Why Participating in The Federal Long Term Care Insurance Program Could Be a Very Smart Move

Is it worth joining the Federal Long Term Care Insurance Program (FLTCIP)?

I encourage my clients to look at their personal financial plan as if they were building their dream house: if you want it to last you and your family a lifetime, you need a rock-solid foundation.

Just like in a house, a holistic financial plan is held up by a few key weight-bearing pillars – all playing an important role in keeping things standing. Savings and investments, cashflow, life insurance, education for kids – are common examples that help fuel your retirement dreams, but each unique financial situation will have its own blueprint.

Long-term care insurance is one key pillar that seldom gets the attention it deserves, and yet, without it, your dream house may come crashing down.  One reason for ignoring long term care insurance may be that you’re fit and healthy, and can’t imagine a time in your life where that might not be the case.  But statistics paint a very different picture.

When should you consider joining the Federal Long Term Care Insurance Program?

Whether or not you see the need for long term care insurance right now, it is a conversation that I regularly have with my clients. That’s because if life throws them a curveball they need to be able to deal with it; and as they age, the likelihood of life pitching that curveball increases.  Also, keep in mind that the longer you wait to purchase long term care insurance the higher the premium.

When we do sit down to chat, we can compare all the private and federal options.

Who is eligible for the Federal Long Term Care Insurance Program?

The program is available to those who are eligible for the Federal Employees Retirement System (FERS) or the Civil Service Retirement System (CSRS), and their spouses, domestic partners, parents, and adult children.

Why do some federal employees choose not to participate in the Federal Long Term Care Insurance Program?

Many federal employees don’t see the immediate need for long-term care coverage. Others may explore alternative options. Some have access to long-term care coverage through other means, such as a spouse’s program, private insurance policies, or their state’s long-term care programs.

There are other reasons why federal employees miss out on the benefits of the FLTCIP or prefer other coverage options. These include:

• Pre-existing Conditions: Like any insurance program, pre-existing medical conditions can affect eligibility or premiums. Some employees with pre-existing conditions might find it challenging to qualify, or might face higher premium rates.
• Limited Enrollment Periods: The FLTCIP usually opens for enrollment during specific periods. If a federal employee misses the enrollment window, they might have to wait for the next open season to apply for coverage.
• Financial Constraints: While the FLTCIP provides valuable coverage, it comes with a cost. Some federal employees find the premiums too expensive or not within their current budget, leading them to opt out of the program.

What should I consider before choosing to participate in the Federal Long Term Care Insurance Program?

When we first begin discussing a financial plan for retirement, I always encourage my federal employee clients to compare the FLTCIP with other long term care insurance options to determine the best fit for their needs.

It’s essential that they review their options carefully and consider their personal circumstances before making a decision. It’s also important to check the specific terms and conditions, including coverage limits, waiting periods, exclusions, and premiums, to fully understand the benefits and any limitations.

For the most up-to-date information, I recommend reaching out to your human resources department or visiting the official website of the FLTCIP (ltcfeds.com).

What are the main benefits of the Federal Long Term Care Insurance Program?

• Coverage for Long-Term Care Expenses: The FLTCIP provides coverage for a range of long-term care services, including nursing home care, assisted living facility care, home healthcare, and adult daycare. It helps cover the costs associated with these services, which can be substantial and potentially deplete your retirement savings.
• Comprehensive Coverage Options: The FLTCIP offers a variety of coverage options to meet individual needs and budgets. You can choose from different benefit periods, daily benefit amounts, and inflation protection options to customize your coverage.
• Eligibility Regardless of Health: Unlike some private long-term care insurance plans, the FLTCIP has limited underwriting requirements during the initial enrollment period. As long as you meet the eligibility criteria, you can enroll. Currently, Federal Long Term Care Insurance Program (FLTCIP) applications were suspended effective December 19, 2022. Individuals not currently enrolled may not apply for coverage, and current enrollees may not apply to increase their coverage. The suspension will remain in effect for 24 months, unless OPM issues a subsequent notice to end or extend the suspension period. This makes it all the more important to work with someone who can research other options, if long term care coverage is important to you.
• Portable Coverage: The FLTCIP coverage is portable, meaning it stays with you even if you change federal agencies, retire, or leave federal service. You may continue coverage as long as you pay the premiums.
• Access to Care Coordination Services: The FLTCIP provides access to care coordination services, including care coordinators who can help assess your needs, develop a care plan, and assist in finding appropriate long-term care providers.
• Premium Flexibility: You can select a payment method that aligns with your financial preferences. The FLTCIP allows you to choose different premium payment options, including monthly or biweekly deductions from your salary, direct billing, or electronic funds transfer.
• Potential Tax Benefits: The premiums paid for qualified long-term care insurance, such as the FLTCIP, may be tax-deductible. I introduce my clients to a tax advisor to help them understand the specific tax implications based on your circumstances.
• Spousal Coverage: The FLTCIP extends coverage to spouses and domestic partners of eligible federal employees and annuitants. This allows you to secure coverage for your spouse or partner under the same policy.

I don’t usually quote Spanish proverbs (I save my extensive internal dictionary for the intricacies of being an advisor!), but this one has stuck with me because it encapsulates how our actions can often buy us peace. What we do today – staying fit, finding time to enjoy life and spending time relaxing with our loved ones – all contribute to a “restful” tomorrow.

A Long-Term Care Insurance Program puts you in control of how and where you receive care.

Part of the problem of having no long-term care coverage is the worry that you won’t be prepared when life drops a challenge in your lap. There are already well over 800,000 people in assisted living according to The American Health Care Association. Nobody wants to add to that number, but as we saw earlier, the odds are stacked against us.

So, let’s have the conversation.

Is it cheaper to get insurance coverage privately or through the Federal Long Term Care Insurance Program?

Whether it is cheaper to get insurance coverage privately or through the FLTCIP will depend on individual circumstances. The cost can vary depending on several factors, including the insurance provider, the level of coverage, the age and health of the insured, and any optional features or riders chosen. As mentioned before, when I sit down to chat with my clients, we always compare all the private and federal options.

Here are some key considerations for both options:

Private Long-Term Care Insurance:

• Customization: Private insurance policies often offer more flexibility in terms of coverage options, benefit periods, and elimination periods. This can allow individuals to tailor the policy to their specific needs and budget.
• Underwriting: Private insurers typically underwrite policies, meaning they assess an applicant’s health and medical history. This could result in higher premiums or even denial of coverage for individuals with pre-existing health conditions.
• Cost: The cost of private long-term care insurance can vary significantly based on the level of coverage, the age of the insured, and other factors. Some individuals might find more affordable options in the private market, especially if they are relatively young and in good health when purchasing the policy.

The Federal Long Term Care Insurance Program

Simplified Underwriting: One advantage of the FLTCIP is that it typically has more relaxed underwriting standards compared to private insurers. While applicants must meet certain criteria, it may be easier to qualify for coverage compared to private policies, particularly for individuals with pre-existing health conditions.

• Portability: FLTCIP coverage is portable, which means that if a federal employee leaves federal service, they can continue the coverage even if they retire or change jobs.
• Premium Stability: FLTCIP rates are subject to change, but they are generally reviewed less frequently than rates for private policies. This can offer more predictable premiums over the long term.
• Group Coverage: The FLTCIP is a group insurance program, which can often provide more favorable rates compared to individual policies.

To determine which option is most cost-effective for you, you should compare quotes from reputable private insurers and the FLTCIP, considering the coverage levels and features you need. It’s essential to carefully review the terms, conditions, and costs of any policy before making a decision.