Long-Term Insurers Show their Ugly Side

Los Angeles, CACalifornia is among a dozen American states taking a proactive stance against potential long-term health insurance fraud, with beefed-up legislation and safeguards for policyholders. And yet, almost one out of every four California residents making a legitimate claim was denied in 2005.

Imagine paying for years into a long-term insurance policy, either for yourself, or a loved one. You've deferred vacations, that new car, even a nicer home, to ensure you make your payments in a timely manner. A small price to pay for the peace of mind that comes from knowing you're going to be looked after when the time comes.

Don't count on it.

Honest, hard-working Americans have begun to discover that their long-term care is only as good as the current business sense it may represent for the insurer. Indeed, they've collected premiums from you for years - premiums that help to fund a U.S. $50 billion dollar a year industry. That's $50 billion in premiums. And yet there is little preventing an insurer from denying your claim, or stonewalling long enough that it effectively mitigates the payout owed to you - or wipes it out altogether if their stalling tactics outlive you.

The practise is contrary to regulatory decorum, and there are substantial fines - fines that are considered chump change compared to the profits, and the potential cost of long-term payouts. In the end, it's often cheaper to jerk you around and pay the fines, than cough up payouts on the long-term insurance you have paid for.

Thankfully, not all long-term insurance companies think in those terms. Most carry out their contractual responsibilities in good faith. But there are enough bad apples to warrant concern, and a recent New York Times article exposed the suspect practices of a handful of companies either stonewalling to avoid a payout, or denying a claim altogether.

One story involves a widow of 81. She had paid into her policy faithfully since 1990, but was denied benefits despite intervention from her family, who wound up paying a $70,000 long-term-care bill themselves. The insurer kept making excuses, and in the end didn't pay anything at all.

Ray Bourhis, a lawyer based in San Francisco, is a consumer advocate and author who knows well the conduct of crooked long-term-care companies. He is attempting to lobby Congress on the merits of strengthening the Employee Retirement Income Security Act by rescinding the pre-emption clause that makes it easier for insurers to skate around their responsibilities in the event of criminal fraud.

Bourhis is also calling on individual states to enact safeguards for policyholders, following the lead of proactive states like California in this regard.

It's sorely needed, given the stalling tactics revealed in a host of lawsuits. Claims have been denied due to the unavailability of trivial paperwork, the submission of incorrect forms provided to the claimant by the insurers themselves, or insisting on information that was not required to process a claim. Meanwhile, time runs out for you, or your loved one - while the withholding tactics go on, unabated.

Reform is needed now, with baby boomers poised to crest the long-term-care wave. Conservative estimates reveal eight million Americans have acquired long-term coverage, and that number is certain to grow - adding to the swollen coffers of an already profit-rich industry. Profits that come at the expense of well-meaning Americans convinced that having insurance takes away the worry.

In actual fact, the worrying may have just begun.