When Consumer Protection Isn’t There

Since June 2012 I have been trying to help this lovely woman with what I thought would be an inadvertent oversight/error with a long-term care insurance company. Instead she is out $40,000, and has few if any alternatives or any recourse. There is not a regulation or law on the books—federally or in our state—that can help her.

‘Mary’s’ Story:  This Could Be You or a Loved One

Mary (not her real name) missed three payments over 22 years when she moved from her home to an independent living retirement community that has a health center and assisted living facility. Her premiums are paid semi-annually.  When she was reviewing her taxes for 2011 she discovered she had not deducted her long-term care premiums.  When she discovered her mistake of missing some payments after she moved, she tried to pay the company in full for her missed payments. She was told that her policy had lapsed. They refused to accept the money to bring her policy current.

She has lived independently since she moved into the retirement community.  She has used no services and continues to live independently.

In every appeal to the company to reinstate her policy with payment in full for the missed premiums, we were told ‘no’.  Mary’s son had even worked for a while with one of the insurance company’s board members.

The company said they sent three premium notices to her, but when she did not pay them, they said, her policy simply lapsed and there is nothing they can do about it.  She did not pay the premium notices because she did not receive them.  She did not receive them because the post office forwarding time expired. The notices would have been returned to the company with a postal sticker saying:  “Forwarding Time Expired.”

All the time, however,  the company actually knew where Mary was. The very month she moved she had received a letter from them indicating that the retirement community’s health center and assisted living would be eligible for coverage under her policy.  The company knew the name and address of the retirement community where she was moving. Mary has the letter from the company about their evaluation and approval of the facility.  Her last premium payment to them even had her new address on it.  All they had to do was contact the retirement community to see if she had moved there. They didn’t.

The postal notices would not have been checked for some of the other reasons mail was never received, such as:  “deceased” or “addressee unknown.”

The insurance company says her policy lapsed and cannot be reinstated. From what I have found in several conversations with the state Insurance Commissioner’s Office,  there is  no law or regulation that can force the company to reinstate her policy or return her money.  She paid in advance for services she thought she would receive. They provided no services; they have her money. She has no alternatives.  Or right now, no heavy lifting advocates. Yet.

 Other Appeal Routes?

I called the Attorney General’s Office to see if we could go after the company through their office.  Their reply was: “We don’t handle insurance issues.  The Insurance Commissioner handles insurance.”

Her only choice at this point, according to the Insurance Commissioner’s Office, is to take the insurance company to a federal district court to see if she can get reinstated.

Even though we have a law in this state about “inadvertent forfeiture,” it somehow does not seem to apply to Mary’s case, I am told.  While I am not a lawyer, this is certainly what happened to Mary.  She paid her premiums on time for over 20 years with no late payments.  It was never Mary’s intent to terminate her policy. She simply moved and offered immediately to replace the missing payments in full when she discovered her error. She was turned down every time.

Fortunately Mary has all her insurance records—from the original policy provisions saying she can be reinstated at any time at the discretion of the company. The current insurance company does not care. They are now the third company to own her long-term care policy.

The company has thoughtful Values and Code of Ethics statements. They are buried, however, only on the Investors’ page on their website. Nowhere else.

But, it is not just long-term care insurance policies according to some attorneys I spoke with, both long-term care and disability claims are routinely denied. The only recourse people have is going to court.  But how many people can afford to pay attorneys several hundred dollars an hour to fight a large corporation?  An experienced attorney can charge up to $400 an hour—or 100 hours; roughly two and a half weeks of work.   These corporations can nickel and dime a single consumer to death.

Long-term Care and $40,000 in Perspective

I think long-term care insurance companies may be in trouble.  While Mary’s premiums went up between 1992 and now, the premium increases did not keep up with the steep increases in health care costs over the same period of time. At nearly double digit increases over the past 20 years, what long-term care insurance would have been “affordable” in 1992 cannot possibly be covered in 2013.

For example, I don’t know what long-term care services would have cost in 1992, but I do know that when my mother had Alzheimer’s Disease and needed 24 hour care in 2002-04, her care cost $5,000 a month.  That was in a special community setting.

If Mary ever needs that level of care, at $5,000 a month, her long-term care benefits would last eight months. I have heard estimates today of $8,000 a month for 24 hour care.  That’s five months.  Her policy was for lifetime care.  No wonder they don’t want her back.

What Needs to Be Done

After 25+ year in health care I thought I could no longer be surprised.  The lack of consumer protection teeth in our insurance regulations stunned me. We have teeth, perhaps, when it comes to financial solvency—reserves insurance companies must have, etc.  But even those are often toothless.

Insurance regulation has always been the responsibility of the states. Which is why I think insurance regulations have so few teeth. I was stunned to learn as I was writing this that the states have jurisdiction over insurance because a Supreme Court decision in 1869 said “issuance of a policy of insurance was not the transaction of commerce, and therefore beyond the scope of federal legislation.”

This has changed over the years (see the final link at the end), but more needs to be done.  And it can be done.  And it must be done to protect people like Mary and the other thousands who have had the same problem and do not know where to turn.

What We Need to Do

What happened to Mary is wrong. Not only is it wrong, it is highway robbery.  What is really wrong is that she—as with how many others—has no affordable legal recourse or any state or federal protector or advocate.  We must give some teeth to “inadvertent forfeiture.”  This is not as if she stopped paying her car insurance and had an accident and suddenly decided to pay her missed payments.  She moved. She discovered her inadvertent error; wanted to make restitution for her oversight and was told no.

The galling piece of information for me in researching this was when I discovered that health insurance companies in our state are not covered by our state’s Insurance Fair Conduct Act:  http://www.insurance.wa.gov/your-insurance/health-insurance/understanding-health-insurance/your-rights/bill-of-rights.html


Health insurance is regulated instead under the relatively toothless Patient Bill of Rights:  http://www.insurance.wa.gov/your-insurance/health-insurance/understanding-health-insurance/your-rights/bill-of-rights.html

That is, however, another story.  Her long-term care insurance policy is not considered a health insurance policy, but still there is nothing in any regulation that can help her I have been told repeatedly.

As we move forward with the Affordable Care Act, we must be sure to be vigilant for consumer protection.  We will keep a watchful eye here.

Next week:  The ACA impact on business–who is impacted by what and when;  and the fight is on over the Independent Payment Advisory Board which is charged with addressing Medicare physician payments and quality care.   There is already at least one bill to repeal it.  And they are finding it hard to find people to be on it: http://www.washingtonpost.com/blogs/wonkblog/wp/2013/01/28/who-wants-to-sit-in-the-hot-seat-on-a-federal-health-care-panel/?wprss=rss_ezra-klein&wpisrc=nl_wonk

For a quick History of Health Insurance Regulation see: http://en.wikipedia.org/wiki/Insurance_regulatory_law

Please share with others you think would find this story of interest.

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About Kathleen

Kathleen O’Connor: 30+ year health care consumer advocate, non-profit executive and author. For more information about Kathleen, please see "About" on the main content bar above.
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