Federal audit reveals LTC insurance claims practices

When someone contacts me to inquire about purchasing long-term care insurance, one of the questions I’ll ask is:  “What prompted you to look into long-term care insurance?”

Over the past few years many of my clients have been answering that question like this:

“Well, my dad has a long-term care policy and it’s paying for his assisted living facility right now.  I want a policy that will do the same for me.”

Or, “My mom has 24-hour home health aides right now.  If it wasn’t for her long-term care policy, we’d have to put her in a nursing home.”

Millions of long-term care policies were bought in the 90’s.  Many of those policyowners are now making claims.  In fact, just ten of the leading long-term care insurers combined to pay over $3.9 BILLION in long-term care insurance claims in 2010.

I shared that statistic with someone recently and he asked, “But how many claims do they deny?”

Recently, the federal government conducted an audit of long-term care insurance claims practices and released their findings in a 20-page report.  The audit was conducted over a 22-month period in 2008 and 2009.

The federal audit reviewed both approved and denied claims from seven of the leading long-term care insurers.  These seven insurance companies are currently paying over 70% of long-term care insurance claims.  They audited EVERY denied claim for some of the insurers in the study.

You can read the 20-page report at the Dept. of Health & Human Services website.  I’ve provided a link below.  Here are a few important points made in the report:

“…there is a low incidence of disagreement between the clinical audit team and the insurance company adjudicators, particularly when it comes to denied claims.”

“…There is a greater probability of approving rather than denying a questionable claim.”

“…Regarding denial decisions, we found that in all cases, there was no evidence to suggest that the individual met the tax-qualified criteria for benefit eligibility in their policy.”

“…This would suggest that companies are consistently applying their clinical contract language to their claims decisions.”

In other words, the claims are being paid! The reason some claims are not paid is because the policyholder does not meet the federal guidelines for “benefit eligibility” in the policy.

Here’s a link to the study at the Dept. of Health and Human Services website:


This is a very important topic.  I welcome your comments and discussion below!


About Scott A. Olson

Scott A. Olson, is the author of “The Guidebook for Making Long-Term Care Insurance Easier.” He is a licensed insurance agent and has specialized in long-term care insurance since 1995. He is licensed to sell long-term care insurance in over 40 states. Scott was born and raised in New Jersey and attended Rutgers University. Scott was a caregiver for a close relative for two years. That personal experience has made him acutely aware of how to help his clients design and choose a long-term care policy that will benefit them when they need it the most. Scott and his wife Carolyn live in Redlands, California. Scott and Carolyn have four sons.

3 comments on “Federal audit reveals LTC insurance claims practices

  1. Great post Scott. Thanks for the info.

  2. Scott, thanks for your comments over at The-Military-Guide.com .

    Your military readers might be interested in a comparison of how the Federal Long-Term Care Insurance Program compares to the coverage available from civilian employers, other groups, or on their own.

    It’s particularly interesting to active-duty military whose parents are eligible for the coverage. I wouldn’t have picked up on the eligibility issue if my father hadn’t coincidentally mentioned that he was shopping around.

    • The primary advantage to any employer-sponsored LTCi policy is the “simplified” or “abbreviated” underwriting. That means that employees can get approved for coverage by just answering a few, simple health questions.

      There is a trade-off, though, for that simplified underwriting. A healthy person (especially a healthy married person) might be missing out on preferred health discounts and marital discounts by going with the employer-sponsored LTCi program.

      Preferred health discounts can be as high as 25% with some LTCi policies.
      Marital discounts can be as high as 40% with some LTCi policies.

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