The long-term care insurance sector made a powerful enemy last week when presidential candidate Barack Obama called for a wide-ranging federal investigation of reported abuses by carriers of elderly claimants. Just what the industry needs–another high-profile Washington probe of alleged insurer wrongdoing!
I first raised this subject in my blog on March 27, headlined “Another Black Eye.” I said then that even though LTC is not a property-casualty coverage, since the general public doesn't make any distinction about different insurance sectors, the entire industry will inevitably be tarred with the same brush.
As reported by NU's Allison Bell, Sen. Obama–the charismatic Illinois Democrat who is matching his chief rival, Sen. Hillary Clinton, D-N.Y., dollar for dollar on the fundraising trail–wrote to the U.S. Government Accountability Office to ask for a probe into a New York Times reporters allegations of widespread LTC insurance claims problems.
Ms. Bell reported that Sen. Obama–a member of the Senate Health, Education, Labor and Pensions Committee–also asked GAO to examine claims denial rates, the extent to which denials were justifiable, and the percentage of policies sold that do adjust and do not adjust for inflation, along with the frequency and amount of premium increases in already-purchased policies, average lapse rates of policyholders, and the correlation between premium increases and lapse rates.
Of course, Sen. Obama also asked GAO to consider what, if any, additional federal regulation is needed.
It seems as if Congress can't get enough of the insurance industry these days, and why not? While insurance issues are usually esoteric at best and dull at worst, today's disputes are juicy indeed–real red meat for the political opportunists on Capitol Hill. Helping people abandoned by their insurers–whether homeowners left with nothing after Hurricane Katrina, or helpless oldtimers told by carriers to take a hike when bills for LTC services come due–can make a politician's career.
The problem, again, is not one of perception, but of reality. The politicians might be capitalizing on the missteps of insurers, but the politicians didn't make the missteps in the first place. Will federal regulation help? Probably not. In fact, meddling by Uncle Sam could cause more harm than good in the long run.
But either way, insurers have no one but themselves to blame for their mishaps. Everyone talks the talk about putting policyholders first, but unless everyone walks the walk, this industry will continue to be hammered by lawmakers of all stripes, and rightfully so.
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