News and Announcements

06/01/2018

Help Protect Your Family with the Federal Long Term Care Insurance Program
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05/01/2018

Uniformed Services Members: Help Protect Your Family with the Federal Long Term Care Insurance Program
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03/02/2018

Caregiving: The FLTCIP Offers Support When You Need It Most
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call us 1-800-582-3337 TTY 1-800-843-3557

 

Inflation Protection  Options

Inflation Protection Options

Notice: Your 2018 future purchase option (FPO) decision deadline is December 1, 2017.

Select a question below:

  • What is inflation?
  • The U.S. Department of Labor's Bureau of Labor Statistics defines inflation as, "the overall general upward price movement of goods and services in an economy."
  • Why is it important to have inflation protection in long term care insurance coverage?
  • The National Association of Insurance Commissioners (NAIC) states that, "Inflation protection can be one of the most important additions you can make to a long-term care insurance policy. Inflation protection increases the premium. However, unless your daily benefit increases over time, years from now you may find that it has not kept up with the rising cost of long-term care." From the NAIC's A Shopper's Guide to Long-Term Care Insurance.
  • What does the Federal Long Term Care Insurance Program (FLTCIP) offer for the automatic compound inflation option (ACIO)?
  • FLTCIP 2.0 offers 4% and 5% ACIO. With these options, your daily benefit amount (DBA) and remaining portion of your maximum lifetime benefit (MLB) (as well as other remaining benefit amounts listed in your schedule of benefits) will automatically increase by either 4% or 5% (depending on the percentage shown on your schedule of benefits) compounded every year. The increases occur on each anniversary of your original effective date of coverage (or the date you switch to one of these options). Increases under this option are made even if you are eligible for benefits, without regard to your age, claim status, claim history, or the length of time your coverage has been in effect.

    If you select ACIO, your premium is designed to include all future inflation increases you will receive each year while you are insured. Your premium does not increase annually as a result of this annual increase in benefits. However, premiums are not guaranteed.*

    * Premiums are not guaranteed. Your premium will not change because you get older or your health changes or for any other reason related solely to you. Premiums may only increase if you are among a group of enrollees whose premium is determined to be inadequate. While the group policy is in effect, the U.S. Office of Personnel Management (OPM) must approve the change.

    If we determine in the future that the cumulative actual rate of inflation in the cost of long term care services since the last increase under this provision is significantly higher than the automatic compound inflation option rate shown on your schedule of benefits, compounded annually, we and OPM will agree upon a method to allow you, at your option, to adjust your DBA. This method will account for the higher rate of inflation for an additional premium if you are not then eligible for benefits.
  • What is the difference between the 4% and 5% automatic compound inflation options?
  • Benefits with 4% ACIO grow at a lesser rate than those with 5% ACIO. Therefore, the premium for 4% ACIO is less than the premium for the 5% option. To see the differences in premium rates for selecting 4% or 5% ACIO, please visit our Rate Quote Calculator. To see how DBAs increase over time with 4% and 5% ACIO, please visit our Inflation Option Tool.

    The following is an example of how a $150 DBA increases over 5 decades at both the 4% and 5% ACIO rates. Note: Your actual daily benefit amount may vary depending on the rounding of increases each year. When your daily benefit amount is adjusted based on the inflation that you selected, the resulting amount may not be in whole dollar increments since each is rounded to the nearest penny.

    example of how a $150 daily benefit amount increases over 5 decades at both the 4% and 5% ACIO rates

  • What does the Federal Long Term Care Insurance Program (FLTCIP) offer for the future purchase option (FPO)?
  • With the future purchase option (FPO), every two years we will increase your DBA and the remaining portion of your MLB (as well as other remaining benefit amounts listed in the schedule of benefits), except as described below. We will send notice of the increase to enrollees with this option with the next fall FPO offering for an increase that will apply the following January 1. Increases will occur every two years on January 1 thereafter. Your premium will increase for each inflation increase under this option; the additional premium for each increase will be based on your age and the premium rates in effect at the time the increase takes effect. Your coverage must be in effect for at least 12 months in order for you to receive your first increase under this provision.

    If you do not want the FPO increase, we must receive your rejection before the date specified in the increase notice. If you want the increase, you do not have to take any action other than paying the additional premium. The increase will automatically take effect. Increases under this option will be made regardless of your age, but we will not increase your benefits under this option if you are eligible for benefits. Increases under this option do not require you to provide evidence of your good health. There are some differences between the FLTCIP 1.0 and FLTCIP 2.0 features for the future purchase option, as noted below.

    FLTCIP 1.0 enrollees:

    The FPO increase is based upon the change in the Department of Labor's Consumer Price Index for Medical Care (CPI-M) or another index mutually agreed upon by the U.S. Office of Personnel Management (OPM) and John Hancock. We include the amount of the increase in the notice we send to you.

    Each time we send you notice of an increase under this option, we will also offer you the opportunity to receive future benefit increases under the automatic compound inflation option (ACIO) instead of this option. If you elect to switch to ACIO, you will not receive the current increase under FPO.

    If you decline a total of three increases and you later wish to resume receiving increase offers, you must provide, at your expense, evidence of your good health that is satisfactory to us.

    FLTCIP 2.0 enrollees:

    The FPO increase is based upon the change in the Department of Labor's Consumer Price Index for All Urban Consumers (CPI-U), All Items, or another index mutually agreed upon by OPM and John Hancock. We include the amount of the increase in the notice we send you.

    You may decline any number of increases without affecting your ability to receive future increases.

    At any time, you may request to switch from the future purchase option to the automatic compound inflation option, and should you make such a request:

    • you will be required to provide, at your expense, evidence of your good health that is satisfactory to us; and
    • the effective date of all future automatic compound benefit increases will be the anniversary of the first day of the month following the approval of your request.


    All FPO enrollees (FLTCIP 1.0 and FLTCIP 2.0):

    If you select the future purchase option, your premium will increase for each implemented inflation increase under this option. The additional premium for each increase will be based on your age and the premium rates in effect at the time the increase takes effect. If you change from the future purchase option to the automatic compound inflation option, your premium will increase based on your age and the premium rates in effect at the time that change goes into effect. This increase in premium is intended to pay for future increases under the automatic compound inflation option. Once you have changed, your premium will not increase annually with each corresponding increase in benefits. However, premiums are not guaranteed.*

    * Premiums are not guaranteed. Your premium will not change because you get older or your health changes or for any other reason related solely to you. Premiums rates may only increase if you are among a group of enrollees whose premium is determined to be inadequate. While the group policy is in effect, OPM must approve the change.

    View graphs that demonstrate FPO and the changes in benefits and premium.
  • What have the past future purchase option (FPO) increases been and what were they based on?
  • The following FPO increases have been offered by the FLTCIP:

    • 2004 — 5.03%
    • 2006 — 8.55%
    • 2008 — 8.98%
    • 2010 — 6.68%
    • 2012 — 4.80%
    • 2014 — 3.24%


    For individuals who are currently enrolled in FLTCIP 1.0, the increases from 2004 through 2010 were based on the Consumer Price Index for Medical Care (CPI-M).

    For individuals who are currently enrolled in FLTCIP 2.0, the increases from 2012 and on are based on the Consumer Price Index for All Urban Consumers (CPI-U).
  • Why does the inflation index used to calculate the FPO increase differ between FLTCIP 1.0 and FLTCIP 2.0?
  • There is no specific index that measures inflation as it relates to long term care services, which are rendered in a variety of settings for a number of reasons. For individuals who are currently enrolled in FLTCIP 1.0, the Consumer Price Index for Medical Care (CPI-M) is used to measure inflation increases. The CPI-M measures costs associated with technology, lifesaving medical equipment, complex procedures performed by specialists, prescription drugs, and malpractice insurance premiums.

    For FLTCIP 2.0 we are using the Consumer Price Index for All Urban Consumers (CPI-U) as the FPO index for inflation increases to coverage. The CPI-U measures the average change over time in the prices paid by urban consumers for specified consumer goods and services, including food and beverages, housing, transportation, and medical care, among others. The underlying cost drivers for long term care are predominantly contained within this index, making the CPI-U one of the most suitable indices for tracking current and future changes in long term care costs.

    While past performance is not a reliable indicator of future performance, it may be helpful to note historical CPI-U trends for those interested in the future purchase option.

    The following chart compares historical changes in the CPI-U over time against 5% and 4% annual percentage increase benchmarks.

    Annual Consumer Price Index Increases - 50 Years 1965-20014

    Source: U.S. Department of Labor, Bureau of Labor Statistics. "Consumer Price Index for All Urban Consumers," www.bls.gov/cpi (accessed May 2015).

    Average CPI-U increases for the past 50 years are as follows:

    Average
    Period
    CPI-U
    10 year
    2005–2014
    2.3%
    20 year
    1995–2014
    2.4%
    30 year
    1985–2014
    2.8%
    40 year
    1975–2014
    4.0%
    50 year
    1965–2014
    4.2%


    John Hancock's proposal for the second contract term included using the CPI-U as the measuring index for FPO. Based on the information provided, the U.S. Office of Personnel Management (OPM) agreed to this change for those individuals applying for FLTCIP 2.0.
  • How many FPO increases can I decline and still receive future offers?
  • If you are covered under FLTCIP 1.0, you can decline up to two offers and still receive future offers. As indicated in your Benefit Booklet, once you have declined the FPO offer three times, you will no longer receive offers to increase your coverage under this option.

    Please note: if you were eligible for and declined the 2004 FPO offer, it is not counted toward the three declines mentioned above.

    If you are covered under FLTCIP 2.0, you may decline any number of increases without affecting your ability to receive future increases.
  • How can I find out how many times I have declined the FPO increase?
  • To determine how many times you have declined the FPO increase, please contact us at 1-800-LTC-FEDS (1-800-582-3337) TTY 1-800-843-3557 and we can provide you with a detailed history of your FPO offers.
  • What if I decline three times and then decide that I want additional coverage?
  • If you have FLTCIP 2.0 coverage, you may decline as many offers as you wish and will continue to receive future increase offers. If you have FLTCIP 1.0 coverage, you must provide to us, at your expense, evidence of your good health that is satisfactory to us. Call us at 1-800-LTC-FEDS (1-800-582-3337) TTY 1-800-843-3557, and we will let you know specifically what you need to do.
  • What if I am eligible for or receiving benefits during an FPO offer?
  • While you are eligible for benefits, you are not eligible for an FPO increase.
  • Can I switch to the automatic compound inflation option (ACIO)?
  • If you are covered under FLTCIP 1.0, you can switch to ACIO during the FLTCIP 1.0 FPO offer period on a guaranteed-acceptance basis (meaning you don't have to answer any questions about your health), as long as you are not eligible for benefits and have not declined three FPO offers in the past. If you switch to ACIO instead of accepting the FPO increase, you will not receive the FPO increase offered at that time.

    If you are covered under FLTCIP 2.0, you may request to switch from the future purchase option to the automatic compound inflation option at any time. However, you will be required to provide, at your expense, evidence of your good health that is satisfactory to us.
  • Which inflation option should I choose?
  • Choosing an inflation option is as important as selecting your DBA because your inflation option will impact the value of your benefits over time. The best choice for one person may not be the best choice for another. Our goal is to provide you with information and knowledge so you can make your own informed decision.

    Your inflation protection decision should consider the following:

    • ACIO premiums are initially more expensive than FPO premiums, and the 5% ACIO premiums are more expensive than the 4% ACIO premiums. However, if you accept all/most increases, the FPO premiums will eventually be higher than ACIO premiums.
    • If you are considering FPO, have you considered if you can afford the additional premiums for future increases to your benefits?
    • If you do not plan to accept future increases, have you considered how you will pay for any long term care that exceeds the amount your insurance will cover?
    • If you are considering ACIO, does 4% or 5% suit your needs?
    • And remember, premiums are not guaranteed, regardless of the inflation option you choose.
    You might find our Inflation Options Tool helpful while considering your inflation protection options.
  • How could the 4% and 5% Automatic Compound Inflation Options impact my benefits?
  • Do you have an Inflation Options Tool?



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Federal family members can apply for coverage anytime—you do not have to wait for the next open season. Premiums are based on your age and the premium rates in effect at the time we receive your application—the younger you are when you apply, the lower your premium will be.

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