Which to choose? The Federal Long Term Care Insurance or an Individual Plan?

Historically, many of our clients compared individual rates with the Federal Long Term Care Insurance (LTC) program, so it's understandable why they'd be curious as to which is the better plan. While new FLTCIP applications are suspended, these are the comparison points to revisit if the program reopens.

Historical Federal Long Term Care Insurance Plan Considerations

• When applications are open, the Federal Long Term Care Insurance plan may have an open enrollment

  • Good if you are unhealthy and can't get covered on the private market.
  • Bad / Expensive if you are healthy - see below.

• Individual plans are less expensive, on average

  • Because they require you to submit medical records, there's less risk.
  • Individual plans may be harder to get because you must qualify.

Here's a historical email exchange with a client asking the same question when the program was still open to new applicants:

Our Response at the time:

Good Morning Mrs. Client, Sure, we help Fed employees save money in many cases when comparing the group long term care plan. The Fed LTC plan is a good option for people with poor health because it's easier to qualify for during open enrollment than an individual long term care plan. However, if you have good health you can typically get more benefits for less money. Often with the same company or another blue-chip carrier if you go outside the Federal long term care insurance group plan.

The reason being is in the whole Federal Employee system you have people with good health and people with bad health. For the people with good health they are being grouped in with people with ailments such as diabetes, osteoporosis, cancer, etc. For the Federal LTC group to make money they have to charge everyone more money.

I'd get an individual plan if I were in your shoes and use your good health to your advantage. Once you have the actual Fed quotes in hand just let me know the exact benefits and I'll send you a comparison that will probably save you money and potentially get you more stable future rates. We don't have better rates than the Fed all the time, but the majority of our clients are able to get more benefits for less money if they buy an individual long term care insurance plan.

Why Individual Plans may Best Group Coverage

Group plans, where it's not mandatory for the employees to buy, face an adverse selection risk when the less healthy people buy into the group plans and the healthy people buy the private plans. The healthy people do this because they will often receive more benefits for less money outside the group. Who wouldn't do that? If you're in a group plan there will probably be higher risk people in the plan who will file more claims. When they file more claims than anticipated then you could have fairly substantial rate increases.

This makes common sense, but I feel it's not properly explained to the employees who buy group insurance. When group coverage is actually open, shoppers should compare both the group and individual long term care insurance options. If you'd like quotes from our top blue-chip carriers please fill in the form.