When someone contacts us to inquire about purchasing long-term care insurance, one of the questions we ask is: ”What prompted you to look into long-term care insurance?” Over the past few years many of our clients have been answering that question like this:
“Well, my dad has a long-term care policy and it’s paying for his assisted living facility right now. I want a policy that will do the same for me.”
Or, “My mom has 24-hour home health aides right now. If it wasn’t for her long-term care policy, we’d have to put her in a nursing home.”
Millions of long-term care policies were bought in the 90′s. Many of those policyowners are now making claims. In fact, in just 2012, the leading long-term care insurers combined to pay over $6.6 BILLION in long-term care insurance claims to over 264,000 individual policyholders. (Source: AALTCi)
I shared that statistic with someone recently and he asked, “But how many claims do they deny?”
Recently, the federal government conducted an audit of long-term care insurance claims practices and released their findings in a 20-page report. The audit was conducted over a 22-month period in 2008 and 2009.
The federal audit reviewed both approved and denied claims from seven of the leading long-term care insurers. These seven insurance companies are currently paying over 70% of long-term care insurance claims. They audited EVERY denied claim for some of the insurers in the study.
Here are a few important points made in the report:
“…there is a low incidence of disagreement between the clinical audit team and the insurance company adjudicators, particularly when it comes to denied claims.”
“…There is a greater probability of approving rather than denying a questionable claim.”
“…Regarding denial decisions, we found that in all cases, there was no evidence to suggest that the individual met the tax-qualified criteria for benefit eligibility in their policy.”
“…This would suggest that companies are consistently applying their clinical contract language to their claims decisions.”
In other words, the claims are being paid! The reason some claims are not paid is because the policyholder does not meet the federal guidelines for “benefit eligibility” in the policy.
Click the image below to read the full report.
[...] http://ltcfacts.org/2013/01/25/federal-audit-reveals-long-term-care-insurance-claims-practices/ [...]
Before concluding whether information is credible, it is a good idea to look closely at the source and consider whether they have anything to gain or lose by taking a position one way or the other. Please look closely at the third page of this “audit.” It was NOT written by the federal government, as stated above. It was written by LifePlans, Inc. The report itself also says that “[t]he opinions and views expressed in this report are those of the authors. They do not necessarily reflect the views of the Department of Health and Human Services, the contractor or any other funding organization.”
The actual authors of the report are personnel from LifePlans, Inc., a for-profit company whose principal income comes from contracting with long-term care insurance companies to perform services. In other words, the companies that LifePlans was “auditing” — are its own customers, or companies that it hopes will become customers. LifePlans can’t be blamed for taking the position that “the customer is always right,” but neither can we be blamed for taking their conclusions with a grain of salt.
LifePlans’ personnel wrote another report in 2006, recommending that claim examiners not look to treating physicians for information to support benefit eligibility determinations for long term care policyholders, claiming that treating physicians are not reliable because they want to help their patients. That report was admitted into evidence in federal court in Billings Montana in the case of Arlene Hull v. Ability Insurance Company, a case in which company personnel testified they had implemented LifePlans’ recommendations. The jury found the company liable for breach of contract and violation of the Montana Unfair Trade Practices.
Long-term care can be a good product for many people, and under the right circumstances it provides a valuable safety net. But it’s still a good idea to watch out for propoganda and slick operators.
Mike,
Thank you for your reply.
Do you think the Dept. of Health & Human Services was unaware of LifePlans role in the LTC industry when they contracted them for this study?