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Bucks Blog: Preventing Lapses in Long-Term Care Policies

June 13, 2013 by Leave a Comment

Last week, my colleague Tara Siegel Bernard wrote about the challenges some consumers have had when trying to file claims for benefits under their long-term care insurance policies. One reader told about an experience she had when her mother – stricken with Alzheimer’s disease – canceled her own long-term care policy. Through persistent efforts, the reader said, she was able to have the policy reinstated, more than a year later.

It is not unheard-of, given the health status of those seeking benefits under long-term care insurance, for unintended breaks in coverage to occur. And long-term care policies typically have provisions for a grace period that allows for reinstatement after a lapse in coverage, in the event a policyholder fails to pay premiums, said Jesse Slome, executive director of American Association for Long-Term Care Insurance, an industry group.

The length of the grace period, however, depends on when the policy was written, Mr. Slome explained in an e-mail. Policies written before the Health Insurance Portability and Accountability Act of 1996, known as Hipaa, typically provided for a 30-day grace period, he said.

Policies written after the act was passed, he said, generally include a provision allowing the policy to be reinstated for up to six months, if the policy lapsed because of the policyholder’s failure to pay because of a cognitive impairment, or because he or she needed help with “activities of daily living.” (The law requires a period of at least five months, but some insurers allow as long as seven months, Mr. Slome said.)

In general, the policy will be reinstated when all overdue premiums are paid.

Some insurers calculate the six months starting from the date the policy lapsed, he said, while others count it from the date the premium was originally due.

Current policies also provide consumers with additional protections against an unintended lapse, Mr. Slome said. For instance, the policyholder must designate another person on their application for coverage and provide contact information so that person will be notified of any missed premium payments. (If a contact person is not designated, the policyholder must submit a written waiver electing not to do so).

In addition, he said, the insurer is required to notify the policyholder at least once every two years of their right to change the designation.

Have you ever had a lapse in your long-term care insurance policy? Have you named someone as an alternate contact, to avoid potential coverage problems?

Article source: http://bucks.blogs.nytimes.com/2013/06/13/preventing-lapses-in-long-term-care-policies/?partner=rss&emc=rss

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Bucks Blog: Buyers of Long-Term Care Insurance Prefer Home Care

March 26, 2013 by Leave a Comment

Long-term care insurance, which can help cover the cost of extended care if you’re unable to care for yourself, is something no one really wants to think about. It’s a product you buy, after all, in the hope that you will never have to use it.

On top of that, coverage is increasingly expensive and confusing — and it is sometimes hard to get the insurance company to pay out the benefits, even when it seems clear that a policy’s requirements have been met.

Yet it is something many people in their 50s, 60s and older are thinking about a great deal, as I learned when reporting on an article for this week’s Your Money section. Rather than seeking the insurance as a way to cover the cost of a nursing home, some people see it as a way to keep themselves out of a nursing home — to provide a decent quality of life in their own homes, when they become frail. They have seen the difference, often with a family member, between in-home care and nursing home care, and they want in-home care for themselves as long as possible. They want insurance to pay for that care, so they do not burden their adult children or other family members.

While fear of a nursing home is often visceral and can be a strong motivator for buying long-term care insurance, elder law specialists say consumers must set aside that emotion when buying a policy so that they are clear on what their policies do and do not cover.

Years ago, policies were sold that offered “lifetime” benefits. But such coverage is too expensive now for most people, so most policies offer a fixed pool of benefits to be used over time. To further keep down the costs of annual premiums, companies are offering policies without built-in inflation protection, on the theory that some coverage is better than none. That means, however, that the benefits will not go as far when the policyholder needs them, years in the future. The difference will have to be made up out of the policyholder’s own pocket.

Have you considered buying long-term care insurance? If you have bought it, what sort of coverage does your policy offer? And if you have used it, tell us about your experience.

Article source: http://bucks.blogs.nytimes.com/2013/03/26/buyers-of-long-term-care-insurance-prefer-home-care/?partner=rss&emc=rss

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Seeking Business, States Loosen Insurance Rules

May 9, 2011 by Leave a Comment

Today, all it takes is a trip to Vermont.

Vermont, and a handful of other states including Utah, South Carolina, Delaware and Hawaii, are aggressively remaking themselves as destinations of choice for the kind of complex private insurance transactions once done almost exclusively offshore. Roughly 30 states have passed some type of law to allow companies to set up special insurance subsidiaries called captives, which can conduct Bermuda-style financial wizardry right in a policyholder’s own backyard.

Captives provide insurance to their parent companies, and the term originally referred to subsidiaries set up by any large company to insure the company’s own risks. Oil companies, for example, used them for years to gird for environmental claims related to infrequent but potentially high-cost events. They did so in overseas locations that offered light regulation amid little concern since the parent company was the only one at risk.

Now some states make it just as easy. And they have broadened the definition of captives so that even insurance companies can create them. This has given rise to concern that a shadow insurance industry is emerging, with less regulation and more potential debt than policyholders know, raising the possibility that some companies will find themselves without enough money to pay future claims. Critics say this is much like the shadow banking system that contributed to the financial crisis.

Aetna recently used a subsidiary in Vermont to refinance a block of health insurance policies, reaping $150 million in savings, according to its chief financial officer, Joseph M. Zubretsky. The main reason is that the insurer did not need to maintain conventional reserves at the same level as would have been required by insurance regulators in Aetna’s home state of Connecticut.

In other big transactions, companies including MetLife, the Hartford Financial Services Group, Swiss Reinsurance, Genworth Financial and the American International Group, among others, have refinanced life, disability and long-term-care insurance policies, as well as annuities.

For the states, attracting these insurance deals promotes business travel and creates jobs for lawyers, actuaries and other white-collar workers, who pay taxes. States have also found that they can impose modest taxes on the premiums collected by captives.

For insurers, these subsidiaries offer ways to unlock some of the money tied up in reserves, making millions available for dividends, acquisitions, bonuses and other projects. Three weeks after Aetna’s deal closed, the company announced it was increasing its dividend fifteenfold.

And as changes to the nation’s health systems are phased in, such innovations might even help hold down the cost of insurance for consumers, much as selling pooled mortgages to investors has made buying a home less expensive.

The downside, though, is that the states are offering a refuge from other states’ insurance rules, especially the all-important ones requiring companies to have sufficient reserves. California, for one, has already chosen not to try to lure such businesses. “We are concerned about systems that usher in less robust financial security and oversight,” said Dave Jones, the California insurance commissioner.

While saying that he wanted to remain open to innovation, Mr. Jones added, “We need to ensure that innovative transactions are not a strategy to drain value away from policyholders only to provide short-term enrichment to shareholders and investment bankers.”

The cost of some of the deals has been considerable. In 2008, MetLife used a subsidiary in Vermont to handle a crucial $3.5 billion letter of credit, with help from Deutsche Bank, because the subsidiary was not subject to the same collateral requirements as in New York. The trade immediately bolstered MetLife’s balance sheet, helping the company to endure that year’s market turmoil without government assistance. But MetLife agreed to pay Deutsche Bank $3.5 million a year for 15 years, according to internal documents obtained by The New York Times — locking itself into high costs for years.

MetLife said its transaction was in keeping with industry rules and norms, and Deutsche Bank declined to comment.

Another issue is public oversight. State regulators normally require insurance companies to make available reams of detailed information. A policyholder can find every asset in an insurer’s investment portfolio, for instance, or the company the carrier turns to for reinsurance. But not if the insurer relies on a captive. The new state laws make the audited financial statements of the captives confidential.

Article source: http://feeds.nytimes.com/click.phdo?i=2a4089ee526f4a1c8ff36f66b4975f97

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