Iowans need legislation that would give owners of long term care insurance policies the same rights to contest claims as those given for health insurance in the state, Insurance Commissioner Susan Voss says.
Voss made her recommendation in a report on LTC insurance submitted to Gov. Chet Culver on Sept. 18.
Gov. Culver requested the report in June following media accounts of unfair claims-handling, high premium increases and other problems affecting LTC insurance.
When a health insurer denies coverage, Iowa law allows the policyholder to ask a neutral third party to rule on the issue. That right is not extended to owners of LTC policies, Voss notes in her report.
In 1999, the Iowa legislature enacted a requirement that allows a policyholder to request that an outside expert to determine the medical necessity of a treatment that is rejected by a carrier.
“A similar system for long term care insurance claims would provide an efficient and cost effective mechanism for consumers to have medical claim issues resolved,” Voss said in her report.
LTC insurance carriers have also done a poor job of pricing their products, Voss said.
Not only has the industry often provided poor customer service, but the state insurance division itself has also fallen short sometimes when LTC policyholders asked for help, said Voss.
Carriers often underestimated price components, such as the number of policyholders who would file claims and policy lapse rates, Voss observed.
When policyholders or their families call to complain or ask questions, carriers often leave them on hold for excessive periods or lose documents consumers send to them, Voss said.
Her division also had sometimes failed to review some policyholder’s complaints thoroughly, Voss acknowledged. Her staff will conduct a thorough review of closed cases in the division’s files to evaluate the problem and advise further action, she said.
However, the division’s survey of the top 20 LTC carriers found claims denials and rate increases in the state, for the most part, were not significant, she reported.
Claim denial rates were generally below 1% in Iowa last year. As for rate increases requested by a total of 15 carriers, the average approved increase last year was about 21%, compared to a requested average increase of 33%, Voss reported.
Approved rate increases affected 29% of policies in the state, she reported. “This means that 71% of the Iowa long term care insurance market did not have a premium increase in 2006,” Voss stated.
Using a weighted average for the year shows the overall increase for LTC policies in the state was just over 7%, compared to about 10% the year before, she added.
Among other measures to improve consumer protections for LTC insurance, Voss said the state should authorize consumer-initiated rating hearings for LTC insurance, okay a prompt-pay law for LTC claims and adopt the 2006 Long Term Care Insurance Model Act proposed by the National Association of Insurance Commissioners.
Voss also made the following proposals in her report:
Require carriers to make a one-time offer of other types of LTC benefits to policyholders who have only nursing home coverage.
Standardize policy terminology and definitions.
Require LTC carriers to provide clear policy summaries to policyholders.
Review all marketing materials on LTC products before use by carriers and agents.
Work with other state agencies to educate consumers about insurance and long term care.
Establish education requirements for insurance agents who sell LTC insurance in the state. (The division already adopted this mandate Sept. 7.)
Review and approve marketing materials on long term care used by insurers and agents.
Create a unit to handle all types of consumer insurance complaints.
One frequent critic of Voss’s division had mild praise for the report.
“It appears a number of things in the report are on track,” says Donald J. Doudna, president of the Family Business Resource Center in West Des Moines. Recommendations on improving suitability, claims processing and training of agents were particularly laudable, he says.
“It took a long time for the commissioner to listen to the consumer,” states Doudna, who says he has had an LTC policy for 15 years. “Some companies and agents in Iowa should lose their licenses. The commissioner needs the courage to move forward. Companies forget they are in the business of paying claims. Any that don’t shouldn’t be licensed any longer.”
John Greene, legislative director of Federal and regulatory affairs for the National Association of Health Underwriters, Arlington, Va., thinks the report’s recommendations range from laudatory to unnecessary.
The big concern for Greene was Voss’s proposal that the insurance division review all marketing materials used by carriers and agents. The fact that agents’ materials would be included could be a “nightmare” for them, Greene warns.
“A lot of agents create marketing materials to show consumers the differences between products,” he says. “This is a benefit to consumers.” Having to run such brochures through the state for approval “is going to create chaos,” he cautions.
Greene also scorned the idea of holding consumer-initiated rate hearings. “I can’t imagine any consumer saying, ‘Yes, please raise my rates,’ ” he says.
Another industry expert, Jesse Slome, called the report “a balanced look” that helps counter critical articles about the industry that have appeared in the press in the past year.
Some of the report’s criticism of industry practices with policy pricing and lapse rates was not accurate, however, argues Slome, executive director of the American Association for Long-Term Care Insurance, Westlake Village, Calif.
“The report includes a regrettable reference to the industry having ‘done a poor job of making assumptions in regard to pricing long term care insurance,’ ” he says.
Much of that problem stemmed from carriers having underestimated the costs and length of time claimants would need care, Slome says. In addition, they overestimated policy lapse rates. “So the good news, not included in the conclusions, is that insurers paid more in benefits for people with policies,” Slome says. “These Iowans clearly benefited more than the insurance companies anticipated.”