Doris McMillon: Welcome to the Federal Long Term Care Insurance Program educational video. My name is Doris McMillon and I'm here on behalf of Long Term Care Partners and OPM to talk to you about the new Federal Long Term Care Insurance Program sponsored by the U.S. Office of Personnel Management (OPM) and offered by John Hancock and MetLife. Now, this program is an important benefit for the Federal Family. As you'll hear, few of us already have coverage to help pay for long term care services, and yet many of us will need that type of care. This important new program can protect you from the potential threat to your finances. I urge you to talk about the program with your family members, such as spouses, parents, and adult children. Today we're going to spend a few minutes talking about what long term care really means and then we'll review the Federal Long Term Care Insurance Program, who's eligible, and how the benefits work. We'll talk about how much plans cost. And here to help me explain is Phyllis Shelton, the author of "Long-term Care: Your Financial Planning Guide", and a consumer reference for financial publications including the Wall Street Journal, Kiplinger's Personal Finance Magazine, Smart Money, Business Week and Money Magazines. Welcome, Phyllis.

Phyllis Shelton: Thank you, Doris.

Doris McMillon: Now before we begin can you give us the background on why we're here today?

Phyllis Shelton: I certainly can. The Federal Long Term Care Insurance Program has been in the works for a while. President Clinton signed the Long Term Care Security Act into law in the year 2000. Then OPM selected John Hancock and MetLife as the insurers for the program, because they have the combined experience and resources to get the job done.

Doris McMillon: Well, before we begin our overview of the Federal Long Term Care Insurance Program, I think it would be a good idea to begin with a brief review of what long term care is. Can you help us with that?

Phyllis Shelton: I sure can. Well, long term care, Doris, is the type of care needed if you can no longer perform normal activities of daily living, and that would be things like bathing, eating, dressing and so forth... Or some people are fine physically, but they have a cognitive impairment, such as Alzheimer's. Now, this type of care is provided in many different settings, such as assisted living facilities, nursing homes. But most often, Doris, long term care is performed at home. And the activities of daily living, or we're going to call them ADLS today, are key to understanding how you qualify for benefits under the Federal Program. But we'll talk about that a little bit later. Right now, I'd like to start off by looking at some of the myths or misconceptions that many people believe about long term care.

Doris McMillon: Okay...I bet I can guess the first myth, Phyllis. It has to be, "it won't happen to me."

Phyllis Shelton: That's a great guess, Doris! And it's a myth because the fact is, anyone can need long term care services at any time. First though, how old do you think people are when they need this care?

Doris McMillon: Well, I think the common assumption is that long term care is something only old people need.

Phyllis Shelton: Actually, Doris, that is not true. 6 out of 10 people who reach age 65 will need long term care at some point in their lives. But 40% of the people who need long term care today are working age adults, and that would be ages 18 to 64. It is so important to understand, Doris, that younger people need long term care due to reasons like automobile and sporting accidents and debilitating diseases like multiple sclerosis, Lou Gehrig's disease, even Parkinson's disease. And I know I was really surprised to learn that a third of the people who have a stroke every year in our country are under 65 years old!

Doris McMillon: I had no idea the percentage was that high. So what we're really saying here is that all ages need long term care.

Phyllis Shelton: You got it. Now let's take a moment and look at a younger person who has had this type of unfortunate situation.

Female: and I got a phone call...telling me that my husband had been in a motorcycle accident. Finally, I just realized my husband was on a motorcycle. A dump truck had pulled out in front of David. They didn't expect him to live, first of all. When we got to talk to the doctor, the first thing he said ...24 hours, then he said 48, then he said 72. But if he even lived 72, he's going to be a vegetable. You know, it wasn't like what we used to be anymore. David didn't remember me which made it a little harder. I was a wife...and then when I became a caregiver... Caregiver is a nice word for it...I became a mom. I was still the wife but all the things that I did for so long I felt like the mother, and because the daily routine...he was completely dependent on that person. With a case like this, I guess you couldn't have enough insurance. The reason to have long term care insurance is...when David was homebound and... If I would have had that it would have been a big load off my shoulders.

Doris McMillon: Oh Phyllis, that is so sad!

Phyllis Shelton: It certainly is, Doris. Well, another myth is, "I'm already covered for long term care." have you heard that one?

Doris McMillon: Oh yes. Well, I think the questions here are doesn't Medicare pay for long term care? And wouldn't my medical insurance pay if I needed it?"

Phyllis Shelton: The reality is than neither Medicare nor most types of medical insurance, including the Federal Employees Health Benefits Program, TRICARE, and TRICARE for Life were designed to cover long term care. Neither were Medicare supplemental plans or HMOs. The Department of Veterans Affairs provides limited long term care services with restrictions on who can receive them. And I don't want you to confuse long term care insurance with disability income insurance that pays to replace part of your income so you can just pay your bills. It doesn't give you another $1,400 to $4,300 a month to pay for someone to take care of you, and it usually ends at age 65.

Doris McMillon: Well then, Phyllis, how is long term care paid for?

Phyllis Shelton: The facts are that today, Doris, most long term care is paid for by two primary sources... Your personal finances--that is, your income and assets-- or by Medicaid, and that program is known as Medi-Cal in California. Medicaid pays for 44% of long term care because most people don't adequately plan how they will pay for long term care, and then they often end up with no choice but Medicaid. Medicaid is a federal and state program that pays for the health care services for individuals who meet their state's poverty guidelines. As a result, those individuals not meeting the strict income and asset guidelines required by Medicaid will need to spend down their personal assets to qualify. Additionally, by relying on Medicaid, you would likely lose much of your independence and choice in where you receive care. For example, it may require you to enter a nursing home rather than staying at home, and then you may have little choice as to which nursing home to enter.

Doris McMillon: Okay...I'm ready for the next myth.

Phyllis Shelton: Well, there's a common misperception about how much long term care insurance costs. In fact, many people overestimate its price. Do you have any idea what it costs, Doris?

Doris McMillon: I think most people think it's really expensive.

Phyllis Shelton: Actually, Doris, it's reasonable. But before we look at that, I think it's important to look at how much long term care itself costs. That's the expensive item! The national average is $52,000 a year for nursing home care and over $20,000 for home care. And that home care statistic is based on $18/hour, 5 hours a day...then 5 days a week for a home health aide. And if you need home care for more hours per day or more days per week, the costs will be higher. In fact, in higher cost areas like parts of New York, New England, and California, long term care costs today can exceed $100,000 a year. And get this...the cost is expected to triple in the next 20 years.

Doris McMillon: Phyllis, that's a lot of money!

Phyllis Shelton: It certainly is. Let's take a look at a couple who has worked all their lives to plan for their retirement and they're concerned about the impact of long term care on their future.

Male: I received a call from my mother in 1997. She had been approached about long term care insurance and I was not familiar with it either. So I looked at the material and encouraged her to proceed and I'm so glad I did. She died at 91 after 4 1/2 years of round-the-clock sitters who were needed because of her Parkinson's disease. When we added up the cost of my mother's long term care--there was a total of a little over 5 years--the highest year was $113,000.

Female: we have a question oftentimes...do you want to live with your children at an older age, once you're needing assisted living, and our answer is "no". We have no desire to be a burden to our children, to interfere with the grandchildren's activities, and we want to provide peace of mind for our children with our long term care insurance.

Doris McMillon: Phyllis, that was powerful.

Phyllis Shelton: Well, we're going to show you some charts that illustrate the potential monthly cost for insurance coverage versus paying for long term care services out-of-pocket. Now, keep in mind that all the figures that we're about to show you represent the monthly cost, okay? The rates illustrated are for a comprehensive plan that will pay up to $150 per day, and it also includes an inflation protection feature that would automatically increase your benefits by 5% compounded each year while keeping the premiums constant, and that's to help your benefits keep pace with projected inflation. Here we go. At age 45, the premium for the Federal Long Term Care Insurance Program is only $95 per month, compared to the cost of home care of at least $1,950 a month and nursing home care at a whopping $4,333 a month.

Doris McMillon: Well, the premium does look really low when you put it that way. But, I'm not sure I understand the benefit features you're talking about here, though.

Phyllis Shelton: Well, that's because we're getting ahead of ourselves. Don't worry if you don't understand the inflation protection part, and what Comprehensive 150 means. We'll discuss that a little bit later. But, let's start talking specifically about the Federal Program, how it works, and who is eligible to apply and finally what it costs. Now, there are six important features you will need to think about during your decision making process. And what you choose, Doris, will impact the cost of your plan, and we'll address that as we go through our discussion. So here we go... Let's deal with decision #1 by talking about the types of services the comprehensive plan covers. It will help pay for care in all settings that long term care is provided in. And it will cover all levels of care--now, that would be custodial to skilled, including nursing home, assisted living facilities, adult day care, hospice care, home care and respite services. Home care can be provided by licensed or certified health care practitioners such as nurses, home health aides, therapists, homemakers, at-home hospice providers, or importantly informal caregivers.

Doris McMillon: What do you mean by informal caregivers, Phyllis?

Phyllis Shelton: This means the comprehensive plan also covers approved care provided in your home, Doris, by friends, family members and other non-licensed caregivers who don't normally live in your home. Now, this is a real advantage, and one not found in most other long term care insurance plans. And when informal care is provided by non-family members, it's covered for your entire benefit period--3 years, 5 years or unlimited--and we'll talk more about those options a little bit later. But as you can imagine, most people prefer to remain in their home should they need care. I know I do. And furthermore, most prefer to receive care from a loved one or other informal caregiver they know and trust. This benefit allows you to choose this option and receive benefits that will in turn allow you to compensate this person for that person's time and expense. Again, this feature is built into the comprehensive plan and provides you with a great deal of flexibility and options when deciding upon the care that best meets your needs.

Doris McMillon: All right, then what would the facilities-only plan cover and then why would someone choose that plan?

Phyllis Shelton: Well, people looking to partially fund their care or who were looking for only catastrophic coverage, let's say, frequently consider the facilities-only plan. This type of plan, Doris, pays only for care in institutional settings such as nursing homes, assisted living facilities, and hospice facilities. And it also pays for respite services in these facilities. It would not pay for care at home. Now, people who live alone, people without large support networks, people who can't see themselves using home care, would probably want to consider a facilities-only plan. And as you can guess, the facilities-only plan is also considerably less expensive than the comprehensive plan. Premiums for the facilities only plan are on average about 30% lower than premiums for the comprehensive plan.

Doris McMillon: Now, I could see how it would be an economic decision since the premiums are that much lower. Do the other decisions also affect the premium?

Phyllis Shelton: That's a great observation, Doris. They certainly do. Let's look at decision #2, which is the daily benefit amount. The daily benefit amount is the highest amount your plan will pay toward the cost of your care for one day. And there's a wide range of choices for your daily benefit amount--anywhere from $50 a day to $300 a day in $25 increments. Now, nursing home and assisted living facilities as well as hospice care--both inpatient and outpatient--and respite care are reimbursed up to 100% of your daily benefit amount. Home care and adult day care costs which are covered under the comprehensive plan--both of those are reimbursed up to 75% of your daily benefit amount. Now, it's important to consider the average daily cost of home care or facility care in your area and how much of that amount you can pay from your own assets and income when selecting your daily benefit amount. Now, you can obtain information on the cost of care in your area by simply visiting the LTC Partners web site. So to answer your question about the impact on premium, Doris, can you see how the amount of your daily benefit will influence the cost of your plan? A higher daily benefit, will accordingly have a higher premium.

Doris McMillon: All right, now what's the third decision?

Phyllis Shelton: Well, you have to choose whether you want your benefits reimbursed on a daily or on a weekly basis, which means 7 times your daily benefit, for greater flexibility. So the weekly reimbursement option is only applicable to the comprehensive plan.

Doris McMillon: Now, Phyllis, does the weekly reimbursement option cost more?

Phyllis Shelton: Just a little more, Doris. Premiums for weekly reimbursement are on average 6% greater than premiums for daily reimbursement.

Doris McMillon: Well, that's not much and it sounds like it provides a great deal more flexibility. Now, what's the fourth decision?

Phyllis Shelton: The next feature you need to consider is your benefit period. This is the length of time your insurance coverage will last if you receive care every single day at a cost equal to or more than your daily benefit amount. This doesn't mean, Doris, how long you can be covered. Rather it is a multiplier to figure out your maximum lifetime benefit.

Doris McMillon: All right. How does that work?

Phyllis Shelton: Your benefit period options are 3 years, 5 years and unlimited. Now, with an unlimited benefit period, your benefits never run out. However, your plan still has a daily or weekly maximum. Premiums for an unlimited benefit period are on average 35% higher than premiums for the 5 year benefit period.

Doris McMillon: So does an unlimited benefit period mean I could have a claim that lasts 10 years and my benefits wouldn't stop?

Phyllis Shelton: That's exactly what it means, Doris. But if you don't choose the unlimited benefit period, let's see how the benefit period multiplied by your daily benefit amount defines your maximum lifetime benefit. The maximum lifetime benefit is the maximum amount your plan could pay. The maximum lifetime benefit is sometimes called a "pool of money". And here is how we arrive at the maximum lifetime benefit. If you chose a daily benefit of $100 and a benefit period of 3 years, your maximum lifetime benefit to start out with would be $100/day x 3 years, which is 1,095 days, so it would be $109,500. That's the length of time your insurance coverage will last if you receive care every single day at a cost equal to or more than your daily benefit amount. If you don't receive care every day or the cost of care is lower than your daily benefit, then your benefits would last longer. And to help with your decision about your benefit period, you may want to consider that the average caregiving time at home is 4.5 years and the average nursing home stay is 2.6 years. Even recognizing these national averages, some people choose the unlimited benefit period, because they never want to be in the position of having their benefits run out while their need for long term care services continues.

Doris McMillon: But, Phyllis, what if I can't afford the unlimited benefit period option?

Phyllis Shelton: Well, obviously Doris, the shorter the benefit period, the lower the premium. But, don't worry if the 3-year benefit period is all you can afford, because that could be 3 years or more of private pay choices you might not otherwise have without a long term care insurance plan. If you're married, you and your spouse don't have to select matching benefit periods either.

Doris McMillon: Okay, I've got that one. Are we ready for the fifth decision?

Phyllis Shelton: You bet. The next feature that determines your premium, Doris, is your waiting period. This is the number of days, once you become eligible for benefits, that you or other insurance pay for care before this insurance begins to pay benefits. Sometimes it's known as an elimination period or a deductible. Now, the Federal Program has two waiting period options-- a 30-day and a 90-day. A 30-day waiting period is available for those of you who would prefer not to be responsible for the cost of the first 90 days of care. Premiums for a 30-day waiting period are on average 12% higher than premiums for a 90-day waiting period.

Doris McMillon: Okay, so a 30-day waiting period is 12% more premium, but I could potentially save some out of pocket cost for care. Is that what you're saying?

Phyllis Shelton: That's exactly what I'm saying.

Doris McMillon: Well, do I have to meet this deductible more than once as is the case with some of my other insurance policies?

Phyllis Shelton: No, you don't, Doris, and that's a really strong point. Unlike auto or homeowner's insurance, which have a per incident deductible, or like health insurance with an annual deductible, the Federal Long Term Care Insurance Program requires that you satisfy your waiting period only once in your lifetime.

Doris McMillon: Well, you know, I like that part a lot. You know, we've covered five out of the six decisions and we haven't hit inflation coverage yet. So, that has to be the last one.

Phyllis Shelton: Good memory, Doris. Inflation protection--that's the sixth decision--is critical, because you want the policy to be as meaningful in the future as it is today. Due to inflation, a specific amount of coverage today may not be worth as much years from now, and therefore may not provide any meaningful benefits after many years. Given this, you will want to give serious consideration to how you might want to ensure that your daily benefit amount is sufficient to cover the cost of care in the future when you need it.

Doris McMillon: Okay, now...I'm very interested in this feature. How does it work?

Phyllis Shelton: With the Federal Long Term Care Insurance Program, you have two inflation protection options. One, the automatic compound inflation option would automatically increase your daily benefit amount by 5% compounded every year with no corresponding increase in your premium for as long as you are covered. And those increases would continue even while you were eligible for benefits. And one other note on this option...because the Federal Long Term Care Insurance Program has a waiver of premium provision built into it, which means you stop paying premiums when benefits are payable, your daily benefit amount would continue to grow at 5% compounded each year even though you are no longer paying premiums. Isn't that great? So your premiums won't increase even though your benefits increase. But, the premiums start out significantly higher because you're pre-paying for the scheduled increases, and because of this, some people choose the other inflation option. Remember, I said there were two. Okay, the second one is called the future purchase option.

Doris McMillon: All right, tell me about that one.

Phyllis Shelton: Well, this inflation option increases your daily benefit amount every two years at an extra cost, as long as you are not eligible for benefits and don't decline the increase. The increase in your daily benefit amount will be based on increases in the consumer price index for medical care. Once you have declined three increases, they will not start again unless you specifically request one and provide evidence of good health. With the future purchase option, you can assess the cost of care as time moves along, and make a decision to decline the increase in benefits if you can't afford it. Each time your coverage increases, Doris, the premium for that additional coverage will be based on your age and premium at the time the increase takes effect. Also, a unique feature of the Federal Program is that each time you are offered an inflation increase, you can switch to the automatic compound inflation option without proof of good health, as long as you are not eligible for benefits at the time and have not declined three increases in the past.

Doris McMillon: Well, Phyllis, what's the difference in premium for the automatic compound inflation option versus a plan with the future purchase option?

Phyllis Shelton: At age 40, it's 3.5 times as much... Age 50, 3 times as much... Age 60, 2.5 times as much... Age 70, 2 times as much. But in a nutshell, Doris, here's the main difference: with the future purchase option, your premium starts out lower than with the automatic compound inflation option. But as your benefit increases the future purchase option premium increases and eventually becomes greater than the automatic compound inflation option premium. The future purchase option premium increases steeply during normal retirement ages, therefore you need to consider whether you will be able to afford the higher premium at that time in your life under the future purchase option.

Doris McMillon: Okay...so let me see if I can recap the six decisions-- comprehensive plan versus facilities-only; daily benefit amount; daily or weekly reimbursement; benefit period; waiting period; and inflation protection.

Phyllis Shelton: I think you're going to win a memory award today, Doris! That's great!

Doris McMillon: But something we haven't talked about yet, Phyllis, is how one would actually qualify for benefits under the Federal Program. I'm sure it isn't enough to simply have insurance. You need to qualify in order to trigger those benefits.

Phyllis Shelton: You're right, of course. You will be eligible for benefits when a licensed health care practitioner certifies and Long Term Care Partners agrees, that you are unable to perform at least 2 of 6 activities of daily living--and you remember we call those ADLS-- without substantial assistance for a period expected to last at least 90 days. Now, I don't think I've told you this yet, Doris, but the 6 activities of daily living are eating, toileting, bathing, transferring--like from bed to chair--dressing, and continence. Or, you may be able to perform all of your ADLS, but you require substantial supervision to protect yourself due to a severe cognitive impairment such as Alzheimer's disease. And that reason would also qualify you for benefits.

Well, that completes my general overview of the primary features of the Federal Long Term Care Insurance Program which will require your thought and decisions. There are many more important and valuable features of the program that are built in and we'll discuss those in a few minutes. In the meantime, when you look at the LTCFEDS web site or review the information package, you'll notice that we tried to help you in your decision making process by presenting four pre-packaged plans. So, I'd like to take a few moments and review each of these with you.

Doris McMillon: All right...do I have to choose one of these pre-packaged plans, Phyllis?

Phyllis Shelton: No, Doris, you don't. And we'll talk about customizing a plan in a few minutes. But first, let's cover the pre-packaged plans to see if one of them will fit your needs. All of the pre-packaged plans include a 90-day waiting period...you need to know that; a daily benefit amount rather than weekly; and a choice of either the automatic compound inflation option or the future purchase option. The benefit period of the plans vary to help you find a plan that best meets your needs and your budget.

Doris McMillon: Okay, there are four of these, right? What's the first one?

Phyllis Shelton: The first one is the facilities 100 plan and that's the least expensive as it is a facilities-only plan. There are no benefits for home care services. The benefits are just for assisted living facilities, nursing homes, care in a hospice facility and respite services in a facility. Now, this plan has a $100 daily benefit amount and a 3 year benefit period.

Doris McMillon: And who might consider this plan, Phyllis?

Phyllis Shelton: Good question, Doris. People who have a tight budget, are comfortable partially financing their cost of care, or are looking only for catastrophic coverage, would typically be interested in this plan. You may also want to consider this plan if your support network is not extensive, or if you think you will outlive your spouse and home care may not be feasible for you.

Doris McMillon: Phyllis, when you say "if my support network is not extensive", do you mean if I don't have a primary caregiver, as many unmarried people don't?

Phyllis Shelton: That's exactly what I mean, Doris. Now, the second plan--the Comprehensive 100 plan--is a comprehensive plan which, if you'll recall from our discussion of the first decision, means that it includes benefits for home care, including informal care, hospice care at home, and adult day care... In addition to benefits for assisted living facilities, nursing homes, care in a hospice facility and respite services. The daily benefit amount on this plan is $100, and the benefit period is 3 years. The only difference between the facilities 100 and Comprehensive 100 plan is the addition of home care, hospice care at home, and adult day care benefits.

Doris McMillon: And who might select this plan?

Phyllis Shelton: This plan would be most appropriate for those individuals concerned about home care, and who may live in a lower cost area of the country or are prepared to pay for some of the costs of their care.

Doris McMillon: I think many people are concerned about home health care, yet they want the premiums affordable as possible. So, what's the third plan?

Phyllis Shelton: Well, the Comprehensive 150 plan is also a comprehensive plan and it increases the daily benefit amount to $150 and extends the benefit period to 5 years. Now, the national average cost of semi-private nursing home care today is $52,000 a year, which is just about $143 a day. So, as a result, this plan would cover the average cost of nursing home care, plus a little bit more. And as we reviewed earlier with all of these plans, benefits will last longer than 3 or 5 years if the actual cost of care in a given day is less than the daily benefit amount selected, or if you don't receive care everyday.

Doris McMillon: All right...I understand that. We can't forget that. And the fourth plan?

Phyllis Shelton: The fourth plan is our Comprehensive 150+ plan. Now, it's the same as our Comprehensive 150 plan except the plus indicates an unlimited benefit period, rather than a 5 year benefit period. Now, this plan would be most appropriate for people looking to cover the average cost of care and who may be concerned about running out of benefits. With an unlimited benefit period, your benefits would last as long as you remain benefit eligible. And, of course, an unlimited benefit period also adds cost to your plan.

Doris McMillon: Didn't you say earlier that premiums for the unlimited benefit period are 35% higher than premiums for a 5 year benefit period?

Phyllis Shelton: That's exactly right. But remember, the unlimited benefit period has no maximum lifetime benefit, so, that is a great deal!

Doris McMillon: You know, I'm going to ask what happens if none of these plans meet my needs...any flexibility?

Phyllis Shelton: Yes, Doris, you can customize a plan to meet your needs by selecting any combination of benefits as shown on this slide. Also, a premium calculator is available on the LTCFEDS web site, which is www.LTCFEDS.com. So you can select any combination of the following... Comprehensive plan or facilities-only; your daily benefit amount--you could vary that from $50 a day up to $300 a day in $25 increments; on the reimbursement you could decide on either the daily or the weekly--now that's applicable only to the comprehensive plans; the waiting period--you could pick 30 days or 90 days; on the benefit period, you could select 3 years, 5 years or unlimited; on the inflation protection, you could select either the automatic compound inflation option or the future purchase option.

Doris McMillon: You know, it's great to know that this plan is so flexible.

Phyllis Shelton: Well, Doris, OPM and LTC Partners hope you can find a plan that meets both your budget and anticipated care needs. Here are some other important things to understand about the premium, Doris... First, it's 100% enrollee paid-- no government contribution; the premiums are based on your age when you buy... Now for open season, it's your age on July 1, 2002; third, premiums do not increase simply because you get older; fourth, rates are per person-- there are no spouse discounts; fifth, rates have been set using premium stability guidelines and are expected to be constant for life unless you purchase more coverage, such as with the future purchase option.

Doris McMillon: Now, Phyllis, is there any chance we could see sample rates?

Phyllis Shelton: Oh yes, we have some sample rates, based on age, for the four pre-packaged plans. And as you can see here on the screen, rates can vary quite significantly based on age and the features you select.

Doris McMillon: Wow, I mean it could really pay off to start the plan as young as you can!

Phyllis Shelton: I was hoping you'd see that, Doris. And as we said earlier, younger people need long term care for many reasons. So not only is it less expensive to buy at younger ages, the important thing is you're covered if you do need long term care at a younger age. Now, let's look at some other important features of the Federal Program. A significant benefit is the care coordination benefit, which will pay for registered nurses to work with you to help you through the benefit qualification process and help you identify the long term care providers to meet your needs. Your care coordinator can arrange for discounted services as well, monitor the care you're receiving, and assist with altering your plan of care as your needs change. That's so important. And, unlike most long term care insurance programs, the Federal Program also provides care coordination services to qualified family members. Now, this can be invaluable, Doris, in helping reduce the inevitable stress that you can experience when a family member needs long term care.

Doris McMillon: You know, Phyllis, I know from personal experience how stressful that time can be. I really like that benefit.

Phyllis Shelton: You'll like this one, too. The Federal Long Term Care Insurance Program is guaranteed renewable, which means it can never be cancelled as long as you pay your premiums. It can't be cancelled due to your individual age or a change in your health either. Premiums have been set to remain constant for life, unless you increase benefits. Premiums can only be changed with OPM's approval on a group, not an individual basis. And, your long term care insurance coverage under the program is portable. This means that once you have coverage but later are no longer a member of an eligible group, you can keep your coverage if you continue to pay the required premium and, of course, you haven't exhausted your maximum lifetime benefit.

Doris McMillon: I mean, I think that's a great deal!

Phyllis Shelton: Oh, it is! And there are so many other benefits in the Federal Long Term Care Insurance Program that add exceptional value. One is alternate plan of care and that provides flexibility in the plan. It can allow your care coordinator to authorize benefits for services that are not specifically defined as covered services under this program. Bed reservations pay to hold your bed up to 30 days per calendar year if you need to temporarily leave an assisted living facility, hospice facility or nursing home. Unlike most long term care insurance policies, the Federal Program provides coverage for those who may require care in a country besides the u.s., so that's international coverage. Also, the Federal Program does not exclude benefits if you become eligible based on a mental or nervous disorder, as many long term care insurance plans do. Caregiver training: this benefit pays 7 times your daily benefit to cover the cost of having someone trained to take care of you.

Doris McMillon: Phyllis, that's a lot of extra benefits! Now that we've reviewed the benefits and features of the Federal Program, can we look at who's eligible?

Phyllis Shelton: That's a great idea. Well, as you can see from the screen, most federal and postal employees are eligible.

• Employees

• Federal and U. S. Postal Service employees

• Members of the uniformed services

• Annuitants

• Federal and U. S. Postal Service annuitants

• Retired members of the uniformed services

• Current spouses and adult children (age 18 and over, including adopted and stepchildren) of living employees and annuitants

• Parents, parents-in-law, and stepparents of living employees

Federal employees must be in a position that conveys eligibility for the Federal Employees Health Benefits Program. That doesn't mean you must be enrolled in the Federal Employees Health Benefits Program, just that you are eligible to enroll. In addition, members of the uniformed services are eligible.

Doris McMillon: I'm sure some people will want more detail on that since the Federal Family is so large.

Phyllis Shelton: I think you're right. Here are a few more details on some of the groups we just talked about.

• Surviving spouses receiving a survivor annuity

• Persons receiving compensation payments from the Department of Labor

• Members of the Selected Reserve (but not Individual Ready Reserve) and active duty National Guard

All those groups are eligible. And in case you're wondering, federal deferred annuitants and "grey reservists" are eligible at the time they are receiving an annuity. They are not eligible from the time they separate until the time they are receiving the annuity.

Doris McMillon: Okay, what else do we need to know?

Phyllis Shelton: Qualified relatives can apply, even if the employee, member of the uniformed services, or annuitant they're related to does not. The minimum age of the plan is 18 years old, maximum age, none. Each person applies individually--there is no "self and family coverage" under this program.

Doris McMillon: Okay...so what kind of questions do I have to answer to apply for the Federal Long Term Care Insurance Program?

Phyllis Shelton: You'll have to answer underwriting questions, Doris. Underwriting is the process of reviewing your health status to determine whether you qualify for coverage. Now, the great news is that OPM has made it possible for employees and their spouses to easily qualify for this insurance coverage by just answering 7 simple medical questions--now that would be 9 for spouses, 7 for employees--as long as you apply during open season. While there will be other open seasons, OPM has not announced when they will be. There will not be annual open seasons, but when the next one will be is anyone's guess right now. OPM needs to evaluate the success of this open season before planning for future open seasons. And, there is no guarantee that this abbreviated underwriting will be offered again. There are additional questions for those requesting the unlimited benefit period. You need to know that. So here's what we're really saying, Doris...employees, members of the uniformed services and their spouses have abbreviated underwriting. All other applicants, such as all annuitants, retired members of the uniformed services, and qualified relatives will need to go through full underwriting. Now, they don't have to have a physical examination. That's good news. But, full underwriting just means answering questions about your health, authorizing access to your medical records and maybe having an interview with a nurse.

Doris McMillon: Wait a minute. What if someone doesn't pass the underwriting process?

Phyllis Shelton: The good news is that all members of the Federal Family will be offered something. Isn't that great? Well, as you can see, there are two possibilities for those people who are declined in the underwriting process. The service package is available to all members of the Federal Family who do not pass underwriting, while the alternative insurance plan is available to some employees and members of the uniformed services and their spouses who are declined in the underwriting process. Please note that the features of the service package are included in the insurance program. Qualified relatives of enrollees in the insurance program have access to these services.

Doris McMillon: Well Phyllis, when is coverage actually effective?

Phyllis Shelton: The later of October 1, 2002, or the first of the month following approval of your application. Now, in order for coverage to be effective, employees and members of uniformed services must be actively at work on their effective date.

Doris McMillon: Phyllis, what are the payment options? I mean, is payroll deduction available to make it really easy?

Phyllis Shelton: Yes, Doris. There are a variety of billing options available... You may also pay the premiums for any of your qualified relatives who apply and are approved for coverage. Some people might want to pay premiums for their adult children, let's say, out of their pay or annuity.

Doris McMillon: Phyllis, have we left anything out?

Phyllis Shelton: Well, I think it would be helpful to summarize why the Federal Program could be an excellent choice for you. There's an expansive informal care benefit, expansive international coverage, innovative inflation options, care coordination for non-insured qualified relatives of enrollees, that's a great benefit! And, in addition, there's no exclusion from benefits for mental or nervous disorders, no war exclusion, the right to an independent third-party review of disputed claims, and premium stability with premiums designed to be constant for life. Also, OPM will make sure that the program evolves over time. And this is a great example. OPM will make sure it covers robotic care if that becomes the primary method of providing care. And also, John Hancock and MetLife have never raised their premiums for their employer-sponsored group long term care insurance plans, so there's a long history of rate stability and that is so important.

Doris McMillon: You know, Phyllis, the Federal Program does sound wonderful. What's the best time to apply?

Phyllis Shelton: Because premiums are based on your age on July 1, 2002, for the open season, if you apply during the open season, you'll pay a lower premium than if you wait to apply. Finally, you never know when you might need the coverage, so you'll want to get it in place as quickly as possible.

Doris McMillon: You know, Phyllis, another question just occurred to me. Now I'm wondering if it would be smarter to invest the premium money rather than purchase a long term care insurance plan.

Phyllis Shelton: Well, this slide helps you see the potential impact of that kind of decision. Now, someone buying the Comprehensive 150 plan at age 40 with a monthly premium of $79.20 would pay $28,512 into the program by age 70. If you invest that amount of money at an average return of 8%, that would result in savings of $118,824 by age 70. But look, Doris, the maximum lifetime benefit by age 70, buying the insurance, would be $1,191,725! And, the older you are the less time you're going to have to invest anyway, before you may need long term care.

Doris McMillon: Now, insurance does look like the better deal when you explain it that way.

Phyllis Shelton: As we close our program, Doris, let's look at the thoughts of three prominent and well respected people, starting with Senator Charles Grassley.

Senator Charles Grassley: Quite frankly, I never met one person in my life that ever said, "I'm just dying to get into a nursing home." Well, some people don't have a choice. Long term care insurance gives you a choice.

Phyllis Shelton: And secondly, Rosalynn Carter. She says that.

There are only four kinds of people in this world...

• Those who have been caregivers

• Those who currently are caregivers

• Those who will be caregivers

• Those who will need caregivers."
  

And third, Kay Coles James, Director, of OPM. She says.

Long term care insurance empowers us to accept personal responsibility for our future security. I urge you to take a serious look at how you would pay for care. Do it for yourself and your loved ones.

Doris McMillon: You know, these are very powerful statements that certainly do an excellent job of summing up the issue. Phyllis, what should people do if they want more information?

Phyllis Shelton: Well, if you haven't already, you need to order an open season information kit by calling 1-800-LTC-FEDS or visit www.LTCFEDS.com. Your information kit will include an application and rates for the pre-packaged plans that are customized to your age. Additionally, if you would like to customize a plan or get rates for someone else, you can use the premium calculator on the web site, or you could ask for a custom quote from one of the long term care insurance consultants at the 800 number. Beginning July 1st, they are available from 8 am to midnight eastern time, seven days a week. Applications are on-line beginning July 1st, so some people will be able to apply on-line. Also, during open season premiums will be based on your age on July 1, 2002, regardless of when during the open season you apply.

Doris McMillon: Phyllis, any last thoughts?

Phyllis Shelton: Well Doris, I hope we've impressed upon you today the issues surrounding long term care and how long term care insurance can help you achieve a comfortable and secure lifestyle. I believe you owe it to yourself and your family to consider long term care insurance for yourself, your spouse, and other loved ones, because when it comes right down to it, Doris, the real reason to buy long term care insurance is because you love your family.

Doris McMillon: Thank you for joining us for this presentation on the Federal Long Term Care Insurance Program. If you haven't already, order an open season information and application kit by calling 1-800-LTC-FEDS (1-800-582-3337) (TDD: 1-800-843-3557), or visit www.LTCFEDS.com.