RFP Number OPM049-08-R-0002.doc

OPM049-08-R-0002

United States

Office of Personnel

Management

Federal Long Term Care Insurance Program

Request for Proposals

Number

OPM049-08-R-0002

AUGUST 25, 2008

UNDER DPAS (15 CFR 350)

RATING

N/A

PAGE OF PAGES

1 104

FORMCHECKBOX

SEALED BID (IFB)

FORMCHECKBOX

NEGOTIATED (RFP)

5. DATE ISSUED

August 25, 2008

6. REQUISITION/PURCHASE NO.

OPM049-08-R-0002

8. ADDRESS OFFER TO (If other than Item 7)

U.S. OFFICE OF PERSONNEL MANAGEMENT

MSD/CCFAS/CONTRACTING GROUP

1900 E STREET, NW, ROOM 1342

WASHINGTON, DC 20415-7710

SAME

NOTE: In sealed bid solicitations “offer” and “offeror” mean “bid” and “bidder.”

SOLICITATION

9. Sealed offers in original and ______9______ copies for furnishing the supplies or services in the Schedule will be received at the place specified in Item 8, or if hand carried, in the depository located in _the issuing office (see Item 7 above)_____________________ ____ until 3:00 PM local time November 14, 2008 (Hour) (Date)

CAUTION - Late submissions, Modifications, and Withdrawals: See Section L Provision No. 52.215.01. All offers are subject to all terms and conditions contained in the solicitation.

10. FOR

INFORMATION

CALL:

A. NAME

Cheryl D. Allen B. TELEPHONE (Include area code)

(NO COLLECT CALLS)

202- 606-2054

C. E-MAIL ADDRESS

Cheryl.Allen@opm.gov

11. TABLE OF CONTENTS

AND OTHER STATEMENTS OF OFFERORS

OFFER (Must be fully completed by offeror)

NOTE: Item 12 does not apply if the solicitation includes the provisions at 52.214-16, Minimum Bid Acceptance Period.

12. In compliance with the above, the undersigned agrees, if this offer is accepted within ___ ___ calendar days (60 calendar days unless a different period is inserted by the offeror) from the date of receipt of offers specified above, to furnish any or all items upon which prices are offered at the price set opposite each item, delivered at the designated point(s), within the time specified in the schedule.

13. DISCOUNT FOR PROMPT PAYMENT

(See Section I, Clause No. 52.232-8)

10 CALENDAR DAYS

20 CALENDAR DAYS

30 CALENDAR DAYS

CALENDAR DAYS

14. ACKNOWLEDGEMENTS OF AMENDMENTS

(The offeror acknowledges receipt of amend-

ments to the SOLICITATION for offerors and related documents numbered and dated:

15A. NAME

AND

CODE

FACILITY

16. NAME AND TITLE OF PERSON AUTHORIZED TO SIGN

OFFER (Type or print)

ADDRESS

OF

OFFEROR

15B. TELEPHONE NO. (Include area code)

15C. CHECK IF REMITTANCE ADDRESS

FORMCHECKBOX

IS DIFFERENT FROM ABOVE - ENTER

SUCH ADDRESS IN SCHEDULE.

AWARD (To be completed by Government)

22. AUTHORITY FOR USING OTHER THAN FULL AND OPEN COMPETI-

TION:

23. SUBMIT INVOICES TO ADDRESS SHOWN IN

(4 copies unless otherwise specified)

ITEM

FORMCHECKBOX

10 U.S.C. 2304(c) ( ) FORMCHECKBOX 41 U.S.C. 253(c) ( )

24. ADMINISTERED BY (If other than Item 7) CODE

25. PAYMENT WILL BE MADE BY CODE

(Signature of Contracting Officer)

28. AWARD DATE

IMPORTANT - Award will be made on this Form, or on Standard Form 26, or by other authorized official written notice.

SECTION B – SUPPLIES OR SERVICES AND PRICES/COSTS

B.1 Period of Performance

The anticipated base period for this contract is May 1, 2009 through April 30, 2016. This contract contains an option for renewal.

B.2 Price Proposal

Section C.2, Paragraph C contains information related to price. Offerors must refer to this section and paragraph in developing their price proposal.

SECTION C – DESCRIPTION/SPECIFICATIONS/WORK STATEMENT

C.1 Background

(A) Objective The U.S. Office of Personnel Management (OPM, or “we”) is issuing this Request for Proposals (RFP) under the authority of Public Law 106-265, which created the Federal Long Term Care Insurance Program (FLTCIP).

This RFP solicits proposals from qualified insurance companies to issue a group long term care insurance policy to OPM. The current FLTCIP book of business will transfer to the successful offeror.

(B) Enabling Legislation

Public Law 106-265, the Long-Term Care Security Act (Attachment 1) 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 the FLTCIP and to prescribe regulations necessary to carry out the law. These regulations are codified at 5 CFR Part 875 (Attachment 2). Offerors must be aware of and be prepared to comply with their requirements. The FLTCIP provides Federal and United States Postal Service employees and annuitants, current and retired members of the uniformed services, and their qualified relatives with the opportunity to apply for long term care insurance.

The Act directs OPM, without regard to statutes requiring competitive bidding, to contract with one or more qualified companies to provide such insurance. The contractor must be licensed to issue long term care insurance in all 50 states and the District of Columbia. However, the terms of any contract awarded for the FLTCIP 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. OPM must award contracts on the basis of contractor qualifications, price, and reasonable competition; they are not automatically renewable. This contract contains an option for renewal.

1. Funding Mechanism Enrollees pay the full premiums for long-term care insurance coverage offered pursuant to the Act. During the contract period, premiums can be adjusted only with OPM’s agreement.

OPM funds its administrative expenses to oversee the contract initially from the Employees’ Life Insurance Fund (in the U.S. Treasury) since the Program’s Experience Fund is held by the Contractor, not by OPM. The Contractor must reimburse OPM on an ongoing basis for these expenses paid from the Employees’ Life Insurance Fund from the Experience Fund, including lost investment income.

2. Underwriting Standards

The Act does not require that long-term care insurance coverage be guaranteed to an eligible individual. Further, the Act does not require that long-term care insurance coverage be made available to any individual who would be eligible for benefits immediately.

3. Potential for Consortia

The Act allows single insurers or consortia of insurers to submit proposals or bids to OPM. Neither alternative is preferred by OPM over the other. Consortia of insurers, if selected by OPM, may jointly underwrite coverage. However, one entity must assume the lead role in communications with government contracting officials.

4. Consumer Information

The Act requires OPM to ensure that each applicant has information regarding the general advantages and disadvantages of long term care insurance and any other information necessary to make an informed decision about obtaining long term care insurance. We look to the Contractor to provide this information with OPM’s review and approval.

(C) History of the Program

The FLTCIP first accepted applications for coverage during an Early Enrollment period from March 25 to 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-December 31, 2002, in which active workforce members and their spouses could apply for coverage with abbreviated underwriting. All other eligible persons were required to submit to full underwriting. Certain medical conditions, or combinations of conditions, prevented some people who applied from being approved for coverage. We believed a six-month period was necessary at that time for the education of the federal population to this new benefit offering.

After the conclusion of the open season, the FLTCIP had become 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 throughout the initial contract period. 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. We held a small number of limited open seasons when new eligible groups were added to the Program, but no further general open seasons have been held. Enrollment currently stands at around 220,000.

(D) Profile of Employees and Retirees

Attachment 3A contains demographic and premium information for the current enrolled population. Attachment 3B contains demographic information for the eligible population.

(E) Communication Vehicles

A number of vehicles are available to communicate with employees and annuitants about the FLTCIP. Attachment 4 has this information. However, there is no eligibility file and no opportunity to receive employee home or email addresses.

(F) Voluntary Benefits Portal

Information on the voluntary benefits portal, called BENEFEDS, is described in Section C.2.(F) and Attachment 5. The Contractor will be required to interface with and use BENEFEDS for premium administration purposes.

(G) Current Plan Design and Applications

Attachments 6A – 6L contain the current plan Outlines of Coverage and Benefit Booklets (including the Alternative Insurance Plan), Service Package information, and the current abbreviated and full underwriting applications.

C.2 Summary of Requirements

Special Note: You must answer questions stated in Section L regarding each of the below requirements and include your responses as a part of your response to this RFP.

(A) Plan Design

1. Plan Summary

This table describes the benefit options to be offered to New and Current Enrollees in the standard plan. For a description of the current Alternative Insurance Plan (AIP), please see the AIP Benefit Booklet in Attachment 6D.

· maximum daily benefit amount,

· benefit period, and

· type of inflation protection

Enrollees will be allowed to choose from pre-packaged plans or may choose to customize a plan.

Each enrollee has chosen a:

· plan type,

· maximum daily or weekly benefit amount,

· benefit period,

· waiting period, and

· type of inflation protection

DBA available in $50 increments from a minimum of $100/day to a maximum of $450/day

Daily benefit amount (DBA) or Weekly benefit amount (WBA)

DBA available in $25 increments from a minimum of $50/day to a maximum of $300/day

WBA is seven times the DBA

· Respite care

· Bed reservations

· Caregiver training

· Alternate Plan of Care: Appliances, special equipment, home modifications, and other products or services are covered if specified in a plan of care and authorized by a care coordinator

· Up to 100% of DBA for care in a facility

· Up to 100% of DBA for care at home (by formal or informal caregivers) or in adult day care. Informal care provided by family members is covered up to 500 days per lifetime.

· Care coordination

· Respite care

· Bed reservations

· Caregiver training

· Alternate Plan of Care: Appliances, special equipment, home modifications, and other products or services are covered if specified in a plan of care and authorized by a care coordinator

Comprehensive and Facilities-Only coverage:

· Up to 100% of DBA/WBA for care in a facility

Comprehensive coverage also includes:

· Up to 75% of DBA/WBA for care at home (by formal or informal caregivers) or in adult day care. Informal care provided by family members is covered up to 365 days per lifetime.

Provision for waiver of premiums Employee-pay-all with no Government contribution

Provision for waiver of premiums

2.

Plan Details

The following specifications apply to both the current plan design and the plan design for the next contract:

a. Daily Benefit Amount (DBA)

(1) Reimbursement is limited to the actual charges for the services, not to exceed the daily benefit amount (or weekly benefit amount for Current Enrollees who have chosen that option).

(2) There will be no copayments or coinsurance. Out-of-pocket costs are limited to costs incurred in the waiting period and costs in excess of the DBA (or WBA for Current Enrollees who have chosen that option).

b. Benefit Period/Maximum Lifetime Benefit

The maximum lifetime benefit is calculated using a “pool of money” approach, where the pool = DBA multiplied by 365 multiplied by the number of years in the benefit period. The unlimited benefit period has no maximum lifetime benefit.

c. Inflation Protection

(1) Enrollees choose one of two inflation options: automatic compound inflation (5% compounded annually) or future purchase option.

(2) For automatic compound inflation, the premium is based on the initial issue age, despite the fact that benefits increase over time.

(3) Future purchase options must be offered every other year, without individual underwriting or proof of insurability, as long as the enrollee has not declined three prior options and is not eligible for benefits. An enrollee must be insured for at least 12 months in order to receive a future purchase option offer. The offer to the enrollee must be made in writing, and the timing and format of the offer is subject to OPM’s approval. The effective date of the next future purchase option increase will be January 1, 2010.

(4) The future purchase option increase is based on the change in the Department of Labor’s Consumer Price Index for Medical Care or another index mutually agreed to by the Contractor and OPM.

(5) For the future purchase option, the premium for the original coverage amount is based on issue age while the premium for each additional amount is based on the attained age at purchase of the increment.

(6) At the time of each future purchase offer, the Contractor must give enrollees in the future purchase option the right to switch, without underwriting, to automatic compound inflation, with a corresponding premium adjustment based on attained age.

(7) For the future purchase option, inaction by the enrollee at the time of a scheduled increase will trigger that increase (i.e., the increase is the default).

d. Waiting Period for Benefits

(1) Please see the Benefit Booklets in Attachments 6E and 6F for an explanation of the service day waiting period for Current Enrollees.

(2) The waiting period does not apply to hospice care, respite care, or caregiver training. These services do not count toward the waiting period.

e. Benefit Eligibility

(1) The Contractor will determine benefit eligibility as required by the Health Insurance Portability and Accountability Act (HIPAA), 26 U.S.C. §7702B for qualified long term care insurance contracts.

(2) To qualify for benefits:

i. A licensed health care practitioner must certify that an enrollee:

· is unable to perform, without substantial assistance from another individual, at least two of six activities of daily living (ADLs) for an expected period of at least 90 days due to a loss of functional capacity, or

· requires substantial supervision to protect such individual from threats to health and safety due to severe cognitive impairment.

ii. The Contractor must agree with that certification; and

iii. The Contractor must approve a written plan of care established for the enrollee by a licensed health care practitioner or the Contractor’s care coordinator.

(3) ADLs are those listed at 26 U.S.C. § 7702B(c)(2)(B): eating, toileting, transferring, bathing, dressing, and continence.

f. Covered Services

(1) Specific covered services include the following. More information is available in the Benefit Booklet in Attachment 6E:

i. Care in a nursing home (skilled, intermediate, or custodial), Alzheimer’s facility, assisted living facility, and inpatient hospice. The waiting period does not apply to hospice care.

ii. Home care rendered by an appropriately licensed or certified provider, agency or non-agency, including services by a nurse, home health aide, therapist, homemaker, or in‑home hospice. The waiting period does not apply to hospice care. For Current Enrollees, these services are covered only if the enrollee has Comprehensive coverage.

iii. Care provided by informal caregivers (unlicensed caregivers qualified to provide custodial care) when included in a plan of care approved by the care coordinator. For Current Enrollees, these services are covered only if the enrollee has Comprehensive coverage. Informal care by family caregivers may be covered, provided they do not live with the enrollee at the time the enrollee becomes benefit eligible. Payment for care provided by family caregivers is limited to reasonable costs for a lifetime total of 365 days for Current Enrollees, 500 days for New Enrollees.

iv. Adult day care and other community based services. For Current Enrollees, these services are covered only if the enrollee has Comprehensive coverage.

v. Respite care in an amount equal to 30 times the DBA per calendar year. The waiting period does not apply to respite care. Current Enrollees with Facilities-Only coverage may receive benefits only for respite care provided in a facility.

vi. Caregiver training, up to seven times the DBA. The waiting period does not apply to caregiver training.

vii. Bed reservations, up to 30 days per calendar year.

(2) The Contractor must provide care coordinators to facilitate access to benefits.

(3) Alternate Plan of Care -- A care coordinator may approve coverage for items not explicitly listed as covered under the plan, e.g., appliances or special equipment, home modifications, etc.

(4) The Contractor must coordinate benefits with any other applicable insurance coverage and must not duplicate Medicare or other payments to which an insured individual is entitled.

(5) The Contractor must warrant that the coverage afforded under the master group policy issued to OPM satisfies, at a minimum, the provisions of the 2000 Long Term Care Insurance Model Act and Long Term Care Insurance Model Regulations promulgated by the National Association of Insurance Commissioners (NAIC Model Act and Regulations).

(6) The Contractor must warrant that its master group policy is designed to meet the Internal Revenue Code definitions of a “tax-qualified” contract.

g. Premiums

(1) Premiums are issue age premiums (based on the applicant’s age at time of application), with no Government contribution.

(2) Individual coverage must be guaranteed renewable and can be canceled only for nonpayment of premiums after a grace period of not less than thirty (30) days. The Contractor shall reinstate coverage if, within six months of the termination, the Contractor receives proof that the enrollee suffered a cognitive impairment or a loss of functional capacity, which occurred before the end of the grace period, and the enrollee makes retroactive premium payments. The Contractor must follow NAIC third party notice rules. In no event can the Contractor’s reinstatement provisions be more restrictive than what is permitted under HIPAA and the NAIC Model Act and Regulations.

(3) There is no Return of Premium option.

(4) Waiver of premium begins once the enrollee is certified as benefit eligible and has either satisfied the waiting period or is receiving hospice care.

(5) A contingent nonforfeiture benefit as defined by the 2000 NAIC Model Act and Regulations is included.

(6) The FLTCIP does not offer any spousal or similar discounts.

h. Portability

Enrollees who separate from employment with the eligible group or who otherwise lose their affiliation to the eligible group may continue FLTCIP coverage with no corresponding effect on premium.

i. International Benefits The Contractor must cover services provided anywhere in the world. However, the Contractor may administer benefits provided outside the United States and its territories and possessions differently than those provided within the United States and its territories and possessions. Any such differences will be subject to OPM’s approval.

j. Exclusions and Limitations

(1) FLTCIP coverage does not have a war exclusion. As a result, benefits may be payable for conditions due to war or acts of war, declared or undeclared, or service in the armed forces or auxiliary units.

(2) Exclusions must satisfy the provisions of the 1993 NAIC Model Act and Regulations. However, we expect that the FLTCIP will follow the 2000 and any later NAIC models.

(3) Exclusions for pre-existing conditions or mental and nervous conditions are not allowed.

k. Partnership-qualified Coverage

(1) If directed by OPM, the Contractor will provide enrollees the opportunity to obtain Partnership-qualified (PQ) coverage under the FLTCIP. The plan design for PQ coverage will be subject to OPM’s approval.

(2) OPM reserves the right to determine whether to offer PQ coverage under the

FLTCIP, or to offer it only to enrollees who meet certain specifications (e.g., those who reside in certain states).

(3) If an exchange of “like kind” coverage is required in order for an enrollee to obtain PQ coverage, the exchange must be made at the original issue age and require no new underwriting. Enrollees who must upgrade in order to obtain PQ coverage are subject to the rules for qualifying for upgrades, noted below.

l. Upgrades and Downgrades

(1) The Contractor must have provisions for upgrades and downgrades of coverage.

(2) Enrollees who are not eligible for benefits may request an upgrade at any time. Upgrades may be subject to underwriting. The premium for upgraded coverage will be a blended rate, with the rate for the original benefits calculated based on the original issue age and the rate for the new benefits calculated based on the attained age.

(3) Enrollees may request a downgrade of their coverage at any time. Downgrades are not subject to underwriting. The premium for downgraded coverage shall be based on the original issue age.

m. Plan Transition

(1) Upon the Transfer Date, the Contractor shall provide to each Current Enrollee coverage that is the same or substantially the same as the coverage he or she had on the day before the Transfer Date. Premiums will be based on the enrollee’s original issue age.

(2) The Contractor shall, at a time and in a manner agreed to by OPM, communicate in writing to each enrollee. The communication must, at a minimum:

i. Identify any provisions of the enrollee’s coverage that are not exactly the same as his or her previous coverage;

ii. Specify the premium for the coverage, and how it compares with the enrollee’s previous premium;

iii. Provide structured choices to move to the new benefit design, detailing any effect on premium and any underwriting requirements; and

iv. Provide a limited number of structured choices to downgrade coverage, if the enrollee’s new premium is higher than his or her current premium. These downgrade choices should allow the enrollee to continue coverage with a premium approximate to his/her current premium. The enrollee may request other downgrades, if available, by contacting the Contractor.

n. Alternative Insurance Plan

The Contractor must continue coverage in the AIP for Current Enrollees who are enrolled in the AIP as of the Transfer Date. The Contractor must indicate in its proposal whether it intends to offer an AIP during the contract term. If so, it must propose a plan design and eligibility criteria.

o. Minimum/Maximum Applicant Age

The minimum applicant age is 18 years of age. There is no upper age limit.

(B) Contractor Information

1. The Contractor may be a single insurance company or be comprised of more than one insurance company, or other entities, aligned together to respond to this RFP.

2. By the time of the contract award, the successful Contractor must be licensed to sell insurance in all 50 states and the District of Columbia. In the case of a Contractor comprised of more than one company, the licensure requirement can be met by the companies collectively.

3. Relationships with subcontractors, partners or members of a joint contracting entity cannot be exclusive. This means that each company is free to enter into more than one proposed relationship and/or contracting arrangement with us, for this or future contract terms.

4. The Contractor will demonstrate significant experience in providing group long term care insurance to large employer groups.

5. If submitting a proposal as a Consortium, you will clearly define the roles and responsibilities of each entity and provide information as to which entity speaks for the Consortium.

6. The Contractor will agree to provide all necessary records to a subsequent carrier upon contract termination. This includes enrollee data and claims information.

(C) Financial

Special Note: In your separately bound reply to this Financial section, you must also include copies of the applicable financial questions and your corresponding answers from the Plan Design section, the Underwriting section, and any other applicable financial questions elsewhere in Section L.

1. General

a. The FLTCIP must be fully insured with enrollees paying the full cost. OPM is not liable for nonpayments or insufficient funds, if any.

b. The FLTCIP operates on a fiscal year basis that begins October 1.

c. By law, the Contractor must account for the experience of the FLTCIP separately from that of other groups that the Contractor insures. The Contractor must account for an Experience Fund, as described below under Subsection 5. The FLTCIP funds shall not be available for any obligations other than those associated with the FLTCIP.

2. Actuarial Assumptions

a. While rates will not be “guaranteed for life” to enrollees, your pricing assumptions should produce fully sustainable premium rates for New Enrollees. The Contractor will be held to the most recent NAIC standard for rate adequacy. Thus, you must certify that you have priced to “moderately adverse” conditions.

b. Assumptions for expenses, claims, lapse and investment income may contain some margins for adverse deviations. An explicit profit margin must be built into the premiums and disclosed to OPM.

c. Actual expenses, claims, lapses and investment income must be accounted for separately for the FLTCIP and annual comparisons of actual to expected shall be performed and communicated to OPM to ensure rate adequacy.

d. The Contractor must regularly monitor FLTCIP experience and propose corrective action whenever experience indicates that it may be needed. Any such action so proposed is subject to approval by OPM.

3. Premium Rates a.

The Contractor will be held to the NAIC standard for rate adequacy. The Contractor must certify that its new issues are priced to “moderately adverse” conditions. We believe that efficiencies in marketing to a large group will allow us to achieve this goal while providing premiums competitive with the individual market for standard risks. As discussed in Section (D), we are considering various underwriting strategies for actively-at-work employees. We will select the type of underwriting to balance premium levels and stability.

b. Premiums proposed for Current Enrollees should adjust current premiums toward rate adequacy where necessary. Premium increases should be limited to 25% for individual enrollees. Subsidies across issue ages, plan options and classes should be avoided. In some cases the Contractor’s proposed premiums for Current Enrollees may achieve less than full adequacy under “moderately adverse” conditions.

c. You must provide to each Current Enrollee experiencing a premium increase the alternative to downgrade coverage into a choice of one or more benefit options available at a premium approximate to his/her current rate. Specific provisions pertaining to downgrades may be further negotiated after contract award.

4. Reserves a.

The Contractor will establish and maintain any reserves that are in keeping with statutory accounting standards required by its state(s) of domicile, and in accordance with actuarial standards of practice.

b.

You may propose a Reserve Charge for the purpose of establishing and maintaining a Reserve. You are required to provide to OPM an annual accounting of the Reserve.

c.

The Reserve is to be credited the actual annual rate of interest equal to that earned by the Experience Fund.

d.

The balance of the Reserve with interest must be returned to the Experience Fund at termination of the contract.

5. Experience Fund

a. The Contractor must account for the experience of the FLTCIP separately from that of its other accounts and must account for a FLTCIP Experience Fund.

b. The Contractor will invest Experience Fund assets according to its proposed investment strategy, subject to approval by OPM. The Contractor will propose an investment strategy appropriate to the underlying assets, liabilities and risks of the FLTCIP.

c. Annually, the Contractor must calculate the amount in the FLTCIP Experience Fund as follows: (1) cumulative premiums paid, (2) plus cumulative investment income (3) minus cumulative actual paid claims, (4) minus cumulative taxes paid, (5) minus profit as discussed in the Profit section, (6) minus expenses either agreed-upon or actual, whichever is less, (7) minus Reserve charges.

d. In the above formula, the Contractor must:

(1) Credit to the Experience Fund the actual total net income for assets in the separately-identifiable FLTCIP account.

(2) Annually calculate the “agreed-upon” expenses as proposed in Section

L, Financial. In calculating the Experience Fund, use the “agreed-upon” amounts, or actual amounts, whichever is less.

(3) If a portion of any year’s profit has been forfeited due to performance-based evaluations (as described in Section 7, Profit), subtract the forfeited portion from cumulative profit.

(4) Deduct expenses from the Experience Fund in the year in which the expense is incurred.

(5) Assess the Experience Fund for the actual payment of Premium Taxes, DAC Taxes and any local taxes, fees or guarantee association payments, with offsetting DAC Tax additions.

(6) Immediately invest, or credit interest from the date of receipt at the rate of Experience Fund earnings, all Premiums and other FLTCIP income.

e. The Contractor will reimburse the current contractor from the Experience

Fund any unpaid, allowable expenses it incurred under its contract, as directed by OPM.

6.

Contract Termination a.

In the event of contract termination where a different contractor is selected, the Contractor must transfer the Experience Fund (reduced by: incurred but not reported claims, any other reserves for claims remaining with the current Contractor, and agreed-upon termination fees), calculated as of the date of termination, to the next Contractor.

b.

In making this transfer:

(1) The Contractor must provide estimates of reserves and assets at least 45 days prior to the termination date.

(2) The Contractor must give OPM the final calculation of reserves and assets within 30 days after the termination date.

(3) Ninety (90) days after the termination date, the Contractor must transfer all reserves and assets to the next Contractor.

(4) The Contractor will not deduct expenses to calculate and transfer assets from the transferable amount.

(5) The Contractor will pay the value of any scheduled future DAC Tax offsets to the Experience Fund.

7.

Profit

a. The Contractor will propose an annual profit charge expressed as a percentage of premiums.

b. Your profit will include performance-based elements at risk to the Contractor based on your formula proposed in the Quality Assurance Surveillance Plan (Attachment 7).

c. The Contractor may propose a profit charge for achievement of cumulative long-term Experience Fund investment results.

d. The Contractor must provide reports for OPM to evaluate the items in the proposed formula.

(D) Underwriting

1. The following standards will form the basis for your underwriting proposals:

Guaranteed Issue:

See Definitions

Modified Guaranteed Issue:

See Definitions

Short Form:

Modified Guaranteed Issue questions, plus a limited number of additional questions which you must propose.

Full Underwriting:

See Definitions

2. The Offeror will submit premium estimates under each proposed underwriting scenario below for Actively At Work Employees and their spouses during a limited

Open Season, and for newly hired and newly eligible employees and their spouses and newly married spouses of employees who apply within 60 days of their hire/eligibility date on an ongoing basis. We expect that you will propose full underwriting for all other applicants. We will select the type of underwriting to balance premium levels and stability:

a. Abbreviated underwriting: The Offeror will present the standard product design requiring active employees to be subject to abbreviated underwriting, which may take the form of either modified guaranteed issue or short form.

b. Guaranteed issue: The Offeror will also describe the effect on premiums of presenting the standard product design as a guaranteed issue product.

3. By statute, spouses of employees are to be treated “as nearly as practicable” as active employees for underwriting purposes. To enable this under guaranteed issue and modified guaranteed issue, the Offeror can require spouses to demonstrate “actively-at-work” or equivalent status, or may require them to answer short form questions as assumed for pricing purposes. The Offeror will propose how to do this. You must describe the impact on premiums of all proposed underwriting scenarios.

4. Even if the underwriting for employees is not guaranteed issue, we still intend for the FLTCIP to cover as many people as possible while maintaining competitive premiums.

a.

The underwriting structure may need to support the issuance of both standard and non-standard coverages, at least for active workers/spouses and preferably for other groups as well. The Plan Design section contains more information on this aspect of the FLTCIP.

b.

Active employees and their spouses who do not satisfy abbreviated underwriting may be asked to furnish additional information to determine if (a) they are insurable, and if yes, (b) whether standard or a type of nonstandard insurance coverage can be offered. If they are not insurable, the Offeror may propose offering a non-insurance product.

c.

According to the Equal Employment Opportunity Commission (EEOC), approximately 1% of the active Federal workforce are employees with disabilities. These persons will apply for coverage in the same manner as persons without disabilities.

5. Premiums may vary based on age but not gender or eligibility class (i.e., active vs. retiree, etc.). However, with OPM’s approval, underwriting standards can differ for different eligibility classes.

6. You must maintain underwriting standards regardless of volume with no shortcuts.

7. A number of potential enrollees live or work outside of the United States. You must propose a strategy for processing the underwriting of their applications.

8. The contractor must provide underwriting services at or above the levels indicated in the attached Quality Assurance Surveillance Plan (Attachment 7). These service levels also apply to subcontracted operations.

(E) Reporting

1. The Contractor shall furnish reports and data that OPM determines to be necessary to assess the success of the FLTCIP. These reports shall be furnished on a timetable and in a format as determined acceptable by OPM. Report topics shall include, but are not limited to:

· claims and claim disputes;

· executive summary of operations;

· competitive status;

· industry news and trends;

· financial statement and cash flow including receipts and disbursements from Experience Fund;

· periodic actuarial valuations;

· customer satisfaction surveys;

· enrollment and claims data extracts; and

· reports necessary for performance-based profit evaluation.

2. The Contractor must report group-specific FLTCIP experience separately.

3. The Contractor will permit OPM and the Government Accountability Office (GAO) and/or other government agencies as determined appropriate by OPM to examine its records to the extent necessary for OPM and GAO to carry out their functions and responsibilities.

4. The Contractor must contact OPM by phone or email to report incidents/potential incidents it believes may adversely impact FLTCIP customer service/enrollee satisfaction within two hours of becoming aware of the incident/potential incident. The Contractor must provide OPM with a written preliminary incident report within 24 hours. Thereafter, the Contractor must monitor and track the incident, and provide OPM with updates, new information and a corrective plan of action at least weekly, until the cause of the incident is identified and resolved.

5. The Contractor will not use any FLTCIP data (including enrollees' addresses) for any reason other than administering the FLTCIP without OPM's explicit written approval.

(F) Administration and Systems

1. The Contractor must have systems in place by the Transfer Date to:

· assume all claims related activity, including care coordination for FLTCIP enrollees and qualified relatives, claims payment for FLTCIP enrollees then on claim, tracking of enrollees in waiting-period status, and benefit eligibility determinations;

· accept all Current Enrollees into the Contractor’s enrollment system;

· accept, underwrite and process applications received via mail, fax and online; and

· calculate blended rates for upgraded coverage.

2. The Contractor must host and operate a Section 508-compliant web site (or sites) specifically for the FLTCIP. The dedicated web site(s) must be ready to become operational by the Transfer Date, and must:

· provide educational material about long term care, long term care insurance, and the FLTCIP, including information about who is suitable for the product and who is not;

· provide the ability for individuals to model the cost of long term care in various geographic areas and model the various means of paying those costs (e.g., self pay, insurance, etc.);

· provide the ability for individuals to model product configurations and calculate applicable premiums;

· securely accept online applications for all underwriting types;

· securely accept emails containing personally identifiable information;

· provide information for agency benefits officers;

· securely make enrollment (account) information available to all enrollees and specific claims information available to those on claim; and

· provide all Program printed material in electronic format.

OPM reserves the right to review and approve all information to be posted to the Contractor’s FLTCIP website.

3. The Contractor must operate toll-free phone service specifically for the FLTCIP.

The phone system must:

· ensure domestic and international access;

· provide a toll-free TTY number;

· provide prompts in Spanish;

· provide translation support for Spanish and other languages as you determine their value to prospective and actual enrollees;

· ensure live operation at least 10 hours per day on weekdays, with an interactive voice response (IVR) system available when the call center is not open; and

· be capable of expanding days and hours during an open season.

4. The Contractor must agree to work with the current contractor to assume ownership of the current FLTCIP phone numbers, fax numbers, and website addresses wherever possible.

5. In order to limit the number of interfaces for the collection of premium deductions for voluntary benefit programs, OPM contracts for a voluntary benefits portal, currently known as BENEFEDS. BENEFEDS will collect FLTCIP enrollee premiums by payroll deduction, retirement plan deduction, automatic bank withdrawal, and direct billing (and other options that may be proposed by the Contractor and agreed to by OPM) and will regularly remit those payments to the Contractor.

The Contractor must be fully prepared by the Transfer Date to interface with BENEFEDS for the following core functions:

· Submit electronic enrollment files to BENEFEDS and accept transfers of electronic payment files from BENEFEDS in a format and timing prescribed by BENEFEDS and approved by OPM;

· Accept and account for regular transfers of premium from BENEFEDS; and

· Perform periodic reconciliations with BENEFEDS.

Other ancillary functions will be identified in a Requirements document provided by BENEFEDS after contract award.

The Contractor will pay BENEFEDS a monthly fee, as approved by OPM, for the services that BENEFEDS provides. The Contractor will pay the fee to BENEFEDS from the Experience Fund. The functions BENEFEDS performs on your behalf should be included in your premium rate development.

The Contractor is required to complete a thorough testing period with BENEFEDS to ensure that all systems interfaces are operational by the Transfer Date.

See Attachment 5 for more information about BENEFEDS.

6. The Contractor must maintain the security and confidentiality of all systems and files in accordance with Federal directives. The Contractor must ensure compliance with Federal requirements, including all HIPAA privacy and confidentiality rules, to protect the privacy of individually identifiable health information.

7. The Contractor must have a disaster recovery and business continuity plan that ensures continued operations in the event of a major business disruption due to natural and man-made disasters, including a pandemic. The Contractor must agree to provide relevant sections of its plan to OPM upon request and must report to OPM any material changes to the plan, such as a prime disaster recovery subcontract change or a hot site change. The plan must address flexibility for the following:

· Continuation of timely claims payments;

· Establishment of a crisis toll-free hotline;

· Ability to identify Current Enrollees;

· Ability to make benefit eligibility determinations;

· Recovery procedures for critical business functions (e.g., system, network, communication, work area recovery, interface with BENEFEDS);

· Secure backup site(s) (hot/cold). A “hot work site” is a designated location to be used in the event of a disaster that is fully prepared for continuation of work to which the employees can go. A “cold work site” is a designated location to use in the event of a disaster that is not fully prepared for continuation of work to which the employees can go; and

· Barriers to accessing long term care services.

8. The Contractor must agree to cooperate with OPM in continuity of government operation plans and exercises.

9. The Contractor must agree that, in the event of a disaster or other national emergency that inhibits the ability of affected enrollees to make timely premium payments, it will suspend prompt payment requirements for a reasonable period and will not cancel affected enrollees’ coverage without OPM’s prior approval.

10. The Contractor must agree that as it implements, acquires, or upgrades health information technology systems, it will utilize, where available, certified health information technology systems and products that meet interoperability standards recognized by the Secretary of Health and Human Services, as existing on the date of the implementation, acquisition, or upgrade of health information technology systems (“Interoperability Standards”). The Contractor must agree that such health information technology systems will have already been pilot tested in a variety of live settings and refined, if needed, before the Contractor considers them for implementation.

11. The Contractor must agree to implement systems and procedures acceptable to the Federal intelligence community to securely accept applications from, and maintain enrollments of, specified intelligence agency employees. These processes may be required to be handled on a manual basis outside the Contractor’s enrollment system. Selected Contractor staff may be required to receive and maintain security clearance. In addition, the Contractor may be required to set aside a secured space for certain equipment such as secure phone and secure fax, which is subject to periodic inspection by Federal intelligence entities.

12. The Contractor will conduct a fraud and abuse program that (1) assesses its vulnerability to fraud and abuse, and (2) detects and eliminates fraud and abuse by Contractor employees and subcontractors, by long term care providers, and by individual FLTCIP enrollees. The program must have provisions in place to avoid the payment of fraudulent costs and to detect fraud after costs have been incurred. Criteria for follow-up actions must be specified.

The Contractor will annually report to OPM the results of its fraud and abuse program, including:

· an analysis of the costs and benefits of the program;

· the number of cases opened;

· dollars identified as lost and recovered;

· actual and projected savings;

· cases referred to law enforcement and OPM’s Office of the Inspector General and those resolved administratively; and

· number of arrests and criminal convictions.

13. The Contractor will maintain policies, procedures and infrastructure designed to ensure compliance with applicable state and federal laws and regulations, as well as related standards found in the latest NAIC Long Term Care Insurance Model Act and Regulations.

14. The Contractor must perform at or above the service levels indicated in the attached Quality Assurance Surveillance Plan (Attachment 7). These service levels also apply to subcontracted operations.

(G) Customer Service

1. The Contractor must provide customer service at or above the levels indicated in the Quality Assurance Surveillance Plan (Attachment 7). These service levels also apply to subcontracted operations.

2. The Contractor must survey a statistically significant sampling of customers on a regular basis to measure satisfaction with services provided. Survey instruments and their frequency must be approved by OPM prior to use. These surveys shall include, but are not limited to:

· Claimant satisfaction with the claims approval/payment process and care coordination services;

· Enrollee/potential enrollee satisfaction with the customer service center;

· Attitudes on specific topics (e.g., web site functionality, particular marketing material, etc.)

The Contractor must develop an action plan to improve satisfaction if OPM determines satisfaction levels to be unacceptable.

3. The Contractor must have adequate controls and monitoring in place to ensure the quality of customer service activities (direct or subcontracted) is acceptable.

4. The Contractor must provide OPM with copies of all correspondence templates for review, including letters and emails, and with phone scripts and training/reference material used by customer service representatives. OPM reserves the right to require revisions prior to implementation.

5. The Contractor must agree to allow OPM to monitor customer service and to review samplings of actual correspondence, as we deem appropriate.

(H) Claims Administration

1. The Contractor must:

a. Develop and use a standard ADL assessment form to determine whether a claimant cannot perform the ADLs established for the FLTCIP, as well as a similar tool to determine whether a claimant is severely cognitively impaired.

b. Develop claims forms and explanation of benefits forms for review and approval by OPM.

c. Administer appropriate coordination of benefits and non-duplication provisions with FEHB, Medicare and other insurance pursuant to applicable law, including HIPAA.

d. Coordinate with enrollees’ health care practitioners to develop the medical data necessary to substantiate a claim for benefits.

e. Establish quality assurance guidelines and audit procedures for its subcontractors.

f. Establish a process for enrollees to appeal the Contractor’s decision to deny a claim or deny the enrollee’s eligibility for benefits.

g. Subcontract for a vendor to provide independent third-party reviews of claims decisions and decisions regarding eligibility for benefits. This subcontract shall be subject to OPM’s review and approval.

2. Care coordinators are an integral part of the FLTCIP. Enrollees and their non-enrolled qualified relatives utilize the services of care coordinators in a variety of ways. The Contractor must establish and maintain a care coordination infrastructure to perform the following claims related services:

a. Provide general information about and referrals to long term care services.

b. Assess eligibility for benefits.

c. Develop the overall plan of care.

d.…