Long-term care insurance has its rewards but may not be for everyone

"Long-term care insurance is a wonderful thing," says Judy Koehler, a state government worker in Southfield, Mich.

Koehler's mother, Lillian Jurcak, spent four months in a hospital in 1998 with emphysema before she died. Long-term care insurance paid most of the bill, and did so promptly.

Unfortunately, many people's experiences with long-term care insurance have been far from wonderful. Hilda Puth, a Southern California homemaker, took out a long-term care policy on herself in 2001 because her husband, George, had been disabled by a stroke. She wanted to be sure that if she, too, became disabled, someone would be able to take care of her in her home.

When Puth needed knee-replacement surgery, her policy was supposed to pay $100 a day for home health services. But her insurer denied the claim. Its reason: It couldn't determine whether the home aide would be helping Hilda or George — even though George had his own care arrangements.

For millions, long-term care insurance, which is supposed to pay for at-home care, assisted living or nursing-home care, is a savior. But for other people, delays, premium increases and denials of payment make the enormous investment in long-term care polices all but worthless.

Allegations of deceptive practices in long-term care insurance have prompted a congressional inquiry. Reps. John Dingell, D-Mich., and Bart Stupak, D-Mich., have written letters to two insurers — Penn Treaty American and Conseco — asking for documents related to their claims practices. Both companies say they have fully cooperated with the inquiry, whose results could be made public by the fall.

"We're in the business to pay claims and honor contracts, and we want to make sure that the protection consumers are counting on for the future is there for them," says Cameron Waite, an executive vice president for Penn Treaty.

In a statement, Conseco said it paid 98% of its long-term care policy claims submitted last year — more than $600 million.

For those who worry about whether their parents will be able to afford long-term nursing care, the task of sorting out long-term care policies is arduous enough. Worrying about whether a policy will pay off after 20 years of payments — with annual premiums typically exceeding $1,000 for a 55-year-old healthy married person — can be excruciating.

Patti Puth, George and Hilda's daughter, had to downplay the insurance setbacks in front of her father, fearing that if he became too upset, he might suffer another stroke.

"It was a really difficult time," she says.

A profit center

Though most insurers pay the requested claims, some long-term care insurers have been accused of invoking every possible reason to deny payments.

"What I'm seeing, on a regular basis, is that the insurers have made the claim process cumbersome and complicated," says Frank Darras, a lawyer in Ontario, Calif., who specializes in battling insurers that have denied long-term care claims. "In almost all the cases I have tried, the senior has died before the case has gotten to trial. They have turned the claim department into a profit center."

Paula Johnson of Orono, Minn., bought a long-term care policy for herself and her husband, Gene, when she was 39 and he was 47. The cost: about $1,300 a year for each of them. When Gene was only 49, he began showing signs of Alzheimer's.

"He couldn't find his way to familiar places, or he'd tell the same story over and over," Paula says.

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