The Risks of Long-Term Care Policies
Bad faith claims against disability insurers have been prevalent for decades, but claims against long-term care insurers are now catching up. Since baby boomers have created a large senior population in America, long-term care policies are in demand. Many insurance companies are scrambling to sell high-benefit long-term care policies to millions of seniors looking for healthcare protection benefits. To date, long-term healthcare claims represent only two percent of filed insurance claims. Insurers expect the money in reserves set aside for future long-term care claims will reach approximately $15 billion over the next 15 years.
Long-term care insurance is generally designed to cover a variety of expenses and services not covered by regular health insurance. It usually provides coverage for physical and mental disabilities, chronic medical conditions, and cognitive disorders like dementia and Alzheimer’s. Long-term care policies usually provide coverage for preventative and diagnostic care, therapy and rehabilitative services, and other services rendered in an acute care hospital unit or long-term care facility.
Seniors are the largest group of purchasers for long-term care policies because they are at greater risks for medical conditions covered by these policies. However, waiting until their senior years to purchase a policy makes older adults more susceptible to insurance fraud and abuse. Seniors often fall victim to clever salespeople who distort facts and omit important coverage information. As a result, many seniors buy long-term care policies with inadequate coverage protection and benefits.
Limited Coverage and Benefits
Many long-term care policies limit a policy holder’s rights to collect benefits. Such limitations are usually explained in the policy’s definitions section, as well as other sections of the policy. In addition, long-term care policies typically define and set daily benefit limits for the reimbursement of certain types of care expenses including:
- Nursing homes – Facilities providing a full range of professional health care, rehabilitation, personal care, and daily activities in a 24-hour, 7-day environment.
- Assisted living facilities – Facilities with individual residence or apartment units that provide personal care and individual services to residents as needed.
- Home healthcare – Agencies or individuals who provide personal services for help with daily tasks and household chores.
- Adult day care – Programs that provide health, personal, and social support services in a supervised adult setting during the day.
Many long-term care policies also cover certain home modifications like wheelchair ramps and grab bars that provide easier accessibility and safety. Some policies cover the costs of professional, licensed care coordinators who arrange care and services based on the patient’s needs.
For policyholders with physical disabilities or cognitive impairments, benefits are limited to patients who are unable to perform two or more daily activities without assistance such as walking or standing; eating or drinking; bathing and personal hygiene; dressing; and toileting.
Inflation Protection Coverage
Although a policy with a fixed daily benefit may cover a person’s needs at the time of purchase, as healthcare costs rise over time coverage will become inadequate. With a six percent annual inflation rate, nursing home care costs can double every 12 years.
To cover inflation, insurance companies offer a variety of solutions such as annual inflation protection and additional insurance. Seniors purchasing long-term care policies are especially vulnerable to insurance agents and salespeople pushing policies without inflation protection coverage to make a commissioned sale. Most insurance policies are difficult to read and understand, even for the most knowledgeable, informed consumers.
Understanding the Policy
To prevent inadequate coverage and bad faith insurance claims, understanding the coverage, benefits, and limitations of a long-term care policy is essential. Many policies contain confusing language and hidden traps that are buried in the fine print. They are difficult to read and understand without the assistance of an insurance attorney or claims advisor who is familiar with hidden licensing requirements and limitations of care facilities and healthcare providers. Common limitations include:
- Services limited to registered nurses (RNs) and licensed practical nurses (LPNs)
- Requirement of prior hospitalization for nursing home patients
- Requirement of prior medical attention for acute conditions in nursing home patients
- Coverage limited to certified Medicare or skilled care providers
- Requirement of inability to perform three or more activities of daily living (ADLs)
People with long-term care insurance should review the policy when benefits are delayed, reduced or denied. They could have grounds for a bad faith insurance lawsuit.