OPM DRAFT BILL TO MAKE LONG-TERM CARE INSURANCE AVAILABLE TO CIVILIAN FEDERAL EMPLOYEES, AND FOR OTHER PURPOSES.

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP90M00004R000900080009-2
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 12
• Document Creation Date: December 22, 2016
• Document Release Date: October 5, 2011
• Sequence Number: 9
• Publication Date: February 12, 1987
• Content Type: MEMO

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2. DD/Legislation .
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3. DO/Senate i4rs ";
4. Ch/Senate Affas
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9. FOIA Officer
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STAT
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EXECUTIVE OFFICE OF THE PRESIDEN
OFFICE OF MANAGEMENT AND BUDGET
WASHINGTON, D.C. 20503
February 12, 1987
LEGISLATIVE REFERRAL MEMORANDUM
TO: Legislative Liaison Officer -
Department of Agriculture
Department of Commerce
Department of Defense
Department of Education
Department of Energy
Department of Health and Human Services
Department of Housing and Urban Development
Department of the Interior
Department of Justice
Department of Labor
Department of State
Department of Transportation
Department of the Treasury
Council for Economic Advisers
Agency for International Development
*Central Intelligence Agency
Environmental Protection Agency
Federal Emergency Management Agency (Federal
Insurance Administration)
General Services Administration
National Aeronautics and Space Administration
National Science Foundation
Small Business Administration
Tennessee Valley Authority
U.S. Information Agency
Veterans Administration
U.S. Postal Service
SUBJECT: OPM draft bill "To make long-term care insurance
available to civilian Federal employees, and for other
purposes."
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The Office of Management and Budget requests the views of your
agency on the above subject before advising on its relationship
to the program of the President, in accordance with OMB
Circular A-19.
A response to this request for your views is needed no later than
Friday, February 27, 1987.
Questions should be referred to Todd Gramms (395-6156), or to
Hilda Schreiber (395-7362), the legislative analyst in this
office.
Naomi R. Sweeney for
Assistant Director for
Legislative Reference
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UNITED STATES
OFFICE OF PERSONNEL MANAGEMENT
WASHINGTON, D.C. 20415
Honorable George Bush
President of the Senate
Washington, DC 20510
Dear Mr. President:
The Office of Personnel Management submits herewith a legislative
proposal, "To make long-term care insurance available to civilian
Federal employees, and for other purposes."
This proposal will give Federal employees access to a unique and
critically-needed benefit in a manner that is fully consistent
with the Administration's policies with respect to budgetary re-
straint and emphasis on utilizing private sector services to
the maximum extent in addressing public needs. Moreover, it
will advance a key Administration priority in the health care
area, that is, the development of mechanisms to offer protection
to older Americans against the devastating costs associated with
chronic, debilitating illness.
In view of the increases in longevity already attained, and the
near explosion predicted in the over-age-80 population during
the next few decades, the need for long-term care services will
continue to expand. Although our proposal for long-term care
(LTC) insurance is designed exclusively to benefit Federal em-
ployees, it will also provide a valuable opportunity to educate
the American public in general to the likelihood that they will
need LTC for a chronic illness and to the impending threat to
their financial well-being. Few people realize that neither Medi-
care nor typical health insurance policies will pay for expenses
associated with long nursing home confinements or similar home
health care arrangements. We expect that OPM's proposal will
stimulate discussion and development of variations on the Federal
employee program throughout the insurance marketplace.
In order to keep the cost of LTC insurance reasonably afford-
able, OPM has determined that the best approach would be to
encourage middle-aged individuals to gradually set aside funds
over a period well in advance of when benefits will likely be
needed. A large, consolidated risk pool is also desirable.
Since the Federal Employees' Group Life Insurance (FEGLI) Program
is structured to permit such long-term financing of benefits and
CON 131!62
Wy INS
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Honorable George Bush 2.
approximately 90 percent of Federal employees participate
in the program, FEGLI presents an ideal vehicle for providing
LTC insurance. (Our existing health insurance program, in
contrast, has a subdivided risk pool and only short-term
financing.) In addition, as wage earners approach their
mature years, family responsibilities and the need for large
amounts of life insurance typically decrease. Thus, instead
of carrying a large amount of life insurance coverage into
retirement, as is the current practice, we believe that many
employees will be better served by converting some portion
of their basic life insurance coverage to insurance providing
LTC benefits. Such conversion would, of course, be entirely
voluntary under OPM's proposal.
Specifically, our proposal would add a new option under the
FEGLI Program which would allow Federal employees who are at
least 50 years old and have been program participants for a
total of at least 10 years to convert the lesser of:
(A) the face value of basic life insurance
in excess of $2,000, or
(B) such portion of the face value of basic
life insurance in excess of $2,000 as OPM
regulations shall specify,
to LTC insurance. (OPM anticipates that the regulatory
conversion requirement will be established at about $25,000.)
When an employee elects the LTC option, he would commence
paying an age-adjusted LTC premium each pay period (based
upon age at time of conversion) in addition to the usual
employee contribution toward the cost of each remaining $1,000
of basic life insurance. (For employees who convert at age
50, OPM estimates that the LTC premium would be approximately
$11 biweekly.) For an additional premium, employees could
also provide LTC coverage for a spouse. OPM regulations
would establish rates of reimbursement for expenses associated
with nursing home and other qualifying care arrangements; for
example, $40 per day for nursing home confinement and $20
per visit for home health care. Benefits would be available
for a period of at least 3 years.
Each of the above amounts established by OPM regulations
would be indexed to increases in General Schedule pay rates
and further adjusted at such other times as OPM regulations
may prescribe. The Government would continue to. pay its
present one-third share of program costs associated with the
basic insurance amount corresponding to each insured individ-
ual's annual rate of basic pay. No additional Government
expenditures would be required.
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d.......a...as ..wadi Wwast 30
An employee's participation in the existing optional FEGLI
coverages would be unaffected by the decision concerning
basic life insurance conversion. Thus, employees who need
to retain substantial amounts of life insurance would still
have access to optional life insurance providing death bene-
fits of up to five times their salary. In addition, if
Federal service terminates prior to retirement. the employee
could convert to an individual policy of life insurance as
if the LTC election had not been made.
In summary, our proposal would offer Federal employees an
opportunity during their middle years to reassess the types
and levels of insurance protection they will need during
their subsequent years and to trade off, if they so choose, a
portion of their basic life insurance coverage for long-term
care benefits. It updates an old program to accommodate a
new and urgent need and it achieves this goal without adding
to the deficit or creating or expanding any Governmental
entity.
In addition to the LTC proposal, section 1(3) of the draft
bill proposes to add a new subsection 8708(d) to title 5,
United States Code, regarding Government contributions for
basic insurance coverage. This is a technical amendment to
correct an oversight in the Federal Employees' Group Life
Insurance Act of 1980, Public Law 96-427. That act amended
the FEGLI law to require employees who become eligible after
1989 to retain basic insurance while retired or receiving
worker's compensation to continue employee contributions for
basic insurance coverage to age 65. There was no amendment
to section 8708 of title 5, however, to provide funding for
the corresponding Government contributions which will be
required under subsection 8708(a).
The Office of Management and Budget advises that enactment
of this proposal would be in accord with the program of the
President.
A similar letter is being sent to the Speaker of the House of
Representatives.
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To make long-term care insurance available to civilian
Federal-employees, and for other purposes.
Be it enacted by,the Senate and House of Representatives of
the United States of America in Congress assembled, That Chapter
87 of title 5, United States Code, is amended--
(1) in section 8J04, by adding a new subsection (e) to read:
"(e)(1) Consistent. with the conditions, directives, and
terms specified in section 8709 and 8712 of this title, the
Office shall arrange for each qualified employee, as defined in
paragraph (4) of this subsection, to have an opportunity to
irrevocably convert a portion of the employee's basic insurance
amount for purposes of group life insurance and accidental death
and dismemberment insurance under this section to group long-term
care insurance. The long-term care insurance shall provide
specified benefits for a period of at least 3 years' duration to
offset expenses related to nursing home and home health services
required by the employee. In addition to the life insurance
conversion requirement under this paragraph, the Office shall
prescribe appropriate employee contributions which will be
payable for all periods during which long-term care insurance
continues and will be withheld from any salary, compensation, or
retirement annuity due an insured individual. Each employee's
contribution rate shall be determined by the employee's age, at
the time an election is made for purposes of this subsection,
relative to such age and rate categories as the Office determines
will, with adjustments provided for by paragraph (3) below, fully
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cover long-term care policy costs. The Office shall also arrange
for qualified employees who elect the life insurance conversion
for purposes of this subsection to have a further option of
purchasing supplementary long-term care insurance coverage on a
spouse, without evidence of such spouse's insurability and at
appropriate group rates added to the employee's individual
contribution rate. An employee may cease contributions under
this subsection at any time, in which case the long-term care
insurance shall terminate, with no restoration of group life
insurance coverage.
"(2) All employees who convert to long-term care insurance
under this subsection shall retain a residual amount of the group
life insurance and accidental death and dismemberment insurance
authorized under this section which shall equal the greater of--
"(A) $2,000, or
"(B) an amount representing the basic insurance amount
generally available based on the employee's current annual
rate of basic pay decreased by the life insurance coversion
requirement on the date the employee elected long-term care
insurance.
"(3) For purposes of this subsection, the regulations of the
Office shall specify the initaldollar amounts for: the life
insurance conversion requirement; the reimbursement rates for
long-term care insurance benefits; and periodic employee
contributions for self and for spouse coverage based on age
categories of qualified employees as the Office considers
appropriate. All amounts determined in accordance with this
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paragraph shall be subsequently adjusted on the effective date,
and in accordance with the average percent, of any change in pay
rates for the General Schedule authorized under section 5305 of
this title, and at such other times as the Office deems necessary
and prescribes by regulation.
"(4) A qualified employee for purposes of this subsection is
any employee in active service who has attained at least age 50,
has been insured under this chapter for a total of at least in
years, and has not transferred ownership of life insurance to
another person under section R706(f) of this chapter.
"(5) An election under this subsection shall he disregarded
for purposes of determining an emloyee's basic insurance amount
for purposes of section R705(a) of this chapter concerning
conversion to an individual policy of life insurance.";
(2) by amending subsection R709(a) to read:
"(a) Except as otherwise provided by this subsection, for
each period in which an employee is insured under a policy of
insurance purchased by the Office of Personnel Management under
section 8709 of this title, a sum equal to one-half the employee
withholding specified under subsection R707(c) of this title
shall be contributed from the appropriation or fund used to pay
the employee.";
(3) in section R70R, by adding subsections (d) and (e) to
read:
"(d) The sum required by subsection (a) of this section in
the case of each employee who retires on immediate annuity or
commences receiving compensation under subchapter I of. Chapter. R1
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of this title after December 31, 1989, and who elects to-retain
insurance in accordance with R706(b) (3) (A) of this chapter, shall
be paid by the Office from annual appropriations which are hereby
authorized to be made for that purpose and which may he made
available until expended.
"(e) Contributions under this section shall he determined
without regard to any election an employee makes under subsection
8704(e) of this chapter for purposes of long-term care
insurance.";
(4) in subsection 8709(a) by revising the first sentence to
read:
"(a) The Office of Personnel Management, without regard to
section 5 of title 41, United States Code, may purchase from one
or more life insurance companies a policy or policies to provide
benefits specified by this chapter, including group life
insurance, accidental death and dismemberment insurance, and
long-term care insurance."; and
(5) in the first sentence of subsection R714(a) by inserting
"or 8704(e)" after "8707".
Sec. 2. This Act shall take effect on January 1 of the first
year which begins at least 120 days after enactment.
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STATEMENT OF PURPOSE AND JUSTIFICATION
To accompany a draft bill
"To make long-term care insurance available to
civilian Federal employees, and for other purposes."
This proposal would restructure the existing Federal Employees'
Group Life Insurance (FEGLI) Program to offer older employees the
option of converting a portion of group life insurance protection
to long-term care insurance. The long-term care insurance would
provide benefits to- offset expenses associated with nursing home
and home health care services required by an employee, retiree,
or covered spouse for chronic, debilitating illnesses.
The American population over age 65 is growing faster than the
population as a whole. Approximately one-fourth of the over-65
population can expect to spend some time in a long-term care
facility. For Federal employees, as for Americans generally, the
most significant uninsured event of potentially catastrophic
impact is the expense associated with nursing home or other long-
term care arrangements.
As wage earners approach their mature years, family respon-
sibilities and the need for large amounts of life insurance
typically decrease while the vulnerability to chronic illnesses
increases. Instead of carrying a large amount of life insurance
coverage into retirement, as is the current practice for Federal
employees, many employees would be better served if they had the
option of converting some portion of basic life insurance
coverage to insurance providing long-term care benefits.
This proposal would add a new option to the FEGLI Program that
would allow Federal employees who are at least 50 years old and
have been program participants for a total of at least 10 years
to convert a portion of basic insurance to long-term care in-
surance. The employee would then pay an additional long-term
care premium each pay period and the Government would continue
to make the usual basic insurance contributions based on the
employee's basic pay rate. For an additional premium, the em-
ployee could secure supplementary long-term care coverage for a
spouse. Employees who need to retain substantial amounts of life
insurance would still have access to optional life insurance
providing death benefits of up to five times their salary. Under
this proposal, Federal employees will have access to a unique and
critically-needed benefit in a manner consistent with the Admin-
istration's policies relative to budgetary restraint and reliance
on private sector services.
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