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LTCI Watch: Claims

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Idea: Maybe insurers should get ahead of the news cycle and do something about long-term care insurance (LTCI) claims, and claims for related or semi-related products, now, rather than waiting for consumer groups to get Congress to start hollering, and for Congress to goose the state regulators.

Some of the inspirations for this idea:

  • A life insurance agent readers who doesn’t sell much disability insurance wrote to ask me which carriers pay their claims smoothly.
  • When I searched for LTCI legislative news, I found a few state bills that deal with payment of LTCI claims.
  • I’ve been posting few articles about “gap filling” products, such as critical illness insurance and short-term care insurance (STCI), written by outside contributors.
  • A wonderful reader who, I know is right, and has my best interests at heart, tried to get me to buy LTCI coverage for myself.

For me, some of the barriers to buying LTCI coverage for myself include the usual cash flow concerns and fear of future cash flow fluctuations; underwriting concerns, including the health record consequences of a growing aversion to the idea of having anything to do with primary care doctors (a.ka., thieves with stethoscopes); and, really, anxiety about the prospects of civilization. 

Personally, I trust the big suppliers of LTCI to manage themselves better than the government manages Social Security and Medicare, and to do a better job of meeting their obligations, but I’m not that confident about things like dollars, or the coastline.

For me, thinking about what life might be like in the United States is 2050s is troubling. I’d rather just float along in a nice little bubble of comfort in which “Soylent Green” still seems to be a work of fiction.

Ron Iverson sent us a great article about STCI, and it hit me that, for an extreme economic pessimist, one of the advantages of STCI is that it seems to be a lot simpler and more practical than LTCI for an insurer to write, and that it seems to be the kind of product that I could envision possibly needing while the current version of the United States still exists.

The problem, though, with any type of insurance product that isn’t in every responsible taxpayer’s filing cabinet is wondering about claims. If insurance agents have trouble knowing which issuers of disability insurance pay claims well, how could I, consumer, possibly evaluate how well an insurer pays claims?

I would expect an insurer to be vigilant, and maybe somewhat hard on insureds who submit borderline claims, but I’d want an insurer to be good at paying clear-cut, clean claims promptly. If the insurer had financial problems, I would prefer that it simply be honest, figure out some way to get the rating agencies to stop throwing selective default hissy fits, and come up with a realistic plan for paying me in a way it could handle, not get me off its back by pretending that I’d messed up the paperwork.

My impression is that, aside from a few unlicensed programs run by obvious, outright crooks, the people at just about all medical and non-medical health insurers sincerely want to have their companies pay clean claims promptly. My guess is that stories about insurers stretching out payment cycles to deal with financial problems or boost profits are probably exaggerated. But, really, how do I know?

Some states have prompt-pay laws, and some post complaint statistics, but it’s hard to find those statistics.

But I know, as a reporter, that a consumer group will have an ambitious worker looking into this or that insurance product every 20 years or so, and that, if the consumer group worker is industrious and photogenic, that investigation will eventually lead to congressional investigations, brow furrowing at state insurance departments, consternation at insurance companies, breathless news coverage, etc.

Meanwhile, the insurers probably lose out on many, many sales, simply because consumers are skeptical about whether the issuers of clever-sounding, need-meeting products will pay claims.

Instead of losing out on those sales, and waiting passively for an ambitious consumer group worker who looks like Robert Redford or Jane Fonda to initiate the next wave of breathless news coverage about how scandalous Product X is, why don’t the insurers that do make a serious effort to pay claims smoothly get together and just have MIB, or American’s Health Insurance Plans (AHIP), or some other organization set up a regularly audited claims payment performance database that shows how the member insurers are doing at paying various types of claims?

Maybe, for example, the database could provide different columns of statistics for clean LTCI or STCI claims, disputed LTCI or STCI claims, and incomplete LTCI or STCI claims, and show what percentage of claims an insurer puts in each category. This could resemble the claim determination database the Social Security Administration publishes for the Social Security Disability Insurance (SSDI) program.

Maybe the database could provide similar types of statistics for disability insurance policies, critical illness insurance policies, hospital indemnity policies, and many other types of policies that now suffer from the effects of consumer skepticism.

Certainly, some of the insurers would end up reporting weak claims payment statistics, but chances are that none of the statistics would be as bad as skeptical consumers think they are.

If the statistics really are that bad: Either the insurers should fix how they pay claims, or, if they can’t, they have to get real and schedule that scary conversation with the rating agencies about how the agencies treat selective defaults. Maybe it would be better to have one quick, three-month wave of selective defaults, then start paying claims on time, than for insurers to make folks mad by trying to disguise selective defaults as vigilant efforts to guard against insurance fraud.

Assuming that the insurers really do have the cash to pay claims on time, and, mostly, are paying the claims that should be paid quickly reasonably quickly: Then maybe the database would actually help the poor performers, by drawing their attention to problems with the way they handle claims.

If the insurers wouldn’t or couldn’t do this, maybe insurance brokers could find some way to create a rough-and-ready substitute. Even if 10 experienced brokers simply tried to give honest estimates of how quickly carriers were paying various types of claims, that would be better than nothing.

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