Congress Scrutinizes Long Term Care Insurance

Conseco and Penn Treaty Long Term Care insurance companies must be biting their nails to the quick, as the House Committee on Energy and Commerce breathe down their necks and the General Accountability Office closes in.

Conseco hired a great ad agency. I loved their long term care insurance commercials. They were so funny! Yet every time I watched them, I couldn't help but cringe. My concern was that people would buy a Conseco policy, then perhaps someday their rates would go up, or worse yet, their claims might get denied. Clay and I knew that, as far back as the 1990's, Conseco was selling relatively inexpensive policies to lots of unhealthy people. Now, approving "sickies" for long term care insurance seems compassionate, doesn't it? Of course it does. I sure wish companies would approve more, but that's not how insurance works. Companies with smart actuaries know that insurance can only work when there are more "low risk" policies sold, than there are "high risk" sold. That way, more money is coming in than going out. More premium payments, less benefit pay-outs. That's how the "pool" of money held by insurance companies stays strong.

When the high risk/low risk ratio is reversed, the money pool is in danger of drying up. That was the problem we saw, way back when. Clay never sold Conseco. He was advised not to by his mentor, but he did sell a few Penn Treaty policies to people who, due to health concerns, would not have been approved by other companies.

Penn Treaty had decent policies, yet Clay always told his clients that there was a good chance their premiums would go up in the future, due to Penn Treaty's high risk/low risk ratio and lower premium prices. Still, given the choice between having no LTC insurance at all and the possibility, no matter how great, of rate raises most people chose the insurance. Would Clay have made the same choice if he had the chance of being insured. You better believe it"¦ He would buy a Penn Treaty policy today if they would take him.

Even so, I think it's high time the long term care insurance industry got a good once over. Rate raising and refusing to pay-out, if only from a few companies, damages the entire industry, not to mention consumers' well being. If you diligently pay your premiums, year after year, and you have a legitimate claim, you should expect the LTCi carrier to pay-out, as per your contract. Paper shuffling and other foot dragging techniques being used by a few insurers are shameful.

Why has Congress waited so long to look into this situation? Was the Insurance lobby too strong for the last Congress? It may be political "low-hanging fruit" to rail against the Evil Insurance companies during these pre-election days, but I'm glad that Obama and Hillary have the moxy to do so. The states haven't been doing a great job regulating, so maybe this will get their tails in gear.

One last thing: 81 year old Mary Rose Derks has gotten a lot of press. She's been in a nursing home since 2002 and her long term care has cost her $70,000 or so. Articles and news shows site her case, claiming that Conseco has not paid her claim. I'd like to know where her LTCi agent has been all this time. Isn't he helping her, fighting for her?

It's easy to get alarmed. Yet we don't know what Mary's policy's contract wording was, so we don't know if Conseco is in the right or if Mary Rose Derks has a valid claim. There could be legal wording in the policy itself that allows Conseco to not accept her claim. Conseco might have found that Mary didn't disclose all of her health conditions when she applied, therefore, nullifying her contract. Or not. Maybe Conseco is simply trying to save a buck at the expense of a fragile, little old lady. We don't know. We only hear the plaintive cries of her family so eagerly repeated through the Media.

But I bet Conseco wishes they had spent less on advertising and more toward paying their claims now!

And let's remember: Long Term Care Insurance companies pay out Billions of dollars in claims. Most LTCi companies should be applauded for helping Americans during times of great stress and need.

By: Clay Cotton

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