LONG TERM CARE INSURANCE--Beware!
Fraud and Mismanagement in Long Term Care Insurance
A front page story in today's NY Times, March 26, 2007, entitled "Aging Frail and Fighting Insurers to Pay Up," details fraud and mismanagement found in several long term care insurers who have been trying to cash in on the rising numbers of aged Americans. The clear message from the story is when shopping for long term care insurance, choose your insurance company and read the policy carefully before signing up. Apparently there are numerous "Catch 22s" in the policies and their administration.
In 2003, a subsidiary of Conseco, Bankers Life and Casualty, sent an 85- year-old woman suffering from dementia the wrong form to fill out, then denied her claim because of improper paperwork.
Last year Penn Treaty American decided that a 92-year-old man had so improved that he should leave his nursing home despite his forgetfullness, anxiety and doctors orders to seek continued care.
Another suit contended that a company owned by John Hancock Insurance Company had tried to rescind the coverage of a 72-year-old man when he was diagnosed with Alzheimer's four years after buying the policy.
Policyholders have lodged thousands of complaints against the major long-term care insurers.
Some companies have many fewer complaints than others. The largest insurer, Genworth Financial received only one complaint for every 12,434 policies. [Caveat: This may understate the problem because most complaints arise only when the policy holder files a claim. I suspect that by far the greatest number of policies have not yet experienced a claim.]
When Mrs. Derks bought her policy from a DOOR-TO-DOOR SALESMAN in 1990, she was unaware tht she represented the industry's newest goldmine....long term care policies were becoming one of the insurance industry's fastest growing products. Conseco , Bankers Life and Penn Treaty were aggressively signing up clients who were not in the best health at rates far below their competitors' in order to win more business....Cracks in the business soon started to appear...As insurers began realizing their miscalculations they persuaded insurance commissioners in California, Pennsylvania and Florida to approve rate increases as much as 40 percent a year...By 2002, Conseco's payouts exceeded revenue.
Initially, Conseco told Mrs. Derks's daughter that her claim would go smoothly and the family began paying the nursing home's $1,900 per month fee. But three months after submitting her claim Mrs. Derks received a letter denying her entire claim because she had not submitted proof of illness. Yet a copy of Mrs. Derks's policy mentions no requirement for proof of illness. It requires only that confinement be ordered by a physician.
"This is medically necessary!!!" reads a form signed by Mrs. Derks's physician. "This has been filled out three times! This person needs assistance!"
Seven months later Conseco sent another letter, this time denying Mrs. Derks's claim because her policy "requires a staffed registered nurse 24 hours per day." Her policy does not mention such a requirement.
Conseco also sent letters denying Mrs. Derks's claim because her policy had an "assisted living facility rider," and because Mrs. Derks "does not have an assisted living facility rider." In all the family received more than a dozen letters from the company. Many contradicted one another, and frequently cite requirements that are nowhere mentioned in Mrs. Derks's policy.
Conseco, asked by a reporter about the company's handling of the Derks claim, declined to answer, citing the pending litigation. In court documents, the company denied Mrs. Derks's allegations without specifing why the claim was denied.
Here's a link to the long NY Times story by Charles Duhigg: