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How Long-Term Care Insurers Deny Benefits

The best ways to fight back and get a loved one's claims paid

By Richard Eisenberg

Here’s a heartbreaking scenario: Your parents or another loved one bought a long-term care insurance policy years ago and have paid its steep premiums ever since, but now that they need the benefits, the insurer refuses to pay them.
Sadly, this happens all too often, as I learned last week at the Aging in America 2014 conference of the American Society on Aging in San Diego.
“This is a big problem,” said Alan Kassan, a lawyer with Kantor & Kantor in Northridge, Calif., whose firm represents long-term care policyholders on a contingency basis in their battles to get claims paid. “You pay for the insurance and when it’s time to collect the benefits, you get the bad news.”
Red Tape and Payment Difficulties

Corinne Chandler, a fellow lawyer at the firm, added: “We also handle life, disability and health insurance claims, but there’s no other area of the law where I’ve seen more red tape and difficulty getting claims paid.”

(MORE: ABCs of Long-Term Care Insurance)
Kassan and Chandler said there are a number of ways you and your parents can get recalcitrant insurers to pay benefits, though. I’ll go through them in a moment.
I don’t want to leave the impression that all long-term care insurers are stingy about claims. They’re not.
Last year, 273,000 Americans received $7.5 billion in long-term care insurance benefit payments, according to the Association for Long Term Care Insurance (ALTCI).  Benefit payments rose 13 percent from 2012, according to ALTCI’s director, Jesse Slome.
But with the average annual cost of an assisted living facility at $41,400, a private room in a nursing home running $83,950 and a licensed home-health care aide charging around $19 an hour — according to the Genworth 2013 Cost of Care Surveyall long-term care insurance policyholders should receive the benefits they’re due.
How Long-Term Care Policies Have Changed

You should know that long-term care policies from the 1990s were often written much differently than today’s version. That’s one reason why people with older contracts — precisely the ones now trying to get benefits paid — sometimes run into trouble.
Back then, regulation of the long-term care industry was lax and many policies were “poorly written,” said Chandler. Assisted living facilities were fairly new, so policies generally didn’t specifically cover them.

(MORE: Buying Long-Term Care Insurance Gets Trickier)
Instead, the contracts provided nursing home coverage or home health care coverage. And even the definition of “home” was vague.
Now that assisted living facilities have grown in popularity, they’re usually included in current long-term care policies.
“The policies written in the last 10 years or so typically provide comprehensive coverage,” said Chandler.
The key to getting long-term care benefits paid on most recent policies is that the insured is unable to perform two or more activities of daily living (ADLs) — eating, bathing, dressing, toileting, transferring to or from a bed or chair and continence.
Here are four ways Kassan and Chandler have seen insurers deny or delay benefits and how to avoid or handle them:
Ineligible Care Provider
If the insured person is in a nursing home or an assisted living facility, that operator must prove to the long-term care insurer that it’s an “eligible care provider.”
In some cases, the policy requires that the facility have a specific license and the appropriate personnel and care.
“If you’re considering placing a loved one in a facility, find out in advance if it meets the criteria of that person’s policy,” said Chandler. “You don’t want to move someone in and then have to move them out because the insurance doesn’t pay for that facility. That’s something we see happen all the time.”
Some insurers will insist that a facility meets their current criteria even though that criteria wasn’t specified in the policy. In this case, challenge the decision. “If the policy wasn’t written that way, they can’t interpret it to deny you coverage,” said Chandler.
No Prior Hospitalization
This is sometimes known as “the gatekeeper provision” and often appears in older long-term care policies. This wording requires that a policyholder had hospitalization confinement, a nursing home stay or both before claims would be paid.
But most states have outlawed these provisions for many years.
No Benefits for Personal Care
Some insurers may say they won’t pay benefits for “personal” care such as light housekeeping or errands a caregiver must run for the policyholder. “But you can often get these benefits paid even if the insurer says otherwise, as long as the insured meets the policy’s ADL requirements,” said Kassan.
Most policies also exclude care provided by family members, but you should scrutinize the policy’s wording on this. “Last week, I had case where the policy excluded care from the insured’s spouse, siblings or those related by marriage,” said Chandler. “But the person providing care was the policyholder’s granddaughter, so that care should be paid for.”
Failure to Pay Claims Due to Cognitive Impairment
Sometimes, benefits are denied because the policyholder has forgotten to pay the premiums due to his or her cognitive impairment. But “in most states, you have up to five months before a policy can lapse because premiums weren’t paid,” said Chandler. “If you can get a physician’s statement during that time demonstrating your parent is cognitively impaired, the insurer will reinstate the policy.”
7 Tips for Getting Benefits Paid
Kassan and Chandler also had seven tips for anyone planning to file a claim for a long-term care policy:
1. Have your parent sign a statement authorizing you to act on his or her behalf in policy disputes. “It doesn’t need to be a power of attorney — just a statement that’s signed,” said Chandler. It may be too late for you to do this if your parent is suffering from dementia, of course.
2. Never submit a claim without first reading the policy closely. “Otherwise, you may wind up characterizing a claim in a way that prejudices your ability to get benefits paid,” said Kassan. “If you read the policy first, you’ll be able to characterize the claim properly.”
If you don’t have, or can’t find, the policy, ask the insurer to send one. Ideally, it will.
3. When filing a claim, don’t feel confined to include only the information the claim form asks for. “Don’t be constrained by the boxes on the form,” said Kassan.
Feel free to submit as much as evidence as you need to substantiate your claim, such as information from your parent’s physician or caregiver. “It’s a good idea to submit a physician’s ‘certification of necessity of treatment’ or ‘plan of care,’” said Kassan. “Sometimes that’s required, but it’s good to include even if it isn’t.”
4. If you’re having trouble getting the insurer to pay a claim, put it in writing and send the letter to the company. Don’t try to resolve a problem over the phone.
“A letter doesn’t leave room for ambiguity the way a phone call does,” said Kassan. “If the insurer makes an unreasonable demand, like saying you need a power of attorney to represent your parent, send a letter saying ‘You instructed us that we need power of attorney. Please provide the authority for that.’ With this kind of paper trail, there’s no doubt what was said.”
5. If you plan to hire a home health aide from an agency, make certain the aide will keep what are known as “daily care notes.” Insurers often demand these before approving home-care claims, said Chandler.
6. Be with your parent when the insurer sends someone out to do an assessment to determine whether to pay benefits. Otherwise, your parent might be too proud to tell the interviewer what he is unable to do — such as dressing, feeding or bathing himself  — which could lead to claims being denied.
If you’re there, you can set the record straight. “You might say: ‘Mom, you do need help getting into the shower,’” said Chandler. Then have your parent prove it during the assessment.
7. Tell your parent’s insurer that you want to be a third party designee and receive a copy of any lapse notices. This way, if your mom or dad doesn’t make the premium payment, you’ll know and can remedy the situation.

Photograph of Richard Eisenberg
Richard Eisenberg is the former Senior Web Editor of the Money & Security and Work & Purpose channels of Next Avenue and former Managing Editor for the site. He is the author of "How to Avoid a Mid-Life Financial Crisis" and has been a personal finance editor at Money, Yahoo, Good Housekeeping, and CBS MoneyWatch. Read More
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