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Keep an eye on insurers

Published April 9, 2007


Like a lot of retirees who don't want to be a financial burden to their families, Mary Derks purchased a long-term-care insurance policy at age 65. Twelve years later, after a series of health setbacks, Derks counted on her insurance to help cover the cost of assisted living. Yet her insurer, Conseco, found excuse after excuse to deny her claims. Now, four years later, Derks' daughter has had to sell part of the family business to cover her elderly mother's care.

That case in Montana is far too common nationwide. A recent investigation by the New York Times revealed that Conseco and a few other insurance companies had devised bureaucratic obstacles to delay or avoid payment of benefits. Conseco and its subsidiary Bankers Life made quick resolution of policyholders' claims difficult and commonly asked for irrelevant paperwork, according to documents the newspaper obtained. A former Bankers Life manager described the company's claims department this way: "Their mentality is to keep every dollar they can."

The problem is apparently widespread, although specifics are difficult to gather because each state regulates such policies. In California, for example, one in every four long-term-care claims is rejected, the New York Times reported. Florida's Office of Insurance Regulation has had disagreements with Conseco and another company mentioned in the story, Penn Treaty, and complaints about long-term-care insurance here still arise.

In fact, Conseco and Penn Treaty had the highest number of complaints compared to market share in 2004. Conseco had a 20 percent market share but was the subject of 46 percent of complaints. Recent records show improvement by both companies. Complaints against Conseco dropped from 78 in 2004 to 46 last year, and for Penn Treaty from 53 to 29.

Long-term-care insurance is big business in Florida, with more than $6-billion in premiums collected annually. Residents who believe their insurer isn't living up to its promises can seek help through the state Consumer Helpline: 1-800-342-2762. If the Department of Financial Services believes a potential violation has occurred, it will refer the case to the Office of Insurance Regulation, though it is not clear how often that occurs.

Long-term-care policies can be beneficial to retirees as well as states, which otherwise would have to pay the cost of assisted-living or nursing-home care through Medicaid programs. Yet such policies are worthwhile only if they are understood by the buyer and administered fairly by the insurer. So an aggressive consumer protection program can mean not only a better quality of life for the frail elderly, but also a savings for taxpayers.

[Last modified April 8, 2007, 21:35:38]

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