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Buying Long Term Care Insurance - Fraud is Prevalent
Insurance as it is supposed
to be when many pay a small amount of money and in return receive
the promise from the long term care insurance company that they will
not be wiped out financially by a catastrophe. Long term health care
is an entirely different type of financial company bet. Fifty percent
is the probability that the purchaser of a long term care policy will
actually use long term care during their lifetime. A long term care policy holder will be mentally, physically and emotionally unable to assert their rights once a policy holder needs the benefits of a long term policy. This article was written to educate potential long term insurance policy purchases at present when they are able to make a good decision. The information is for the benefit of purchasers of long term care insurance and we will detail the major pitfalls of purchasing long term care insurance. Just good advice A long term care insurance policy is a contract written by teams of attorneys modifying the contract over an extended period of time. As new laws and interpretations of the law occur, trained attorneys will modify the long term care contract in order to take advantage of new realities. Knowledge of the language of the long term care insurance industry and understanding how to compare the policies of different long term insurance companies requires special effort. This special effort is well worth the time in making a good choice. Thousands of dollars in insurance premiums and the risk of costly litigation in the future, the wise choice is to make a good decision from the start. Believe nothing that you are told by a long term care sales agent and rely exclusively on what you read in the long term care insurance policy itself is the key to being satisfied when you submit a long term care insurance claim for benefits. A grossly misleading advertising brochure was disregarded in 1998 by a Florida appellate court ruling that took the side of the long term care insurance company. The court determined that the content of the long term care insurance policy was the determining factor. Do not buy the insurance policy till you understand what you are buying and make an informed decision. There are attorneys that specialize in insurance coverage. long term care insurance policies are their specialty. Find a attorney with experience in insurance coverage. If hiring a attorney is not an option, you must determine if you can afford to buy long term care insurance coverage. As a long term care policyholder and in poor health you may have to hire a attorney to actually collect policy benefits. A long term insurance broker is an independent agent for numerous insurance companies and normally knows the market. A good long term care agent can point out the various advantages and disadvantages of different policies on the market. There are captive agents who are employees of the long term care insurance company. If you are considering a policy offered by one a captive agent, be sure to listen carefully and obtain opinions from an independent broker. Independent brokers usually can offer better values. Ask questions and compare the best policy with the various agents. These insurance agents want to make the sale. The sale is the primary objective of the long term care insurance salesman. Long term care insurance should be a family decision. Your children, spouse, siblings should be involved. Group decision making that will help you avoid some well documented mistakes. Promises, Promise, Promises A nursing home costs an average of $30,000 per year in the United States and in major cities the average escalates to $65,000 and as high as $100,000 per year. Thank you San Francisco. The average nursing home stay is 18 months, older Americans living in big cities areas will spend $100,000 on long term care in on top of medical bills and prescription medications. Seniors are looking for reliability in long term care insurance. For those over 65 years old insurance premiums can range from $2,500 to over $12,000 per year. "The fastest growing type of health insurance sold in the recent period" is what long term care insurance has been. Yet, only six percent of those over 65 have made the purchase of private long term care insurance. The vast majority of seniors are uninsured for long term care expenses and these seniors constitute a huge market. Not surprisingly, over 100 long term care insurance companies now offer long term care insurance policies to fill this need. The cost of the every day care for an insured person with a long term illness is payed by the long term care insurance company. This care in nursing homes by many seniors receive, but home and at adult day-care centers is growing in popularity due to its cost effectiveness. These long term care policies are often full of small print that do not adequately protect a insured's life savings. There are policies that have very strict criteria that many long term care policy owners who need help do not qualify for benefits. Other long term care policies narrowly define qualifications so that long term care insurance company physicians, who are given bonuses for controlling costs, can overrule the medical orders of a long term care insurance policyholder's private physician. Even when long term care policyholders qualify for the claim, many policyholders will learn that their insurance coverage has been out paced by the cost of the care. Yet only six of every one hundred 60-year-old consumers will buy a long term care insurance policy in 1995 will even have coverage in place at age 80 when the long term care insurance policy is needed. Thus, it is proven that the high cost of long term care insurance insurance premiums force policyholders to drop their insurance coverage. Long term care Insurance companies carefully study this data and know from experience that increases in premium causes the amount of policies to be cancelled. Seniors on limited incomes find themselves facing tighter budgets as prices rise. Long term care Insurance agents are not keen to bring up negative aspects of the long term care insurance policy insurance commissions are 40% to 65% of the first year's premium. State agencies are not staffed to monitor insurance agent sales pitches, except in the rare work of the undercover investigations conducted by the Florida Department of Consumer Affairs. In effect, there are no government agencies that actively keeps the insurance agents under constant scrutiny. The fear of needing long term care is a difficult situation for seniors and their families. The personal concerns about losing one's health and economic independence is real. Scare tactics such as the elderly being thrown out of their house because of the lack of long term care coverage are very persuasive. Long term care policies with small print, long term care insurance sales agents working on commission. The elderly is prime target for a slick long term care insurance salesman. This is what we are working against and knowledge is king. Long term care sales presentations frequently overstate the policies benefits, while eligibility criteria are not grounded in reality. the long term insurance sales agents frequently fail to explain aspects of policies as well as the probability that insurance premiums will be increased. Sales are based on scare tactics. Long term care insurance sales agents repeatedly tell of the cases of unfortunate seniors who lose everything because of illness. It should be known that providing the new insured with a copy of the long term care contract is not common. It is not likely for a consumer to make a good purchase based on what is learned in a sales pitch by a long term care sales agent. As well, long term care insurance company advertising literature is not to be trusted to explain the detailed terms of the contract being sold. An example: Prudential is a name well known to consumers and enjoys the reputation of the American public. To my regret, a senior sales agent of the the company relied upon scare tactics in his sales pitch. Nursing home patients who were abused were part of this long term care sales pitch. At the end of the sales pitch the long term care insurance states "my grandmother would be turning in her grave now" if this long term care insurance policy were not purchased. A Conseco agent illegally promised that insurance premiums would not rise under Conseco. When asked as to whether insurance premiums are allowed to be raised, the long term care sales agent promised that a rate increase "has never happened." Premium increases on long term care policies are common. Regardless, after making one phone call to Conseco headquarters it was discovered that Conseco raised insurance premiums the previous year. Regarding sales literature. A Prudential pamphlet tells buyers, "Your nursing home is covered when your physician states that it is needed." That is a simply not true. The fine print of the long term care insurance policy states clearly that the long term care company, not the long term care insurance policyholder's physician, is the final arbiter as to whether the long term care policyholder qualifies for benefits. Strict policy terms control how policyholders can receive care. It is not uncommon for policyholders to need "24 hour one-on-one assistance" in performing activities of daily living in order to qualify for benefits. So it seems that one would have to be severely incapacitated to collect under the long term care insurance policy. The government must be the solution to these abuses. Insurance companies spend thousands of dollars in lobbying the government to prevent regulations . Many times the damage to the long term care insurance policyholder is not suffered until the victim's health has deteriorated to the point that they are not capable of helping their attorneys fight the long term care insurance company. The government should initiate undercover investigations of long term care insurance agents who lie to potential clients criminally prosecute the insurance agent. Insurance companies have to be held liable for the actions of their long term care sales agents to ensure that policies are sold in a straightforward manner. A purchase of long term care insurance is a gamble and potential policyholders need to know what is at stake. Tremendous sums of money spent as out-of-pocket costs are not uncommon. A long term care policy should be fully understood and it and have analyzed for your complete financial needs. Always have a policy studied by a trained professional before spending. Make sure you know what you are buying. The warning to consumers is clearly they one should never rely on the price of a long term care policy "as a measure of it's value." Buying coverage is not what the price is today, but what will it cost tomorrow. What are the benefits of the long term care policy and what is needed to qualify for those benefits. Long Term Care Defined Long term care is the help provided when a patient is unable to care for themselves. Personal care at home, such as dressing and bathing on the low end to intensive care in a nursing home. Long term care services are offered through senior centers, home care agencies, adult day care centers, retirement communities and traditional nursing homes that provide 24 hour care. long term care insurance policies offer various kinds of care. We are offering the most commonly used terms and their most common meaning. The definitions given here can can be defined by long term care insurance company in their policy in a slightly different manner. Skilled nursing care is for medical conditions that require care by specially trained medical professionals. Skilled nursing care is on orders of a doctor who determines that the care is to be provided and is usually required 24 hours a day. Skilled nursing care is given during a severe illness and can continue even after the most intense level care of that illness has passed. Skilled nursing care can also be provided in a person's home with help from non-registered nurses. Intermediate nursing care is needed for stable conditions that require daily supervision, but not 24 hour care. It is less intense than skilled nursing care, more personal care is required that registered nurses will supervise. Intermediate care could be needed for years. Custodial care is associated with assistance with daily living, which includes dressing, bathing, eating, and other routine activities. Special medical training is not required. Unskilled nursing assistants in nursing homes, day care centers, and at home provide the care. Personal care is the term used to describe the care. The person's home is often the place that the care is provided. Practical nursing assistance, skilled nursing care, the services of a nurses aide, physical or occupational therapy, homemaker assistants and chore workers, will provide assistance in a person's home. long term care is expensive, depending on the degree of care needed and in what region of the U.S. the care is provided. In 1992, the cost of a year in a nursing home averaged $30,000 across the United States. Skilled nursing care at home with two-hour visits by a nurse three times a week over a year, would cost approximately $13,000. Personal care at home from a home health aide three times a week for three hours would cost approximately $9,800 a year. In major cities, the cost can be expected to reach $65,000 a year and as much as $100,000. With an average nursing home stay of 18 months, seniors living in major metropolitan areas can expect to pay $100,000 on long term care on top of other expenses like medical bills and prescriptions. Long Term Care - Who Pays? Long term care comes your assets, the assets of your family. For the indigent, Less than half are of nursing home bills are paid by state Medicaid programs while slightly more than half of nursing home bills are paid by individuals and their families. Long term care expenses, for the most part, Insurance, are not paid by long term care insurance companies. The industry is simply too new. In certain cases Medicare will cover the cost of skilled nursing care in approved nursing homes or in your home. Medicare has no coverage for custodial or extended home health care. Medicare does not pay for Long Term Care Medicare supplement policies fill in the gaps of Medicare coverage. Hospital deductibles and physicians' charges are covered, but Medicare supplement policies do not cover long term care expenses. Medicare supplement policies, Plans D, G, I and J, contain a limited at-home recovery benefit that pays up to $1,600 per year for a short-term, at-home assistance, after an illness for a limited duration of time. Medicaid coverage is reserved for those who meet governmental poverty guidelines for income and assets. There are those who consume assets in order to qualify for free health care. A personal residence is not counted when determining Medicaid eligibility, but other assets must be reduced to qualify for Medicaid. Eligibility guidelines have severely become more strict in recent years and are expected to become even more strict in the coming years. Long term care expenses are commonly paid by the individual till their assets fall to the poverty level and afterwards the nursing home resident will qualify for Medicaid. The end result is that many nursing home residents are so poor that they cannot afford to leave the nursing home. Medicaid qualification differs from state to state as to the financial assets one is allowed to possess. These financial requirements have tightened up considerably quite a bit in recent years and the "old" practice of giving away assets has, in essence, become illegal. Long Term Care Insurance? A long term care insurance policy is for a limited population. A long term care policy is worthwhile form of insurance for many middle and upper income Americans. In essence, the purchase of a long term coverage should not cause force you to forego other financial needs. The decision to purchase long term care insurance requires a full financial analysis. The need for long term care will arise gradually as a person ages and needs more and more assistance with activities of daily living. Those with acute illnesses may need nursing home care for a short period of time, while others may need care for years. It is difficult to predict who will need long term care, but there are studies which indicate the exact likelihood of needing such care. In one study, it is anticipated that 44% of those who turned age 65 in 1991 will enter a nursing home at some time during their life. Of those who live to age 65, nearly 1 in 3 will spend ninety days or more in a nursing home and 1 in 4 will spend more that a year in a nursing home. Only one in eleven will spend more than five years in a nursing home. According to this specific study women greatly outnumber men in nursing homes. Fourteen percent of the women as compared to five percent of the men were projected to spend five or more years in a nursing home. In addition, the risk of needing nursing home care increases as one ages. Consumers must analyze the reasons for a long term care policy and the ability to pay for the long term care insurance policy for the rest of a person's life. The long term care policy must be be paid every year until death. This is rule etched in stone. If you can anticipate the day that you will not be able to continue paying the premium, then don't purchase the long term care policy. Purchasing the long term care policy is dependant on age, health status, income and wealth. Let's say that your primary source of income is Social Security benefit or Supplemental Security Income (SSI), forget about buying a long term care policy. If money is tight; do not consider purchasing a long term care policy. Long term care policies are for people with assets that they want to pass on to family members. The long term care policy is also designed to assure one's independence and to ensure that nursing home bills do not ruin a family's finances. Do not buy a long term care policy if paying the insurance premiums will stretch the family budget. An existing health problems such as Alzheimer's or Parkinson's disease will prevent a long term care insurance company from accepting the applicant. So there is no need to spend time and effort shopping for a long term care policy. Long Term Care - What coverage is available? Standardized long term care policies do not exist in the long term care market. It is extremely difficult to compare company policies because companies are selling policies with many combinations of benefits and coverage. Most long term care companies offer to pay a specific amount of money each day that you receive care. Other long term care insurers offer to pay a percentage of the cost of services to cover the actual charges for care. These policies are are not worthwhile, unless the long term care insurance policy provide for benefits to increase as nursing home costs increase. Without inflation protection a long term policyholder will be left with a benefit that is potentially meaningless. Long term care benefits are offered as riders in some life long term care insurance policies. As an example, a fixed percentage of a life insurance policy's death benefit is paid when long term care is required and the death benefit and cash values are reduced in conjunction . These life long term care insurance policies generally have strict rules for qualifying for benefits. Long Term Care Policies - Who sells them? Private insurance companies sell long term care policies through sales forces. There are long term care insurance companies that sell the insurance coverage through the mail-order and other long term care insurance companies market their policy through senior citizen organizations, fraternal societies and other means. Large and small employers are beginning to offer long term care policies to their workers, their workers parents, and their retirees. What do Long Term Care Policies Provide? What benefits are on the Long Term Care Policy are offered? There are no "standard" benefits so it is difficult to compare policies offered by different companies. Some policies limit coverage for services provided in nursing homes and do not provide coverage for services delivered in your home, while others cover both nursing home and home care. Others companies pay for care only if it is provided by adult day care centers or other community facilities. Each policy defines what benefits it will pay, so it is imperative that you carefully read the fine print to understand what is offered. In general, nursing home coverage usually pays for skilled, intermediate and custodial care. Some policies offer to pay for any care required, provided eligibility requirements are met. Home care coverage is trickier. Some companies offer to pay for skilled nursing care in your residence but only if it is provided by certain providers: registered nurses, licensed practical nurses, and licensed rehabilitation therapists. These policies usually do not provide home health aides. A home health aide has less education and training than registered or practical nurses and they are paid less than a licensed practical nurse. An aide assists with personal or custodial care. Only the exceptional policy will provide for homemaking services to cook in your home, run errands and perform work that otherwise could not be done. Because of the potential for being defrauded and the difficulty of monitoring benefits, rarely will a long term care insurance company pay benefits to family members who perform home care services. Occasionally group policies sold to employers will provide some coverage allowing family members to provide care. It's best to look for a policy that provides for a range of services, including home care services, since the nature and extent of the care to be required in the future is at best a guess. Where are Long Term Care Services received? Insurance companies carefully limit and control where you can receive services to make sure they are paying benefits required under the long term care insurance policy and unless you are receiving services in an approved facility, companies will refuse to pay for your care. Many carriers will not cover custodial care unless it's provided in a skilled or intermediate nursing facility. Some will describe by name the types of facilities where you will not be covered. Most often these are homes for the aged and rest homes, even if they are in fact providing custodial care. There are so many different restrictions written by insurance companies that it is impossible to list them all here. Common descriptions include the type of nursing supervision, the size of the facility, type of care provided, and level of licensing. Check these rules very carefully and search for companies that offer a range of facilities. Remember, the insurance carrier wants you in the least expensive facility that will not provide any level of care above the minimum care it is obligated to provide. Policy restrictions will often be in conflict with state licensing requirements and will not authorize payment for custodial care coverage in a particular facility even though it is licensed to provide custodial care. Another pitfall is that facilities certified by Medicare to provide skilled nursing care may be excluded as skilled nursing care providers. Exclusions on a Long Term Care Policy Do not expect any carrier to pay benefits for: mental disease and nervous
disorders, other than Alzheimer's; Limitations on a Long Term Care Policy Benefits are usually described in terms of the amount the carrier will pay per day for care in a nursing home and vary from $75 up to $250 a day. Gain familiarity with the general charges for nursing homes in your area before you buy an insurance policy. Keep in mind that prices will increase by the time you will need care, so all you are obtaining is a reference level to familiarize yourself with the market. Once you know prices in your area you can calculate the range of future charges by following the Rule of 72. This simple formula allows you to determine the length of time it will take for a price to double at a given rate of interest. Assuming a nursing home near you charges $100 per day and that nursing home charges will increase at an annual rate of 6% per year. How long will it take the price to reach the $200 level? The answer is calculated by dividing the number 72 by the interest rate. Seventy-two divided by six gives a quotient of 12. Assuming a six percent rate of inflation, the $100 a day charge will double in 12 years. So if you are 60 years of age and purchasing a policy with the expectation that you may need nursing home care in your early seventies, you should be looking for a policy that will be paying benefits of at least $200 per day twelve years from now. Home care is growing in popularity with patients and carriers so read policies carefully for limits. Many policies usually agree to pay for home care at a rate that is one-half of the nursing-home rate. Other policies limit the benefits for home care to a specified daily sum or limit the number of hours at a specific rate per hour. All policies allow you to specify how long you desire benefits to last. Benefit periods range from one year to life. Remember that most nursing home stays are three months or less and many people have illnesses that last for years. Obviously policies with long benefit periods cost more. How do you decide? If you own your home or have a minimum mortgage and will be depending upon Social Security and a company pension for retirement income, you will want to protect your equity in your home in order to preserve a place for your spouse to live. Assume that you will need up to 19 months in a nursing facility at current rates and compute that cost. Compare that to your available assets and you can begin making some intelligent choices. Carefully consider any limits on benefits if you have a repeat stay in a nursing home. Some policies require that you must be discharged from a nursing home for a stated time period before you can be re-admitted. Others calculate the second admission as part of the first if you return within 30, 90 or 180 days. Does the long term care insurance policy require an elimination period to run again for a second stay? Repeat nursing home admissions are not the rule, so this is a minor consideration when comparing policies. Under home care provisions, the benefit period is usually more limited than for nursing home stays and benefit periods of one to two years are available. Figuring out when benefits begin on a Long Term Care Policy Most policies do not pay benefits till the waiting period has ended, commonly called an elimination or a deductible period. That means benefits begin 30, 60, 90 or 100 days after you are admitted to a nursing home. Some policies have no elimination period and they naturally cost more. During any waiting or elimination period, you are responsible for paying for your care, but there are significant trade-offs. Having a reasonable waiting period during which you are personally responsible for your care means the long term care insurance company can expect to pay out fewer benefits and accordingly underwriters can establish lower prices for these contracts. Inflation Insurance on a Long Term Care Policy If your policy does not provides a way for your daily benefit to increase, you will learn a very serious and sad lesson about the increasing costs of nursing home services. Assume nursing home costs today of $100 a day and 8% inflation, what will the cost per day be in 18 to 20 years? Apply the Rule of 72, the cost will double every 9 years and in 18 years a charge of $100 per day will be $400 [double in nine and then re-double in an additional nine years]. If you bought a policy that did not provide for an annual inflator your insurance carrier would only pay a fraction of your expenses. Inflation protection is critically valuable and important. Insurance companies provide inflation protection in two ways. Some offer customers the right to buy additional coverage in the future at the future price the company will be charging. The catch here is that the new premium will be based on your current age, which means it will be more expensive because it is more probable that you will need nursing care, but many companies will sell you the coverage without proof of insurability. If you have a policy with this protection and if you are suffering from a progressive condition you would be smart to exercise your option to buy more coverage. The major disability for the consumer is that the price of buying added coverage goes up rapidly, and many customers decline the additional protection because they cannot afford it. Furthermore, some companies require that you buy the additional coverage when it's offered or you lose the right to buy more in the future. The second way for inflation protection is to provide for automatic benefit increases. But even here while the daily benefit increases by a fixed percentage, carriers usually cap coverage at the end of 10 or 20 years. Some companies may offer unlimited increases and others end benefits when a customer reaches age 80 or 85. The next trick employed by the carriers is the method used to calculate the percentage increase. Some use a "simple interest" approach and add to the daily benefit each year by a stated percentage of the original coverage. In a 5% simple inflator policy the coverage on a $100 daily benefit would increase by five dollars every year. At the end of fourteen years the daily benefit would be $170 dollars, but if the company used the "compound interest" method, at the end of 14 years the daily benefit would be close to $200 [72 divided by 5]. Always buy an insurance policy with automatic increases that are calculated using the compounded method. Premium waiver on a Long Term Care Policy A provision waiving premium payments is common in health long term care insurance policies. It discontinues your legal obligation to pay insurance premiums if you are receiving benefits. Some companies stop billing you as they make the first benefit payment. Others wait 60 to 90 days. Often insurance premiums are not waived while you are in a hospital or if you are receiving care at home. If You stop paying insurance premiums on a Long Term Care Policy Non forfeiture benefits in policies provide that at least some benefits will be paid even if the buyer fails to keep up premium payments and the long term care insurance policy is cancelled for non-payment. Life Insurance aspect of a Long Term Care Policy Death benefits are an agreement to refund to your estate insurance premiums that you paid minus benefits paid to you. The Determination of the entitlement to benefits on a LTC policy? All policies have "gatekeepers" who have the power to decide if you are eligible for benefits. Every policy contains terms usually referred to as "eligibility for benefits," "qualifying for benefits," or "benefit conditions." Gatekeepers are a critical feature of every long term care policy and one you should carefully study before you buy because there is a big difference between companies when it comes to who decides if the company will pay out money. For some companies this issue is so important that the policies provides for more than one gatekeeper. Under the best policies, you can qualify for benefits if your doctor orders specific care. Other policies will require that care be "medically necessary for sickness and injury." You already know who will make that determination. If you are in need of nursing-home services, but are not sick or injured, you would not qualify. The long term care insurance company would determine whether you were sick or injured. A third type of rule limiting your right to benefits requires that you be unable to perform a certain number of "activities of daily living," commonly referred to as ADLs. These normally include bathing, dressing, walking, moving from bed to chair, toilet, maintaining continence, and eating. Some policies evaluate mental functions to determine the qualifications for benefits. This gatekeeper standard is important in cases of Alzheimer's disease. Even though insurance regulators require policies to cover Alzheimer's disease, a long term care insurance policyholder who has the disease can be denied benefits if he or she is physically able to perform the activities of daily living specified in the long term care insurance policy, unless there is a mental functioning criteria. If the long term care insurance policy uses an ADL gatekeeper, an insured with Alzheimer's disease may not qualify even though they are at risk for forgetting to take medications and may forget to come home after they walk to the corner store for a loaf of bread. With a mental functioning standard, a long term care insurance policyholder with the disease is more likely to receive benefits. ADL criteria are not the same from one company to another. Most insurers define what is meant by an inability to perform a particular activity such as failure to feed or bathe oneself. A definition that requires someone to physically assist in performing the activity is more restrictive than one that calls for someone to supervise the activity. It is the difference between being able to climb into a bath by yourself, needing someone to lend a hand or needing someone to actually make the transfer for you. The more specifically a company describes its requirements, the opportunities for disagreements and disputes will be lessened. A few policies require customers to have a prior hospital admission of at least three days before qualifying to receive benefits. This requirement severely limits a disabled person's ability to receive benefits. Medicare uses this requirement to determine eligibility for skilled nursing benefits. As explained in great detail below, gatekeepers are used to keep consumers from reaping benefits and are a major source of cost control for carriers. Eligibility to buy a Long Term Care Insurance Policy? Insurance companies do not sell policies without first determining what the probability will be that they will have to make good on the bet. This is called "underwriting" and it means the company evaluates your health before it will sell you a policy. Some companies follow "short-form" underwriting. On the application for coverage, you will be asked to answer a few questions about your health. Have you been in a hospital during the last 12 months or are you confined to a wheelchair? If you answer "no" to all of the questions, the company believes you are a good bet to be a customer who will pay money in and not force them to pay out. The insurance sales person is authorized to issue coverage as soon as you write a check. Other companies are more selective. They will examine your current medical records and ask for a statement about your health from your doctor. Having conditions that are likely to require long term care makes you a bad bet and will disqualify you with these companies. Always answer all health questions truthfully. If the salesperson completes the form as you are asked questions, change any entries that are not 100% correct before you sign the application. The reason is simple. Once you make a claim you become just another statistic and the company will not pay you a penny if it later can claim that you lied about your health. If there is anything the carrier can do to avoid paying it will and the carrier will lament that it relied on the misstatement to grant coverage. Even though you "won" the bet and are entitled to benefits, the carrier will rescind your policy and return the money you wagered. These companies do not investigate your medical record until you file a claim, and then they investigate it with extremely fine attention to every conceivable reason why they should deny benefits based on inconsistencies. This practice is called "post-claims underwriting." It is illegal in many states. Companies that do their underwriting studies at the outset and thoroughly check on your health before issuing a policy are not as likely to engage in post-claims underwriting. Never guess when filling out an application. Do not answer a question unless you understand it. If you do not know that "pulmonary" refers to lungs, then you should not respond to any inquiries concerning "pulmonary" conditions, complaints or symptoms. Just because you believe you know what a word means, does not mean you understand it. This is not a matter of pride. If you do not know what a word means, ask. Trying to remember every condition you ever had and when you had it is not easy. It is far better to state that you believe you have had that condition but do not recall when or the details. Add an asterisk [*] to every section of the application where you are not sure and at the place for explanations add an asterisk and the words "please see the records of Dr. Smith" or whoever can provide the necessary information. If you follow this advice, the company can never deny you benefits after the fact because you were honest in disclosing what you remembered and offered the carrier access to a specific doctor's records where the information could be found. If a carrier tries to deny coverage for a customer with this information in their application, the long term care insurance company's attorneys will be facing a civil lawsuit not only for the damage caused by the company, but in addition punitive damages. Many companies will issue a policy if a customer has relatively minor health problems, but will not cover those particular conditions for a period of time, usually six months or longer. A pre-existing condition is one for which you sought medical advice or treatment or had symptoms within a certain period before applying for the long term care insurance policy. Companies also vary in the length of time they will look back at your health status, and you will want to consider these variations as well. If the company discovers you have not disclosed a pre-existing condition on your application, it may refuse to pay for treatment related to that condition and perhaps terminate your coverage. The long term care insurance company's right to not Pay a Claim An insurer can rescind a policy and refuse to honor a claim where the long term care insurance policyholder has not provided full and complete information in the application. Where the language of the application is clear and capable of only one interpretation, where there have been no modifications in the application made by the sales agent, the purchaser had knowledge of the information requested, the long term care insurance policyholder concealed requested information or misrepresented his/her history and the misrepresentation was material or critical, then the insurer can rescind the long term care insurance policy. The burden of proving misrepresentation falls on the long term care insurance company. In many cases the carrier must prove its case by clear and convincing evidence, which is a more stringent burden than the usual standard that requires proof by a preponderance of the evidence. Nonetheless, many companies accept policyholders only to provide the most rigorous scrutiny when a claim is presented, which is natural and to be expected. Insurance companies and their employees have the highest duty not to pay a false, fraudulent or illegal claim. It is the nature of the beast. If a long term care insurance policyholder has failed to disclose his/her full medical history, the company would be a fool not to take advantage of such a failure to avoid paying a claim. The best insurance against have a policy rescinded for failure to make a timely and full disclosure is to make a full and complete disclosure, not matter what the sales agents says. On this issue the long term care insurance should be thought of as the enemy. the long term care insurance's interest is in making the sale and earning the commission. It matters not that 10 years later coverage will be denied. What matters to the long term care insurance is getting paid this month for the policies submitted and accepted by the company. Defend yourself by making a full disclosure no matter what the long term care insurance says. If the long term care insurance policy is not issued to you now, at least you can apply to other companies. This is a far better result than having the carrier issue the long term care insurance policy to you and then rescind once you have need for benefits and are not in a position to apply to anyone because of the condition of your health. Check the application carefully. If any condition has not been fairly reported, added it to the form. Tender your complete medical records with your doctors by name and address in answer to any question where you do not know the answer. Never answer "no" when you do not recall. "I don't know" is a common idiom in American speech. Literally it means absence of knowledge, but as a practical matter most folks use it when they do not recall. In a court of law there is a huge gulf of difference between the two. So, be smart and be safe, always answer "I do not recall" when an answer does not immediately come to mind, instead of answering "I do not know." It may save you from losing coverage when you need it most. Is the Long Term Care Policy Guaranteed Renewable? Today almost all policies are guaranteed renewable. Even if your health worsens after you buy the long term care insurance policy, it cannot be cancelled. But keep in mind that companies can raise insurance premiums on guaranteed renewable policies. Renewability does not mean you will be guaranteed a good price. It only means you will be again offered the bet, although the amount you will have to put up may increase substantially. It is this aspect of long term care that is the most troublesome. The older you get the greater is the probability that you will be injured or take ill. As a result carriers facing an older customer will routinely increase the amount of the bet to cover their losses, knowing full well that for a customer on a fixed budget the probability the insured will not renew increases as the amount of the premium increases. The carriers also know with a high degree of probability when the cost of a future year will be declined, at what age most customers give up their coverage and what price increase will cause the most cancellations for those in the highest risk groups. This is the real world and there are no free lunches, but this reality is still troublesome. Cost of a Long Term Care Insurance Policy? A long term care policy can be expensive. Before signing a contract analyze whether you can readily pay the insurance premiums for long term care, Medicare and Medicare supplement coverage. The annual premium for long term care policies with good inflation protection is in the neighborhood of $2,000 for 65 year-olds. Premium are lower for those who are a better bet the carrier will not have to pay benefits, primarily those who are younger. Policies cost more for those who are older. At age 75, the premium will be two and a half times greater than if the long term care insurance policy had been purchased at age 65 and six times higher than if you bought it at age 55. It's common for a husband and wife age 65 to spend approximately $7,500 a year for health insurance coverage. A policy with a large daily benefit that lasts for several years, is more expensive. Inflation protection can add 25 to 40 percent to the benefits and non forfeiture rights can add 10 to 100 percent to the bill. When buying a long term care policy you must consider whether you can afford to pay the premium now, and more importantly whether you will be able to continue to pay the insurance premiums in the future. Policies that are "guaranteed renewable" only mean that the company guarantees that it will offer you the opportunity to renew the long term care insurance policy and continue the coverage; it does not mean that you are guaranteed renewal at the same premium. insurance premiums can and will rise over time as companies begin to experience greater payouts in nursing home claims. However, once you buy an insurance policy the insurance premiums won't rise just because you get older, although add-on coverage will increase in cost. Perform a personal financial audit and decide how much income you have available to spend on a long term care policy now. Project your future income, your living expenses, and how much you can pay. If you don't expect your income to increase, it would not be prudent to buy an insurance policy now with a premium that is at the upper limit of what you think you can afford. Ripe with the potential for fraud on Long Term Care Policy Loopholes Written by long term care insurance company attorneys Now that the fundamentals of long term care insurance are understood, it is time to look more closely at how long term care insurance companies operate. The most important concept to understand is that long term care insurance policies will not protect a person's savings. Despite the claims of sales personnel, most policies are so flawed that if agents were honest about the policies' limitations, many customers would probably not purchase them at all. Furthermore, to properly cover anticipated future costs and reasonably hedge their bets against rising insurance premiums, consumers would have to choose such high benefit amounts that most would decide that the policies would be unaffordable. Consumers who are wealthy enough to afford adequate coverage most probably have the assets to cover the costs of long term care without the high cost of long term care insurance. The most common and most serious pitfalls of buying long term care are detailed below. Inflation Coverage on a Long Term Care Insurance Policy long term care policies for seniors living in major metropolitan areas with high labor costs can expect to pay $167 per day for nursing home care. This translates into $61,000 per year. If a consumer purchases a policy that pays a fixed $100 per day, with an inflation rate of six percent per year, $100 per day will pay less than one-third of the daily cost in 12 years, and 14% of the cost in 24 years. The math is easy. At six percent inflation the cost of nursing care will double every 12 years and the daily charge will become $354. In twenty-four years the same nursing charge will have grown to $708 daily. So a consumer who purchases today at age 56 a long term care with a fixed benefit of $100 per day who requires nursing-home care at age 80 will have to pay more than 85% of the costs out of his or her own pocket. The answer is to purchase compounded inflation protection that increases the benefit the long term care insurance policy will pay each year. Since health-care costs predictably will continue to inflate, the U.S. House Select Committee on Aging concluded that "without inflation protection, long term care insurance policies are not a wise purchase." Carriers offer purchasers the option to buy inflation protection under four different options, none of which will fully protect buyers against increasing nursing home costs. Simple inflation protection. This option increases the daily benefit annually by a given percent of the original base benefit. In other words, a $100-per day nursing home benefit which covers 60% of today's costs would increase $5 each year, making the daily benefit $150 after ten years and doubling the benefit after 20 years to $200. But if inflation in the long term care market continues at 6%, the average daily cost of a nursing home is projected to $296 in ten years and $530 in twenty years. As a result, rather than maintaining a benefit at 60% of cost, simple inflation protection allows this coverage to erode to only 37% of cost in 20 years. Five percent compounded inflation protection. Rather than increasing the daily benefit by five percent of the original benefit, this option increases the benefit by five percent compounded, meaning that each successive year's benefits are increased by five percent over the previous year. So while the example above pays simple inflation protection and only covers 37% of expected future costs after 20 years, the compounded option at 5% compounded per year will pay approximately $265 per day, after twenty years. This approach is the best option available, but given the historical, as well as anticipated, six percent inflation rate for long term care costs, this plan does not keep pace with inflation. Indexed inflation option. This option gives the buyer the right to increase the amount their policy will pay once every three years. The amount of the increase is indexed and tied to the Consumer Price Index reported by the U.S. government. This option is based on the real rate of inflation. This is not much help for the consumer if the inflation rate for long term care services continues to be higher than that for goods and services. Additionally as the benefit increases so does the premium. As the long term care insurance policy and the owner age the premium increases significantly and for purchasers on fixed incomes it is probable the long term care insurance policy will be discontinued because it is too expensive at a time when coverage is most needed. Option to purchase additional coverage. This option offers little benefit to the consumer because it only allows the long term care insurance policyholder to purchase additional benefits at then-current rates. Sales agents tout this coverage as a worthwhile option because it offers a long term care insurance policyholder the right to purchase additional coverage without having to prove medical eligibility. Consumer Reports rated this the worst possible option. It is equivalent to no inflation protection. Because these options increase the cost of a policy nearly 50%, sales agents interested in earning a commission do not urge inflation protection to sales prospects. As a result inflation benefits are not often sold and the Health Insurance Association of America (HIAA) reports that of the major carriers offering inflation protection across the United States only one-quarter of the policies sold include inflation provisions Nonforfeiture Benefits on Long Term Care Insurance Policy A nonforfeiture benefit is essentially a useless option added to a contract to give a sales person something to crow about. The promise is that the carrier will return to the long term care insurance policyholders some of their "investment" in the long term care insurance policy if they discontinue coverage. Without a nonforfeiture benefit term, these companies claim that it would be unfair if you drop the long term care insurance policy say 10 or 20 years later and never used it. These companies usually offer a nonforfeiture benefit in the form of a reduced paid up policy in which lesser benefits are provided after you drop the coverage. Other carriers may offer a "return of premium" in which they return a portion of the insurance premiums after a certain number of years if the long term care insurance policy is cancelled. A nonforfeiture benefit is a cost item carefully calculated by the carrier's actuary. It has a cost that is added to the underlying policy. Assuming a policy is purchased at age 60 and remains in effect until age 80, the age by which 50% of all seniors will need a nursing home, the average policyholder will have paid in the neighborhood of $60,000, about the cost of a year of nursing home care. Most seniors have difficulty maintaining their insurance policies until they reach age 80, when they most probably will need them. The National Association of Insurance Commissioners reports that 16% of all nursing home insurance buyers drop their coverage each year because they can no longer afford it. Insurance companies know that of those who buy coverage at age sixty, 95% will have cancelled the coverage by age 80. The U.S. General Accounting Office confirmed those figures. Of long term care insurance company files that were investigated and excluding those who had died, 60% or more of the original policyholders allowed their insurance policies to lapse within 10 years and one long term care insurance company reported a lapse rate approaching 90%. Nonforfeiture benefits provide consumers who most probably will not be able to maintain their premium payments at least something for their premium dollars. Without nonforfeiture benefits, once a consumer stops paying all rights under the long term care insurance policy end. The most popular nonforfeiture benefits are: Reduced paid up benefit on a Long Term Care Insurance Policy. This benefit pays the long term care insurance policy benefits at a reduced rate, depending upon how much money was paid into the long term care insurance company. For example, if an individual paid insurance premiums for 10 years, he might receive one-third of the benefit of a $100 a daily policy or $34 per day. The amount of reduced benefits is specified in the original contract. The reduced paid-up benefit amount will not increase for inflation and all policy restrictions apply. Extended term benefit on a Long Term Care Insurance Policy. Under this concept the customer receives the originally specified daily benefit, but only for a reduced period depending upon how much money was paid to the carrier over the life of the long term care insurance policy. For example, after 10 years, 25% of the premium paid is credited to a "benefit account" and, if the long term care insurance policyholder qualifies, the company will pay benefits until the money in the account runs out. So after paying nearly $30,000 over 10 years the customer would be entitled to $7,500 in long term care benefits - little more than the cost of one month in a nursing home today in a metropolitan area The long term care insurance company would only pay benefits from this account until the account was depleted. At best, nonforfeiture benefits are similar to a consolation prize paid by the carrier to customers who have guaranteed a profit to the company by never making a claim, paying insurance premiums and then canceling the long term care insurance policy prior to qualifying for benefits. Gatekeepers are in the Fine Print "Gatekeepers" are what consumers typically refer to as the "fine print" when they are denied benefits they believe they are entitled to receive. To the long term care insurance company expert these terms are the key aspects of the long term care insurance policy because they limit the rights of consumers to collect benefits, they specifically define what coverage is provided, and where it can be received. Gatekeeper rules are the reasons why claims are denied, and they can render policies virtually worthless. Important gatekeeper limitations are often contained in the "definitions" section of the policies which many consumers do not carefully read. The most important gatekeepers a well-informed consumer needs to understand and recognize are : Requiring prior hospitalization
in order to qualify for nursing home and/or home care stays. According
to a Congressional study, "57% of all those who enter a nursing
home were not hospitalized before their admittance." Insurance
companies know this fact and those that include such a limitation
in their policy know that 57% of all buyers are being defrauded because
the long term care insurance policy is worthless. This is a classic
example of a rip-off that is designed and intended to defraud an innocent
and unsophisticated purchaser of a policy. Most long term care insurance policies require policyholders to pay for their own care for a specified number of days before they are entitled to receive benefits. The days paid for directly by the long term care insurance policyholder are commonly referred to as an "elimination period," which is very much like a deductible in accident insurance. In the long term care policy the deductible is set forth in days rather than dollars, most probably to keep consumers from focusing on the fact that nursing care is always increasing in cost and defining the deductible in this manner is a direct benefit to the carrier. Some companies offer products without an elimination period, but most require as few as 30 days to as long as one year. How the elimination period is calculated differs from company to company. Some carriers count the days cumulatively, where for example a patient moves in and out of a nursing home. Other companies demand that the waiting period be counted consecutively, namely, they do not allow any interruption in the days of nursing home care in order to qualify. Some require only one elimination period for the life of the long term care insurance policy and others begin counting every time a long term care insurance policyholder applies for benefits. Elimination period rules can require consumers to physically pay costs out of their own pockets, not just incur liability for services. Most policies even require the consumer to continue paying insurance premiums while also paying health care costs during the elimination period. Elimination periods are designed to contain costs and because carriers are interested in lowering the cost of total benefits to be paid, many push insureds into less expensive home care. As an incentive to encourage home care, waiting periods often are shorter than for nursing home benefits, but once the choice is made for home care obtaining more comprehensive care will be a problem. In selecting a waiting period, you'll have to weigh the trade-off between paying more for coverage that begins when you enter a nursing home or paying out of your own pocket for the first days you spend there. Generally speaking you are better off choosing the highest deductible period that you can afford because the probability of an additional day in a nursing home decreases with each day of an illness. Another way to view this choice is to consider the length of a nursing home stay in terms of gambling odds. The odds are high that after spending the first night in a nursing home you will need to be there for at least a month. After ninety days in a nursing home the odds of your needing to stay there an additional day are much lower. That is exactly how a long term care insurance company actuary views this situation. If a nursing home in your area costs $100 a day, a policy with a 30-day elimination period will require you to pay $3,000 or in other words your long term care insurance company does not have to pay $3,000. Consider what you can afford today for a thirty-day nursing home stay. If you have the discipline to put that much money into a long term government treasury bill you will be guaranteed that money will be there when you need it. Only then you should buy an insurance policy with a thirty-day wait. As a practical matter, there are significant savings the longer the waiting period you can accept. Look closely at this aspect of purchasing long term care coverage. Life Insurance Benefits on a Long Term Care Insurance Policy In a policy offering a death benefit the company agrees to refund to your estate a stated level of the insurance premiums you paid minus the benefits paid to you. To qualify for a death benefit with most companies you must have paid insurance premiums for a certain number of years. Others limit the payback if the long term care insurance policyholder dies before a certain age, usually 65 or 70. Death benefits are a cost to the carrier, increase the insurance premiums to be paid by an insured and offer little value. The main value of a death benefit is to provide the long term care insurance company sales agent with an opportunity to present the carrier in a false, beneficent light, in the event insurance premiums are paid for years and the long term care insurance policyholder promptly dies without ever qualifying or needing care. Should this case arise "we obviously have no need to be unjustly enriched and for that reason pay the death benefit provided in the long term care insurance policy," is what you can expect to hear from the sales agent. Remember, there is no such thing as a free lunches. Every aspect of a long term care insurance policy has a specified cost. The idea is for money to come into the company and not to go out unless it is absolutely mandatory under the specific terms of the long term care insurance policy. Life long term care insurance policies, while still having their own peculiar defenses, do not provide as many opportunities for denying coverage. The insured is either dead or alive in most cases. long term care because of the seemingly endless possibility for different facts to occur has that many more potential opportunities for carriers to hide behind policy provisions and to avoid paying benefits unless they are squarely mandated by the long term care insurance policy. Seniors Citizens: Con Artists are Looking for You Seniors abhor losing physical independence and becoming financially dependent. They buy long term care insurance coverage to avoid becoming dependent on family or friends. The fear of nursing homes makes them especially vulnerable to high-pressure sales tactics that focus upon the risk of losing assets and with reassuring promises of protection. Loneliness clearly magnifies seniors' concerns and their vulnerabilities as consumers. One-third of those who are older than 65 live alone, and the ratio of women to men is two to one. Looking at those who own their own homes and who are often targeted to buy long term care insurance, more than half live alone. When people are isolated their beliefs are readily influenced by those who fill the loneliness of their lives. This is a human factor well understood by long term care insurance sales agents, who focus on these seniors as the most likely source of sales. Lonely seniors have difficulty resisting sales pressure, especially those who live alone who do not have anyone looking out for their interest and no one with whom to discuss the decision to buy long term care. The opportunity for fraud to occur in this setting is unchecked. The most common tactic is known as "turning, turn to earn, or churning," in which sales agents return once a year to pitch a "new and improved" insurance policy. By convincing a buyer to cancel a good policy a sales agent subjects a customer to higher insurance premiums and new waiting periods for the sake of earning a new commission. state department of insurances commonly report receiving complaints of this type of misconduct. Sell, sell, sell the darn policy long term care insurance, like life insurance, routinely pays a high percentage of the first year's premium to the sales agent. In the long term care field the sales commissions are usually 50 to 66% of the first year's insurance premium. The average long term care insurance commission is 48.5%, which is enormous. When policies are renewed, a long term care agent earns an average commission of 13% of the premium. By way of comparison, more readily sold auto long term care insurance policies pay ten percent commissions on new policies and 5% on renewals, which in some cases only continue for a specified period. Because of the need to "sell" long term care and the time necessary to secure a purchaser, companies offering a long term policy with $200-per-day benefits for three years and with compound-inflation protection will pay commissions in the range of $2,000 for the first year of the long term care insurance policy, and $500 for every year the long term care insurance policy is renewed. If a consumer purchases such a policy at age 65 and pays insurance premiums for 20 years, the sales agent will earn $12,000 over the life of the long term care insurance policy. By focusing sales efforts on selected adult communities, such as synagogues, churches, senior centers, senior recreation programs, and senior neighborhoods, an aggressive agent with a thousand policyholders can generate a substantial cash flow with minimum overhead. Because they are dealing with a gullible market of unprotected consumers, insurance agents are rarely reported to state insurance investigators and few are charged with misrepresenting benefits or rights under the policies they sell. In virtually all states the Insurance Commissioner or the State Department of Insurance does not have financial resources to conduct undercover investigations and that is the only way the unscrupulous are caught. The little undercover enforcement is targeted at thieves engaged in criminal activity, rather than misleading sales presentations, which is believed to be less serious, although the damage can be as equally devastating to the victim. An Undercover Investigation in Florida Salesmen promoting long term care routinely urge the elderly to buy protection to preserve their life savings, as was shown by an undercover investigation spearheaded by the Florida Commissioner of Consumer Affairs. A sales brochure claimed that the company's "Individual long term Care insurance plan will allow you to protect your assets and insure your independence should you require long term care services." Unfortunately for the average American, with or without a long term care policy, life savings are still at risk. Most policies, in all probability, will not cover the total cost of extended medical care 10 to 15 years after the long term care insurance policy is purchased. the long term care insurance policyholder will always be out of pocket for some portion of care, especially if the long term care insurance policy provides a limit, or cap, on the available benefit unless it provides for inflation protection. To understand why this is the case apply the Rule of 72 to calculate how often the charge for nursing care today will double. Assuming a 6% rate of inflation in the medical sector, a nursing facility charging $150 a day will be charging $300 a day in 12 years. Unless a long term care policy has equivalent inflation protection, it will never keep pace. the long term care insurance policyholder will always have to pay for some care from accumulated savings or home equity. A long term care insurance policy purchased in 1995 that would actually cover the anticipated cost of an average nursing home in 2010 would have to pay $200 daily benefit inflated by five percent on a compound basis or a $235 daily benefit using a five percent simple inflation factor. And even at these high levels, seniors would still exhaust personal assets for each year of care after 2010, or even sooner assuming nursing costs home inflate at a greater than expected rate. Although a policy with high benefit amounts could be expected to cost $3,000 annually, many agents sell policies providing much lower benefit levels costing $2,000 per year. These sales personnel routinely claim that such a policy will cover all long term care expenses, which is not true. In the Florida special investigation, an agent selling a plan that provided $200 a day with a simple five percent inflation protection said, "...this is the one most people go for because it pays all the costs that are involved. It pays up to $200 a day for your care in nursing home, $6,000 per month for the nursing home benefit, which is about what nursing homes are in this area. These benefits are going to increase every year for 20 years at the rate of inflation." Sounds good, but if benefits increase at only a five-percent simple-inflation rate, less than the predicted six-percent rate of nursing home inflation, this proposal cannot "pay all the costs that are involved." If the consumer should need benefits at age 80 the long term care insurance policy is $16,000 short and every year thereafter the amount increases. At age 85 this customer would be out of pocket approximately $50,000 for every year of needed care. A Conseco long term care agent reported: "I think that if you have the five-percent simple interest, you'll be pretty much keeping up with it fairly well. You might have a little bit that's not covered, but you can buy $220 a day." In this case, at age 80 the shortfall would be $16,000 per year. If the consumer bought the $220-a-day benefit, the shortage would be $3,000, but then the difference in insurance premiums paid in the interim would be substantial. A New York Life agent claimed that for a $2,400 annual premium, "the best kind of protection" could be bought, i.e. a $150 daily benefit. Obviously, this is totally insufficient to cover actual costs. Protected from Very High insurance premiums on a Long Term Care Policy Customers are often told by long term care agents that their insurance policies could not be canceled and that premium costs would remain level, a promise that everyone would like to believe, but it is not that simple. Insurance companies cannot unilaterally raise insurance premiums on any one individual policy, but they can petition state insurance commissioners or departments of insurance for legal authority to raise insurance premiums for all policyholders in a given pool of insured and then raise rates for everyone in that class. Despite the promises by long term care agents that insurance premiums are fixed and will not increase, insurance premiums have increased and are expected to increase in the future. Experts in industry, government, and consumer advocacy organizations expect it to continue. No one has yet found a company that decreased rates in the long term care field. According to an officer with Ohio Life and Accident, "The next five years will produce rate increases as the rule rather than the exception for most companies currently marketing long term care insurance." The U.S. Government Accounting Office also found that, "because the long term care insurance market is still developing, the extent to which policy prices will increase remains uncertain." Consumers Reports [July, 1991] describes the precarious future of long term care insurance premiums as follows: Companies can justify lower insurance premiums by underestimating the dollar value of claims they will eventually have to pay or by overestimating the number of policyholders who will drop their coverage before they ever file a claim. Some insurers are doing both. Either way, if more claims materialize than the company has counted on, it will have to raise policyholders' insurance premiums or risk going out of business. Such predictions are a realistic appraisal of what can be expected. For example when Ohio Life and Accident took over United Equitable's policies, the company raised insurance premiums between 103% and 213%. The expected result would be that many would cancel their coverage. A U.S. Congressional study reports that 66 companies requested rate increases nationally in 1990, and 60 were approved. The increases averaged 31.7%.
Next to no one understands what long term care involves at the time when they purchase a policy. Restrictions are not truly understood until care is needed. Agents readily gloss over restrictions on their insurance policies and misstate what is actually provided. A Florida Life agent described respite care as informal care, even that provided by "a friend." Actually, the long term care insurance policy defines it as "care provided by or through a Home Care Agency, including companion care or live-in care, to temporarily relieve other care providers in the Home Convalescent Unit." This does not cover services provided by members of the long term care insurance policyholder's immediate family or friends. When asked if consumers could spend their insurance benefits however they wanted, a CNA agent agreed. Read the fine print. the long term care insurance policy specifically lists what is covered by nursing homes as well as home-health-care services. The carrier is not going to turn over a check to the insured under this policy. Qualifying will not be easy on a Long Term Care Insurance Policy In the Florida investigation salesmen told customers that policyholders simply had to get a note from their doctor to qualify for benefits. That is far from the truth. Under all policies there are critical "triggers" for receiving benefits, such as not being able to perform activities of daily living or sustaining a mental disability. Even worse, some argue that the customer's personal doctor's order could not be overruled by the carrier's physician. This occurred even though nearly all policies can demand a medical examination of the claimant in order to determine eligibility for benefits. An AMEX manager told undercover agents that "your nursing home stay is covered when your doctor, not our doctor, not somebody else's physician, gives approval. This is what distinguished us from other companies, and this is why we have the American Health Care endorsement." Read the long term care insurance policy: "we reserve the right, as part of the review, to do a face-to-face assessment or to require you to take a physical examination paid for by us. Similar reviews may be required, at reasonable intervals, to determine your eligibility for continued benefits. We may use an outside service to assist in evaluating your condition; but any decision will be made by us based on consistently applied, reasonable standards." According to a Florida Life agent promised if "you're sick, they'll pay." Under the actual policy an insured could be sick and still not meet the restrictive "continual one-one-one assistance" standard in the long term care insurance policy. Many times the trigger requirements are grossly misstated. In one case a Travelers agent said that not being able to take medications was a trigger. However, taking medications is not one of the "activities of daily living" described in the Travelers policy and a long term care insurance policyholder would not qualify to receive benefits if he or she could not take their own medications. In another case when asked what activities-of-daily-living criteria were the triggers for benefits under an IDS policy, that agent said "basic taking care of the house." However, the long term care insurance policy language is clear and unambiguous. The definition of daily living is: bathing, dressing, toileting, continence, transferring and feeding. Filing a claim will be real hard on a Long Term Care Insurance Policy Most consumers know nothing about the important requirements for filing claims until policy benefits are needed. It is a tragic pitfall for the unwary. Nearly all long term care policies in Florida, for example, require that the insured give written notice to the company within 30 days of disability. Most policies require verification of disability not just once but every 30 to 90 days. Giving timely notice and continuing to verify disability can be a daunting task for a long term care claimant often suffering from a serious disability. Insurance companies can and will deny benefits if the insured does not comply with guidelines for filing claims or cannot meet exactly the criteria to qualify for benefits. If a claim is denied consumers have little recourse other than contacting their State Department of Insurance, or filing suit. Few contracts provide for appeal rights and force a long term care insurance policyholder to proceed with filing a suit to obtain benefits. On the other hand, the Florida investigation found agents promising that filing a claim was "a very easy, uncomplicated process. You make a phone call to an 800 number, notifying the company that this individual is going to go on claim and that there's going to be a claim form that the doctor, your doctor, is going to complete and send up to us." A reading of that company's policy requires the insured submit a "written notice of claim" within 60 days after a covered loss and a "proof of loss," including copies of medical records and/or telephone consultations with a primary physician and with providers of health care services. An UNUM agent said, "When you receive the long term care insurance policy, there's a form inside. But actually you would call me. That's why I'm here, to call me." The written policy though requires that the insured must give the company "written notice of claim within 30 days of the Loss of Functional Capacity or Cognitive Impairment" and that the company "will send you our initial claim forms when we receive your written notice of claim." The customer must also provide an initial proof of claim no later than 90 days after the date of loss, and must give proof of continued loss at intervals requested by the company. Finally, the contract notes that the company may require "an independent medical examination" and that it reserves "the right to select the physician to perform the independent medical examination." Independent medical examination in this case is all to often a long term care insurance company medical examination by a physician specially selected to be disposed towards the carrier. Really mean stuff Fear, Fear, Fear Long Term Care Insurance agents skillfully utilize carefully contrived scripts to stampede customers to buy now by using the fear of financial ruin, becoming dependent on family or going on "welfare" because of catastrophic medical bills. Sometimes more subtle tactics are used, but real scare tactics are effectively used because they motivate many seniors to buy coverage in the first place and sales agents readily manipulate this common concern. Not Insurable in the Future Closing the sale is often accomplished by telling the customer that he/she risks being uninsurable in the future, but if the consumer hands "over a check today," he or she would be covered even if an illness or disability struck tomorrow. Not so easy. Agents do not explain that a customer could still be turned down for the long term care insurance policy and he or she would not receive any benefits, regardless of whether the prospective insured paid the whole premium immediately. Another technique is to threaten the risk of increasing insurance premiums in the future so that consumers will "buy now." But buying long term care insurance at a younger age can be a mistake. Many policies limit increases for inflation after 20 years or at the point where the original benefit doubles, so a consumer buying early in life could be left with inadequate benefits when needed. Small Print and the Big Lie on a Long Term Care Insurance Policy In 1990 the U.S. House Select Committee on Aging reported that it had received a wide range of complaints, which included delays in receiving premium refunds, twisting and churning, duplicate sales, overselling, clean sheeting, and agent misrepresentations. The Committee also heard numerous complaints from consumers who have been damaged by anti-consumer provisions in policies that benefited the carriers. The number and severity of those complaints are a direct warning to the elderly to protect themselves from similar abuses. One customer wanted to purchase nursing home coverage for an 83-year-old aunt with arthritis and suspected Alzheimer's disease. An insurance agent sold the customer a policy with an annual premium of $1,735 promising that Alzheimer's was a covered disability. However, the company later denied a claim on the grounds that the application had not noted Alzheimer's. The aunt is now on Medicaid. Out-of-pocket cost for the first two months of care totaled $7,000. The only avenue for relief was to retain a attorney. A widow from Florida died penniless in a nursing home, even though she had two policies and had paid thousand of dollars in insurance premiums for nearly 10 years. The carrier denied nursing-home care because the care needed did not meet the definition of "skilled" care described in the policies. The sales agent had promised the long term care insurance policy would provide financial security. It did not. An Illinois man purchased a nursing-home policy in 1981 for $1,000 a year. By 1985 his annual insurance premiums had increased to more than $5,000. In 1987, he cancelled his coverage because his long term care insurance company raised his annual premium to $8,000 a year. A few years later, he needed care, and paid the entire cost himself because he no longer was covered and did not have nonforfeiture of benefit protection. In Missouri, a physician
prescribes nursing home care for a man who was unable to care for
himself and selected an intermediate-care facility. The director of
the facility agreed the placement was correct. Nonetheless the carrier
denied the claim on the ground there was "no indication they
any medical regimen was being pursued which would require the continued
residency on a clinical basis." The carrier vetoes the personal
physician and the nursing home director. Buyers of Long Term Care Insurance must Beware. Switching Companies and Plans is Tricky Before you buy a new policy, make sure it is better than the one you already have. Even if your agent has switched companies and wants you to switch too, carefully consider any changes. If you do decide to switch, make sure your new application is accepted before you cancel the old policy. If you cancel a policy in the middle of its term, most companies will not return any insurance premiums you had paid. If you switch policies, pre-existing conditions clauses may have to run again, and you may not have coverage for certain conditions for a specific period of time. It may be appropriate to switch, however, if you have an old policy with requirements for a prior hospital stay or for prior levels of care, and you are in good health and can qualify for another policy. If you have a good policy you bought when you were younger, you might ask if the insurance carrier can enhance the long term care insurance policy, for example, by adding inflation protection. It might be cheaper to keep the long term care insurance policy you have and improve it rather than buy a new one. Consider this when Buying a Long Term Care Insurance Policy Here are some points to keep in mind as you shop. Always check with several companies and agents Is it wise to contact several companies (and agents) before you buy. Be sure to compare benefits, the types of facilities you have to be in to receive coverage, the limitations of coverage, the exclusions, and, or course, the insurance premiums. (Policies that provide identical coverage and benefits may not necessarily cost the same.) Take your time and compare outlines of coverage Never let anyone pressure or scare you into making a quick decision. Don't buy an insurance policy the first time an agent comes calling. Ask the long term care insurance to give you an outline of coverage. The outline of coverage summarizes the long term care insurance policy's benefits and highlights important features. Compare outlines of coverage for several policies. Understand the policies Make sure you know what the long term care insurance policy covers and what it does not. If you have any questions, ask the long term care insurance or call the long term care insurance company's home office before you buy. If the long term care insurance agent gives you answers that are vague or differ from information in the company literature, or if you have doubts about the long term care insurance policy, tell the long term care insurance you will get back to him or her later and don't hesitate to call or write to the company and ask your questions. Beware of an agent who claims the long term care insurance policy can be offered only once. Some long term care insurance companies may sell their insurance policies through the mail, bypassing agents entirely If you decide to buy an insurance policy through the mail, contact the company if you don't understand how the long term care insurance policy works. Don't be misled by advertising Don't be misled by the endorsements of celebrities. Most of these people are professional actors who are paid to advertise. They are not long term care insurance experts. Neither Medicare nor any other federal agency endorses or sells long term care insurance policies. Be skeptical of any advertising that suggests the federal government is involved with this type of insurance. Be wary of cards received in the mail that look as if they were sent by the federal government. They may actually have been sent by long term care insurance companies or agents trying to find potential buyers. Be skeptical if you are asked questions over the phone about Medicare or your long term care insurance. Any information you give may be sold to long term care insurance agents who will call you or come to your home. Don't buy multiple long term care insurance policies It is not necessary to purchase several long term care insurance policies to get enough coverage. One good policy is enough. Your medical history is extremely important Accurately disclosing your medical history is extremely important. Make sure you fill out the application completely and accurately. If a long term care insurance agent fills out the application for you, don't sign it unless you have read it and made sure that all of the medical information is correct. If information about the state of your health is misstated, incomplete, or wrong, the company will refuse to pay your claims and cancel your policy. For that reason you should always fully and completely explain the full extent of your medical condition. If you are unsure about any particular item be sure to state "do not recall." And as a catchall to protect yourself, always refer the carrier to your doctors' records of the care provided to you and list the names and address of your doctors. Never pay the long term care insurance in cash Write a check and make it payable to the long term care insurance company. | |||||