Long-Term Care Insurance Issuers Face a Form Tsunami: Idea File

Millions of Americans still have long-term care insurance (LTCI) policies in force, and hundreds of thousands of the LTCI policyholders are eventually going to file claims.

Someone will have to pay the claims.

Peter Goldstein, the chief executive officer of LTCG, has an idea about LTCI claims; Everyone had better recognize that paying benefits according to the terms of the policies will be complicated.

LTCG is a major LTCI policy administrator.

LTCG helps with the administration of about 1.2 million of the long-term care insurance (LTCI) policies still in force.

The company accounts for about 85% of the LTCI policy administration outsourcing market. If an issuer has named some other entity to administer its LTCI policies, chances are high that the administrator is LTCG.

About 40,000 to 45,000 of the 1.2 million policyholders in LTCG's world are collecting benefits, and the number of policyholders collecting benefits is growing about 10% per year, Goldstein said in a recent interview.

To administer an LTCI policy properly, the administrator will have to capture information about matters such as the original policy provisions, the policyholder's premium payment history, any rate increases, and any policy provision changes that have occurred over the lifetime of the policy. In many cases, the policy may have been in effect for 20 years. Or for 30 years.

"Lots of times, the data is not in great shape," Goldstein said. "When you're moving the data, getting it right is critical."

Form Numbers

For LTCG, the number of LTCI forms is another critical concern:.

"There are so many different kinds of products," Goldstein said.

LTCI policies have changed dramatically over the decades, and issuers have often offered many different coverage options at the same time.

The result, Goldstein said, is that U.S. LTCI issuers have used about 50,000 different policy forms.

Goldstein sees no easy way for states or other entities to make things simpler.

The LTCI policyholders have contracts in place with the issuers.

Any government effort to standardize the coverage provisions by fiat, to simplify policy administration for all of the LTCI policies in a state, or in the country, could hurt the policyholders' contractual rights, Goldstein said.

Goldstein said the complexity of LTCI policies and forms is one reason nursing homes and other care providers usually ask the patients or the patients' families to seek payments from the LTCI issuers, rather than handling that task themselves.

Another reason, Goldstein said, is that 80% of LTCI claims have reimbursement assigned to the patient or the family, not to the provider.

"We would love to deal with the providers directly," Goldstein said, but, in many cases, he said, that's not how the claims work.

What Issuers and Administrators Can Fix

Goldstein said he would like to see the LTCI community focus on holding down LTCI claim costs by keeping the insureds as healthy and safe as possible, through mechanisms such as fall prevention programs and other wellness programs.

Medicare alone spends about $50 billion per year on care for patients who have fallen, and falls are the third most common reason for LTCI claims, Goldstein said

"That's something you can actually impact," Goldstein said.

LTCG itself has a fall prevention program that involves components such as a medication review, and advice to insureds about rugs and lighting.

The LTCG fall prevention program has cut the overall claims incidence rates by 15%, Goldstein said.

Goldstein said the LTCI community could also do more to help claimants recover from the conditions that triggered the need for long-term care services.

An issuer may not be able to improve the situation of an insured who is collecting LTCI benefits because of Alzheimer's disease, but, in some cases, the issuer might be able to support the recovery of an insured who needs long-term care services because of an injury, or because of depression, Goldstein said.

— Read The LTC Insurance Industry Is Not Waiting For Godot, on ThinkAdvisor.

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