LTC Bullet: Massachusettsís Legislators Misguided on LTCI

Thursday, May 29, 2003


LTC Comment: "Hell is paved with good intentions," said Dr. Samuel Johnson in 1775, but he could have been referring to what often happens today when well-intentioned state legislators try to "protect" consumers from alleged shortcomings in private LTC insurance. More after the ***news.***

*** THE LTC GRADUATE SEMINAR -- unexpected opportunity: June 2, 2003 in Milwaukee. Steve Moses will conduct this highly acclaimed full-day training program on long-term care service delivery and financing. Sorry for the late notice. We expected this to be a closed session, but the sponsor has thrown it open to anyone who cares to register. Contact Amy McDougall to sign up at 425-377-9500 or . Seven Wisconsin CEUs approved. For details on the program, go to . ***

*** TOP-FLIGHT SPEAKER FOR AS LITTLE AS $150. Spice up your next meeting with a nationally recognized speaker known for his perceptiveness and passion on long-term care issues. Center for Long-Term Care Financing President Steve Moses speaks across the country at conferences in the fields of gerontology, law, accountancy, financial planning, LTC service delivery, and insurance. He'll "appear" by speaker phone or conference call at your next Board, sales, or any other meeting to educate and motivate your group. All you have to do is contribute a negotiated amount based on the duration of the call to the Center for Long-Term Care Financing. Contact Executive Director Amy McDougall at 425-377-9500 or to schedule a time. ***

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LTC Comment: Welcome to the latest in the Center for Long-Term Care Financing's series of "Reality Check" LTC Bullets intended to correct mistaken or misguided reports or articles on LTC insurance. To read the rest of the Bullets in this series, go to and click on "Reality Check: The Facts on LTCI."

We asked Marilee Driscoll, a nationally known, Massachusetts-based speaker and consultant, to review "Long-Term Care Ė Buyer Beware; Consumers Lack LTC Insurance Protections," a report of the Massachusetts Senate Committee on Post Audit and Oversight. Ms. Driscoll is the author of "The Complete Idiotís Guide to Long-Term Care Planning," which LTC Bullets reviewed last December: "LTC Bullet--Book Report: LTC Planning for Idiots" . Please direct your feedback on today's Bullet to Marilee at . The Center for Long-Term Care Financing does not necessarily endorse each and every opinion expressed by our guest authors whom we intentionally invite to bring you a range of provocative thinking.

"Massachusettsí Legislators Misguided on LTCI"


Marilee Driscoll

"Long-Term Care Ė Buyer Beware; Consumers Lack LTC Insurance Protections" is a report published in April 2002 by the seven-member Massachusetts Senate Committee on Post Audit and Oversight. [For an electronic copy of this report, email your request to or .]

The report is breathtakingly misguided in some of the issues it raises as problems in the LTC insurance industry (summarized under the title "Mass. Hysteria" below).

But just when this reader was on the verge of dismissing all 61 pages, the report offered some laser-sharp insights and ideas that the LTC insurance industry would do well to consider seriously -- and implement. You can find these insights below under the title "Let The Revolution Start Here."

Mass. Hysteria

1) The report states "Insurers are now selling long-term care policies to some consumers in Massachusetts that are "nursing home only" policies, even though most policyholders will never need extended nursing home care. These policies do not provide any coverage for in-home LTC needs -- care most seniors are far more likely to need. . . . Multiple care settings: Individuals should have a choice of receiving care at home or in a nursing home. All policies sold in the Commonwealth that cover nursing home care should have a home care benefit. (p. 8)"

Although I am a fan of comprehensive policies, as opposed to "nursing home only" or "home care only" policies, I respect the right of a consumer to purchase limited coverage. The reportís observation is especially amusing in light of Massachusetts's regulatory history. When Massachusetts first adopted regulations for individual LTC policies back in 1989, I was an agent. These regulations were revised in January 2000. Hereís the kicker: the 1989 regulation prohibited the sale of "nursing home only" individual LTC insurance policies, but allowed "home health-care only" policies. The 2000 regulation did an about-face, permitting "nursing home only" policies but not "home health-care only" policies. Huh?

2) "Typically, consumers are forced to make PERMANENT DECISIONS (emphasis added) on the features of their policy at the time of purchase. Insurers are not required to send a yearly statement reminding policyholders what coverage they have nor are they required to let them reassess their coverage options each year. (p. 8)"

Reading this point actually makes me want to cancel my subscription to "Mother Jones" magazine, send a political donation to Mitt Romney, and buy a pickup truck with a gun rack. I feel awfully bad for the industry lobbyist who has to speak with the person who penned that paragraph. Imagine the persecuted LTCI consumer, having to make a permanent decision about coverage that heíll likely have for 30-or-40 or so-years. It kindíve reminds me of applying for life insurance. Or disability insurance in my 20ís. Of course, letís not ruminate about how the insurance company is also forced to make a permanent decision about the applicantís health at the time of purchase.

I absolutely agree that people should review their coverage every year or so, and periodically reassess their coverage options. When I used to sell insurance, that was called an annual review. It should be more than a notice sent in the mail Ė itís a discussion with a qualified agent who cares about his or her clients. But when I read about reassessing coverage options each year, I get the sinking feeling that the politicians really mean something more damaging, and my suspicion was confirmed on page 9, which reads:

"Policyholders should be allowed to revisit their policies on an annual basis . . . at a minimum, the consumer should be able to:

"Change their elimination period;

"Modify the amount of coverage;

"Add or remove nonforfeiture . . . and;

"Add or remove inflation protection coverage."

Imagine pricing that policy!

3) On suitability, the report says "Consumers may receive little or inappropriate guidance in determining whether a policy is appropriate for them." (p. 10) But, the Department of Insurance requires that a Consumerís Guide be delivered by any agent before a LTC insurance policy is sold.

In a related manner "insurers should develop suitability guidelines for all policies sold in the Commonwealth based on a format approved by DOI. " (p. 9) Assuming that a consumer is legally competent, I believe that most consumers are smart. Smart enough to know if they can afford LTC insurance. Cookie-cutter suitability guidelines can never replace the good judgment of a consumer working with a qualified agent. I would prefer that the DOI put the money that would be spent on developing a suitability format into policing the few bad apple insurance agents who rip off consumers.

4) The report defines important policy features incorrectly. The report says policy benefit triggers are activities of daily living, and fails to mention cognitive impairment (p. 17). Elimination period (EP) is described in this way: "Policyholders must wait for the 'elimination period' to end before they receive any funds . . . [With] a 90-day elimination period . . . This means the insurer will not provide any coverage for LTC services for the first 90 days after a policyholder has filed a claim." As most subscribers of "LTC Bullets" know, waiting doesnít satisfy an EP, rather, paying out-of-pocket for covered services does. But seeing such glaring errors on a final report doesnít give me confidence.

Let the Revolution Start Here

Unfair Claims Practices. The report highlights an important topic ". . . there is no third-party appeal process for consumers who have problems with their long-term care insurance policies . . . (p. 6)" "Policyholders lack an appropriate forum for acknowledging and officially appealing claims denials or other problems with their policies. DOI and the Attorney Generalís office both have a system in place to address and mediate complaints by consumers regarding their LTC insurance policies. However, these systems fall short of providing an independent, third-party appeal process for individuals wishing to challenge a denied claim or benefit by their LTC insurance provider (p. 8)." AMEN! I echo this sentiment. And itís an important benefit available in the new Federal Long Term Care Insurance Program, but not in any of the private LTC insurance policies that Iíve seen. A close relative of mine's LTC claim has just been declined for the third time by a major insurer. As someone who is a believer in private LTC insurance, when appropriate, this experience has rocked my world. The LTC insurance industry should adopt this type of appeal process immediately.

Premium Rate Stability. The report recommends "Establishing guidelines for appropriate premium increases: Insurers and consumers should have the same expectation regarding how much premiums may increase. DOI should establish a premium cap that prevents rates from increasing more than a designated percentage over the life of a policy . . .." (p. 47) In my opinion, there are two potential possibilities that can stop the LTC insurance industry dead in its tracks:

Future significant premium hikes by several companies (or one huge player); and real or perceived unfair claims practices.

Either will be in turn plastered across every media outlet. I understand that, for insurers, LTC insurance is a high risk product with difficult-to-predict claims, which has not yet been embraced as a mainstream product. Therefore, it needs to have a high rate of return to compensate for this uncertainty. But a consumer purchases insurance to get rid of risk, not to trade one risk for another. If my LTC insurance premium can triple (or more) at any time in the future, how can I as a middle-class consumer feel comfortable that I can afford the policy as I age, and how can I even determine if the coverage is appropriate? Some insurers are offering paid-up policies or policies with a guaranteed fixed premium for a certain number of years. Why canít the industry give the average purchaser some peace of mind -- say by guaranteeing that the premium will never increase more than a total of 100%?

Massachusetts was the home of "the shot heard Ďround the world" at the start of the Revolutionary War. Maybe this LTC Bullet can start a revolution thatís great news for both the LTC insurance industry and consumers.