Long Term Care – Report from the Public Hearing

I attended the public hearing on Long Term Care Insurance conducted by the Iowa Insurance Division on July 11^th. There I learned that this was the first of three public hearings to be held before the Insurance Commissioner, Susan Voss, makes her written recommendations to Governor Culver. The remaining hearings are scheduled for August 8^th and September 12^th. The meeting started with presentations from various industry components.

The first panel was from the Iowa Insurance Division which may have been one of the most interesting. From Rosanne Mead, Deputy Commissioner responsible for Enforcement and the Market Regulation Bureau, we learned that complaints focus on rate increases and claims problems. One area of claims where problems occur is when an insured doctor declares long term care as "medically necessary" and the insurance company disagrees. When that happens and a complaint is filed, the State's investigation is limited to the process used by the insurance company as they have no authority to make decisions of fact. All they can do is determine if the process used by the insurance company to reach their decision was sound. If it was, the insured's only remaining course of action would be litigation. She also reported that many problems arise with long term care insurance because the insured's family was not involved in the purchase and selection of the insurance, but they are the ones who are dealing with the claim.

Klete Geren, an actuary for the Insurance Division who reviews all proposed insurance company rate increases, presented some very interesting figures. Nationally, long term care new sales and policies in force peaked in 2002 and have been declining ever since. In Iowa the number of in force policies continues to increase (127,809 as through 2005) although the number of carriers has shrunk from 20 down to 6.

The next panel included other State agencies including the Department of Elder Affairs, Department of Inspections and Appeals, and the Department of Justice, Attorney General's office. An Assistant Attorney General from the Consumer Protection Bureau (I believe his name is Bill Brauch) spoke quite a bit about the Consumer Fraud Act and how it relates to situations where insurance claims are denied. Iowa, it seems, is the only State which prohibits individuals from seeking legal recourse under the Consumer Fraud Act. Only the Attorney General on behalf of the State of Iowa has the ability to initiate such legal action. Given the individual nature of an insurance claim denial it is quite unlikely, unless there appears to be a widespread problem, that the AG office can address the matter. Mr. Brock passionately spoke of the need for a legislative change to empower individuals to seek recourse under the Consumer Fraud Act.

The next panel was insurance industry representatives who spoke about the evolution of long term care policies and the profile of both buyers and non-buyers of the protection. A panel of insurance agents chose to postpone their presentations until the next hearing (in the interest of time) and a panel of assisted living/nursing home industry representatives spoke to the issues of care and how it is paid for.

Lastly, Commissioner Voss opened the floor for public comment. There were many insured's and their family members in attendance who presented problems they had with rate increases and claims. I tip my hat to the Insurance Division. Even though the hearing ran past five o'clock in the evening (3:15 long), they were fully staffed and prepared to initiate investigations into concerns presented.

Right now, based on what I heard at the hearing, I would grade the long term care insurance situation a B-. It is important to keep perspective. While those people who are experiencing problems are dealing with troublesome matters, most of the time the system works but there is certainly room for improvement.

Photo in Flickr by Tony_ia

Comments

[Scott A. Olson, CLTC]

Art,

Great blog. I like your relaxed, yet professional approach.

I'm not sure where Klete Geren got her statistics, but she made some factual errors.

1) I am aware of 24 different long term care insurers that currently offer long term care insurance in Iowa (not including a myriad of group long term care policies that are available through organizations like AARP, other associations, and large employers). However, it is true that the vast majority of policies are sold by about ten companies or so, including: Genworth, John Hancock, Met Life, Allianz, Prudential, New York Life, Mass Mutual, State Farm, Mutual of Omaha and Medamerica.

2) The statement, "Nationally, long term care new sales and policies in force peaked in 2002 and have been declining ever since" is incorrect also. The number of policies in force and the amount of premium in force has been increasing every year. The reason is persistency. Most people who purchase long term care insurance keep their policies. They rarely cancel. There are about 1 million more policies in force today than there were in force in 2002.

3) Clarification: What has decreased is the growth in sales. Less policies were sold in 2003 than in 2002. Less policies were sold in 2004 than were sold in 2002. Less policies were sold in 2005 than were sold in 2002. Last year the number of policies sold was near the number of policies that were sold in 2002. The industry continues to grow each year, it's just not growing as fast as it was in the late 90's and up to 2002.

4) According to the NY Times article, the long term care insurer with the worst complaint ratio has a complaint ratio of .29%. That means that 29 out of every 10,000 policyholders have filed a complaint against that insurer.

5) But, here’s the real shocker, according to the New York Times, the top long term care insurers have a complaint ratio of .01%. That means that 1 out of every 10,000 policyholders have filed a complaint against those insurers. (I’ll be happy to email you that chart if you would like to see it.)

I'm sure that General Motors, surgeons, and Starbuck's franchisees would love to have only 1 complaint for every car owner, patient, and coffee connoisseur, respectively.

Scott A. Olson, CLTC
www.LTCInsuranceShopper.com

[Scott A. Olson, CLTC]

Correction to the last paragraph:

I'm sure that General Motors, surgeons, and Starbuck's franchisees would love to have only 1 complaint for every 10,000 car owners, patients, and coffee connoisseurs, respectively.