Time flies.

Can nice people and nice companies keep people who are obviously at a high risk of needing long-term care insurance (LTCI) from buying LTCI coverage?

What if the would-be applicants already could be defined as people who need LTCI?

What if the applicant was Helen Keller or Stephen Hawking, and was, at one and the same time, a highly productive, high-earning individual and someone who needed help with important activities of mundane daily living? What then?

Many have questioned the ethics and practicality of allowing the free use of medical underwriting in the sale of personal insurance.

In recent years, for example, the drafters of the Patient Protection and Affordable Care Act (PPACA) have included a provision that seems to forbid use of personal health information when health insurers are deciding whether to issue policies or price the policies they do issue.

It seems as if the wellness regulations that the U.S. Department of Health and Human Services has proposed wellness regulations could add footnotes to those limits. The draft regulations seem to give group health plans the ability to adjust rates by as much as 50 percent depending on how well employees participate in wellness programs and get health indicators, such as blood pressure, to what the plans and the government think of as being acceptable levels.

But the Senate was debating a treaty — apparently, probably a doomed treaty, for now, but a treaty that the Senate could possibly ratify — that includes provision, Article 25(e), that forbids use of disability information in life insurance underwriting as well as health insurance underwriting. 

It’s not really clear what that provision means, and it’s hard to find many discussions about it on the Web. But, in theory, “health insurance” could refer to disability insurance and long-term care insurance as well as major medical insurance, and, in theory (probably not, but, in very theoretical theory), maybe ratifying the treaty could somehow affect U.S. life and health underwriting standards. 

Australia, insurance policy specialists seem to be thinking that the treaty would let insurers continue to use any disability-based underwriting criteria that they could justify with actuarial data.

If Hellen Keller — who lived from 1880 to 1968 — came back to life and applied for LTCI coverage, and the Australian interpretation of Article 25(e) applied, maybe an LTCI carrier could deny Keller’s application based on the notion that she was already getting long-term care (LTC) services. Maybe a life insurer could have refused to issue her coverage based on the idea that the after effects of scarlet fever, the condition that apparently blinded her, could shorten her life. (Although, in reality, she did live to the age of 88.)

Insurance exists to spread the financial risk related to unhappy events that have not yet happened and are relatively unlikely to happen. Insurers do not want to “insure a burning house.”

Many patient advocates note that the people who already have serious health problems or serious problems with the activities of daily living (ADLs) are the people who need health and LTC finance programs the most.

Any acute-care health finance or LTC finance program in a developed country that leaves people with health problems, disabilities, or both to fend for themselves is not a particularly useful or serious program, the patient advocates say. 

For example: Christopher Roberton, a law professor at the University of Arizona and research associate with an affiliate of the Harvard law school recently published a blog entry in which he worries about the possibility that patients will refrain from getting Alzheimers brain scan tests because they fear the results will affect their eligibility for LTCI coverage.

“Since Medicaid remains the insurer of last resort especially in this area, the insurers’ cream-skimming imposes a huge burden on the state and federal governments, perhaps worse than the uncompensated care problem for regular health insurance,” Robertson says.

On the one hand: Sure, people who find out that Alzheimers is already eating away at their brains certainly need help with finding a way to prepare for the financial impact of having Alzheimers.

On the other hand: In the real world, if people who already know they have Alzheimers can buy private LTCI coverage on roughly the same basis as other people, and no one pumps in any subsidies or imposes any requirement that a large number of healthy individuals also buy coverage, every private LTCI program will soon end up covering only people who know they have Alzheimers or some or condition that is requiring or soon will require that they have LTCI coverage. Buying LTCI coverage from that pool would end up being a worse deal for those individuals than if they had all joined together to pay the premiums into a savings account. 

I don’t have the patience, or skills, to figure out the math, but my guess is that this would be one unusual group of people that would be better off pooling their money to buy lottery tickets, or alien invasion insurance.

So, what’s a way to reconcile the desire to help people in burning houses with the desire to make insurance a practical, affordable product?

One answer would be: Don’t try to reconcile such things, or, at least, not through any government action. Some of my smartest readers would suggest that trying to restrain free-market forces is a fast path to financial doom.

Those readers are probably right, in the long run. Maybe in the 30-year or 50-year medium run. But, right now, the reality is that most of us succumb to the idea that the government can somehow make things better, at least for now.

So, assuming that we allow for government intervention, and assuming that we have some financial resources, what then?

I think the short-term answer, while resources are available, is that we just about always need a two-tier system.

People with the cheap or free government/charity program/charity care protection should get coverage that keeps them alive and reasonably comfortable but not particularly happy, and not enough to keep their relatives happy. People who get depend on Medicaid for LTC services, for example, really shouldn’t be able to pass much more on to their children than the family photographs and the family papers.

The idea that anyone getting Medicaid LTC benefits (outside of a Long Term Care Partnership arrangement) can pass a house on to children is absurd.

People who make a serious effort to pay for their own medical care or LTC care should get much nicer, more convenient services.

And what of people who know from a very early age that they are uninsurable?

I think acute health care and LTCI should work a little like baby whole life insurance: Relatives buy whole life policies for newborns partly because it’s understood that the parents or the child can later convert the policy into a small amount of guaranteed-issue coverage.

What if we had a “baby grownup whole health rider”?

Maybe 21-year-olds could have a 6-month period in which they could decide to buy or not buy a whole health rider along with their acute health coverage.

Maybe, with the help of a government tax subsidy, the rates for the whole health policy riders could be pegged to the young adults’ income.

The small number of unlucky young adults who were already unhealthy enough to need LTC services could continue to get coverage through a government program that would provide access to reasonably nice LTC services.

Other young adults could pay to insure their access to acute health and LTC coverage as they went about their lives.

LTCI carriers would get small amounts of additional revenue from sensible, forward-thinking young people who, in most cases, would probably not be likely to need LTC services.

Young people who were prudent could protect their access to LTCI at a reasonable cost, even before they were buying full-blown LTCI coverage, and insurers could deny applications from older applicants with pre-existing conditions who had not thought to buy whole health riders with a clear conscience. knowing that those applicants had ignored their opportunity to protect their access to LTCI when they’d had the chance.

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