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B.
UNDERWRITING OPTIONS. Insurance companies use a screening process,
called underwriting, to determine those individuals who might have a need for
services immediately or soon after enrollment. The underwriting process for LTC
is designed to keep premiums lower than those in the private market for the
majority of potential enrollees. Without medical underwriting, individuals with
an immediate or potential need for services could purchase a policy with the
intention of collecting benefits soon after their enrollment. This would drive
up the cost of premiums for other policyholders and could affect participation
in the program. All applicants for the LTC program will be subject to some form
of underwriting. All retired NARFE members will have to qualify for the program
under the full underwriting option (see section B1). OPM has asked the
insurance industry for three underwriting proposals for active federal
employees, members of the uniformed services, and their spouses: (1) guarantee
issue, (2) modified guarantee issue, and (3) short form. OPM will select one of
these three options depending on the impact on overall premiums.
1. Full
Underwriting. All applicants except active federal employees, members of
the uniformed services, and their spouses will be subject to full underwriting.
Thus, federal annuitants, military retirees, and their family members will have
to complete a questionnaire about their medical history, and they may be asked
to provide medical records and to undergo a personal interview. This
underwriting option is similar to that required in the private market.
2. Guarantee Issue
Underwriting. Under this option, no health-related questions would be
asked. Applicants would merely answer a question as to whether they are
actively at work; for example, “Were you actively at work (not on annual, sick,
or other leave) for at least one-half of the hours in your official tour of duty
last pay period?” This option will probably not be available for spouses even
if this option is chosen by OPM.
3. Modified
Guarantee Issue Underwriting. Under this option, applicants would be
asked a few health-related questions to determine current eligibility for
covered benefits. They might be asked if they currently need help bathing,
eating, dressing, etc; if they have been confined to a nursing home or custodial
facility within the past 12 months; or whether they are currently receiving home
health services. Spouses would be asked some additional information as a
substitute for not being actively employed by the government.
4. Short Form
Underwriting. Under this option, applicants would be asked several
health-related questions to determine whether there might be an immediate need
for benefits or whether they might be eligible for benefits within a short
time. They would be asked the same questions as in the modified guarantee issue
underwriting (section B3). In addition, they would be asked a few more
questions: whether they (1) currently use any mechanical devices such as
wheelchair, walker, crutches, dialysis machine, oxygen, stair lift; (2) have
been diagnosed with or had any symptoms of Alzheimer’s disease, dementia,
multiple sclerosis, muscular dystrophy, Parkinson’s disease; (3) have been
diagnosed with or treated for AIDS or AIDS-related complex; and (4) have been
diagnosed with any ongoing mental or nervous disorder.
5. NARFE Questions
Fairness of Underwriting Standards. NARFE has questioned the fairness
of using different underwriting options for annuitants and active employees.
Although NARFE acknowledges that employees tend to be healthier than retirees,
there would be many instances where employees and retirees of the same age might
be subject to different underwriting criteria. NARFE believes that the two
groups should be treated the same and that the proposed underwriting options
will create inequity between employees and retirees.
6. Nonstandard Policies
for Individuals with Disabilities. OPM may offer nonstandard policies
for those employees who fail the underwriting options, including those with
disabilities. The nonstandard policies might cover only nursing home facilities
or they might offer no coverage at all but provide discounts on LTC services.
The premiums for nonstandard policies would be significantly higher than those
for standard coverage. NARFE has asked that OPM make federal annuitants who
fail the underwriting options eligible to apply for nonstandard policies.
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