# Presentation: 342120

## BRINGING LONG TERM CARE TO THE FEDERAL FAMILY

**Frank D. Titus**
**Assistant Director For Insurance Programs **

## BACKGROUND

**President’s LTC initiatives announced on January 4, 1999:**
**Tax credit for LTC**
**Medicaid initiatives to encourage expansion of home and community based LTC options**
**National LTC  information campaign**** **
**Private LTC insurance for Federal employees **

## ADMINISTATION GOALS

**OPM role similar to health and life insurance**
**Flexible authority **
**Broad population**
**HIPAA tax-qualified standards as floor**

## LONG TERM CARE SECURITY ACT

**OPM Role Similar to Health and Life Insurance**
**Contracting authority**
**Contract(s) awarded based on qualifications, price, and reasonable competition                                                                                                                                 **

## LONG TERM CARE SECURITY ACT

**Flexible Authority                                                                                                **
**Gives OPM regulatory authority & oversight **
**Allows for one or more carriers**

## LONG TERM CARE SECURITY ACT

**Broad Population                                                                                               - Employees and Annuitants of the:                                                                                                                                                                                                                                • Federal Government                                                                                                                                                                                                                                           • Uniformed Services                                                                                                                                                                                                                                           • Postal Service**
**Qualified relatives**

## LONG TERM CARE SECURITY ACT

**HIPAA Tax-Qualified Standards                                                                                 - Benefits are not taxable                                                                                               - Choice of Service                                                                                                      - Consumer protections                                                                                                                                                                                                                                            • ****Portability of insurance coverage                                                                                                                                                                                                                             ****•**** Nonforfeiture provisions                                                                                                                                                                                                                                     ****•**** Guaranteed renewability                             **

## LONG TERM CARE SECURITY ACT

**HIPAA Tax-Qualified Standards (cont.) **
**Benefit Triggers - ADL’s & cognitive impairment**
**ADL’s (Activities of Daily Living) include:**
**Eating, toileting, transferring, bathing, dressing, continence **

## LONG TERM CARE SECURITY ACT

**Other Provisions**
**Minimal underwriting standards for employees at first opportunity to enroll                                                                                                                   **
**Spousal equity                                                                                                          **
**Premium withholding**

## OPM will consult with:                         
Employee representatives              
Retiree representative 
Congressional staff 
Industry experts 
Other interested parties and stakeholders

**Employee representatives              **
**Retiree representative **
**Congressional staff **
**Industry experts **
**Other interested parties and stakeholders**

- PRODUCT DESIGN

## PRODUCT DESIGN

**Design objectives:                                 **
**Premiums significantly below the private market **
**Flexible, adaptable product**
**Simple, understandable product**

## PRODUCT DESIGN

**Prototype benefits                                **
**Pool of money approach with variable pools available **
**Variable pay-out rates tied to level of care **
**Many eligible levels or care                      **
**Level premium**

## PRODUCT DESIGN

_**Daily care rate**_
_**X 365 days **_
**X Term of Coverage**

- POOL OF MONEY

##        MAXIMUM DAILY BENEFIT = $100

- PRODUCT DESIGN

- _Nursing Home Care - 100%_

- $100 / day X 365 days X 4 years = $146,000

- Pool of Money Examples

## PRODUCT DESIGN

**Hypothetical Benefits Structure                 - Nursing Home Care - 100%                   - Assisted Living Care - 75%                - Adult Day Care - 50%                             - Home Health Care - 50%                       - Respite Care - 50%                             - Robotic Care - ???**

## PRODUCT DESIGN

**Options                                                    - Daily rates                                           - Term of coverage                               - Inflation protection                                 - Elimination period                                   - Kind of nonforfeiture **
**A Collaborative process**

## PREMIUM CONVERSION

## WHAT IS PREMIUM CONVERSION?

**Section 125, Internal Revenue Code**
**Pre-tax deductions of health insurance premiums**
**Reduction of employee’s taxable income through pre-tax deduction of health insurance premiums**
**Saves on Federal income tax, Social Security, and Medicare tax (and most state and some local taxes)**

## TIMELINE	

**February 7, 2000**
**Included in President Clinton’s budget**
**OPM begins planning**
**July 2000, Interim regulations published**
**October 1, 2000**
**All agency implementation date**

## GOALS	

**Implementation has two objectives:**
**Equal treatment for Federal employees**
**Improving the Government’s ability to recruit and retain staff**

## WHO IS ELIGIBLE?

**Federal employees**
**Executive Branch and others eligible for FEHB**
**Approximately 1.6 million employees will have this advantage!**

## WHO IS NOT ELIGIBLE?

**Retirees**
**Survivors**
**Former Spouses**

## HOW MUCH WILL EMPLOYEES SAVE?

**	****	****Highest combined tax rates**
**X****	****	****Total number of FEHB premiums**
**=****	****	****$ Saved**
***-Example:  If your combined rate for Federal and local income taxes, Social Security and Medicare tax is 35% and the cost of your annual health insurance premiums total $1,400, your annual reduction in taxes would be $490 (1,400 X 3.5 = 490)***

## COMMONLY ASKED...

**Does not affect Government contribution**
**No initial open season**
**Enrollment is automatic unless waived**
**Permanent benefit with annual option to waive/reenroll**
**Does not affect grade or step level**
**Cannot use for non-FEHB health plans**
**Does not affect retirement high 3 computation**
**Flexible Spending Accounts (FSA) may be implemented at later date**

## Flexible Spending Accounts		

**Pre-tax, section 125 cafeteria plans**
**Employee chooses amount to set aside each calendar year, within limits**
**Medical-vision-dental or dependent care expenses not reimbursed by insurance**

## Flexible Spending Accounts	

**Amounts held in account by employer**
**Employee makes claims against account based on expenses**
**Amount remaining at end of year is retained by employer**
**Third Party Administrator**