Another Media Flap Over LTC Insurance

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.