[Federal Register Volume 68, Number 23 (Tuesday, February 4, 2003)]
[Rules and Regulations]
[Pages 5530-5538]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-2463]


-----------------------------------------------------------------------

OFFICE OF PERSONNEL MANAGEMENT

5 CFR Part 875

RIN 3206-AJ71


Federal Long Term Care Insurance Regulation

AGENCY: Office of Personnel Management.

[[Page 5531]]


ACTION: Interim rule with request for comments.

-----------------------------------------------------------------------

SUMMARY: In compliance with the Long-Term Care Security Act, the Office 
of Personnel Management (OPM) is issuing interim regulations that set 
forth rules for the administration of the Federal Long Term Care 
Insurance Program (FLTCIP).

DATES: Effective Date: February 4, 2003.
    Comment Date: Comments due on or before April 7, 2003.

ADDRESSES: Send or deliver written comments to Frank D. Titus, 
Assistant Director for Long Term Care, Office of Personnel Management, 
Room 2H24, 1900 E Street NW., Washington DC 20415, or by fax to (202) 
606-2023. You may send comments electronically to [email protected], using 
the subject line ``Comments on Proposed Regulations.''

FOR FURTHER INFORMATION CONTACT: Terry Schleicher, (202) 606-0417, or 
[email protected].

SUPPLEMENTARY INFORMATION: On September 19, 2000, the Long-Term Care 
Security Act (Pub. L. 106-265) became law. The Act directs OPM to 
prescribe regulations necessary to carry out the law.
    In new part 875, subpart A provides definitions, methods for 
contract and claims dispute resolution, and the authority for OPM to 
order correction of errors. It also sets out agency and OPM 
responsibilities under this Program.
    The Act provides preemption of State insurance laws that relate to 
the nature, provision, or extent of coverage or benefits under FLTCIP. 
The regulations specify OPM's authority to act as the regulator for 
FLTCIP in accordance with the Act and the consumer protection 
provisions of the Health Insurance Portability and Accountability Act 
of 1996.
    OPM has determined that the enrollee's proof of insurance will 
consist of a benefit booklet prepared by OPM and the Carrier, together 
with the schedule of benefits. The enrollee will also receive a copy of 
the approved application for coverage. The booklet will provide general 
FLTCIP provisions, definitions, exclusions, and limitations. The 
schedule of benefits will specify the coverage purchased (e.g., waiting 
period, daily benefit amount, benefit period, type of inflation 
protection, and either a comprehensive package or a facilities only 
package). The approved application will show the specific information 
that provided the basis for issuing the coverage. This will help to 
reduce Program costs by eliminating the expense of preparing a 
customized certificate of insurance for each enrollee.
    Subpart B specifies eligibility requirements for, and exclusions 
from, participation in the FLTCIP for Federal civilian employees, 
Postal employees, members of the uniformed services, civilian 
annuitants, retired members of the uniformed services, and their 
qualified relatives.
    The FLTCIP law defines an eligible Federal or Postal employee as 
someone also eligible for Federal Employees Health Benefits (FEHB) 
participation. Therefore, Federal civilian and Postal eligibility for 
and exclusions from coverage are tied to FEHB regulations found in part 
890 of this chapter. There are 2 exceptions, however. The FLTCIP law 
specifically excludes all District of Columbia employees from 
participation, even though some are eligible for FEHB coverage. The 
regulations make this exclusion clear. Also, Tennessee Valley Authority 
employees are eligible for FLTCIP participation, even though by law 
they may not be eligible for FEHB.
    Civilian annuitants eligible to apply for coverage under the FLTCIP 
law include those who have retired on an immediate annuity, deferred 
annuitants when they begin to receive an annuity, and survivor 
annuitants.
    The regulations specify that if an employee has separated from 
service under the Federal Employees Retirement System (FERS) Minimum 
Retirement Age (MRA) + 10 provision (5 U.S.C. 8412(g)), but has not 
begun drawing an annuity, he or she can apply for coverage under the 
FLTCIP. He or she will be considered an annuitant for underwriting 
purposes.
    A retired member of the uniformed services is eligible to apply for 
coverage if he or she is entitled to retired or retainer pay, even if 
that member is receiving disability retirement pay. However, the FLTCIP 
law specifies that a former member of the uniformed services retired 
under chapter 1223 of title 10, United States Code, (a ``gray 
reservist'') is not eligible to apply for coverage until he or she 
starts receiving retirement pay at age 60.
    If an individual applies as a qualified relative, the regulations 
specify that the workforce member (Federal civilian or Postal employee, 
Federal annuitant, member of the uniformed services, or retired member 
of the uniformed services) on whom the applicant bases the qualified 
relative status must be alive at the time the applicant applies for 
coverage. There is 1 exception to this rule. If the applicant is 
receiving an annuity as the spouse of a deceased workforce member, then 
he or she may apply for coverage.
    A new employee or member of the uniformed services and his or her 
spouse will have a 60-day period after becoming eligible to apply for 
coverage with the same underwriting requirements provided to that 
eligible group during the most recent open season.
    If a Federal civilian or Postal employee or member of the uniformed 
services held a position that did not convey eligibility for FLTCIP 
coverage, and then enters into a position that conveys eligibility, he 
or she also has a 60-day period to apply for coverage with the same 
underwriting requirements provided to that eligible group during the 
most recent open season, as well as his or her spouse, if any. For 
example, if an employee was not eligible because he or she was a 
temporary employee who had worked less than 1 year, and then took a 
permanent position, he or she would now be eligible to apply for FLTCIP 
coverage.
    If a Federal civilian or Postal employee or member of the uniformed 
services is returning from a break in service of 180 days or more, he 
or she may apply for coverage with the same underwriting requirements 
provided to that eligible group during the most recent open season, as 
may his or her spouse, if any.
    Other qualified relatives may apply for enrollment at any time with 
full underwriting.
    If a Federal civilian or Postal employee or member of the uniformed 
services returns from nonpay status during an open season, he or she 
can apply for coverage within 60 days from return to pay status, or by 
the end of the open season, whichever provides more time. For example, 
if the open season runs from July 1 through December 31, and an 
individual returns on October 15, he or she still gets until December 
31 to apply with the open season underwriting requirements for his or 
her eligibility group. If he or she returns on November 15, he or she 
will have until January 14 to apply. If he or she returns after the 
open season has ended, he or she can apply with the open season 
underwriting requirements of his or her eligibility group within 60 
days from his or her return. This section only applies when the 
applicant is in nonpay status for more than one-half of the scheduled 
open season, unless he or she went into nonpay status for a reason 
beyond his or her control. If the applicant has been actively at work 
for at least one-half of the open season, he or she has already had 
ample opportunity to get information and apply for coverage without the 
need for the special provisions of this section.

[[Page 5532]]

    The regulations prescribe that an applicant must state his or her 
employment/retirement status or relationship as a qualified relative 
when applying for coverage. If the applicant misrepresents his or her 
eligibility, he or she may lose his or her coverage or it may never 
become effective.
    The applicant must remain a member of an eligible group for 
coverage to take effect. If he or she becomes ineligible between the 
date that the application is submitted and the coverage effective date, 
he or she will no longer be eligible for coverage. This may happen when 
the applicant separates from service without retiring or when he or she 
loses qualified relative status, such as through divorce. There are 2 
exceptions to this rule, explained below.
    If the separation from service is involuntary, such as through a 
reduction in force, the application (and the application of any 
qualified relatives) will proceed. If the application is approved, the 
applicant will be enrolled for coverage. However, if the individual had 
not applied for coverage before separation, he or she is no longer 
eligible at separation. Qualified relatives also lose their eligibility 
at the same time.
    If an applicant's involuntary separation is due to misconduct or a 
dishonorable discharge, then he or she immediately becomes ineligible, 
regardless of whether the applicant had applied for coverage prior to 
separation. This is consistent with temporary continuation of coverage 
requirements under the FEHB Program, which do not allow for continued 
enrollment if the separation is due to misconduct.
    The second exception is when an applicant loses qualified relative 
status through the death of a workforce member. If the person through 
whom the applicant is qualified for coverage dies after the applicant 
has submitted an application but before the application is approved, he 
or she does not lose eligibility. If the application is approved, he or 
she will be enrolled for coverage.
    Eligibility status may change between the time of application for 
coverage and the coverage effective date. The applicant may have 
retired or separated from service under FERS MRA +10 provisions. Or, 
the applicant may have separated from service but still may be eligible 
because he or she is the qualified relative of an employee or 
annuitant. The applicant must reapply for coverage in these instances, 
submitting to the underwriting requirements specified for the eligible 
group of which he or she is now a part. For example, if an applicant 
separates from active service, but is also the spouse of an employee, 
he or she remains eligible for coverage. But, he or she will have to 
resubmit the application with the additional underwriting required of 
employees' spouses.
    Subpart C addresses payment issues under the FLTCIP. As specified 
in the FLTCIP law, there is no Government contribution toward premiums 
for long term care insurance. The enrollee pays the entire cost.
    If the enrollee underpays premiums, he or she must pay retroactive 
premiums to the Carrier. If he or she does not repay such premiums, the 
Carrier may cancel coverage. Conversely, if the enrollee has overpaid 
premiums, the Carrier will either reimburse the enrollee or apply the 
overpayment toward future premium payments due.
    The regulations specify that an enrollee will not receive a refund 
of premiums if he or she decreases coverage, cancels coverage, or dies. 
The enrollee must pay for the coverage agreed to for the period that it 
was in effect. The enrollee is not entitled to a refund just because 
coverage was not used. This is consistent with Federal Employees' Group 
Life Insurance (FEGLI) Program rules, where there is no provision for 
the refund of premiums when an enrollee decides to reduce or cancel 
coverage. There are some exceptions for FLTCIP. Premiums paid in 
advance for the period beyond the date of death or for any period 
following the effective date of cancellation will be refunded. Any 
premiums paid will be returned if the enrollee cancels coverage within 
the ``free look'' period specified in the benefit booklet.
    A requirement of the FLTCIP law is for the Carrier to account for 
FLTCIP funds separately from all other funds. This requirement, which 
is also found in FEHB and FEGLI regulations, ensures that Program funds 
can be traced and examined for accounting and audit purposes. The 
Carrier is also required to only use FLTCIP funds for purposes related 
specifically to the FLTCIP, such as administering the Program and 
paying claims.
    Subpart D describes coverage requirements. Before the first open 
season for enrollment, OPM will determine the ways in which applicants 
can apply for coverage. OPM may allow enrollment on paper and various 
electronic formats. However, OPM does not believe it necessary to 
specify in regulation the different formats of enrollment applications. 
OPM believes FLTCIP is best served by using the most current technology 
available at any time without going through a regulatory process to do 
so.
    It is not necessary for the workforce member to apply for coverage 
in order for his or her qualified relatives to be able to apply for 
coverage. For example, the parents of an employee may submit 
applications even if the employee decides not to apply. OPM wants each 
qualified relative to have maximum flexibility and unrestricted 
opportunity to apply for and select the coverage or cost that works 
best for him or her.
    OPM does not plan to have regularly scheduled open seasons. There 
may be open seasons with abbreviated underwriting requirements for some 
eligible groups when OPM determines it is in the best interest of the 
FLTCIP. OPM will specify open season beginning and ending dates, as 
well as the requirements for applicants during the open season, in 
Federal Register Notices.
    The FLTCIP Carrier will accept applications for coverage at any 
time. Any workforce member or qualified relative may apply, subject to 
full underwriting requirements. (OPM may or may not reduce underwriting 
requirements during an open season.)
    In order to prevent adverse selection and thus keep the FLTCIP 
viable, OPM must require full underwriting outside of an open season 
even for Federal civilian and Postal employees and members of the 
uniformed services. Adverse selection occurs when someone enrolls only 
when it is apparent that he or she will need access to benefits. By 
deferring enrollment until benefits are needed, such individuals likely 
would not pay their fair share of overall premiums.
    OPM will announce effective dates of coverage for open season 
enrollments in a Federal Register Notice. The effective date will be 
different for each open season. At any time outside of an open season, 
an applicant's coverage effective date is the first day of the month 
after the approval date of the application. For example, if an 
application is approved on November 1, then the coverage effective date 
is the first day of the next month, December 1.
    There are some situations in addition to open season in which 
Federal civilian and Postal employees and members of the uniformed 
services will be eligible for abbreviated underwriting, such as when 
they become newly eligible for FLTCIP (see Sec.  875.206). In such 
situations, the applicant must also be actively at work on the coverage 
effective date for coverage to actually go into effect. This 
requirement protects FLTCIP's stability. With abbreviated underwriting, 
only a few questions are

[[Page 5533]]

asked about the applicant's health status. If an employee is actively 
at work, he or she is less likely to go into claims status shortly. As 
discussed previously, it is important to protect the FLTCIP against 
adverse selection.
    If an applicant is not actively at work on the coverage effective 
date, he or she must inform the Carrier. He or she will get a revised 
coverage effective date, which will be the first day of the month after 
his or her return to active work. But, he or she must also be actively 
at work on the revised coverage effective date for coverage to take 
effect. If that is not the case, then the applicant must inform the 
Carrier, and the process of issuing a revised effective date will begin 
again.
    A newly married spouse of a Federal civilian or Postal employee or 
member of the uniformed services may apply for coverage within 60 days 
of marriage with the same underwriting requirements provided to this 
group during the most recent open season. However, if the employee or 
member of the uniformed services is not already enrolled, and wants to 
apply for coverage at the same time, then he or she must apply with 
full underwriting. This person already had the opportunity to apply 
with abbreviated underwriting and does not get another opportunity 
outside of an open season.
    The regulations specify that an enrollee may upgrade coverage at 
any time, with full underwriting. An enrollee may also upgrade coverage 
during an open season with the underwriting requirements and coverage 
rules specified for that open season.
    If an enrollee upgrades coverage by adding to the daily benefit 
amount other than through the automatic compound inflation option, he 
or she will then pay a ``blended'' premium, where the premium for that 
amount of increased daily benefit is based on his or her age and 
premium rates at the time of the purchase of the increased benefit 
(also called the attained age), while the premium for the base 
insurance purchased is still based on the enrollee's age and rates when 
the base insurance was purchased. For example, if an enrollee chose at 
age 55 a $125 daily benefit amount, he or she can decide at age 65 to 
increase that coverage to $150. He or she will pay age 65-based 
premiums for the additional $25 in coverage, but will continue to pay 
age 55-based premiums for the initial $125 coverage. For other types of 
coverage upgrades, premiums will be based on the enrollee's attained 
age and the prevailing rate at the time of purchase.
    An enrollee may also decrease or cancel coverage at any time. There 
will be no refund of premiums paid for the portion of insurance 
cancelled, unless he or she cancels during the ``free look'' period 
specified in the benefit booklet. Any increase or decrease is subject 
to the Program options available at the time of the change.
    The Carrier will make insurability decisions for all applicants, 
and these decisions are not appealable to OPM. This rule is identical 
to the FEGLI Program rule, which vests all insurability decisions with 
the Carrier. This requirement has worked very well for many years in 
the FEGLI Program, and OPM expects the same outcome for the FLTCIP.
    A standard feature of life and long term care insurance policies is 
an incontestability clause, which allows for erroneous enrollments to 
remain in effect under certain conditions. The FEGLI Program 
regulations contain such a clause, and OPM is providing similar 
protections under the FLTCIP.
    However, it will be important for each applicant to complete the 
enrollment application accurately and thoroughly. If the Carrier finds 
that the applicant omitted, misstated, or misrepresented information on 
the application, the Carrier may rescind coverage. This provision is 
meant to protect the integrity of the FLTCIP, in terms of both premium 
sufficiency and fairness to all applicants.
    An enrollee must authorize the release of his or her medical 
information within 3 weeks of the Carrier's request (4 weeks if he or 
she is outside the United States). It is in an enrollee's best interest 
to get the authorization to the Carrier as quickly as possible. Without 
access to medical records, the Carrier cannot determine whether an 
enrollee is eligible for benefits. If the enrollee does not provide the 
authorization within this time period, the Carrier has the right to 
deny claims for benefits or, as a last resort, void coverage.
    The FLTCIP law provides for portability of coverage. Federal 
civilian or Postal employees and members of the uniformed services and 
their qualified relatives may maintain coverage if the employee or 
member of the uniformed services transfers, retires, or separates from 
service, so long as the Carrier continues to receive the premiums. The 
premiums do not change because of these events. Once the employee or 
member of the uniformed services leaves active service, however, he or 
she is no longer eligible for any abbreviated underwriting provided 
during an open season or other qualifying event. The portability 
feature of the FLTCIP also extends to other individuals who separate 
under the FERS MRA+10 provision. Enrolled qualified relatives may also 
keep FLTCIP coverage when they lose qualified relative status, such as 
upon divorce.
    Coverage will terminate when the enrollee exhausts the benefits 
available, does not timely pay the required premiums, or dies. If an 
enrollee does not pay a premium on time, he or she will have a grace 
period of 30 days in which he or she can bring payments up to date 
before the Carrier may terminate coverage.
    If an enrollee's coverage ends because he or she did not pay the 
required premium, the Carrier will reinstate coverage if the Carrier 
receives proof within 6 months of the date coverage ended that the 
enrollee suffered a cognitive impairment such as Alzheimer's disease or 
loss of functional capacity before the premium payment grace period 
ended. In such an instance, the enrollee does not need to submit to any 
further underwriting to restore the earlier coverage.
    The Carrier may reinstate an enrollee's coverage for other reasons 
within 12 months from the date coverage terminated. This provision 
applies when an enrollee voluntarily cancels coverage or does not pay 
the required premium. However, the enrollee must submit to full 
underwriting and the Carrier will determine whether he or she is still 
insurable. Coverage will be reinstated retroactively to the termination 
date and he or she must pay back premiums for that period. The 
enrollee's premium will be the same as it was prior to termination.
    Lastly, FLTCIP benefits will be coordinated, according to National 
Association of Insurance Commissioners (NAIC) guidelines, with other 
government programs, group medical benefits, and other employer-
sponsored long term care insurance coverage so that benefit payments 
are not duplicated. Coordination of benefits is a standard feature of 
health and long term care insurance policies, and helps to keep costs 
down by ensuring that payments do not exceed 100 percent of charges.

E.O. 12866, Regulatory Review

    This rule has been reviewed by the Office of Management and Budget 
in accordance with Executive Order 12866.

Regulatory Flexibility Act

    I certify that this regulation will not have a significant economic 
impact on a substantial number of small entities because it affects 
only Federal employees, annuitants, members of the uniformed services, 
retired members of

[[Page 5534]]

the uniformed services, their qualified relatives, and the FLTCIP 
Carrier(s).

List of Subjects in 5 CFR Part 875

    Administrative practices and procedures, Government contracts, 
Government employees, Employee benefit plans, Health insurance, 
Military personnel, Organization and functions, Retirement.

Office of Personnel Management.
Kay Coles James,
Director.

    For the reasons stated in the preamble, the Office of Personnel 
Management amends title 5, Code of Federal Regulations, by adding part 
875 as follows:

PART 875--FEDERAL LONG TERM CARE INSURANCE PROGRAM

Subpart A--Administration and General Provisions
Sec.
875.101 Definitions.
875.102 Where do I send benefit claims?
875.103 Do I need to authorize release of my medical records when I 
file a claim?
875.104 What are the steps required to resolve a dispute involving 
benefit eligibility or payment of a claim?
875.105 May OPM correct errors?
875.106 What responsibilities do agencies have under this Program?
875.107 What are OPM's responsibilities as regulator under this 
Program?
875.108 If the Carrier approves my application, will I get a 
certificate of insurance?
875.109 Is there a delegation of authority for resolving contract 
disputes between OPM and the Carrier?
Subpart B--Eligibility
Sec.
875.201 Am I eligible as a Federal civilian or Postal employee?
875.202 Am I eligible as a Federal annuitant?
875.203 Am I eligible if I separated under the FERS MRA+10 
provision?
875.204 Am I eligible as a member of the uniformed services?
875.205 Am I eligible as a retired member of the uniformed services?
875.206 As a new Federal civilian or Postal employee or member of 
the uniformed services, when may I apply?
875.207 What happens if I am in nonpay status during an open season?
875.208 May I apply as a qualified relative if the person on whom I 
am basing my eligibility status has died?
875.209 How do I demonstrate that I am eligible to apply for 
coverage?
875.210 What happens if I become ineligible after I submit an 
application?
875.211 What happens if my eligibility status changes after I submit 
an application?
875.212 Is there a minimum application age?
Subpart C--Cost
Sec.
875.301 Is there a Government contribution toward premiums?
875.302 What are the options for making premium payments?
875.303 How are premium payment errors corrected?
875.304 How does the Carrier account for FLTCIP funds?
Subpart D--Coverage
Sec.
875.401 How do I apply for coverage?
875.402 When will open seasons be held?
875.403 May I apply for coverage outside of an open season?
875.404 What is the effective date of coverage?
875.405 If I marry, may my new spouse apply for coverage?
875.406 May I change my coverage?
875.407 Who makes insurability decisions?
875.408 What is the significance of incontestability?
875.409 Must I provide an authorization to release medical 
information?
875.410 May I continue my coverage when I leave Federal or military 
service?
875.411 May I continue my coverage when I am no longer a qualified 
relative?
875.412 When will my coverage terminate?
875.413 Is it possible to have coverage reinstated?
875.414 Will benefits be coordinated with other coverage?

    Authority: 5 U.S.C. 9008.

Subpart A--Administration and General Provisions


Sec.  875.101  Definitions.

    This part is written as if the reader were an applicant or 
enrollee. Accordingly, the terms ``you,'' ``your,'' etc., refer, as 
appropriate, to the applicant or enrollee.
    In this part, the terms annuitant, employee, member of the 
uniformed services, retired member of the uniformed services, and 
qualified relative have the meanings set forth in section 9001 of title 
5, United States Code, and supplement the following definitions:
    Abbreviated underwriting is a type of underwriting that asks fewer 
questions about your health status than with full underwriting to 
enable the Carrier to determine whether your application for coverage 
will be approved. The Carrier may also require review of your medical 
records, a phone interview, or an in-home interview.
    Actively at work means:
    (1) For a Federal civilian or Postal employee, that you meet all of 
the following conditions:
    (i) You are reporting for work at your usual place of employment or 
other location to which Government business requires you to travel;
    (ii) You are able to perform all the usual and customary duties of 
your employment on your regular work-schedule; and
    (iii) You are not absent from work due to sickness, injury, annual 
leave, sick leave or any other leave. (You are not considered to be on 
leave on your alternate work schedule's scheduled day off.)
    (2) For a member of the uniformed services, that you are on active 
duty and are physically able to perform the duties of your position.
    Carrier means a qualified carrier as defined in section 9001 of 
title 5, United States Code, with which OPM has contracted to provide 
long term care insurance coverage under this section. A Carrier may 
designate 1 or more administrators to perform some of its obligations.
    Eligible individual means an annuitant, Federal civilian or Postal 
employee, member of the uniformed services, retired member of the 
uniformed services or qualified relative, as defined in section 9001 of 
title 5, United States Code.
    Enrollee means an eligible individual whose application for 
coverage the Carrier has approved and whose coverage is in effect.
    FLTCIP means the Federal Long Term Care Insurance Program.
    Free look means that within 30 days after you receive the Benefit 
Booklet, you may cancel your coverage if you are not satisfied with it 
and receive a refund of any premium you paid. It will be as if the 
coverage was never issued.
    Full underwriting is the more comprehensive type of underwriting 
under the FLTCIP, which requires that you answer many questions about 
your health status to enable the Carrier to determine whether your 
application for coverage will be approved. The Carrier may also require 
review of your medical records, a phone interview, or an in-home 
interview.
    Stepparent means any person, other than your mother or father, who 
is currently married to one of your parents, or, if one of your parents 
is dead, a person who was married to that parent at the time of that 
parent's death.
    Underwriting requirements means the information about your current 
health status and history and other information that you must provide 
to the Carrier with your application for coverage to enable the Carrier 
to determine your insurability.
    Workforce member means a Federal civilian or Postal employee, 
member of the uniformed services, Federal annuitant, or a retired 
member of the uniformed services, as defined in

[[Page 5535]]

section 9001 of title 5, United States Code.


Sec.  875.102  Where do I send benefit claims?

    You must submit your benefit claims to the FLTCIP Carrier or its 
designee.


Sec.  875.103  Do I need to authorize release of my medical records 
when I file a claim?

    Yes, if you file a claim for benefits, the Carrier needs to have a 
valid authorization from you to release your medical records.


Sec.  875.104  What are the steps required to resolve a dispute 
involving benefit eligibility or payment of a claim?

    (a) If you dispute the Carrier's denial of your eligibility for 
benefits or your claim for payment of benefits, you must first send a 
written request for reconsideration to the Carrier no later than 60 
days from the date of its decision.
    (b) The Carrier must provide you with written notice of its review 
decision no later than 60 days after the date it receives your 
reconsideration request.
    (c) If the Carrier upholds its denial (or does not respond within 
60 days), you have the right to appeal its reconsideration decision. 
You must make this appeal in writing within 60 days from the date of 
the Carrier's notice upholding its decision. You will be notified of 
the decision on your appeal in writing no later than 60 days from 
receipt of your appeal request.
    (d) If a denial of your eligibility for benefits or a denial of 
your claim is upheld upon appeal due to the evaluation of your medical 
condition/functional capacity, the Carrier will inform you that you may 
request that an independent third party, mutually agreed to by OPM and 
the Carrier, review the decision. You must make this request in writing 
within 60 days from the date of the notice informing you of the appeal 
decision. The independent third party must notify you in writing of its 
decision no later than 60 days from the Carrier's or its designee's 
receipt of your request for appeal to the third party. This is the 
final administrative remedy available to you. The decision of the 
independent third party is final and binding on the Carrier.
    (e) You may seek judicial review of the final administrative denial 
of a claim. Such action may not be brought prior to exhaustion of the 
administrative process provided in this section. To pursue such 
judicial review, you must bring legal action against the Carrier in an 
appropriate United States district court within 2 years from the date 
of the final decision. You may not sue OPM, the independent reviewer, 
or any other entity. If you prevail in court, your recovery is limited 
to the amount of benefits payable under your benefit booklet and 
schedule of benefits.


Sec.  875.105  May OPM correct errors?

    OPM may order correction of administrative errors after reviewing 
evidence and finding that it would be against equity and good 
conscience not to do so.


Sec.  875.106  What responsibilities do agencies have under this 
Program?

    Federal agencies and uniformed services establishments are 
responsible for:
    (a) Providing access to information about the FLTCIP to eligible 
individuals;
    (b) Responding to questions from the Carrier, including questions 
on the employment status of an applicant or enrollee;
    (c) Providing reports as OPM requires;
    (d) Complying with Benefits Administration Letters and other OPM 
issuances/instructions; and
    (e) Deducting premiums as authorized by a workforce member and as 
requested by the Carrier, when possible.


Sec.  875.107  What are OPM's responsibilities as regulator under this 
Program?

    Consistent with the authority and discretion given to OPM by the 
FLTCIP law, OPM's responsibilities include those functions typically 
associated with, and preemptive of, State insurance regulatory 
authorities such as:
    (a) Reviewing and approving the content and format of materials 
associated with the FLTCIP pursuant to section 9008(d) of title 5, 
United States Code;
    (b) Reviewing and approving rates, forms, and marketing materials; 
and
    (c) Determining the qualifications of enrollment personnel and the 
Program administrator(s).


Sec.  875.108  If the Carrier approves my application, will I get a 
certificate of insurance?

    If the Carrier approves your application for coverage, OPM and/or 
the Carrier will make available to you a benefit booklet and schedule 
of benefits with complete coverage information, which will serve as 
your proof of insurance. You will also get a copy of your approved 
application for coverage.


Sec.  875.109  Is there a delegation of authority for resolving 
contract disputes between OPM and the Carrier?

    For the purpose of making findings of fact and to the extent that 
conclusions of law may be required under any proceeding conducted in 
accordance with the provisions of the disputes clause included in the 
FLTCIP master contract, OPM delegates this function to the Armed 
Services Board of Contract Appeals.

Subpart B--Eligibility


Sec.  875.201  Am I eligible as a Federal civilian or Postal employee?

    (a) If you are a Federal civilian or Postal employee whose current 
position conveys eligibility for Federal Employees Health Benefits 
under part 890 of this chapter, you are also eligible to apply for 
coverage, with the following exceptions:
    (1) If you are a District of Columbia employee or retiree, you are 
not eligible to apply for coverage, regardless of whether you are 
eligible for Federal Employees Health Benefits coverage.
    (2) If you are a Tennessee Valley Authority employee or retiree, 
you are eligible to apply for coverage, even though you may not be 
eligible for Federal Employees Health Benefits coverage.
    (b) If you are a Federal civilian or Postal employee whose current 
position is excluded from Federal Employees Health Benefits eligibility 
under Sec.  890.102 of this chapter, you are excluded from applying for 
coverage unless paragraph (a)(2) of this section applies.
    (c) If you are an annuitant reemployed by the Federal Government, 
you may apply for coverage as an employee.


Sec.  875.202  Am I eligible as a Federal annuitant?

    If you are a Federal annuitant, including a survivor annuitant, a 
deferred annuitant, or a compensationer, you are eligible to apply for 
coverage. If you are a deferred annuitant, you may apply for coverage 
only after you begin receiving your annuity.


Sec.  875.203  Am I eligible if I separated under the FERS MRA+10 
provision?

    If you have separated from service under the FERS Minimum 
Retirement Age and 10 years of service (MRA+10) provision of 5 U.S.C. 
8412(g), and have postponed receiving an annuity under that provision, 
you are eligible to apply for coverage under this part. For 
underwriting purposes, you will be considered an annuitant.


Sec.  875.204  Am I eligible as a member of the uniformed services?

    (a) You are eligible to apply for coverage if you are on active 
duty or full-time National Guard duty for more than a 30-day period.

[[Page 5536]]

    (b) You are eligible to apply for coverage if you are a member of 
the Selected Reserve, which consists of:
    (1) Drilling Reservists and Guardsmembers assigned to Reserve 
Component Units;
    (2) Individual Mobilization Augmentees who are Reservists assigned 
to Reserve Component billets in Active Component units (you may be 
performing duty in a pay or non-pay status); and
    (3) Active Guard and Reserve members who are full-time Reserve 
members on full-time National Guard duty or active duty in support of 
the National Guard or Reserves.
    (c) You are not eligible to apply for coverage if you belong to the 
Individual Ready Reserve. The Individual Ready Reserves includes 
Reservists who are assigned to a Voluntary Training Unit in the Naval 
Reserve and Category E in the Air Force Reserve.


Sec.  875.205  Am I eligible as a retired member of the uniformed 
services?

    (a) You are eligible to apply for coverage if you are a retired 
member of the uniformed services entitled to retired or retainer pay 
(including disability retirement pay).
    (b) You are eligible to apply for coverage if you are a retired 
reservist who is currently receiving retirement pay.


Sec.  875.206  As a new Federal civilian or Postal employee or member 
of the uniformed services, when may I apply?

    (a) As a new, newly eligible, or returning Federal civilian or 
Postal employee or member of the uniformed services, you may apply as 
follows:
    (1) If you are a new Federal civilian or Postal employee or member 
of the uniformed services entering a position that conveys eligibility, 
you may apply for coverage within 60 days after becoming eligible.
    (2) If you are entering a position that conveys eligibility as a 
Federal civilian or Postal employee or member of the uniformed services 
from a position that did not convey eligibility, you may apply for 
coverage within 60 days after becoming eligible.
    (3) If you return to Federal civilian or Postal service or the 
uniformed services after a break in service of 180 days or more to a 
position that conveys eligibility, you may apply for coverage within 60 
days after becoming eligible.
    (b) Your spouse may also apply during that 60-day period after you 
become eligible.
    (c) The underwriting requirements that will be applicable will be 
those required of Federal civilian and Postal employees and members of 
the uniformed services and their spouses during the last open season 
for enrollment before the date of your application.
    (d) After the 60-day period ends, you may still apply for coverage, 
as may your spouse, but full underwriting requirements will apply.
    (e) If your employing office determines that you were unable, for a 
cause beyond your control, to submit an application during the initial 
60-day period, you may submit an application within 60 days after your 
employing office advises you of that determination. Similarly, your 
employing office may make this determination if your spouse is unable 
to submit an application during the same time period for a cause beyond 
his/her control. This employing office authority only applies within 6 
months after the beginning date of the initial eligibility period. The 
underwriting requirements will be as specified in paragraph (c) of this 
section.
    (f) Your other qualified relatives may apply for coverage at any 
time. They will be subject to full underwriting requirements.


Sec.  875.207  What happens if I am in nonpay status during an open 
season?

    (a) If you return to a pay status from nonpay status during the 
open season, you have 60 days from the date of your return, or until 
the end of the open season, whichever gives you more time, to apply for 
coverage pursuant to the open season underwriting requirements for 
Federal civilian or Postal employees and members of the uniformed 
services.
    (b) If you return to pay status from nonpay status after the open 
season, you have 60 days from the date of your return to apply for 
coverage pursuant to the underwriting requirements specified for 
Federal civilian or Postal employees and members of the uniformed 
services in the immediately preceding open season.
    (c) Paragraphs (a) and (b) of this section apply only when you have 
been in nonpay status for more than one-half of an open season, unless 
you went into nonpay status for a reason beyond your control.


Sec.  875.208  May I apply as a qualified relative if the person on 
whom I am basing my eligibility status has died?

    You may not apply as a qualified relative if the workforce member 
on whom you are basing your qualified relative status died prior to the 
time you apply for coverage, unless you are receiving a survivor 
annuity as the spouse of a deceased workforce member.


Sec.  875.209  How do I demonstrate that I am eligible to apply for 
coverage?

    (a) When you submit your application for coverage, you must make 
known your status as a member of an eligible group.
    (b) If the Carrier finds that you misrepresented your eligibility 
status, the Carrier has the right to void your coverage and return to 
you any premiums you paid, without interest. The incontestability 
provisions in Sec.  875.409 do not apply to this section.


Sec.  875.210  What happens if I become ineligible after I submit an 
application?

    (a) You must be eligible at the time of your application and at the 
time your coverage is scheduled to go into effect. Except as noted in 
paragraph (b) of this section, if you lose your status as part of an 
eligible group before your coverage goes into effect, you are no longer 
eligible for FLTCIP coverage. You are required to inform the Carrier 
that you are no longer eligible.
    (b) In two instances, you will continue to be eligible for coverage 
even if you lose your status as part of an eligible group after you 
submit an application for coverage, but before your coverage becomes 
effective. The two instances are:
    (1) When you are involuntarily separated from Federal civilian 
service (except for misconduct) or from the uniformed services (except 
for a dishonorable discharge). In either of these events, your 
qualified relatives will continue to be eligible.
    (2) When you are the qualified relative of a workforce member who 
dies.


Sec.  875.211  What happens if my eligibility status changes after I 
submit an application?

    (a) If you applied as a Federal civilian or Postal employee or 
member of the uniformed services, and separate from service under the 
MRA+10 provisions of 5 U.S.C. 8412(g), or retire after you submit an 
application for coverage, but before your coverage becomes effective, 
you must reapply as an annuitant and submit to full underwriting 
requirements.
    (b) If you applied as a Federal civilian or Postal employee or 
member of the uniformed services, and otherwise separate from service, 
but you are a qualified relative of another workforce member, you must 
reapply based on the additional underwriting requirements specified for 
that type of qualified relative.

[[Page 5537]]

Sec.  875.212  Is there a minimum application age?

    Yes, there is a minimum application age. You must be at least 18 
years old at the time you submit an application for coverage.

Subpart C--Cost


Sec.  875.301  Is there a Government contribution toward premiums?

    There is no Government premium contribution toward the cost of long 
term care insurance.


Sec.  875.302  What are the options for making premium payments?

    (a) Premium payments may be made by Federal payroll or annuity 
deduction, uniformed services retirement pay deduction, by pre-
authorized debit, or by direct billing.
    (b) You must continue to make premium payments when they are due 
for your coverage to stay in effect.


Sec.  875.303  How are premium payment errors corrected?

    (a) If the Carrier finds that you have underpaid the premium rate 
for your age and/or level of coverage, you must pay retroactive 
premiums to the Carrier for the amount due. If you fail to pay back 
premiums within the time provided by the Carrier to correct the error, 
the Carrier may terminate your coverage.
    (b) If the Carrier finds that you have overpaid premiums, the 
Carrier will either reimburse you or reduce a future premium payment(s) 
by the amount of the overpayment.
    (c) If you die while you have coverage, any premiums paid for the 
period beyond the date of your death will be refunded to your estate or 
to an alternate payee. If there is no estate, the Carrier will 
determine whether to pay the refund to an alternate payee. If you 
cancel your coverage, any premiums paid in advance for the period 
following the effective date of your cancellation will be refunded to 
you.
    (d) Any premiums you paid will be returned if you cancel coverage 
within the ``free look'' period specified in the benefit booklet.


Sec.  875.304  How does the Carrier account for FLTCIP funds?

    The Carrier must keep account of all funds received under this 
section separate from all other funds. The Carrier may use FLTCIP funds 
only for purposes specifically related to the FLTCIP.

Subpart D--Coverage


Sec.  875.401  How do I apply for coverage?

    (a) To apply for coverage, you must complete the application in a 
form appropriate for your eligibility status as prescribed by the 
Carrier and approved by OPM.
    (b) If you are the qualified relative of a workforce member, you 
may apply for coverage even if the workforce member does not apply for 
coverage.


Sec.  875.402  When will open seasons be held?

    (a) The first open season for enrollment under this section began 
July 1, 2002, as described in a Federal Register Notice (67 FR 43691, 
June 28, 2002), including the open season ending date(s) and which 
eligible individuals may apply based on abbreviated underwriting.
    (b) There are no regularly scheduled open seasons for long term 
care insurance. OPM will announce any subsequent open seasons via a 
Federal Register Notice. The Notice will include the requirements for 
applicants during the open season.


Sec.  875.403  May I apply for coverage outside of an open season?

    If you are eligible for coverage, you may submit an application at 
any time outside of an open season. You will be subject to full 
underwriting requirements.


Sec.  875.404  What is the effective date of coverage?

    (a) The effective dates of coverage under open season enrollments 
will be announced in a Federal Register Notice that announces open 
season dates.
    (b)(1) If you enroll at any time outside of an open season, your 
coverage effective date is the 1st day of the month after the date your 
application is approved.
    (2) If you are a Federal civilian or Postal employee or member of 
the uniformed services and you are applying for coverage under 
abbreviated underwriting, you also must be actively at work on your 
coverage effective date for your coverage to become effective. If your 
coverage effective date falls on a weekend or holiday, you must be 
actively at work on the last workday before that date for coverage to 
become effective. You must inform the Carrier if you are not actively 
at work on your coverage effective date. In that event, the Carrier 
will issue you a revised effective date, which will be the 1st day of 
the month after the date you return to being actively at work. You also 
must be actively at work on any revised effective date for coverage to 
become effective, or you will be issued another revised effective date 
in the same manner.


Sec.  875.405  If I marry, may my new spouse apply for coverage?

    (a)(1) If you are a Federal civilian or Postal employee or member 
of the uniformed services and you have married, your spouse is eligible 
to submit an application for coverage under this section within 60 days 
from the date of your marriage, and will be subject to the underwriting 
requirements in force for the spouses of civilian employees and members 
of the uniformed services during the most recent open season. You, 
however, are not eligible for abbreviated underwriting because of your 
marriage. You may apply for coverage along with your spouse, but full 
underwriting will be required for you.
    (2) After 60 days, your spouse may still apply for coverage but 
will be subject to full underwriting. Your new qualified relatives 
(such as parents-in-law) may apply for coverage with full underwriting 
at any time following the marriage.
    (b) The new spouse and other qualified relatives of an annuitant or 
retired member of the uniformed services may apply for coverage with 
full underwriting at any time following the marriage.


Sec.  875.406  May I change my coverage?

    (a) You may make the following changes to your coverage:
    (1) You may apply to increase your coverage at any time. Full 
underwriting is required, except when an open season allows abbreviated 
underwriting.
    (2) If you increase your coverage by adding to your daily benefit 
amount, the premiums for the additional coverage will be based on your 
age, prevailing premium rates, and coverage rules in effect at the time 
you purchase the additional coverage.
    (3) For other types of coverage increases, your entire premium will 
be based on your age, prevailing premium rates, and coverage rules in 
effect at the time you purchase the increased coverage. Any increase in 
coverage will take effect on the 1st day of the month following the 
date the Carrier approves your request for an increase.
    (b) You may decrease your coverage at any time, although any 
decrease will be subject to coverage rules at the time of the decrease. 
Decreased coverage takes effect on the 1st day of the month after the 
Carrier receives your request. You will not receive any refund of 
premiums paid for coverage you held before the decrease; however, your 
subsequent

[[Page 5538]]

premiums will be reduced based on your new, lower level of coverage. 
The Carrier will refund or credit any portion of premium paid in 
advance for the period following the date on which you decrease your 
coverage.
    (c) You may cancel your coverage at any time.
    (1) If you cancel during the free look period, your premiums will 
be refunded to you.
    (2) If you cancel your coverage at any time other than during the 
free look period, cancellation will take effect on your requested 
cancellation date or at the end of the period covered by your last 
premium payment, whichever occurs first. You will not receive any 
refund of premiums paid, other than any premiums paid in advance for 
the period following the effective date of your cancellation of 
coverage, and you will not have to pay any more premiums unless you 
owed retroactive premiums.


Sec.  875.407  Who makes insurability decisions?

    The Carrier determines the insurability of all applicants. The 
Carrier's decision may not be appealed to OPM.


Sec.  875.408  What is the significance of incontestability?

    (a) Incontestability means coverage issued based on an erroneous 
application may remain in effect. Such coverage will not remain in 
effect, and your claim may be denied, under any of the following 
conditions:
    (1) If your coverage has been in force for less than 6 months, the 
Carrier may void your coverage or deny a claim upon a showing that 
information on your signed application that was material to your 
approval for coverage is different than what is shown in your medical 
records.
    (2) If your coverage has been in force for at least 6 months but 
less than 2 years, the Carrier may void your coverage or deny a claim 
upon a showing that information on your signed application that was 
material to your approval for coverage is different than what is shown 
in your medical records, and pertains to the condition for which 
benefits are sought.
    (3) After your coverage has been in effect for 2 years, the Carrier 
may void your coverage only upon a showing that you knowingly and 
intentionally made a false or misleading statement or omitted 
information in your signed application for coverage regarding your 
health status.
    (b) Your coverage can be contested at any time when the Carrier 
finds that you were not an eligible individual at the time you applied 
and were approved for coverage.
    (c) If the Carrier voids coverage after it has paid benefits, it 
cannot recover the benefits already paid.
    (d) Incontestability does not apply when you have not paid your 
premiums on a timely basis.


Sec.  875.409  Must I provide an authorization to release medical 
information?

    You must provide the Carrier with an authorization to release 
medical information when requested. The Carrier may deny a claim for 
benefits or void your coverage if the Carrier does not receive an 
authorization to release medical information within 3 weeks after its 
request (4 weeks for those outside the United States).


Sec.  875.410  May I continue my coverage when I leave Federal or 
military service?

    If you are a Federal civilian or Postal employee or member of the 
uniformed services, your coverage will automatically continue when you 
leave active service, as long as the Carrier continues to receive the 
required premium when due. However, once you leave active service, you 
are no longer eligible for any abbreviated underwriting provided during 
any future open season.


Sec.  875.411  May I continue my coverage when I am no longer a 
qualified relative?

    If you are already enrolled as a qualified relative, you may 
continue your FLTCIP coverage if you subsequently lose qualified 
relative status (such as upon divorce), as long as the Carrier receives 
the required premium when due.


Sec.  875.412  When will my coverage terminate?

    Your coverage will terminate on the earliest of the following 
dates:
    (a) The date you specify to the Carrier that you wish your coverage 
to end;
    (b) The date of your death;
    (c) The end of the period covered by your last premium payment if 
you do not pay the required premiums when due, after a grace period of 
30 days; or
    (d) The date you have exhausted your maximum lifetime benefit. 
(However, in this event, care coordination services will continue.)


Sec.  875.413  Is it possible to have coverage reinstated?

    (a) Under certain circumstances, your coverage can be reinstated. 
The Carrier will reinstate your coverage if it receives proof 
satisfactory to it, within 6 months from the termination date, that you 
suffered from a cognitive impairment or loss of functional capacity, 
before the grace period ended, that caused you to miss making premium 
payments. In that event, you will not be required to submit to 
underwriting. Your coverage will be reinstated retroactively to the 
termination date but you must pay back premiums for that period. The 
premium will be the same as it was prior to termination.
    (b) If your coverage has terminated because you did not pay 
premiums or because you requested cancellation, the Carrier may 
reinstate your coverage within 12 months from the termination date at 
your request. You will be required to reapply based on full 
underwriting, and the Carrier will determine whether you are still 
insurable. If you are insurable, your coverage will be reinstated 
retroactively to the termination date and you must pay back premiums 
for that period. The premium will be the same as it was prior to 
termination.


Sec.  875.414  Will benefits be coordinated with other coverage?

    Yes, benefits will be coordinated with other plans, following the 
coordination of benefits (COB) guidelines set by the National 
Association of Insurance Commissioners. The total benefits from all 
plans that pay a long term care benefit to you should not exceed the 
actual costs you incur. The other plans that are considered for COB 
purposes include government programs, group medical benefits, and other 
employer-sponsored long term care insurance plans. Medicaid, individual 
insurance policies, and association group insurance policies are not 
taken into consideration under this provision.

[FR Doc. 03-2463 Filed 2-3-03; 8:45 am]
BILLING CODE 6325-50-P