Long-term Care Insurance: The Good, The Bad and the Ugly

For several years increasing attention has been given to the poor quality of care provided in many of America’s nursing homes. Fortunately, the nursing home is no longer the central component of elder care services. Services such as adult day health, in-home care, assisted living, retirement communities, transportation, home delivered meals, paid companions and sub-acute and rehabilitation services are all part of the growing spectrum of services to older Americans who need help.

Few of these services are covered by Medicare or other forms of insurance, and when they are, only for a brief period of time.

The Deficit Reduction Act places severe constraints on access to publicly funded elder care services. Elder care professionals face a difficult challenge when advising their clients on the care planning options available to them.

In addition to providing a full range of geriatric care management and caregiver support services for more than 20 years, we've also been helping clients select long-term care insurance plans from several top rated carriers for more than a decade.


Long-term care insurance policies sold by most reputable companies today provide "comprehensive" elder care benefits. If you meet the criteria to file a claim, most if not all of the services mentioned above can be paid for by your policy. In fact, long-term care insurance has gone from what was once known as "nursing home insurance" to what is more accurately described as 'nursing home avoidance" insurance.

This insurance is not available to everyone, especially those in poor health or for whom the premiums may be prohibitive. Some newly developed financing alternatives such as; reverse mortgages,” blended" life insurance policies, and annuities with long-term care riders should also be explored before deciding on which option best suits your client's needs. We'll be discussing some of these alternative funding mechanisms in future posts.

In recent months, articles highly critical of the sales practices of some long-term care insurers, and describing difficulties that some policy holders have had getting their claims paid have been prominent in the press.

Two companies most prominently identified in these articles, Conseco and Penn Treaty, have in fact been the subject of investigations and penalties by regulators for years.Now it appears that the sleazy practices of these two companies are finally catching up to them.

Conseco recently reported losses of $64.5 million in its second quarter. The losses are primarily attributed to Conseco's hemorrhaging long-term care reserves. This is a result of the company's practice of insuring individuals who were not acceptable underwriting risks. This results in higher sales and income in the form of new premiums but eventually results in huge losses when these poorly underwritten policies become claims. Conseco is also the defendant in a class-action lawsuit settlement over life insurance policies.

Another insurer that has repeatedly brought disgrace to the long-term care insurance industry is Penn Treaty. Like Conseco, this insurer has been infamous for underwriting poor risks. When the inevitable claims start coming in that can't be supported by existing premiums, Penn Treaty then applies to state insurance commissioners for huge rate increases. Penn Treaty has frequently asked state insurance commissioners to approve rate increases on existing policyholders of more than 60% per year. This made the premiums unaffordable for many policy holders who were then forced to drop the coverage.

Penn Treaty was allowed to get away with this outrageous consumer rip off in many states for many years, although some states suspended the sale of new products.

Finally, the State of Iowa has refused to let them get away with this any longer. According to the August 9Th edition of the Des Moines Register; " History has been made. For the first time anyone at the Iowa Insurance Division can remember, the commissioner has flat out denied - as opposed to negotiating down - a premium increase requested by a long-term-care insurance company. Penn Treaty Network America Insurance Co. asked for rate increases for "policy forms," or groups of policies, that would result in jumps as high as 145.7 percent for some long-term-care policyholders. According to Cameron Waite of Penn Treaty, rate increases are needed because policyholders are projected to use their benefits longer. That's traced in part to new types of care, such as assisted living, which have proliferated in Iowa."

Consumers should not be driven from the LTC insurance market because of the reprehensible practices of a few insurers. There are several companies, including Met-Life, John Hancock and Allianz, who have never filed rate increases on existing policyholders.

John Hancock Long Term Care (LTC) Insurance Posts 61% Increase in Sales in Q2 2007 over Q2 2006
John Hancock Long Term Care Insurance announced sales of $58.2 million for Q2 '07, representing a 61 percent increase compared to the same quarter last year. Group LTC insurance posted its best sales quarter ever, bolstered by the enrollment of several large clients and increased activity in the emerging small to mid-sized employer market. Retail LTC insurance sales increased 17 percent over Q2 '06 and 34 percent on a year-to-date basis. With 36 new clients and $23.9 million in new sales during Q2 alone, John Hancock's Group LTC insurance business more than tripled results achieved during the previous year. Adding re-enrollment numbers to new sales, John Hancock's figure represents approximately 50 percent of the entire group market for the first half of 2007.

John Hancock just issued a press release announcing that there own sales of long-term care insurance have been growing.

"John Hancock Long Term Care (LTC) Insurance Posts 61% Increase in Sales in Q2 2007 over Q2 2006
John Hancock Long Term Care Insurance announced sales of $58.2 million for Q2 '07, representing a 61 percent increase compared to the same quarter last year. Group LTC insurance posted its best sales quarter ever, bolstered by the enrollment of several large clients and increased activity in the emerging small to mid-sized employer market. Retail LTC insurance sales increased 17 percent over Q2 '06 and 34 percent on a year-to-date basis. With 36 new clients and $23.9 million in new sales during Q2 alone, John Hancock's Group LTC insurance business more than tripled results achieved during the previous year. Adding re-enrollment numbers to new sales, John Hancock's figure represents approximately 50 percent of the entire group market for the first half of 2007."


Here are some shopping tips from the New York State Office for the Aging to keep in mind if you are considering purchasing long-term care insurance.

Don’t be Misled by Advertising or Suspect Credentials (See my earlier post on some of the bogus credentials that are used to dupe consumers that an insurance agent is a "certified Expert" in the financial issues of older people.

¯Check with Several companies and Agents

Contacting several companies and agents before you buy is wise. Be sure to compare company benefits, the types of facilities you have to be in to get coverage, the limits of your coverage, what’s excluded and the premium. Policies that have the same coverage and benefits may not cost the same.

¯ Check the Companies’ Rate Increase Histories

Ask companies about their rate increase histories and whether they have increased rates on long-term care insurance policies that they sell.

¯ Take Your Time and Compare Outlines of Coverage

Never let anyone pressure or scare you into making a quick decision. Don’t buy a policy the first time you see an agent. Ask for an outline of coverage. It outlines the policy benefits and points out important features. Compare outlines of coverage for several policies. Make sure the outlines are similar, if not the same, when you are comparing premiums.

¯ Understand the Policies

Make sure you know what the policy covers and what it doesn’t cover. If you have questions call the insurance company before you buy.

"Without Foreign Labor, Long-term Care Could Close its Doors in Seattle."

An article by Danny Westneat, Seattle Times staff columnist, on August 12 describes the dilemma we face in an aging society, where the caregiving workforce is overwhelmingly recent immigrants. Simply put we need more immigrant workers at a time when anti-immigration fever is growing everyday.

Many political analysts say that the decline of John McCain's presidential campaign, (he's been sinking steadily in the polls and has fallen far behind his 2 leading anti-immigrant opponents, Mitt Romney and Rudy Giuliani) has less to do with his support of the war in Iraq than his position that we need to be more flexible on immigration for the sake of the American economy)

Here's a few excerpts from Westneat's column that does a great job of painting a very real illustration that is consistent with the "Who Will Care" perspective of this blog. (To read the full text of Westneat's column see the link below)

The list of jobs Americans won't do apparently includes caring for our aging parents.

We leave that work to people like Virgilio Fule. He's a 62-year-old Filipino man who has been nursing the decrepit and the dying of the Seattle area for 13 years.

Despite his age, he puts in 16 to 20 hours a day. He goes to the homes of folks bedridden by cancer, Alzheimer's or multiple sclerosis. Alzheimer's patients have spit on him and hit him. The pay is low, the job security nil and many of his patients wind up dying.

"When you help ease someone's pain, or brighten them, or give some relief to their families — there's no job satisfaction like that," Fule says. "I'm very proud of the work I do."

But instead of doing everything possible to keep a valuable caregiver in the labor force at a time of growing shortage, Westneat tells us that Virgilio Fule has been imprisoned in the Northwest Detention Center in Tacoma, because he's an illegal immigrant.

Fule says practically everyone on the front lines of elder care is not from around here. "They are Ethiopians, Haitians, Filipino like me," he says. "Americans don't want to do those jobs. You go to any home, you will see it."

"As the director of a Seattle nursing home told The Seattle Times last year: "Without foreign labor, long-term care could close its doors in King County." Now, I realize the debate about immigration has ended, at least for now. We chose to do nothing, except launch a major crackdown.

Westneat asks: "...what's the point of driving a skilled elder-care worker out of our country? Why not fine him and give him some path to stay here legally?"

"There's no plan to do that. Or to bring in any workers to replace him. Yet seven weeks later, there Fule sits. At a $125-per-day cost to us to detain him."

The full text of Danny Westneat's column can be found at the following link:
http://seattletimes.nwsource.com/cgi-bin/PrintStory.pl?document_id=2003832744&zsection_id=2002111777&slug=danny12&date=20070812
Danny Westneat's column appears Wednesday and Sunday. Reach him at 206-464-2086 or dwestneat@seattletimes.com.

Copyright © 2007 The Seattle Times Company