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Monday, March 26, 2007

Insurance: a legal scam
Posted by Jill | 6:43 AM
Fresh on the heels of Friday's news that Blue Cross of California routinely cancelled policies when policyholders became ill or pregnant comes this article in the New York Times about how the purveyors of long-term care are similarly collecting premiums for years and then setting up roadblocks to payouts when the time comes:

Interviews by The New York Times and confidential depositions indicate that some long-term-care insurers have developed procedures that make it difficult — if not impossible — for policyholders to get paid. A review of more than 400 of the thousands of grievances and lawsuits filed in recent years shows elderly policyholders confronting unnecessary delays and overwhelming bureaucracies. In California alone, nearly one in every four long-term-care claims was denied in 2005, according to the state.

“The bottom line is that insurance companies make money when they don’t pay claims,” said Mary Beth Senkewicz, who resigned last year as a senior executive at the National Association of Insurance Commissioners. “They’ll do anything to avoid paying, because if they wait long enough, they know the policyholders will die.”

In 2003, a subsidiary of Conseco, Bankers Life and Casualty, sent an 85-year-old woman suffering from dementia the wrong form to fill out, according to a lawsuit, then denied her claim because of improper paperwork. Last year, according to another pending suit, the insurer Penn Treaty American decided that a 92-year-old man had so improved that he should leave his nursing home despite his forgetfulness, anxiety and doctor’s orders to seek continued care. Another suit contended that a company owned by the John Hancock Insurance Company had tried to rescind the coverage of a 72-year-old man when he was diagnosed with Alzheimer’s disease four years after buying the policy.

[snip]

Inside the large Conseco headquarters in Carmel, Ind., scores of employees receive the flood of documents and calls that arrive each day. At times, according to depositions and interviews, that deluge became so overwhelming that documents were lost, calls went unreturned and mistakes occurred.

Some employees describe vast mailrooms where documents appear and disappear. One call-center representative said he was afforded an average of only four minutes to handle each policyholder’s call, no matter how complicated the questions. Employees said they were instructed not to say when the company was behind in processing paperwork, even when the backlog extended to 45 days. Workers were prohibited from contacting each other by phone, although such calls might have quickly resolved obstacles, according to depositions.

Conseco, asked in detail about the company’s policies, declined to respond.


When companies sell insurance policies and then don't pay claims, that's called a scam. And at least so far, it's all perfectly legal. Is this what conservatives call "market forces at work"? Preying on elderly people who may not have the capacity to read the small print, or changing the rules in midstream, and then refusing to pay after tens of thousands of premiums have been received?

For me, this is no longer an abstract issue. With no children in the picture to handle my care in my old age (assuming I make it that long), things like long-term care become important when you get north of 50. I know that the younger you are when you buy a policy, the lower the premiums. But when there's a very strong possibility that no matter how young you are when you buy the policy and how promptly you pay the claim, the companies that sell this type of insurance turn out to be in the business of blocking claims rather than playing them, I wonder just how wise the purchase of such policies is -- and what is the alternative when nursing homes are likely to cost $100,000/year by the time I need one.

While presidential candidates are talking about health insurance availability for all, they might consider also addressing the nature of the entire insurance industry, the business model of which is akin to a Mob protection racket -- only with fewer ethics, because they don't even provide the promised protection

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