How could someone buy an individual LTCi policy from John Hancock and:
- pay less premium than the FLTCIP,
- get better benefits than the FLTCIP, and
- have no rate increases (or a much smaller rate increase than FLTCIP)
The answer: Underwriting.
Although the FLTCIP make look like “a lemon” to some, it’s definitely NOT a lemon for tens of thousands of federal employees and retirees (including my mother-in-law).
The OPM wanted as many federal employees as possible to be able to obtain long term care insurance coverage through the FLTCIP. To achieve that goal the OPM had “open enrollment” periods in 2002, 2009 and just recently in 2016. During the “open enrollment” periods, underwriting was lenient. Many federal employees who couldn’t have qualified for an individual long-term care insurance policy, were able to qualify for the FLTCIP because the underwriting was very forgiving.
The OPM/FLTCIP had to weigh their options. Would they prefer a policy that was priced lower, but had tough underwriting? Or would they prefer to insure as many federal employees as possible at the risk of higher premiums and possibly higher rate increases? They chose the latter.
For many federal employees with severe chronic illnesses, the FLTCIP is the only long-term care insurance they could obtain. For them, the FLTCIP is not a lemon–it’s a lifesaver!