Differences among state rules for long term care insurance policies has led to major variations among policies, depending on where they were bought as well as which company they were brought from, experts said in testimony before a House panel on July 24.
Members of the House Energy and Commerce Oversight and Investigations Subcommittee called the hearing to review conclusions of a report from the Government Accountability Office that found inconsistencies in state regulation of the industry. (See NU, July 28.)
The GAO report also found wide variations in rate increases among policies as well as in oversight of company claims-handling practices.
"Despite states implementing more comprehensive standards and using other oversight efforts intended to enhance rate stability, some consumers may remain more likely to experience rate increases than others," the GAO report stated.
GAO, found, too, that 30% of policies in force were issued in states that have not adopted strict rate-setting standards adopted in 2000 by the National Association of Insurance Commissioners.
GAO found wide variations in state reviews of claims denials. Of 10 states its reviewers examined in depth, 7 reported one or more claims-settlement practices as of March 2008. Four states were preparing to establish an independent review system of denied claims, the report said. Yet one did not even have a standard that required companies to pay claims in a specific period of time. Of the remainder, the standard for timely payment varied from 5 days to 45 days, and 2 specified no time limit at all, GAO found.
In his testimony before the panel, John E. Dicken, director of health care for the GAO, argued that "more comprehensive standards are needed to enhance rate stability." Many owners of existing policies lack protection against high increases "because they lived in states that have not adopted standards devised by the [NAIC] or else have older policies sold before the standards were adopted in their state."
As a result, some consumers have experienced increases ranging from 30% to 70%, while others have experienced much lower premium boosts, he noted.
Marc Cohen, president and chief operating officer of Life Plans Inc., Waltham, Mass., told the House panel that the vast majority of LTC policy benefits meet the needs of the policyholders.
His company's study of LTC insurance claimants found half thought they would have had to seek institutional alternatives care if they had not had their policies.
In addition, 94% of claimants reported no claim that was not resolved satisfactorily, Cohen reported.
Of claimants his company surveyed over 2.5 years, 96% had their claim immediately approved. Of the 4% who were initially denied, about half were ultimately approved within a year, he added. Of the remaining 2%, most claimants had not met the terms of their policies, Life Plans found.
Cameron Waite, executive vice president of strategic operations for Penn Treaty American Corp., Allentown, Pa., told the hearing that from 2004 though mid-2007, his company had 41 pending litigations involving claims disputes, which represented less than 0.2% of nearly 25,000 claims Penn Treaty received in the period.
"Of this small number of cases, most were mutually resolved for relatively small sums," he said.
Waite also told the legislators that, regardless of where it sold its policies, his company has adopted the most rigid of state requirements for claim payment timing. Only about half of the states have any requirement for timeliness, he noted.
Even in states that impose no claims-handling timetable, his company's policies require claims to be paid within 15 days of receipt of necessary paperwork, he said.
