LTC Overview

LTC OVERVIEW
Where It’s Been & Where It’s Going
Judy Bass, LTCP, MHP, FLMI, ACS, ALHC, HIA
State Farm Mutual Automobile Insurance Co.
Bloomington, Illinois
Lori Watson, CLTC, LTCP
Genworth Financial
San Rafael, California
Robert R. Pohls, Esq.
Pohls & Associates
Los Angeles, California

1
International Claim Association – 2010 Annual Education Conference – Austin, Texas – October 5, 2010

LTC OVERVIEW
2

The Evolving Long Term Care Insurance Product
The Early Years – 1970’s – early 1980’s
◦ Nursing Home Only Policies

◦ Medical Necessity Trigger determined by Admitting
Physician

◦ Indemnity-Based Benefit Structure

◦ Prior Hospital Stay Requirement


LTC OVERVIEW
3

1980’s – early 1990’s
◦ Comprehensive Policies (Nursing Home, ALF,
Home Care, etc.)
◦ Introduction of:
◦ Expense Reimbursement Benefit
Structure
◦ Care Coordination
◦ Intake Process
◦ First Partnership Policies Sold in 4 State Pilot
(CA, IN, NY, CT)


LTC OVERVIEW
4

Mid 1990’s – Present
◦ Comprehensive Policies (Nursing Home, ALF,
Home Care, etc.)
◦ HIPAA Impact and NAIC Influence on Policy
Language
◦ Chronically Ill Benefit Trigger
◦ Qualified Long Term Care Services Defined
◦ Non-duplication of Coverage
◦ Increased Claims Department Involvement in New Product
Development


LTC OVERVIEW
5

Budgeting, Staffing and Constructing an
Effective Claim Operation
Claim Department 1970’s – 1990’s
◦ Staff
◦ Smaller Team
◦ Basic Claim Processing Skill Set Required
◦ Informal On-the-Job Training Program
◦ Basic Caseload Distribution Model
◦ Infrastructure / Technology
◦ Manual processes
◦ Paper Claims Environment
◦ Limited Reporting Capability
◦ Rudimentary Quality Assurance Process

LTC OVERVIEW
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Claim Department 2000 – Present
◦ Staff
◦ Significant Growth
◦ Understanding Policy Variations – 35+ years of LTCi
◦ Complex Claims Adjudication Skills Required
◦ Understanding Functional and Cognitive Incapacity
◦ Knowledgeable in Medical Terminology and
Medical Record Review


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◦ Staff (Cont’d)
◦ Plan of Care Appropriateness
◦ Understanding the Impact of Co-Morbidities on
Functional/Cognitive Impairment
◦ Ability to Reconcile Benefit Eligibility
Documentation
◦ Formal Foundation and Ongoing Training Programs
◦ Formal Quality Assurance Process
◦ Performance Development Plans


LTC OVERVIEW
8

◦ Infrastructure / Technology
Calypso – Paperless Environment
◦ IMAGE-Based System
◦ Automation of Benefit Payments and Letters
◦ Electronic Transmission of Assessment Data
◦ Metrics and Reporting Capability
◦ Dedicated Compliance Resource
◦ Dedicated Practices Resource
◦ Formal Referral Matrix Developed and Implemented


LTC OVERVIEW
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Decision Making: Efficiency v. Effectiveness
Claims Adjudication vs. Claims Processing
◦ Reactive vs. Proactive Approach
◦ Early involvement in Claim Process
◦ Obtaining Quality Information in a Timely Manner
◦ Setting appropriate expectations
◦ Managing claims beyond initial decision (Insured's do
Recover/Regain Independence)
◦ Reconciling Conflicting Benefit Eligibility Information
◦ Managing Suspect Claim Activity
◦ Relying on Care Coordination Suppliers to Gather and
Provide Chronically Ill Certifications and Appropriate Plans
of Care


LTC OVERVIEW
10

Decision Making: Efficiency v. Effectiveness
Claims Adjudication vs. Claims Processing
◦ Recognize uniqueness of each claim
◦ Motivational Factors
◦ Situational Factors
◦ Co-Morbids


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Appropriate Resource Utilization
◦ Segmenting Caseload Appropriately
◦ Accessing Highly Skilled Technical Resources
◦ Continually Developing, Revising and Training on Claims
Adjudication Practices
◦ Developing and Maintaining Functional Care Provider Database
◦ Addressing Media and Consumer Concerns
◦ Hiring, Developing, and Retaining Skilled Staff
◦ Appropriate Succession Planning


LTC OVERVIEW
12

Legal and Regulatory Compliance
◦ Understanding and Applying Variations in State Laws and
Regulations
◦ Growing Media, Departments of Insurance and Consumer
Interest
◦ Impact of Market Conduct Examinations on Claims Organization


LTC OVERVIEW
13

Litigation Report -- Compliance
Continental Casualty Co. v. Lontz
No. 281183 (Mich.App. 3/26/2009)
◦ Insurer sold tax-qualified and non-tax-qualified policies
◦ Non-tax-qualified policies had “exchange privileges”
◦ Insurer stopped selling long term care insurance altogether
-- Initially concluded the “exchange privilege” need
not be honored
-- After 6 weeks, concluded the “exchange privilege”
had to be honored
◦ Held: Plaintiffs lacked standing because they offered no
evidence that they “suffered an injury in fact.”


LTC OVERVIEW
14

Litigation Report -- Compliance
Yoder v. American Travellers Life Insurance Co.
2002 Pa.Super. 398 (PAS, 2002)
◦ Policy provision requiring 3-day hospitalization was not
affected by later changes in law
◦ Insurer had no duty to advise policyholder of changes in law

Haley v. AIG Life Insurance Co.
A2-01-49 (D.N.D. 1/24/2002)
◦ Same issue and holding
◦ Insurer was required to defend fraud claim based on
alleged misrepresentations that were non-specific


LTC OVERVIEW
15

Litigation Report -- Premiums
Rakes v. Life Investors Ins. Co. of America
582 F.3d 886 (8th Cir. 2009)
◦ Named plaintiffs in putative class action bought “guaranteed
renewable” LTC policies
◦ Knew premiums could increase
◦ When premiums did increase, claimed the insurer
always meant to increase them
◦ Held:
◦ Plaintiffs were guaranteed the right to renew their
policies, but not guaranteed a level premium
◦ No fraudulent statement by insurer on which plaintiffs
relied

LTC OVERVIEW
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Litigation Report -- Premiums
Newman v. Dinallo
2009 NY Slip.Op. 50422(U) (N.Y.Sup.Ct. 2/10/2009)
◦ Consumers sought information offered to justify insurer’s
premium increase
◦ Held: “The variables that factor into pricing premiums
constitute trade secrets and need not be disclosed.”
Rose v. United Equitable Insurance Co.
2001 N.D. 154 (ND, 2001)
◦ Policy allegedly priced and underwritten improperly
◦ Allegations of a “death spiral”
◦ Held: Trial court improperly denied class certification motion


LTC OVERVIEW
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Litigation Report -- Rescission
Metropolitan Life Insurance Co. v. Conger
474 F.3d 258 (6th Cir. 2007)
◦ Contestable investigation revealed pre-application problems
and treatment for undiagnosed progressive disorder
◦ Held: No duty to disclose undiagnosed symptoms or
medical history not specifically requested in application
Smith v. AF&L Insurance Co.
No. ED 83685 (MO 8/24/2004)
◦ Held: Rescission for undisclosed use of Aricept improper
because part of treatment for depression (not forgetfulness)


LTC OVERVIEW
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Litigation Report -- Rescission
Derbridge v. Mutual Protective Insurance Co.
963 P.2d 788 (Utah App. 1998)
◦ Innocent misrepresentations do not justify rescission
◦ Utah statute contemplates at least some level of knowledge or
awareness of the misstatement to make it a misrepresentation

Kirsh v. Unum Life Insurance Co. of America, Inc.
2002 CA 5412 (Cal.App. 2002)
◦ Held: Applicant must disclose all material changes
in his or her medical condition


LTC OVERVIEW
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Litigation Report -- Post-Claim Underwriting
Derbridge v. Mutual Protective Insurance Co.
963 P.2d 788 (Utah App. 1998)
“Insurers can, to some degree, avoid being surprised by claims stemming
from conditions that would have led to denial of an application in the first
place. No law requires insurers to limit the source of their information to
the insurance applicant. Specifically, insurers can require applicants to
release their medical records or have a physical examination. This case is
a prime example.”


LTC OVERVIEW
20

Litigation Report -- Post-Claim Underwriting
Smith v. AF & L Insurance Co.
No. ED-83685 (Mo. 8/24/2004)
The “contrast between the post claims review process and all its rigidity
with the looseness of the underwriting process . . . when the application
was reviewed is remarkable.”


LTC OVERVIEW
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Litigation Report -- Pre-Existing Conditions
Wickland v. American Travellers Life Insurance Co.
513 S.E.2d 657 (W.Va. 1998)
◦ Periodic complaints of symptoms, without a health care
provider’s medical advice or recommended treatment for the
underlying condition, do not establish a pre-existing condition
◦ Ruling otherwise could prompt insureds to “keep all of their
complaints to themselves to prevent … a denial of coverage.”
◦ The result would be “the camouflaging of “the early signs of
illnesses and diseases that otherwise might have been curable,
preventable, or treatable.”


LTC OVERVIEW
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Litigation Report -- Nursing Homes
Gregg v. IDS Life Ins. Co., 592 NYS2d 182 (N.Y.A.D. 3 Dept. 1999)
◦ NY home care services agency is not a Nursing Home
Gillogly v. GE Capital Assurance Co.. 430 F.3d 1284 (10th Cir. 2005)
◦ OK residential care facility is not a Nursing Home
Geary v. Life Investors Ins. Co., 508 F.Supp.2d 518 (N.D. Tex. 2007)
◦ TX assisted living facility is not a Nursing Home
Musick v. AF & L Ins. Co., No. 2007-CA-168-MR (Ky.App. 11/21/2007)
◦ KY assisted living facility is not a Nursing Home
Wash. Health Care Ass’n. v. Arnold-Williams, 601 F.Supp.2d 1224 (2009)
◦ WA boarding home must be licensed by DSHS and/or ADSA


LTC OVERVIEW
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Litigation Report -- Other Facilities
Healing Place, Ltd. V. Farm Bureau Mutual Ins. Co. of Michigan
No. 286050 (Mich.App. 2010)
◦ Adult foster care facilities serve “adults who . . . require
supervision on an ongoing basis but who do not require
continuous nursing care.”
◦ Held: Unlawful to operate an unlicensed adult foster care facility
Empire State Association of Assisted Living, Inc. v. Daines
887 N.Y.S.2d 452 (N.Y.Sup.Ct. 2009)
◦ DOI regulations require adult care facilities to have RN on duty
and on site 8 hours/day and 2 days/week
◦ Held: DOI cannot impose requirements that will inflate costs

LTC OVERVIEW
24

Litigation Report -- Home Health Care
Bell Care Nurses Registry, Inc. v. Continental Casualty Co.
20 So.3d 13 (Fla.App. 2009)
◦ Policy covered “secondary services” only if received in a week
during which at least one “primary service” was received
◦ Primary services include those of an RN
◦ Secondary services include those of non-professional
providers (e.g., home health aides)
◦ Insured received secondary services, but primary services were
unnecessary
◦ Held: Insurer may not require that insured receive unnecessary
primary services as a condition to coverage for secondary services

LTC OVERVIEW
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Litigation Report -- Alternate Plan of Care
Roland v. Transamerica Life Insurance Co.
No. 08-10941 (5th Cir. 2009)
◦ Insured proposed an APC; insurer proposed a different APC
◦ No agreement reached
◦ Held:
◦ APC provision was not ambiguous, merely an option
that required mutual agreement
◦ No legal barrier to requiring a separate agreement to
“contractual alternatives”


LTC OVERVIEW
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Litigation Report -- Alternate Plan of Care
Mansur v. PFL Life Insurance Co.
589 F.3d 1315 (10th Cir. 2009)
◦ APC provision covered services outside of nursing home/LTCF if
insured, physician and insurer all agreed
◦ Insurer offered to pay for home care services at 40% of daily
benefit for services provided in nursing home/LTCF
◦ Insured objected, then sued for “cost of all services agreed to in
the APC, subject only to the Policy maximum benefit”
◦ Held: 1) No enforceable APC without insurer’s agreement
2) No benefits payable since not in a nursing home/LTCF


LTC OVERVIEW
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Litigation Report -- Fraud
United States v. Bryant
No. 09-2532 (8th Cir. 6/4/2010)
◦ Insured’s son submitted claim forms for home care provided to
his mother
◦ After caregiver stopped providing services, son asked him to sign
20 blank forms to seek reimbursement for unbilled services
◦ Son submitted claim forms for later period (11/2005-1/2007)
◦ Insured discovered when insured moved in with other son, hired
a new care provider, and submitted separate claim forms
◦ Held: Guilty of mail fraud (18 months in prison; ordered to pay
$29,444 in restitution)

LTC OVERVIEW
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QUESTIONS?
Judy Bass, LTCP, MHP, FLMI, Lori M. Watson, CLTC, LTCP Robert R. Pohls
ACS, ALHC, HIA Claims Practices and Managing Attorney
Senior Claims Analyst Quality Assurance Leader Pohls & Associates
Long-Term Care Claims LTC Claims Services 10940 Wilshire Boulevard
State Farm Mutual Genworth Financial Suite 1600
Automobile Insurance 1650 Los Gamos Drive Los Angeles, California 90024
Company San Rafael, California 94903 Telephone: (310) 694-3092
One State Farm Plaza Phone: (415) 492-7916 Fax: (310) 694-3093
Bloomington, Illinois 61710 Fax: (415) 492-7113 rpohls@califehealth.com
Phone: (309) 766-4542 lori.watson@genworth.com
Fax: (309) 735-6200
judy.bass.a013@statefarm.com


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