Long-term care (LTC) insurance is designed to provide financial security for people facing challenges that come with aging, such as those suffering from chronic medical conditions or disabilities that require assistance with daily activities. However, recent trends indicate a growing concern: long-term care insurers underpriced their policies several years ago and now that those insured by these policies are coming of age, LTC policyholders are filing many claims. As a result, these insurers are denying more legitimate claims than ever. If you or someone you know purchased a LTC policy in the late 1990s or early 2000s, there is a good chance that a claim made under the policy will be denied, regardless of the merits of the claim. And the likelihood of such a claim being denied will only increase over time, as the insurance companies expect the number of LTC claims to substantially increase for the foreseeable future.
The Underpricing Dilemma
Many insurers initially offered affordable premiums to make LTC insurance an appealing option for policyholders. The problem is that as policyholders age and begin to need care requiring the benefits of these policies, the actual costs of providing such services can be significantly higher than the premiums collected. This results in a precarious financial situation for insurers, leading them to take extreme measures to maintain profitability.
Some factors that contribute to the underpricing dilemma include:
- Misjudgment of future claims: Insurers initially underestimated the number of policyholders who would file claims and the duration and extent of care they would eventually need. As a result, insurers find themselves with a more significant financial burden than expected.
- Increasing healthcare costs: The cost of healthcare services has been steadily rising over the past several years. These escalating costs place additional strain on insurers attempting to honor their policies.
- Low interest rates: LTC insurers invest the premiums they collect to generate income. With persistently low interest rates in recent years, the returns on these investments have been insufficient to offset the growing liabilities from claims.
The Denial of Legitimate Claims
The underpricing problem has caused LTC insurers to resort to denying legitimate claims, often leaving policyholders in dire straits. This unlawful practice can have severe consequences for those who have invested in these policies for years, believing they would receive the coverage they paid for. For many policyholders, not receiving the benefits they were promised and to which they are entitled under their policies can be catastrophic and can leave them without any means of receiving the care they desperately need. The denial of legitimate claims manifests itself in several ways, including:
- Strict policy language: LTC insurance policies often contain complex and ambiguous clauses that may be exploited by insurers to deny claims. Even seemingly minor discrepancies in documentation or the interpretation of policy language can result in a claim being denied.
- Post-Claims underwriting: Some insurers have engaged in a controversial practice known as retroactive underwriting, which involves scrutinizing policyholders’ health histories and medical records after a claim is made. If any discrepancies or undisclosed medical conditions are discovered, the insurer may use this information to deny the claim. The upside for the insurance company is that it can collect premiums for several years and invest those premiums to finance its business, then simply refund those premiums (but not the income the insurer benefitted from) without paying the benefits promised to the policyholder.
- Delay tactics: Some insurers employ delay tactics to extend the time policyholders must wait for a claim decision, such as requesting additional documentation or medical evaluations, to stall the claims process. This can place undue stress on policyholders who are already dealing with the challenges of LTC needs.
- Denials based on supposed inadequate medical evidence: This is perhaps the most oft-used reason for a denial of LTC claims. Insurers hire biased medical professionals to assess medical evidence and then assert that the medical evidence is simply inadequate to support a valid claim for LTC benefits.
Protecting Your Interests
Given the potential pitfalls associated with LTC insurance, it is essential for policyholders and potential buyers to take steps to protect their interests, such as:
- Thoroughly review policy terms: Before purchasing LTC insurance, carefully review the policy terms and conditions. Seek legal counsel if needed to ensure you understand the coverage and any potential pitfalls.
- Transparency is key: When applying for LTC insurance, be transparent about your health history and any pre-existing conditions. Failing to disclose this information can give insurers grounds for denying claims in the future.
- Thoroughly document your claim: when you prepare to file a claim, make sure you assemble all necessary evidence you will need to adequately document and support your claim. Be sure you are able to obtain physician support for an inability to perform the required activities of daily living.
- Document diligently: Keep detailed records of all interactions with the insurer, including phone calls, emails, and written correspondence. This documentation can be valuable if you need to dispute a denied claim.
- Seek professional assistance: If your claim is denied and you believe the denial is improper, seek legal counsel to navigate the appeals process.
- Stay informed: Stay up to date with the latest developments in LTC insurance and the insurance industry as a whole. Being informed will help you make better decisions regarding your policy.
LTC insurance is supposed to provide peace of mind and financial security to individuals as they age. However, the underpricing of policies and the denial of legitimate claims by LTC insurers have seriously undermined the peace of mind and financial security that LTC policyholders expect. It is therefore imperative that those considering filing LTC insurance claims are informed, cautious, and proactive in protecting their interests. By understanding the potential pitfalls and taking measures to mitigate them, policyholders can better ensure that their insurance coverage serves its intended purpose during their time of need. If you have made a claim for LTC benefits that has been denied or delayed, contact the McKennon Law Group PC for a free consultation.