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House Panel Starts Probe Of LTC Insurers' Claims Practices

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A congressional committee investigating the long term care insurance claims practices of Conseco Inc. and Penn Treaty American Corp. could ultimately take a look at the claim procedures of the whole industry, according to a source close to the committee.

Investigators for the Committee on Energy and Commerce, headed by Rep. John Dingell, D-Mich., and Bart Stupak, D-Mich., chairman of the committee’s Oversight and Investigations Subcommittee, announced the investigation late last month.

The congressmen launched the investigation because of concern about a March 29 New York Times article alleging that many consumers had their legitimate LTC claims denied or seriously delayed by carriers after years of paying premiums.

However, a trade group that reports life and health insurance claims to the California Department of Insurance now says the high LTC claim denial rates in the state, which were quoted by the Times, are inaccurate.

A spokeswoman for the California DOI also said the department expects to report on the extent of denied LTC claims. The DOI had asserted that 24% of LTC claims submitted in the state were denied.

“The industry as a whole and Penn Treaty vehemently felt [that figure] was incorrect,” said an executive for Penn Treaty, Allentown, Pa.

He made his comment before the Association of California Life and Health Insurance Companies, which had submitted the claims data, said it planned to amend its figures.

In addition to the disputed data, the Times article recounted other evidence to back its assertion that thousands of LTC claims had been denied unfairly by insurers.

In letters to both Conseco, Carmel, Ind., and Penn Treaty, Dingell and Stupak stated their concerns about the Times’ accounts of problems with the way insurers treat some LTC insurance claims.

Some insurers “may have developed procedures that make it difficult–if not impossible–for policyholders to get paid,” Dingell and Stupak wrote.

Although LTC insurance is regulated by the states, the committee’s attention is focused on the net impact of excessive claims denial on Medicare and Medicaid.

Both Conseco and Penn Treaty have 3 weeks following receipt of the May 23 letter to provide the requested information.

Results of the investigation are expected this fall, according to the source familiar with the probe.

Commenting on the negative publicity for the industry, Cameron Waite, executive vice president of strategic operations for Penn Treaty, says LTC insurance is very important to the elderly, and that is Penn Treaty’s reason for being in the business.

“We hope Congress’s inquiries will educate the public even more about the importance of long term care insurance. It will also help Congress understand its importance to reducing Medicaid financing,” Waite says.

The Times article raised legitimate questions and restirred an emotional issue, he says. “But if the companies that are requested to supply information do that, I think Congress will regain confidence.”

Waite insists that Penn Treaty looks at each claim and related information as fairly and quickly as possible to determine eligibility. “Our own records show that once the requested information is submitted on eligibility requirements, 80% are paid within 20 days, and 75% within 15 days,” he says.

The company has showed consistent improvement on claims paying against its own benchmarks, Waite adds.

“We go to great lengths to assure claims are paid promptly and properly,” he says. “We receive between 8,000 and 10,000 claims every year. Generally, those claims will require medical records to help us determine the kind of care needed, often requiring additional information from doctors.”

Part of the disparity in data reported by different states about LTC claim denials lies in the different ways denials are counted, he says.

There has been a “disconnect” between how one company or another reports its experience, Waite says. For example, Penn Treaty may list a simple inquiry from a customer as a denial if the customer merely asked if he were covered and was told he was not. Or it might list an application as denied when the customer had simply not yet met the elimination period stated in the policy.

“The industry as a whole has not worked hard to define what is a denial,” he says.

Companies such as Penn Treaty and Conseco, which have been in the LTC business longer than most other competitors, may also have skewed denial figures because many of their policies are decades old, he says. “To compare an older block of business to a company with a substantially new business is not a proper comparison.”

Anne Eowan, vice president of government affairs for the Association of California Life and Health Insurance Companies, Sacramento, says her group recently reviewed data it reported to the state Department of Insurance and concluded some of the data was erroneous.

“The department agrees with that assessment,” Eowan says.

Part of the problem stemmed from lack of clarity on what the definition of a claim was, she adds.

“We hope to have better figures available soon,” she says. “The 24% figure [of denied LTC claims, which the ACLHIC had originally reported for 2005] is extraordinarily high and well beyond what has been seen in earlier years,” she says.

A spokeswoman for the state’s DOI says the department has opened its own examination on the issue. Preliminary evidence shows the 1-in-4 figure was perhaps skewed by reports of a few large companies, says the spokeswoman, Jennifer Kerns.

“There is anecdotal evidence that the actual denial rate is 8% to 10%,” says Kerns.

The DOI will probably issue a report on its findings in the fall, she says.