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Dear Consumer Reports President and Staff,
My wife and I read with great anticipation your November 2003 article “CR Investigates/Do You Need Long Term Care Insurance?” We had longed to read more of your sage wisdom on Long Term Care insurance, specifically how to get out of the “pickle” your previous Long Term Care articles had put us in.
Unfortunately, we didn’t find the answers we were looking for, just more of the terrific LTC advice we had read before.
You see, we followed your Long Term Care Insurance expertise and waited until my wife (at age 52 with no family history) was diagnosed with a chronic condition, insulin controlled diabetes, to apply for Long Term Care insurance. You know how debilitating diabetes can be later in life. It really scares the daylights out of us what the possible Long Term Care expenses could be associated with this disease. However, we were absolutely dumb-founded when we applied to two of the three companies you picked as your favorites for Long Term Care insurance in your November 2003 article, and they refused to issue my wife a policy! I guess hindsight is 20/20. If we would have applied for the insurance prior to March 1, 2003 she would have been accepted, but we would have been going against your expert LTC advice.
Knowing the integrity of your magazine, however, we are sure you will
“make good” for us and accept responsibility to pay for her
future Long Term Care expenses. Please forward the person’s name
to whom we should send these bills. Thanking you in advance. Keep up the
good work and thanks for looking out for all of us ill-advised consumers!
Sincerely,
Jack Stayer
P.S. I’m just teasing you--not the diabetes part, as my wife was diagnosed with diabetes in March 2003. And, unfortunately she would be denied insurance by two of your “recommended” LTC companies. Fortunately, we didn’t take your advice. We bought Long Term Care insurance when we were in our 40’s, before we had a change in health, and while the premiums were still affordable. (I’m still trying to figure out why you recommend people wait until they are older to buy this insurance and then say how outrageously expensive it is?) No one has a lock on good health forever, and no one knows what their future Long Term Care needs may be. We all want to live a long life, but we need to take the personal responsibility (financially and socially) of growing old.
P.P.S. Would you mind sharing with me the insurance degrees, education and experience your Long Term Care Insurance “experts” have who wrote this article?
Financial Planning Magazine takes up the cause at http://www.financial-planning.com/pubs/fpi/20031010101.html
From Arthur D. Rudnick
New York Long Term Care
109 Winding Ridge Road
White Plains, NY 10603
Phone: 914-946-5695
Fax: 914-946-5696
Email: AR4LTC@aol.com
October 13, 2003
Mr. James Guest, President
Consumer Reports
101 Truman Avenue
Yonkers, NY 10703
Dear Mr. Guest,
A wise man once said; "If you have nothing intelligent to say about a subject, don't say anything". He went on to say; "The very last thing to do would be to put it in writing and prove to the entire world, that you have nothing intelligent to write as well."
Since 1991, Consumer Reports has published 3 articles about Long-Term Care Insurance. At least you're consistent. For what ever reasons, you have trashed the product each and every time. I'm not sure what your agenda is, but most surely you have one. Your negative bias is visible in every paragraph.
The federal government offers, endorses and promotes long-term care insurance to over 20 million of its federal employees. State & local governments also offer their workers the option to purchase long-term care insurance. Thousands of companies, both small and large, including IBM, Bank of America, and General Motors, to name a few, offer long-term care insurance to their workers. Group purchasers of long-term care insurance include major universities, hospitals, trade associations, and law firms. Millions of individual consumers in every state, after doing their own due diligence, decided that the purchase of a long-term care policy was the appropriate and sensible thing to do.
I have copies of dozens of articles by respected newspapers such as The New York Times, Wall Street Journal, Chicago Sun-Times and USA Today, who have consistently endorsed, promoted and recommended the purchase of long-term care insurance. Major financial publications, such as Kiplinger's, Money Magazine, Business Week, Fortune Magazine and many others have endorsed and recommended the purchase of a long-term care policy in order to protect one's assets if long-term care services are ever needed. Suze Orman and Jane Bryant Quinn, two of the most respected financial advisors in the country, recommend long-term care insurance to their followers. AARP has consistently endorsed the product and regularly suggests that their members purchase a policy. Most estate planning professionals, most elder-law attorneys, most accountants and CPAs, recommend that their clients purchase long-term care insurance.
However, with all of the above considered (which, of course your report never mentions) a Consumer Reports "Investigation" seems to be the only entity in the entire free world that has nothing good to report about this subject. I wonder why that is?
There are so many errors, misrepresentations, omissions and half-truths in your November article it is very obvious that the writer has absolutely no idea what the subject of long-term care insurance is really about. Unfortunately, as erroneous as your reporting is, you have no one to answer to but yourself.
And, for that reason, how can a consumer decide whether anything else that you are reviewing, whether it be an automobile, a washing machine or a pair of shoes, is impartial, unbiased and/or truthful?
In your own back yard, Westchester County, NY, the cost of a nursing facility is running over $100,000 every year. It doesn't take long for the average person to spend down an entire life's savings in a few short years. But long-term care insurance is not only about nursing homes, it's about having people remain in their own homes if care were ever needed. For every person in a facility, there are 8 more people receiving care in their own home. A long-term care policy will keep people out of a nursing home. Statistics show that if it were not for the purchase of a long-term care policy, many people on claim would instead be in a facility, rather than being cared for at home. I didn't see that mentioned in your article either, must have been an innocent omission.
The opening paragraph of your 1997 long-term care article started off as follows: "Half of all women and a third of all men will spend their last years in a nursing home......" That statement was one of the few correct ones in your article of six years ago. However, what you fail to understand is that the purchase of a long-term care insurance policy is not about statistics. It's about emotions. People buy this insurance for nothing more than peace of mind. Your negative article means nothing to a 50 year old couple who may be experiencing the personal and emotional trauma of caring for a parent who suffered a stroke or was diagnosed with Alzheimer's. It means nothing to that 77 year old grandmother who had to sell her home and other assets so she would have the money to pay for her husband's long-term care.
There are so many incorrect and misleading statements in your November issue I don't have the time nor the inclination to rebut each and every one. There are however five that I will address:
- One of the more ridiculous statements made and one which proves definitively
that you don't know what you're talking about is: "Only consider a Plan
if, by around the age of 55, you have a chronic medical condition that
you and your doctor believe could eventually require nursing home care........."
Dear "Mr. Investigative Reporter", if a person has a "chronic medical condition", that person will not be able to medically qualify for a long-term care policy! One has to be in generally good health to purchase this insurance. But why would you possibly know that?
- You feature Kathleen Donley of Roseville, California and tell how
she had to wait two months in order for her father's insurance company
to pay his claim.
If someone at Consumer Reports bothered to check (possibly call the claim department of any long-term care company?) you would find that a claim must be verified by the patient's doctor and the company before payments start. There are certain criteria that must be met by the policyholder, prior to a claim being paid. Just because her father had a policy that "Called for the company to start paying immediately", should Conseco, or any company just mail out a check, the day a person calls and says, "Send me the money"?
Maybe you should call your automobile insurance company today, tell them you were in an accident and ask them to send you a check immediately. Do you think they may possibly ask for an accident report from the police? Do you think they may want their adjuster to view your car?
If you would have gone the extra mile to get the facts (but why would you want to do that?) you'd find that it normally takes 4-8 weeks to verify that a policyholder does in fact qualify according to the contract. What you didn't state was that quite possibly, Kathleen's father, after waiting 8 weeks for his first check, received a monthly check while in a nursing home for the rest of his life. I guess you did not find that important?
- or some reason, you seem to like the ratings from Weiss. I'm not sure
why, when everyone else in the industry looks to AM Best, which is a
much more respected rating service. You also used Weiss in your 1997
"investigation" when you listed Penn-Treaty Insurance Company as your
choice to recommend. I find that of interest considering that 18 months
later your company of choice filed for Bankruptcy. Didn't see that mentioned
in your article either.
- As a negative to long-term care insurance, you state; "As with health
insurance, you must keep paying the premiums to keep it in force."
Did your "Investigation" really uncover that fascinating bit of information? And, did you investigate other insurance products as well? How about automobile insurance, home owner's insurance, life insurance or pet insurance? What a strange concept! You mean in order to keep an insurance policy active the policyholder has to pay their annual premiums? Is that the best you could come up with?
I could go on and on, but I'll stop at this last statement, because this may very well give me and the tens of thousands of people in the long-term care industry something to look forward to. And that is:
- "Such coverage really shouldn't be considered before reaching the
age of 60............."
Here's the scenario that I envision so clearly: There is someone out there now at the age of 55 who looked into buying long-term care insurance. Then, one October morning, he reads in Consumer Reports that their "investigation" determined that he should wait another 5 years before making his purchase, so he does.
Three years later, at 58 years old, this poor guy will be diagnosed with early-onset Parkinson's. He will therefore be uninsurable for the rest of his life and he will also require a nursing home for the last 15-20 years of his existence. Unfortunately for you, this person will be an attorney and will form a class action lawsuit and decide to sue you and your magazine for one hundred million dollars.
Your "Investigative Reporter" should ask The Three Stooges for his money back!
Unfortunately, you will never acknowledge your misstatements of fact in print, nor will you even acknowledge your receipt of this letter.
I look forward to reviewing your next long-term care investigation in another six years. I think I already know what it's going to say.
Sincerely,
Arthur Rudnick
We shouldn't be surprised that Consumers Union has a relatively negative view toward LTCI. I doesn't seem to particularly like anything insurance companies offer. Why? I haven't a clue. Under their recommendations for the purchase of LTCI, they might as well suggest waiting to purchase homeowners insurance until the house is burning. We recognize the insurance concept. CU seems to beleive that insurance companies have an obligation to send money to those who need it with a minimal contribution from only those who need it. The article in CU didn't spend enough time discussing family history, didn't point out the differences in care between Medicaid and private pay patients, and appears to me to have based its accusations on the history of the painful early years of LTCI. CU has many biases. I appreciate the objective analysis of various physical products that it does, and discount the subjective measures it uses. All of this article was subjective. The unfortunate result is that many people will refuse to purchase LTCI, will become insolvent because of that decision, and CU will accept no responsibility. In fact, we can probably assume that at least one insurance agent will be successfully sued for not adequately counteracting this article and convincing a person relegated to long term care to purchase it anyway.
Mandell Winter, Jr.
October 14, 2003
Dear [Consumer Reports] Editor,
As a certified specialist in long term care planning, I was outraged by
your article in the November edition on the topic of long term care insurance.
I was especially incensed after learning that you had at your disposal the assistance of one of the finest experts in the country on long term care insurance, Phyllis Shelton. However, you chose to use and abuse her expertise to further your blatant misrepresentation of the facts in planning for this enormous risk facing our nation.
If your "mission" was truly to test products, inform the public and "protect consumers"....you FAILED miserably.
What you have succeeded in accomplishing will undoubtedly harm and confuse the consumer, but I'm sure it will "sell" more magazines.
One has to question, "What really is your "mission"? It certainly appears to be anything but "protecting the consumer"!
Sincerely,
Denise R. Molohon, CSA, LTCP
Review of Consumer Reports Article on Long-Term Care
By
Everett Thorne RHU CLU ChFC
MasterCare Solutions, Inc.
Portland, OR.
In the November’03 edition of Consumer Reports (pg 20-24), published by Consumers Union (CU) of Yonkers, NY. there was an article entitled “Do You Need Long-Term Care Insurance?” A more in depth treatment of this topic was published in November, 1997 whereupon similar conclusions were presented with one major exception—this time the strength of the companies were emphasized.
CU first recommended a Long-Term Care policy back in the early nineties, but the carrier went into receivership before they published their findings. Their next recommendation in ’97 was Penn Treaty’s Freedom Plan. As we all know Penn Treaty has been struggling for survival for the past few years in spite of rate increases and a temporary shut down. With this sterling track record of anointing marginal companies Consumer Reports now says, “Finally, there’s no guarantee that long-term-care insurers, some of which have weak balance sheets, will be around 20, 30, or 40 years from now when you need them to pay.” How profound! They finally figured out that this business wasn’t just about making promises, but keeping them.
In previous articles they stressed the role of State guarantee funds
as the consumer’s financial backup in case of carrier insolvency.
This time they put their sole reliance upon Weiss Ratings Inc. of Palm
Beach Gardens, Florida, to cull out the losers by excluding those with
ratings lower than B+. They then relied upon Niis/Apex, and actuary firm
based in Princeton, NJ, for technical expertise in evaluating the policies.
I don’t know anything about the actuarial firm, but I know that
Weiss makes only an arms length evaluation. They do not verify the facts
through an onsite examination nor scrutinize the tracking systems of the
companies in question. For this and other reasons Weiss is not highly
regarded within the insurance industry as being either accurate or using
the right
indicators. It appears that CU would have been better off using all four
nationally recognized rating authorities with the corresponding Comdex
ratings this generates. After reviewing 47 different policies from the
state of California the final rankings were: (In order of preference)
Physician’s Mutual Vista Care PQ/104, Farmers New World Farmers
Premier LTC/TQ100, and John Hancock Custom Care/LTC-02. Master Care Solutions
Inc. has Physicians Mutual and John Hancock in their line up of carriers
and the Farmers plan is only available from Farmers agents. By the way,
unless I miss my guess, the Farmers plan was designed and priced by C
N A our leading company for several years. Small world. Even though I
can agree with the choices, I am not thrilled
with their methods and appalled that other reputable companies and policies
were excluded from this exclusive list.
Beginning with the premise that for “most people long-term-care insurance is too risky and too expensive” and that “long-term-care insurance may be a lousy deal, but right now it’s just about the only deal.” This article sets forth the suggestion that “such coverage really shouldn’t be considered before age 60 except by those with chronic diseases.” Excuse me? I thought this stuff was underwritten.
It’s clear that CU has no sense of reality here. The fact that
they would recommend that only people with adverse risks should buy early
and the rest should wait until it’s closer to claim time shows their
true colors. They would happily beat the insurance companies out of money
in the name of consumer advocacy. It’s great to be in favor of the
little guy but unless everybody wins the little guy gets hurt too. If
insurance companies widen the
threshold to allow chronic conditions for people in their fifties while
everyone else waits until their mid-sixties to get covered how profitable
could that be? Yet, unless carriers can stay profitable and remain in
business claims are going to get denied or premiums raised. Ultimately
the average premium payer is vulnerable to bad business decisions such
as loose underwriting. How does this help consumers at large? The goal
should be that no reasonable claim should be denied. For that to occur,
careful health scrutiny must be executed, careful actuarial predictions
must be made and careful money management must occur. There should be
no fast track for some to beat the system. It appears that CU thinks there
should be.
In their attempt to alert the public against unscrupulous agents ( a good idea) CU takes it a step further by accusing insurance agents in general of pushing plans on people in their 40s because “…no wonder. Agents can reap hefty commissions—50% of your first year’s premium and 10% of your payment for every succeeding year.” Ignoring the fact that commissions typically drop significantly after the tenth year, one would think that selling long-term-care insurance is the path to get rich at the public’s expense. The free enterprise system is fiercely competitive. No businessperson in their right mind would pay more than absolutely necessary to produce or distribute their product. Distribution of long-term-care insurance has been particularly elusive. Lower commissions have been attempted with disastrous results. The main problem is that suspicion and denial on this vital topic reigns supreme in the neighborhoods of America. Finding someone to talk to on a favorable basis is challenging and expensive. If the public would come knocking, commissions could be less. Instead of promoting a fresh look at this topic and encourage Americans in their fifties to be proactive in purchasing long-term-care insurance, CU ignores improvements and discredits an industry that has done a commendable job of policing itself. Even though the caliber of agents has been steadily improving, this report plays the tired refrain that they are greedy, untrustworthy, and high-pressure salesmen. What more could they do to corrode the minds of their readers with distrust.
Another thing they could do would be pick a really lousy and non representative claims experience to publicize. This they found it in a Conseco claim. To begin with, Conseco is not a respected long term committed member of the insurance community. They are like a dirty sweat sock in the punch bowl. They purchased American Travelers and Pioneer Life, two industry bottom feeders, and Bankers Life and Casualty, who has wisely taken back their own name. Any long-term-care insurance sold by this group was likely to have been oversold and lightly underwritten. O. K. it took two month’s to get Conseco to start paying, but remember with cost incurred plans you must incur the expense before it can be reimbursed. Even so, they should have done better. The real problem is this case study wasn’t balanced by the ample evidence that many other carriers are paying claims promptly and generously. One is left to assume that there are no “good faith” performers out there. This is not an impartial study. This is sensational journalism. You’d think Consumers Union was promoting an agenda.
Insurance companies are also criticized for paying out a measly 35%
of total premiums received during 2001. What wasn’t explained is
that many policy forms that are 5-10 years old are experiencing 60-80%
of premium in claims. Policies in excess of ten years of age may be experiencing
claims in excess of 100% of premium. Rate increases are typically assessed
by policy form with the oldest policies getting the greatest increases.
The Consumer Reports article would lead the public to believe that rate
increases are not justified. In most cases they are overdue. Instead of
pushing low price CU should promote responsible pricing and inform the
public that paying more initially may mean paying less eventually.
Apart from some blatant misinformation on page 24 that states employees can pay premiums with pretax dollars (this is untrue, LTCI has not been approved for section 125 pretax treatment), there are some positive recommendations in this article: 1) Deal with insurers that will be around for the long haul. 2) Buy coverage that will be sufficient. 3) Purchase compound inflation protection. Unfortunately, Consumer Reports gives little reason to buy in the first place.
I will not discuss the cheap shots further, but let’s face it, I’m biased toward insurance as a solution to believe in. However, there is no question that there is room for improvement in designing and communicating policies. I just want to see this industry recognized for the improvement that has been made. Apparently no such acknowledgement will emanate from the pages of Consumer Reports.
For Agent Distribution Only
Hi Trudy,
I just read Phyllis Shelton's response to the article and have several observations.
- What did you do to her? Her frustration came thru loud & clear. I've met enough people on the LTC insurance sales side & have seen the same emotion about their business. Are you missing something here?
- I've been in the LTC insurance business for over 15 years as an actuary. I share some of their passion and excitement. LTC is a real tough business for the insurance companies. But that's not what gets me excited although I do love the challenge. The real reason for me is that LTC is an inter-generational transfer problem. You know the story: less young people in the future to support the then elderly like you and I. Time is running out (I've a daughter 18 years old who's going to bear our burden) and LTC insurance is the only game in town for the moment. As my good friend Marc Cohen (LifePlans) has figured out: every LTC policy saves Medicaid dollars in the future.
- I don't think your article is that bad for the CU readership. You've made it clear that it's not for the average folks and it's true. Your average working couple don't have couple of thousands of discretionary income a year to spare. However, the article was just too simplistic and sadly missed the critical issues, such as tax incentives, real progress made in regulations and pricing, etc.
- You could have made a positive difference. You could have brought the real issues up-front. Too bad. Seek to understand our passion . . .there is always the next article. Remember what my new governor, Arnold S., has been saying: it's always for the children.
- By the way, I've checked out Niis/Apex. I believe they're medical insurance consultants not knowledgeable with LTC. I know because I've never heard of them. Maybe Phyllis is right: perhaps you didn't do your homework in this instance.
Trudy, if I can help in the future, please don't hesitate to contact me. Take care.
Bob Yee
