The FLTCIP 86% Rate Hike: Your Three Options as a Federal Enrollee

If you hold a Federal Long Term Care Insurance Program (FLTCIP) policy under the 1.0 or 2.0 series, the premium increase that took effect January 1, 2024 was not a routine cost-of-living adjustment. Enrollees who kept their coverage unchanged saw an average increase of 86%. And unlike a private policyholder, you cannot simply shop the market for a cheaper replacement — because in the same window, the federal government closed FLTCIP to new applicants entirely. If you are in the newer FLTCIP 3.0 plan, this particular repricing did not touch you; the 86% figure applies to the older blocks. Everyone else has a decision to make. Here is what actually happened and the three moves the program left open to you.

Why federal long-term care insurance is frozen

FLTCIP is the group long-term care insurance program for federal and U.S. Postal Service employees, annuitants, active and retired members of the uniformed services, and their qualified relatives. It covers roughly 260,000 to 270,000 enrollees. Since December 19, 2022, the Office of Personnel Management (OPM) has suspended the program — no new applications, and no requests from current enrollees to increase their coverage. That suspension was originally 24 months; OPM has since extended it, and it now runs through at least December 19, 2026, with no guarantee the program reopens on that date.

The reason is statutory, not a market panic. The Long-Term Care Security Act of 2000 requires FLTCIP to be funded 100% by enrollee premiums — there is no taxpayer subsidy behind it. Federal law (5 U.S.C. § 9003) further requires that premiums "reasonably and equitably reflect the cost of the benefits provided." When the program's actuaries concluded that existing premiums would not cover projected claims — the same longevity and cost pressures that have hammered the entire long-term care insurance market — OPM was obligated to raise rates rather than absorb the shortfall. The suspension gives OPM and the carrier room to redesign benefits and set sustainable pricing before letting anyone new in.

One structural fact sharpens the stakes: FLTCIP has a single underwriter, John Hancock, which was the only bidder when OPM re-competed the contract and extended it for another seven years in May 2023. The program is administered by FedPoint (formerly Long Term Care Partners). A market thin enough to produce one bidder for millions of eligible federal employees is the context for both the increase and the freeze.

The 86% number, decoded

Precision matters here, because "86%" is not what lands on every enrollee's statement. It is the average increase for 1.0 and 2.0 enrollees who chose to keep their existing benefits. Individual increases reportedly ranged from roughly 49% to 86%, varying by policy series, age at enrollment, and inflation option — OPM has not published the full distribution. Enrollees received personalized notification letters in September 2023 ahead of the January 2024 effective date. For enrollees with the automatic compound inflation option, the increase could be phased in over three years (2024, 2025, and 2026) rather than hitting all at once.

This is also not unprecedented. FLTCIP's 2016 repricing averaged 83%, with some enrollees seeing increases as high as 126%. Recurring, structural repricing is a feature of how the program is funded — which is exactly why the decision in front of you is not "will this happen again" but "how do I want my coverage to sit before it does."

Why this isn't an ordinary rate hike

When a private carrier wants more premium, it files with a state insurance department through the NAIC SERFF system, and a regulator can approve or trim the request. FLTCIP sits outside that process — there is no state commissioner to appeal to, and because the program is closed, there is no re-underwriting path to restore benefits you give up. The playbook from a standard private-carrier rate-hike letter only partly transfers. The closest parallel in the portfolio is another closed public program, CalPERS Long-Term Care, which raised premiums and shut its doors to new members for the same actuarial reasons.

Your three options

During the 2023 Enrollee Decision Period, OPM presented three top-level choices. Each is a real, defensible move depending on your health, age, and finances.

Option 1 — Pay the full increase

Keep every benefit exactly as it is and absorb the higher premium. This makes sense if your coverage is rich (long or unlimited benefit period with compound inflation), your health suggests you are more likely than average to claim, and the higher premium is affordable relative to what an equivalent private policy would cost you today at your current age — which, for most enrollees, is far more than the increased FLTCIP premium. Run the self-insure-versus-keep math before assuming the increase is the expensive path; walking away from an in-force benefit is frequently the costlier one.

Option 2 — Reduce benefits to blunt the increase

You can lower the premium by trimming coverage. The single largest lever is downgrading your inflation protection — moving from the Automatic Compound Inflation Option (ACIO), which raises your daily benefit by a set percentage compounded every year, to the Future Purchase Option (FPO), which offers periodic buy-up opportunities instead. Because compound inflation is the most expensive feature to fund, dropping it can offset most or all of the increase. You can also shorten the benefit period or lower the daily benefit amount. This is the same tradeoff analyzed in our inflation-rider reduction decision: the reduction is generally permanent, and with the program closed there is no adding the coverage back later.

The break-even to run: paying the full increase buys you the difference in future benefit dollars that a downgrade would forfeit. If you are younger, healthy, and likely years from a claim, compound inflation compounds a long time and is worth keeping. If you are older and closer to a probable claim, the incremental inflation growth you would buy may never materialize into paid claims — and the downgrade is the rational trade.

Option 3 — Stop paying and take the paid-up limited benefit

You can stop paying premiums entirely and convert to a paid-up, limited benefit — the program's Contingent Benefit Upon Lapse (CBUL). This is the same nonforfeiture protection defined in the NAIC model regulation, triggered when a substantial premium increase occurs. Your remaining coverage is capped at the greater of the total premiums you have already paid, or 30 times your daily benefit amount. You pay nothing further, and that pool is available for qualifying care.

CBUL is mathematically strongest when your total premiums paid is large relative to the near-term claims you realistically expect — for example, a long-tenured enrollee in fragile health who has paid in heavily and wants to stop the premium bleed while retaining a meaningful benefit floor. It is weakest for a younger enrollee who has paid little in, because the paid-up pool would be small.

The costly mistake is a fourth path nobody recommends: simply stopping payment without electing CBUL. That is an ordinary lapse — you forfeit the coverage and the premiums behind it. If you intend to stop paying, you must affirmatively elect the paid-up benefit.

The tax angle almost no one models

Federal employees often assume FLTCIP premiums work like FEHB health premiums — deducted pre-tax. They do not. FLTCIP premiums are paid with post-tax dollars, whether by payroll allotment for active employees or by deduction from an annuity for retirees. That means the 86% increase hits your after-tax budget in full — there is no pre-tax cushion softening it, which changes the real cost of "just paying it" versus a private alternative that you would also fund post-tax.

The offset: FLTCIP is a tax-qualified long-term care plan, so premiums count as a medical expense for enrollees who itemize — but only to the extent total medical costs exceed 7.5% of adjusted gross income, and only up to the IRS age-based limit. For most working enrollees taking the standard deduction, that offset is unavailable. See our note on how LTC insurance is taxed for the mechanics.

The replacement question

Because FLTCIP is closed, dropping it does not free you to re-shop the same coverage — it drops you into a high-friction replacement market. Any private alternative requires fresh medical underwriting at your current, older attained age, and the private long-term care market has contracted so far that equivalent standalone coverage is often either unavailable or priced well above what you pay now. This is why, for most in-force enrollees, the honest comparison is not "FLTCIP versus a better policy" but "FLTCIP versus self-funding or Medicaid spend-down." If that comparison points toward keeping coverage, the real question narrows to which of the three options above preserves the most value for your situation.

How to decide

• Younger, healthy, well inside your career: keeping compound inflation (Option 1) usually wins — you have the most years for it to compound into real benefit.
• Older or budget-constrained, but still want coverage: the ACIO→FPO downgrade (Option 2) typically offsets most of the increase without surrendering the policy.
• Long-tenured, fragile health, want to stop paying: the paid-up CBUL benefit (Option 3) locks in a floor equal to the greater of premiums paid or 30× your daily benefit.
• In any case: do not let the policy lapse by inaction, and re-price your alternatives before assuming the increase is the expensive choice.

Frequently asked questions

Does the 86% increase apply to FLTCIP 3.0 enrollees? No. The January 2024 repricing applied to the FLTCIP 1.0 and 2.0 blocks. FLTCIP 3.0 enrollees were not subject to this increase.

Can I still enroll in FLTCIP? No. OPM suspended new applications on December 19, 2022, and the suspension currently runs through at least December 19, 2026, with no guaranteed reopening.

If I take a benefit reduction, can I restore it later? Generally no. Reductions are permanent, and with the program closed there is no re-underwriting path back to the original benefit.

What is the paid-up benefit worth if I stop paying? Under the Contingent Benefit Upon Lapse, your coverage is capped at the greater of the total premiums you have paid or 30 times your daily benefit amount.

Are my FLTCIP premiums pre-tax like FEHB? No. FLTCIP premiums are paid with post-tax dollars. Because the plan is tax-qualified, premiums may be deductible as a medical expense only if you itemize and exceed the 7.5%-of-AGI threshold, subject to IRS age-based limits.