December 16, 2017

Long Term Insurance: The Fine Print


One of the big reasons people buy long-term care insurance is to avoid burdening a spouse or grown children when they can no longer care for themselves.

But some family members are shouldering another type of burden: one that involves piles of paperwork and repeated phone calls, as they are forced to navigate a labyrinth of requirements to collect benefits that the insured spent many years paying.

“There is no possible way an elderly person who is ill and needs help can possibly do this work,” said Fiona Havlish, who coordinated her father’s home care in Pottstown, Pa., before he died last year, a week after his 90th birthday. “It took six to eight weeks to get the insurance into place, and this was working on it every single day. It was an incredible amount of work.”

Ms. Havlish, a former nurse who now works as a life coach in Boulder, Colo., said she first had to find a home care agency that was not only covered by the long-term care policy but one that she felt comfortable entrusting with her father’s care. Later, she had to follow up continually with the aides and doctors to make sure they were filing the proper paperwork so that they insurer would pay. “Three months after he was gone,” she added, “I was still fighting with them over paper.”

At least the bill for her father’s care was eventually paid. In other cases, families have had to fight to overturn denials, and have gone as far as hiring lawyers to file suit. Many Americans now in their 80s and 90s who are collecting benefits — or trying to — bought their policies decades ago when the policies were more restrictive than now. On top of that, many insurers have since left the business after mispricing the policies and failing to judge the economics of the industry, which has made collecting payments even more difficult.

“Everything is not rosy,” said Jesse Slome, director of the American Association for Long Term Care Insurance. “When insurers stop selling or exit the business, many of them hire these third-party administrators to adjudicate claims and that is where interpretations don’t seem to be as liberal.”

Insurance agents who have specialized in long-term care policies for a couple of decades, however, told me that most of the top-rated insurers pay claims without issue. And clearly, claims worth billions are paid each year: An estimated 264,000 people received long-term care benefits at the end of 2012, according to Mr. Slome, and $6.6 billion in benefits were paid that same year.

Still, “the process can be pretty daunting for people,” said Bonnie Burns, a policy specialist at California Health Advocates, an education and advocacy group.

If you need to file a claim on behalf of a loved one, it helps to know why claims are denied and where filers tend to get tripped up. Here’s what I gathered, from longtime brokers, consumer advocates and lawyers who do battle with insurers on these issues:

DEDUCTIBLES In the long-term care world, deductibles work a bit differently than typical insurance policies. The policies have waiting periods, or elimination periods, and they are typically measured in days: 30, 60, 90 or 100 days. So if your policy covers $150 a day for in-home care, and you have a 60-day waiting period, you will typically owe the first $9,000 — 60 times $150 a day — before the policy kicks in.

But the way the waiting periods are counted is critical, too. “If a person is getting home care a few days a week, and the company only counts those days of care toward the waiting period, the total time needed to satisfy the waiting period will be much longer than 60 days,” Ms. Burns said. “So it isn’t just the $9,000, but the total time that has to be satisfied.”

With certain older policies, meanwhile, the insured person must also spend three days in the hospital before the policy will pay any benefits. “Some of these older policies have requirements that most states don’t allow today,” Ms. Burns said. “But these requirements must still be met in these older policies.”

ELIGIBILITY To become eligible for benefits, patients must be expected to need “substantial assistance” for at least 90 days, either because they are suffering from a form of dementia, for instance, or because they can’t perform two basic daily activities from a list of six, including items like bathing, getting dressed and eating. (This applies to certain policies written after 1997.)

“What we are finding today is that when people are getting assessed, they fire on 8 or 10 cylinders on some days and they will trick people,” said Brian I. Gordon, president of MAGA, a long-term care insurance agency in Riverwoods, Ill. “They want to become Superman the day the assessor comes out. And then the insurer may deny the claims.”

Glenn R. Kantor, a lawyer in California whose firm focuses on insurance claims, said he represented a woman, blind from severe macular degeneration who was receiving benefits for home care. But when the representative from the insurer asked her if she could bathe by herself, the woman told the company she could as long as her aide led her into the shower and gave her soap and a washcloth. Shortly thereafter, the insurer cut off her payments.

Then, “they sent her to collections to get the money back,” Mr. Kantor said, because the caregiver was not within arm’s length but left the bathroom to go into the next room while the woman bathed. The insurance company settled, but the terms were confidential so Mr. Kantor could not divulge the insurer or the exact amount it paid.

LICENSED CAREGIVERS Depending on where a patient lives and the type of policy, a licensed caregiver for home care services will probably have to be hired (though some policies, known as cash plans, will let you spend the money with fewer restrictions and pay a grandchild or a neighbor for care, for instance). “If they are not licensed, those types of people may not be covered under most long-term care policies today,” Mr. Gordon said.

But that’s not the case everywhere. In California, for instance, the state insurance law prohibits insurers from imposing this requirement, Mr. Kantor said. “So we are seeing a number of people have their claim denied by the carrier saying your caregiver isn’t licensed.”

ASSISTED LIVING Many of the policies that benefit people today were written before assisted-living facilities came into vogue, experts said. So some families will find out that only a “skilled nursing facility” is covered. “Then you have the daughter wandering around the state with the contract trying to find a place that meets the policy’s requirements,” Ms. Burns added.

Mr. Gordon said that many carriers could still pay for assisted-living facilities as long as they met certain conditions, including being licensed by the state, providing care by a licensed doctor and 24-hour nursing services, among other items. Ultimately, however, it “may or may not be covered after the claim is submitted,” he added.

Even once you think you have found the right type of facility, be sure to read the fine print. Some policies will require that a facility have a nurse on duty 24 hours a day. “But some of them will have a nurse there for 12 hours and on call for 12 hours,” Mr. Gordon said. And if that’s the case, the coverage may be denied.

Mr. Slome, of the trade organization, said that many insurers did not anticipate the new types of facilities. And while he has heard insurance claims directors say that they don’t officially provide coverage, they will. “The squeaky gear gets the grease,” he added.

ALTERNATE PLAN OF CARE Some policies have provisions for what they call “alternate plans of care,” which experts said implied a certain degree of flexibility. “People read those and say, ‘Look, it says they will do this,’ ” said Ms. Burns. In reality, “they will consider something different, but the insurer makes the ultimate decision.”

Continental Casualty Company, a subsidiary of the CNA Financial Corporation, sold policies with a similar provision, which could potentially allow the insured to receive benefits for care, say, in the home instead of a nursing home, Mr. Kantor said. But since the CNA unit stopped selling the policies in 2003, he said they were making a habit of no longer honoring those provisions. “The insurance company is insistent that they have the right not to approve the plan,” said Mr. Kantor, who is representing a woman with Alzheimer’s disease whose request for an alternate plan was not even considered. “But it was not sold that way.”

A spokeswoman for CNA declined to comment on the specific case, but said “an alternate plan of care may be mutually agreed upon between CNA and the claimant. However, the alternate plan of care benefit was never intended to confer a general right to home health care that the optional rider provides.”

DOCUMENTATION For Ms. Havlish, the Pennsylvania woman who handled her father’s claims, documentation was one of the most frustrating parts of the process. “Every time the agency billed the insurance company, it would get sent back as not paid because they did not chart properly,” she said, referring to documentation kept by caregivers.

And some insurers have been known to deny claims on that basis. Harvey Rosenfield, a lawyer and founder of Consumer Watchdog, recently represented Dr. William Hall, a man who filed suit against Senior Health Insurance Company of Pennsylvania (formerly known as Conseco Senior Health Insurance Company) for failing to pay long-term care benefits for eight months. The insurer required an inordinate amount of forms and documents that were not referred to in or required by the policy, according to the lawsuit complaint. The two parties ultimately reached a settlement last month.

“With all of the hurdles, trying to get a claim paid can be like an Olympic event,” Mr. Rosenfield said. “The bottom line is that practices vary widely from company to company and state to state. And whether you can trust the company depends on regulation in that state — and most states have limited regulation.”

Shopping for Long-Term Care Insurance

Most of us don’t like thinking about all of those end-of-life documents and preparations. However, you and family members will be glad later if you take some time now to gather information and make some decisions.

Long-term care insurance (LTCI) is a product that might be needed before one reaches “old age.” So, looking at it in mid-life can have its advantages. A good place to start your search for LTCI information is at the NC Department of Insurance/SHIIP website at:

At that website, there are several short publications to download or you may call the National Association of Insurance Commissioners at (816) 783-8300 (Option 2) to request a copy of the Long Term Care Guide.

Long-term care insurance protects the individuals/family from the high cost of long-term care and protects assets for heirs. Long-term care insurance is designed to pay some or all the costs of nursing home, community or home health care when you cannot meet the needs of everyday living on your own. While such insurance is costly and might not cover all of your expenses, it can help to safeguard your assets and protect your financial stability. It is not for everyone. If your only income is Social Security, it is unwise to buy a long-term care policy.

In general, you should purchase as much coverage as you can reasonably afford. Policies vary in their coverage features. Buyers must exam the written details of policies before purchase to avoid surprises later, like no inflation protection and to avoid misleading statements about coverage.

The Facts About Long-Term Care Insurance In North Carolina fact sheet (at above website) lists the NC requirements for LTC Policies and lists companies approved to sell LTCI in NC. It lists general shopping tips and describes features of some policies. A page is included to help determine if LTCI is right for you.

When people make application for LTCI, companies underwrite the policy either before the policy is issued or after a claim is made which is called post claim underwriting. Be sure the underwriting is done before your policy is issued. The insurance company will gather information about your health status to determine your risk and whether they wish to cover you. This will take some time.

Avoid post claim underwriting as the insurance company might decide you are too high a risk and they don’t want to cover your claim. They will refund all of your premiums and cancel the policy, leaving you unable to get any other coverage.

Finding a good policy from a good company takes some investigation and weighing of your needs and available features/costs.

Is Long Term Insurance Worth the Cost?

Buying long-term care insurance could do you more retirement planning harm than good, says actuary Anna Rappaport, chair of the Committee on Post-Retirement Needs and Risk for the Society of Actuaries and key author of a new study on retirement security.

Long-term care insurance is expensive, and the likelihood you’ll need it for a significant period of time is relatively low. Rappaport says that in the case of couples who made an average income before retirement — about $60,000 a year — and who retire with less than $100,000 in savings, buying long-term care insurance could reduce their standard of living and leave them vulnerable to minor financial shocks — a leaky roof or a damaged car. And it could increase the likelihood they will outlive their money.
On the other side of the slate are couples whose incomes before retirement were greater than $150,000 a year and who retired with more than $500,000 in savings. These couples can afford to purchase long-term care insurance without seriously reducing their standard of living — but the purchase, Rappaport believes, may not add sufficient financial stability over the long run to be worth the money. In a pinch, they could pay the bill without the help of insurance.

The people most likely to benefit from the purchase of long-term care insurance are those in the middle — $105,000 a year in salary before retirement and about $250,000 in savings. But even in those cases, she recommends that couples consider insuring only the wives. Research suggests that while women live longer than men, those extra years are unlikely to be healthy ones, she says. Buying long-term care insurance for this woman who will probably be widowed and is likely to have health care needs makes good sense in many cases.

“It’s not a perfect solution — there isn’t a perfect solution. You have to make trade-offs. But insuring the wife may be a very good trade-off,” Rappaport says.

Rising Costs of Long Term Care Insurance

No doubt about it—long-term care is expensive. In 2012, the average cost for a nursing home stay was about $88,000 per year, reports the AARP, and the cost of a home health aide averaged $19,000 for three visits a week, according to the Department of Health and Human Services.

Whether it’s personal care services like bathing assistance and household chores, community services such as adult day care and transportation, or nursing home services, the Department of Health and Human Services estimates that 70 percent of us will need long-term care at some point after turning 65. What’s more, most health insurance programs—including Medicare—do not cover these costs, leaving the burden on the consumer.

Some people choose to buy private long-term care insurance to try to fill the gap. But the problem is, those private insurance premiums are rising, too. Prices for new policies have risen between 6 and 17 percent over the past year, according to the 2012 National Long-Term Care Insurance Price Index published by the American Association for Long-Term Care Insurance.

The Reasons Behind Rising LTC Insurance Costs

Why is long-term care insurance more expensive than ever? One major factor in the price jump has been the decline in interest rates in the wake of the economic recession, which caused insurers to increase premiums.

“The cost of long-term care insurance has risen because claim costs are increasing and interest rates are at historic lows,” explains Jesse Slome, executive director of the American Association for Long-Term Care Insurance. “Most affected are policies which contain the five percent inflation growth option; but with inflation so low, there are other options available where costs are surprisingly affordable.”

That last bit, at least, is good news; with many policies paying up to 60 or 70 percent of long-term care costs, the savings could be considerable if you take the time to shop around for more reasonably-priced options.

Does Mom Really Need Long-Term Care Insurance?

Private long-term care insurance may not be the right option for everyone. If your loved one has a fairly low income and savings, and/or a high level of disability, then they might qualify for Medicaid or a state-funded program to pay for LTC services. Conversely, those with a lot of income or savings may be able to afford the actual costs of care. However, if you fall somewhere in the middle, you might want to shop around.

What’s the right approach to shopping for LTC insurance? “Buying some coverage with no inflation growth,” suggests Slome, is a good place to start. “A better plan could look at the same initial benefit with the ability to add to the coverage in future years even if your health changes.”

Learn More About Long Term Care Insurance

Don’t count on Medicare to pay for the costs of at-home nursing, an assisted living facility or nursing home care. Medi-Cal helps, but only if you are low-income.

Long-term care insurance covers the cost of care if you develop dementia or can’t physically perform daily activities, such as eating and bathing. The federal government estimates that more than two-thirds of people over age 65 will eventually need long-term care. But be advised that the insurance is very expensive.

For general information, go to A fee-only financial planner can be found at Local insurance agents can be found at

Choosing a Long Term Care Policy for Retirement

Over the past few years, long-term-care insurance policies have become more restrictive and premiums have spiked. Generous benefits, such as lifetime payouts, are extraordinarily expensive or have disappeared from policy menus.

With the cost of long-term-care insurance soaring, many people are taking a new approach to covering the risk, by covering a portion of the anticipated expense and calculating how much they can pay from savings. Insurers are also offering more-affordable policies. For example, some are selling policies with benefits that rise with the consumer price index or provide 3-percent compound inflation protection, rather than 5-percent compound inflation protection, and such policies can cost thousands of dollars less per year.

Be sure to check the insurer’s home-care requirements. It’s better to buy a policy that doesn’t require you to use only licensed caregivers from an agency, who tend to cost more than informal caregivers. “If you’re in a nursing home, it doesn’t matter very much what company you use. But home care is where the rubber meets the road,” says Mike Ashley, of Senior Benefits Consultants, in Prairie Village, Kan.

Also, look at how the policy counts days of care toward the waiting period, which is often 60 or 90 days. Some policies start the clock as soon as your doctor certifies that you need help with two out of six activities of daily living (such as bathing and dressing) or have cognitive impairment. Others count only the days that you receive care. Note that if you use less than your maximum daily benefit, you can extend the benefit period.

Some insurers are a lot stricter than others about which medical conditions disqualify you for a policy. John Ryan, of Ryan Insurance Strategy Consultants, in Greenwood Village, Colo., recommends that agents review your medical history and then find companies likely to provide the best deal for someone with your health conditions. For his clients, Ryan tends to work with Genworth, United of Omaha and MassMutual. John Hancock, New York Life and Northwestern Mutual are also big players in the long-term-care insurance business.

Premiums vary wildly, so it’s essential to comparison shop. Recently, a policy for a 55-year-old with a $150 daily benefit, three-year benefit period and 3-percent compound inflation protection had an average premium of $2,110 — but there was a 50-percent difference between low and high premiums, according to the American Association for Long-Term Care Insurance 2012 Price Index. To find agents who can offer quotes from several companies, visit the association’s website (