With baby boomers approaching middle age, many are planning for what they hope will be a secure retirement. Key to that security is knowing that if you need long-term nursing home or home care, you will be able to afford it.
Today's seniors don't have that assurance because private long-term care insurance seems designed to protect insurance companies, not consumers.Long-term care is extremely costly. It can run $40,000 a year in some nursing homes. Americans need protection from the financial devastation spurred by these costs. We hope Congress will address the nation's long-term care crisis early next year when it considers President-elect Clinton's health-care proposal.
But as long as long-term care insurance is sold through private companies, we need to regulate this market.
In 1990, Congress imposed rules on Medicare supplement (Medigap) insurance that made these policies much more consumer-friendly. Congress needs to do the same thing for long-term care.
Now, the only oversight is provided by the National Association of Insurance Commissioners (NAIC), which writes model regulations that states are free to adopt - or ignore.
Thus, it's not surprising that long-term care policies are filled with traps for the unwary consumer.
Trap No. 1 - failure to cover inflation. Insurers are not required to build such protection into these policies.
Insurers would rather not let consumers know about the next trap - that they expect most policy holders to drop their polices before they get any benefits.
In fact, the congressional General Accounting Office found that, on average, insurers expected that 60 percent or more of their policy holders would drop their policies within 10 years.
The surprise for consumers: After paying thousands of dollars in premiums, they lose all their equity in the policy if they drop it. This is like paying your mortgage for 30 years and then finding that you cannot recover your equity when it's time to sell.
Long-term care insurance also flunks the "kitchen table test." Consumers should be able to compare and understand a variety of policies. They should not need a sophisticated computer program - or an actuarial background - to analyze competing plans. Policies today are loaded down with fine-print restrictions, formidable hurdles to clear before benefits are paid and a confusing plethora of definitions.
For example, "home care" means, to many consumers, assistance with meal preparations and other housekeeping chores. In fact, many policies limit "home care" benefits to highly skilled medical care and therapy.
Policies should have uniform definition of terms and standard benefit packages so consumers can make well-informed choices.
Insurers should be barred from deliberately underpricing policies to make a sale, them jacking up the premium later to recoup losses.