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C. BENEFIT
CHOICES. Enrollees will be able to customize their policies to suit
their individual needs by selecting a weekly benefit and the length of the
policy. Together, the weekly benefit and length of policy will form a “pool of
money” (see section C3) from which benefits will be paid. The choices selected
will affect the amount of premiums. The higher the weekly benefit and the
longer the length of the policy, the more premiums will cost (see section E).
1. Weekly Benefit.
A maximum weekly benefit from $400 to $2000 a week in multiples of $20
will be available. Before purchasing a LTC policy, potential enrollees should
research the cost of LTC in their area to determine a reasonable weekly benefit
amount. A recent study found that the average cost of a nursing home nationwide
was $980 a week or approximately $51,000 per year.
2. Length of Policy.
Enrollees will have the option of selecting a 3-year policy, a 5-year
policy, or lifetime coverage. Enrollees can extend the length of the policy by
using services that require less than their maximum benefit level (see section
D) and by participating in the care coordination program (see section D3).
3. Pool of Money.
The maximum weekly benefit and the length of the policy will determine the
pool of money from which covered services will be paid. Selection of a $700
weekly benefit and a 3-year policy would create a $109,200 pool of money ($700 x
52 weeks x 3 years). Benefits of either $700 or $350 a week would be paid from
this pool of money depending on the type of care being used (see section D). As
benefits are paid, the money remaining in the pool is reduced. When the pool is
exhausted, the insurance ends unless lifetime coverage was selected. Plan
participants who spend less than the maximum weekly benefit can extend the
number of years coverage beyond that originally selected by using less expensive
types of services (see section D).
4. Waiting
Period. The waiting period (or deductible) is the number of days
of covered services that the insured must pay (possibly with other
insurance) before LTC coverage begins. The standard policy will have a 90-day
waiting period, but the option of a shorter 30-day waiting period will be
available. NARFE was pleased that OPM included the 30-day waiting period since
the combination of Medicare and some FEHBP plans cover only the first 30 days of
skilled care in a nursing home (see section A5). After Medicare pays the first
30 days in a nursing facility, the insured must pay a copayment of $99 a day.
The waiting period is
counted in days that services are actually used rather than in calendar days—so
a 90-day waiting period will last longer than 90 calendar days unless services
are received every day. The waiting period also affects the cost of premiums;
the shorter the waiting period, the higher the premiums (see section E). When
choosing a waiting period, potential enrollees should consider whether they
prefer to pay the initial out-of-pocket expense of the waiting period rather
than the higher premiums for a shorter waiting period.
5. Inflation
Protection. Under a compound inflation option, benefits will
automatically increase every year, probably by 5 percent. Premiums will remain
the same for life even though benefits increase.
Policyholders who decline
the compound inflation option when they purchase their policy will be asked
periodically if they want to purchase future inflation protection. If they then
choose to purchase future inflation protection, their benefits will increase
every two or three years based on the consumer price index (CPI), but their
premiums will also increase. Those who repeatedly decline the future purchase
option for inflation protection will eventually not be allowed to purchase
inflation protection until they prove their insurability—that means the enrollee
will have to undergo medical underwriting to requalify for the future purchase
option. The underwriting necessary to requalify will not affect the coverage
originally purchased.
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