The state of Oregon has introduced new protections for consumers who buy long-term care insurance (LTCI) coverage there.
The new Oregon law took effect July 1.
Under the new law, LTCI policyholders must have claims paid promptly and have the right to appeal should the insurance company arrive at a decision to deny benefits. The new law also provides this protection to those with existing policies. For holders of in-force policies, the protections become effective when the policy renews.
LTCI companies must pay claims that are submitted with all the required information within 30 days of receiving the claim. Should the insurer fail to pay on time, the insurer must pay the claim plus interest.
In addition, policyholders may appeal an insurance company’s decision of ineligibility for benefits. Should the internal review by the company uphold the denial, the consumers may request an external review by an independent review organization. The insurance company pays for the cost for independent review.
In some ways, I think this is a positive story.
It can help agents remind consumers of an important point: The private LTCI market is a big market. My group, the American Association for Long Term Care Insurance, has found that insurers paid nearly $7 billion in claims last year to more than 200,000 claimants.
On the other hand, I think some might see stories about the new Oregon law and miss an important point: Insurers have an obligation look at claims carefully.
Certainly, consumers are entitled to have their claims paid promptly and ought to have the right to appeal. But, in my experience, when claims are denied, it is generally because the policyholder has not met the requirements of the policy.
The U.S. Department of Health and Human Services recently conducted an audit of insurers. The auditors noted that LTCI companies paid more claims than the auditors would have approved.
More people own LTCI coverage these days, and, naturally, that means more fraudulent claims are being filed.
We’ve seen a report on one fraudulent LTCI claim that amounted to nearly $600,000.
Burdensome regulation is one of the reasons many LTCI companies have decided to cease selling new policies and turn responsibility for the long-term care needs of Americans without enormous savings over to states’ taxpayers.