Personnel Management Office Proposed Rule: Enhancing Stability, Flexibility for Federal Long Term Care Insurance Program

WASHINGTON, June 3 -- The U.S Office of Personnel Management has issued a proposed rule (5 CFR Part 875), published in the Federal Register on June 3, 2022, entitled " Enhancing Stability and Flexibility for the Federal Long Term Care Insurance Program (FLTCIP)-Abbreviated Underwriting, Applications for FLTCIP Coverage, and Technical Corrections".

The proposed rule was issued by Stephen Hickman, Federal Register Liaison.

DATES: OPM must receive comments on or before July 5, 2022.

FOR FURTHER INFORMATION CONTACT: Julia Elam, Supervisory Analyst, [email protected], (202) 606-1560.

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The Office of Personnel Management (OPM) is proposing amendments to support FLTCIP program stability and flexibility by amending when abbreviated underwriting will be offered to prospective enrollees and proposing rules for the suspension of applications for coverage and the requirements around any such suspension periods.

OPM is also proposing technical corrections for the sake of clarity and to remove redundancies. Finally, with the publication of this rule, OPM is also providing notice of an anticipated suspension period.

SUPPLEMENTARY INFORMATION:

Background

The Federal Long Term Care Insurance Program (FLTCIP) was created as a result of the enactment of the Long Term Care Security Act of 2000, Public Law 106-265 ("the FLTCIP statute"). This Act required OPM to make long term care (LTC) benefits available to Federal employees, annuitants, active and retired members of the uniformed services, and the qualified relatives of these individuals. As of September 2021, FLTCIP has approximately 267,000 enrollees.

FLTCIP is administered by OPM in accordance with 5 U.S.C. chapter 90 and implementing regulations (5 CFR part 875). FLTCIP is an enrollee-pay-all program; there is no Government contribution toward premiums. Pursuant to 5 U.S.C. 9008, OPM has authority to administer the FLTCIP and is proposing changes, including to the use of abbreviated underwriting and suspension of applications for coverage, as a part of our administrative functions. More information on the program can be found at LTCFEDS.com .

Discussion of the Changes

Changes to the Use of Abbreviated Underwriting

Underwriting is the process of reviewing medical and health-related information furnished in an insurance application process to determine if an applicant presents what an insurance carrier considers an acceptable level of risk. Under current regulations at 5 CFR 875.101 full underwriting is the more comprehensive type of underwriting under FLTCIP which requires an applicant to answer many questions about their health status to enable the Carrier to determine whether the application will be approved. It may also include a review of the applicant's medical records, a phone interview, or an in-home interview. Under the regulations, abbreviated underwriting in FLTCIP asks fewer questions about an applicant's health status than with full underwriting to enable the Carrier to determine whether the application for coverage will be approved. It may also include a review of the applicant's medical records, a phone interview, or an in-home interview.

While eligible individuals may apply for FLTCIP coverage at any time with full underwriting, current rules also provide a 60-day abbreviated underwriting period to newly eligible active workforce members and their spouses. An individual becomes newly eligible as an active workforce member when they enter a position that conveys eligibility, enter a position that conveys eligibility from a position that did not convey eligibility, or return to active service after a break in service of at least 180 days to a position that conveys eligibility. However, experience has shown that the 60-day abbreviated underwriting period for newly eligible active workforce members and spouses is not well-suited to FLTCIP. FLTCIP enrollment is much more common later in one's career than when someone is newly hired. According to a Treasury Report of the Federal Interagency Task Force on Long-Term Care Insurance, people typically purchase long term care insurance (LTCI) in their 50s or 60s, and then hold the insurance while paying premiums for a lengthy period./1 Since the inception of FLTCIP, only approximately 8% of FLTCIP applicants have applied during the 60-day abbreviated underwriting period. The remaining 92% of FLTCIP applicants have applied during an open season or with full underwriting.

The proposed changes would eliminate the 60-day abbreviated underwriting period, but not remove abbreviated underwriting entirely from the FLTCIP application process. Instead, OPM would continue to announce in the Federal Register any period during which active workforce members and spouses may apply with abbreviated underwriting, as OPM has done with open seasons in the past. To use more accurate terminology that reflects the underwritten nature of the benefit, and to reduce confusion between a FLTCIP abbreviated underwriting opportunity and the annual Federal Benefits Open Season, OPM is proposing to change the name of any such period to a "special application period" rather than an "open season." Each future special application period may offer its own underwriting rules. Individual agencies will provide notice to their Federal employees of any special application period.

Suspension of Applications for FLTCIP Coverage

Current rules permit eligible individuals to apply for FLTCIP coverage at any time with full underwriting. As a result, the FLTCIP is continuously open to new enrollment. However, it may be appropriate from time to time for OPM to suspend applications for FLTCIP coverage. For example, it may be appropriate to suspend applications to allow a period of time for revisions to underwriting processes or for premium repricing after a review of actuarial assumptions, in order to ensure that premium rates reasonably and equitably reflect the cost of the benefits provided as required by the statute, and to ensure that OPM can provide eligible individuals with the information needed to enable them to fully evaluate the advantages and disadvantages of obtaining LTCI under FLTCIP. The proposed changes create a process for suspending applications and communicating the start and end of such a suspension period.

Technical Corrections

The current rules have some language that may be considered duplicative or would benefit from greater clarity. The proposed changes make such technical corrections, which do not make any substantive changes to the FLTCIP rules.

Proposed Changes by Section

OPM proposes to make technical corrections to several sections. In 5 CFR 875.101, OPM makes such corrections to the definitions of "Carrier" and "Eligible individual." Additional technical corrections are proposed to 5 CFR 875.102, 875.203, 875.204, 875.213, and 875.404.

In 5 CFR 875.101, OPM proposes to amend the definition of "Free look" to clarify that the 30-day period is only "after you are approved for coverage and receive the Benefit Booklet," and not just any time after receiving the Benefit Booklet. The free look applies to any approved coverage, including coverage increases. OPM proposes to add a definition of "special application period" to identify periods of applications for coverage with abbreviated underwriting for active workforce members and spouses. The term "open season" was not used here because such periods require some form of underwriting for enrollment and are held as determined by OPM and not on an annual basis. Conforming amendments are proposed throughout 5 CFR part 875 to use the term "special application period" instead of "open season."

In 5 CFR 875.107, OPM proposes to add holding special application periods and suspending applications for FLTCIP coverage in its list of responsibilities. OPM proposes the process for such a suspension period in a new section at 5 CFR 875.110. Under this process, OPM may suspend applications for FLTCIP coverage, including coverage increases, for up to 24 months when it determines a suspension to be in the best interests of the Program. A duration of up to 24 months may be necessary to allow for revisions to underwriting processes or for the development and review of pricing assumptions and rates in order to ensure the premium rates reasonably and equitably reflect the cost of the benefits provided, and to ensure that OPM can provide eligible individuals with the information needed to enable them to fully evaluate the advantages and disadvantages of obtaining LTCI under FLTCIP. OPM will issue a Federal Register notice announcing the beginning and end date of the suspension period, at least 30 days before the start of the suspension period. The suspension period may be extended with another notice in the Federal Register at least 30 days before the end of the current suspension period. Additional conforming amendments are proposed throughout 5 CFR part 875 to note that applications for FLTCIP coverage are only permitted outside of a suspension period.

OPM proposes to delete the language at 5 CFR 875.206. This section provided for the 60-day abbreviated underwriting period for new, newly eligible, or returning active workforce members and their spouses. This proposed rule eliminates this 60-day abbreviated underwriting period, thereby limiting abbreviated underwriting to special application periods, for which a definition and conforming amendments are proposed throughout 5 CFR part 875.

In 5 CFR 875.207, OPM previously addressed nonpay status during an open season. OPM proposes to amend this section to use the term "special application period" instead of "open season." To limit program risk, OPM also proposes to allow only those individuals that return to pay status within 180 days after the end of a special application period to apply using the special application period's rules. Anyone who returns to pay status after missing at least half of the special application period and is eligible to apply using the rules of the special application period will have at least 60 days to do so.

In 5 CFR 875.209, OPM proposes to amend paragraph (a) to require a qualified relative to provide identifying information about the workforce member that makes the qualified relative an eligible individual. This amendment clarifies the regulation and makes it consistent with the application required for the FLTCIP.

In 5 CFR 875.210, OPM proposes to amend paragraph (b)(1) to clarify that the qualified relative of a workforce member that has been involuntarily separated remains eligible for coverage if their application has already been submitted even if coverage has not become effective. This situation only applies where the involuntary separation is not for misconduct in the Federal civilian service or a dishonorable discharge from the uniformed services.

In 5 CFR 875.211, an individual that applies as an active workforce member, but whose eligibility status changes to annuitant, retired member of the uniformed services, or qualified relative, must reapply based on the applicable underwriting requirements. Under the proposed changes for abbreviated underwriting, the underwriting rules would be the same for all applications outside of special application periods. As such, OPM proposes to only require notification to the Carrier about a change in eligibility status after submitting an application for coverage as an active workforce member. No reapplication is necessary if the application was originally submitted with full underwriting.

In 5 CFR 875.213, OPM proposes to delete paragraph (b). That paragraph contains a definition of "domestic partner." The applicable definition of "domestic partner" is contained in 5 CFR 875.101 and applies to all of 5 CFR part 875.

In 5 CFR 875.401, OPM proposes to remove paragraph (b). The language is now contained in 5 CFR 875.403.

In 5 CFR 875.402, OPM confirms that there are no regularly scheduled open seasons. OPM proposes to amend this section to state that there may be special application periods as appropriate, that those special application periods will be announced in the Federal Register , and the special application periods would offer abbreviated underwriting to active workforce members and their spouses. OPM proposes to delete paragraph (c) since abbreviated underwriting would not be tied to new eligibility under the proposed changes to 5 CFR 875.206.

In 5 CFR 875.403, OPM addresses the timing for applications for FLTCIP coverage. OPM proposes to amend this section to confirm that applications for coverage, including coverage increases, are permitted outside of a suspension period. Applications outside of a special application period would be subject to full underwriting. The language from the removed paragraph (b) of 5 CFR 875.401 is now contained in this section.

In 5 CFR 875.405, OPM proposes to remove all specific provisions based on the nature of the relationship. With the proposed changes to abbreviated underwriting, this language is unnecessary. All applications for FLTCIP coverage outside of a special application period would be subject to full underwriting.

In 5 CFR 875.406, OPM proposes to amend paragraph (a)(1) to make it clear that, outside of a suspension period as described in 5 CFR 875.110, applications for coverage increases are permitted with full underwriting.

In 5 CFR 875.410, OPM proposes to amend the language by deleting the second sentence referencing abbreviated underwriting during any future open season. OPM is proposing to use the term "special application period" and addresses abbreviated underwriting rules for such a period in the proposed changes to 5 CFR 875.402.

In 5 CFR 875.413, OPM proposes to clarify that the potential reinstatement window will begin with the date of the written notice of termination and not from the termination date itself. The written notice comes after the actual termination date, so this allows more time and does not adversely impact the individual if the Carrier is delayed in sending the written notice. The provisions reinstating coverage to the termination date remain unchanged.

Office of Personnel Management.

Stephen Hickman,

Federal Register Liaison.

[FR Doc. 2022-11720 Filed 6-2-22; 8:45 am]

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The document was published in the Federal Register: https://www.federalregister.gov/documents/2022/06/03/2022-11720/enhancing-stability-and-flexibility-for-the-federal-long-term-care-insurance-program

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