Bad News

If you are a seller or provider of long term care insurance, you will at least have heard about the front-page lead article in last Monday's New York Times–unless, that is, you have been living in a cave.

Even if you hate the Times (and I'm amazed at how many people do!) I would advise you to read the article, since you are going to have to deal with it one way or another if you are in the business. It's not going to be enough to say, "Oh yeah, The New York Times, what do you expect?" as if the Times were an abattoir that produced only tainted meat.

Like it or not, the paper makes news by what it reports and forces the public and politicians to pay attention. Playing ostrich because you hate the messenger is a self-defeating strategy.

Granted that Monday morning's edition is generally light on hard news, I still can't remember when an investigative story got such play. It was in a 4-column box in the top right of the page (above the fold) with a 4-column picture of a woman comforting her obviously anguished mother. The headline read: "Aged, Frail and Denied Care by Their Insurers."

The human focus of the article was the elderly woman pictured on the front page, Mary Rose Derks, who was 65 in 1990 when she started paying Conseco about $100 a month for an LTC policy. The article went into excruciating detail about the alleged runaround Mrs. Derks and her family have endured in their dealings with the insurer.

While acknowledging that "tens of thousands of elderly Americans have received life-prolonging care as a result of their long term care policies," the article continues, "Yet thousands of policyholders say they have received only excuses about why insurers will not pay."

Then comes the clincher: "Interviews by The New York Times and confidential depositions indicate that some long term care insurers have developed procedures that make it difficult–if not impossible–for policyholders to get paid." The article cites a statistic provided by California that nearly 1 out of every 4 LTC claims in the state was denied in 2005.

The article also says that nationwide, "a disproportionate number [of complaints] have focused on Conseco, its affiliate, Bankers Life, and Penn Treaty."

As it happens, Associate Editor Trevor Thomas was in Dallas at the 7th Annual Intercompany LTCI Conference sponsored by the Society of Actuaries when the Times article appeared, and you can read his story about the reaction of attendees on page 7.

Long term care agents tend to be quite passionate about their specialty, and it is easy to identify with their anguish about how the Times article made the business look and what damage it might do to the product.

All insurance products are essentially based on a bond of trust that the insured feels with the insurer with the payment of a premium. In the case of LTC insurance, this bond of trust needs to be most effective at the time when insureds and their families are at their most vulnerable.

If the claims-denying activities of a few LTC insurers are indeed premeditated, then the "bad apple" specialists–i.e., state regulators–need to do a much better job of making sure these apples don't taint the entire barrel. For instance, it almost defies belief that 25% of claims in California should be denied and that no regulator is on the warpath (where were you, John Garamendi?).

One attendee at the LTC meeting said he thought the Times article would amount to "one week's annoyance."

Perhaps. But to my ear that sounds like what an ostrich would say.

Steve Piontek

Editor-in-Chief