Insurers balk at paying up on long-term care policies

By Charles Duhigg, The New York Times
Posted March 26 2007

CONRAD, Mont. – Mary Rose Derks was a 65-year-old widow in 1990, when she began preparing for the day she could no longer care for herself. Every month, out of her grocery fund, she scrimped together about $100 for an insurance policy that promised to pay eventually for a room in an assisted living home.

On a May afternoon in 2002, after bouts of hypertension and diabetes had hospitalized her dozens of times, Derks reluctantly agreed that it was time. She shed a few tears, watched her family pack a truck with photo albums and her favorite blankets and rode to Beehive Homes, five blocks from her daughter’s farm equipment dealership.

At least, Derks said at the time, she would not be a financial burden on her family.

But when she filed a claim with her insurer, Conseco, the company said she had waited too long. Then it said Beehive Homes was not an approved facility, despite its state license. Eventually, Conseco argued that Derks was not infirm, despite her early-stage dementia and the 37 pills she takes each day.

After more than four years, Derks, now 81, has yet to receive a penny from Conseco, while her family has paid about $70,000. Her daughter, Jackie Wheeler, has sent Conseco dozens of bulky envelopes and spent hours on the phone. Each time the answer is the same: Denied.

Tens of thousands of elderly Americans have received life-prolonging care as a result of their long-term-care policies. With more than 8 million customers, such insurance is a fast-growing business, one of the many products that insurers, financial companies, and drug makers are pitching to Baby Boomers and older Americans reaching retirement. Thanks to recently passed federal incentives intended to promote purchases of long-term-care policies, the business is expected to grow even more.

Yet thousands of long-term-care policy holders say that years of paying premiums have resulted in only a stream of excuses about why insurers will not pay.

Confidential depositions from policy holder lawsuits and interviews by The New York Times indicate that some long-term-care insurers have developed procedures that make it difficult — if not impossible — for policy holders to get paid. A review of more than 400 of the thousands of grievances and lawsuits filed in recent years shows elderly policy holders confronting unnecessary delays and overwhelming bureaucracies. In California alone, almost one in every four long-term-care claims was denied in 2005, according to the state.

“The bottom line is that insurance companies make money when they don’t pay claims,” said Mary Beth Senkewicz, who resigned last year as a senior executive at the National Association of Insurance Commissioners. “They’ll do anything to avoid paying, because if they wait long enough, they know the policy holders will die.”

In a statement, Conseco said the company “is committed to the highest standards for ethics, fairness and accountability, and strives to pay all claims in accordance with policy contracts.” Penn Treaty said in a statement, “We strive to treat all policy holders fairly, and to deliver the best, most efficient evaluation of their claim as possible.”

But policy holders have lodged thousands of complaints against every major long-term-care insurer. A disproportionate number have focused on Conseco, its affiliate, Bankers Life, and Penn Treaty. In 2005, Conseco received more than one complaint regarding long-term-care insurance for every 383 such policy olders, according to data from the insurance commissioners’ association. Penn Treaty received one complaint for every 1,207 long-term-care policy holders.

By comparison, Genworth Financial, the largest long-term-care insurer, received only one complaint for every 12,434 policies.

Conseco is among the nation’s largest insurers, collecting premiums worth more than $4.2 billion in 2006, of which long-term-care policies contributed 21 percent. Penn Treaty focuses primarily on long-term-care products and collected premiums of about $320 million in 2004, the last year the company filed an audited annual report.

In depositions and interviews, current and former employees at Conseco, Bankers Life, and Penn Treaty described business practices that denied or delayed policy holders’ claims for seemingly trivial reasons. Employees said that they had been prohibited from making phone calls to policy holders and that claims had been abandoned without informing policy holders. Such tactics, advocates for the elderly say, are becoming common throughout the industry.

“These companies have essentially turned their bureaucracies into profit centers,” said Glenn R. Kantor, a California disability lawyer who has represented policy holders.

Yet these concerns have been ignored by state regulators, advocates say, and have gone unnoticed by lawmakers who hope long-term-care insurance will forestall a Medicare funding crisis.

Conseco and Bankers Life “made it so hard to make a claim that people either died or gave up,” said Betty J. Hobel, a former Bankers Life agent in Cedar Rapids, Iowa.

“When someone is 70 or 80 years old,” she said, “how many times are they going to try before they just give up?”

When Derks bought her long-term-care policy from a door-to-door salesman in 1990, she was unaware that she represented the insurance industry’s newest gold mine.

Her husband had died eight years earlier of a stroke, leaving her to run a barley farm in northern Montana, where she lived with her three children and her aging mother. As she watched her own parent decline, Derks became preoccupied with sparing her children the expense of her final years.

“She was terrified that she would bankrupt us or get sent to a public nursing home,” said Ken E. Wheeler, her son-in-law.

Eventually, the Wheelers had to sell part of their farm equipment dealership to raise the money to pay for her mother’s care. In October 2006, they sued.

Conseco, asked by a reporter about the company’s handling of the Derks claim, declined to answer, citing the pending litigation.

“We did everything they asked,” Jackie Wheeler said. “And this company just treats us like dirt.”

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