educate and encourage federal employees to participate. Currently, about 5 percent of federal employees and retirees participate in the FLTCI program. OPM recently announced that over half of FLTCI policyholders will face up to a 25 percent increase in their monthly premium payments, raising concerns about how well OPM is fulfilling its duties as regulator of the insurance program.
"It's important that we begin this hearing with an understanding of the crucial role long-term care insurance can play for so many Americans, both now and as our country ages at an unprecedented rate," said Kohl. "The problems we are seeing with the federal long-term care insurance program are occurring with long-term care insurance products nationwide. If state and federal governments are going to promote these products, it's our duty to be sure that consumer interests are protected."
"Many of the Federal Long Term Care Insurance Program enrollees whose premiums have increased by up to 25 percent are angry because they feel they were misled when they joined the program," said Akaka. "They understood that if they chose the automatic compound inflation option, their premiums would never increase. In these difficult economic times, this unexpected increase is unacceptable."
The hearing examined OPM's use of aggressive marketing materials to promote the program in 2000, and questioned the agency's plan to inform current policyholders and help them weather the rate increase. Dan Green, Deputy Associate Director of Employee Support and Family Policy, testified on behalf of OPM. In light of the sharp increase in premiums, policyholders are faced with unpleasant choices: to pay the increased premiums; to accept reduced benefits to keep their premiums from skyrocketing; or to let their policy lapse, leaving them with no coverage if they ever need care, and forfeiting all the payments they have already made.
Margaret Baptiste, president of the National Association of Retired Federal Employees (NARFE), and Colleen Kelley, president of the National Treasury Employees Union (NTEU), testified on behalf of the federal workers and retirees who hold policies. Many policyholders are angry as they think back to the aggressive push made by OPM for this program, distributing slick marketing materials that led them to believe their premiums would not rise if they bought policies with inflation protection. Chester Joy, an individual policyholder and former employee of the U.S. Government Accountability Office (GAO), also offered testimony. The Senators called on OPM to ensure that policyholders have adequate time to consider their options, that counseling is available to help them make a decision, and that it is understood that this is likely not the last rate hike they will face.
Mary Beth Senkewicz, Deputy Commissioner from the Florida Office of Insurance Regulation, offered testimony explaining the current regulation of long-term care insurance both as it affects tax-qualified polices sold within OPM's group market, and in the individual and group markets that are regulated by states. Marianne Harrison, president of Long-Term Care at John Hancock Financial Services, Inc., also testified. John Hancock is the carrier for OPM's long-term care insurance policies.
In June of this year, Chairman Kohl and Senator Ron Wyden (D-OR) introduced the Confidence in Long-Term Care Insurance Act of 2009 (S. 1177), which strengthens consumer protections with respect to premium rate stability, market disclosures, and training and certification of agents across the entire long-term care insurance market. The legislation would make it easier for consumers to accurately compare policies from different insurance carriers, particularly with regard to what benefits are covered and whether the plan offers inflation protection. The bill would also require reciprocity across state partnership plans.
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