Did the Press Hurt LTCI?

Posted on February 26, 2007.

Author: Michael Murillo

Industry experts speak to agents on avoiding the LTCI claims trap, contending with negative media attention

When the New York Times published its March 26 story about claim denials and customer service frustrations with long term care insurance, the negative tone fell on producers, clients, and insurance companies alike.
After reviewing more than 400 grievances and lawsuits filed in recent years and focusing on Conseco and Penn Treaty in particular, NYT author Charles Duhigg presented a portrait of an industry that frustrates clients, provides incorrect forms, delays critical decision-making and denies seemingly valid claims. Readers were told of cases where clients were disappointed by years of denials and instances where policy holders died before claims could be paid. Current and former insurance company employees described bureaucratic business practices that work against clients' best interests and customer communication procedures that lead to significant delays.

This coverage adds a layer to the obstacles agents already face when presenting and writing long term care insurance policies. They contend with widely differing state regulations and constantly evolving policy options. They struggle with objections from clients and prospects who might not see the financial risks that LTCI assumes for them. They may even need to overcome their own hesitancy to immerse themselves in a complex product and must be prepared to answer a variety of complex questions from clients and prospects alike.

Now, LTCI agents have a new wave of negative publicity and political commentary to fight.

Fueling the flames?

While industry-related voices have been eager to refute the negative images portrayed in the NYT story, the journalistic weight of a New York Times expose has already been felt. The story caught the eye of New York Sen. Hillary Rodham Clinton, who responded with a letter to Comptroller General David M. Walker. In her letter, also released to the public, Clinton asked the Government Accountability Office to investigate how well federal long term care insurance protections are being enforced and to provide information as to which states provide extra consumer safeguards.

Clinton also expressed concern about the impact of denied claims on the Medicaid program, noting that a 2006 report found that more than half of all Medicaid spending is devoted to recipients who use long term care services. The letter included a request for the GAO to "make recommendations for where federal law should be adjusted, if consumer protections are inadequate." Illinois Sen. Barack Obama has also written a letter to the head of the GAO calling for an investigation.

According to Jesse Slome, however, executive director for the American Association for Long-Term Care Insurance, more governmental oversight would be the wrong response.

"More regulation is not the answer," Slome said. "We already have a product that is too complex thanks to many states applying (their) own personal litmus test. And shame on us as an industry if we fuel their flames."

Slome noted that while the article has attracted negative publicity, it follows more positive LTCI-related pieces printed in the NYT and other publications, such as the Wall Street Journal. Taken as a whole, he believes the LTCI media coverage is positive and the value of LTCI will not diminish as a result of negative press.

"The number of positive articles advocating private protection and the number of prominent legislators who advocate the role of long term care insurance is not diminished by headline-seeking individuals or legislators with agendas to push. They outnumber any bad press by 100-to-one," Slome said. "The need for long term care won't disappear because of one New York Times story."

Slome believes that agents should focus on that need or else lose business to other agents who do.

"This needs to be a mainstream product, just like life and health (insurance)," he said. "It's as important, and agents who look at the industry through a rearview mirror will find themselves lagging behind others in the years to come."

'Bad news always travels fast'

LTCI isn't just an integral part of Barbara Hanson's business; it's her only business.

Hanson, an agent since 1995 who previously worked in private nursing homes and an LTC county mental health hospital, focuses exclusively on LTCI, and she believes that the NYT article concentrated on older programs that have been outdated for years and don't reflect the standards of top-rated carriers.

"The NYT just 'researched' a few older policies from somewhat problematic carriers with older benefit triggers," Hanson explained. "Those of us who do this work full time were always aware that there are some poor policies out there with problematic financials. The top-rated companies, in my experience, have gone out of their way to pay claims, sometimes paying for service and equipment purchased months before even filing for a claim."

She said that many companies known for underpricing and having loose underwriting standards are no longer selling policies, and firms still doing business have tightened their procedures. Hanson also credited the Health Insurance Portability and Accountability Act (HIPAA) of 1996 with standardizing tax-qualified LTCI definitions and triggers.

Hanson believes that while the situations brought to light by the NYT represent just a small portion of the overall pool of LTCI policies, and while HIPAA has resolved many issues, the attention could result in more paperwork and apprehension from less-experienced agents.

"Bad news always travels fast, and officials love to do their duty," she said.

Can bad news be good?

On the other hand, Frank Darras, an attorney with a nationwide practice that handles about 2,000 LTC cases each year, sees the "bad news" as being good for consumers and the industry as a whole.

"When you put a spotlight on a dilemma that's evolving into a full-blown tragedy, that's a good thing," he said. Darras met with Duhigg while he was researching the article, and he said he believes that some of the negative claims statistics were actually understated, since many seniors fail to file a complaint or simply die before their issue can be resolved.

However, while he calls LTCI-related problems "the crisis of the 21st century," Darras doesn't blame the agents who sell the policies.

"I do not, in any way, shape, form, or fashion, attribute any guilt or responsibility to the agents or brokers across the country," Darras said. "It's not the agent's or broker's fault that these policies aren't working. They're not in control of the claims department. They didn't price the policy, and they're not responsible for the non-forfeiture." Instead, he faults companies that improve their financial numbers by utilizing their claim department against policyholders.

In fact, Darras believes that the unscrupulous companies are the ones hurting the industry and its many well-intentioned participants. "There are good companies that have sold really good policies that are actuarially sound, that have a fair claim department, that are giving seniors a fair break. It's the bad apples right now that are staining the industry," he said. "I think this (New York Times) article, congressional investigation and a spotlight on the bad actors — the weeding out is a good thing. The bigger folks need to make sure that the bad actors don't stain the entire industry."

The companies respond

Two companies singled out in the NYT article, Conseco and Penn Treaty, do not consider themselves bad actors. In fact, they believe that selective research and misused statistics has cast them in a negative light.

In a prepared response to the NYT article, Conseco said that the company is precluded from discussing individual cases or revealing policyholder information, making it difficult to refute the article's inaccuracies. It also said that the article focused on a small number of cases that don't reflect the vast majority of policyholder experiences.

"The Conseco insurance companies have more than 600,000 long term care policies in force, and last year we paid nearly $650 million of long term care claims," the statement said. "The 'investigation' by the New York Times was based on just 10 cases where policyholders disputed our claims handling, and eight of those cases had been settled long before the article was published." They went on to say that Conseco pays claims in accordance with policy contracts and constantly reviews complaints in an effort to resolve problems as they occur.

Penn Treaty also provided the Agent's Sales Journal with a statement, which claimed that the article unfairly represented the industry:

"The New York Times' March 26 article creates a recklessly misleading impression of the industry using innuendo, old industry news, select information from unnamed plaintiff attorneys, and a flawed methodology for measuring policyholder complaints," the company stated. "Its unbalanced perspective does not benefit the thousands of policyholders who are served daily and will benefit in the future from owning long term care policies."

Penn Treaty said that, while the article focused on claims complaints, the information ranking companies by their ratio of total complaints is misleading. Total complaints include premium increases, advertising, and promotions, as well as claims-related complaints. By focusing on claims complaints and providing statistics related to total complaints, the company said it believes the Times was using "sleight of hand" to paint a darker picture of the industry.

The company's statement also said that since 2003, just 1.7 percent of claims were denied for policyholder eligibility reasons, and that litigation from claims denials represents less than .01 percent of all claims filed annually with Penn Treaty.

What can you do?

With newspapers, insurance companies, politicians, and attorneys adding their voices to the discussion, how can agents be heard and regarded as competent providers of information and financial solutions?

Hanson recommends that agents visit and recommend Web sites providing valuable information on LTCI companies. She cited the Texas Department of Insurance site to research complaints, the California Department of Insurance to check rate increases by insurance company, and Weiss Ratings to review ratings for each company. (See sidebar for more information.)

In addition, Hanson said agents should do their own research in order to become familiar with the importance of carrying LTCI. Then, they can convey that knowledge to clients and prospects.

"Visit nursing homes and assisted living facilities, and imagine where you would want to live or visit," she suggests. "Tally the cost of these facilities and home health care rates. Help the public decide on the best policy for their personal situation, dreams and budget. Recommend the companies you trust with your own future. Do your homework."

Margie Barrie, who provides LTCI sales training through books, online courses, and other materials, suggests that an agent's homework should include a review of policy definitions. Areas such as types of facilities, supervision, and home health care should be reviewed to make sure the parameters are suitable for each client's needs. She also suggests that agents look for an alternate plan of care benefit and make sure that the company utilizes care coordination in a way that benefits the client.

Barrie also believes that agents can provide valuable assistance once a claim is made.

"There is something the agent can do to make things go more smoothly: When a client has to go on claim, arrange and participate in a conference call with the client and a carrier claims representative. This ensures that the client or family understands the process. Then tell the client to work directly with the claims person, and to contact you only if there is a problem," She said. "Once the paperwork has been submitted correctly the first time, then subsequent claims go more smoothly."

Darras said that agents should research which companies have a history of rate increases and make sure that clients can afford policies in the future, as well. He believes that touting a company that has price stability can be a valuable selling point.

Darras also suggests that agents themselves purchase the products in which they believe. When advising consumers, in fact, he suggests that they ask agents if they own the policies they're marketing.

"I'd like people who sell me a long term care policy to own the same thing I have," he said.

Slome advises agents to help their own cause by doing what they do best: Sell more insurance. He stated that about 40,000 agents sell at least one or two LTCI policies a year, but that number should be higher. "That's only a small percentage of the industry. Too many (agents) still refuse to take the time to understand how newer, simpler products have made long term care insurance easier to understand and offer to clients," he said. "We often blame consumers for having their heads in the sand when it comes to long term care. It's regrettable that many professionals — too many — can be accused of the same behavior."

Slome also said that agents can combat bad press by providing good reasons to buy LTCI. Instead of discussing the specifics of one popular media article, agents should focus on the compelling benefits that the insurance provides to clients and their families. "I don't think agents need to address the negative publicity. They just need to be educated, honest and forthright," he said. "You never get burned by telling the truth."

Michael Murillo is a freelance writer and frequent contributor to the Agent's Sales Journal. He can be reached at vivamurillo@hotmail.com. vivamurillo@hotmail.com.