United States Government Accountability Office

GAO Report to Congressional Committees

LONG-TERM CARE 

INSURANCE 

Federal Program 

Compared Favorably 

with Other Products, 

and Analysis of Claims 

Trend Could Inform 

Future Decisions 

March 2006 

 

GAO-06-401 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

March 2006

LONG-TERM CARE INSURANCE

Federal Program Compared Favorably 

with Other Products, and Analysis of 

Claims Trend Could Inform Future 

Decisions 

Highlights of GAO-06-401, a report to 

congressional committees 

The Long-Term Care Security Act 

required the federal government to

offer long-term care insurance to 

its employees, their families, and 

others. The act also required GAO 

to conduct a study of the 

competitiveness of the Federal

Long Term Care Insurance 

Program, which began in 2002,

compared with individual and 

group products generally available 

in the private market. GAO

compared the federal program’s 

benefits, premiums, enrollment 

rates, and enrollee characteristics 

with other products over a 3-year 

period. GAO also compared the

federal program’s early claims 

experience with initial

expectations. 

What GAO Recommends

GAO recommends that the Director 

of the Office of Personnel 

Management (OPM) (1) analyze the 

reasons for lower-than-expected 

early claims experience and, as 

appropriate, use the results to

modify assumptions about the 

expected claims experience and 

(2) analyze the projections for the 

amount of premiums to be

collected to pay for claims. OPM 

should report both analyses to

Congress prior to the next contract 

negotiations for the administration

of the federal program. 

In commenting on a draft of this 

report, OPM generally agreed with 

the report’s findings and said it 

would provide updated information

on claims experience and premium

setting to Congress. 

During its first 3 years, the Federal Long Term Care Insurance Program 

offered benefits similar to those of other long-term care insurance products 

GAO reviewed. Most enrollees in the federal program and in individual and 

group products chose similar benefit amounts, elimination or waiting 

periods, and benefit periods. The federal program usually offered lower 

premiums than individual products for comparable benefits. Overall, annual 

premiums for the federal program averaged across three benefit plan designs 

were 46 percent lower for single people and 19 percent lower for married 

couples who were both the same age in comparison with similar individual 

products sold on March 31, 2005. 

The participation rate in the Federal Long Term Care Insurance Program for 

active federal civilian employees—5 percent—was comparable to the 

industry average in the group market, although enrollment in the federal 

program was lower than initially expected. The average age of all enrollees

in the federal program was younger than the average age of enrollees in 

individual products and older than the average age of enrollees in group 

products. 

The Federal Long Term Care Insurance Program paid 39 percent of what it 

initially projected to pay for claims per enrollee. The number of claims paid 

per enrollee was also lower than initial projections. While the early claims

experience was below expectations, it is still too early to determine whether 

this trend will continue or whether adjustments to the projected claims

experience or premiums are indicated, because most claims are not 

expected to be submitted for many years. 

Federal Long Term Care Insurance Program Actual Claim Payments in the First 3 Years 

Compared with Expected Claim Payments over 35 Years 

www.gao.gov/cgi-bin/getrpt?GAO-06-401.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact John Dicken at 

(202) 512-7119 or dickenj@gao.gov. 
Contents 

Letter 1

Results in Brief 4

Background 6

Federal Long Term Care Insurance Program Offered Benefits 

Comparable to Other Products, Usually at Lower Premiums 13 

Federal Program Participation Was Comparable to Other Group 

Products, while Federal Enrollees Were Younger Than Enrollees 

in Individual Products and Older Than Enrollees in Group 

Products 23

Early Claims Experience in Federal Long Term Care Insurance 

Program Was Lower Than Expected, but It Is Too Soon to 

Determine Whether Adjustments Are Needed 28 

Conclusions 32

Recommendations for Executive Action 32 

Agency Comments 33 

Appendix I Scope and Methodology 36 

Data Request 36 

Long-term Care Insurance Interviews 39 

Appendix II Federal Long Term Care Insurance Program Benefits 41 

Prepackaged Benefit Plans in the Federal Long Term Care 

Insurance Program 41 

Customized Benefits in the Federal Program 43 

Other Benefits in the Federal Program 44 

Enrollment in Federal Program Benefits 44 

Appendix III Annual Premiums for Three Benefit Packages 

Offered in the Federal Program and at Five Carriers 46 

Appendix IV Comments from the Office of Personnel Management 50 

Appendix V GAO Contact and Staff Acknowledgments 52 

Page i GAO-06-401 Federal Long Term Care Insurance Program 
Tables 

Table 1: Benefit Options in the Federal Long Term Care Insurance 

Program and in Individual and Group Products Sold from 

July 1, 2002, through March 31, 2005 15 

Table 2: Benefit Options Chosen by Federal Long Term Care 

Insurance Program Enrollees and by Individual and Group 

Product Enrollees for New Policies Sold from July 1, 2002, 

through March 31, 2005 16 

Table 3: Estimated Eligible Population and Actual Enrollees in the 

Federal Long Term Care Insurance Program, by Category 26 

Table 4: Enrollee Characteristics of the Federal Long Term Care 

Insurance Program and of Individual and Group Products, 

July 1, 2002, through March 31, 2005 28 

Table 5: Actual Claims per Enrollee as a Percentage of Expected 

Claims per Enrollee in the First 3 Years for the Federal 

Long Term Care Insurance Program 29 

Table 6: Prepackaged Plans in the Federal Long Term Care 

Insurance Program 42 

Table 7: Benefit Options in the Federal Long Term Care Insurance 

Program 44

Table 8: Federal Long Term Care Insurance Program Enrollment in 

Prepackaged Benefit Plans, Customized Benefits, and 

Alternative Insurance Plan from March 25, 2002, through 

March 31, 2005 45 

Table 9: Federal Long Term Care Insurance Program Enrollment in 

Prepackaged Benefit Plans from March 25, 2002, through 

March 31, 2005 45 

Table 10: Annual Premiums for Single People and Married Couples 

Who Were Both the Same Age for the Federal Long Term 

Care Insurance Program and for Five Carriers in the 

Individual Insurance Market for Package 1 Sold on 

March 31, 2005 47 

Table 11: Annual Premiums for Single People and Married Couples 

Who Were Both the Same Age for the Federal Long Term 

Care Insurance Program and for Five Carriers in the 

Individual Insurance Market for Package 2 Sold on 

March 31, 2005 48 

Table 12: Annual Premiums for Single People and Married Couples 

Who Were Both the Same Age for the Federal Long Term 

Care Insurance Program and for Five Carriers in the 

Individual Insurance Market for Package 3 Sold on 

March 31, 2005 49 

Page ii GAO-06-401 Federal Long Term Care Insurance Program 
Figures 

Figure 1: Average Annual Federal Premiums for Single People and 

for Married Couples Who Were Both the Same Age 

Compared with Averages for Individual Products, for 

Three Benefit Packages and Overall, Sold on 

March 31, 2005 19 

Figure 2: Annual Premiums by Age for Single People and Married 

Couples Who Were Both the Same Age for the Federal 

Long Term Care Insurance Program and for Five Carriers 

Selling Individual Products for the Most Popular Federal 

Comprehensive Benefit Package Sold on March 31, 2005 21 

Figure 3: Actual Claim Payments per 10,000 Enrollees in the First 3 

Years Compared with Expected Claim Payments per 

10,000 Enrollees over 35 Years for the Federal Long Term 

Care Insurance Program 30 

Figure 4: Actual Number of Paid Claims per 10,000 Enrollees in the 

First 3 Years Compared with Expected Number of Paid 

Claims per 10,000 Enrollees over 35 Years for the Federal 

Long Term Care Insurance Program 31 

Abbreviations 

ADL activity of daily living 

CalPERS California Public Employees’ Retirement System 

HIPAA Health Insurance Portability and Accountability Act 

NAIC National Association of Insurance Commissioners 

OPM Office of Personnel Management 

Partners Long Term Care Partners, LLC 

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Page iii GAO-06-401 Federal Long Term Care Insurance Program 
United States Government Accountability Office

Washington, DC 20548 

March 31, 2006 

Congressional Committees 

In 2004, about $193 billion was spent nationwide on nursing home and 

other long-term care services. Private insurance covered 7 percent of this 

amount, about $14 billion, while most long-term care services were 

financed by government programs, primarily Medicaid. The elderly—

people 65 years old and older—consume about two-thirds of all long-term 

care services. As the elderly population begins to grow with the aging of 

the baby boomers, the increasing demand for long-term care services will 

continue to strain federal and state resources. Some policymakers propose 

that increased use of long-term care insurance, particularly by the baby 

boom generation, may be a means of reducing some of the future financial

burden on public programs. In September 2000, Congress passed the LongTerm Care Security Act. The act required that the federal government offer 

long-term care insurance to its employees, their families, and others.1

Congressional committee reports accompanying this act indicated that a 

long-term care insurance program could encourage more people to obtain

long-term care insurance, serve as a model for other employer-sponsored 

programs across the nation,2

 and possibly shift some of the future burden 

to private payment sources.3

In December 2001, at the conclusion of a competitive bidding process, the

Office of Personnel Management (OPM)—the federal agency responsible 

for administering governmentwide compensation and benefit systems—

contracted with Long Term Care Partners, LLC (referred to as Partners) 

for 7 years to provide long-term care insurance for active federal civilian 

employees, members of the uniformed services, and Postal Service 

employees; federal, military, and Postal Service retirees; qualified 

relatives; and certain others. Partners is a joint venture formed by two 

large carriers selling long-term care insurance products in the private 

market, John Hancock Life Insurance Company and Metropolitan Life 

Insurance Company. The Federal Long Term Care Insurance Program 

 1

Pub. L. No. 106-265, 114 Stat. 762, 764 (2000). 

2

Senate Committee on Governmental Affairs, S. Rep. No. 106-344, at 18 (2000). 

3

House Committee on Government Reform, H.R. Rep. No. 106-610, at 8 (2000). 

Page 1 GAO-06-401 Federal Long Term Care Insurance Program 
conducted limited early enrollment from March 25, 2002, through May 15, 

2002, and open enrollment from July 1, 2002, through December 31, 2002. 

From March 25, 2002, through March 31, 2005, 218,890 employees, retirees,

relatives, and others were enrolled in the federal program, making it the 

largest long-term care insurance program in the nation. 

The Long-Term Care Security Act also required that we conduct a study of 

the competitiveness of the federal program with individual and group 

products generally available in the private insurance market.4

 As agreed to

by the committees of jurisdiction, this report addresses the following 

questions: 

• How do benefits and premiums for the Federal Long Term Care Insurance 

Program compare with those of other products available in the long-term 

care insurance market? 

• How do enrollment rates and the characteristics of enrollees in the 

Federal Long Term Care Insurance Program compare with those of other 

products available in the long-term care insurance market? 

• How does the early claims experience of the Federal Long Term Care 

Insurance Program compare with initial expectations? 

To obtain data on benefits, premiums, enrollment, and enrollee 

characteristics, we surveyed Partners, the California Public Employees’ 

Retirement System (CalPERS),5

 and five of the largest long-term care 

insurance carriers.6

 The five insurance carriers were AEGON USA,7

Bankers Life and Casualty Company, Genworth Financial, John Hancock 

Life Insurance Company, and Metropolitan Life Insurance Company. All 

five carriers sold products in the individual market, and two of the five 

carriers—John Hancock Life Insurance Company and Metropolitan Life 

Insurance Company—were also among the five largest carriers that sold 

 4

Pub. L. No. 106-265, § 9006, 114 Stat. 768. The act also requires us to conduct a second, 

subsequent study of the Federal Long Term Care Insurance Program. 

5

CalPERS manages pension, health, and other benefits for more than 1.4 million California 

public employees, retirees, and their families and for more than 2,500 public employers. 

CalPERS began offering a long-term care insurance program in 1995. After the federal 

program, CalPERS is the next largest group offering long-term care insurance. In contrast 

to the federal program and most group products, the CalPERS group product is self-funded 

rather than purchased from an insurer. 

6

We selected the five carriers on the basis of the total number of policies and annualized 

premiums in effect in the individual market as of December 31, 2004. 

7

AEGON USA left the long-term care insurance market on March 31, 2005. 

Page 2 GAO-06-401 Federal Long Term Care Insurance Program 
products in the group market. We requested data from Partners on new 

policies sold during two time periods: (1) from March 25, 2002, through 

February 7, 2003, to correspond to the federal early enrollment and open 

enrollment periods8

 and (2) from March 25, 2002, though March 31, 2005, 

to capture the full experience of the program’s first 3 years. We asked 

CalPERS and the five carriers to provide data for policies sold from July 1, 

2002, through March 31, 2005.

9

 We then compared the benefits offered, 

enrollment, and enrollee characteristics of the federal program, CalPERS, 

and the five carriers. To compare premiums, we asked CalPERS and the 

carriers to price the benefit packages offered in the federal program. In 

addition, we obtained data from Partners on the expected and early claims 

experience of the federal program to provide an early indicator of financial 

performance. Because of the proprietary nature of the data provided by 

the five carriers, we aggregated data across the individual and group 

carriers for reporting purposes. While we aggregated the CalPERS data 

with the private market group data in all cases, we also separately 

reported publicly available CalPERS data in two places because its 

experience in managing benefits for large numbers of public employees, 

retirees, and their families is most comparable to the federal program. 

To supplement the data we collected, we interviewed officials at OPM, 

Partners, CalPERS and the organization that administers its program, the 

five carriers, and five trade associations representing groups such as 

insurers and actuaries. We also interviewed three experts on long-term 

care insurance. In addition, we reviewed several studies, including recent 

studies addressing (1) the long-term care insurance market, (2) buyers of a 

long-term care insurance product and those who considered buying 

coverage but decided not to buy, and (3) claims experience. We assessed 

the reliability of the data we obtained from Partners, CalPERS, and the 

five carriers and determined that the data were sufficiently reliable for the 

purposes of our study. (App. I provides more-detailed information on our 

methodology.) We performed our work from March 2005 through 

 8

The open enrollment period closed on December 31, 2002, but applications submitted and 

received by February 7, 2003, were processed as part of the open enrollment period. 

9

We asked the carriers to provide data for the period beginning July 1, 2002, which is the

beginning of a financial quarter and the beginning of the federal open enrollment period, 

rather than March 25, 2002, the beginning of the federal early enrollment period. Because 

few federal program enrollees—about 4 percent of the program’s total enrollment as of 

March 31, 2005—had coverage that became effective during the early enrollment period, 

we reduced the reporting burden for the carriers by requesting data for the period

beginning July 1, 2002. 

Page 3 GAO-06-401 Federal Long Term Care Insurance Program 
March 2006 in accordance with generally accepted government auditing 

standards. 

Benefits offered during the first 3 years of the Federal Long Term Care 

Insurance Program and premiums associated with these benefits generally

compared favorably with those offered by other long-term care insurance 

products sold during the same period. Compared to individual and group 

products, the federal program offered similar benefits—long-term care 

services provided in facilities and in the home with coverage for specified

dollar amounts and periods to begin after a predetermined waiting period. 

However, the federal program offered fewer options within these benefits, 

especially compared with individual products. Most federal program 

enrollees and enrollees in individual and group products chose benefits in

similar ranges. Annual premiums in the federal program averaged across 

the three most commonly purchased federal benefit packages were 

46 percent lower for single people and 19 percent lower for married 

couples who were both the same age than the premiums for similar 

individual products. Although the premium estimates reported for 

individual products included discounts for married couples, they did not

include discounts for enrollees who were considered to be in good health. 

Annual premiums for each of the three different federal benefit packages 

were always lower for single enrollees compared with premiums for the 

individual products we reviewed, while premiums were lower in the 

federal program for married couples who were both the same age in most, 

but not all, cases. In contrast, annual federal premiums averaged across 

the three benefit packages were 3 percent higher than those at CalPERS, 

the one group product for which we had premium data. 

Five percent of eligible active federal civilian employees enrolled in the 

federal program, which is similar to the enrollment rates of other groups. 

Yet overall enrollment was 36 percent lower than the initial expectations 

established by Partners, in part because active military members and 

Postal Service employees enrolled in low numbers. During the 3-year 

period covered by our study, the average age of enrollees in the federal

program at the time of enrollment was 56 years old, which is younger than

the average age of 60 for individual products we reviewed and older than 

the average age of 52 for group products we reviewed. As was true for the 

individual and group products, more women than men purchased 

coverage in the federal program during the 3-year period. 

The early claims experience of the Federal Long Term Care Insurance 

Program was below the expectations established by Partners. The federal 

Results in Brief 

Page 4 GAO-06-401 Federal Long Term Care Insurance Program 
program paid 39 percent of what it expected to pay for claims per enrollee 

during the first 3 years of the program. The number of paid claims per 

enrollee was also below expected levels. While there was a discrepancy 

between the actual and expected claims experience during these early 

years, it is not known whether the discrepancy indicates the future trend 

or is a brief departure from the expected claims experience over the long

term. In general, the expected claims experience in the first years of a 

long-term care insurance program is very low relative to the longer term 

because the majority of claims are unlikely to be submitted for many 

years. Furthermore, the claims experience is only one of many factors 

affecting premiums. While about half of the total claims payment amount 

was spent on facility care during the first 3 years, this type of care 

represented less than a quarter of the total number of claims. The most 

common medical conditions prompting claims in the early years of a 

policy for the federal program were cancer, stroke, and injuries and 

poisoning. Across the individual and group products we reviewed, the 

most common medical conditions prompting claims were also cancer, 

stroke, and injuries, as well as cognitive problems, musculoskeletal 

disorders, cardiac disease, and arthritis. 

We recommend that the Director of OPM take the following two actions. 

First, the Director should analyze the reasons for the lower-than-expected 

early claims experience and, as appropriate, use the results of this analysis

to modify assumptions about the expected claims experience. Second, the 

Director should analyze the projections for the amount of premiums to be

collected to pay for claims, including an analysis of the assumptions made 

for the projections that are related to future claims experience and other 

factors affecting premiums. OPM should report both analyses to Congress 

prior to the next contract negotiations. 

In its written comments on a draft of this report, OPM generally agreed 

with the report’s findings. In response to our recommendations, OPM 

indicated that it intends to provide updated information on claims 

experience and premium setting in its written recommendation to 

Congress before entering into a new contract for administration of the 

Federal Long Term Care Insurance Program, in accordance with the LongTerm Care Security Act. OPM stated that it believes an additional report 

on the issues of claims experience and projections for the amount of 

premiums to be collected is not needed. OPM also indicated in its 

comments that the expectations about enrollment and claims experience

were established by Partners prior to the start of the federal program, 

rather than established by the marketplace, and we revised the report 

accordingly.

Page 5 GAO-06-401 Federal Long Term Care Insurance Program 
Long-term care services assist people who need help in performing 

activities of daily living (ADLs), such as eating, bathing, and dressing.10 As 

some of these services can be expensive, especially services provided in a 

nursing home, long-term care insurance helps people pay for the cost of 

care. However, relatively few people have obtained long-term care 

insurance through products sold in the individual and group markets. To 

help federal employees, retirees, and others obtain coverage, the federal 

government began offering the opportunity to apply for long-term care 

insurance in 2002 through an employer-sponsored group program in which 

enrollees pay the entire cost of their premium. 

Long-term care refers to a range of support services provided to people 

who, because of illness or disability, generally are unable to perform ADLs 

for an extended period. Long-term care services include medical, social, 

and personal services. Care may be provided in various settings, including

facilities such as nursing homes or assisted living facilities, a person’s own 

home, or the community. Both paid and unpaid caregivers may provide 

long-term care services. As a person ages, his or her ability to perform 

basic physical functions typically declines, increasing the likelihood that 

he or she will need long-term care services. 

People can purchase long-term care insurance directly from carriers that 

sell products in the individual market or can enroll in products offered by 

employer-sponsored and other groups.11 Long-term care insurance policies 

sold in the individual and group markets cover costs associated with longterm care. For a specified premium amount that is designed—but not 

guaranteed—to remain level over time, the carrier agrees to provide 

covered benefits under an insurance contract. First sold in the 1970s, longterm care insurance has evolved from initially offering coverage for 

nursing home care only to offering comprehensive coverage.

Comprehensive coverage pays for care provided in facilities such as 

nursing homes and other settings such as a person’s home. Insurance is 

Background 

Long-term Care 

Long-term Care Insurance 

 10People may need help in performing ADLs such as eating, bathing, dressing, using the 

toilet, getting in and out of bed, and getting around the house. Also, people may need help

in performing instrumental ADLs such as preparing meals, shopping for groceries, and 

getting around outside. 

11Throughout this report we use the term “enrollees” to refer to people who enroll in the 

Federal Long Term Care Insurance Program, who purchase individual products, or who 

enroll in group products. 

Page 6 GAO-06-401 Federal Long Term Care Insurance Program 
generally purchased for defined daily benefit amounts and benefit periods, 

with elimination, or waiting, periods. For example, long-term care 

insurance might provide coverage at $100 per day for care provided in a 

nursing home or in other settings for 3 years after a waiting period of 

90 days. Because long-term care insurance claims might not be filed for 

many years after the product is purchased, the insured can purchase 

protection against inflation, which can increase the daily benefit amount 

covered. In addition, long-term care insurance products can (1) cover 

home care at varying percentages of the daily benefit amount; (2) offer 

people a range of other types of options, such as policies that return a 

portion of the premium payments if the person dies; and (3) include 

selected benefits, such as international coverage or care-coordination 

services that, among other things, provide information about long-term 

care services to the enrollee and monitor the receipt of services. 

Many factors affect long-term care insurance premiums. Carriers charge 

higher premiums for richer benefits; for example, higher daily benefit 

amounts, longer benefit periods, and higher levels of inflation protection 

will increase the cost. Premiums are based on the age of the applicant, 

with premiums increasing more rapidly as age increases. Premiums are 

also based on the health status of the applicant. Most carriers selling 

coverage in the individual market assign applicants to one of three general 

rating categories based on health status when underwriting the coverage—

preferred, standard, or substandard—with associated discounts and 

surcharges.12 In addition, carriers in the individual market usually offer 

discounts to married couples when both spouses purchase coverage. 

Products sold in the group market may be sold on a guaranteed issue basis 

during an open enrollment period, with no or limited underwriting for 

employees actively at work who enroll through an employer-sponsored 

program, and the products generally do not provide discounts for spouses. 

Carriers cannot increase a particular person’s premiums but can increase 

premiums for a group of people who bought the same type of policy when 

the carrier can demonstrate that anticipated costs will exceed premium 

revenue. Carrier pricing assumptions, including projected interest rates, 

morbidity or illness rates, and lapse rates—the number of people expected 

to drop their policies over time—all affect premium rates and rate setting. 

 12Underwriting is the process of reviewing medical and health-related questions furnished

in an application to determine if the applicant presents an acceptable level of risk and is 

insurable. Some insurers require medical record reviews and interviews with nurses as

well.

Page 7 GAO-06-401 Federal Long Term Care Insurance Program 
Carriers estimate the total amount of premiums to be collected for longterm care insurance policies sold as well as projected claims and 

administrative costs for these policies using an anticipated lifetime loss 

ratio. This ratio describes what portion of total premiums is expected to

be paid for claims for the reimbursement of the costs of long-term care 

over the life of a set of policies.13 The portion of premiums not spent on 

claims is used to pay for administrative costs, such as marketing, agent 

commissions, claims handling, overhead, and taxes, and for profits. In the 

past, National Association of Insurance Commissioners (NAIC) model 

regulations for long-term care insurance stated that carriers should spend 

a minimum of 60 percent of collected premiums on claims.14 However, in 

model regulations released in August 2000, NAIC recommended that 

carriers price their products high enough initially to prevent the need for 

future rate increases rather than target a minimum percentage to be spent 

on claims. So far, according to NAIC, a majority of states have adopted 

long-term care insurance regulations based on the 2000 NAIC model, while 

some states still require minimum loss ratios. Many large carriers set 

premium rates on a national rather than regional basis. Carriers also price 

to cover a profit margin and administrative costs as well as to meet 

minimum loss ratios. 

Few claims are expected to be submitted during the early years of a longterm care insurance policy. As a result of underwriting, it is unlikely that

many people could meet the eligibility requirements to buy the policy yet 

submit a claim within 3 years. Industry experts suggested that the effects 

of underwriting begin to decline and the rate of claim submissions starts to 

increase after about 3 to 7 years. The rate of increase in claim submissions 

depends on the average age of the enrollees, with most long-term care 

insurance claims submitted when people reach their mid-70s to mid-80s. 

Industry experts also noted that the rate of claim submissions in the 

federal program is expected to peak 25 years or more after the program 

began. Because the average age of enrollees in the individual market is 

higher than the average age of enrollees in the federal program, the rate of

claim submissions is likely to peak earlier in the individual market, after 15

 13For the purposes of this report, a claim refers to the series of payments made to 

reimburse the provider or the policyholder for the costs of an episode of care. 

14State insurance regulators established NAIC to help promote effective insurance 

regulation, to encourage uniformity in approaches to regulation, and to help coordinate 

states’ activities. Among other activities, NAIC develops model laws and regulations to 

assist states in formulating their policies to regulate insurance. 

Page 8 GAO-06-401 Federal Long Term Care Insurance Program 
to 25 years. The rate of claim submissions is likely to peak after 30 to 

40 years in the group market because of the younger average age of its 

enrollees. 

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) 

specified conditions under which long-term care insurance benefits and 

premiums would receive favorable federal income tax treatment and 

provided specific protections to people who purchased tax-qualified 

plans.15 Long-term care insurance plans must meet certain requirements 

contained in HIPAA to be considered tax-qualified.16 For example, 

according to HIPAA, a plan must begin coverage when a person is certified

to need substantial assistance with at least two of the six ADLs and a 

disability is expected to last 90 or more days, or to need regular 

supervision because of a severe cognitive impairment. In addition, 

federally tax-qualified plans must comply with the NAIC long-term care 

insurance model act and regulations in effect as of January 1993, as 

incorporated into HIPAA.17 These provide certain consumer protections, 

such as preventing a carrier from (1) not renewing a long-term care 

insurance policy because of age or deteriorating health and (2) increasing 

the premium of an existing policy because of a person’s age or claims filed. 

Another consumer protection was that carriers had to offer inflation 

protection as specified in the NAIC model regulations. 

Each state establishes its own long-term care insurance laws and 

regulations that cover areas such as benefits, premium setting, and 

consumer protections.18 As a result, product requirements in the individual 

and group markets can vary among the states. According to NAIC, 41 

states based their long-term care insurance regulations on the NAIC 

model, 7 based their regulations partially on the model, and 3 did not 

follow the model. 

 15Pub. L. No. 104-191, §§ 321-327, 110 Stat. 1936, 2054-2067. 

16Long-term care insurance premiums for HIPAA tax-qualified plans can be itemized as

deductions from income along with other medical expenses, which is similar to how

premiums for accident and health insurance are handled. 

17HIPAA requirements will be met if an insurance contract complies with state law in a 

state that has adopted the NAIC model regulations or a more stringent version of the

model. 

18Throughout this report, we include the District of Columbia in our references to the

states. 

Page 9 GAO-06-401 Federal Long Term Care Insurance Program 
The number of long-term care insurance policies sold has been small—

about 9 million as of 2002, the most recent year for which data were 

available.19 About 80 percent of these policies were sold through the 

individual insurance market and the remaining 20 percent were sold 

through the group market. In March 2005, 13 percent of full-time workers 

in private industry had access to employer-sponsored long-term care 

insurance benefits; within private industry, 21 percent of workers in large 

establishments with 100 or more workers had access to this benefit.20

People purchase policies from carriers in the individual market, usually 

through agents or brokers, and choose their own benefits from among a 

range of options the carriers offer. Groups—for example, employers, 

associations, or unions—purchase policies from carriers in the group 

market. Groups usually design the benefits, and enrollees are often given 

some benefit options from which to choose, for example, differing daily 

benefit amounts and benefit periods. However, benefit choices offered in

employer-sponsored group products tend to be more limited than those 

that are available in the individual insurance market. Some groups offer 

benefit packages in which the benefit options are predetermined. In 

contrast to health insurance, where employers often contribute a share of 

the premium costs, enrollees in group long-term care insurance coverage 

usually pay the entire premium. 

A recent downturn in the long-term care insurance industry has led to 

more conservative assumptions when setting premiums and consolidation 

among carriers. The long-term care insurance industry experienced 18 

percent annual growth in the number of policies sold from 1987 through 

2002, but the industry has experienced a downturn in more-recent years. 

Beginning in 2003, many carriers in the individual market raised 

premiums, left the marketplace, or consolidated to form larger companies. 

This activity occurred in response to several factors including high 

administrative expenses relative to premiums; lower-than-expected lapse

rates, which increased the number of people likely to submit claims; low 

interest rates, which reduced the expected return on investments; and new 

government regulations limiting direct marketing by telephone. Many 

Long-term Care Insurance 

Marketplace 

 19America’s Health Insurance Plans, Research Findings, Long-Term Care Insurance in

2002 (Washington, D.C.: June 2004). 

20U.S. Department of Labor, Bureau of Labor Statistics, National Compensation Survey: 

Employee Benefits in Private Industry in the United States, March 2005 (Washington, 

D.C.: August 2005). 

Page 10 GAO-06-401 Federal Long Term Care Insurance Program 
carriers revised the assumptions used in setting their premium rates, 

taking a more conservative approach that led to higher premiums, while 

state regulators increased their oversight of the industry. Currently, 

several large carriers dominate the coverage sold in the individual and 

group markets as a result of mergers and acquisitions, and sales in the 

group market are growing faster than in the individual market. 

The federal government began offering group long-term care insurance 

benefits in 2002 for federal employees, retirees, and certain other people.

When the Federal Long Term Care Insurance Program began, eligible 

people could apply for benefits during two specified time periods: (1) an 

early enrollment period for benefit options that were somewhat limited21

that ran from March 25, 2002, through May 15, 2002, intended for people 

who were well-informed about long-term care insurance and were eager to

enroll in the federal program and (2) an open enrollment period for all 

benefit options that ran from July 1, 2002, through December 31, 2002. 

Active and retired federal and Postal Service employees, active and retired 

members of the uniformed services, qualified relatives, and certain others

are eligible to apply for federal long-term care insurance benefits.22

Following the open enrollment period, eligible people could apply at any 

time. 

The federal program determines eligibility for long-term care insurance 

through underwriting. During the early and open enrollment periods, the 

program used an abbreviated underwriting application to determine 

eligibility for active employees and active members of the uniformed 

services and their spouses who applied. All other applicants, including 

retirees and qualified relatives, used the full underwriting application, 

which was similar to underwriting in the individual insurance market. 

Since the conclusion of the open enrollment period, newly hired federal 

Federal Long Term Care 

Insurance Program 

 21During the early enrollment period, enrollees had more limited choices in some of the

benefit options such as the benefit period and type of coverage; for example, they could 

select only comprehensive coverage. 

22Qualified relatives include current spouses of employees and retirees; adult children at

least 18 years old—including natural, adopted, and stepchildren, but not foster children—

of living employees and retirees; and parents, parents-in-law, and stepparents of living 

employees, but not of retirees. Selected military reservists, employees and retirees of the

Tennessee Valley Authority, District of Columbia government employees and retirees first 

employed before October 1, 1987, and employees and retirees of the District of Columbia 

Courts are also eligible to apply. 

Page 11 GAO-06-401 Federal Long Term Care Insurance Program 
and Postal Service employees and newly active members of the uniformed 

services who apply for long-term care insurance within 60 days of 

employment can do so using an abbreviated application, as can their 

spouses.23 All other applicants must use the full underwriting application. 

The federal program offers four prepackaged plan designs, each with a 

90-day elimination period, a choice of two types of inflation protection—

either automatic compound inflation protection or the future purchase 

option24—and the following benefit options: 

• Package 1—$100 daily benefit amount for comprehensive coverage and 

3-year benefit period, 

• Package 2—$150 daily benefit amount for comprehensive coverage and 

5-year benefit period, 

• Package 3—$150 daily benefit amount for comprehensive coverage and an

unlimited benefit period, and 

• Package 4—$100 daily benefit amount for facilities-only coverage and 

3-year benefit period. 

If not choosing a prepackaged plan, an enrollee in the federal program also 

has several options for customizing benefits. The federal program was 

designed to comply with the NAIC model regulations and HIPAA taxqualification standards, which specify that certain benefit options be 

offered. (App. II provides more information on federal long-term care 

insurance benefits and enrollment in these benefits.) 

The federal program provides reimbursement for costs of care when an 

enrollee is unable to perform at least two ADLs for an expected period of 

at least 90 days or needs substantial supervision because of a severe 

cognitive impairment. Reimbursement is based on the benefits chosen by 

the enrollee. The federal government does not contribute to the cost of 

coverage, so an enrollee pays the entire premium for the benefits chosen. 

 23Newly married spouses of eligible employees and certain federal or Postal Service 

employees returning from a nonpay status and their spouses can also use an abbreviated 

application. 

24With automatic compound inflation protection, benefit amounts increase by a stated 

percentage of the previous year’s amount with generally no change in premiums. The 

future purchase option offers the ability to increase benefits at predetermined time 

intervals for an additional cost. 

Page 12 GAO-06-401 Federal Long Term Care Insurance Program 
OPM, rather than the states, regulates the federal program, and Partners 

administers the program in accordance with the requirements of the 

contract between OPM and Partners. The contract—which was signed on 

December 18, 2001, and extends for a period of 7 years—defines key 

administrative requirements including who controls program assets and 

how profits are determined. The contract requires that the parent 

companies of Partners—John Hancock Life Insurance Company and 

Metropolitan Life Insurance Company—must hold federal program assets 

in accounts separate from all their other businesses. At the end of the 

contract period, OPM may decide to enter into a new contract with 

Partners. However, if OPM selects a different contractor at that time, the

financial assets of the federal program would be transferred to the new 

contractor. The contract also specifies how Partners earn a profit each 

year. The profit formula consists of two parts: (1) some of the profit is 

capped at 6.5 percent of premiums collected in a year—nearly half of this

type of profit is subject to performance criteria while the rest is 

guaranteed—and (2) some of the profit is based on the performance of the 

total assets of the federal program being managed by Partners to pay 

future claims—this type of profit consists of 0.3 percent of the total assets, 

called a “risk charge.” Partners must pay federal taxes on their total profit, 

but may charge other taxes to the federal program. Partners also collects

investment-management fees that are less than 0.2 percent of total assets. 

No profit is allowed if the premiums are not sufficient to cover claims and 

expenses. While OPM expects premium rates to remain level over an 

enrollee’s lifetime, Partners may raise or lower premiums for groups of 

enrollees during the contract period with OPM’s agreement. Additionally, 

premium rates may be changed at the time of a new contract.

The federal program offered benefits that were similar to those of other 

long-term care insurance products we reviewed and usually offered lower 

premiums for comparable benefits in individual products. While federal 

program enrollees could choose from many options to customize their 

benefits, a broader range of options was available in the other products we 

reviewed, especially in the individual products. However, despite the 

broader range of options available in the other products, most enrollees in 

the federal program and in individual and group products chose similar 

daily benefit amounts, elimination periods, and benefit periods. A greater

percentage of federal enrollees chose automatic compound inflation 

protection compared with enrollees in other products. Overall, annual 

premiums in the federal program averaged across three benefit plan 

designs were lower for both single people and married couples who were 

both the same age compared with similar individual products sold on 

Federal Long Term 

Care Insurance 

Program Offered 

Benefits Comparable

to Other Products, 

Usually at Lower 

Premiums 

Page 13 GAO-06-401 Federal Long Term Care Insurance Program 
March 31, 2005.25 Moreover, of total premiums projected to be collected

over the life of the coverage sold during the study period, the federal 

program expected to pay a higher percentage in claim payments and a 

lower percentage in administrative costs compared with individual and 

group products. 

Long-term care insurance benefit options were similar in the federal 

program and in individual and group products we reviewed. While the 

federal program offered over 500 possible benefit option combinations in 

addition to the four prepackaged benefit plans, other products, especially 

individual products, offered more possible benefit combinations and more 

extensive customization in daily benefit amounts and in elimination and 

benefit periods.26 Benefits offered in the federal program and in the 

individual and group products we reviewed were covered by consumer 

protections required for HIPAA tax-qualified plans. These consumer 

protections included, among other provisions, that enrollees be offered an

option to protect their benefits against inflation. However, some individual 

and group product enrollees were also offered the opportunity to purchase 

policies that did not meet requirements for HIPAA tax-qualified plans. In 

addition, according to officials at OPM and Partners, the federal program 

offered several unique benefits, including payment to family members 

providing informal care, international coverage, and a process allowing 

third-party review of denied claims. Table 1 summarizes the benefit 

options in the federal program and in the individual and group products 

we reviewed. 

Federal Program Benefits 

Were Similar to Those in 

Individual and Group 

Products

 25The federal program offers four prepackaged plan designs. One package is a facilities-only 

design, while the remaining three packages provide comprehensive coverage, including 

long-term care services provided in the home. We report data on premiums for the three 

comprehensive packages because two carriers selling individual products did not offer 

facilities-only benefits on March 31, 2005.

26Partners officials told us that group products typically offer fewer options than individual 

products because the group products are sold without the assistance of an agent. 

Page 14 GAO-06-401 Federal Long Term Care Insurance Program 
Table 1: Benefit Options in the Federal Long Term Care Insurance Program and in

Individual and Group Products Sold from July 1, 2002, through March 31, 2005 

Benefit options Federal programa Individual products Group products

Coverage type Comprehensive or 

Facilities-only 

Comprehensive, 

Facilities-only, or 

Home-care-onlyb

Comprehensive or 

Facilities-only 

Daily benefit 

amounts 

$50 to $300 $18 to $500c$35 to $465 

Elimination 

periods 

30 days or 90 days 0 days to 730 days 20 days to 180 days 

Benefit periods 3 years, 5 years, or 

lifetime 

1 year to lifetime 1 year to lifetime 

Inflation 

protectiond

Automatic compound 

or Future purchase 

option 

Automatic compound, 

Simple, Future 

purchase option, 

Other, or None

Automatic compound, 

Future purchase 

option, Other, or None

Source: GAO analysis of data provided by Partners, five carriers selling individual products, CalPERS, and two carriers selling group 

products. 

a

Some federal enrollees, members of the uniformed services, and their spouses who could apply for 

the federal program using an abbreviated application, but who were denied regular coverage, were 

offered coverage in the Alternative Insurance Plan. This Plan covered nursing homes only, had a 

180-day elimination period, provided coverage for 2 years, and started with a weekly benefit amount 

of $200. 

b

One carrier reported selling individual products with home-care-only coverage. 

c

One carrier reported that one policy was sold with a daily benefit amount of $822. 

d

With automatic compound inflation protection, benefit amounts increase by a stated percentage of 

the previous year’s amount with generally no change in premiums. For example, a $100 daily benefit 

amount with automatic compound inflation protection of 5 percent will go up by $5 to $105 at the 

beginning of the second year. At the beginning of the third year, benefits will go up by 5 percent of 

$105 or by $5.25 to $110.25. Simple inflation protection increases benefits by the same amount each

year with generally no change in premiums. For example, a $100 daily benefit amount with simple 

inflation protection of 5 percent will go up by $5 each year. The future purchase option offers the 

ability to increase benefits at predetermined time intervals for an additional cost. Other inflationprotection options include a deferred inflation option, where the enrollee can increase benefits at a 

later date chosen by the enrollee. 

Most enrollees in the federal program chose comprehensive coverage and 

daily benefit amounts, elimination periods, and benefit periods similar to

those chosen by enrollees in individual and group products. Most enrollees 

in all products chose to have the cost of long-term care services 

reimbursed at a rate in the range of $100 to $199 per day and chose an 

Page 15 GAO-06-401 Federal Long Term Care Insurance Program 
elimination period of 90 days or greater27 and a benefit period from 3 to 

5 years. With regard to inflation protection, over two-thirds of federal 

program enrollees chose automatic compound inflation protection, a 

higher proportion than for enrollees in individual and group products. 

Federal enrollees who did not choose automatic compound inflation 

protection received the future purchase option as a default. Several 

experts and industry officials said the federal government was a leader in

the group market by encouraging enrollees to choose more comprehensive 

inflation-protection benefits. Table 2 summarizes the benefit options 

chosen by enrollees in the federal program and in individual and group 

products. 

Table 2: Benefit Options Chosen by Federal Long Term Care Insurance Program 

Enrollees and by Individual and Group Product Enrollees for New Policies Sold 

from July 1, 2002, through March 31, 2005 

Percentage choosing benefit option 

Federal program 

enrolleesa

Average for 

individual product 

enrollees 

Average for group 

product enrollees

Coverage type

Comprehensive 89 91 91

Facilities-only 11 3 9

Other <1 6 n.a.

Daily benefit amountb

Less than $100 3 11 12

$100 to $149 49 53 44

$150 to $199 42 25 18

$200 and greater 5 11 26

Elimination period 

Less than 30 days n.a. 8 <1

30 days to 89 days 12 21 30

90 days and greater 88 71 70

 27All four federal prepackaged plans included 90-day elimination periods. Federal enrollees 

who designed their own customized benefits could choose either a 30- or 90-day 

elimination period. Elimination periods can be based either on the number of days from the 

beginning of the episode of illness—calendar days—or on the number of days from when

services are first received—service days. The elimination periods for the federal program

are based on service days. 

Page 16 GAO-06-401 Federal Long Term Care Insurance Program 
Percentage choosing benefit option 

Federal program 

enrolleesa

Average for 

individual product 

enrollees 

Average for group 

product enrollees

Benefit period 

Less than 3 years <1 14 6

3 years 49 23 13

Greater than 3 years 

to 5 years 31 27 54

Greater than 5 years 

to 20 years n.a. 10 4

Lifetime 20 26 23

Inflation protectionc

Automatic compound 68 55 18

Simple n.a. 22 n.a.

Future purchase 

option 32 7 32

None n.a. 16 7

Other <1 1d42e

Source: GAO analysis of data provided by Partners, five carriers selling individual products, CalPERS, and two carriers selling group 

products. 

Notes: Individual entries may not add to 100 percent because of rounding. 

n.a. = not applicable. 

a

Federal program enrollees include those who chose a prepackaged plan, designed their own 

customized plan, or chose the Alternative Insurance Plan from March 25, 2002, through March 31, 

2005. 

b

Daily benefit amounts for individual products were from four of the five carriers. At the fifth carrier, 80 

percent of the enrollees chose daily benefit amounts that were greater than $75 and less than or

equal to $175. 

c

With automatic compound inflation protection, benefit amounts increase by a stated percentage of 

the previous year’s amount with generally no change in premiums. For example, a $100 daily benefit 

amount with automatic compound inflation protection of 5 percent will go up by $5, to $105, at the 

beginning of the second year. At the beginning of the third year, benefits will go up by 5 percent of 

$105, or by $5.25, to $110.25. Simple inflation protection increases benefits by the same amount 

each year with generally no change in premiums. For example, a $100 daily benefit amount with 

simple inflation protection of 5 percent will go up by $5 each year. The future purchase option offers

the ability to increase benefits at predetermined time intervals for an additional cost. Other inflationprotection options include a deferred inflation option, where the enrollee can increase benefits at a 

later date chosen by the enrollee. 

d

One carrier reported a deferred inflation option, where the enrollee can increase benefits at a later 

date chosen by the enrollee. 

e

One carrier reported optional inflation protection, which is similar to a future purchase option. Under 

optional inflation protection, an enrollee is offered the chance to increase benefits at predetermined 

time intervals whether or not the enrollee has submitted a claim for benefits, while the future purchase 

option is offered by this carrier only if the enrollee has not submitted a claim. 

Page 17 GAO-06-401 Federal Long Term Care Insurance Program 
Federal Long Term Care Insurance Program annual premiums were 

usually lower than annual premiums for individual products for three 

benefit packages with similar benefit options sold on March 31, 2005.

28

Overall, the average premium in the federal program for the three benefit

packages for single people was 46 percent lower than average premiums 

for individual products we reviewed, while premiums for married couples 

who were both the same age were 19 percent lower. However, the 

premium estimates reported for individual products do not include 

discounts for good-health status, which several carrier officials said were 

about 10 percent to 15 percent and apply to about one-third of all 

enrollees.29 Figure 1 compares average annual premiums for three benefit

packages and overall for the federal program with average annual 

premiums for the individual products we reviewed at five carriers. 

Premiums for Three 

Federal Benefit Packages 

Were Usually Lower Than 

Those for Comparable 

Benefits in Other Products 

 28We included premiums for the three comprehensive benefit packages available in the 

federal program. Premiums included compound inflation protection. 

29The premiums for married couples include spousal discounts of 30 or 40 percent. 

Page 18 GAO-06-401 Federal Long Term Care Insurance Program 
Figure 1: Average Annual Federal Premiums for Single People and for Married Couples Who Were Both the Same Age 

Compared with Averages for Individual Products, for Three Benefit Packages and Overall, Sold on March 31, 2005 

Source: GAO analysis of data provided by Partners and five carriers selling individual products.

Average annual premium for federal program

Average annual premium for five carriers

Range of average annual premiums for five carriers

Average annual single person premiums Average annual married couple premiums

Premium

$9,000

$8,000

$7,000

$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

$0

Premium

$9,000

$8,000

$7,000

$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

$0

Package

1 2 3 Overall

Package

1 2 3 Overall

Notes: We analyzed annual premiums for the three federal benefit packages with comprehensive 

coverage available in the federal program. The three benefit packages were 

Package 1—$100 daily benefit amount and 3-year benefit period,

Package 2—$150 daily benefit amount and 5-year benefit period, and 

Package 3—$150 daily benefit amount and an unlimited benefit period. 

Each package had a 90-day elimination period and included the automatic compound inflationprotection option.

For the five carriers selling individual products that we reviewed, single premiums represented a 40-, 

50-, 60-, and 70-year-old person underwritten into the standard rating category, the category where 

carriers place most enrollees after they assess the risk. Premiums for married couples represented 

situations where both were the same age—40, 50, 60, and 70 years old—and both were written into 

the standard rating category. Premiums for couples at the five carriers reflected either a 30-percent or

a 40-percent discount per couple. The federal program did not provide discounts for spouses; 

therefore, for the federal program we doubled the premiums charged for single people. For each 

benefit package, we averaged premiums for single people and averaged the premiums for married 

couples who were both the same age across the four age categories. We assumed there was no 

discount for good health. 

Page 19 GAO-06-401 Federal Long Term Care Insurance Program 
All benefits chosen by an enrollee affect the pricing of the package to some degree. Carriers provided

premiums for the major benefit options most similar to the federal packages that had the largest effect

on premiums—daily benefit amounts, benefit periods, elimination periods, and inflation protection. 

The pattern of lower premiums in the federal program compared with 

those in the individual products remained consistent in different age 

groups as well as for single people and married couples. Figure 2 shows 

the range in annual premiums in the individual products we reviewed 

relative to annual federal premiums for single people and married couples 

who were both the same age, by age group, for the most popular federal 

comprehensive benefit package. Appendix III provides more information 

on annual federal and individual product premiums for the benefit 

packages we reviewed.

Page 20 GAO-06-401 Federal Long Term Care Insurance Program 
Figure 2: Annual Premiums by Age for Single People and Married Couples Who Were Both the Same Age for the Federal Long

Term Care Insurance Program and for Five Carriers Selling Individual Products for the Most Popular Federal Comprehensive 

Benefit Package Sold on March 31, 2005 

Source: GAO analysis of data provided by Partners and five carriers selling individual products.

Annual premium of most popular benefit package for federal program

Average annual premium for five carriers

Range of annual premiums for five carriers

Age group

Age 40 Age 50 Age 60 Age 70

Age group

Age 40 Age 50 Age 60 Age 70

Annual single person premiums Annual married couple premiums

Premium

$9,000

$8,000

$7,000

$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

$0

Premium

$9,000

$8,000

$7,000

$6,000

$5,000

$4,000

$3,000

$2,000

$1,000

$0

Notes: Premiums shown are for the federal program’s Comprehensive 100 benefit package 

(Package 1), the most popular federal benefit package purchased through March 31, 2005. Package 

1 included a $100 daily benefit amount, 3-year benefit period, 90-day elimination period, and the 

automatic compound inflation-protection option. One carrier reported premiums for a 100-day 

elimination period rather than for a 90-day period.

For the five carriers selling individual products we reviewed, premiums were for the standard rating 

category. The federal program did not use rating categories. Premiums for married couples who were 

both the same age at the five carriers reflected either a 30-percent or a 40-percent discount. The 

federal program did not provide discounts for spouses; therefore, we doubled the premiums the 

federal program charged for single people. We assumed there was no discount for good health. 

All benefits chosen by an enrollee affect the pricing of the package to some degree. Carriers provided

premiums for the major benefit options most similar to the federal program that had the largest effect 

on premiums—daily benefit amounts, benefit periods, elimination periods, and inflation protection. 

Page 21 GAO-06-401 Federal Long Term Care Insurance Program 
When compared with premiums offered by CalPERS, the only group 

product for which we had premium information, average federal 

premiums were higher for two of the three packages.30 Overall, the average

annual federal premium for single people and for married couples who 

were both the same age for the three benefit packages combined was 

3 percent higher than the average annual premium for CalPERS. 

Federal Program Expects 

to Spend Higher 

Proportion of Premium on 

Claims and Lower 

Proportion on 

Administrative Costs Than 

Individual and Group 

Products

As measured by the anticipated lifetime loss ratio,31 the federal program 

expects to spend a higher proportion of collected premium on claims and 

a lower proportion of collected premium on administrative costs than 

individual and group products. The Federal Long Term Care Insurance 

Program had a higher anticipated lifetime loss ratio than the average 

anticipated lifetime loss ratios for the individual and group products we 

reviewed32—75 percent for the federal program, compared with 59 percent 

for individual products and 68 percent for group products.33 The federal 

program expected to pay out in claim payments three-quarters of the 

$3.1 billion in premiums it projected would be collected over the life of the 

policies for all policies sold from March 25, 2002, through March 31, 2005.

The federal program expected to spend the remaining amount of collected 

premiums—25 percent—on administrative costs, including marketing, 

underwriting, claims handling, overhead, and taxes, and on profits. For 

individual products sold during July 1, 2002, through March 31, 2005, 

individual market carriers estimated that an average of 41 percent of total

premiums collected would cover administrative costs and profits. Unlike 

the federal program, these administrative costs included agent 

 30We did not request premium information for comparable benefit packages for group 

products other than CalPERS, because of the variation that exists across the groups

insured by each carrier. In contrast to the federal program and most group products, the

CalPERS group product is self-funded rather than purchased from an insurer, which

CalPERS claims may lower its costs to provide benefits compared with other insurers. 

31The anticipated lifetime loss ratio describes what portion of the premium is expected to 

pay for claims over the life of a set of policies. This ratio is calculated as the present value

of the total expected claim payments compared with the present value of the total 

expected premiums over the life of a set of policies. 

32Four of the five respondents in the individual market provided loss ratio data; three of 

these respondents provided additional detail about administrative costs. Two of the three

respondents in the group market provided loss ratio data. 

33The federal program followed NAIC’s 2000 revised guidelines, which recommended that 

carriers price their products high enough initially to prevent the need for future rate 

increases rather than target a minimum percentage of total premiums—for example, 

60 percent—to be spent on claims. 

Page 22 GAO-06-401 Federal Long Term Care Insurance Program 
commissions, which averaged 17 percent of premiums collected for the 

individual products we reviewed, or about half of their administrative 

costs. For group products, carriers estimated that an average of 32 percent 

of total premiums collected for coverage sold during this time period 

would cover administrative costs and profits. 

The employee participation rate in the Federal Long Term Care Insurance 

Program for active federal civilian employees was 5 percent, comparable

to the industry average in the group market, but overall enrollment was 

lower than the expectations established by Partners. Federal enrollees 

were younger than enrollees in individual products and older than 

enrollees in group products. For all products we reviewed, more women 

than men obtained coverage. 

The Federal Long Term Care Insurance Program’s employee participation 

rate of 5 percent after the open enrollment period for active federal 

civilian employees was comparable to the industry average in the group 

market.34 Experts suggested that typically 5 to 6 percent of a group’s 

potentially eligible population would enroll in a long-term care insurance 

product when initially offered coverage. Participation rates tend to 

increase over time, usually reaching closer to 8 percent, depending upon 

the average age of the eligible population. The federal program’s employee 

participation rates were much lower for active military members, at 

Federal Program 

Participation Was 

Comparable to Other 

Group Products, 

while Federal 

Enrollees Were 

Younger Than 

Enrollees in 

Individual Products 

and Older Than 

Enrollees in Group 

Products 

Federal Program 

Participation Rate Was 

Comparable to 

Participation Rates of 

Other Group Products but 

Lower Than Initially 

Expected 

 34In general, the participation rate is calculated as the number of enrollees divided by the

eligible population at a point in time. The most common formula, called the employee 

participation rate, is the number of enrolled employees divided by the number of active 

employees. The number of people who are eligible to enroll in individual products is 

unknown; therefore, an accurate participation rate for the individual market cannot be

calculated. 

Page 23 GAO-06-401 Federal Long Term Care Insurance Program 
0.2 percent, and for active Postal Service employees, at 0.9 percent. Active

military members are young and can be difficult to reach for marketing 

purposes, which might explain why they were less likely to apply than 

active federal workers, who tend to be older and can be reached directly 

through their workplace. Active Postal Service employees are also difficult 

to reach because they are located throughout the nation rather than 

grouped in centralized locations, and because access to these employees 

for marketing purposes has been restricted during working hours. 

The federal program was the largest employer-sponsored group in the 

nation, with more than 218,000 individuals enrolled for new policies sold 

from March 25, 2002, through March 31, 2005. The next largest group 

program was CalPERS, with more than 175,000 enrollees for policies sold

from 1995 through 2005. According to Partners, the federal program 

accounted for 15 percent of the enrollees in the entire group market and 

2 percent of the entire long-term care insurance market in 2002.35

Even though it was the largest group in the nation, the federal program’s 

enrollment was lower than expected. Partners initially estimated in 2001 

that 286,066 people would enroll during the open enrollment period, but 

actual enrollment was 161,048, or 44 percent lower than expected. 

Partners also estimated that enrollment would reach 343,280 by the third 

year of the program; total enrollment eventually rose to 218,890 enrollees 

for new policies sold from March 25, 2002, through March 31, 2005, or 

36 percent lower than expected. Some of the lower-than-expected 

enrollment can be explained by the low participation rates for active 

military members and Postal Service employees. Additionally, according 

to Partners, the terrorist attacks in the fall of 2001 resulted in slower sales 

of discretionary products, such as long-term care insurance, and also 

resulted in temporarily reduced access to federal employees, military 

members, and Postal Service employees for marketing purposes during the 

open enrollment period. A representative of Partners and an expert 

knowledgeable about the federal program indicated that a pool of at least 

200,000 enrollees is adequate for the federal program to achieve financial 

stability, although no minimum number was ever formally established. 

 35For the period of March 25, 2002, through March 31, 2005, 74 percent of the federal 

program’s enrollees had coverage that became effective during the early and open

enrollment periods. 

Page 24 GAO-06-401 Federal Long Term Care Insurance Program 
The federal program focused its marketing efforts on a core group of 

nearly 6 million people out of an estimated eligible population of almost 19 

million people, and the majority of the enrollees came from this core 

group. The core group consisted of 1.8 million active federal civilian 

employees, 1.4 million active military members, 0.8 million active Postal 

Service employees, and 1.8 million spouses of active employees and 

military members, as shown in table 3. Almost two-thirds of the 218,890 

people enrolled from March 25, 2002, through March 31, 2005, came from 

this core group. According to OPM officials, the federal program also 

reached out to retired federal employees, retired military members, and 

retired Postal Service employees. 

Page 25 GAO-06-401 Federal Long Term Care Insurance Program 
Table 3: Estimated Eligible Population and Actual Enrollees in the Federal Long 

Term Care Insurance Program, by Category 

Estimated eligible 

population as of 

October 15, 2001 

Enrollees for new policies 

sold from March 25, 2002, 

through March 31, 2005 

Category Number

Percentage

of total 

eligible Number

Percentage

of total 

enrollees

Core group 

Active federal civilian 

employees 1,792,000 10 90,613 41

Active military members 1,353,000 7 3,244 2

Active Postal Service 

employees 800,000 4 6,352 3

Spouses of active 

employees and military 

membersa

1,775,000 10 35,924 16

Subtotal for core group 5,720,000 31 136,133 62

Noncore group

Retired employees and 

military members 4,263,000 23 48,013 22

Spouses of retired 

employees and military 

members and all other 

relativesb

8,084,000 44 23,451 11

Otherc 500,000 3 11,293 5

Subtotal for noncore

group 12,847,000 69 82,757 38

Total 18,567,000 100 218,890 100

Source: Partners. 

Note: Individual entries may not sum to totals because of rounding.

a

The estimated eligible population for the spouses category for the core group includes only eligible 

spouses of active employees and military members. The number of actual enrollees in the spouses

category for the core group includes both enrolled spouses and enrolled relatives of active employees 

and military members.

b

The estimated eligible population for the spouses and relatives category for the noncore group 

includes eligible spouses and eligible relatives of retired employees and military members, as well as

eligible relatives of active employees and military members. The number of actual enrollees in the 

spouses category for the noncore group includes enrolled spouses and enrolled relatives of retired 

employees and military members, but not enrolled relatives of active employees and military

members.

c

The estimated eligible population for the “other” category includes selected military reservists, but not

other eligible groups for which the population was unknown. The number of actual enrollees in the 

“other” category includes selected military reservists, and also employees and retirees of the

Tennessee Valley Authority, District of Columbia government employees and retirees first employed

before October 1, 1987, and employees and retirees of the District of Columbia courts. 

Page 26 GAO-06-401 Federal Long Term Care Insurance Program 
The enrollees during the first 3 years of the federal program represented 

about three-quarters of the applications submitted. The federal application 

approval rate of 74 percent was similar to the average approval rate of 

75 percent for individual products, but lower than the average approval

rate of 84 percent for group products, which may enroll active workers 

using guaranteed issue during an open enrollment period. The most 

common reasons for denial of an application for the federal program and 

for the group products were height and weight outside of insurable 

standards, a chronic condition such as diabetes or cardiac problems, and 

cognitive impairment. In addition to these reasons, the most common 

reasons for denial of an application for the individual products included 

cancer, stroke, and musculoskeletal problems. 

Federal Program Enrollees 

Were Younger Than 

Enrollees in Individual 

Products and Older Than 

Enrollees in Group 

Products, and More 

Women Than Men 

Obtained Coverage for All 

Products

The average age of federal enrollees was 56 years at the time of 

enrollment, compared with an average age of 60 for enrollees in individual

products and 52 for enrollees in group products, as shown in table 4. The 

average age was 54 for enrollees in CalPERS. In the individual market, 

carriers typically target older adults who are planning for retirement or 

who have already retired. The carriers are able to market to them through 

direct contact from commission-based agents. In the group market, 

carriers typically target active employees, who are younger than enrollees 

typically marketed to in the individual market. The carriers market to the 

active employees through the employer via mailings and on-site 

enrollment meetings, but may not be able to obtain contact information 

for retirees. Unlike much of the group market, the federal program does 

have access to retiree contact information and is able to market to retirees

through mailings to their home addresses. 

More women than men enrolled in the Federal Long Term Care Insurance 

Program, individual products, and group products. (See table 4.) While 

more women than men enrolled in the federal program overall, slightly 

more men than women enrolled among eligible active federal employees, 

active military members, and active Postal Service employees. However, 

women in these groups enrolled in the federal program at a higher rate 

than their representation in the eligible population. Enrollees in the federal 

program from these groups were 51 percent male and 49 percent female,

while the eligible population of all active federal employees, active military 

Page 27 GAO-06-401 Federal Long Term Care Insurance Program 
members, and active Postal Service employees was 67 percent male and 

33 percent female.36

Table 4: Enrollee Characteristics of the Federal Long Term Care Insurance Program

and of Individual and Group Products, July 1, 2002, through March 31, 2005 

Characteristic Federal programa

Individual products Group products

Average age 56 years 60 years 52 years

Sex

Female 54% 58% 56%

Male 46% 42% 44%

Source: GAO analysis of data provided by Partners, five carriers selling individual products, CalPERS, and two carriers selling group 

products. 

a

The federal program includes 218,890 enrollees from March 25, 2002, through March 31, 2005. 

The early claims experience of the Federal Long Term Care Insurance 

Program was below the expectations established by Partners. During its 

first 3 years, the federal program paid 39 percent of what it initially 

expected to pay for claims per enrollee; the number of claims paid per 

enrollee also was lower than initial expectations. It is still too early to 

determine whether this trend will continue or whether adjustments to the 

expected claims experience or premiums are needed. About half of the 

total amount of claim payments was spent on facility care. The most 

common medical conditions prompting claims in the early years of the 

federal program were cancer, stroke, and injuries and poisoning. Across 

the individual and group products we reviewed, the most common medical 

conditions that prompted claims were also cancer, stroke and injuries, as 

well as cognitive problems, musculoskeletal disorders, cardiac disease, 

and arthritis. 

Early Claims 

Experience in Federal 

Long Term Care 

Insurance Program 

Was Lower Than 

Expected, but It Is 

Too Soon to 

Determine Whether 

Adjustments Are 

Needed 

The cumulative claims experience in the first 3 years of the Federal Long 

Term Care Insurance Program was considerably lower than the 

expectations established by Partners. The program paid 39 percent of the 

claims expenditures expected per enrollee for long-term care services and 

paid 33 percent of the expected number of claims per enrollee, as shown 

 36Eligible population data were collected as of September 30, 2002, the most recent date for 

which all data were available. 

Page 28 GAO-06-401 Federal Long Term Care Insurance Program 
in table 5.37 While the overall claims experience for the first 3 years was 

lower than expected, the number of claims paid as a percentage of 

expected claims in each consecutive year of operation was higher than the 

previous year. In the first year of operation, the amount paid for claims per 

enrollee was 40 percent of expected payments and the number of claims 

per enrollee was 4 percent of expected claims. By the third year of 

operation, the amount paid for claims per enrollee had remained level at 

40 percent of expected payments, while the number of claims per enrollee 

had increased to 48 percent of expected claims. 

Table 5: Actual Claims per Enrollee as a Percentage of Expected Claims per 

Enrollee in the First 3 Years for the Federal Long Term Care Insurance Program 

Characteristic Year 1 Year 2 Year 3 Cumulative

Amount of claim payments per enrollee as a 

percentage of expected claims per enrollee 40% 39% 40% 39%

Number of paid claims per enrollee as a 

percentage of expected claims per enrollee 4% 37% 48% 33%

Source: GAO analysis of data provided by Partners. 

It is still too early to determine whether the early claims experience will 

continue or whether adjustments to the expected claims experience or 

premiums are indicated. While having lower-than-expected claims 

experience is a positive financial indicator, if the claims experience is 

significantly lower than expected over the longer term, then it is possible 

that the premiums are too high. On the other hand, in accordance with 

NAIC premium-setting guidelines, it may be appropriate to project the 

claims experience assuming moderately adverse results to protect against 

the need to raise premiums. As noted earlier, it is expected that the 

number of claims submitted in the first years of a long-term care insurance

program will be a small percentage of the claims submitted over time—

most claims are not expected to be submitted until 25 years or more after 

the program begins. Additionally, the expected claims experience is 

sensitive to factors such as the level of underwriting, the total number of 

enrollees, the ages of the enrollees, and the types of enrollees—for 

example, active workers, retirees, or relatives. Furthermore, the claims 

experience is only one of many factors—such as interest rates, lapse rates, 

 37Partners developed estimates for the claims experience based on their estimates for 

enrollment before the federal program began. We used a ratio that compares actual with 

expected paid claims per enrollee to account for lower-than-expected enrollment, but data 

were not available for the age or type of enrollees. 

Page 29 GAO-06-401 Federal Long Term Care Insurance Program 
and mortality rates—that affect the long-term financial outlook of the 

program. The financial projections for long-term care insurance are 

sensitive to changes in assumptions about all these factors. Figure 3 shows 

the amount of paid claims per 10,000 enrollees and figure 4 shows the 

number of paid claims per 10,000 enrollees during the first 3 years of the 

program compared with the expected claims experience over the first 

35 years of operation. 

Figure 3: Actual Claim Payments per 10,000 Enrollees in the First 3 Years 

Compared with Expected Claim Payments per 10,000 Enrollees over 35 Years for 

the Federal Long Term Care Insurance Program 

Source: GAO analysis of data provided by Partners.

Expected claim payments

Actual claim payments

$0

$1

$2

$3

$4

$5

$6

Policy year

Claim payments per 10,000 enrollees, 

in millions of dollars

0 5 10 15 20 25 30 35

Page 30 GAO-06-401 Federal Long Term Care Insurance Program 
Figure 4: Actual Number of Paid Claims per 10,000 Enrollees in the First 3 Years 

Compared with Expected Number of Paid Claims per 10,000 Enrollees over 35 Years

for the Federal Long Term Care Insurance Program 

Source: GAO analysis of data provided by Partners.

Expected number of paid claims

Actual number of paid claims

0

10

20

30

40

50

60

Policy year

Number of paid claims per 10,000 enrollees

0 5 10 15 20 25 30 35

Facility care accounted for a considerable portion of the federal program 

claim payments in the first 3 years. Of the total $3.6 million it paid for 

claims in the 3-year period, the federal program spent 49 percent on 

facility care, 3 percent on home care, 22 percent on informal caregivers, 

and 27 percent on other care. While about half of the total claim payment 

amount was spent on facility care, this type of care represented less than a 

quarter of the total number of claims. 

Generally, most early long-term care insurance claims are submitted for 

conditions such as cognitive problems, cancer, arthritis, stroke, and 

injuries. For the federal program, the most common medical conditions 

that prompted claims during this relatively early period were cancer, 

stroke, and injuries and poisoning. Across the individual and group 

products we reviewed, the most common medical conditions that 

prompted claims were also cancer, stroke and injuries, as well as cognitive 

problems, musculoskeletal disorders, cardiac disease, and arthritis. 

Page 31 GAO-06-401 Federal Long Term Care Insurance Program 
The Federal Long Term Care Insurance Program generally compared 

favorably with other products we studied during the first 3 years it offered 

coverage. The federal program offered benefits comparable to other 

products at competitive premium rates for similar benefits. Ultimately, the 

premium any enrollee pays for a long-term care insurance product is 

affected by several different factors, including the benefit options 

purchased, the age of the enrollee at the time of purchase, applicable 

discounts or surcharges, and the results of underwriting decisions. In 

addition, the premium is affected by the underlying assumptions about 

what will happen in the future regarding the number and dollar value of 

claims filed, interest rates, mortality rates, and lapse rates. If the actual 

claims experience, interest rates, mortality rates, or lapse rates vary 

significantly from what was expected, then this could mean that the 

premiums were too low or too high, and that premium or benefit 

adjustments could be warranted. Because the federal program had been 

offering coverage for only about 3 years at the time of our study, it was too 

early to draw conclusions about the claims experience, especially in

relation to the premiums charged. Consistent with other long-term care 

insurance products, the federal program expected most enrollees, who 

averaged 56 years old when they enrolled, to submit long-term care 

insurance claims in their mid-70s to mid-80s—the time when most claims 

are submitted. While the early claims experience of the federal program 

was considerably lower than initially projected before the program began,

an assessment of the claims submitted during the next several years and of

other factors that affect the financial performance of the program will 

begin to provide a clearer picture of the longer-term implications. 

We recommend that the Director of OPM take the following two actions. 

First, the Director should analyze the reasons for the lower-than-expected 

early claims experience and, as appropriate, use the results of this analysis

to modify assumptions about the expected claims experience. Second, the 

Director should analyze the projections for the amount of premiums to be

collected to pay for claims, including an analysis of the assumptions made 

for the projections that are related to future claims experience and other 

factors affecting premiums. OPM should report both analyses to Congress 

prior to the next contract negotiations. 

Conclusions 

Recommendations for 

Executive Action 

Page 32 GAO-06-401 Federal Long Term Care Insurance Program 
We provided a draft of this report to OPM, Partners, CalPERS, and five 

long-term care insurance carriers. Agency Comments 

In its written comments, OPM generally agreed with our findings and 

provided comments on our recommendations. OPM stated that it intends 

to consider this report when performing due diligence before making a 

decision about a new contract for administration of the Federal Long Term

Care Insurance Program, in accordance with the Long-Term Care Security 

Act. OPM also stated that the discussion of claims experience and 

premium setting in this report provides all the information currently 

available, precluding the need for a specific report on these issues at this 

time. OPM commented that it would provide updated information on 

claims experience and premium setting in its written recommendation to 

Congress prior to making a decision about the next contract. We support 

OPM’s willingness to consider updated information on claims experience 

and premium setting as it works with Congress in determining the next 

contract for the Federal Long Term Care Insurance Program, and we agree 

that a separate report will not be necessary. We believe that it is important 

that actuarial assumptions about future claims experience and premium 

setting reflect the experience of the program to date while still anticipating 

moderately adverse assumptions regarding claims experience and other 

factors in the future. In its comments, OPM also indicated that the 

expectations about the federal program’s enrollment and claims 

experience were established by Partners prior to the start of the program, 

rather than established by the marketplace. We revised the report to 

reflect that the expectations about enrollment and claims were established 

by Partners. (OPM’s comments are reprinted in app. IV.) 

In its written comments, Partners stated that the recommendation in the 

draft report implied that claims experience is the determining factor in the 

pricing of premiums, but that other sections of the report explain that 

other factors in addition to claims experience affect pricing, such as 

interest rates and lapse rates. We clarified the recommendation to reflect 

that other factors in addition to claims experience affect the pricing of 

premiums. 

OPM, Partners, and one carrier provided technical comments, which we 

incorporated as appropriate. 

Page 33 GAO-06-401 Federal Long Term Care Insurance Program 
We are sending copies of this report to the Director of OPM and interested 

congressional committees. We will also provide copies to others on 

request. In addition, this report is available at no charge on the GAO Web 

site at http://www.gao.gov. 

If you or your staff have any questions about this report, please contact me 

at (202) 512-7119 or dickenj@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix V. 

John E. Dicken 

Director, Health Care 

Page 34 GAO-06-401 Federal Long Term Care Insurance Program 
List of Committees 

The Honorable John Warner 

Chairman 

The Honorable Carl Levin 

Ranking Minority Member 

Committee on Armed Services 

United States Senate 

The Honorable George V. Voinovich

Chairman 

The Honorable Daniel K. Akaka 

Ranking Minority Member 

Subcommittee on Oversight of Government Management, 

 the Federal Workforce, and the District of Columbia 

Committee on Homeland Security and Governmental Affairs 

United States Senate 

The Honorable Duncan L. Hunter 

Chairman 

The Honorable Ike Skelton 

Ranking Minority Member 

Committee on Armed Services 

House of Representatives 

The Honorable Jon Christopher Porter 

Chairman 

The Honorable Danny K. Davis 

Ranking Minority Member 

Subcommittee on the Federal Workforce and Agency Organization 

Committee on Government Reform 

House of Representatives 

Page 35 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix I: Scope and Methodology 

Page 36 GAO-06-401 Federal Long Term Care Insurance Program 

Appendix I: Scope and Methodology 

To evaluate the competitiveness of the Federal Long Term Care Insurance 

Program, we surveyed Long Term Care Partners, LLC (referred to as 

Partners), the administrator of the federal program; the California Public 

Employees’ Retirement System (CalPERS), the second largest long-term 

care insurance group in the nation after the federal program; and five of 

the largest long-term care insurance carriers1

 to obtain long-term care 

insurance data. The five insurance carriers were AEGON USA,2

 Bankers 

Life and Casualty Company, Genworth Financial, John Hancock Life 

Insurance Company, and Metropolitan Life Insurance Company. All five

carriers sold policies in the individual market, and two of the five 

carriers—John Hancock Life Insurance Company and Metropolitan Life 

Insurance Company—were also among the five largest carriers that sold 

products in the group market. To supplement these data, we interviewed 

officials at the Office of Personnel Management (OPM); Partners; the five 

carriers; CalPERS and the organization that administers its program; and 

five trade associations, including one representing actuaries. We also 

interviewed three experts on long-term care insurance. In addition, we 

reviewed studies and literature addressing long-term care insurance. We

conducted our work from March 2005 through February 2006 in 

accordance with generally accepted government auditing standards. 

We developed a data-collection instrument to obtain uniform long-term 

care insurance data from Partners, CalPERS, and the five carriers. In 

developing the instrument, we attempted to collect as much data as 

possible while also considering the burden our request would place on the

respondents. Because of the proprietary nature of much of the data we 

requested from the five carriers, we agreed to report the data so that they

could not be attributed to any specific carrier unless the carrier agreed 

that we could release the data. To capture the full experience of the 

Federal Long Term Care Insurance Program, we requested data from 

Partners for the period March 25, 2002—the first day of the federal early 

enrollment period—through March 31, 2005. We requested data from the 

Data Request 

 1

We selected the five carriers on the basis of the total number of policies and annualized 

premiums in effect in the individual market as of December 31, 2004. 

2

AEGON USA left the long-term care insurance market on March 31, 2005. 
Appendix I: Scope and Methodology 

carriers and CalPERS for the period July 1, 2002, through March 31, 2005.3

To document the early enrollment and open enrollment periods for the 

federal program, we also requested data from Partners for the period of 

March 25, 2002, through February 7, 2003—the last day the open 

enrollment period applications were processed. From each source, we 

requested data for the following categories: benefits, premiums, 

administrative costs, enrollment and enrollee characteristics, and claims 

experience.

We requested data on the number of enrollees in the individual and group 

markets (including the federal program and CalPERS) who chose selected 

benefit options for new long-term care insurance policies sold from July 1, 

2002 (March 25, 2002, for the federal program) through March 31, 2005. We 

collected data on coverage types, daily benefit amounts, elimination 

periods, benefit periods, inflation-protection options, Health Insurance 

Portability and Accountability Act of 1996 (HIPAA) tax-qualification 

status, and optional benefits offered. The respondents determined which 

policies they considered to be sold during the period. While we asked the 

respondents, where possible, to report data for sold policies that became 

active and for which they collected premiums, two respondents reported 

benefit data for the number of new applications submitted rather than for 

the new policies sold during the period. Because the federal program 

offered long-term care insurance coverage in four prepackaged plans, we 

asked Partners to identify the most popular benefit package chosen. 

(Table 6 in app. II summarizes the four prepackaged plans offered in the 

federal program.) 

We asked Partners to provide annual premiums for a policy sold on March 

31, 2005, for enrollees in each of the four prepackaged benefit plans 

offered by the federal program, with automatic compound inflation 

protection. Partners provided premium data for enrollees of four different 

ages—40, 50, 60, and 70 years old—for the four benefit packages, with 

automatic compound inflation protection and with a future purchase 

Benefits 

Premiums 

 3

We asked the carriers and CalPERS to provide data for the period beginning July 1, 2002,

which is the beginning of the federal open enrollment period, rather than March 25, 2002, 

the beginning of the federal early enrollment period. Because few federal program

enrollees—about 4 percent of the program’s total enrollment as of March 31, 2005—had

coverage that became effective during the early enrollment period, we reduced the 

reporting burden for the carriers by requesting data for the period beginning July 1, 2002.

Page 37 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix I: Scope and Methodology 

option for inflation protection. Because the federal program provided no 

discounts for spouses, we doubled the premiums that single people paid to

determine how much a married couple of the same age would pay 

annually for a long-term care insurance policy through the federal 

program. 

To compare premiums with those in the federal program, we asked the 

five carriers selling products in the individual insurance market and 

CalPERS to provide annual premium data for the four federal benefit 

packages or for coverage that most closely resembled each package for 

people for the four ages—40, 50, 60, and 70 years old—for policies sold on

March 31, 2005. Two of the five carriers selling individual products did not 

sell facilities-only coverage on March 31, 2005, so we did not include the 

premiums for facilities-only coverage in our analyses. Therefore, we 

compared premiums for the three comprehensive benefit packages in the 

federal program. Because carriers selling products in the individual 

market usually place people in rating categories according to their health 

and other criteria, we asked them to provide annual premiums for a single

person underwritten into the standard rating category, which is the 

category most often used. Furthermore, as these carriers usually offer 

discounts for married couples, we asked them to provide annual premiums 

for a married couple of the same age underwritten into the standard rating

category. The premiums the carriers reported reflected their discounts for 

couples, which in each case was either 30 percent or 40 percent. We also 

asked respondents to identify the coverage types, daily benefit amounts, 

elimination periods, benefit periods, and inflation protection for the 

packages if these benefits differed from those of the federal benefit 

packages. These are the benefit options that most affect premiums. We did 

not ask them to identify other benefits automatically included in the 

coverage or to identify the percentage of the daily benefit amount that the 

package covered for benefits such as formal home care or informal home 

care, if included. Other than for CalPERS—which, like the federal 

program, did not use rating categories or provide discounts for spouses—

we did not request any premium data for other group products because of

the variation that exists across the groups insured by each carrier. 

To compare the amount of premium spent on claims and the costs 

associated with administering long-term care insurance in the federal

program with that of other products, we collected information on 

anticipated lifetime loss ratios. The anticipated lifetime loss ratio 

represents the present value of the total expected claim payments 

compared with the present value of the total expected premiums over the 

life of a set of policies. This ratio describes what portion of the premium 

Page 38 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix I: Scope and Methodology 

dollar is expected to pay for claims over a long period, with the balance 

going to administrative costs and profits. We collected these data for new

policies sold from July 1, 2002 (March 25, 2002, for the federal program) 

through March 31, 2005. Two respondents did not provide data on loss 

ratios. 

We asked for enrollment information from Partners, CalPERS, and the five 

carriers for new policies sold from July 1, 2002 (March 25, 2002, for the 

federal program) through March 31, 2005, including the number of new 

applications submitted and approved. We obtained data on selected 

enrollee characteristics, including age at time of enrollment and sex. 

We collected claims-related data from our study participants. For example, 

we obtained the primary medical conditions that prompted the claims 

from Partners, CalPERS, and the five carriers. However, because of 

differences in enrollee characteristics and benefit choices across the 

carriers that would affect the claims experience, we focused primarily on 

the early claims experience of the federal program. We collected data on

the number of paid claims and the amount of claim payments during the 

3-year study period from Partners. We also compared the anticipated 

claims experience for the federal program as projected prior to initial 

enrollment with the actual number of claims submitted and the actual 

amount of claim payments during the 3-year period. 

To learn about long-term care insurance and to discuss the type of data we 

wanted to obtain through our data request, we interviewed officials at 

OPM and Partners, a CalPERS official and an official from the organization 

that administers the program, and officials at five carriers that sold 

products in the individual market—two of these carriers were also among 

the five largest carriers that sold products in the group market. We also 

conducted follow-up interviews to clarify the data provided in response to 

our data request, to verify reliability of the data received, and to obtain 

additional information. 

Enrollment and Enrollee 

Characteristics 

Claims Experience 

Long-term Care 

Insurance Interviews 

We interviewed officials at several groups and associations as well as longterm care insurance experts. To obtain broader-based information about 

long-term care insurance, we interviewed the Director of Long-Term Care 

at America’s Health Insurance Plans and the Senior Director of Long-Term 

Care Insurance at the American Council of Life Insurers. We interviewed

actuaries and health policy staff from the American Academy of Actuaries. 

Page 39 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix I: Scope and Methodology 

To learn more about state regulation of long-term care insurance products

we contacted officials at the National Association of Insurance 

Commissioners. We interviewed officials at AARP to learn about long-term 

care insurance and the products offered through that association. We also 

interviewed three experts on long-term care insurance. 

We also reviewed studies on long-term care insurance, including a 

longitudinal study on buyers and nonbuyers of long-term care insurance.4

In addition, we reviewed a literature review5

 and six policy briefs 

commissioned by the Department of Health and Human Services, Office of 

the Assistant Secretary for Planning and Evaluation, all dated August 

2004.

6

 4

For example, we reviewed America’s Health Insurance Plans, Research Findings, LongTerm Care Insurance in 2002 (Washington, D.C.: June 2004); Health Insurance 

Association of America by LifePlans, Inc., Who Buys Long-Term Care Insurance in 2000? 

A Decade of Study of Buyers and Nonbuyers (Washington, D.C.: October 2000); and

Society of Actuaries, Long Term Care Experience Committee Intercompany Study 1984 – 

2001 (Schaumburg, Ill.: November 2004). 

5

Department of Health and Human Services, Office of the Assistant Secretary for Planning 

and Evaluation, What We Know About Buyers and Non-Buyers of Private Long-Term 

Care Insurance: A Review of Studies (Washington, D.C.: August 2004). 

6

The six policy briefs were (1) A Demographic and Attitudinal Profile of Buyers of the 

Federal Long-Term Care Insurance Program, (2) A Demographic and Attitudinal Profile 

of Non-Buyers of the Federal Long-Term Care Insurance Program, (3) A Demographic

and Attitudinal Profile of Non-Responders to the Federal Long-Term Care Insurance 

Program, (4) A Comparison of Demographic and Attitudinal Characteristics Among 

Active and Retired Buyers, Non-Buyers and Non-Responders to the Federal Long-Term 

Care Insurance Program, (5) Marketing Activities: A Comparative Analysis of 

Engagement and Participation Among Buyers, Non-Buyers and Non-Responders of the 

Federal Long-Term Care Insurance Program, and (6) Multivariate Analysis of Buyers

and Non-Buyers of the Federal Long-Term Care Insurance Program. Each policy brief 

was prepared under contract between the Department of Health and Human Services, 

Office of the Assistant Secretary for Planning and Evaluation, Office of Disability, Aging 

and Long-Term Care Policy and LifePlans, Inc. (Washington, D.C.: August 2004). 

Page 40 GAO-06-401 Federal Long Term Care Insurance Program 
Appendi

Insuranc

x II: Federal Long Term Care 

e Program Benefits 

Page 41 GAO-06-401 Federal Long Term Care Insurance Program 

Appendix II: Federal Long Term Care 

Insurance Program Benefits 

The Federal Long Term Care Insurance Program offered enrollees the 

option of choosing a prepackaged benefit plan or of customizing benefits.

In addition, some applicants for federal benefits who were denied regular 

coverage had another option available that offered nursing-home-only 

coverage, called the Alternative Insurance Plan, while all applicants denied

coverage could purchase a Service Package, which did not provide 

insurance but offered services such as access to a person who coordinated 

care and to a discounted network of long-term care providers. Nearly twothirds of all federal enrollees during the period March 25, 2002, through 

March 31, 2005, chose a prepackaged benefit plan, with the remaining 

enrollees during that period customizing benefits or enrolling in the 

Alternative Insurance Plan. 

Enrollees in the Federal Long Term Care Insurance Program could choose 

from four prepackaged benefit plans. In each of the plans, several benefit

options—daily benefit amount; coverage period; elimination period; and 

maximum lifetime benefit, which is a combination of the daily benefit 

amount and benefit period—had been preselected into the packages along 

with all covered services. After selecting one of the four packages, the 

enrollee only had to choose the type of inflation protection—either 

automatic compound1

 or the future purchase option.2 Table 6 shows the 

four prepackaged plans offered in the Federal Long Term Care Insurance 

Program. 

Prepackaged Benefit 

Plans in the Federal 

Long Term Care 

Insurance Program 

 1

Automatic compound inflation protection increased daily benefit amounts and the

remaining amount of the maximum lifetime benefit by 5 percent each year without 

increasing premiums. The increase in benefits continued even if the enrollee had begun to

receive covered long-term care services. 

2

The future purchase option offered the opportunity to increase the daily benefit amount

and the remaining amount of the maximum lifetime benefit every 2 years at an extra cost. 

When offered the option to increase benefits, the enrollee could not be receiving covered 

long-term care services. The benefit increases would be based on increases in the

Consumer Price Index for Medical Care. Once the enrollee had declined three offers to

increase benefits, the offers would not start again unless the enrollee specifically requested

one and provided evidence of good health. The premium for the additional coverage was 

based on the enrollee’s age and premium at the time the increase took effect. With each 

inflation offer, the enrollee could also switch to the automatic compound inflationprotection option without proof of good health, as long as he or she was not eligible for 

benefits at that time and had not declined three offers in the past. 
Appendix II: Federal Long Term Care 

Insurance Program Benefits 

Table 6: Prepackaged Plans in the Federal Long Term Care Insurance Program 

Facilities 100 Comprehensivea 100 Comprehensivea 150 Comprehensivea 150+

Benefit options

Daily benefit amount 

(DBA)b

$100 $100 $150 $150

Benefit period 3 years 3 years 5 years Unlimited 

Elimination period 90 days 90 days 90 days 90 days 

Maximum lifetime 

benefitb

$109,500 $109,500 $273,750 Unlimited

Inflation protection Choice of automatic 

compound or future 

purchase option

Choice of automatic 

compound or future 

purchase option

Choice of automatic 

compound or future 

purchase option

Choice of automatic 

compound or future 

purchase option

Covered services

Nursing home, assisted 

living facility, or hospice 

facility 

100% of DBA 100% of DBA 100% of DBA 100% of DBA 

Respite care in a 

facilityc

100% of DBA 100% of DBA 100% of DBA 100% of DBA 

Caregiver trainingd100% of DBA 100% of DBA 100% of DBA 100% of DBA 

Bed reservationse100% of DBA 100% of DBA 100% of DBA 100% of DBA 

Formal caregiver 

services at home 

None 75% of DBA 75% of DBA 75% of DBA 

Informal caregiver 

services at homef

None 75% of DBA 75% of DBA 75% of DBA 

Hospice care at home None 100% of DBA 100% of DBA 100% of DBA 

Adult day care center None 75% of DBA 75% of DBA 75% of DBA 

Sources: OPM and Partners. 

a

A comprehensive plan covers everything a facilities-only plan covers plus formal or informal care at

home, care in adult day care centers, hospice care at home, and respite services at home. 

b

Does not reflect inflation-protection increases. Also, weekly benefit amounts are available under 

comprehensive options. The weekly benefit amount is equal to 7 times the DBA. 

c

Benefits limited to 30 times the DBA per calendar year. Comprehensive options provide respite care 

at up to 75 percent of the DBA at home or at an adult day care center in addition to services in a 

facility.

d

Benefits limited to 7 times the DBA in a lifetime. 

e

This benefit pays a nursing home, assisted living facility, or hospice facility to hold a bed while an 

enrollee is temporarily absent so that the enrollee may return to the facility. Benefits are limited to 30 

days per calendar year. 

f

Benefits for informal caregiver services are limited to those provided by people who did not normally 

live in enrollee’s home at the time enrollee became eligible for benefits. Benefits for care provided by

family members are limited to 365 days in a lifetime. 

Page 42 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix II: Federal Long Term Care 

Insurance Program Benefits 

The federal program included care-coordination benefits and coverage for 

international benefits and had no war exclusion. Federal program care 

coordinators provide, among other services, general information about 

long-term care services; assess and approve need for care; develop a care 

plan; and monitor and reassess services. Using these services did not 

reduce an enrollee’s maximum lifetime benefits. Care-coordination 

services were also available to qualified relatives,3 who did not need to be

enrolled in the program, although some services could be provided at an 

additional charge. Coverage for benefits received outside the United States

was available at 80 percent of the maximum amounts that would 

otherwise be payable, with certain restrictions. Although the federal 

program did not have a war exclusion, it included a catastrophic-coverage 

limitation; that is, a catastrophic event could limit the benefit period. 

The federal program did not include several benefits and services that 

could be available in other products. For example, the federal program did 

not offer limited pay policies, in which the long-term care insurance policy 

could be paid up over a limited period of time; restoration of benefit 

options, in which any of the policy’s maximum benefits that has been used 

could be replaced if the enrollee did not receive benefits for a specified 

period of time; or any discounts for both spouses of a married couple 

purchasing coverage, all of which were options available in individual 

products. 

Federal program enrollees had several options for customizing benefits 

instead of choosing a prepackaged benefit plan. Within certain parameters, 

federal enrollees could design their own plans by mixing and matching 

benefit options. In total, the federal program provided for 528 design 

variations. In addition to the benefit options selected, covered services 

listed in table 6 were automatically included. Table 7 shows the type and

number of benefit options available to enrollees.

Customized Benefits 

in the Federal 

Program 

 3

Qualified relatives include current spouses of employees and retirees; adult children at

least 18 years old—including natural, adopted, and stepchildren, but not foster children—

of living employees and retirees; and parents, parents-in-law, and stepparents of living 

employees but not of retirees. 

Page 43 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix II: Federal Long Term Care 

Insurance Program Benefits 

Table 7: Benefit Options in the Federal Long Term Care Insurance Program 

Benefit description

Number of 

options

Coverage type—facilities-only or comprehensivea 2

Daily benefit amountsb—from $50 to $300, in $25 increments 11

Elimination periods—30 days or 90 days 2

Benefit periods—3 years, 5 years, or unlimited 3

Inflation protection—automatic compound inflation or future 

purchase option 2

Source: OPM and Partners. 

a

A comprehensive plan covers everything a facilities-only plan covers plus formal or informal care at

home, hospice care at home, respite services at home, and care in adult day care centers. 

b

The federal program also offers weekly benefit amounts with a comprehensive plan for an additional 

cost. 

Applicants denied regular coverage in the Federal Long Term Care 

Insurance Program had other benefit options. Some federal employees, 

members of the uniformed services, and their spouses who could apply for 

the federal program using an abbreviated application, but who were 

denied regular coverage, were offered coverage in the Alternative 

Insurance Plan. This plan covered nursing homes only, had a 180-day 

elimination period, provided coverage for 2 years, and started with a 

weekly benefit amount of $200. In addition, all applicants for the federal

program who were denied coverage could purchase a Service Package for 

an annual fee. This noninsurance option provided access to carecoordination services and discounts. 

Nearly two-thirds of the 218,890 people who enrolled in the federal 

program from March 25, 2002, through March 31, 2005, chose one of the

four prepackaged benefits. As shown in table 8, 35 percent of the enrollees 

customized their benefits within the ranges offered by the federal 

program, and less than 1 percent enrolled in the Alternative Insurance 

Plan. 

Other Benefits in the 

Federal Program 

Enrollment in Federal 

Program Benefits 

Page 44 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix II: Federal Long Term Care 

Insurance Program Benefits 

Table 8: Federal Long Term Care Insurance Program Enrollment in Prepackaged

Benefit Plans, Customized Benefits, and Alternative Insurance Plan from

March 25, 2002, through March 31, 2005 

Number Percentage

Prepackaged benefit plans 141,195 65

With automatic compound inflation protection 93,870 43

With future purchase option for inflation protection 47,325 22

Customized benefits 77,164 35

With automatic compound inflation protection 55,015 25

With future purchase option for inflation protection 22,149 10

Alternative Insurance Plana531 <1

Total 218,890 100

Source: OPM and Partners. 

Note: Individual entries may not add to 100 percent because of rounding. 

a

For the Alternative Insurance Plan, if coverage remains in effect for 24 months, 48 months, or 72 

months, and enrollee does not become eligible for benefits, weekly benefit amount increases to $300, 

$400, or $500, respectively, without an increase in the premium. 

Overall, 141,195 people enrolled in one of the four prepackaged benefit 

plans. Of the enrollees who chose a prepackaged benefit plan, 12 percent 

enrolled in the facilities-only package. The remainder, 88 percent, enrolled 

in one of the three comprehensive packages. Most of the people who 

enrolled in a comprehensive package enrolled in the Comprehensive 100 

package. About two-thirds of all the enrollees choosing a prepackaged 

benefit plan also chose automatic compound inflation protection. Table 9 

shows federal program enrollment in the four prepackaged benefit plans. 

Table 9: Federal Long Term Care Insurance Program Enrollment in Prepackaged

Benefit Plans from March 25, 2002, through March 31, 2005 

Number who 

chose automatic 

compound

inflation

Number who 

chose future 

purchase option Total Percentage

Facilities 100 10,324 6,749 17,073 12

Comprehensive 100 41,031 18,110 59,141 42

Comprehensive 150 25,575 12,962 38,537 27

Comprehensive 150+ 16,940 9,504 26,444 19

Total 93,870 47,325 141,195 100

Source: OPM and Partners. 

Page 45 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix III: Annual Premiums for Three 

Benefit Packages Offered in the Federal

Program and at Five Carriers 

Page 46 GAO-06-401 Federal Long Term Care Insurance Program 

Appendix III: Annual Premiums for Three 

Benefit Packages Offered in the Federal 

Program and at Five Carriers 

Annual premiums for three comprehensive benefit packages offered in the 

Federal Long Term Care Insurance Program compared favorably with 

premiums at five carriers selling similar products in the individual 

insurance market. Tables 10 through 12 show that federal premiums for 

each of the three benefit packages were always lower than the average 

premium at five carriers for single people and for married couples who 

were both the same age. When considering the range of premiums 

available at the five carriers selling similar individual products, federal 

premiums for a single person were always lower than the premiums for 

individual products, while married couples who were both the same age 

could find lower premiums in the federal program in almost every case. 
Appendix III: Annual Premiums for Three 

Benefit Packages Offered in the Federal

Program and at Five Carriers 

Table 10: Annual Premiums for Single People and Married Couples Who Were Both

the Same Age for the Federal Long Term Care Insurance Program and for Five 

Carriers in the Individual Insurance Market for Package 1 Sold on March 31, 2005 

Enrollee 

Federal 

program

Average for five 

carriersa

 

Percentage

differenceb

Range for

five carriers

Single person 

40 years old $520.80 $1,045.70 50 $913.68 to 

$1,349.01

50 years old 746.40 1,253.02 40 1,063.14 to 

1,580.06

60 years old 1,118.40 1,702.32 34 1,455.12 to 

2,213.00

70 years old 1,852.80 3,143.29 41 2,723.27 to 

3,880.77

Married couples who were both the same age 

40 years old 1,041.60 1,382.38 25 1,152.00 to 

1,888.61

50 years old 1,492.80 1,653.03 10 1,428.00 to 

2,212.08

60 years old 2,236.80 2,248.25 1 1,920.00 to 

3,098.20

70 years old 3,705.60 4,155.52 11 3,518.00 to 

5,433.07

Source: GAO analysis of data provided by Partners and five carriers selling individual products. 

Notes: Premiums shown are for the federal program’s Comprehensive 100 benefit package (Package

1), the most popular federal benefit package purchased through March 31, 2005. Package 1 included

a $100 daily benefit amount, 3-year benefit period, 90-day elimination period, and the automatic 

compound inflation-protection option. 

For the five carriers we reviewed, premiums were for a single person and a married couple who were

both the same age placed in the standard rating category. The federal program did not use rating 

categories. Premiums for married couples who were both the same age at the five carriers reflected 

either a 30-percent or a 40-percent discount. The federal program did not provide discounts for 

spouses. Therefore, we doubled the premiums charged for single people. We assumed there was no

discount for good health. 

All benefits chosen by an enrollee affect the pricing of the package to some degree. Carriers provided

premiums for the major options most similar to the federal program that had the largest effect on the 

premiums—daily benefit amounts, benefit periods, elimination periods, and inflation protection. 

a

One carrier reported premiums for a 100-day elimination period rather than for a 90-day period. 

b

The percentage difference shows how much lower the annual federal program premium is than the 

average annual premium at the five carriers selling individual products. 

Page 47 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix III: Annual Premiums for Three 

Benefit Packages Offered in the Federal

Program and at Five Carriers 

Table 11: Annual Premiums for Single People and Married Couples Who Were Both

the Same Age for the Federal Long Term Care Insurance Program and for Five 

Carriers in the Individual Insurance Market for Package 2 Sold on March 31, 2005 

Enrollee 

Federal 

program

Average for five 

carriersa

 

Percentage

differenceb

Range for five 

carriers

Single person 

40 years old $950.40 $2,066.88 54 $1,855.00 to 

$2,557.12

50 years old 1,364.40 2,446.50 44 2,144.61 to 

3,000.74

60 years old 2,044.80 3,332.64 39 2,842.56 to 

4,213.44

70 years old 3,380.40 6,178.10 45 5,352.64 to 

7,428.87

Married couples who were both the same age 

40 years old 1,900.80 2,735.83 31 2,225.00 to 

3,579.97

50 years old 2,728.80 3,231.50 16 2,700.00 to 

4,201.03

60 years old 4,089.60 4,404.34 7 3,726.00 to 

5,898.81

70 years old 6,760.80 8,149.30 17 6,801.00 to 

10,400.41

Source: GAO analysis of data provided by Partners and five carriers selling individual products. 

Notes: Premiums shown are for the federal program’s Comprehensive 150 benefit package (Package

2). Package 2 included a $150 daily benefit amount, 5-year benefit period, 90-day elimination period, 

and the automatic compound inflation-protection option. 

For the five carriers we reviewed, premiums were for a single person and a married couple who were

both the same age placed in the standard rating category. The federal program did not use rating 

categories. Premiums for married couples who were both the same age at the five carriers reflected 

either a 30-percent or a 40-percent discount. The federal program did not provide discounts for 

spouses. Therefore, we doubled the premiums charged for single people. We assumed there was no

discount for good health. 

All benefits chosen by an enrollee affect the pricing of the package to some degree. Carriers provided

premiums for the major options most similar to the federal program that had the largest effect on the 

premiums—daily benefit amounts, benefit periods, elimination periods, and inflation protection. 

a

One carrier reported premiums for a 100-day elimination period rather than for a 90-day period. 

b

The percentage difference shows how much lower the annual federal program premium is than the 

average annual premium at the five carriers selling individual products. 

Page 48 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix III: Annual Premiums for Three 

Benefit Packages Offered in the Federal

Program and at Five Carriers 

Table 12: Annual Premiums for Single People and Married Couples Who Were Both

the Same Age for the Federal Long Term Care Insurance Program and for Five 

Carriers in the Individual Insurance Market for Package 3 Sold on March 31, 2005 

Enrollee 

Federal 

program

Average for 

five carriersa 

Percentage

differenceb

Range for five 

carriers

Single person 

40 years old $1,310.40 $3,066.24 57 $2,755.65 to 

$3,585.57

50 years old 1,875.60 3,647.26 49 3,165.00 to 

4,186.00

60 years old 2,779.20 5,004.11 44 4,455.00 to 

5,788.75

70 years old 4,550.40 9,093.04 50 7,740.90 to 

10,051.12

Married couples who were both the same age 

40 years old 2,620.80 4,051.62 35 3,546.00 to 

5,019.80

50 years old 3,751.20 4,812.09 22 3,798.00 to 

5,846.35

60 years old 5,558.40 6,606.20 16 5,346.00 to 

8,104.25

70 years old 9,100.80 11,971.86 24 10,837.26 to 

14,071.56

Source: GAO analysis of data provided by Partners and five carriers selling individual products. 

Notes: Premiums shown are for the federal program’s Comprehensive 150+ benefit package 

(Package 3). Package 3 included a $150 daily benefit amount, unlimited benefit period, 90-day 

elimination period, and the automatic compound inflation-protection option. 

For the five carriers we reviewed, premiums were for a single person and a married couple who were

both the same age placed in the standard rating category. The federal program did not use rating 

categories. Premiums for married couples who were both the same age at the five carriers reflected 

either a 30-percent or a 40-percent discount. The federal program did not provide discounts for 

spouses. Therefore, we doubled the premiums charged for single people. We assumed there was no

discount for good health. 

All benefits chosen by an enrollee affect the pricing of the package to some degree. Carriers provided

premiums for the major options most similar to the federal program that had the largest effect on the 

premiums—daily benefit amounts, benefit periods, elimination periods, and inflation protection. 

a

One carrier reported premiums for a 100-day elimination period rather than for a 90-day period. 

b

The percentage difference shows how much lower the annual federal program premium is than the 

average annual premium at the five carriers selling individual products. 

Page 49 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix IV: Comments from the Office of

Personnel Management 

Page 50 GAO-06-401 Federal Long Term Care Insurance Program 

Appendix IV: Comments from the Office of 

Personnel Management 
Appendix IV: Comments from the Office of

Personnel Management 

Page 51 GAO-06-401 Federal Long Term Care Insurance Program 
Appendix V: 

St

GAO Contact and 

aff Acknowledgments

Page 52 GAO-06-401 Federal Long Term Care Insurance Program 

Appendix V: GAO Contact and Staff 

Acknowledgments 

John E. Dicken, (202) 512-7119 or dickenj@gao.gov 

In addition to the contact named above, Christine Brudevold, Assistant 

Director; Laura Sutton Elsberg; Elizabeth T. Morrison; Michelle Murray; 

and Joseph Petko made key contributions to this report. 

GAO Contact 

Acknowledgments 

(290447) 
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