OPM Puts Finishing Touches on Long-Term Care Program
By: Stephen Barr
In almost any discussion of long-term care insurance, the
issue of medical underwriting comes up. Insurance companies try to limit
their financial risk, so they often ask for health-related information from
people applying for coverage.
As the Office of Personnel Management prepares to offer
long-term care insurance to employees and retirees, it plans to negotiate
with insurers underwriting standards that will determine who is eligible for
coverage and who can be excluded. OPM also will try to calculate the effect
of various underwriting options on the premiums that enrollees pay.
Under the law that created the program, coverage will be
offered in October 2002 to active-duty members of the armed forces, civil
service employees, retirees, spouses and certain family members. To test
different approaches, OPM has drawn up underwriting options that it wants
the insurance companies to consider when making their bids.
Three options under consideration for active-duty employees
and their spouses are:
• Guarantee issue underwriting. Under this option,
employees would not be asked questions about their health but would simply
show that they are working and collecting a paycheck. Spouses of employees
probably won't be offered such an option, but OPM will not know for certain
until it has negotiated a contract.
• Modified guarantee issue underwriting. Under this
option, the applicant answers a few health-related questions designed to
show that the applicant can perform basic activities of daily living and has
not been in a nursing home or receiving home health care services within the
past year. Spouses who are not government employees may be asked to provide
• Short-form underwriting. The application would ask
several health-related questions designed to determine whether a person
might require long-term care benefits immediately or within a short period
of time. For example, applicants could be asked if they had symptoms of
Alzheimer's disease, multiple sclerosis or Parkinson's disease or had been
diagnosed with a continuing mental disorder.
Options could be eliminated or modified as OPM negotiates
contract provisions with insurers. One of OPM's top goals is to provide a
long-term care benefit that can be purchased at premiums that are 15 percent
to 20 percent less than what's available in the open market.
"We intend to select the underwriting approach that
will provide the broadest possible coverage while producing premiums and an
overall program design that is likely your best buy," OPM says on its
Internet page (www.opm.gov).
Other than active-duty government workers and their spouses,
people who are eligible for coverage will be subject to full underwriting
procedures, according to OPM.
Retirees, for example, probably will have to answer numerous
health-related questions. They also may have to provide medical records and
answer questions in a personal interview. According to OPM, the underwriting
process for retirees should not be markedly different from that faced by
applicants who purchase polices in the open market.
But the National Association of Retired Federal Employees
has questioned the fairness of using different underwriting standards for
retirees and others. NARFE favors treating retirees and other applicants the
same. The group argues that the economy of scale created by the large
federal population should be used to make underwriting standards better for
Eligible groups include civil service employees and members
of the uniformed services; retirees, survivor annuitants, and military
reservists at the time they qualify for an annuity; adult children,
including adopted children and stepchildren; spouses of employees and
annuitants; and parents, parents-in-law and stepparents of employees.
The law authorizing the program gives OPM the authority to
cover other relatives of employees. OPM may include these groups for
coverage: parents, parents-in-law and stepparents of annuitants; unmarried
former spouses of employees and annuitants who are entitled to a pension
benefit; adult foster children of employees and annuitants; and unmarried
brothers and sisters of employees and annuitants.
Under the timetable set up for the program, OPM will request bid proposals in mid-June and try to award a contract in October. By then, the underwriting standards and the cost of premiums should be settled.