"We're From The Government ... And We're Here To Sell You Long Term Care Insurance"
Believe it or not, some states are actually “partnering” with marketing firms to convince low- and middle-income seniors to buy long-term care insurance policies that they do not need and cannot afford, according to an article in today's Wall Street Journal by Jennifer Levitz and Kelly Greene entitled States Draw Fire for Pitching Citizens On Private Long-Term Care Insurance.
LTC insurance is one of the most complex and expensive forms of insurance around. It also provides agents some of the highest commissions in the business – between 30% and 65% of the first-year premium payments plus 3% to 5% a year after that. The benefits for many targeted customers are nonexistent because their income and assets are low enough that they would qualify for free long term care under Medicaid.
To add insult to injury, some of these insurance companies play “hardball” with their customers, jacking up LTC premiums by as much as 700% after the first year, and refusing to pay legitimate claims. The National Association of Insurance Commissioners (“NAIC”) reported a 74% increase in complaints to state regulators relating to claim denials on LTC policies from 2003 to 2006. NAIC also said that more than 70% of those denials are reversed after complaints were made – a “pattern of error” not found with other types of health insurance.
The WSJ article focuses on California’s LTC partnership program, but notes that many other states have similar programs in which the state “hawks” LTC insurance. Incredibly, California allowed a direct-mail marketing company to mail millions LTC “pitch” letters on the letterhead of the California Department of Health Services that bear the Governor’s name and the official state seal, according to the article. Recipients of the Department’s letters are urged to return a reply card or call a toll-free number to be connected with one of “our agents.” Inquiries are routed to Senior Direct, a Texas marketing firm hired by the state. Operators at a Minnesota call center answer the phone: “Thank you for calling the California Partnership for Long-Term Care.”
Any consumer doubts are dispelled by the voice of State authority. Brenda Bufford, the director of California’s LTC partnership program, was quoted in the article as saying: “Some consumers have asked, ‘Is this fraud?’ … ‘We say, ‘No, it isn’t. It’s the state of California.’”
Why this “unholy alliance” between state governments and LTC insurance companies? The answer has to do with (surprise?) money. The Deficit Reduction Act of 2006, signed into law by President Bush, lifted a ban on states partnering with the insurance industry to sell long-term care insurance. A lead co-sponsor of this legislation received the second-largest amount of money from insurance-industry political action committees in Congress. In addition, states say they encourage people to buy LTC policies because they are concerned about rising Medicaid costs and by Medicaid recipients transferring assets in order to qualify for Medicaid. Studies by the U. S. Government Accountability Office, however, found no widespread evidence of asset transfers, and concluded that government LTC partnerships are unlikely to result in Medicaid savings.
Page Perry, LLC is a ten lawyer Atlanta-based law firm with over 125 years collective experience representing investors in insurance and securities related litigation and arbitration. While past results are not indicative of future success, Page Perry’s attorneys have recovered over $1,000,000 for clients on more than 30 occasions. If you know someone who has been a victim of an unsuitable sale of a LTC policy or other insurance product, please contact us for a free consultation
