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Senate Committee Holds Hearing on Long Term Care Insurance

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Milwaukee, WIIf you have purchased a long term care insurance policy, you have probably already considered the "what-ifs" associated with aging. You have probably already thought about the circumstances under which you might need long term care insurance benefits and have decided that the probability of needing long term care insurance is great enough that it is worth having coverage. However, a recent hearing about the long term care insurance industry suggests that such insurance may have some serious flaws.

Long Term InsuranceThe Senate Special Committee on Aging recently questioned representatives of the long term care insurance industry about industry practices.

"The Committee is aware of instances in which Americans living on modest or fixed incomes who have held policies for many years have seen premium rates double when a company encounters financial difficulties," Senator Herb Kohl, chairman of the committee said. "For such consumers, the choices are stark and very limited. They can either dig deeper and pay the increased premiums or let their policy lapse, leaving them with no coverage if they ever need care."

Kohl has introduced the Confidence in Long-Term Care Insurance Act, designed to make policies easier for consumers to understand and put a limit on premium increases. He said a US Government Accountability Office report about consumer protections for purchasers of long term care insurance found that, "increases are common throughout the industry and consumer protections are uneven."

One of the issues in long term care insurance is that a policy purchased might not be required for 20 or 30 years. In that time, a lot can change in medical care, but the policy might not reflect those changes. For example, some claims might currently be denied based on the type of facility the claimant lives in. Many people are choosing to live in assisted living facilities, but those facilities might not be covered by policies that were written in the 1980s, even though they provide an important service today.

Likewise, there is no telling what advancements will be made over the next 20 years, so people currently purchasing policies must try to weigh the policy as it is written now against what their needs might be in the future.

"Changing service definitions and the evolution of new forms of residential care, as well as the advent of assistive technologies test the flexibility of long-term care insurance products," Diana Rowland, Executive Vice President of Henry J. Kaiser Family Foundation, said in her testimony before the Committee. "Unlike well-understood and defined services such as nursing home and home care, assisted living and other forms of residential care do not always meet the service definitions contained in long-term care insurance policies. Future users of long-term care may receive assistance at home from a range of technologies that include motion sensors and other remote monitoring devices…Policymakers must consider how to ensure the product flexibility that will provide today's purchaser with tomorrow's services and technology."

In her testimony before the committee, Rowland said there are a number of barriers to people purchasing long term care insurance. Those include the cost (up to $4,515 per year for an individual aged 70), being screened out because of health risks and complexity of policies.

But the question might be whether or not long term care insurance is the answer at all. According to a report in Bloomberg, Joseph Bleth, professor emeritus of insurance at Indiana University in Bloomington said, "Long-term care insurance can't solve the financially devastating problem of the cost of long-term care." He went on to say that policy provisions prevent sufficient coverage for middle class people.

While the Committee sorts out the ins and outs of the long term care insurance industry, policyholders are left to wade through current policies, some of which, according to Rowland, might not cover the type of care they need.

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