Long term care insurance executives reacted heatedly last week to a front-page Wall Street Journal article that raised questions about state programs backing private long term care insurance.
Many states are pushing LTC insurance because they see it as a way to curb the soaring costs of LTC paid under Medicaid, the article by WSJ reporters Jennifer Levitz and Kelly Greene noted. But they quoted critics who contend that LTC insurance offers few if any benefits for many lower-income people and that state endorsements should therefore be qualified.
Other allegations in the article included that the policies pay relatively high commissions to agents, that legitimate claims of policy owners were sometimes denied and that Partnership programs don’t really save Medicaid much at all.
One critic quoted in the article, Patricia White, a director of the National Association of Free Clinics, Alexandria, Va., argued that many people of modest means “can’t even buy medicine; why should they buy a [long term care] policy?”
The article labeled state LTC Partnership programs as “marketing partnerships” between states and insurers.
Under the Deficit Reduction Act of 2006, states are allowed to adopt a qualified LTC Partnership program, which is tied to Medicaid, if they meet certain requirements. Among its key provisions is asset protection for the insured, under which a policy holder can shield assets from Medicaid, up to the amount of their Partnership policy, if they ultimately need LTC and exhaust their policy benefits.
The WSJ article cites an LTC promotional effort by the California Partnership for Long Term Care, a state agency that sent out 6 million letters to Californians last year touting the benefits of LTC insurance. Many recipients were low-to-middle income people, the article states.
The letter, sent under California Gov. Arnold Schwarzenegger’s signature, directed consumers seeking more information to call a phone number, where people answered the phone as the California Partnership for Long Term Care, the article reports. That number, it turned out, actually belonged to a direct-marketing firm, Senior Direct Inc., which referred callers to insurance agents, who then tried to sell them policies.
California went beyond what most states are doing to promote their Partnership programs, acknowledges one expert who helped design the state’s marketing program.
The expert, Claude Thau, an LTC insurance consultant in Overland Park, Kan., maintains that referring inquirers to live agents is an exception to usual state practices. But he says it’s a sound idea, because agents in the program support its cost through fees.
“My original draft proposal was careful to say, ‘You might want to consider a Partnership policy, but we don’t endorse it,’ ” Thau says.
He doesn’t know how much of his original plan was adopted by California. But he did recommend that any materials sent out contain caveats to ensure no recipient thought the state endorsed any agent or one plan over another.
Thau also emphasized that under the DRA, Partnership states must impose strict suitability standards for LTC policies.
The journalists who wrote “didn’t do the research they should have done,” Thau said. “They should be ashamed and embarrassed.”
Among LTC carriers mentioned in the WSJ article was Penn Treaty, which the writers reported was being investigated by the South Dakota Division of Insurance over complaints that it might be wrongfully denying legitimate claims.
“We have good relations with all the states and strive not to have any complaints,” says Cameron Waite, executive vice president of strategic operations at Penn Treaty American Corp., Allentown, Pa. “On the rare occasions when complaints do occur, we try to get more information and to rectify them or help the policyholder understand why the claim was denied.”
Penn Treaty has had a 60% reduction in claims-related complaints in the last 4 years after it installed an internal multiple-stage appeals process, Waite says.
Penn Treaty also is firmly in favor of the Partnership programs, he said.
“We believe Partnerships plans not only enable consumers to protect an element of their assets but also provides them with freedom of choice in care for potential future needs,” Waite said.
Frank Keating, president, American Council of Life Insurers, Washington, wrote a letter to the editors of the WSJ saying the article showed “unfair reporting and a shallow depiction of the nation’s emerging long term care crisis.”
Keating argued that the article depicted the entire LTC insurance industry “on the basis of the alleged problems of a few companies. Its shallowness is demonstrated by a lack of recognition of the threat of increasing Medicaid costs to state budgets fueled by the pending long term care needs of 78 million baby boomers.”
A spokesman for America’s Health Insurance Plans also criticized the article as “misleading both about the value of long term care insurance and of long term care Partnership programs in the states.”
Data for 2005 shows only 251 LTC policyholders in Partnership states actually exhausted their benefits, says Mohit Ghose, the spokesman. Even fewer filed for asset protection under Medicaid, he adds.
“We believe the public-private Partnerships program will provide value for both states and for individuals who plan for their future long term care needs and are able to preserve retirement savings and save themselves from impoverishment,” he said. “Contrary to assertions made in the article, we know insurers observe strict standards that only consumers with certain income levels purchase policies.”
AHIP’s own analysis of data from insurers also shows “a vast majority of claims are paid,” he said. Moreover, when claims were unpaid, it was largely because they did not meet the policy terms, had not met deduction requirements or had an expired policy, he said.