[House Report 106-610]
[From the U.S. Government Publishing Office]
106th Congress Rept. 106-610
HOUSE OF REPRESENTATIVES
2d Session Part 1
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LONG-TERM CARE SECURITY ACT
_______
May 8, 2000.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Burton of Indiana, from the Committee on Government Reform,
submitted the following
R E P O R T
[To accompany H.R. 4040]
The Committee on Government Reform, to whom was referred the
bill (H.R. 4040) to amend title 5, United States Code, to
provide for the establishment of a program under which long-
term care insurance is made available to Federal employees,
members of the uniformed services, and civilian and military
retirees, and for other purposes, having considered the same,
report favorably thereon with an amendment and recommend that
the bill as amended do pass.
CONTENTS
Page
I. Summary of Legislation...........................................6
II. Background and Need for the Legislation..........................6
III. Legislative Hearings and Committee Actions.......................9
IV. Committee Hearings and Written Testimony.........................9
V. Explanation of the Bill.........................................15
VI. Compliance With Rule XI.........................................21
VII. Budget Analysis and Projections.................................21
VIII.Cost Estimate of the Congressional Budget Office................21
IX. Specific Constitutional Authority for This Legislation..........24
X. Committee Recommendation........................................24
XI. Congressional Accountability Act; Public Law 104-1..............24
XII. Unfunded Mandates Reform Act; Public Law 104-4, Section 423.....24
XIII.Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b).....24
XIV. Changes in Existing Law.........................................25
The amendment is as follows:
Strike out all after the enacting clause and insert in lieu
thereof the following:
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Long-Term Care Security Act''.
SEC. 2. LONG-TERM CARE INSURANCE.
(a) In General.--Subpart G of part III of title 5, United States
Code, is amended by adding at the end the following:
``CHAPTER 90--LONG-TERM CARE INSURANCE
``Sec.
``9001. Definitions.
``9002. Availability of insurance.
``9003. Contracting authority.
``9004. Financing.
``9005. Preemption.
``9006. Studies, reports, and audits.
``9007. Jurisdiction of courts.
``9008. Administrative functions.
``9009. Cost accounting standards.
``Sec. 9001. Definitions
For purposes of this chapter:
``(1) Employee.--The term `employee' means--
``(A) an employee as defined by section 8901(1); and
``(B) an individual described in section 2105(e);
but does not include an individual employed by the government
of the District of Columbia.
``(2) Annuitant.--The term `annuitant' has the meaning such
term would have under paragraph (3) of section 8901 if, for
purposes of such paragraph, the term `employee' were considered
to have the meaning given to it under paragraph (1) of this
subsection.
``(3) Member of the uniformed services.--The term `member of
the uniformed services' means a member of the uniformed
services, other than a retired member of the uniformed
services.
``(4) Retired member of the uniformed services.--The term
`retired member of the uniformed services' means a member or
former member of the uniformed services entitled to retired or
retainer pay.
``(5) Qualified relative.--The term `qualified relative'
means each of the following:
``(A) The spouse of an individual described in
paragraph (1), (2), (3), or (4).
``(B) A parent, stepparent, or parent-in-law of an
individual described in paragraph (1) or (3).
``(C) A child (including an adopted child, a
stepchild, or, to the extent the Office of Personnel
Management by regulation provides, a foster child) of
an individual described in paragraph (1), (2), (3), or
(4), if such child is at least 18 years of age.
``(D) An individual having such other relationship to
an individual described in paragraph (1), (2), (3), or
(4) as the Office may by regulation prescribe.
``(6) Eligible individual.--The term `eligible individual'
refers to an individual described in paragraph (1), (2), (3),
(4), or (5).
``(7) Qualified carrier.--The term `qualified carrier' means
an insurance company (or consortium of insurance companies)
that is licensed to issue long-term care insurance in all
States, taking any subsidiaries of such a company into account
(and, in the case of a consortium, considering the member
companies and any subsidiaries thereof, collectively).
``(8) State.--The term `State' includes the District of
Columbia.
``(9) Qualified long-term care insurance contract.--The term
`qualified long-term care insurance contract' has the meaning
given such term by section 7702B of the Internal Revenue Code
of 1986.
``(10) Appropriate secretary.--The term `appropriate
Secretary' means--
``(A) except as otherwise provided in this paragraph,
the Secretary of Defense;
``(B) with respect to the Coast Guard when it is not
operating as a service of the Navy, the Secretary of
Transportation;
``(C) with respect to the commissioned corps of the
National Oceanic and Atmospheric Administration, the
Secretary of Commerce; and
``(D) with respect to the commissioned corps of the
Public Health Service, the Secretary of Health and
Human Services.
``Sec. 9002. Availability of insurance
``(a) In General.--The Office of Personnel Management shall establish
and, in consultation with the appropriate Secretaries, administer a
program through which an individual described in paragraph (1), (2),
(3), (4), or (5) of section 9001 may obtain long-term care insurance
coverage under this chapter for such individual.
``(b) General Requirements.--Long-term care insurance may not be
offered under this chapter unless--
``(1) the only coverage provided is under qualified long-term
care insurance contracts; and
``(2) each insurance contract under which any such coverage
is provided is issued by a qualified carrier.
``(c) Documentation Requirement.--As a condition for obtaining long-
term care insurance coverage under this chapter based on one's status
as a qualifiedrelative, an applicant shall provide documentation to
demonstrate the relationship, as prescribed by the Office.
``(d) Underwriting Standards.--
``(1) Disqualifying condition.--Nothing in this chapter shall
be considered to require that long-term care insurance coverage
be made available in the case of any individual who would be
eligible for benefits immediately.
``(2) Spousal parity.--For the purpose of underwriting
standards, a spouse of an individual described in paragraph
(1), (2), (3), or (4) of section 9001 shall, as nearly as
practicable, be treated like that individual.
``(3) Guaranteed issue.--Nothing in this chapter shall be
considered to require that long-term care insurance coverage be
guaranteed to an eligible individual.
``(4) Requirement that contract be fully insured.--In
addition to the requirements otherwise applicable under section
9001(9), in order to be considered a qualified long-term care
insurance contract for purposes of this chapter, a contract
must be fully insured, whether through reinsurance with other
companies or otherwise.
``(5) Higher standards allowable.--Nothing in this chapter
shall, in the case of an individual applying for long-term care
insurance coverage under this chapter after the expiration of
such individual's first opportunity to enroll, preclude the
application of underwriting standards more stringent than those
that would have applied if that opportunity had not yet
expired.
``(e) Guaranteed Renewability.--The benefits and coverage made
available to eligible individuals under any insurance contract under
this chapter shall be guaranteed renewable (as defined by section 7A(2)
of the model regulations described in section 7702B(g)(2) of the
Internal Revenue Code of 1986), including the right to have insurance
remain in effect so long as premiums continue to be timely made.
However, the authority to revise premiums under this chapter shall be
available only on a class basis and only to the extent otherwise
allowable under section 9003(b).
``Sec. 9003. Contracting authority
``(a) In General.--The Office of Personnel Management shall, without
regard to section 5 of title 41 or any other statute requiring
competitive bidding, contract with 1 or more qualified carriers for a
policy or policies of long-term care insurance. The Office shall ensure
that each resulting contract (hereinafter in this chapter referred to
as a `master contract') is awarded on the basis of contractor
qualifications, price, and reasonable competition.
``(b) Terms and Conditions.--
``(1) In general.--Each master contract under this chapter
shall contain--
``(A) a detailed statement of the benefits offered
(including any maximums, limitations, exclusions, and
other definitions of benefits);
``(B) the premiums charged (including any limitations
or other conditions on their subsequent adjustment);
``(C) the terms of the enrollment period; and
``(D) such other terms and conditions as may be
mutually agreed to by the Office and the carrier
involved, consistent with the requirements of this
chapter.
``(2) Premiums.--Premiums charged under each master contract
entered into under this section shall reasonably and equitably
reflect the cost of the benefits provided, as determined by the
Office. The premiums shall not be adjusted during the term of
the contract unless mutually agreed to by the Office and the
carrier.
``(3) Nonrenewability.--Master contracts under this chapter
may not be made automatically renewable.
``(c) Payment of Required Benefits; Dispute Resolution.--
``(1) In general.--Each master contract under this chapter
shall require the carrier to agree--
``(A) to provide payments or benefits to an eligible
individual if such individual is entitled thereto under
the terms of the contract;
``(B) to establish internal administrative procedures
designed to expeditiously resolve disputes regarding
claims for payments or benefits under the terms of the
contract; and
``(C) for disputes not resolved under subparagraph
(B), to establish procedures for 1 or more alternative
means of dispute resolution involving independent
third-party review under appropriate circumstances
mutually acceptable to the Office and the carrier.
``(2) Eligibility.--A carrier's determination as to whether
or not a particular individual is eligible to obtain long-term
care insurance coverage under this chapter shall be subject to
review only to the extent and in the manner provided in the
applicable master contract.
``(3) Other claims.--Disputes arising under this chapter
between a carrier and the Office shall, after exhaustion of
administrative remedies, be subject to de novo judicial review
under section 9007.
``(4) Rule of construction.--Nothing in this chapter shall be
considered to grant authority for the Office or a third-party
reviewer to change the terms of any contract under this
chapter.
``(d) Duration.--
``(1) In general.--Each master contract under this chapter
shall be for a term of 7 years, unless terminated earlier by
the Office in accordance with the terms of such contract.
However, the rights and responsibilities of the enrolled
individual, the insurer, and the Office (or duly designated
third-party administrator) under such contract shall continue
with respect to such individual until the termination of
coverage of the enrolled individual or the effective date of a
successor contract thereto.
``(2) Exception.--
``(A) Shorter duration.--In the case of a master
contract entered into before the end of the period
described in subparagraph (B), paragraph (1) shall be
applied by substituting `ending on the last day of the
7-year period described in paragraph (2)(B)' for `of 7
years'.
``(B) Definition.--The period described in this
subparagraph is the 7-year period beginning on the
earliest date as of which any long-term care insurance
coverage under this chapter becomes effective.
``(3) Congressional notification.--No later than 180 days
after receiving the second report required under section
9006(c), the Office of Personnel Management shall submit to the
Committees on Government Reform and on Armed Services of the
House of Representatives and the Committees on Governmental
Affairs and on Armed Services of the Senate, a written
recommendation as to whether the program under this chapter
should be continued without modification, terminated, or
restructured. During the 180-day period following the date on
which it submits its recommendation under this paragraph, the
Office may not take any steps to rebid or otherwise contract
for any coverage to be available at any time following the
expiration of the 7-year period described in paragraph (2)(B).
``(4) Full portability.--Each master contract under this
chapter shall include such provisions as may be necessary to
ensure that, once an individual becomes duly enrolled, long-
term care insurance coverage obtained by such individual
pursuant to that enrollment shall not be terminated due to any
change in status (such as separation from Government service or
the uniformed services) or ceasing to meet the requirements for
being considered a qualified relative (whether as a result of
dissolution of marriage or otherwise).
``Sec. 9004. Financing
``(a) In General.--Each eligible individual obtaining long-term care
insurance coverage under this chapter shall be responsible for 100
percent of the premiums for such coverage.
``(b) Withholdings.--
``(1) In general.--The amount necessary to pay the premiums
for enrollment may--
``(A) in the case of an employee, be withheld from
the pay of such employee;
``(B) in the case of an annuitant, be withheld from
the annuity of such annuitant;
``(C) in the case of a member of the uniformed
services described in section 9001(3), be withheld from
the basic pay of such member; and
``(D) in the case of a retired member of the
uniformed services described in section 9001(4), be
withheld from the retired pay or retainer pay payable
to such member.
``(2) Voluntary withholdings for qualified relatives.--
Withholdings to pay the premiums for enrollment of a qualified
relative may, upon election of the appropriate eligible
individual (described in section 9001(1)-(4)), be withheld
under paragraph (1) to the same extent and in the same manner
as if enrollment were for such individual.
``(c) Direct Payments.--All amounts withheld under this section shall
be paid directly to the carrier.
``(d) Other Forms of Payment.--Any enrollee who does not elect to
have premiums withheld under subsection (b) or whose pay, annuity, or
retired or retainer pay (as referred to in subsection (b)(1)) is
insufficient to cover the withholding required for enrollment (or who
is not receiving any regular amounts from the Government, as referred
to in subsection (b)(1), from which any such withholdings may be made,
and whose premiums are not otherwise being provided for under
subsection (b)(2)) shall pay an amount equal to the full amount of
those charges directly to the carrier.
``(e) Separate Accounting Requirement.--Each carrier participating
under this chapter shall maintain records that permit it to account for
all amounts received under this chapter (including investment earnings
on those amounts) separate and apart from all other funds.
``(f) Reimbursements.--
``(1) The Office shall have access to the Employees' Life
Insurance Fund without fiscal year limitation for its
reasonable expenses in administering this chapter, including
reasonable initial implementation costs.
``(2) Each master contract under this chapter shall include
appropriate provisions under which the carrier involved shall
reimburse the Employees' Life Insurance Fund for funds accessed
under paragraph (1) (including lost investment income), on a
pro rata basis.
``Sec. 9005. Preemption
``The terms of any contract under this chapter which relate to the
nature, provision, or extent of coverage or benefits (including
payments with respect to benefits) shall supersede and preempt any
State or local law, or any regulation issued thereunder, which relates
to long-term care insurance or contracts.
``Sec. 9006. Studies, reports, and audits
``(a) Provisions Relating to Carriers.--Each master contract under
this chapter shall contain provisions requiring the carrier--
``(1) to furnish such reasonable reports as the Office of
Personnel Management determines to be necessary to enable it to
carry out its functions under this chapter; and
``(2) to permit the Office and representatives of the General
Accounting Office to examine such records of the carrier as may
be necessary to carry out the purposes of this chapter.
``(b) Provisions Relating to Federal Agencies.--Each Federal agency
shall keep such records, make such certifications, and furnish the
Office, the carrier, or both, with such information and reports as the
Office may require.
``(c) Reports by the General Accounting Office.--The General
Accounting Office shall prepare and submit to the Office of Personnel
Management and each House of Congress, before the end of the third and
fifth years during which the program under this chapter is in effect, a
written report evaluating such program. Each such report shall include
an analysis of the competitiveness of the program, as compared to both
group and individual coverage generally available to individuals in the
private insurance market. The Office shall cooperate with the General
Accounting Office to provide periodic evaluations of the program.
``Sec. 9007. Jurisdiction of courts
``The district courts of the United States have original jurisdiction
of a civil action or claim against the United States or a carrier
founded on this chapter, after such administrative remedies as required
under section 9003(c)(2) or (3) have been exhausted, but only to the
extent judicial review is not precluded by any dispute resolution or
other administrative remedy under this chapter. In cases against the
United States, the jurisdiction of the district courts shall be
concurrent with that of the United States Court of Federal Claims.
``Sec. 9008. Administrative functions
``(a) In General.--The Office of Personnel Management shall prescribe
regulations necessary to carry out this chapter.
``(b) Enrollment Periods.--The Office shall provide for periodic
coordinated enrollment, promotion, and education efforts in
consultation with the carriers.
``(c) Consultation.--Any regulations necessary to effect the
application and operation of this chapter with respect to an eligible
individual described in paragraph (3) or (4) of section 9001, or a
qualified relative thereof, shall be prescribed by the Office in
consultation with the appropriate Secretary.
``(d) Informed Decisionmaking.--The Office shall ensure that each
eligible individual applying for long-term care insurance under this
chapter is furnished the information necessary to enable that
individual to evaluate the advantages and disadvantages of obtaining
long-term care insurance under this chapter, including:
``(1) The principal long-term care benefits and coverage
available under this chapter, and how those benefits and
coverage compare to the range of long-term care benefits and
coverage otherwise generally available.
``(2) Representative examples of the cost of long-term care,
and the sufficiency of the benefits available under this
chapter relative to those costs. The information under this
paragraph shall also include--
``(A) the projected effect of inflation on the value
of those benefits; and
``(B) a comparison of the inflation-adjusted value of
those benefits to the projected future costs of long-
term care.
``(3) Any rights individuals under this chapter may have to
cancel coverage, and to receive a total or partial refund of
premiums. The information under this paragraph shall also
include--
``(A) the projected number or percentage of
individuals likely to fail to maintain their coverage
(determined based on lapse rates experienced under
similar group long-term care insurance programs and,
when available, this chapter); and
``(B)(i) a summary description of how and when
premiums for long-term care insurance under this
chapter may be raised;
``(ii) the premium history during the last 10 years
for each qualified carrier offering long-term care
insurance under this chapter; and
``(iii) if cost increases are anticipated, the
projected premiums for a typical insured individual at
various ages.
``(4) The advantages and disadvantages of long-term care
insurance generally, relative to other means of accumulating or
otherwise acquiring the assets that may be needed to meet the
costs of long-term care, such as through tax-qualified
retirement programs or other investment vehicles.
``Sec. 9009. Cost accounting standards
``The cost accounting standards issued pursuant to section 26(f) of
the Office of Federal Procurement Policy Act (41 U.S.C. 422(f)) shall
not apply with respect to a long-term care insurance contract under
this chapter.''.
(b) Conforming Amendment.--The analysis for part III of title 5,
United States Code, is amended by adding at the end of subpart G the
following:
``90. Long-Term Care Insurance............................. 9001.''.
SEC. 3. EFFECTIVE DATE.
The Office of Personnel Management shall take such measures as may be
necessary to ensure that long-term care insurance coverage under title
5, United States Code, as amended by this Act, may be obtained in time
to take effect not later than the first day of the first applicable pay
period of the first fiscal year which begins after the end of the 18-
month period beginning on the date of enactment of this Act.
I. Short Summary of Legislation
H.R. 4040 establishes a program under which federal
civilian employees, members of the uniformed services, as well
as civilian and military retirees can purchase private group
long-term care insurance for themselves and certain qualified
relatives at a discount.
II. Background and Need for the Legislation
Long-term care refers to a broad range of supportive,
medical, personal, and social services designed for individuals
who are limited in their ability to function independently on a
daily basis. Long-term care needs may arise at any time due to
an injury, chronic illness, or the effects of the natural aging
process. Functional dependency is generally defined as the
inability to function independently, perform essential
activities of daily living (ADLs) such as dressing, bathing,
eating, toileting, transferring (e.g., from a bed to a chair),
walking, and maintaining continence, or to perform instrumental
activities of daily living (IADLs) such as shopping, preparing
meals, taking medicine, and housekeeping. Assistance with these
ADLs may require hands-on assistance or direction, instruction,
or supervision from another individual. Long-term care services
can be provided in a nursing home, an assisted living facility,
the community or in the home.
Longer life spans coupled with a steady increase in the
elderly population as baby boomers (people born between 1946
and 1964) age will lead to a dramatic rise in the numbers of
Americans who will need long-term care. Continuing increases in
the number of two worker families, more single workers, and the
increased geographic spread of family members means that there
will be fewer family members available to provide care on an
informal basis. As a result of these trends, long-term care
will increasingly be provided in institutional settings or by
hired personnel.
Long-term care is expensive. For example, a person with a
severe disability living at home may pay over $36,000 per year
for the help of a home care aide.\1\ Assisted living facilities
charge $26,000 on average. A nursing home can cost $40,000 per
year.\2\ These figures are averages and can vary depending on
geographic location.
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\1\ This represents two visits per day by a home care aid costing
$54 per visit in 1997. National Association for Home Care (1997).
``Basic Statistics About Home Care in 1997. Washington, DC.''
\2\ American Health Care Association (1998). ``Today's Nursing
Facilities and the People They Serve''. Washington, DC.
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It is projected that the costs per nursing home resident
will increase. Since 1990, the costs per stay have increased at
an annual average rate of 3% above inflation. When today's 45-
year-olds reach age 85, one year of nursing home care will cost
$244,000. The increase in the number of nursing home residents
combined with a higher cost per stay is estimated to quadruple
nursing home expenditures by the year 2030.\3\
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\3\ American Council of Life Insurance Policy Research Department.
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Long-term care insurance is an affordable way for a number
of eligible individuals to protect against the risk of losing
their savings to pay for long-term care services. The younger
one is when purchasing long-term care insurance, the less
expensive the premium. Once a policy is purchased, the premiums
cannot be increased solely because one grows older. However,
with OPM's approval, rates may be adjusted by class to reflect
claims experience and underlying costs. By offering long-term
care insurance to individuals in their working years, the
federal government can provide federal employees the
opportunity to purchase this product at younger ages, when
premiums are lower.
Most people believe that they are covered for long-term
care by their health care plans, disability insurance, or by
Medicare. Unfortunately, many learn the hard way--when they or
a family member needs care--that they are not sufficiently
covered and must pay for long-term care on their own. By 2030,
the average cost of a nursing home stay will increase from
$40,000 today to more than $97,000 (in 1996 dollars).\4\ As
nursing home costs rise faster than overall inflation and
incomes, many more middle income baby boomers could become
impoverished by nursing home costs and thus become eligible for
Medicaid. To the extent that individuals purchase long term
care insurance, the burden of paying for long-term care will be
shifted from Medicaid and other public programs to private
resources, and individuals will be able to protect their life's
savings and other assets.
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\4\ American Council of Life Insurance Policy Research Department.
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Medicare covers very little long-term care. In fact, the
only type of long-term care that Medicare covers is skilled
care. Only 12% of all long-term care provided is skilled care.
Medicare also limits the amount of time it will pay for skilled
care (up to 100 days in a nursing home, with a $95 copayment
from day 21 to day 100). Further, Medicare only pays for
skilled nursing home care under limited circumstances (e.g., if
one is first in a hospital for the same condition and one is in
a Medicare-certified nursing home). In short, one cannot rely
on Medicare to pay for long-term care.
Medicaid is a federal/state health insurance program for
the poor. It provides a major portion of long-term care
financing, paying for care when someone is at or below the
federal poverty level known as welfare. Eligibility for
Medicaid is based on income and assets. Individuals must
deplete their assets to a certain percentage of the poverty
level (spend-down requirements) before they are eligible for
Medicaid benefits.
Many people also believe that their health care insurance
will pay for long-term care services. Most health care
insurance plans pay for medical services resulting from illness
or injury, but not for costs associated with long-term care.
Generally, these plans follow the same rules and limitations as
Medicare. Also, custodial/personal care services are never
covered.
Personal assets are often inadequate. As previously noted,
long-term care services are expensive. The vast majority of
families are unprepared to shoulder the costs of long-term
care. Therefore, without long-term care insurance, they must
deplete hard-earned assets, and eventually depend on Medicaid
to pay the costs of long-term care.
Employer-based plans represent the fastest growing market
for long-term care insurance.These plans are generally
available to the employer's employees, their spouses, parents, parents-
in-law, and retirees on a beneficiary-pay-all basis. As a major
employer in America, the federal government can reach over 2.8 million
workers and an additional 2.1 million annuitants and survivors.
Depending on how such a benefit is administered, competition among
carriers, group discounts, and volumes of sales should keep premiums
affordable for federal employees.
Federal employees have expressed a significant interest in
being offered an option to purchase long-term care insurance.
Specifically, in response to an Office of Personnel Management
(OPM) random survey distributed to federal employees in 1997,
approximately 86% of federal employees reported an interest in
long-term care insurance.\5\
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\5\ Office of Personnel Management, 1997.
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III. Legislative Hearings and Committee Actions
The Committee held no legislative hearings on H.R. 4040.
Rep. Joe Scarborough introduced this measure on March 21, 2000.
It was referred to the Committee on Government Reform, and in
addition, to the Committee on the Armed Services. The Committee
on Government Reform's Civil Service Subcommittee marked up the
bill on March 22, 2000. By voice vote, the Subcommittee
approved an amendment offered by Mr. Waxman to ensure that
those eligible to purchase long-term care insurance under this
program will be able to make informed decisions. The
Subcommittee approved the bill as amended and forwarded it to
the Committee on Government Reform by voice vote.
On March 30, 2000, the Committee on Government Reform
marked up the bill. Chairman Burton offered an amendment in the
nature of a substitute. The Chairman's amendment revised the
educational information to be made available to prospective
purchasers, the mechanism for funding OPM's initial
administrative expenses, and the dispute resolution procedures.
It also broadened the class of qualified relatives eligible to
buy insurance. The Committee agreed to the Burton amendment by
voice vote. Also by voice votes, the Committee adopted H.R.
4040, as amended, and ordered it favorably reported to the
House of Representatives.
IV. Committee Hearings and Written Testimony
Three hearings were held to examine various aspects of the
long term care insurance issue.
March 18, 1999 Hearing
On March 18, 1999, Chairman Scarborough conducted a hearing
entitled, ``Long-Term Care Insurance for Federal Employees'' to
address H.R. 602 and H.R. 110, both of which establish a
program under which federal employees and annuitants may
purchase long-term care insurance.
Chairman Scarborough stated that achieving maximum
participation would require affordable premiums and an ability
to satisfy the varying needs of a diverse population. The
success of the program would be measured by the number of
participants in the federal program. The Chairman also noted
that as one of the nation's largest employers, the federal
program would serve as a model for employers throughout the
country.
Three panels presented testimony to the subcommittee. The
first panel consisted of Judy Kramer, a private individual with
personal experience with the Medicaid spend-down process. The
second panel provided the Administration's views on H.R. 602
and H.R. 110 through the testimony of OPM Director Janice
Lachance and William E. Flynn, III, Associate Director for
Retirement and Insurance Services. The third panel consisted of
representatives from the insurance industry, including the
American Council of Life Insurance, the Health Insurance
Association of America, and New York Life Insurance company.
Ms. Kramer gave a compelling account of her struggles with
the current system of government assistance as a custodian for
her aging parents. After a difficult spend-down process, her
parents had to rely on Medicaid to cover the costs of their
nursing home care. She testified to her desire to purchase
long-term care for herself and her husband, a retired federal
employee, yet noted without a group discount it would be
difficult to afford such protection.
Director Lachance provided the Administration's views on
H.R. 602 and H.R. 110. Director Lachance agreed that long-term
care insurance for federal employees is an idea whose time has
come. The Administration estimates that, initially, 300,000
eligible participants would enroll in such a program. OPM hopes
to seek competitive bids for long-term care insurance that
meets specified quality and price criteria in order to select
the best contractor or contractors possible. As program
administrator, OPM envisions its role to negotiate an optimum
price for a benefit package it predetermines and that
subsequently information on available options is broadly
disseminated.
David Martin, on behalf of the American Council of Life
Insurance, testified to the importance of a long-term care
insurance program as an integral part of an employees'
retirement security. Without this protection, retirement
savings could be wiped out with just one long-term care
episode.
Mr. Martin's testimony spoke to the varying long-term care
needs of individuals. Based on ACLI's experience in dealing
with large employers, it would be appropriate for the federal
government to offer a variety of options. More than one carrier
would have to participate in order to underwrite the risk
inherent in such a large population. The federal participant
group, as defined by both H.R. 602 and H.R. 110, would be
greater than any group underwritten by a single carrier today.
David Brenerman, on behalf of the Health Insurance
Association of America, focused on the development of the long-
term care insurance market. He noted the ability of companies
to offer quality products at affordable premiums results from
the abilities of companies to freely compete with each other in
the marketplace, not because of the imposition of federal or
state requirements that would regulate premiums, hinder product
development, and stifle market competition. He drew a
distinction between a quality, affordable product and the
danger of promising a low-cost plan with ``rich'' benefits and
minimum underwriting requirements that would be financially
unsustainable in the long run.
Kenneth Grubb, President, NY Life Administration
Corporation, NY Life Insurance Company, provided the views of
carriers who sell individual as opposed to group products. He
raised concerns about the limitations in H.R. 602 and H.R. 110
restricting participation to group carriers only. He pointed
out that several companies currently offer discounts on
individual contracts or have specific individual long-term care
policies priced for offering on a group sponsored basis. Since
the individual contracts are competitive with group coverage,
Mr. Grubb stressed they ought not to be excluded from
consideration in the federal program.
Mr. Grubb also highlighted the benefits of broad
eligibility under H.R. 602, resulting in a broader, younger
risk pool that would result in lower overall costs. Letting the
marketplace dictate costs and benefits was key to both wide
acceptance of the product and long term commitments from
strong, reliable carriers.
April 18, 1999 Hearing
On April 18, 1999, Chairman Scarborough held the second
hearing on Long-Term Care Insurance for Federal Employees at
the Naval Air Station in Jacksonville, FL. The purposes of the
hearing were twofold. The subcommittee examined the benefit of
including active and retired members of the uniformed services
in any long-term care insurance program offered to civilian
employees and retirees. The subcommittee also continued its
examination of the scope of OPM's role in administering a long-
term care program and whether participating carriers would be
required to offer policies on a ``guaranteed issue'' basis.
Guaranteed issue refers to the practice of allowing individuals
to purchase long term care insurance without regard to their
current health status and without answering any questions
regarding their medical history. While of obvious benefit to
at-risk individuals, the costs of issuing policies on a
guaranteed basis increase premiums substantially for all
enrollees.
Chairman Scarborough reiterated his intent to include both
active and retired members of the uniformed services in the
long-term care insurance program at the appropriate time in the
legislative process. He recognized the valuable service active
duty service men and women have provided as employees of the
federal government. The Chairman also emphasized the need to
build on past successes in crafting legislation and the
importance of offering competitive benefits at affordable
prices.
Two panels presented testimony to the subcommittee. The
first panel consisted of representatives from the organizations
representing active and retired members of the uniformed
services including The Retired Officers Association (TROA), the
National Military Families Association (NMFA), and The Retired
Enlisted Association (TREA). The second panel consisted of
witnesses on behalf of the American Health Care Association,
the Health Insurance Association of America, and the Department
of Defense.
Speaking for NMFA, Marilyn Cobb Croach provided testimony
on the importance of affordable premiums. Few military families
have the disposable income after the basics of housing, health
care and food to afford a policy with high premiums, no matter
how wise an investment they felt it might be. She also stressed
that service members and their families should not be left out
of a program that includes civilian employees and annuitants.
Of particular importance to the National Military Families
Association was the inclusion of parents and parents-in-law as
eligible to receive coverage. Since thousands of miles often
separate military families from their parents, significant
stress occurs when parents can no longer care for themselves.
The high operations tempo facing the armed services often puts
the burden of care for both sets of parents on the spouse, who
is left with few alternatives. The safety net of an affordable
long-term care insurance policy would relieve families of the
stress involved in caring for an elderly parent.
Larry Hyland testified on behalf of The Retired Enlisted
Association. Mr. Hyland emphasized the equity of including the
military in a program that will provide access to long-term
care insurance at group rates for civilian employees. He
highlighted the increasing anxiety among aging retirees who
were ``promised free health care for life,'' by the Department
of Defense. The ability to purchase long-term care insurance in
the same program would ensure some financial security for
retired members of the uniformed services and ensure quality
health care is available.
Colonel Klyne Nowlin presented testimony on behalf of The
Retired Officers Association. Colonel Nowlin spoke to the need
for the subcommittee to remember those who served in the Armed
Forces and who need comprehensive long-term care coverage for
their remaining years. His testimony also provided an estimate
of participation. Based on the national participation rate of 6
percent, TROA expects that participation for military members
would be approximately 203,000 individuals. By broadening the
participation base to include the military community, all
participants could be the beneficiaries of reduced premiums or
enhanced benefits packages. Without access to the government
plan, it is feared that most service members would not be in a
position to afford long-term care insurance.
Pat Freeman, Associate Executive Director of the John Knox
Village Medical Center, testified for the American Health Care
Association. She examined the effect both affordable premiums
and choice among a variety would have in encouraging the
purchase of private long-term care insurance. The John Knox
Village Medical Center has both nursing and assisted
livingfacilities in Orange City, Florida.
Ms. Freeman provided the subcommittee information on a
recently released American Health Care Association survey on
long term care. While female baby boomers expressed concerns
about their retirement security, survey results indicated they
were not saving adequately for long-term care costs that nearly
three out of five of them will encounter. The overall
conclusion drawn from the survey findings was the reality that
an alarming gap exists in how baby boomers viewed their
retirement needs. While 91 percent of baby boomers are covered
by health insurance, many incorrectly believe either these
policies or Medicare would pay for their long-term care needs.
The study also highlighted that 41 percent of the women
surveyed have either been forced to quit their jobs or take an
extended leave of absence to provide long-term care to a family
member or friend.
Kenneth Grubb, testifying on behalf of the Health Insurance
Association of America, provided information regarding the
desirability and relative importance of both competition in
price and variety of insurance products. Mr. Grubb discussed
the importance of market competition in determining the
availability, quality and affordability of long-term care
plans. He also noted the need for the government to encourage
personal responsibility for financing long-term care through
the expansion of the private long-term care insurance market,
including enhancement of the tax status of long-term care
insurance. As a retired Air Force Reserve Colonel, Mr. Grubb
felt the military should have the opportunity to obtain
affordable coverage to protect themselves against the financial
ravages of a long-term illness.
William J. Carr, Deputy Director, Officer and Enlisted
Personnel Management, provided testimony on the desire of the
Department of Defense to have the military included in the list
of eligible participants. Mr. Carr noted the willingness of the
Department of Defense to study how the inclusion of uniformed
service personnel in long-term care proposals might contribute
to recruitment, retention and morale of military personnel. He
also stated the Department of Defense was willing to work with
the appropriate committees on the issue of long-term care
insurance.
June 14, 1999 Hearing
On June 14, 1999, Chairman Scarborough held a second field
hearing, this time in Baltimore, to further discuss the various
legislative proposals to establish a long-term care insurance
benefit for federal employees. Three bills referred to the
subcommittee were addressed: H.R. 602, H.R. 110, and H.R. 1111.
Chairman Scarborough emphasized the importance of letting
beneficiaries, not government officials, make their own long-
term care decisions. The Chairman also stressed the need for
the legislation to allow for continued innovation of policies
as the insurance industry continues to evolve and mature.
Two panels presented testimony to the subcommittee. The
first panel consisted of two witnesses from AT&T and the
Maryland Department of Health and Mental Hygiene, as well as a
witness with the responsibility for caring for his elderly
relatives. The second panel consisted of representatives of the
National Association of Retired Federal Employees (NARFE), the
Health Insurance Association of America, and Wright & Company.
Charles Yocum provided an account of his experiences with
long-term care as custodian for his aging relatives. His
depiction of his struggles with the current system of
government assistance further emphasized the necessity of
finding a workable solution to the financing of long-term care.
He described himself as a member of the ``sandwich
generation''. Although his children are not yet fully on their
own, he now has the added responsibility of seeing to it that
his parents and other elderly relatives are cared for. An
attorney by profession, he noted the need to consult with an
attorney specializing in ``elder law'' in order to understand
the Medicaid spend-down process.
Dr. Georges Benjamin, the Secretary of Maryland's
Department of Health & Mental Hygiene, provided informative
testimony regarding the State of Maryland's initiatives to
control the growth of public long-term care spending through
partnership with public and private stakeholders. Maryland is
implementing the Outreach Empowerment Campaign for Individual
Long-Term Care Planning. Under this initiative, various
Medicaid waivers and programs have been proposed or are under
development to manage public long-term care spending and
provide home and community based services as alternatives to
institutionalization.
Dr. Benjamin provided statistics regarding expenses for
Maryland's Medicaid program. During fiscal year 1997, the
program spent close to $557 million on long-term care for
recipients aged 21 or over, representing 22 percent of the
total Medicaid budget. His testimony highlighted the need for
private long term care insurance to shift the burden of paying
for long term care from Medicaid and other public programs.
David Carver testified about the long-term care insurance
program offered by AT&T to its employees. In 1990, AT&T began
work on the planning phase of its long-term care program. The
market at that time was considerably less developed than it is
today. AT&T looked for its plan to achieve two goals: (1)
assure financial protection by making the breadth of benefits
extensive, and (2) permit employees to meet specific needs by
offering significant choice of plan designs. AT&T anticipated a
5-7% enrollment rate for management, and a 2-3% enrollment rate
for retired employees and occupational employees. AT&T has
exceeded these targets, with 14% of management enrolled, 3% of
retired employees enrolled, and 4% of occupational employees
enrolled. Since inception of the program, AT&T feels awareness
for this type of coverage has increased, and touted its
continued good experience with lower than expected lapse rates.
The program was not without challenges, and AT&T continues
to be frustrated by the ineligibility of children, the
mandating of certain provisions in specific states, the
difficulty in protecting the integrity of the plan as employee
expectations exceed what can be offered due tounderwriting
requirements, and exclusion from Section 125 of the Internal Revenue
Code.
David Cavanaugh, of Wright & Company, provided information
on products that offer the benefits of life insurance and long-
term care insurance in a single policy. This ``linked
benefits'' approach provides various options during the
completion of the aging process, including long-term care
coverage, a cash accumulation fund, death benefits, and, if
necessary, a recapture of the dollars paid in premium. A key
advantage to this type of policy is that the ``gamble'' aspect
of paying premiums for long-term care insurance coverage is
eliminated. The entire life insurance benefit can be paid as a
tax-free benefit to a beneficiary or can be used to provide
long-term care services.
Frank Atwater, President of the National Association of
Retired Federal Employees, testified on the importance of long-
term care insurance to meet its goal of assuring financial
stability in retirement for government employees. Protecting
retirement assets through careful financial planning means
considering long-term care insurance as an option. Mr. Atwater
commended the efforts of all members of the subcommittee to
provide a long-term care insurance program.
While NARFE's goal is to ensure that annuitant underwriting
standards are less burdensome than those offered in the private
market today, Mr. Atwater did recognize that insurance carriers
would be unlikely to participate in the proposed federal
program if they were forced to sell policies to senior citizens
that are probable candidates for long-term care.
Kenneth Grubb, on behalf of the Health Insurance
Association of America, emphasized the necessity of public
education about the risks and costs of long-term care. Without
understanding the problem, the public cannot be expected to
understand the appropriate solutions. It is critically
important for the public and private sectors to provide long-
term care insurance education. By making the investment now and
designing a financing arrangement our elderly can live with
today, our future retirees can protect their assets. Successful
employer plans that have experienced high participation rates
are those that have invested in multi-faceted education and
marketing campaigns. The federal government's involvement, in
partnership with carriers, is critical to the success of this
program. Without substantial employer participation and
commitment to educating employees about the importance of a
long-term care insurance policy, the Health Insurance
Association of America believes the federal program will not be
successful.
Mr. Grubb's testimony provided information regarding the
costs of long-term care to employers. Long-term care related
expenses cost employers $29 billion a year in lost time, lost
employees, and lost productivity. A federal employee long-term
care insurance program would be the clearest signal of
government support for encouraging personal responsibility and
planning for long-term care through avenues such as long-term
care insurance. The sheer size of the federal government as an
employer would assure an immediate and heightened awareness of
long-term care financing among working adults.
V. Explanation of the Bill as Reported: Section-by-Section
Section-by-section Summary of H.R. 4040 as Reported by the Committee on
Government Reform on March 30, 2000
Section 1. Short title
This section titles the bill the ``Long-Term Care Security
Act.''
Section 2
This section amends Subpart G of Part III of Title 5,
United States Code, by adding a new Chapter 90--Long-Term Care
Insurance, Sections 9001-9009 as follows:
Section 9001. Definitions.--Under this section, individuals
eligible to purchase long-term care insurance include most of
those employees and annuitants who would be eligible to
participate in the Federal Employees Health Benefits Program
(FEHBP) with the exception of District of Columbia government
employees. Eligibility also extends to active duty and retired
members of the uniformed services, including the Commissioned
Corps of the Public Health Service and National Oceanic and
Atmospheric Administration. Relatives of active employees or
members of the uniformed services qualified to purchase long-
term care insurance include the spouse, children at least 18
years of age, parents, stepparents, or parents-in-law. For
retirees, only spouses or children are qualified to
participate. The Office of Personnel Management (OPM) may
include other eligible relatives.
This section defines a ``qualified carrier'' as an
insurance company or consortium of insurance companies licensed
to issue long-term care insurance in all 50 States and the
District of Columbia, either directly or through their
subsidiaries. Through reference to Section 7702B of the
Internal Revenue Code (IRC) of 1986 (the amendments made by the
Health Insurance Portability and Accountability Act of 1996,
which establish favorable tax treatment for certain long-term
care insurance contracts), this section defines a ``qualified
long-term care insurance contract'' as one which covers only
long-term care services; does not pay or reimburse expenses
covered under Medicare; is guaranteed renewable; does not
provide for a cash surrender value or other money that can be
paid, assigned, or pledged as collateral for a loan, or
borrowed; applies all refunds of premiums and policy holder
dividends or similar amounts as a reduction in future premiums
or to increase future benefits; and meets certain consumer
protection standards.
The reference in section 9001(7) to the possible use of
consortia of insurance carriers has generated questions
regarding the antitrust implications of such an arrangement.
The Committee is not aware of any difficulties in using such
forms of organization in other insurance contexts involving
other employers. In the absence of an objection or expression
of concern in the Statement of Administration Policy on H.R.
4040, it can be assumed that the Administration has not found a
problem in that regard.
By reference to the definition of qualified long-term care
insurance contracts and services contained in Section 7702B of
the IRC, this section defines qualified long-term care services
asnecessary diagnostic, preventive, therapeutic, curing,
treating, mitigating, and rehabilitative services and maintenance or
personal care services required by a chronically ill individual and
provided according to a plan prescribed by a licensed health care
practitioner. Under the IRC and this chapter, ``chronically ill
individuals'' must have functional impairments which make them unable
to perform, without substantial assistance from another individual, at
least two of five, among a listing of six, specified activities of
daily living (ADLs) for a period certified to last at least 90 days.
Also includes any cognitively impaired person who requires substantial
supervision to protect them from threats to health and safety.
Section 9002. Availability of insurance.--This section
authorizes the OPM to establish and, in consultation with the
appropriate executive branch cabinet secretaries, administer a
program through which eligible individuals may obtain long-term
care insurance coverage. Individuals seeking coverage as
relatives of eligible employees or annuitants are required to
provide documentation of their relationship, as determined by
OPM. (The eligible employee or annuitant need not purchase a
policy for a qualified relative to purchase one.) Coverage must
be provided through qualified long-term care insurance
contracts (as defined by the Sec. 7702B of the IRC) that are
fully insured or reinsured (that is, financially capable of
paying all qualified claims) and issued by a qualified carrier.
This section establishes underwriting standards under which
provision of long-term care insurance is not guaranteed to any
individual, and it is not required to be provided to
individuals who would be immediately eligible for benefits. The
intent of this section is to make clear that OPM is not
required to offer long-term care policies to those who are
immediately eligible. The provision should not be read,
however, to preclude OPM from offering long-term care insurance
to individuals who are immediately benefit eligible if OPM
during the contract negotiation process determines it is
appropriate to do so. Individuals who do not enroll during
their first period of opportunity but who elect to enroll
during a subsequent opportunity may be required to meet more
stringent underwriting standards than would have been applied
during the first enrollment period.
For purposes of underwriting, this section specifies that
spouses of eligible employees and spouses of eligible
annuitants must be treated as nearly as practicable like the
eligible individual. It further provides that benefits and
coverage are guaranteed renewable as long as the premiums
continue to be paid in a timely manner. Premiums may be revised
on a class basis only.
The Committee acknowledges that the need to screen
enrollees, and the desire to qualify as many eligible
individuals as possible, is a balancing act. For that reason,
prescriptive statutory requirements regarding underwriting have
not been included in this Act. Instead, this Act provides OPM
with authority and flexibility to negotiate underwriting
standards with carriers, just as it negotiates premiums,
benefit design, and other terms and conditions. It is the
Committee's intention that underwriting standards allow the
greatest possible number of employees, active duty personnel,
annuitants, and retirees to buy long-term care insurance at
reasonable rates while still containing costs and making
carrier participation feasible. The Committee expects OPM to
use the buying power inherent in the large group of eligible
individuals under this chapter to make the underwriting
standards initially less burdensome to eligible individuals
than commonly required by plans available in the private
market. Representative Waxman wrote OPM to learn how OPM
intends to address underwriting under H.R. 4040. OPM's letter
in response outlines their goal of offering insurance on a
modified issue basis, which in order ``to insure as many
participants as possible.'' OPM's letter, which is included as
an exhibit to this report, embodies the Committee's
understanding of how OPM intends to address the underwriting
issue.
Section 9003. Contracting authority.--This section
authorizes OPM to contract with one or more qualified carriers
for a policy or policies of long-term care insurance on the
basis of contractor qualifications, price, and reasonable
competition. The Committee directs the Office of Personnel
Management to ensure that the selection process of qualified
carriers is as competitive as possible. The Committee expects
competition among the carriers will result in affordable
premiums and attractive benefit packages for the federal
community. The Committee encourages the Office of Personnel
Management to consider all insurance companies who meet program
criteria and standards for participation in the program. In
particular, the Committee believes that insurers in the
individual market could make a significant contribution to the
program, and should have the opportunity to compete. Each
``master contract'' is required to include a detailed statement
of benefits, premium charges, the terms of the enrollment
period, and any limitations. Master contracts shall not be
automatically renewable. Premiums must reasonably and equitably
reflect the cost of benefits provided, as determined by OPM;
premiums can be adjusted during a contract period only by
mutual agreement between OPM and the carrier.
Under the terms of the master contract, carriers must agree
to provide payments or benefits to entitled individuals. Master
contracts must also specify procedures to resolve expeditiously
disputes regarding payment of claims or benefits, including
internal administrative procedures and independent third-party
review under circumstances approved by OPM. The choice of third
party review entities must be mutually acceptable to OPM and
the carrier. Master contracts shall also include procedures for
review of an individual's eligibility for coverage. Disputes
between a carrier and OPM shall be subject to de novo judicial
review after exhaustion of administrative remedies.
Neither OPM nor any third-party reviewer shall have the
authority to change the terms of any master contract. Each
master contract is for a term of 7 years, that term beginning
on the earliest date as of which any long-term care insurance
coverage under the Act becomes effective. Any master contract
entered into later than the effective date for coverage shall
end at the close of the same 7-year period. Master contracts
may be terminated earlier by OPM according to the contract
terms. If a master contract is terminated, the rights and
responsibilities of the enrolled individuals, of the insurers,
and OPM must continue until the termination of the enrolled
individuals' coverage or the effective date of a successor
contract.
Within 180 days of submission of a report by the General
Accounting Office (GAO) before the end of the fifth year of the
program, OPM shall submit to the Committees on Government
Reform and on Armed Services of the House of Representatives
and the Committees on Governmental Affairs and on Armed
Services of the Senate a written recommendation as to whether
this program should be continued unmodified, terminated, or
restructured. For 180 days after their recommendation, OPM is
prevented from rebidding or otherwise contracting for any
coverage which would follow the expiration of the 7-year
period.
This section requires each master contract to provide for
portability of coverage, ensuring that the policies of duly
enrolled individuals shall not be terminated because of a
change in the individual's status, such as separating from
covered employment or no longer being a qualified relative due
to divorce or otherwise.
Section 9004. Financing.--This section establishes that 100
percent of the premiums for long-term care insurance coverage
under this program must be paid by eligible individuals either
through withholding from pay or retirement benefits or through
direct payments to the carrier. Eligible employees or
annuitants may pay for a qualified relative's premium through
withholding from the employee's pay or annuitant's retirement
benefit.
This section requires each participating carrier to
maintain records which permit it to account for all amounts
received under this program, including investment earnings on
these amounts, separately and apart from all other funds of the
carrier. It grants OPM access to the Employees' Life Insurance
Fund to finance reasonable expenses associated with initial
implementation and administration of this chapter, without
fiscal year limitation. Subsequently, the master contracts must
require each carrier to reimburse the Employees' Life Insurance
Fund on a pro rata basis for ongoing OPM administrative
expenses, including lost investment income of the Life
Insurance Fund.
Section 9005. Preemption.--This section states that any
state or local laws and regulations relating to long-term care
insurance or contracts are superseded and preempted by the
terms of any contract under this chapter.
During this process, the Committee encourages OPM to give
scrutiny to state practices with respect to consumer
protection. The Committee urges the Office of Personnel
Management, in negotiating contracts with carriers, to strive
to maximize consumer protections. This will promote consumer
confidence in the process and in the insurance products created
by the Act.
Concerns have been raised regarding the effect of the
preemption provision in this section on the tax qualification
of products under this program. The Committee has been assured
that the provisions in question present no barrier to the
products under this program being tax qualified under section
7702B of the Internal Revenue Code. The Statement of
Administration Policy on H.R. 4040 would express a similar
concern if the Administration believed a problem existed.
Section 9006. Studies, reports, and audits.--This section
requires carriers with master contracts to furnish reasonable
reports to OPM and permits OPM and GAO to examine the carrier's
records as necessary to carry out this chapter. Additionally,
federal agencies are required to keep records, make
certifications, and furnish OPM with information and reports.
GAO is required to compare the competitiveness of this program
with group and individual coverage available in the private
insurance market and submit written evaluations to OPM and each
House of Congress before the end of the third and fifth years
of this program. OPM is also required to cooperate with GAO in
providing periodic evaluations of the program.
Section 9007. Jurisdiction of courts.--This section
provides that, after all required administrative remedies have
been exhausted, individuals disputing a decision of a carrier
or of OPM may file a civil action or claim against the carrier
or against the United States in U.S. District Courts. In cases
against the United States, the U.S. District Court jurisdiction
shall be concurrent with that of the U.S. Court of Federal
Claims.
Section 9008. Administrative functions.--Under this
section, OPM is required to prescribe the regulations necessary
to carry out this chapter, including enrollment periods,
promotion, and education efforts. In addition, OPM is required
to consult with the appropriate Secretaries in prescribing
regulations with respect to active and retired members of the
uniformed services and their qualified relatives. OPM is also
required to ensure that each applicant has the information
necessary to make an informed decision about obtaining long-
term care insurance and to compare coverage and benefits to
that otherwise generally available. OPM must provide
information on the cost of long-term care and sufficiency of
benefits to cover those costs, including the effects of
inflation; an individual's right to cancel coverage and receive
a premium refund; the number or percent of individuals likely
to fail to maintain their coverage; how and when premiums for
long-term care insurance under this chapter may be raised; a 10
year premium history for each qualified long-term care insurer
under this chapter and whether increases are anticipated; the
projected premiums for a typical insured individual at various
ages; and the general advantages and disadvantages of long-term
care insurance relative to other means of meeting the costs of
long-term care.
The Committee strongly believes that eligible individuals
will need access to a substantial amount of information in
order to make an informed decision regarding the purchase of
long-term care insurance coverage. Long-term care is a
complicated product. For some, it is a good way for individuals
to save for the future. But for others, it can have drawbacks.
Given the size and diversity of the pool of eligibles, the
Committee recognizes the need to strike the appropriate balance
and to provide information that is adequate without being
overwhelming. The Committee expects the Office of Personnel
Management to involve the insurance industry, consumer
advocates, state insurance commissioners, and other experts in
the field in the development of appropriate educational
materials, and to keep the Committee informed as to how it is
meeting requirements specified in section 9008(d).
Section 9009. Cost Accounting standards.--This section
provides that long-term careinsurance contracts under this
chapter are exempt from the cost accounting standards issued by the
Office of Federal Procurement Policy.
Section 3. Effective date
This section requires OPM to ensure that long-term care
insurance coverage under this Act will be available so that it
may take effect at the beginning of the first fiscal year
following a period of 18 months after enactment.
The Committee understands that some individuals eligible to
participate in the long-term care insurance program made
available by this Act have previously purchased such insurance
in the private market. Some of these individuals have expressed
an interest in converting their present long-term care
insurance policies, purchased before this Act became law, into
policies made available under the program authorized by this
Act. The Committee directs the Office of Personnel Management
to investigate and, to the extent practicable, facilitate such
conversions with insurance carriers selected by the Office to
sell long-term care insurance under the program authorized by
this Act. The Committee acknowledges, however, that such
conversions are to be contingent on whether they are allowed by
policies purchased by eligible individuals before this Act
became law. Further, the Committee directs the Office to
examine whether facilitating such conversions would have an
adverse impact on the program authorized by this Act. If the
Office anticipates adverse impact from such conversions, it
should take such findings into account before facilitating such
conversions.
VI. Compliance With Rule XI
Pursuant to rule XI, clause 2(1)(3)(A) of the Rules of the
House of Representatives, under the authority of rule X, clause
2(b)(1) and clause 3(f), the results and findings from
Committee oversight activities are incorporated in the bill and
this report.
VII. Budget Analysis and Projections
The budget analysis and projections required by section
308(a) of the Congressional Budget Act of 1974 are contained in
the estimate of the Congressional Budget Office.
VIII. Cost Estimate of the Congressional Budget Office
U.S. Congress,
Congressional Budget Office,
Washington, DC, April 6, 2000.
Hon. Dan Burton,
Chairman, Committee on Government Reform,
Rayburn House Office Building, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 4040, the Long-
Term Care Security Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Charles
Betley.
Sincerely,
Steven Lieberman
(For Dan L. Crippen, Director).
Enclosure.
H.R. 4040--Long Term Care Security Act
Summary: H.R. 4040 would require the Office of Personnel
Management (OPM) to develop and administer a long-term care
insurance program for federal employees, members of the
uniformed services, retirees from federal or military service,
and specified relatives of the primary eligible groups. Because
the federal government would not contribute to the enrollees'
premiums, and the insurer or insurers would be required to
reimburse OPM for its expenses in setting up and administering
the plan, net federal outlays would be zero over the long run.
However, the expenses that OPM would incur before
collecting premiums from enrollees and reimbursement from the
insurers would be funded by outlays from the federal
government's Employee's Life Insurance Fund. CBO estimates that
such outlays would increase direct spending by $3 million
during fiscal year 2001 and $18 million during 2002, while
receipts would exceed outlays by $2 million in 2003 and by $4
million per year in 2004 and 2005. Because the bill would
affect direct spending, pay-as-you-go procedures would apply.
H.R. 4040 provides that the contracts for long-term care
offered under the bill would supersede and preempt state and
local laws governing long-term care insurance or contracts.
This preemption would be an intergovernmental mandate as
defined in the Unfunded Mandates Reform Act (UMRA). The bill
does not contain any private-sector mandates.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 4040 is shown in the following table.
The costs of this legislation fall within budget function 600
(income security).
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars
--------------------------------------------
2001 2002 2003 2004 2005
----------------------------------------------------------------------------------------------------------------
Changes in Direct Spending
Estimated Budget Authority......................................... 0 0 0 0 0
Estimated Outlays.................................................. 3 18 -2 -4 -4
----------------------------------------------------------------------------------------------------------------
Basis of estimate: H.R. 4040 specifies that eligible
individuals who opt to purchase long-term care insurance would
be responsible for 100 percent of the cost of the premiums, so
that the federal government would not incur net costs over the
long term. However, because OPM would expend funds for start-up
and administrative expenses before enrolles' premiums are
received, the agency would incur outlays in 2001 and 2002,
which would be direct spending from the Employee's Life
Insurance Fund.
Upon enactment of H.R. 4040, OPM would be allowed 18 months
to set up the long-term care insurance program. CBO assumes
that, if the bill were enacted in fiscal year 2000, OPM would
begin in 2001 to negotiate with one or more insurance carriers
to establish the benefits to be provided under the plan and the
premiums to be charged. Marketing the chosen plan or plans
would begin in 2002. The program would take effect in 2003, and
premiums would begin to be deducted from enrollees' salary or
retirement payments. The federal government would not
contribute to the enrollees' premiums, and the insurer or
insurers would be required to reimburse OPM for the agency's
expenses in setting up and administering the plan.
The expenses that OPM would incur before being able to
collect premiums from enrollees and reimbursement from the
insurers would be paid from the Employees' Life Insurance Fund.
The only limitation on these outlays are the bill's requirement
that they be ``reasonable.'' Based on information from OPM and
the costs of administering other benefit programs, CBO
estimates that start-up costs over three fiscal years would be
about $23 million. A significant portion of the costs would be
for education and outreach--especially for printing and mailing
brochures to inform potential participants of their eligibility
and options under the plan. About 10 percent of the estimated
costs represents expenses for drafting plan specifications,
evaluating contract proposals, negotiating with contractors,
and setting up systems for tracking enrollment and premium
deductions.
Expenditures for education and outreach would be
significant because long-term care insurance is a new type of
benefit, unlike pensions and health insurance, which are
already established and familiar. Furthermore, OPM would have
to contact active and retired military personnel, whose
benefits are ordinarily administered by the Department of
Defense. More intensive outreach efforts may attract a larger
pool of participants, which would help to assure the plan's
financial solvency by broadening the distribution of people who
pay premiums and including more enrollees with lower risk of
needing services.
Expenses of $3 million in 2001 would be primarily for
developing plans, while education and outreach expenses are
projected to increase outlays to $18 million in 2002. Start-up
expenses for administrative costs and processing enrollment in
the first year of the plan's operation are estimated to amount
to $2 million in 2003. Once the insurance program is
established, CBO expects that, beginning in 2003, OPM would
incur costs of about $1 million annually to administer it.
Those ongoing expenses are expected to remain steady unless
another open season is held. The bill directs OPM
``periodically'' to conduct open enrollment seasons, during
which administrative expenses would be expected to increase.
However, frequent open seasons would create greater
opportunities for risk selection, as low-risk individuals could
defer joining the plan until they perceive that their risk of
needing long-term care has changed. The bill would make it
harder for people to elect coverage only when their risk
changes by authorizing the insurance plans to apply
underwriting standards for individuals who defer joining at
their first opportunity. Nevertheless, CBO expects that OPM
would allow open seasons infrequently. If open seasons occur at
the same intervals as the length of the contract specified in
the bill, or once every seven years, the next increase in
outlays for a new open season would occur in 2010.
CBO expects that reimbursement of the $23 million in start-
up costs, including interest paid at the current rate for
Treasury bills, and for ongoing administrative expenses, would
be spread over the duration of the seven-year contract
specified in the legislation. Those payments from insurers
would result in offsetting collections of $5 million a year to
the Life Insurance Fund beginning in 2003. Since payments from
the contracting insurers would lag outlays, net outlays over
the 2001-2005 period would be about $11 million.
H.R. 4040 specifies that the government collect premiums
from most enrollees by withholding a portion of their pay and,
in turn, transfer those amounts to the insurance companies.
These transactions would also be direct spending but would have
no significant net effect on the budget.
Pay-as-you-go considerations: Section 252 of the Balanced
Budget and Emergency Deficit Control Act sets up pay-as-you-go
procedures for legislation affecting direct spending or
receipts. The net changes in outlays and governmental receipts
that are subject to pay-as-you-go procedures are shown in the
following table. For the purposes of enforcing pay-as-you-go
procedures, only the effects in the current year, the budget
year, and the succeeding four years are counted.
----------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
---------------------------------------------------------------------
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
----------------------------------------------------------------------------------------------------------------
Changes in outlays........................ 3 18 -2 -4 -4 -4 -4 -4 -4 3
Change in receipts........................ Not applicable
----------------------------------------------------------------------------------------------------------------
Estimated impact on State, local, and tribal governments:
H.R. 4040 provides that the contracts for long-term care
offered under the bill would supersede and preempt state and
local laws governing long-term care insurance or contracts.
This preemption would be an intergovernmental mandate as
defined in UMRA. By preempting those state and local laws, the
bill would enable the federal government to enter into
contracts for long-term care insurance without meeting the
various state and local requirements and limitations on such
coverage. CBO estimates that the limitation on regulatory and
oversight authority would result in no costs to state, local,
or tribal governments.
Estimated impact on the private sector: The bill does not
contain private-sector mandates as defined in UMRA.
Estimate prepared by: Federal Costs: Charles L. Betley;
impact on State, local, and tribal governments: Leo Lex; impact
on the private sector: Stuart Hagen.
Estimate approved by: Robert A. Sunshine, Assistant
Director for Budget Analysis.
IX. Specific Constitutional Authority for this Legislation
Clauses 1 and 18 of Article I, Sec. 8 of the Constitution
grant Congress the power to enact this law.
X. Committee Recommendation
On March 30, 2000, a quorum being present, the Committee
ordered the bill, as amended, favorably reported.
Committee on Government Reform--106th Congress Rollcall
Date: March 30, 2000.
Amendment offered by: Hon. Dan Burton.
Adopted by voice vote.
Final Passage of H.R. 4040, as amended.
Offered by: Hon. Dan Burton.
Adopted by voice vote.
XI. Congressional Accountability Act; Public Law 104-1; Section
102(B)(3)
H.R. 4040 will allow employees in the legislative branch to
purchase private long-term care insurance under the same terms
as other federal employees.
XII. Unfunded Mandates Reform Act; Public Law 104-4; Section 423
H.R. 4040 does not impose any federal mandates on state,
local, or tribal governments. However, in order to ensure that
all federal employees are offered a uniform benefit nationwide,
H.R. 4040 preempts state and local laws relating to long-term
care insurance or plans.
XIII. Federal Advisory Committee Act (5 U.S.C. App.) Section 5(b)
The Committee finds that H.R. 4040 does not establish or
authorize establishment of an advisory committee within the
definition of 5 U.S.C. App., Section 5(b).
XIV. Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
TITLE 5, UNITED STATES CODE
* * * * * * *
PART III--EMPLOYEES
* * * * * * *
Subpart G--Insurance and Annuities
Chap. Sec.
Compensation for Work Injuries................................8101
* * * * * * *
9001.ong-Term Care Insurance..........................................
* * * * * * *
Subpart G--Insurance and Annuities
* * * * * * *
CHAPTER 90--LONG-TERM CARE INSURANCE
Sec.
9001. Definitions.
9002. Availability of insurance.
9003. Contracting authority.
9004. Financing.
9005. Preemption.
9006. Studies, reports, and audits.
9007. Jurisdiction of courts.
9008. Administrative functions.
9009. Cost accounting standards.
Sec. 9001. Definitions
For purposes of this chapter:
(1) Employee.--The term ``employee'' means--
(A) an employee as defined by section
8901(1); and
(B) an individual described in section
2105(e);
but does not include an individual employed by the
government of the District of Columbia.
(2) Annuitant.--The term ``annuitant'' has the
meaning such term would have under paragraph (3) of
section 8901 if, for purposes of such paragraph, the
term ``employee'' were considered to have the meaning
given to it under paragraph (1) of this subsection.
(3) Member of the uniformed services.--The term
``member of the uniformed services'' means a member of
the uniformed services, other than a retired member of
the uniformed services.
(4) Retired member of the uniformed services.--The
term ``retired member of the uniformed services'' means
a member or former member of the uniformed services
entitled to retired or retainer pay.
(5) Qualified relative.--The term ``qualified
relative'' means each of the following:
(A) The spouse of an individual described in
paragraph (1), (2), (3), or (4).
(B) A parent, stepparent, or parent-in-law of
an individual described in paragraph (1) or
(3).
(C) A child (including an adopted child, a
stepchild, or, to the extent the Office of
Personnel Management by regulation provides, a
foster child) of an individual described in
paragraph (1), (2), (3), or (4), if such child
is at least 18 years of age.
(D) An individual having such other
relationship to an individual described in
paragraph (1), (2), (3), or (4) as the Office
may by regulation prescribe.
(6) Eligible individual.--The term ``eligible
individual'' refers to an individual described in
paragraph (1), (2), (3), (4), or (5).
(7) Qualified carrier.--The term ``qualified
carrier'' means an insurance company (or consortium of
insurance companies) that is licensed to issue long-
term care insurance in all States, taking any
subsidiaries of such a company into account (and, in
the case of a consortium, considering the member
companies and any subsidiaries thereof, collectively).
(8) State.--The term ``State'' includes the District
of Columbia.
(9) Qualified long-term care insurance contract.--The
term ``qualified long-term care insurance contract''
has the meaning given such term by section 7702B of the
Internal Revenue Code of 1986.
(10) Appropriate secretary.--The term ``appropriate
Secretary'' means--
(A) except as otherwise provided in this
paragraph, the Secretary of Defense;
(B) with respect to the Coast Guard when it
is not operating as a service of the Navy, the
Secretary of Transportation;
(C) with respect to the commissioned corps of
the National Oceanic and Atmospheric
Administration, the Secretary of Commerce; and
(D) with respect to the commissioned corps of
the Public Health Service, the Secretary of
Health and Human Services.
Sec. 9002. Availability of insurance
(a) In General.--The Office of Personnel Management shall
establish and, in consultation with the appropriate
Secretaries, administer a program through which an individual
described in paragraph(1), (2), (3), (4), or (5) of section
9001 may obtain long-term care insurance coverage under this chapter
for such individual.
(b) General Requirements.--Long-term care insurance may not
be offered under this chapter unless--
(1) the only coverage provided is under qualified
long-term care insurance contracts; and
(2) each insurance contract under which any such
coverage is provided is issued by a qualified carrier.
(c) Documentation Requirement.--As a condition for obtaining
long-term care insurance coverage under this chapter based on
one's status as a qualified relative, an applicant shall
provide documentation to demonstrate the relationship, as
prescribed by the Office.
(d) Underwriting Standards.--
(1) Disqualifying condition.--Nothing in this chapter
shall be considered to require that long-term care
insurance coverage be made available in the case of any
individual who would be eligible for benefits
immediately.
(2) Spousal parity.--For the purpose of underwriting
standards, a spouse of an individual described in
paragraph (1), (2), (3), or (4) of section 9001 shall,
as nearly as practicable, be treated like that
individual.
(3) Guaranteed issue.--Nothing in this chapter shall
be considered to require that long-term care insurance
coverage be guaranteed to an eligible individual.
(4) Requirement that contract be fully insured.--In
addition to the requirements otherwise applicable under
section 9001(9), in order to be considered a qualified
long-term care insurance contract for purposes of this
chapter, a contract must be fully insured, whether
through reinsurance with other companies or otherwise.
(5) Higher standards allowable.--Nothing in this
chapter shall, in the case of an individual applying
for long-term care insurance coverage under this
chapter after the expiration of such individual's first
opportunity to enroll, preclude the application of
underwriting standards more stringent than those that
would have applied if that opportunity had not yet
expired.
(e) Guaranteed Renewability.--The benefits and coverage made
available to eligible individuals under any insurance contract
under this chapter shall be guaranteed renewable (as defined by
section 7A(2) of the model regulations described in section
7702B(g)(2) of the Internal Revenue Code of 1986), including
the right to have insurance remain in effect so long as
premiums continue to be timely made. However, the authority to
revise premiums under this chapter shall be available only on a
class basis and only to the extent otherwise allowable under
section 9003(b).
Sec. 9003. Contracting authority
(a) In General.--The Office of Personnel Management shall,
without regard to section 5 of title 41 or any other statute
requiring competitive bidding, contract with 1 or more
qualified carriers for a policy or policies of long-term care
insurance. The Office shall ensure that each resulting contract
(hereinafter in this chapter referred to as a ``master
contract'') is awarded on the basis of contractor
qualifications, price, and reasonable competition.
(b) Terms and Conditions.--
(1) In general.--Each master contract under this
chapter shall contain--
(A) a detailed statement of the benefits
offered (including any maximums, limitations,
exclusions, and other definitions of benefits);
(B) the premiums charged (including any
limitations or other conditions on their
subsequent adjustment);
(C) the terms of the enrollment period; and
(D) such other terms and conditions as may be
mutually agreed to by the Office and the
carrier involved, consistent with the
requirements of this chapter.
(2) Premiums.--Premiums charged under each master
contract entered into under this section shall
reasonably and equitably reflect the cost of the
benefits provided, as determined by the Office. The
premiums shall not be adjusted during the term of the
contract unless mutually agreed to by the Office and
the carrier.
(3) Nonrenewability.--Master contracts under this
chapter may not be made automatically renewable.
(c) Payment of Required Benefits; Dispute Resolution.--
(1) In general.--Each master contract under this
chapter shall require the carrier to agree--
(A) to provide payments or benefits to an
eligible individual if such individual is
entitled thereto under the terms of the
contract;
(B) to establish internal administrative
procedures designed to expeditiously resolve
disputes regarding claims for payments or
benefits under the terms of the contract; and
(C) for disputes not resolved under
subparagraph (B), to establish procedures for 1
or more alternative means of dispute resolution
involving independent third-party review under
appropriate circumstances mutually acceptable
to the Office and the carrier.
(2) Eligibility.--A carrier's determination as to
whether or not a particular individual is eligible to
obtain long-term care insurance coverage under this
chapter shall be subject to review only to the extent
and in the manner provided in the applicable master
contract.
(3) Other claims.--Disputes arising under this
chapter between a carrier and the Office shall, after
exhaustion of administrative remedies, be subject to de
novo judicial review under section 9007.
(4) Rule of construction.--Nothing in this chapter
shall be considered to grant authority for the Office
or a third-party reviewer to change the terms of any
contract under this chapter.
(d) Duration.--
(1) In general.--Each master contract under this
chapter shall be for a term of 7 years, unless
terminated earlier by the Office in accordance with the
terms of such contract. However, the rights and
responsibilities of the enrolled individual,
the insurer, and the Office (or duly designated third-party
administrator) under such contract shall continue with
respect to such individual until the termination of coverage
of the enrolled individual or the effective date of a
successor contract thereto.
(2) Exception.--
(A) Shorter duration.--In the case of a
master contract entered into before the end of
the period described in subparagraph (B),
paragraph (1) shall be applied by substituting
``ending on the last day of the 7-year period
described in paragraph (2)(B)'' for ``of 7
years''.
(B) Definition.--The period described in this
subparagraph is the 7-year period beginning on
the earliest date as of which any long-term
care insurance coverage under this chapter
becomes effective.
(3) Congressional notification.--No later than 180
days after receiving the second report required under
section 9006(c), the Office of Personnel Management
shall submit to the Committees on Government Reform and
on Armed Services of the House of Representatives and
the Committees on Governmental Affairs and on Armed
Services of the Senate, a written recommendation as to
whether the program under this chapter should be
continued without modification, terminated, or
restructured. During the 180-day period following the
date on which it submits its recommendation under this
paragraph, the Office may not take any steps to rebid
or otherwise contract for any coverage to be available
at any time following the expiration of the 7-year
period described in paragraph (2)(B).
(4) Full portability.--Each master contract under
this chapter shall include such provisions as may be
necessary to ensure that, once an individual becomes
duly enrolled, long-term care insurance coverage
obtained by such individual pursuant to that enrollment
shall not be terminated due to any change in status
(such as separation from Government service or the
uniformed services) or ceasing to meet the requirements
for being considered a qualified relative (whether as a
result of dissolution of marriage or otherwise).
Sec. 9004. Financing
(a) In General.--Each eligible individual obtaining long-term
care insurance coverage under this chapter shall be responsible
for 100 percent of the premiums for such coverage.
(b) Withholdings.--
(1) In general.--The amount necessary to pay the
premiums for enrollment may--
(A) in the case of an employee, be withheld
from the pay of such employee;
(B) in the case of an annuitant, be withheld
from the annuity of such annuitant;
(C) in the case of a member of the uniformed
services described in section 9001(3), be
withheld from the basic pay of such member; and
(D) in the case of a retired member of the
uniformed services described in section
9001(4), be withheld from the retired pay or
retainer pay payable to such member.
(2) Voluntary withholdings for qualified relatives.--
Withholdings to pay the premiums for enrollment of a
qualified relative may, upon election of the
appropriate eligible individual (described in section
9001(1)-(4)), be withheld under paragraph (1) to the
same extent and in the same manner as if enrollment
were for such individual.
(c) Direct Payments.--All amounts withheld under this section
shall be paid directly to the carrier.
(d) Other Forms of Payment.--Any enrollee who does not elect
to have premiums withheld under subsection (b) or whose pay,
annuity, or retired or retainer pay (as referred to in
subsection (b)(1)) is insufficient to cover the withholding
required for enrollment (or who is not receiving any regular
amounts from the Government, as referred to in subsection
(b)(1), from which any such withholdings may be made, and whose
premiums are not otherwise being provided for under subsection
(b)(2)) shall pay an amount equal to the full amount of those
charges directly to the carrier.
(e) Separate Accounting Requirement.--Each carrier
participating under this chapter shall maintain records that
permit it to account for all amounts received under this
chapter (including investment earnings on those amounts)
separate and apart from all other funds.
(f) Reimbursements.--
(1) The Office shall have access to the Employees'
Life Insurance Fund without fiscal year limitation for
its reasonable expenses in administering this chapter,
including reasonable initial implementation costs.
(2) Each master contract under this chapter shall
include appropriate provisions under which the carrier
involved shall reimburse the Employees' Life Insurance
Fund for funds accessed under paragraph (1) (including
lost investment income), on a pro rata basis.
Sec. 9005. Preemption
The terms of any contract under this chapter which relate to
the nature, provision, or extent of coverage or benefits
(including payments with respect to benefits) shall supersede
and preempt any State or local law, or any regulation issued
thereunder, which relates to long-term care insurance or
contracts.
Sec. 9006. Studies, reports, and audits
(a) Provisions Relating to Carriers.--Each master contract
under this chapter shall contain provisions requiring the
carrier--
(1) to furnish such reasonable reports as the Office
of Personnel Management determines to be necessary to
enable it to carry out its functions under this
chapter; and
(2) to permit the Office and representatives of the
General Accounting Office to examine such records of
the carrier as may be necessary to carry out the
purposes of this chapter.
(b) Provisions Relating to Federal Agencies.--Each Federal
agency shall keep such records, make such certifications, and
furnish the Office, the carrier, or both, with such information
and reports as the Office may require.
(c) Reports by the General Accounting Office.--The General
Accounting Office shall prepare and submit to the Office of
Personnel Management and each House of Congress, before the end
of the third and fifth years during which the program under
this chapter is in effect, a written report evaluating such
program. Each such report shall include an analysis of the
competitiveness of the program, as compared to both group and
individual coverage generally available to individuals in the
private insurance market. The Office shall cooperate with the
General Accounting Office to provide periodic evaluations of
the program.
Sec. 9007. Jurisdiction of courts
The district courts of the United States have original
jurisdiction of a civil action or claim against the United
States or a carrier founded on this chapter, after such
administrative remedies as required under section 9003(c)(2) or
(3) have been exhausted, but only to the extent judicial review
is not precluded by any dispute resolution or other
administrative remedy under this chapter. In cases against the
United States, the jurisdiction of the district courts shall be
concurrent with that of the United States Court of Federal
Claims.
Sec. 9008. Administrative functions
(a) In General.--The Office of Personnel Management shall
prescribe regulations necessary to carry out this chapter.
(b) Enrollment Periods.--The Office shall provide for
periodic coordinated enrollment, promotion, and education
efforts in consultation with the carriers.
(c) Consultation.--Any regulations necessary to effect the
application and operation of this chapter with respect to an
eligible individual described in paragraph (3) or (4) of
section 9001, or a qualified relative thereof, shall be
prescribed by the Office in consultation with the appropriate
Secretary.
(d) Informed Decisionmaking.--The Office shall ensure that
each eligible individual applying for long-term care insurance
under this chapter is furnished the information necessary to
enable that individual to evaluate the advantages and
disadvantages of obtaining long-term care insurance under this
chapter, including:
(1) The principal long-term care benefits and
coverage available under this chapter, and how those
benefits and coverage compare to the range of long-term
care benefits and coverage otherwise generally
available.
(2) Representative examples of the cost of long-term
care, and the sufficiency of the benefits available
under this chapter relative to those costs. The
information under this paragraph shall also include--
(A) the projected effect of inflation on the
value of those benefits; and
(B) a comparison of the inflation-adjusted
value of those benefits to the projected future
costs of long-term care.
(3) Any rights individuals under this chapter may
have to cancel coverage, and to receive a total or
partial refund of premiums. The information under this
paragraph shall also include--
(A) the projected number or percentage of
individuals likely to fail to maintain their
coverage (determined based on lapse rates
experienced under similar group long-term care
insurance programs and, when available, this
chapter); and
(B)(i) a summary description of how and when
premiums for long-term care insurance under
this chapter may be raised;
(ii) the premium history during the last 10
years for each qualified carrier offering long-
term care insurance under this chapter; and
(iii) if cost increases are anticipated, the
projected premiums for a typical insured
individual at various ages.
(4) The advantages and disadvantages of long-term
care insurance generally, relative to other means of
accumulating or otherwise acquiring the assets that may
be needed to meet the costs of long-term care, such as
through tax-qualified retirement programs or other
investment vehicles.
Sec. 9009. Cost accounting standards
The cost accounting standards issued pursuant to section
26(f) of the Office of Federal Procurement Policy Act (41
U.S.C. 422(f)) shall not apply with respect to a long-term care
insurance contract under this chapter.
Committee Correspondence
House of Representatives,
Committee on Government Reform,
Washington, DC, March 21, 2000.
Hon. Janice R. Lachance,
Director, Office of Personnel Management,
Washington, DC.
Dear Madam Director: The House Committee on Government
Reform, Civil Service Subcommittee, is currently considering
legislation that would authorize the Office of Personnel
Management (OPM) to purchase group insurance policies from
qualified private-sector contractors to make long-term care
insurance available to federal employees, federal employees'
spouses, federal retirees, and family members.
In meetings with my staff, OPM representatives have stated
that, for the purpose of underwriting, a ``modified guarantee
issue'' application form would be used to determine the
eligibility of at-work federal employees, and their spouses,
for long-term care insurance. Please explain ``modified
guarantee issue'' and how it would be applied to at-work
federal employees and their spouses.
A prompt response to this request would be appreciated. If
you have any questions, please contact Tania Shand, of my
staff.
Sincerely,
Henry A. Waxman,
Ranking Minority Member.
------
Office of Personnel Management,
Washington, DC, March 22, 2000.
Hon. Henry Waxman,
Ranking Minority Member,
Committee on Government Reform,
House of Representatives,
Washington, DC.
Dear Congressman Waxman: Thank you for your letter dated
March 20, 2000, requesting additional information on how the
Office of Personnel Management (OPM) would implement a long-
term care insurance program for Federal employees and their
spouses, as it pertains to underwriting standards and modified
guarantee issue.
In keeping with our mission to provide Government-wide
human resource management leadership, one of OPM's objectives
is to achieve a modern, performance-oriented compensation
system. As part of that, we intend to include a quality and
affordable group long-term care benefit package for Federal
employees and their family members.
Although we cannot state definitively what the final
underwriting standards will be, we can describe what our goals
will be in approaching this important issue.
At-work Federal employees
If OPM is authorized to establish a long-term care
insurance program for Federal employees, we will work to
negotiate a long-term care benefit package that is affordable
for all eligible groups. We intend to make this long-term care
insurance available to as many at-work Federal employees as
possible.
Our goal for at-work Federal employees will be to apply
minimal underwriting standards, often referred to in the
insurance industry as ``modified guaranteed issue,'' during
their initial enrollment period. Our objective would be to make
Federal long-term care insurance available to all at-work
Federal employees except for those who would be eligible for
benefits immediately. Thus, we anticipate asking questions
aimed at determining if at-work employees require assistance
with activities of daily living, such as eating or bathing. Our
goal would be to avoid asking detailed questions about the
health status of at-work employees.
We expect that different underwriting standards would apply
in the case of at-work employees who seek to enroll in the
long-term care program after the initial enrollment period. To
prevent adverse selection, additional underwriting questions
are likely to be required for these employees.
Spouses of Federal employees
Our goal will be to treat spouses of at-work Federal
employees in much the same way we treat at-work Federal
employees. This means that our goal would be to ask them the
same questions that we ask at-work Federal employees.
In the case of at-work Federal employees, we know something
about their health status simply by virtue of the fact that
they are actively at work. We do not have the same information
about spouses of Federal employees. Although it is our
intention to treat spouses like at-work Federal employees, it
may be necessary to seek additional information from spouses
during the underwriting process to compensate for the fact that
we do not know they are actively at work. However, our goal
will be to seek as little additional information as necessary.
Premium considerations
A long-term care insurance program can provide a
substantial benefit to Federal employees, their spouses,
Federal retirees, and other eligible participants by providing
access to quality long-term care insurance products on a group
basis. To achieve a viable program, however, we believe that
Federal long-term care insurance must be less expensive than
the insurance that a Federal employee can obtain on the private
long-term care market. The level of underwriting affects the
insurer's ability to assess the risk of enrolling an applicant
for coverage and what the cost of that coverage should be.
For this reason, until we have engaged in contract
negotiations with the long-term care carrier or carriers, we
will not be in a position to be definitive about what specific
underwriting standard will be applied to eligible groups. Our
intent will be to achieve the goals described above and to
insure as many participants as possible. We will also explore
alternative forms of coverage for those who do not meet the
underwriting standards applied to the workforce at large. Until
we complete contract negotiations, we will not know for certain
the details of the underwriting standards.
We look forward to working with Congress, Federal employee
groups, and the insurance industry to implement a successful
long-term care insurance program for Federal employees.
Sincerely,
Janice R. Lachance, Director.