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Guest column: Legislature should plug loophole There's a flaw in Minnesota's Long-Term Care Insurance law By SHIRLEY McCONNELL
In 2001, the Minnesota Legislature passed a law which significantly changed the regulations that govern increases in premiums for Long-Term Care Insurance (LTCI). The change came after legislators became concerned about a rash of rate increases on LTCI policies.
The law was modeled after a recommendation from the National Association of Insurance Commissioners, and certainly indicated the mind of the Legislature at that time.
It was adopted to guarantee rate stability. It stated, "For the policies to be approved, the company actuary must certify that the initial premium rate schedule is sufficient to cover anticipated costs under moderately adverse experience and that the premiums rate schedule is reasonably expected to be sustainable over the life of the formulary with no future premium increases anticipated as required by MS62A, 615.021, sub.2, para.(2) (i)."
It was a good and fair change in the law. There was only one problem. The revision only applied to the LTCI policies approved after Dec. 31, 2001. So what's the problem? It means that all those who bought LTCI before 2002 and faithfully paid in for years are not covered and insurance companies, using that loophole in the law, are free to raise premiums on that select group; one well-known fraternal company demanding an increase of approximately one-third. The result is compounded because the companies "have them over a barrel" since they cannot seek a better deal from another company at their age without paying much more. Why? Because the sales pitch to those who purchased policies when they were younger was something like this: Sign up now because each additional year's premium rises quite steeply. In addition, many seniors were assured that their rate would not be increased. In other words, competition does not apply in a situation like that. I suggest it was that very fact, no competition, that made the Legislature take action to prevent those increases.
From a public policy standpoint, it is understood that LTCI is unlike other kinds of insurance in that it has cost considerations for government. If I purchase home insurance and my house burns down after I have defaulted on my payments, the government does not pay for a new house. On the other hand, if I live without LTCI and I must go into a nursing home, after I use up my own funds, then Medicaid steps in to pay the bills. And it is a fact that the great majority of costs in state Medicaid dollars pay nursing homes. The State and taxpayers should be aggressively urging people to sign up.
From a human standpoint, seniors with limited incomes may struggle to pay their premiums rather than deplete everything they have saved. Others will continue because of the principle involved, that they do not want to depend on taxpayer dollars. It is this group that is especially harmed by the inconsistency in this law.
It is the Minnesota Department of Commerce that approves rate increases. When contacted, they explained that two changes in the economy made the rate increase feasible: (1) lower interest rates than had been anticipated when the policies were written and (2) fewer policies were dropped. What they fail to consider is that those very interest rates have also gravely impacted some retired policy holders as well and only strengthened their determination to hang on to their policies in the face of rising nursing home costs. Could it be that rates are being raised to increase the so-called lapse rate?
For years, human service professionals have urged greater use of home care services that can greatly reduce costs rather than simply funneling most of our Medicaid dollars into expensive nursing homes. Wisely, the insurance companies got the message and began in their sales pitches to emphasize that their policies would cover in-home care so that individuals could be cared for in their homes. We should applaud them for this. As a result, credible people maintain that there has not been significant loss in profits in this line of insurance. In that case, how can companies use lower earnings as justification for rate increases?
Finally, given the age and frailty of this affected population, in rather short order in the scheme of things, these folks will die and the problem for the companies will die also-no longer a negative for profits. In light of these facts, seniors should consider banding together to convince their representatives to correct this inequity and protect those seniors who were only trying to do the right thing by taking out LTCI early on, seniors who believed in trying to take care of themselves in their declining years.
SHIRLEY McCONNELL can be contacted at shirlmcc@nisswa.net. A Lake Hubert resident, she is a retired director of social services in Dakota County. She is a member of the Rosenmeier Board and past president of the League of Women Voters in the Brainerd Lakes Area. She was a member of various Governor's Task Forces on the Family, Health Care Cost Containment and the Council on Youth.
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