United States Government Accountability Office

GAO Report to Congressional Committees

LONG-TERM CARE 

INSURANCE 

Federal Program Has 

a Unique Profit 

Structure and Faced a 

Significant Marketing 

Challenge 

December 2006 

 

GAO-07-202 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

December 2006

LONG-TERM CARE INSURANCE

Federal Program Has a Unique Profit 

Structure and Faced a Significant 

Marketing Challenge 

Highlights of GAO-07-202, a report to 

congressional committees 

Spending on long-term care

services—about $193 billion in 

2004—is expected to rise. In 2000, 

Congress passed the Long-Term

Care Security Act, requiring the 

federal government to offer longterm care insurance. To do so, the 

Office of Personnel Management 

(OPM) contracted with Long Term

Care Partners LLC (Partners) to

create the Federal Long Term Care

Insurance Program. This is the 

second of two reports required by

the act on the competitiveness of

the federal program. GAO’s 

March 31, 2006, report, Long-Term

Care Insurance: Federal Program 

Compared Favorably with Other 

Products, and Analysis of Claims 

Trend Could Inform Future 

Decisions (GAO-06-401), found

that the federal program’s benefits 

and premiums compared favorably

with other plans, but enrollment 

and claims experience—the

amount and number of claims 

payments—were lower than

Partners expected. 

In this report, GAO compared the 

federal program’s profit structure

and marketing efforts with those of 

other plans and updated its 

analysis of the program’s claims 

experience. GAO reviewed the 

contract between OPM and 

Partners and interviewed OPM,

Partners, and insurance carrier 

officials, as well as actuaries and 

industry experts. GAO also 

analyzed data on claim payments 

for the federal program since it 

began in 2002. 

The Federal Long Term Care Insurance Program has a unique profit 

structure that is explicitly defined in the contract between OPM and 

Partners. This profit structure consists of three distinct annual payments to 

Partners: (1) a guaranteed payment of 3.5 percent of the year’s collected 

premiums, (2) a payment linked to OPM’s evaluation of Partners’ 

performance of up to 3 percent of the year’s collected premiums, and (3) a

guaranteed payment of 0.3 percent of the average annual assets of the 

program. These payments are separate from other payments made to cover

the program’s expenses. In contrast to the federal program, profits realized 

by carriers offering other long-term care insurance plans generally are not 

based on explicit profit structures, but rather on the experience of the 

programs they insure. 

The federal program’s marketing efforts were generally similar to those used 

for other plans sold in the group market, but faced a significant challenge in 

sending information directly to eligible individuals. The federal program and 

other plans sold in the group market used such marketing efforts as mailing 

information to the homes of eligible individuals and hosting employee and 

retiree seminars. Of these efforts, carrier officials GAO spoke with explained 

that mailing to the homes of eligible individuals was critical to their 

marketing strategy. The federal program faced a significant challenge in 

mailing information to the homes of those eligible for the program because it 

initially did not have the home addresses for nearly all active federal civilian 

employees. Because of this challenge, the federal program relied heavily on 

marketing efforts that were less direct and less personalized, such as

sending information to federal employees through agency benefits officers. 

The federal program’s claims experience increased in the program’s fourth 

year, but remained lower than the expectations established by Partners in its 

contract with OPM. This increase was generally consistent with trends since 

the federal program began in 2002. Overall, the federal program has paid 

44 percent of the expected amount of claim payments per enrollee and 

41 percent of the expected number of claims per enrollee. As of August 2006, 

Partners officials had not determined why the claims experience was lower

than Partners’ expectations. While it is generally expected that the number 

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

program will be a small portion of the total number of claims submitted over 

time, a program’s claims experience is one of several factors that may affect 

its long-term financial outlook. The results of this analysis underscore GAO’s 

prior recommendations that OPM analyze the claims experience and 

assumptions affecting premiums to inform forthcoming contract 

negotiations.

In commenting on a draft of this report, OPM generally agreed with the 

report’s findings. 

www.gao.gov/cgi-bin/getrpt?GAO-07-202.

To view the full product, including the scope 

and methodology, click on the link above. 

For more information, contact John E. Dicken 

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

Letter 1

Results in Brief 4 

Background 6

Federal Program Has a Unique Profit Structure 11 

Federal Program Used Marketing Efforts Generally Similar to

Those Used for Other Plans but Faced a Significant Challenge 14 

Claims Experience in the Federal Program Increased but Remained 

Lower Than Expectations 17 

Concluding Observations 18 

Agency Comments 20 

Appendix I Performance Measures Used for the Federal Long 

Term Care Insurance Program 23 

Appendix II Comments from the Office of Personnel Management 26 

Appendix III GAO Contact and Staff Acknowledgments 28 

Related GAO Products 29 

Tables 

Table 1: Profit Structure of the Federal Long Term Care Insurance 

Program 12

Table 2: Actual Claims per Enrollee as a Percentage of Expected 

Claims per Enrollee in the First 4 Years of the Federal 

Long Term Care Insurance Program 17 

Table 3: Federal Long Term Care Insurance Program’s Short-Term 

Performance Measures, Assessed Annually 24 

Table 4: Federal Long Term Care Insurance Program’s Long-Term 

Performance Measures, Assessed Every 3 Years 25 

Page i GAO-07-202 Federal Long Term Care Insurance Program 
Figure 

Figure 1: Actual Claim Payments per 10,000 Enrollees in the First 4 

Years of the Federal Long Term Care Insurance Program 

Compared with Expected Claim Payments per 10,000 

Enrollees over 35 Years 18 

Abbreviations 

NAIC National Association of Insurance Commissioners 

OPM Office of Personnel Management 

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Page ii GAO-07-202 Federal Long Term Care Insurance Program 
United States Government Accountability Office

Washington, DC 20548 

December 29, 2006 

Congressional Committees 

In 2004, about $193 billion was spent nationwide on long-term care 

services, including nursing home care and other assisted-living services.1

Most of this care was financed by government programs, primarily by 

Medicaid, a joint federal-state program that finances health insurance for 

certain low-income adults and children. Elderly people—those aged 65 or 

older—consume about two-thirds of all long-term care services. As the 

elderly population continues to grow, particularly with the aging of the 

baby boom generation, the increasing demand for long-term care services 

will likely strain federal and state resources. Some policymakers propose 

that increased use of long-term care insurance may be a means of reducing 

the future financial burden on public programs. In 2000, Congress passed 

the Long-Term Care Security Act, requiring the federal government to offer 

long-term care insurance to its employees, their families, and others.2

Congressional committee reports accompanying the act indicated that a 

federal long-term care insurance program could encourage people to 

purchase long-term care insurance, serve as a model for other employersponsored programs across the nation,3

 and encourage private payment 

sources to assume some of the insurance risk.4

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—

entered into a 7-year contract with Long Term Care Partners LLC (referred 

to as Partners) that allows certain eligible individuals affiliated with the 

federal government to apply for long-term care insurance. Individuals 

 1

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

illness or disability, generally are unable to perform activities of daily living for an extended 

period. Such activities include eating, bathing, dressing, using the toilet, getting in and out 

of bed, and getting around the house. Some people may also need help in performing

instrumental activities of daily living, which include preparing meals, shopping for 

groceries, and getting around outside. 

2

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

3

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

4

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

Page 1 GAO-07-202 Federal Long Term Care Insurance Program 
eligible for the Federal Long Term Care Insurance Program include federal 

and Postal Service employees and retirees; active and retired members of 

the uniformed services; qualified relatives of these individuals, such as 

spouses of employees and retirees; and certain others. Partners is a joint 

venture formed by two large insurance carriers that sell long-term care 

insurance products in the private market—John Hancock Life Insurance 

Company and Metropolitan Life Insurance Company. The contract 

between OPM and Partners outlines the roles and responsibilities of all 

parties with respect to the program, including how payments for program 

expenses and profits are determined. Partners began marketing the 

Federal Long Term Care Insurance Program in February 2002, and the 

program began accepting enrollment applications on March 25, 2002. As of

September 30, 2006, the federal program had 214,034 current enrollees, 

making it the largest private long-term care insurance program in the 

nation.5

This report is the second of two reports required by the Long-Term Care 

Security Act on the competitiveness of the federal program compared with 

group and individual plans generally available in the private insurance 

market.6

 Our first report found that the program compared favorably with 

other group and individual plans we reviewed in terms of benefits offered 

and premiums. However, in its first 3 years, from April 1, 2002, through 

March 31, 2005, the federal program’s enrollment and claims experience—

that is, the number of paid claims and the amount paid for those claims—

were lower than the expectations established by Partners.7

 We 

recommended that the Director of OPM analyze the reasons for the lowerthan-expected claims experience and, as appropriate, use the results to 

modify assumptions about the expected claims experience. We also 

recommended that the Director of OPM analyze the projections for the 

amount of premiums collected to pay for claims. In response to these 

recommendations, OPM indicated that it intended to provide updated 

 5

From March 25, 2002, through September 30, 2006, the federal program enrolled 231,664

people. This number includes past enrollees as well as those enrolled as of September 30, 

2006. 

6

Pub. L. No. 106-265, 114 Stat. 768. The group market includes plans offered by employers 

to employees and plans offered by other groups, such as professional organizations. The 

individual market includes plans sold by insurance carriers to individuals, usually through

agents or brokers. 

7

See GAO, Long-Term Care Insurance: Federal Program Compared Favorably with Other 

Products, and Analysis of Claims Trend Could Inform Future Decisions, GAO-06-401 

(Washington, D.C.: Mar. 31, 2006). See also Related GAO Products at the end of this report. 

Page 2 GAO-07-202 Federal Long Term Care Insurance Program 
information on claims experience and premium setting in its written 

recommendation to Congress before entering into a new contract for the 

administration of the Federal Long Term Care Insurance Program. 

Partners’ current contract with OPM ends December 31, 2008. 

In this report, as discussed with the committees of jurisdiction, we 

examined the following questions regarding other aspects of 

competitiveness: 

1. How does the profit structure of the Federal Long Term Care 

Insurance Program as defined by the contract compare with that of 

other long-term care insurance plans? 

2. How do the marketing efforts for the Federal Long Term Care 

Insurance Program compare with those for other long-term care 

insurance plans? 

3. How does the Federal Long Term Care Insurance Program’s claims 

experience, updated to reflect the program’s fourth year, compare with 

initial expectations? 

To obtain information on the profit structure of the Federal Long Term 

Care Insurance Program, we interviewed officials at OPM and Partners 

and reviewed relevant documents, including the contract between OPM 

and Partners. We limited our review to the payments that were defined in

this contract as profits. To obtain comparable information on any profit 

structures used in the private sector, we interviewed officials from four of 

the nation’s largest long-term care insurance carriers—Bankers Life and 

Casualty Company, Genworth Financial, John Hancock Life Insurance 

Company, and Metropolitan Life Insurance Company.8,9

 All four insurance 

carriers sold products in the individual market, and two of the four—John 

Hancock Life Insurance Company and Metropolitan Life Insurance 

Company—were also among the five largest carriers that sold products in 

the group market. We also interviewed benefits officials from four states—

California, New Jersey, North Carolina, and Texas—that offered long-term 

 8

We selected the four carriers based on their total number of policies and total annualized 

premiums—the sum of enrollee premiums adjusted to reflect a full year of coverage—in 

effect in the individual market as of December 31, 2005. 

9

Throughout this report, we use the term carrier officials to refer to officials of these four 

insurance carriers and not to officials of Partners. 

Page 3 GAO-07-202 Federal Long Term Care Insurance Program 
care insurance to state employees and certain other groups,10 and we 

interviewed industry experts and actuaries regarding the profit structures 

used in the industry. 

To obtain information on marketing efforts for the Federal Long Term 

Care Insurance Program, we interviewed officials from OPM and Partners 

and reviewed marketing plans for the federal program. To obtain 

comparable information on the marketing efforts used in the private 

sector, we interviewed actuaries, industry experts, officials from the four 

insurance carriers, and benefits officials from the four states. 

To describe how the federal program’s claims experience, updated to 

reflect the program’s fourth year, compared with initial expectations as 

established by Partners in its contract with OPM, we analyzed data from 

Partners on the number of enrollees, the number of paid claims, and the 

amount of claim payments made for the federal program from April 1, 

2005, through March 31, 2006. We also included data presented in our 

previous report regarding the claims experience of the federal program in 

its first 3 years, from April 1, 2002, through March 31, 2005. We compared

the anticipated claims experience for the federal program as established 

by Partners in its contract with OPM prior to the program’s start of 

enrollment, with the actual number of claims paid and the amount of 

claims payments during the federal program’s first 4 years—from April 1, 

2002, through March 31, 2006. We also interviewed Partners officials about 

the federal program’s claims experience. 

We reviewed all data for reasonableness and consistency and determined 

that the data were sufficiently reliable for our purposes. We performed our 

work in accordance with generally accepted government auditing 

standards from May 2006 through December 2006. 

The federal program has a unique profit structure that is explicitly defined 

in the contract between OPM and Partners. This profit structure consists 

of three distinct annual payments to Partners that are separate from 

payments made to cover the program’s expenses. Two of the three profit

payments are based on a percentage of the premiums collected during the 

Results in Brief 

 10In addition to offering long-term care insurance benefits to their employees, retirees, and 

other qualified relatives, such as spouses of employees and retirees, all four states offered

benefits to other groups of public employees, such as public university employees. 

Page 4 GAO-07-202 Federal Long Term Care Insurance Program 
year, and one is based on the average annual assets of the federal program. 

One premium-based payment and the asset-based payment are guaranteed. 

The other premium-based payment is not guaranteed, but rather is linked 

to OPM’s evaluation of Partners’ performance, including OPM’s annual 

evaluation in 21 measures across 4 categories: administrative expense 

savings, customer service, enrollment experience, and responsiveness to 

OPM. In contrast to the federal program, profits realized by carriers 

offering other long-term care insurance plans generally are not based on 

an explicit profit structure. Instead, carriers may realize profits according

to the experience of the programs they insure. 

The federal program used marketing efforts that were generally similar to 

those for other plans sold in the group market, but faced a significant 

challenge in sending information directly to eligible individuals. The 

federal program and other plans sold in the group market used marketing 

efforts such as mailing information to the homes of eligible individuals, 

sending e-mails to eligible employees at work, posting information on a 

Web site, and hosting employee and retiree seminars. Of these efforts, 

carrier officials we spoke with explained that direct mail is a critical 

marketing strategy for long-term care insurance. The federal program 

faced a significant challenge in mailing information to the homes of those 

individuals eligible for the program because it initially did not have the 

home addresses of nearly all active federal civilian employees. Because of

this challenge, the federal program relied on marketing efforts that were 

less direct and less personalized, such as sending information to federal 

employees through agency benefits officers and working with affinity 

groups whose membership consists of eligible individuals. 

The federal program’s claims experience—the amount of claim payments 

per enrollee and the number of paid claims per enrollee—increased in the

program’s fourth year, but remained lower than Partners’ expectations as 

established in its contract with OPM. This increase was generally 

consistent with trends since the federal program began in 2002. Overall, 

the federal program has paid 44 percent of the expected amount of claim 

payments per enrollee and 41 percent of the expected number of claims 

per enrollee. As of August 2006, Partners officials had not determined why 

the claims experience was lower than its expectations. It is generally 

expected that the number of claims submitted in the first few years of a 

long-term care insurance program will be a small portion of the total 

number of claims submitted over time. However, claims experience is one

of several factors that may affect the long-term financial outlook of a longterm care insurance program. The results of this analysis underscore our 

prior recommendations that OPM analyze the claims experience and

Page 5 GAO-07-202 Federal Long Term Care Insurance Program 
assumptions affecting premiums to inform forthcoming contract 

negotiations for the administration of the federal program. These 

negotiations may occur prior to December 31, 2008, the end of Partners’ 

current contract. 

In commenting on a draft of this report, OPM generally agreed with our 

findings. Regarding the program’s profit structure, OPM stated that now 

that it has more operating experience with the program, it plans to 

reexamine the profit structure as it renegotiates or rebids the contract for

the administration of the program. In its comments, Partners highlighted

certain distinct aspects of the federal program’s profit structure that we 

noted in our draft report, including that Partners does not own federal 

program assets and that a profit payment is contingent on Partners 

meeting specific performance standards that Partners characterized as 

exceptionally high for the insurance industry in general. 

Long-term care, which may include care provided in nursing homes, 

assisted-living facilities, or a person’s home, can be expensive. In 2005, the 

average cost of a year in a nursing home was more than $70,000,11 and in 

1999, according to the most recent data available, the average length of 

stay was between 2 and 3 years.12 Long-term care insurance helps 

individuals pay for costs associated with long-term care services. Yet 

relatively few individuals have obtained coverage. As of 2002, about 

9 million people nationwide had obtained long-term care insurance.13 To 

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

government began offering long-term care insurance in 2002.

Long-term care insurance helps pay for the costs associated with longterm care services. People can purchase long-term care insurance directly

from carriers that sell products in the individual market, or they can enroll 

in plans offered by employers or other groups. For a specified premium 

Background 

Long-Term Care Insurance 

 11Metropolitan Life Insurance Company, The MetLife Market Survey of Nursing Home & 

Home Care Costs (Westport, Conn.: September 2005). 

12U.S. Department of Health and Human Services, Centers for Disease Control and

Prevention, National Center for Health Statistics, The National Nursing Home Survey: 

1999 Summary (Hyattsville, Md.: June 2002).

13America’s Health Insurance Plans, Research Findings, Long-Term Care Insurance in

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

Page 6 GAO-07-202 Federal Long Term Care Insurance Program 
that is designed—but not guaranteed—to remain level over time, the 

carrier agrees to provide covered benefits under an insurance contract. 

Long-term care insurance premiums are affected by many factors, 

including the benefits offered and the age and health status of the 

applicant. Carriers review the health status of the applicant during the 

underwriting process.14 Carrier assumptions about interest rates, mortality 

rates, morbidity rates,15 and lapse rates—the number of people expected to

drop their policies over time—also affect premium rates. Carriers set 

premium rates to cover the anticipated cost of enrollee benefits (which 

means paying approved claims),16 administrative costs (which includes 

marketing costs, claims handling, overhead, and taxes), and profits. 

Few claims are expected to be submitted during the early years of an 

enrollee’s long-term care insurance policy. As a result of underwriting, it is 

unlikely that many people could meet the eligibility requirements to buy a 

policy yet submit an approved claim within 3 years. Industry experts 

suggest that the rate of claim submissions begins to increase after about 3 

to 7 years. 

Claims experience is one of many factors—such as interest rates and lapse 

rates—that affect the long-term financial outlook of a long-term care 

program. While having a lower-than-expected claims experience is a 

positive financial indicator, if the claims experience is significantly lower 

than expected over the long term, then it is possible that the premiums are 

too high. On the other hand, in accordance with the National Association 

of Insurance Commissioners (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.17

 14Underwriting is the process of reviewing an applicant’s responses to questions, including

medical and health-related questions, in an application for the carrier to determine if the

applicant is insurable and the premium rate is appropriate, given the level of risk the

applicant presents for the insurance coverage.

15The term morbidity refers to the incidence of illness, injury, or disability. 

16For 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. 

17State 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 7 GAO-07-202 Federal Long Term Care Insurance Program 
Insurance carriers’ long-term care insurance profits—defined as the 

excess of revenues over expenses—are affected by many factors, 

including the amount of risk the insurance carrier assumes. In general, the 

more risk a carrier assumes, the greater the carrier’s expected profits. 

Over time, carriers’ ability to meet or exceed their initial projections 

regarding interest rates, mortality rates, morbidity rates, and lapse rates, 

as well as their ability to contain costs, ultimately affects their profits. 

Carriers are also subject to state requirements, which may affect their 

ability to realize profits. 

Long-Term Care Insurance 

Marketplace 

Long-term care insurance is sold in two primary markets—the individual 

and group markets. Of the nearly 9 million policies sold as of 2002, the 

most recent year for which data were available, about 80 percent were 

sold through the individual market, and the remaining 20 percent were 

sold through the group market.18 Sales in the group market are growing 

faster than sales in the individual market.19 In March 2006, 13 percent of 

full-time employees in private industry had access to employer-sponsored 

long-term care insurance benefits; 20 percent of employees of 

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

The individual market includes plans sold by insurance carriers to 

individuals, usually through agents or brokers. Individuals may choose 

benefits from a range of options offered by the carriers, including the 

duration and amount of daily benefit payments. Those who purchase 

coverage through the individual market typically pay the full premium. The 

carrier generally owns program assets and bears the risk of insuring 

enrollees for the terms of enrollees’ policies. 

The group market includes long-term care insurance plans offered to 

individuals through employers and other groups, such as professional 

associations. In this market, the groups usually design the benefits, and 

enrollees are often given some benefit options from which to choose, 

including the duration and amount of daily benefit payments. However, 

 18America’s Health Insurance Plans, Research Findings.

19Jonathan Shreve and Ksenia Whittal, “Group LTC Continues Its Solid Advance,” National 

Underwriter Life & Health, vol. 110, no. 37 (2006), p. 20. 

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

Employee Benefits in Private Industry in the United States, March 2006 (Washington,

D.C.: August 2006). 

Page 8 GAO-07-202 Federal Long Term Care Insurance Program 
benefit options offered in the group market tend to be fewer than those 

offered in the individual market. Individuals who purchase long-term care 

insurance in the group market typically pay the full premium, similar to 

those who purchase coverage in the individual market.21

Employers and other groups typically contract with insurance carriers to 

provide long-term care insurance to qualified individuals.22 These contracts 

may be time-limited, lasting, for example, 3 to 5 years. Under these 

contracts, carriers are usually required to bear the risk of insuring 

enrollees for the terms of enrollees’ policies; the term of enrollees’ policies 

may be independent from, and therefore longer than, the length of an 

employer’s contract with a carrier. These carriers also generally own all 

program assets. As a result, if a carrier’s contract with an employer was 

not renewed, the carrier would usually be required by its contract to 

continue insuring those individuals for whom it issued policies. 

Several large carriers dominated the long-term care insurance coverage 

sold in the individual and group markets, as of December 31, 2005. While 

the long-term care insurance industry experienced 18 percent annual 

growth in the number of policies sold from 1987 through 2002,

23 the 

industry has experienced a downturn in more recent years, according to 

industry experts. Specifically, carriers faced several challenges, including 

higher-than-expected administrative expenses relative to premiums; lowerthan-expected lapse rates, which increased the number of people likely to

submit claims; low interest rates, which reduced the actual return on 

investments below what had been assumed; and new state regulations that 

limited direct marketing by telephone. As a result, beginning in 2003, for 

example, many carriers in the individual market raised premiums, left the 

marketplace, or consolidated to form larger companies. In addition, many 

carriers have revised the assumptions used in setting premiums, taking a 

more conservative approach that has led to higher premiums, while state 

regulators have increased their oversight of the industry. 

 21In contrast, individuals who purchase health insurance plans in the group market typically

do not pay the full premium because employers often pay a share of the premium. 

22Alternatively, employers may self-fund their long-term care insurance plans.

23America’s Health Insurance Plans, Research Findings.

Page 9 GAO-07-202 Federal Long Term Care Insurance Program 
The federal government began offering a group long-term care insurance 

program in 2002 whereby certain eligible individuals affiliated with more 

than 125 federal agencies may apply for coverage. Individuals eligible for 

the Federal Long Term Care Insurance Program include federal and Postal 

Service employees and retirees; active and retired members of the 

uniformed services; qualified relatives of these individuals; and certain 

others.24 Almost 19 million people were estimated to be eligible for 

coverage as of October 15, 2001. With more than 214,000 current enrollees 

as of September 2006, the federal program is the largest employersponsored group program in the nation. When the Federal Long Term Care 

Insurance Program began, eligible individuals could apply for enrollment 

during two specified periods: an early enrollment period held from 

March 25, 2002, through May 15, 2002, and an open enrollment period held

from July 1, 2002, through December 31, 2002.

25 Following the open 

enrollment period, eligible individuals could apply for coverage at any

time.26 As is typical for other plans sold in the group market, enrollees pay 

the entire cost of their premium. As we noted in our March 2006 report, 

the federal program offered benefits similar to those of other long termcare insurance products, usually at lower premiums for comparable 

benefits, and the federal program’s early enrollment and claims were 

lower than initially expected.27

Federal Long Term Care 

Insurance Program 

 24Qualified 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 for coverage. 

25During the early enrollment period, enrollees’ choices for some of the benefit options,

such as the benefit period and type of coverage, were limited, whereas enrollees were able 

to select from all of the program’s benefit options during the open enrollment period. 

During both of these 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. For all other applicants, the program used a full 

underwriting application. The federal program’s abbreviated underwriting application 

consists of fewer health-related questions than the program’s full underwriting application. 

26Since the open enrollment period, the program has used an abbreviated underwriting 

application to determine eligibility for newly hired federal and Postal Service employees 

and newly active members of the uniformed services and their spouses who apply for 

coverage within 60 days of employment. For all other applicants, the program has used a 

full underwriting application.

27GAO-06-401. 

Page 10 GAO-07-202 Federal Long Term Care Insurance Program 
OPM oversees the federal program, and Partners administers the program 

in accordance with the requirements of a 7-year contract between OPM 

and Partners. The contract, signed December 18, 2001, defines key 

administrative requirements, including OPM’s oversight of the program 

and how payments for the federal program’s expenses, as well as 

payments that are earmarked as profits, are determined. Unlike other 

contracts between employers and carriers, the federal program’s contract 

includes requirements for the management of federal program assets—

that is, the funds collected as premiums and used to pay claims—because 

the federal program does not give Partners ownership of federal program 

assets. 

By statute, OPM’s contract with Partners is for 7 years and is not 

automatically renewable.28 At the end of the 7-year term, OPM can either 

renegotiate the contract with Partners, or allow the contract to terminate 

and select a new carrier. If a new carrier is selected, Partners must 

transfer all federal program enrollees and assets, including any positive or

negative returns related to the experience of the program, to the federal 

program’s next carrier. However, if OPM does not contract with another 

carrier, Partners would continue insuring the individuals who enrolled in 

the federal program through Partners. In this case, the federal program’s 

assets would remain available to Partners to pay for claims and expenses. 

The federal program has a unique profit structure that is explicitly defined 

in the contract between OPM and Partners. This profit structure consists 

of three distinct annual payments to Partners to compensate Partners for 

the risks it assumes under the program’s 7-year contract.29 Of these 

payments, two are based on a percentage of the premiums collected 

during the year and one is based on the average annual assets of the 

federal program. (See table 1.) These three payments are allowed only if

premiums are sufficient to cover the federal program’s current claims and 

expenses. In contrast to the federal program, profits realized by carriers 

offering other long-term care insurance plans generally are not based on 

explicit profit structures. Instead, under the terms of their contracts, 

Federal Program Has 

a Unique Profit 

Structure 

 28Pub. L. No. 106-265, 114 Stat. 765-766. 

29The profit payments are intended as profits, but do not ensure that Partners realizes a 

profit because the payments are not linked to Partners’ actual costs for the program. In

addition to profit payments, the federal program pays Partners for the program’s expenses, 

such as those for marketing, underwriting, and claims administration. 

Page 11 GAO-07-202 Federal Long Term Care Insurance Program 
carriers assume the risk of insuring enrollees for the terms of enrollees’ 

policies and own program assets—and are thus able to realize profits or 

losses according to the experience of the programs they insure. 

Table 1: Profit Structure of the Federal Long Term Care Insurance Program 

Payment type Payment amount 

Premium-based payments

Guaranteed 3.5 percent of the premiums collected during the year 

Performance-based Up to 3.0 percent of the premiums collected during the 

year—the actual amount is determined by OPM based 

on its assessment of Partners’ performance 

Asset-based payment 

Guaranteed 0.3 percent of the average annual assets of the federal 

program 

Source: GAO analysis of OPM’s contract with Partners. 

Note: These three payments are allowed only if premiums are sufficient to cover the federal 

program’s current claims and expenses. 

The federal program guarantees one annual premium-based payment to 

Partners. This payment equals 3.5 percent of the premiums collected in a 

year. For other long-term care insurance plans offered in the group and 

individual markets, carriers’ profits were generally not guaranteed, 

according to carrier officials and industry experts. Similar to the federal

program, one source of carriers’ revenue is enrollee premiums, which 

include an amount for anticipated profits. However, carriers may realize 

profits or losses according to the experience of the programs they insure,

subject to applicable state regulations.30

The federal program links the second annual premium-based payment to 

OPM’s evaluation of Partners’ performance. This payment can equal up to

3 percent of the premiums collected in a year. Under an agreement which 

amended the contract between OPM and Partners and became effective 

beginning fiscal year 2006, OPM evaluates Partners’ performance each

year on 21 short-term performance measures across 4 categories: 

administrative expense savings, customer service, enrollment experience,

 30The terms of contracts under the federal program relating to coverage or benefits, 

including those pertaining to carrier profit, will supersede and preempt applicable state 

regulations. Pub. L. No. 106-265, 114 Stat. 768, 5 U.S.C. § 9005 (2005); 5 C.F.R. § 875.107 

(2006). 

Page 12 GAO-07-202 Federal Long Term Care Insurance Program 
and responsiveness to OPM.31 Each performance measure has a 

corresponding payment equivalent to a percentage of the total 

performance-based payment of 3 percent of premiums. If Partners’ 

performance does not meet stated expectations in a measure, the payment 

corresponding to that measure is placed into a retained profit account. In 

addition, every 3 years, OPM evaluates Partners’ performance in two longterm performance measures: return on investment and claims experience. 

If Partners meets expectations in one measure and funds are present in the 

retained profit account, one-half of the amount present in the retained 

profit account is paid to Partners. If Partners meets expectations in both 

measures and funds are present in the retained profit account, the total 

amount present in the retained profit account is paid to Partners. As of 

September 2006, Partners has been awarded the full performance-based 

payment each year since the federal program began. Appendix I provides a 

complete list of the performance measures used for the federal program. 

Unlike the federal program, most other sponsors of plans offered in the 

group market usually did not link carrier profits to performance 

evaluations, according to carrier officials and industry experts. Carrier 

officials estimated that about 10 percent to 20 percent of employers 

required their long-term care insurance carrier to relinquish a certain 

percentage (for example, 2 percent to 4 percent) of premiums if their 

performance did not meet agreed-upon expectations.32 However, 

employers may require carriers to guarantee a certain level of performance 

in their contracts to ensure that enrollees are provided with standard 

levels of service, according to state officials.33 These performance 

measures and guarantees may include those related to the timeliness of 

underwriting decisions and call center performance. The federal program 

 31From the beginning of the program through fiscal year 2005, the federal program 

subjected the same portion of profit payments to OPM’s annual evaluation of Partners’ 

performance and rated Partners’ performance in 10 or 11 categories as exceeding, meeting, 

or not meeting expectations. In fiscal year 2005, OPM and Partners renegotiated the 

performance evaluation agreement at OPM’s request to make it more challenging. The new

performance evaluation agreement, beginning in fiscal year 2006, allowed ratings of only 

meeting or not meeting expectations in 21 measures across 4 categories. Partners officials 

told us that the new performance evaluation agreement was more challenging for them to 

meet than the prior agreement. 

32The carrier officials we spoke with explained that the carriers they represent had never

had to relinquish profits as a result of a poor performance rating. 

33Employers may impose nominal fines (for example, $25 to $50 per violation) on carriers 

who do not meet performance guarantees. 

Page 13 GAO-07-202 Federal Long Term Care Insurance Program 
used all of the performance measures that industry experts and carrier 

officials cited as those commonly used throughout in the group market, in 

addition to other measures such as administrative expense savings and 

claims experience. 

The federal program’s third payment is guaranteed and is based on the 

average annual assets of the program. This annual payment—0.3 percent 

of the average annual assets of the federal program—is defined in the 

contract between OPM and Partners as a profit payment. The federal 

program developed this payment to recognize that insurers in general are 

required to hold risk-based capital. Risk-based capital is the capital that an 

insurance carrier is required to hold in reserve, separate from any other 

funds used to back insurance liabilities or other lines of business, to 

protect the carrier from insolvency.34 OPM does not require Partners to use 

the third payment to fund risk-based capital and both OPM and Partners 

consider this payment another form of profit for administering the 

program. Similar to the federal program, carriers use enrollee premium 

funds to fund risk-based capital requirements, according to OPM officials. 

However, risk-based capital may be considered an expense to carriers. 

The federal program used marketing efforts that were generally similar to 

those used for other plans sold in the group market.35 For example, the 

types of marketing efforts used for the federal program and other plans 

offered in the group market, according to our review of federal program 

documents and the carrier and state officials we spoke with, included 

Federal Program 

Used Marketing 

Efforts Generally 

Similar to Those Used 

for Other Plans but 

Faced a Significant 

Challenge 

 34Carriers determine the amount of capital to be held as risk-based capital based on their

assessment of the risks they assume according to standards issued by the NAIC. 

35In the individual market, carrier officials we spoke with said that they perform limited 

direct marketing to potential enrollees. Instead, carriers rely on individual agents to 

identify prospective applicants and sell a plan, at times in a one-on-one setting. 

Page 14 GAO-07-202 Federal Long Term Care Insurance Program 
• mailing information directly to the homes of eligible individuals, 

• sending e-mails to eligible employees at work, 

• posting information on a Web site, 

• hosting employee and retiree seminars, and 

• working with affinity groups whose membership consists of eligible 

individuals.

Of these efforts, carrier officials we spoke with told us that direct mail, 

which may include a personalized letter, is a critical marketing effort for 

long-term care insurance plans. One carrier official also explained that 

direct mail was so critical to the carrier’s marketing strategy that it 

generally would not work with employers who neither provide the home 

addresses of employees nor assist in mailing materials to employees. 

The federal program faced a significant challenge in sending information 

directly to eligible individuals, particularly through direct mail. 

Specifically, the federal program was initially unable to mail information 

directly to the homes of about 60 percent of the program’s core group of

eligible individuals that Partners deemed most likely to enroll in the 

federal program—including nearly all active federal civilian employees—

because neither OPM nor Partners had the home addresses of these 

individuals. OPM officials told us that a centralized database of this 

information does not exist. According to OPM officials, OPM did not 

request federal employees’ home address information from other federal 

agencies because they felt it would be too burdensome to comply with 

certain Privacy Act requirements36 and gather accurate information from 

each of the agencies in a timely manner. Despite this challenge, the federal 

program initially mailed information directly to the homes of those for 

whom it had addresses, which included about 40 percent of the program’s 

core group of eligible individuals, as well as other non-core groups such as 

retired military personnel and annuitants under the Civil Service 

Retirement System and the Federal Employees Retirement System, 

 36The Privacy Act of 1974, outside a framework of specified exceptions, prohibits an agency 

from disclosing a record to any person or another agency, except at the request of, or with 

the prior consent of, the individual to whom that record pertains. See 5 U.S.C. § 552a 

(2000). 

Page 15 GAO-07-202 Federal Long Term Care Insurance Program 
according to our analysis of Partners’ data.37 As of October 2006, Partners 

officials noted that direct mail efforts were still limited because of the 

federal program’s inability to mail information directly to the homes of 

most active federal civilian employees.38 Before signing its contract with 

OPM, Partners was aware of the federal program’s limitations regarding 

direct mail. 

As a result of the federal program’s limited ability to send direct mail to 

many eligible individuals, the federal program relied heavily on marketing 

efforts that were less direct and less personalized, including sending 

information to federal employees through agency benefits officers and 

working with affinity groups. Because neither OPM nor Partners has direct 

access to federal employees through e-mail, Partners has worked with 

more than 150 agency benefits officers to distribute program information 

to federal employees through e-mail, internal office mail, or other means.39

For example, Partners relies on agency benefits officers to send e-mails 

about the federal program.40 While Partners officials may be notified by 

agency benefits officers when they send program information, Partners is 

unable to determine whether all eligible federal employees receive this 

information. In addition, Partners has worked with several affinity groups,

such as Federally Employed Women and the National Active and Retired

Federal Employees Association, to educate their members about the need 

for long-term care insurance and to advertise in publications and at 

sponsored events. Through these efforts, Partners has gained direct access 

to the groups’ members. 

 37In total, the federal program mailed information to about 6.6 million eligible individuals 

during the open enrollment period, according to Partners’ data. These individuals 

represented about 35 percent of the total estimated 18.6 million individuals eligible for 

coverage as of October 15, 2001. 

38Partners officials told us that they had obtained addresses for about 22 percent of all 

active federal civilian employees as of October 2006. This percentage includes current 

enrollees as well as other eligible individuals. 

39Partners officials also noted that increased security measures taken in the fall of 2001 in 

response to the terrorist attacks of September 11, 2001, and the anthrax scare temporarily 

reduced access to federal employees for marketing purposes during the program’s open

enrollment period. 

40Partners is able to directly e-mail information to those who provided their e-mail address

in response to a marketing solicitation. 

Page 16 GAO-07-202 Federal Long Term Care Insurance Program 
In the federal program’s fourth year, claims experience—the amount of 

claim payments per enrollee and the number of paid claims per enrollee—

increased from that of the program’s third year, but remained lower than 

Partners’ expectations as established in its contract with OPM. This 

increase was generally consistent with trends since the federal program 

began in 2002. As we reported in March 2006, claims experience in the

federal program’s first 3 years was lower than the initial expectations set 

by Partners.41 Our analysis of Partners’ data showed that claims experience

also remained lower than expected for the federal program’s fourth year.

As of March 31, 2006, the end of the federal program’s fourth year, the

federal program had cumulatively paid 44 percent of the expected amount 

of claim payments per enrollee and 41 percent of the expected number of 

claims per enrollee, across the 4 years, as shown in table 2. Figure 1 shows 

the amount of claims payments per 10,000 enrollees. As of August 2006, 

Partners had not determined why the claims experience was lower than 

Partners’ expectations. Claims experience is one of many factors—such as 

interest rates and lapse rates—that affect the long-term financial outlook 

of a long-term care insurance program. While it is generally expected that

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

insurance program will be a small portion of the total number of claims 

submitted over time, the rate of claim submissions usually begins to 

increase after about 3 to 7 years, according to industry experts. 

Table 2: Actual Claims per Enrollee as a Percentage of Expected Claims per 

Enrollee in the First 4 Years of the Federal Long Term Care Insurance Program 

Claims Experience in 

the Federal Program 

Increased but 

Remained Lower 

Than Expectations 

Claims experience Year 1 Year 2 Year 3 Year 4 Cumulative

Amount of claim payments 

per enrollee as a percentage of 

expected claims per enrollee 40% 39% 40% 50% 44%

Number of paid claims per enrollee 

as a percentage of expected claims 

per enrollee 4% 37% 48% 56% 41%

Source: GAO analysis of data provided by Partners. 

Notes: Partners established expectations for enrollment and claims in its contract with OPM. We 

reviewed claims data for the first 4 years of the federal program, April 1, 2002, through March 31, 

2006. 

 41GAO-06-401. 

Page 17 GAO-07-202 Federal Long Term Care Insurance Program 
Figure 1: Actual Claim Payments per 10,000 Enrollees in the First 4 Years of the 

Federal Long Term Care Insurance Program Compared with Expected Claim 

Payments per 10,000 Enrollees over 35 Years 

Notes: Partners established expectations for enrollment and claims in its contract with OPM. We 

reviewed claims data for the first 4 years of the federal program, April 1, 2002, through March 31, 

2006. 

Our findings from two reports together show that the Federal Long Term 

Care Insurance Program compared favorably with other plans, has a 

unique profit structure, and used marketing efforts that were generally 

similar to those of other plans, but faced a significant challenge. 

Specifically, our initial report found that the federal program offered 

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

usually at lower premiums for comparable benefits. In this, our second 

report, we examined other components of the federal program’s 

competitiveness, including the federal program’s profit structure and 

marketing efforts. We found that the federal program has a unique profit 

structure, created to compensate Partners for the risks it assumed for the 

program. The risks borne by Partners, however, are not as great as those 

$0

$1

$2

$3

$4

$5

$6

Expected claim payments

Actual claim payments

Policy year

Claim payments per 10,000 enrollees

(dollars in millions)

Source: GAO analysis of data provided by Partners.

0 5 10 15 20 25 30 35

Concluding 

Observations 

Page 18 GAO-07-202 Federal Long Term Care Insurance Program 
assumed by carriers selling other plans because, unlike with other plans, 

the federal program’s assets are owned by the program, not by the insurer. 

Because of this structure, the program does not link Partners’ profits to 

the overall experience of the program. Rather, the program guarantees 

some profit payments, links some profit payments to OPM’s evaluation of

Partners’ performance, and requires Partners to assume a potentially timelimited risk, after which all program assets and enrollees may be 

transferred to another carrier. Insurance carriers’ profits are linked to the 

amount of risk they bear, and Partners assumes less risk for insuring the 

federal program than do carriers for insuring other long-term care 

insurance plans. Therefore, the federal program’s profit payments would 

likely be lower than the profits realized by carriers selling other plans. In 

addition, while the federal program used marketing efforts that were 

generally similar to those used for other plans sold in the group market, 

the program faced a significant challenge in providing personalized 

marketing communications directly to eligible individuals and instead 

relied heavily on other marketing efforts. 

In our initial report we found that the federal program’s claims 

experience—the amount and number of claims payments per enrollee—

was lower than expected in the first 3 years of the program. While it is 

generally expected that the number of claims submitted in the first few 

years of a long-term care insurance program will be a small portion of the 

total number of claims submitted over time, a program’s claims experience 

is one of several factors that may affect the long-term financial outlook of 

the program. In response to our recommendation in the initial report that 

OPM analyze the claims experience and assumptions affecting premiums 

to inform forthcoming contract negotiations, OPM indicated that it 

intended to provide updated information on claims experience and 

premium setting in its written recommendation to Congress before 

entering into the next contract for the administration of the Federal Long 

Term Care Insurance Program. Partners’ current contract with OPM for 

the administration of the federal program ends December 31, 2008. After 

reviewing a fourth year of claims data, we note that the program’s claims 

experience increased from that of the program’s third year, but still 

remains lower than Partners’ expectations. These results underscore the 

importance of our prior recommendations that OPM analyze the claims 

experience and assumptions as it considers its recommendations to 

Congress regarding a future contract. 

Page 19 GAO-07-202 Federal Long Term Care Insurance Program 
We provided a draft of this report to OPM and Partners. In its written 

comments, OPM generally agreed with our findings. OPM’s comments are 

reprinted in appendix II.

With regard to the program’s unique profit structure, OPM stated that now 

that it has more operating experience with the program, it plans to 

reexamine the profit structure as it renegotiates or rebids the contract for

the administration of the program. OPM agreed that the marketing efforts 

for the federal program are more challenging for Partners than for other 

insurers because, among other reasons, home addresses for federal 

employees are generally not available. OPM noted that this will continue 

to be a constraint for the program in the future. In addition, OPM 

highlighted, as we noted in our draft report, that the ratio of actual to 

expected claims experience has narrowed and stated that it would 

continue to closely monitor the claims experience of the program. We 

support this effort and continue to encourage OPM to analyze the 

program’s claims experience and ensure that premiums and actuarial 

assumptions about future claims reflect the experience of the program. 

In its comments, Partners highlighted certain distinct aspects of its profit 

structure that we noted in our draft report, including that Partners does 

not own federal program assets and that a profit payment is contingent on 

meeting specific performance standards that Partners characterized as 

exceptionally high for the insurance industry in general. Partners also 

stated that profit payments are paid only if the federal program’s assets are 

sufficient to cover the risks incurred by the program, as our draft report 

noted. Regarding the marketing efforts used for the federal program, 

Partners noted that the terrorist attacks of 2001 and the anthrax scare, 

which caused heightened security at federal buildings, added to the 

marketing challenge acknowledged in the report. We revised the report to

reflect these circumstances. Finally, Partners commented, and as we noted 

in our draft report, that in addition to a program’s claims experience, 

premium rates are affected by a number of factors, including lapse rates 

and interest rates. 

OPM and Partners provided technical comments and clarifications, which 

we incorporated as appropriate. 

Agency Comments 

Page 20 GAO-07-202 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 III. 

John E. Dicken 

Director, Health Care 

Page 21 GAO-07-202 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 C. 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 22 GAO-07-202 Federal Long Term Care Insurance Program 
Appendix I: Performance Measures Used for 

the Federal Long Term Care Insurance 

Program 

Page 23 GAO-07-202 Federal Long Term Care Insurance Program

Appendix I: Performance Measures Used for 

the Federal Long Term Care Insurance 

Program 

The Federal Long Term Care Insurance Program makes some profit 

payments to Long Term Care Partners LLC (Partners) according to the 

Office of Personnel Management’s (OPM) evaluation of Partners’ 

performance. Beginning in fiscal year 2006, OPM evaluates Partners’ 

performance each year on 21 short-term performance measures across 

4 categories: administrative expense savings, customer service, enrollment 

experience, and responsiveness to OPM (see table 3). Every 3 years, OPM 

also evaluates Partners’ performance in two long-term performance 

measures: claims experience and return on investment (see table 4). 
Appendix I: Performance Measures Used for 

the Federal Long Term Care Insurance 

Program 

Table 3: Federal Long Term Care Insurance Program’s Short-Term Performance 

Measures, Assessed Annually 

Category Performance measure

Administrative expense 

savings 

Actual administrative expenses compared to budgeted 

amounts set by OPM and Partners 

Customer service Billing: timeliness of posting payroll and annuity 

payments 

Billing: timeliness of processing automatic bank 

withdrawal reversalsa

 

Billing: timeliness of processing billing changes 

Billing: timeliness of sending payroll bills to payroll 

providers 

Call center: call abandonment rate 

Call center: call answering speed 

Call center: customer satisfaction with customer service 

Call center: timeliness of callbacks 

Call center: timeliness of response to written or e-mail 

inquiries 

Claims: accuracy of claims payments 

Claims: timeliness of claims payments 

Care coordination: customer satisfaction with care 

coordination services 

Care coordination: timeliness of benefit determinations 

Underwriting: timeliness of initial underwriting decisions 

Underwriting: timeliness of reconsideration decisions 

Enrollment experience Actual enrollment compared with enrollment goals set by 

OPM and Partners 

General working relationship with OPM 

Monitoring and reporting on industry trends to OPM 

Responsiveness to the Office

of Personnel Management 

(OPM) 

Timeliness of submitting plans that address deficiencies 

reported by OPM 

Timeliness of reporting significant events to OPMb 

Source: OPM.

a

Individuals may allow the federal program to deduct money from their bank account to pay premiums 

through automatic bank withdrawal. Reversals of these withdrawals may occur as a result of 

insufficient funds. 

b

Significant events are those that may be expected to have a material effect upon Partners’ ability to 

meet its contractual obligations to OPM. Such events may include the disposal of 25 percent or more 

of Partners’ assets within a 6-month period, the termination of a contract or subcontract that may 

have an effect on Partners’ ability to meet its contractual obligations, or the discovery of fraud related 

to the federal program. 

Page 24 GAO-07-202 Federal Long Term Care Insurance Program
Appendix I: Performance Measures Used for 

the Federal Long Term Care Insurance 

Program 

Table 4: Federal Long Term Care Insurance Program’s Long-Term Performance 

Measures, Assessed Every 3 Years 

Category Performance measure

Claims experience Claims experience compared with expectations, as set by 

Partners in its contract with OPM, adjusted to reflect the 

demographic characteristics of actual enrollees 

Return on investment Investment performance compared with contractual 

benchmark 

Source: OPM.

Page 25 GAO-07-202 Federal Long Term Care Insurance Program
Appendix II: Comments from the Office of

Personnel Management 

Page 26 GAO-07-202 Federal Long Term Care Insurance Program 

Appendix II: Comments from the Office of 

Personnel Management 
Appendix II: Comments from the Office of

Personnel Management 

Page 27 GAO-07-202 Federal Long Term Care Insurance Program 
Appendix III: GAO

A

 Contact and Staff 

cknowledgments 

Page 28 GAO-07-202 Federal Long Term Care Insurance Program 

Appendix III: GAO Contact and Staff 

Acknowledgments 

GAO Contact John E. Dicken, (202) 512-7119 or dickenj@gao.gov

In addition to the contact named above, Christine Brudevold, Assistant 

Director; Patricia Roy; Timothy Walker; and Rasanjali Wickrema made key 

contributions to this report. 

Acknowledgments 
Related GAO Products 

Page 29 GAO-07-202 Federal Long Term Care Insurance Program 

Related GAO Products 

Long-Term Care Insurance: Federal Program Compared Favorably with 

Other Products, and Analysis of Claims Trend Could Inform Future 

Decisions. GAO-06-401. Washington, D.C.: March 31, 2006. 

Overview of Long-Term Care Partnership Program. GAO-05-1021R. 

Washington, D.C.: September 9, 2005. 

Long-Term Care Financing: Growing Demand and Cost of Services Are

Straining Federal and State Budgets. GAO-05-564T. Washington, D.C.: 

April 27, 2005. 

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