The long-term care insurance sector made a powerful enemy last week when presidential candidate Barack Obama called for a wide-ranging federal investigation of reported abuses by carriers of elderly claimants. Just what the industry needs--another high-profile Washington probe of alleged insurer wrongdoing!
I first raised this subject in my blog on March 27, headlined "Another Black Eye." I said then that even though LTC is not a property-casualty coverage, since the general public doesn't make any distinction about different insurance sectors, the entire industry will inevitably be tarred with the same brush.
As reported by NU's Allison Bell, Sen. Obama--the charismatic Illinois Democrat who is matching his chief rival, Sen. Hillary Clinton, D-N.Y., dollar for dollar on the fundraising trail--wrote to the U.S. Government Accountability Office to ask for a probe into a New York Times reporter’s allegations of widespread LTC insurance claims problems.
Ms. Bell reported that Sen. Obama--a member of the Senate Health, Education, Labor and Pensions Committee--also asked GAO to examine claims denial rates, the extent to which denials were justifiable, and the percentage of policies sold that do adjust and do not adjust for inflation, along with the frequency and amount of premium increases in already-purchased policies, average lapse rates of policyholders, and the correlation between premium increases and lapse rates.
Of course, Sen. Obama also asked GAO to consider “what, if any, additional federal regulation is needed.”
It seems as if Congress can't get enough of the insurance industry these days, and why not? While insurance issues are usually esoteric at best and dull at worst, today's disputes are juicy indeed--real red meat for the political opportunists on Capitol Hill. Helping people abandoned by their insurers--whether homeowners left with nothing after Hurricane Katrina, or helpless oldtimers told by carriers to take a hike when bills for LTC services come due--can make a politician's career.
The problem, again, is not one of perception, but of reality. The politicians might be capitalizing on the missteps of insurers, but the politicians didn't make the missteps in the first place. Will federal regulation help? Probably not. In fact, meddling by Uncle Sam could cause more harm than good in the long run.
But either way, insurers have no one but themselves to blame for their mishaps. Everyone talks the talk about putting policyholders first, but unless everyone walks the walk, this industry will continue to be hammered by lawmakers of all stripes, and rightfully so.
Comments (4)
The New York Times article highlights two insurers that have had a large portion of the complaints in the long-term care insurance industry. According to the Times, these two insurers have 30 times as many complaints (proportionately) as some of the leading long-term care insurers.
The message of the article is NOT that the long-term care insurance industry has failed. The long-term care insurance industry, as a whole, has paid, and continues to pay, billions of dollars in claims.
Nothing sells more newspapers than a story about mean-old-nasty-insurance-companies. If 1,000 LTC insurance claims are paid, the newspapers will print the story about the one claim that was denied. That's the nature of the print media. It's been that way since Gutenberg.
Here's an interesting reply to this article that should be of interest to most: http://www.ltcinsuranceshopper.com/
Posted by W. Wright | April 10, 2007 10:53 PM
Posted on April 10, 2007 22:53
With the prevalant pork-barrel ethics of politicians, you would think that they could focus their energy on something more interesting than the insurance industry.
Isn't it curious that their moral indignation only follows the issue of the day?
The "cause du jour" attitude of politicians never ceases to amaze. As the elections near and the races heat up, it will be interesting to note who else they will take to task.
Posted by Marc Dubois | April 11, 2007 11:28 AM
Posted on April 11, 2007 11:28
Hear, hear, Marc! This is just cheap political posturing.
The shame of it is that there are some issues there which may or may not be ripe for some type of regulation.
After the soundbites and the BS you usually end up where you started or with a terrible law. I think a perfect example of this is Sarbanes-Oxley.
Posted by James | April 11, 2007 3:30 PM
Posted on April 11, 2007 15:30
All three comments have their points, and here is mine:
If the two largest offenders get their hands spanked, their business ethics shaped up and claims actually do get paid, then it is all worth the talk. I love this country!
Posted by Linda Weber | April 12, 2007 11:25 AM
Posted on April 12, 2007 11:25