For most federal employees, developing a retirement plan for the time after they leave their positions takes years to accomplish. As with any retirement planning, these employees will be closely following their Thrift Savings Plan (TSP) contributions, estimating their federal pension benefits, selecting a health insurance plan from the various options offered under the Federal Employees Health Benefits (FEHB) Program, and attempting to create an outcome that provides them with predictable income in their retirement.

Long-term care affects not only those who are older or seriously ill; millions of people experience it in their lives at many different ages and stages, often without any notice, and sometimes well before they reach what would typically be considered “old age.” The events that need long-term care for federal employees (injury, chronic illness, or cognitive decline) occur suddenly, making life insurance all the more vital.

Let’s break down why it matters, what’s happening, and what options federal employees still have. This will help you understand the landscape, make sense of the risks, and start thinking strategically about how to protect your retirement and financial stability.

This is where the confusion begins. Several people assume that having good health insurance means they are safe. However, long-term care operates in a completely different category. Health insurance covers medical treatment. This covers daily living support and everything people do not even consider until they or someone close to them needs it suddenly. 

Long-term care expenses arise from not being able to carry on with daily activities, not from a hospital event. A hospital admission is not necessary to incur an expense for long-term care. Medicare only covers services provided for short-term rehabilitation or those services that are medically necessary. Costs for custodial care are entirely the responsibility of individuals or their families.

Federal government employees often misinterpret their benefits as providing some sort of coverage for long-term care costs. In actuality, this is incorrect. With rising long-term care costs at a greater rate than general inflation, employees of the federal government need to understand what services are available under their benefits, and more importantly, what services are not available under them. 

The Federal Long Term Care Insurance Program (FLTCIP) has undergone significant changes over the past two years, which have had a profound impact on long-term care.

Specifically, as of January 1, 2024, many federal employees have experienced substantial increases in their insurance premiums (in some cases averaging around 86% for certain enrollee groups), raising concerns about retirement planning. Furthermore, the FLTCIP program currently suspends enrollment, meaning it is not accepting new applications. In addition, they bar existing enrollees from applying to increase their coverage, effectively freezing expansions to coverage during the suspension period.

The decision to implement this enrollment suspension was not made lightly. The Office of Personnel Management (OPM) cited market-related factors, ongoing volatility in long‑term care costs, and a diminished insurance market, which made it difficult to continue pricing FLTCIP with certainty. The suspension (initially effective December  2022) was extended further in November  2024, for another 24 months (i.e., through at least December 2026).

Importantly, the suspension does not affect the enrollment status, benefit eligibility, or claim payments for individuals already insured under FLTCIP — coverage and claims processing continue as before for existing enrollees, provided they keep paying premiums. 

Longer life spans, an increase in the volume of claims being processed, and the economic environment surrounding the insurance industry all led to a situation where OPM could no longer have certainty about premiums. The financial model supporting the existing FLTCIP program had become increasingly stressed, leading OPM to suspend new applications and coverage increases while they reassess the program from the ground up. The authorities began the initial suspension on December 19, 2022, and extended it on November 13, 2024, for another 24 months, lasting at least through December 19, 2026.

Throughout this suspension period, all existing FLTCIP enrollees can maintain their current coverage, file claims, and continue paying premiums. However, it is possible that some enrollees may see increases in their existing premium amounts.

Federal employees planning to rely on FLTCIP for future long-term care needs should explore alternative options immediately instead of waiting for the program to finalize its changes. While FLTCIP may return with new pricing and eligibility rules, there is no guarantee that it will be as supportive or as straightforward to use as before the suspension.

Also Read: Proven TSP Moves to Protect Your Retirement in Volatility

With the program being suspended, federal employees are now forced to look for alternatives to FLTCIP. While this can feel inconvenient, it also opens the door to options that may fit specific needs better. 

Private Policies

The ability to purchase stand-alone long-term care insurance through private insurance companies definitely still exists, as private insurance companies become more selective in their underwriting practices. The costs associated with these plans may be higher than the federally funded government long-term care plans (FLTCIPs). However, many private policies now provide flexible benefit periods, as well as options for inflation protection, and expanded coverage for home-based care services. For federal employees in their 40s or early 50s, private long-term care insurance may be a better option since it may be easier to qualify for and more reliable than relying on the return of the FLTCIP program.

Hybrid Life Insurance with LTC Benefits

Hybrid policies like life insurance or annuities with built-in LTC riders are becoming increasingly popular. They allow people to access part of the death benefit if long-term care is urgent. If the care is never used, the remainder stays in the policy for beneficiaries. These products are often easier to understand and may appeal to those who dislike “use it or lose it” policies. 

Self-Funding Through Purposeful Planning 

Structured long-term care financial plans are vital for people who don’t want insurance. To prepare for upcoming long-term care expenses, a financial advisor for federal employees can create plans for how individuals want to allocate money toward those expenses in the future.

This involves creating a financial plan that outlines which accounts may provide tax-favored ways to invest in long-term care. Individuals also need to honestly assess how much they expect to receive during retirement and how much they may need to pay in long-term care costs. For those with high TSP balances, pensions, or other investments, they can achieve self-funding for long-term care if they are prepared to work hard and make smart decisions about their finances.

Medicaid as a Last Resort

Medicaid is generally viewed as the back-up plan for some retirees that will provide coverage for long-term care. To be eligible for Medicaid, you must have very limited assets and earnings and must meet all of the income criteria. Although Medicaid serves as a necessary resource for those with limited financial resources, individuals who depend solely on Medicaid will face restrictions in terms of the options available regarding their health care and the quality of care they receive. The majority of retirees who are federal workers have spent a great deal of time accumulating retirement savings and do not want to rely completely on Medicaid to cover their long-term care needs unless they have exhausted all other alternatives.

It is natural to avoid planning for long-term care. It’s uncomfortable to think about aging, illness, or losing physical independence. However, delaying this decision can be even more expensive. With rising costs, health changes, or enrollment windows narrowing, opportunities disappear quickly. For employees who wait too long, the freeze on FLTCIP is a perfect example of how quickly access to coverage can vanish. 

Care cost inflation creates another layer of risk. What feels manageable today may be out of reach later. This is the reason many advisors emphasize early retirement planning for federal employees.

To help simplify the process, here is a simple framework federal workers can follow:

1. Review your current situation

Understand what benefits you already have.If you are enrolled in FLTCIP, revisit your plan documents and make sure the coverage still aligns with your goals. 

2. Estimate care costs realistically.

Examine the cost of care in your area. Consider different scenarios (home, nursing home, etc.) and then project those costs forward, adjusting appropriately for reasonable inflation expectations.

3. Explore Private Insurance Options

Look at multiple carriers that offer insurance for long-term care financial planning. Compare and contrast their underwriting criteria, premium stability, elimination periods, and benefits.

4. Create a Savings Reserve For Long-Term Care

Contributing a small amount for a long period of time will build a financial cushion for you if your health deteriorates unexpectedly. Saving money for your long-term care will decrease the reliance on long-term care insurance. 

5. Consult with a Retirement Financial Advisor

Long-term care planning should be a personal decision. A federal retirement financial advisor familiar with the government benefit system can assist you in constructing a long-term care plan that meets your specific retirement goals.

6. Review Your Plan Periodically

As you continue to live your life, your health situation and your family circumstances will change; Therefore, you need to review your long-term care plan regularly to take into account any significant life-changing events. realistic care costs

Also Read: Paycheck Paused: Your Guide to Shutdown Money Relief

The landscape of federal employee health benefits in retirement is shifting rapidly, and the recent changes in insurance make it evident that the old approach no longer works. With the FLTCIP enrollment freeze, rising costs, and uncertainty about future program structure, federal employees need to take a proactive approach. 

This is not about assuming the worst. It is about protecting the retirement you have spent a lifetime building. Whether through private insurance, hybrid solutions, or disciplined self-funding, planning early creates stability and peace of mind. Long-term care may be one of the hardest parts of retirement to think about, but addressing it early gives you control instead of leaving your future to chance.