There are two main types of private long-term care insurance policies offered by providers in the United States: Tax qualified (TQ) policies and Non-tax qualified (NTQ) policies.
In a tax qualified policy, an individual must be unable to perform 2 or more ADLs and require care for at least 90 days. Tax qualified policies also apply to individuals with severe cognitive impairment, such as dementia, Alzheimer’s, or some types of neurological disorders. In general, a plan of care is required by a doctor. Tax qualified policies are the most popular type of private long-term care insurance policies. The benefits received from these policies are non-taxable.
In a non-tax qualified policy, a patient’s doctor must state that the patient needs care for a medical reason; and coverage for that care will be provided by the policy. The eligibility requirements tend to be lower for non-tax qualified policies, but because the benefits may be taxable, individuals who receive these benefits may face significant tax bills.
Both tax qualified and non-tax qualified long-term insurance policies can require very high premium payments that tend to increase the older the purchaser. Thus, elder people who find themselves needing to purchase long-term care insurance can find themselves in the double-bind of either paying high premiums or independently paying for expensive long-term care. Before purchasing any kind of private long-term care policy, it is extremely important to review all fees and agreements in the policy.
Long-Term Insurance Scams and Fraud
Unfortunately, the rise in long-term insurance products has in turn given rise to several scams and fraudulent practices related to the sale of long-term insurance products and purported long-term insurance products.Because the majority of people who purchase long-term insurance tend to be seniors, these scams actively target seniors as well. The following is a list of practices to look out for.
1. Unsuitable Policies
Dishonest people who attempt to sell insurance products to seniors will frequently try to sell the wrong type of insurance so as to gain maximum profit. Examples of this include attempting to sell insurance policies with unnecessarily high premiums; attempting to sell two overlapping policies when only one is needed; and targeting low-income seniors as a scare tactic to make the senior believe that a low income will prevent them from receiving long-term care without an insurance policy. [Note: this is not true. See above section on Medi-Cal for low-income individuals and long-term care.]
Churning occurs when an insurance salesperson or provider attempts to convince a policyholder to cancel a pre-existing policy and replace it with a new one. Churners will often use terms like “trade up” or “upgrade” when talking about the new policy in order to mislead the potential buyer, when in fact the new policy may be more expensive and offer no improvement on the original policy. Furthermore, the client must forfeit the premiums paid on the previous original policy when switching to the new one, and may be denied benefits from the previous policy based on new pre-existing conditions.
3. Watered Coverage
As opposed to #1, in a “watered coverage” situation, an insurance company or seller will offer an enticingly low premium by eliminating or reducing critical features of the policy. These eliminations and reductions can have extremely detrimental effects, such as the denial of important medical benefits and coverage, or exposure to very high out-of-pocket costs.
4. Overstated Benefits
A policy may claim to cover more than it states it does in the fine print of the contract. Be wary of policies that appear “too good to be true” – they probably are.
5. Application Misstatements
Similar to in cases of “watered coverage,” an insurance salesperson may misstate client’s information such as age or medical history in order to lower the premium. These practices are illegal and could lead to the policy being nullified. In addition, the person whose information is misstated could be charged with criminal fraud.
6. Fake Policies
Finally, it is important to be aware of the existence of phony or false policies and coverage. These fraudulent schemes take a potential buyer’s premium and offer nothing in return. One way to avoid these schemes is to always check your state insurance department to make sure the insurance company is licensed in your state and financially stable.
What resources are available as protection from long-term care scams and fraudulent practices?
The best way to avoid long-term scams and fraud is to stay informed and do your research whenever buying or looking into long-term care or insurance. Depending on your financial bracket, it may be prudent to attempt to get Medi-Cal coverage rather than purchase a new insurance policy.
Two resources that are helpful regarding the quality and legitimacy of insurance companies in California are the California Department of Insurance and the California Partnership for Long-Term Care.
Make sure you are aware of the exact benefits you do and do not receive from every potential policy, and compare policies and prices before you select one. Similarly, be aware of the restrictions of each policy. Do not buy duplicate policies.
If you do decide to purchase a policy, fill out your own application to ensure the accuracy of all the information in it, and follow-up regularly to make sure you continue to receive updates regarding the status of your policy. Always pay your premiums by check or debit card, and make the checks payable to the insurance company instead of the individual agent. Keep track of all your documents and payments related to the policy, and avoid pressure to “upgrade” your policy once you have decided upon it.
Finally, if you suspect a scam or fraudulent behavior, contact the Department of Insurance to report it immediately. To report fraud in California, call 1-800-927-HELP.
Who are some of the top sellers of long-term care insurance?
The following are some of the top-selling companies of long-term care insurance:
- Columbus Life Insurance
- Genworth Life Insurance Co.
- John Hancock
- LifeSecure Insurance Co.
- Massachusetts Mutual Life
- MedAmerica Insurance Co.
- Metropolitan Life
- National Life Insurance
- Prudential Insurance Co.
- Transamerica Life Insurance
- Woodbury Financial Services
If you or a loved one are encountering potential fraud or abuse regarding long-term care or long-term care insurance and would like a free and confidential consultation with a California lawyer at the Evans Law Firm, call toll free 888-50EVANS (888-891-4906) or 415-441-8669 or by email at email@example.com