Share of Cost, CHA Comments on Proposed Short Term Care Insurance Regulations
October 20, 2016
Commissioner Katharine L. Wade
State of Connecticut Insurance Department
Attention: Kristin M. Campanelli
P.O. Box 816
Hartford, CT 06142-0816
Re: Proposed Short Term Care Insurance Regulations
Dear Commissioner Weddle:
We write to comment on your department’s proposed regulatory changes to short term care insurance policies. As you know, I am a funded consumer representative to the National Association of Insurance Commissioners (NAIC). I am a Policy Specialist for California Health Advocates (CHA), a not-for- profit organization that among many other Medicare related topics provides information, training, and education on long-term care and long term care insurance. We promote high legislative and regulatory standards for long-term care insurance in our state legislature, at the NAIC, and in Congressional testimony.
At the national Summer meeting of the NAIC, a new subgroup was appointed at our request to explore the issue of how these short term care policies are regulated. My request was backed up by a letter to the SITF signed by 20 consumer group representatives requesting that these products be regulated as long term care insurance. It seems illogical to many people that a product offering nursing home and home care benefits for 360 days or less is regulated differently, and under very general minimum standards, than one that provides those same benefits for 364 days or more. We have not heard a reasonable argument about why consumers should not be protected under the same standard simply because they buy a benefit that covers them for a fewer number of days.
As I review your proposed regulation I note that you have incorporated some of the standards from the long term care insurance models. I would encourage you to go beyond HR 5521 and bring these products under the umbrella of the long term care insurance standards with any exceptions for those elements you think shouldn’t apply to these products.
All of the definitions of benefit triggers, benefits, services, and places of care should be the same in a short term policy as they are in the NAIC Model
All of the disclosures in the NAIC Models should be required in a short term care policy, plus one additional disclosure.
A disclosure should be developed to clearly describe the limitations of a short term care policy with very limited benefits. Purchasers of a short term care policy should also be advised about the availability of a Partnership policy to cover one year of care that can potentially provide them with additional protection of their assets.
In any replacement situation agents should be required to identify in writing the reason for replacement, and explain why the replacement policy is to the advantage of the consumer. If coverage is being added to existing coverage agent should be required to explain in writing the advantage of the additional coverage to the applicant. These explanations should be part of the application or separately attached to the policy.
There is no justifiable reason that companies selling short term coverage ranging from a few months of benefit to just under one year be allowed a 55% loss ratio. The profit margin on these limited benefits is unreasonable, and short term policies should at a minimum comply with a 65% loss ratio for individual coverage and 75% for group coverage.
The actuarial evaluation of premiums for these policies should include an assessment of the limited risk a short term care policy is assuming, and require premiums to reflect that limited risk. In addition, an actuarial evaluation should take into account the difference in underwriting for a short term policy and for a traditional policy. Even with limited benefits it’s possible a company selling one of these short term care policies could underestimate their ultimate claims assumptions and fall into a spiral of rate increases. In another instance a policyholder could ultimately pay more in premiums over their lifetime than the small amount of benefit promised by a few months of coverage.
A consumer buying a short term care product providing benefits for a few months of coverage instead of years should not be less secure or less protected than someone buying more of the same benefits. In fact, consumers buying these limited benefits may require even more protection. They are more likely to be lower income or have a health condition than those who can afford or qualify for a greater amount of coverage. Consumers who buy short term care policies need all of the regulatory protections provided to those who buy a traditional long term care insurance product.
I’ve identified a few issues for your consideration with portions of the proposed regulation:
People buying these products think they are buying long term care insurance or benefits, but for a shorter period of time. Terminology throughout the regulation reinforces the ability of short term care policies to restrict benefits to needs and services that are primarily medical in nature, provided by or under the direction of medical personnel, and in facilities primarily or secondarily providing medical care services. This medical connection has little application to the need for nursing home and home care and community based care. It simply allows companies to restrict or limit benefits by connecting them in some way to medical care.
The use of the term “home health care” instead of home care allows medical criteria and personnel to be applied to care that is primarily a need for personal care services (formerly custodial care).
The use of “own home” and home “health” care throughout the regulation reinforces the ability of companies to restrict benefits and care.
Definitions throughout the regulation of “own home” would allow companies to deny benefits to someone living in the home of a family member, living in an independent living situation from receiving home care services in that setting.
Cognitive impairment represents about half the claims for long term care services today, along with functional impairments, but that broader term is missing throughout the regulation. Nowhere in the regulation are benefit triggers required or spelled out. Dementias other than Alzheimer’s are not recognized in exceptions or exclusions, or elsewhere in the regulation where all causes of dementias should be included. A short term policy would not be required under the proposed regulation to cover cognitive impairment at all.
It is possible, as this regulation is currently written, to write a short term policy with benefit triggers of 5 out of 6 (or even less) ADLs, for care in a nursing home that must be medically necessary at the beginning, and that is not at first custodial in nature.
Here are specific comments on a few provisions of the proposed regulation.
(New) Sec, 38a-xxx-2. Definitions
Definitions in this section reinforce the ability of companies to apply medical standards to benefit triggers, services, providers, and places of care. …..for necessary care or treatment of an injury, illness or loss of functional capacity provided by a certified or licensed health care provider…… and for…confinement in the insured’s own home….
(New) Sec. 38a-xxx-3 Policy definitions and terms
This section lists but does not contain definitions related to activities of daily living or of cognitive impairment thereby allowing companies to define these in very restrictive terms.
There is no requirement that ADLs or cognitive impairment be a benefit trigger, leaving companies free to exclude them completely or require a simultaneous number of ADLs, or require an unrealistic number of ADLs before benefits would be available. The definitions of “accidental injury” or an “acute condition” or medically necessary care” allows these terms to be applied to a benefit trigger or to the policy benefits. These terms and definitions in the regulation have little applicability to the need for the services in short term policies and give companies unrestricted ability to deny benefits.
Under (e) (3) of this section “a home or facility primarily used for the care and treatment of a mental disease or disorders, or custodial care” could exclude care in facilities that provide psychiatric care, or facilities that provide care to people with dementias. Many of those facilities are referred to as memory care facilities, and under these definitions could be excluded. (Some of the definitions of places of care should of course accurately correspond to where care is provided in your state, and how each place of care is regulated in Connecticut.)
Under (h) of this section “Home health care services” includes “medical and non-medical services, provided to ill, disabled or infirm persons who reside at home.”
This is very restrictive when applied to people who need long term care services. Terms like these would allow companies to sell very restrictive benefits that policyholders would be unlikely to discover until they filed a claim.
There is no definition in the regulation of assisted living which could allow companies to refuse to pay for home care in such a facility under the definitions in this regulation.
In (m) of this section: Alzheimer’s disease is excluded from the definition of mental and nervous disorders, but other dementias are not, leaving companies free to demand that benefits are only payable for Alzheimer’s disease.
In (n) of this section: Necessary care for confinement in the insured’s own home is predicated on home “health” care, again linking care to health and not ADLs or conditions of functional or cognitive impairments.
In (o) of this section: Necessary care for confinement in a nursing home is predicated on medically necessary care… that is not at first custodial care.” That is a Medicare standard for payment of nursing home benefits and completely out of place in policies that purport to provide care in a nursing home.
In (s) of this section: the standard of sickness or illness by disease has no place in any insurance policy providing benefits for nursing home and home care, and reinforces the connection to medical services.
Under Other Exclusions (2) (B) there is no exception from mental disease or disorder for Alzheimer’s or other dementias.
Under Limitations and Exclusions (d)(3) A policy is prevented from duplicating Medicare benefits, deductible, or copayment despite the fact that these are not tax qualified policies. There is no justification for carving out these benefits given the short term nature of these benefits and the high cost of care in a nursing home. This requirement is very detrimental to consumers and only benefits companies that write these policies.
Under Renewability (n) companies are able to use words and terms, “usual and customary,” “reasonable and customary,” that have caused claims problems in the past and are all medical in nature. Typically policies providing benefits for institutional and home care use a daily benefit dollar amount and there should be no reason to use those medically related terms. This is another option for companies to limit the amount of benefit they will pay at the time of a claim.
In short, many of the minimum requirements in the proposed regulation could lead to very restrictive policy benefits being sold in a short term care policy to the disadvantage of consumers. I urge you to consider bringing these products under the umbrella of long term care insurance standards with specific exceptions for those elements you think shouldn’t apply to these products.
Bonnie Burns, Policy Specialist