Friday, August 22, 2008

LTCI Scrutinized by Feds

On July 24, 2008, the U.S. House Committee on Energy and Commerce held the second in a series of hearings on the subject "Long-Term Care Insurance: Are Consumers Protected for the Long Term?"

The hearing was preceded by issuance on July 23rd of a Press Release, entitled "
Senate, House Members Release Results of GAO Report on Long-Term Care Insurance."

The referenced report issued by the
U.S. Government Accountability Office (GAO), entitled "Long-Term Care Insurance: Oversight of Rate Setting and Claims Settlement Practices" (June, 2008; GAO No. 08-712; PDF, 41 pages), surveyed "the consumer protections states have in place for those who purchase long-term care insurance (LTCI)."

The Press Release noted the purpose of the GAO's Report:

Due to the rapid aging of America’s population, the marketplace for long-term care services is expected to expand significantly. Private LTCI has emerged as one possible way individuals can prepare for their long-term care needs later in life.

In their request to GAO, members of Congress expressed their interest in examining the frequency with which consumers are experiencing denial of benefits and exorbitant rate increases.

In light of such practices, the GAO report examined the robustness of states’ rate setting standards and the rules for settling of benefit denials. * * *
These were the essential findings of the GAO's Report on LTCI:
GAO found that rate increases for LTCI policies fluctuate widely from state to state and plan to plan. For example, one company cited in the report repeatedly raised premiums, resulting in a cumulative increase of more than 70 percent since 1991, while another company has raised premiums only once since 1975.

According to the report, rate stability standards, which are designed to protect consumers against sharp premium increases, have now been adopted by more than half of all states.

However, because many states have not yet adopted these standards, a vast number of consumers are still left unprotected. Additionally, because the rate standards are so new, state regulators are unsure of how successful they will be in moderating future premium increases.

GAO also reviewed claims settled by LTCI companies in ten states by evaluating consumer complaints. The report found that standards for the timely payment of consumer claims varied significantly by state, with “timely” being defined as five days in one state and 45 days in another. One state did not have a timeliness requirement at all.

GAO also noted that some states are considering implementing an external appeals process for adjudicating disputed claims. * * *

In prior blog entries, I noted the increased promotion by the federal and many state governments, including Pennsylvania, of private long-term care insurance. See: PA EE&F Law Blog postings "PA Joins "Own Your Future" LTCI Campaign" (03/28/08), and "PA to Promote Long-Term Care Insurance" (03/12/08). I expressed concerns about adequate state regulatory review and remedies for policy purchasers & claimants of LTCI coverage.

The GAO's Report acknowledges such concerns, notes varying enforcement measures presently, and recommends further scrutiny of LTCI issuers and policies, given the increasing federal and state government promotion of such private coverage:

The federal government expects that as many as 30 states will have Long-Term Care Partnership programs in place by the end of this year. These programs encourage the private purchase of LTCI and feature state-approved plans that combine private LTCI with possible add-on Medicaid coverage in policies that allow consumers to protect some portion of their accumulated financial assets.

Many state officials, as well as LTCI providers, are enthusiastically supporting rollout of these Partnership programs. As programs of this nature unfold across the country, the GAO report’s findings make it clear that consumers who are urged by state governments to purchase these plans must have access to comprehensive, accurate information about Partnership-approved plans to determine whether they are a sound and affordable choice for them. * * *
Those witnesses who offered testimony at the recent House subcommittee hearing regarding LTCI included two from Pennsylvania. Each witness provided a prepared statement or presentation, available online, as follows:

Panel I:

Panel II:
Panel III:
You can watch the hearing on your computer using Windows Media Player and a high-speed Internet connection.

Seven elected senators or representatives had requested such a Report from the GAO and urged hearings about LTCI. Some were quoted in the Press Release as expressing deep concern about LTCI after reviewing the GAO's Report.

Such investigations are not ended. At the conclusion of the GAO's Report, the principal author,
John E. Dicken Director, Health Care, made an offer for further input about it.
If you or your staffs have any questions about this report, please contact me at (202) 512-7114 or

Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix II.
That is an invitation for participation in this envisioning process.