Long-Term Care Facts Column: article originally published by the Redlands Daily Facts May 9, 2013:

In my last column, I addressed recent articles published on a several well-known news websites have been riddled with half-truths and misleading information.  In an effort to educate the public, here are a few more corrections to the half-truths that have cropped up recently:

LTC policyholders have confronted surprise rate hikes on the order of 45% to 85%.

Some long-term care policies have guaranteed level premiums for life.  But most long-term care policies are “guaranteed renewable” which means that the insurer has a limited right to request a premium increase from each state’s insurance commissioner.  In most states the premium increase can only be approved if the insurer has incurred significantly higher claims than the insurance commissioner had originally approved for that policy.  In most states, premium increases must go towards paying claims only—not profits.  And the premium increases must be shared by all the owners of that type of policy.

Most long-term care policyholders who have had premium increases have had only 1 or 2 premium increases over a 10 to 20 year span. And most premium increases have been closer to 20%, not “45% to 85%”. I’m sure most of us wish our medical insurance had only two increases over the past 10 to 20 years.  In 2004, most states adopted “Rate Stabilization Regulations” for long-term care insurance. Most long-term care policyholders who have purchased their policies after those regulations went into effect have not had any premium increases.

Imagine buying a Lexus for $5,000 down plus $500 a month under a contract that allows the dealer to raise the monthly payment if he wants to. Six months in, it goes to $800, and you have a free choice between paying up or handing in the car and losing your down payment. That would be a ridiculous contract to sign. LTC buyers sign contracts like that.

This Lexus example could only be an accurate analogy it included all of the following requirements for the monthly payment increase:

  1. The state’s “Automobile Commissioner” regulated how much profit the Lexus dealer could make on each car,

  2. The state’s “Automobile Commissioner” had to approve any increase in the monthly payment,

  3. The increased monthly payment approved by the Commissioner had to be shared by all Lexus owners who had purchased cars from that dealer,

  4. The state’s “Automobile Commissioner” would only approve increased monthly payments after the Lexus dealer incurred higher losses and had much lower profits than the “Automobile Commissioner” had originally approved for the Lexus dealer,

  5. The “Automobile Commissioner” required the Lexus Dealer to give you the option to keep your payment at $500 but switch to a different Lexus one grade lower, and, lastly,

  6. The monthly payment increase was required in order to keep all the Lexus owners in their cars, driving safely, and the Lexus dealer in business and able to maintain all the cars and guarantee all the warranties.

Obviously, this is a silly analogy, but these points prove the tight regulations surrounding long-term care insurance.

To collect on an LTC policy, your family may have to put up a fight.

The U.S. Senate Committee on Aging commissioned the federal Dept. of Health and Human Services to conduct an audit of the top long-term care insurers’ claims practices. 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 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. You can download the actual study at LTCFacts.org and seach for Federal Audit in the search box.

To learn more, send your questions or comments to questions@LTCFacts.org.