California Insurance Lawyer Blog

Investment News reports today that Conseco Inc., “despite vehement objections from state regulators” has completed the transfer of its remaining long-care insurance policies into an independent trust after the Pennsylvania Department of Insurance approved the carrier’s reprehensible plan to disavow its responsibility to provide coverage for its policyholders when they need it. See http://www.investmentnews.com/apps/pbcs.dll/article?AID=/20081113/REG/811139970.

The sad fact is that most of the policyholders are too old or too ill to put up much of a fight. Insurance commissions from around the country, including California Insurance Commissioner Steve Poizner, had vigorously urged the Pennsylvania commissioner to hold public hearings, fearing the Senior Health Care Oversight Trust was inadequately capitalized. Those requests were ignored.

From the beginning, Conseco’s handling of its undercapitalized LTC business has been an embarrassment to the entire LTC industry, which includes a number of carriers that operate with integrity in the claims-handling and benefits-paying process. Conseco stood out for its lack of empathy for seriously ill policyholders relying on the company’s promises. The demise of Conseco’s LTC business has been a long, unpleasant saga for many of its consumers, and this latest chapter does not reflect well on the company nor offer much solace for the remaining policyholders.

Now it’s time for plaintiffs’ lawyers to step in to clean up the mess created by corporate ineptitude and government kowtowing. 11/20/08

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Posted In: LongTerm Care Insurance

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This week, U.S. District Judge Faith Hochberg approved a class action settlement that awarded nearly $300,000 to 119 Aetna Insurance Company policyholders who were denied benefits for eating disorders, reports the New Jersey Law Journal. Hochberg also allowed $350,000 in attorneys’ fees for plaintiff counsel Nagel Rice that Aetna must pay directly. In the settlement, Aetna agreed to consider future claims more liberally and institute reforms to resolve benefits disputes about eating disorders.

Plantiffs’ counsel estimated that about 530,000 of Aetna’ 1.2 million policyholders are eligible for the new claims procedures. That could amount to $2 million in recoveries.

Aetna isn’t the only insurer that systematically denies benefits for eating disorders. California is among the few states that have done something about this, passing a mental health parity statute that forces insurers to provide the same treatment for mental illness they provide for physical diseases. The recent economic bailout package approved by Congress contained a federal mental health parity provision.

Still, insurers attempt to get away with as much as they think they can. We have been fighting insurers for benefits for clients with eating disorders for a number of years and winning cases at the appellate level. In fact, we had the first published decision in California involving denial of benefits for in-patient treatment of an eating disorder. Thompkins v. BC Life and Health Ins. Co., 414 F.Supp2d 953, (C.D.Cal. 2006).

Early this year, we won an appellate decision for a client suffering from bulimia. Jacobs v. Kaiser Foundation Health Plan, Inc., 04-57131 (C.D. Cal. Jan. 30, 2008). In that case, medical plan provider Kaiser, which did not offer adequate treatment for plan participants, declined to refer Ms. Jacobs to an out-of-plan treatment facility and refused to pay for the cost of treatment when Ms. Jacobs’ mother obtained the care her daughter desperately needed by checking her into an eating-disorder treatment facility. Although the lower court found that Kaiser had not abused its discretion, the California Court of Appeal ruled that her mother’s “decision to take Laura outside the Kaiser treatment system may have saved her daughter’s life.” The case was reversed and remanded with instructions for the lower court to reimburse the Jacobs for the non-plan services and to pay attorney fees and costs.

It is gratifying to see other courts around the country agree with the Jacobs decision. Perhaps this most recent ruling against Aetna will make the fight for mental health parity for eating disorders much less contentious.

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The Internal Revenue Service released this month long-term care premium deductions for 2009.

Policies issued on or after January 1, 1997, will qualify for the deduction if they adhere to regulations established by the National Association of Insurance Commissioners. Among the requirements are that the policy must offer the consumer the options of "inflation" and "nonforfeiture" protection, although the consumer can choose not to purchase these features. Policies purchased before January 1, 1997, will be grandfathered and treated as "qualified" as long as they have been approved by the insurance commissioner of the state in which they are sold

“Qualified” premiums are tax deductible as long as they exceed 7.5 percent of adjusted gross income, along with other unreimbursed medical expenses. (If you are self-employed, you may deduct the entire premium.) To be qualified, an LTC policy must have been purchased before 1997 and meet National Association of Insurance Commissioners’ regulations. Policies purchased before 1997 may still qualify if they have been approved by the insurance commissioner of the state where they were sold.

If you are between 50 and 60 years old, for 2009 you can deduct a maximum of $1,190. That’s likely less than half of what you pay yearly for coverage. Nevertheless, the deduction could make the policy more affordable in the long run. [NOTE- We are not accountants or tax advisers. Check with your own personal tax professional before relying on the deductibility of costs discussed herein.]

You may have noticed that state governments are now creating public-private partnerships with LTC providers to educate people about planning for long-term care, and to encourage them to buy private insurance. This is our governments attempt to shift the burden from government, whose resources are rapidly diminishing, to the individual. The federal government could do its part by making the tax deduction a more in line with the actual cost of the insurance in order to encourage the middle class baby boomers to purchase LTC insurance. That would make the coming cost-shift from public to private senior-care a little less burdensome.

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Posted In: LongTerm Care Insurance

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