Insurance, the elderly and what to do next

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James M. Berklan, McKnight's Editor
James M. Berklan, McKnight's Editor

No sane person can criticize someone who admits being confused about how medical insurance should be funded, especially for seniors. You don't like the government stepping in to provide too much? Fire away. You think private industry can't be trusted? Keep firing (though you would probably be someone firing from the opposite direction). Last week, a pair of innocently juxtaposed stories highlighted the struggle extremely well.

First came the announcement that the Obama administration was pulling back on the “employer mandate” provision of the Affordable Care Act. Officials essentially said they want to take another year to better figure out how to execute this controversial provision.

Various anti-ACA and anti-Obama players began restarting that entire reform law should be scrapped. Not in favor of the proposed insurance mandate for employers of more than 50 workers, they assail greater government intervention in general.

Part of the answer is not to interject inefficient government processes into the insurance game, they say. When has the government made anything easier or more efficient? they ask.

Free market forces will pave the way. Let competition rule the day, where American capitalism and entrepreneurial spirit will tussle and ultimately spit out the best, lowest-priced product possible.

It's a difficult argument to oppose when one takes into account the hundreds of markets that have been favorably shaped by such free-market thinking. Everything from cars to kayaks has been successfully sold this way.

But long-term care insurance is another animal. Just one day after the employer mandate announcement, the Wall Street Journal published a story that took a damning look at LTC insurance (which “leaves customers groping,” according to the headline).

“Just another reckless hit job” is how some private LTC insurance proponents characterized the story. But they had to have been out-numbered by readers who thought otherwise when all was said and done.

The story spoke of private long-term care insurance policy holders — many on fixed incomes — getting hit with 77% or other huge premium price increases. It also reported on concessions that some policyholders are making so they can simply continue to have coverage, and not forfeit equity already built up in it.

Insurers “underestimated how fast medical costs would rise” and “they underpriced insurance premiums,” the article noted.

Ironically, the miscalculations lambasted by the normally business-friendly newspaper are hurting both insurance sellers and would-be customers. While some clients discontinuing policies, others many of them (including many who are less healthy) are not. This presents companies with potentially huge costs. As a result, not only are individuals but also insurance companies leaving the market.

Five of the 10 largest long-term care insurance sellers have recently pulled back from, or entirely out of, the long-term care market, according to Moody's Investors Service. One estimate says that about only 15 companies still sell significant numbers of LTC insurance policies — down from about 100 companies just 10 years ago.

While disagreements might rage among various political and tactical camps over paying for healthcare, there is something they all can agree on: The insurance funding game is a lot more complex than first glance might indicate.

James Berklan is the editor of McKnight's Long-Term Care News. Follow him on Twitter at @LTCEditorsDesk.

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Daily Editors' Notes

McKnight's Daily Editors' Notes features commentary on the latest in long-term care news and issues. Entries are written by Editorial Director John O'Connor, Editor James M. Berklan, Senior Editor Elizabeth Newman and Staff Writer Marty Stempniak.