Understanding Long-Term-Care Insurance Benefits, Disputes, and Common Denials

By: Margaret Barrett, Owner Attorney

April 26, 2023

Long Term Care (LTC) Insurance is a form of health insurance that covers home health care, assisted living, nursing homes, and other non-skilled care. Regular health insurance does not cover LTC, so it is the fastest-growing type of health insurance sold in recent years. LTC insurance can improve your quality of care, quality of life, and save you money. However, it is important to know how your policy works and the problems that can arise. LTC Insurance is helpful for some, but is usually not enough to cover all expenses, especially if a higher level of skilled nursing is needed.

One issue that clients may face is benefit disputes with their LTC insurance carrier. If you are having a benefit dispute, it could go to either state or federal court, and you will need to contact an elder lawyer early in the process. LTC insurance is custodial care, meaning that you are not getting better. That’s when regular health insurance stops covering your care. LTC insurance covers individuals who require LTC and are unable to perform the Activities of Daily Living (ADLs) such as eating, bathing, dressing, transferring, toileting, and continence. This could be due to cognitive impairment, being unsafe to live alone, medication, food, and more.

There are 7.3 million LTC policyholders nationwide, but currently, only 280,000 policies are on claim. This means that we are just starting to use the policies, and as more claims are made, we are expecting more disputes. In Minnesota, the Department of Commerce enforces insurance policies.

Private room costs in assisted living can reach $41,400, while nursing homes can cost up to $83,950, and a licensed home health care aid costs around $19 per hour, according to the Genworth 2012 cost of care survey. Policyholders should receive the benefits they pay for, and filing claims early is important.

Not all policies are the same, so it is essential to look at your policy. Older policies may only cover nursing homes or home health care, have gatekeeper provisions requiring pre-hospitalization or no coverage, and may not have comprehensive coverage. Newer policies often have more comprehensive coverage, including combined home health care and facility care, no hospitalization requirement, and standard triggers for coverage.

There are common denial reasons for LTC insurance claims, including:

1.       No cognitive impairment,

2.       Not meeting ADL requirements

3.       Facility does not meet definition or licensure

4.       Not medically necessary

5.       No prior hospitalizations

6.       No care by family members

In some cases, disputes may result in litigation, which is time-consuming and costly. Class actions are the bulk of litigation because the damages are huge to the policyholder (e.g., $50,000) but it is often not worth the attorneys’ fees required to litigate.

The Gardner v. CAN Financial Corp case was a class action lawsuit that alleged unfair trade practices, misrepresentation, unjust enrichment, and bad faith by CAN Financial Corp, a long-term care insurance company. The plaintiffs claimed that the company altered their policy interpretation and denied claims for stays in assisted living facilities. The case was settled in 2013 for $2.2 million, and as part of the settlement, CAN Financial Corp did not admit to any wrongdoing.

In the Koskan v. CNA class action suit, the policyholders resided in an assisted living facility and needed more care than the facility could provide. They requested home health care and assisted living benefits, but their claims were denied. The wife was later hospitalized and needed an aide at home due to severe dementia, but her claim was also denied. The lawsuit alleged that CNA engaged in unfair trade practices, misrepresentation, unjust enrichment, and bad faith in its policy interpretation and claims handling. The plaintiffs sought damages for the denied claims and for CNA’s alleged breach of contract and violation of the Minnesota Consumer Fraud Act. The case was settled in 2018 for $10 million.

One example of a non-class action suit, the Ability Insurance Co. vs. Hull case, an elderly policyholder with Alzheimer’s in assisted living had their policy’s definition changed, and Ability Insurance failed to request necessary information. The policyholder sued the insurance company, and the jury awarded over $32 million in damages, which was later reduced to $22 million on appeal.

Each of these cases is an example of the importance of understanding the terms of your policy and seeking legal counsel in case of a dispute.

In summary, LTC insurance is an essential type of health insurance, and policyholders should know the terms of their policies, file claims early, and seek legal counsel if there are disputes. Even if you have LTC insurance, we still recommend that you reach out to our team of Elder Law experts for an asset protection plan. Your cost for care could greatly exceed what your LTC insurance policy covers, so we want to plan so that you can get the care you deserve, while maximizing the most assets possible. There are ways to save money and still get quality care; don’t wait to contact us to learn about all of the tools in the toolchest!

About Safe Harbor Estate Law: Safe Harbor Estate Law creates legal plans to protect your assets, and your loved ones, saving money and hassle in the process. You manage your assets now. How will they be managed when you are gone? If you are in retirement or considering retirement, it’s critical to solidify a plan for your family (and at any age!). Contact our expert team to see how we can help you protect what matters most.

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