Attachment 1 - CSS Number 24322622R0014 - Statement of Objectives--04.18.2022.pdf

Attachment 1 Combined Synopsis/Solicitation Number 24322622R0014

Federal Long Term Care Insurance Program Industry Market Analysis Services Statement of Objectives

Objective

The objective of this procurement is to acquire the services of a contractor to assess the current state of the long term care insurance industry and trends, the current state of the group long term care insurance market, any unused flexibilities in the Long Term Care Security Act, and the Federal Long Term Care Insurance Program (FLTCIP).

Innovative ideas are needed to determine if the Federal government should consider new options or other changes to the current Program. The Federal government offers the largest group long term care insurance program in the country. A comprehensive analysis is needed to assist the United States Office of Personnel Management (OPM) in formulating strategies, some of which may be allowed under the current legislation and some of which may require legislative changes to be proposed to Congress. This includes analysis and recommendations for existing FLTCIP enrollees and potential new product offerings for prospective enrollees.

Background

Public Law 106-265, the Long-Term Care Security Act, was signed into law on September 19, 2000. The Act, codified as Chapter 90 of Title 5 of the U.S. Code, directed OPM to establish and administer FLTCIP and to prescribe regulations necessary to carry out the law (codified at 5 CFR Part 875).

The Act directs OPM to contract with one or more qualified companies licensed to issue long term care insurance in all 50 states and the District of Columbia to provide such insurance. OPM awards contracts based on contractor qualifications, price, and reasonable competition. The contract contains an option for renewal.

FLTCIP provides Federal and United States Postal Service employees and annuitants, current and retired members of the uniformed services, and their qualified relatives the opportunity to apply for long term care insurance. FLTCIP is an enrollee pay all program;

there are no government contributions.

At the time the individual applies for coverage, they make three key decisions:

• Daily Benefit Amount

• Benefit Period

• Inflation Protection

There are two approaches to keep up with the cost of inflation: (1) The Automatic Compound Inflation Option (ACIO), which increases the Daily Benefit Amount each year without a corresponding premium increase; and (2) The Future Purchase Option (FPO), which periodically allows enrollees to purchase additional coverage without going through the medical underwriting process. Under FPO, benefits increase every two years with a corresponding increase in premium. The increase in the Daily Benefit Amount is priced at the enrollee’s attained age.

The first FLTCIP contract was awarded to a consortium of John Hancock Health and Life Insurance Company (John Hancock) and Metropolitan Life Insurance Company. FLTCIP first accepted applications for coverage during an Early Enrollment period from March 25, 2002 through May 15, 2002, with limited benefit offerings to satisfy a pent-up demand from those in the Federal community eager for this coverage. A six-month open season followed from July 1, 2002 through December 31, 2002, during which time active workforce members and their spouses could apply for coverage with abbreviated underwriting. All other eligible persons were required to undergo full underwriting. After the conclusion of the open season, FLTCIP was the largest employer-sponsored group long term care insurance program in the country, with nearly 200,000 enrollees.

The Program has remained open to applications with full underwriting since it began, with an additional open season held in 2011. Under current OPM regulations, newly hired/newly eligible active workforce members, their spouses, and newly married spouses of active workforce members are provided a 60-day window to apply for coverage using abbreviated underwriting standards.

The second 7-year FLTCIP contract was awarded in May 2009 to John Hancock. OPM received two proposals in response to OPM’s Request for Proposals. Under this contract, certain FLTCIP 1.0 enrollees experienced a premium rate increase. The rate increase was effective in March 2010 for FLTCIP 1.0 enrollees with 5% Automatic Compound Inflation Option (ACIO) and ranged from 5-25% depending on age.

No rate increase was applicable for Issue Age 70 and above, or for FLTCIP 1.0 Future Purchase Option (FPO) enrollees. A special decision period was held which allowed enrollees to choose to:

• Maintain their coverage under FLTCIP 1.0;

• Elect a downgrade option to avoid the premium increase; or

• Elect the FLTCIP 2.0 product that was introduced with the new contract.

The 4% ACIO was established for FLTCIP 1.0 as a landing spot from the 5% ACIO for those facing a rate increase during the special decision period.

FLTCIP 2.0 was offered effective October 1, 2009 with some enhanced features and benefits. The Daily Benefit Amount maximum was increased from $300 to $450, and a new 2-year benefit period was introduced. An open season was held April 4, 2011 through June 24, 2011, the first since FLTCIP’s original 2002 open season.

FLTCIP 2.1 became effective for new enrollees as of August 1, 2015, with premium rates higher than those for FLTCIP 2.0 enrollees. Benefits remained the same. This action was taken based on OPM’s review and acceptance of rates proposed by the Insurer.

The third 7-year FLTCIP contract was awarded to John Hancock in April 2016 and began in May 2016. OPM only received one proposal from John Hancock in response to OPM’s Request for Proposal. Under this contract, most existing enrollees in FLTCIP 1.0 and FLTCIP 2.0 experienced a premium rate increase that averaged 83%. Rate increases varied between 28% and 126% for FLTCIP 1.0 (including those who had previously switched from 1.0 to FLTCIP 2.0) and between 12 and 66% for FLTCIP 2.0. At the beginning of the third contract, current enrollees were provided personalized options to reduce the impact of the premium increase, including at least one option to keep the premium neutral. The FLTCIP 2.1 plan and premium rates, which became effective in August 2015, continued to be offered to new enrollees during the first three years of the contract period.

On October 21, 2019, FLTCIP 3.0 was introduced. The traditional plan design remained the same, with some changes to the choices of benefit periods and inflation rates offered. This plan also added a feature called the Premium Stabilization Feature (PSF).

Under the PSF, there is an adjustable amount that is calculated as a percentage of premiums paid. The PSF is designed to reduce the potential need for future premium increases. Under certain conditions, this amount may be used to offset an enrollee’s future premium payments or provide a refund of premium death benefit. The PSF has no cash surrender value or other monetary value except as a premium offset or refund of premium death benefit as described in the FLTCIP 3.0 Benefit Booklet.

The PSF Percentage is used to calculate the amount of premium paid that may be available under the PSF. The PSF Percentage may be adjusted due to actual and projected FLTCIP experience. The PSF Percentage will be changed no more than once annually.

The PSF Percentage will not exceed 100% and will not be less than 10%. OPM must approve any change in the PSF Percentage before the change can be implemented. The PSF Amount is reduced dollar-for-dollar by benefit amounts paid so the PSF Amount for an enrollee may be reduced to zero regardless of the PSF Percentage.

Effective February 1, 2022, the PSF percentage will be reduced from the current 35 percent to 20 percent. The PSF percentage is being reduced due to changes to projected experience, including the prolonged low interest rate environment and its impact on projected investment performance.

Scope

OPM is undertaking a review of the long term care insurance industry. The review will include:

• Comparison of the products, including FLTCIP, in the current long term care insurance market in general, and the group market specifically.

o Engage in a benchmarking review of FLTCIP and the FLTCIP’s benefit options against those offered by other large public and private employers regarding benefits that may be beneficial to the Federal population.

• Tracking of the current trends of major insurance companies offering long term care insurance in the market.

o Evaluate the current long term care insurance market for innovative product offerings; identify any product changes that would have merit;

and recommend when they can/should be implemented as a group benefit for the Federal population.

• Assessment of current long term care insurance market to the current FLTCIP statute, codified as Chapter 90 of Title 5 of the U.S. Code.

o Evaluate if the current statute allows these offerings. Is legislative change required to accommodate these offerings?

• Analysis of current FLTCIP concerns, including evaluation of the program’s structure and competitive position.

o Identify factors limiting insurers’ competitive interest in the long term care insurance industry, and FLTCIP in particular, including the FLTCIP’s statutory provisions and the effect of insurers’ reserving and Risk-Based Capital requirements, and analyze whether FLTCIP can be structured in such a way as to address these limitations.

• Analyze the broader statutory and regulatory environment to identify factors (e.g., permitting withdrawals from retirement accounts for long term care without penalties) that may be inhibiting demand for long term care insurance.

• Assessment of the value to the Government of offering long term care insurance as a group benefit to the eligible population consistent with the Government’s desire to be a model employer able to attract and retain a skilled workforce in a competitive labor market.

• Provide recommendations on how the most innovative industry ideas can be incorporated into the Federal program, for both current enrollees and prospective enrollees, and provide recommendations for short and long term changes including contractual, legislative, and/or regulatory changes necessary to carry out these recommendations.

Key Personnel Requirements

The contractor shall provide key personnel comparable to the labor category titles stated below. The key personnel must possess the following knowledge and skills:

• Knowledge of the long term care insurance industry and its current products, in particular the Federal Long Term Care Insurance Program;

• Knowledge of laws and regulations that impact the long term care insurance industry, in addition to FLTCIP statute and regulations, and the Federal Acquisition Regulation (FAR);

• Direct experience in the industry review of insurance benefits and benchmarking of employer benefit options;

• Knowledge of long term care insurers’ financial reserving and Risk-Based Capital requirements; and

• Ability to communicate effectively, both orally and in writing.

Labor Categories and Labor Category Definitions

The Government anticipates that the below labor category titles and labor category functional descriptions listed in Attachment J.1, HCaTS Standardized Labor Categories (LCATS) are required to provide the services included under the Scope. The Government added some language that is specific to the services includes under the Scope. We noted the additional language in bold.

Labor Category Title Labor Category Functional Description Senior Compensation, Benefits, and Job Analysis Specialist (Standard Occupational Classification (SOC) System Number 13- 1141.00)

Conduct programs of compensation and benefits and job analysis for employer.

May specialize in specific areas, such as position classification and pension programs; plan, develop, evaluate, improve, and communicate methods and techniques for selecting, promoting, compensating, evaluating, and training workers.

May specialize in specific areas, such as long term care insurance programs.

Senior Manager (SOC System Number 11-9199.00)

Plan, direct, or coordinate activities of an organization to ensure compliance with regulations and standard operating procedures. Includes Project Managers.

Senior Market Research Analysts and Marketing Specialists (SOC System Number 13-1161.00)

Research market conditions in local, regional, or national areas, or gather information to determine potential sales of a product or service, or create a marketing campaign. May gather information on competitors, prices, sales, and methods of marketing and distribution.

Research market conditions of long term care insurance in regional and national areas.

Senior Management Analyst (SOC System Number 13-1111.00)

Conduct organizational studies and evaluations, design systems and procedures, conduct work simplification and measurement studies, and prepare operations and procedures manuals to

Labor Category Title Labor Category Functional Description assist management in operating more efficiently and effectively. Includes program analysts and management consultants.

Compliance Officer (Legal/Policy Analyst)

Ensures that the contractor’s actions for this contract follow FAR requirements.

Senior Financial Analyst

Financial analyst familiar with insurance industry requirements.

Lawyer/Attorney Analyzes the FLTCIP law and the insurance regulatory environment to identify factors that may be inhibit the demand for long term care insurance.

Actuary Consultant

Actuary with long term care experience, minimum of 15 years, and recognized as an expert. Serves on actuarial committees or makes presentations to actuarial organizations. Team leader with extensive interaction with clients.

Deliverables

The contractor must provide the below deliverables per the Deliverables and Deliverable Due Dates stated below as follows:

• Create a Project Management Plan – Create a timeline of activities and deliverables, including responsible parties and resource implications.

• Identify and Document Findings – Identify sources of information that led to the conclusions and recommendations.

• Provide General Project Support – In meeting these objectives, the contractor shall be responsible for associated project support, such as: scheduling and facilitating meetings with OPM personnel, including preparing and disseminating agendas and background materials; providing materials during the meetings for idea generation and decision making; recording and disseminating minutes and outcomes of each meeting; and managing production of final project documents, including drafting and editing final deliverables based on feedback from OPM.

• Provide Outline, Draft Report and Final Comprehensive Report – outlining all findings and recommendations for assisting existing FLTCIP enrollees and potential product offerings for prospective enrollees.

o Outline – Detailed document, including the planned sources of information and timeline for all aspects of the purchase order scope. This includes distinct report sections for current enrollees and tasks for new enrollees.

o Draft Report with sections addressing current enrollees – Detailed draft documenting the findings and recommendations, including the current state of the long term care insurance industry and comparison of products.

This includes FLTCIP. The draft should concentrate on findings that directly impact current FLTCIP enrollees.

o Draft Report with sections addressing prospective enrollees – Detailed draft documenting the findings and recommendations that directly impact prospective FLTCIP enrollees and assess the value to the Government of offering long term care insurance as a group benefit to the eligible population.

o Final Report to include all sections – Comprehensive report incorporating purchase order scope, conclusions, and recommendations of innovative ideas, plus short and long term changes for FLTCIP. The report should incorporate OPM feedback to the draft reports.

The contractor shall provide deliverables as outlined in the Management Plan in accordance with the specifications in draft format for review by Healthcare and Insurance. All documents, including ad hoc reports, shall be considered drafts until formally accepted in writing by the appropriate Project Manager (PM). The contractor shall address all comments provided by Healthcare and Insurance on the draft deliverable. Each deliverable will be subject to inspection and acceptance by the PM and will conform to the requirements stated in the Project Management Plan.

All documents produced shall be created in Microsoft Word, Microsoft Project, or Microsoft Excel, and other compatible Windows software as approved by the PM. The PM may request that documents be delivered in hard copy and/or electronic copy format.

Deliverables and Deliverable Due Dates

Deliverable Deliverable Due Date Development of Project Plan 7 days after OPM kick-off meeting Development of Outline for Report – Include distinct report sections for current enrollees and tasks for new enrollees

30 days after OPM kick-off meeting

Draft Report with sections addressing current enrollees

75 days after OPM kick-off meeting

Draft Report with sections addressing prospective enrollees

110 days after OPM kick-off meeting

Final Report to include all sections 150 days after OPM kick-off meeting

Non-Disclosure Agreements

All selected contractor personnel assigned to work on this purchase order shall be required to sign a non-disclosure statement regarding key aspects of the purchase order.

Target Audience

The target audience for this purchase order is comprised of OPM leadership and FLTCIP managers.

Specifications

The contractor shall employ best commercial practices during the conduct of this purchase order.

Place of Performance

The selected contractor shall conduct work at their own facilities.

Period of Performance

The period of performance is six months from the date of award.

Quality Assurance Surveillance Plan

A description of the columns and information are as follows:

A. Deliverable: One of the deliverables described in the Deliverables Section.

B. Performance Standard: The level of performance which the Government considers acceptable.

C. Acceptable Quality Level (AQL): The range of deviation which the Government will consider performance to be acceptable.

D. Monitoring Method: The method the Government will use to monitor performance and determine the extent to which performance has met the standard. Regardless of the method or degree of monitoring, the Government reserves the right to audit all performance data to independently verify its accuracy.

E. Incentives: The incentives include a positive evaluation in the Contractor Performance Assessment Reporting System (CPARS) for performance that exceeds the AQL and a negative evaluation in CPARS for performance that fails to meet the AQL.

Deliverable Performance

Standard Acceptable Quality Level

Monitoring Method

Incentives

Project Management Plan

Accuracy of Service Completion and Timeliness of Deliverable

The deliverable must be in accordance with the requirements stated in the Deliverables Section and received by the specified

The COR will monitor performance.

Positive/Negative

CPARS

Evaluation

Acceptable Quality Level

Monitoring Method

Incentives deliverable due date.

Outline for Final Report

Thoroughness of document that covers all aspects of the report

Timeliness of Deliverable

The deliverable must be in accordance with the requirements stated in the Deliverables Section and received by the specified deliverable due date.

The COR will monitor performance.

Positive/Negative

CPARS

Evaluation

Scheduling and facilitating progress meetings during contract period

Timely and regular updates on the scope of the project

The deliverable must be in accordance with the requirements stated in the Deliverables Section and received by the specified deliverable due date.

The COR will monitor performance.

Positive/Negative

CPARS

Evaluation

Draft Report with Sections Addressing Current Enrollees

Detailed draft including the current state of the long term care insurance industry and comparison of products, including FLTCIP

The deliverable must be in accordance with the requirements stated in the Deliverables Section and

The COR will monitor performance.

Positive/Negative

Acceptable Quality Level

Monitoring Method

Incentives

Timeliness of Deliverable received by the specified deliverable due date.

Draft Report with Sections addressing Prospective Enrollees

Detailed draft including the assessment of the value to the Government of offering long term care insurance as a group benefit to the eligible population.

Timeliness of Deliverable

The deliverable must be in accordance with the requirements stated in the Deliverables Section and received by the specified deliverable due date.

The COR will monitor performance.

Positive/Negative

CPARS

Evaluation

Final Comprehensive Report

Complete document incorporating project scope, conclusions, and recommendations of innovative ideas and short and long term changes for

FLTCIP.

Timeliness of Deliverable

The deliverable must be in accordance with the requirements stated in the Deliverables Section and received by the specified deliverable due date.

The COR will monitor performance.

Positive/Negative

Quality Assurance Surveillance Plan