A Long-Term Problem?

Last month we looked at the public outcry over long-term care insurance and the resulting repercussions throughout the industry, as companies strove to overcome a public relations disaster from widespread coverage of alleged abuses by a few companies. You may recall that recent press coverage alleged severe problems, charging that some companies stalled on paying claims, in some cases until policyholders had died, or denied claims that were legitimate under existing contracts.

While statistics showed that most of the problems originated with only a few companies, the reaction of the press and public seemed to imply that the difficulties might be more widespread. We spoke with advisors and industry professionals, and found that abuses, while they may be confined to just a few insurers, have definitely created an atmosphere of concern–not only among the general public, but also among professionals who advise on the purchase of such policies and sell them to clients.

The level of concern among professionals does seem to be directly related to the experiences each has had with claims filed on policies. Greg Olsen, a partner with Lenox Advisors in New York, when asked how he felt when clients broached questions related to the recent news coverage, said, “We like when our clients bring it up because it actually accentuates the companies that were selling long-term care insurance before there was any standardization. Those are companies that are mostly out of business right now, and of course they’re not going to want to pay claims.”

However, Olsen also said that the average client age at Lenox was “not the [national] average of age 58 or 60; they’re more 45-48.” And when asked about Lenox’s clients’ experience with claims, he noted that the firm has “hundreds of clients with LTC policies in effect, with less than 2% in claim because of the young age of the client base.” Lenox uses it as a planning tool, he explains, to protect client assets against a possible future disability “that can cost them hundreds of thousands of dollars.”

It Can Happen to Anyone

Not all planners were so sanguine about the industry criticism in the news coverage. In fact, one was in the process of fighting a claim denial for her own grandmother. Holly Carroccio, of H.F.G. Advisors in Dallas, has her grandmother Marie Billingslea as an investment client. Holly’s mother, Diane Billingslea, who is an insurance agent, had sold Marie a long-term care policy from Life Investors Insurance, a company Diane was familiar with and considered to be reliable. Marie is currently in assisted care and Life Investors has denied her claim.

We spoke with both Holly and Diane about the situation. The policy, in effect for some 11 years, was to cover Marie Billingslea in the event she needed care. For the coverage to go into effect, says Holly, the insured had to need assistance with two activities of daily living (ADLs) or have cognitive impairments.

Marie Billingslea’s story, as described by her daughter and granddaughter, tracked that of so many older people currently in assisted living or LTC. She was growing increasingly forgetful; her short-term memory led to problems in taking medication and in remembering to eat. Says Holly, “She would not eat for long periods of time, and was getting real thin and gray-looking.” Marie lived two hours away from her daughter Diane, in Paris, Texas, but even so Diane would make the four-hour round trip on at least a weekly basis — more often when she would get a phone call from her mother that she needed to go to the emergency room because “something was wrong.” Nothing was wrong, says Holly, and Diane took her mother to specialist after specialist to be sure.

But things came to a head, says Holly, when Marie overdosed on full-grain aspirin last summer. “She wouldn’t throw out old medications,” relates Holly. “If one was good, two were better, and if she was in pain she’d take way higher doses than she needed.” When Marie overdosed on the aspirin, she ended up in the hospital with a severe kidney infection, and there the doctor diagnosed her with severe dementia, as well as obvious chronic mental deterioration from which she would not recover. He recommended that she get long-term care.

“We had a real battle with her,” says Holly, “because that wasn’t what she wanted and she thought she was fine.” But at last, in August of 2006, after Diane had “turned her life upside down” to care for her mother, Marie entered an assisted living facility.