The Importance of a "Lapse Designee" on Long Term Care Insurance

A U.S. district court has ruled that the purchaser of a long-term care insurance policy may sue for breach of contract the insurance company that failed to notify the purchaser's son, as required in the contract, that the policy was in danger of lapsing. Waskul v. Metropolitan Life Insurance Company, (U.S. Dist. Ct., E.D. Mich., No. 17-13932, July 31, 2018).

Long term care insurance is a valuable tool in planning for long term care costs.  Policy lapse is a serious problem, though, given that an insured may experience periods of poor health or disability during which s/he may be unable to pay premiums.   If premiums are not paid timely, and the policy lapses, the financial investment in the policy is lost, and more importantly, the protection afforded by the insurance benefit is surrendered.  

Tools to prevent lapse include automatic payment, prepayment, and the appointment of a loss designee.  Automatic payment and prepayment work well to prevent policy lapse so long as funds are available and sufficient opportunity is afforded the family to recognize and fulfill the need to pay the premium.  This is uncertain, at best, especially over protracted periods of illness or disability.  A "loss designee" is an appointed person other than the insured who is notified of policy lapse, thereby helping to ensure that the premium is paid. 

Carl Waskul purchased a long-term care insurance policy from Metropolitan Life Insurance Company in 1996. The policy was guaranteed renewable, which meant that as long as Mr. Waskul paid the premiums, the company could not cancel the policy. In 2003, Mr. Waskul designated his son as "lapse designee" to receive notice if Mr. Waskul's policy was about to lapse for non-payment. In 2015, Mr. Waskul was diagnosed as cognitively impaired and failed to pay his premium in February 2016. The long-term care insurance company did not notify Mr. Waskul's son that the premium had not been paid.

When Mr. Waskul's children contacted the insurance company in 2017 for a coverage determination, they were told his policy had been cancelled. Mr. Waskul sued the insurance company for breach of contract and fraudulent misrepresentation. The insurance company filed a motion to dismiss.

The U.S. District Court for the Eastern District of Michigan, Southern Division, denied the motion to dismiss the breach of contract claim, but granted the motion to dismiss the fraudulent misrepresentation claim. The court ruled that Mr. Waskul successfully stated a claim that the insurance company did not meet its obligation under the contract "when it neglected to inform his son that [Mr. Waskul] had failed to pay his policy premium in February 2016." However, the court ruled that Mr. Waskul does not state a claim for fraudulent misrepresentation because the company did designate his son as lapse designee. According to the court, failure to follow through "does not show that [the insurance company] knowingly made the false representation that [Mr. Waskul] could appoint a lapse designee.

Although it is little consolation that an insured has a right to sue for the lapse if a policy lapses, the reality is that legal action may return to an insured and his or her family some of the investment in the policy.  Regardless, the case demonstrates why an insured should designate a lapse designee, whether or not such a designation is permitted by the terms of the policy.  Without a "lapse designee," there is no protection for the insured or the insured's family when illness or disability prevents payment of the premium. 

New Law Helps Seniors Prevent Identity Theft

The National Center for Law & Elder Rights (NCLER) has released a fact sheet explaining a new law that allows consumers to place freezes on their credit information for free. The fact sheet, entitled "New Law Provides Free Security Freezes and Increased Fraud Alert Protection," explains that "[o]n May 24, 2018, the President signed Public Law 115-174 into law. Section 301 of Public Law 115-174 amends the Fair Credit Reporting Act, to establish a new federal right for consumers to implement a security freeze of their credit file." (citations omitted).  

The NCLER fact sheet explains:

A security freeze is the single most effective tool to minimize the risk of identity theft. Identity thieves often target unsuspecting older adults, luring them into giving out personal information. The scammers then use this information to steal the older adults’ identity and ruin a lifetime of positive credit.  As a general rule, security freezes allow a consumer to prohibit the release of their credit report. When a thief applies for credit in the victim’s name, often the intended creditor will attempt to obtain the victim’s credit report or score. The idea behind a security freeze is that, when the credit reporting agency returns no information or a notice that the consumer has frozen the file, the creditor will deny the thief’s application, thereby thwarting the thief and protecting the consumer’s credit reputation as well as the business interests of the creditor.

The new law permits the creation, temporary lifting (or “thaw)” and permanent removal of security freezes from the nationwide consumer reporting agencies. The security freezes are limited to parties seeking the consumer’s information for credit purposes, and do not apply to parties who seek the report for employment, insurance, or tenant-screening purposes. Freezes also do not apply to existing creditors or their agents conducting an account review, collecting on a financial obligation owed them, or seeking to extend a “firm offer of credit” (i.e.,pre-screening). 

The new law also extends the length of  fraud alerts from three (3) months to a full year.  A fraud alert notifies users that the consumer has been or may become a victim of fraud or identity theft. Extending the fraud alert better protects the consumer,

In addition, the new law federalizes or preempts state credit freeze laws.  "The legislation’s preemption extends to any state requirement or prohibition with respect to subject matter regulated by the statute’s provisions relating to security freezes. For example, some state statutes are stronger than the new federal standards by allowing consumers to freeze access to credit reports for employment or insurance purposes." There is also a provision covering when a fiduciary needs to secure a freeze for an individual who is incapacitated.

The new legislation should help seniors avoid identity theft. 

Study Shows Some Hospitals Steering Patients Away from Nursing Homes

Put YOU back in your plan!

Good news is on the horizon for seniors and their families hoping to Age in Place, i.e., avoid unnecessary institutional care.  There is evidence the underlying health care system is reforming to embrace Aging in Place preference for non-institutional care.  According to an article  published in McKnights Long Term Care News, hospitals participating in bundled payment efforts are actively reducing the use of skilled nursing care! The evidence comes in the form of a new study out of the University of Pennsylvania, published Monday in Health Affairs.

Skilled care is a big driver of cost growth and variation in Medicare, the authors note. In 2015 alone, about twenty percent (20%) of Medicare fee-for-service hospital admissions went to a Skilled Nursing Facility (SNF), despite scant evidence that this is the optimal post-acute setting, or that a nursing home helps improve quality, Penn researchers wrote.  Of course, that is no surprise to those of us in the "Aging in Place: community.  Long have advocates decried the obvious negative physical, mental, and  and emotional health outcomes so often incident to and consequence of institutional care, and particularly unnecessary or avoidable institutionalization.   

Motivated primarily by concerns for cost growth and variation, however, the Centers for Medicare & Medicaid Services (CMS) has finally arrived at the same destination.  CMS has undertaken both the Bundled Payments for Care Improvement initiative and the Comprehensive Care for Joint Replacement model in an effort to eradicate some of that cost variation. Wanting to better understand how hospitals are navigating these waters, researchers interviewed leaders at twenty-two (22) institutions taking part in those two CMS bundled pay efforts.

"It's clear from the results that hospitals are looking to reduce SNF use," said Jane Zhu, lead author and a national clinician scholar and fellow in the Division of General Internal Medicine at Penn's Perelman School of Medicine.  She explained:   

“For the past couple of decades, we've had a persistent increase in SNF utilization across the country, but it's still very unclear what the benefit ultimately is for patients, and what the optimal post-acute setting is,” she told McKnight's. “As bundled payment incentives force hospitals to think along the lines of total cost of care, they're starting to see that, for certain patients, skilled nursing facilities offer no greater benefit and are more expensive than other venues.”

Often, hospitals are reducing SNF referrals by using risk-stratification tools, better educating patients, providing care support at home, and better linking up with home health agencies to smooth out any discharge hiccups.  Of course, patient choice and directive, not mentioned by the researchers or McKnights may also be contributing to reduced SNF utilization.

Other hospitals, meanwhile, are strengthening bonds with nursing homes, researchers found. Fifteen institutions formed networks of preferred SNFs, aiming to exert influence over cost and quality. Typical tactics found included linking electronic medical records, embedding a hospital provider in the nursing home and hiring dedicated care coordination staffers.  Most often, hospitals are partnering with SNFs with which they are familiar and have trust, rather than reaching out to new partners, authors added.

Zhu's three key takeaways for skilled nursing operators:

Payment really matters. Hospitals have been “really conscientiously and in a very collective manner reorganizing the way that they are thinking about post-acute care, and specifically trying to save costs, along those lines.” The payment structure is having a distinct effect on hospitals' behavior.

The extent to which these practices have been disseminated is unclear. Some of the things hospitals are doing have “enormous implications” for skilled nursing facilities. Hospitals are really trying to move away from SNF use, particularly for joint replacement patients. They are trying to then integrate and coordinate care with skilled nursing facilities through a variety of different structures.

There's uncertainty over what the ultimate implications are for SNFs. There is a question of what sorts of pressures SNFs will face, given these hospital practices.

“SNFs are not only under heavy pressure to work more closely with hospitals and to compete to be the desired referral partner,” Zhu told McKnights, “but they're also facing downward referral pressures as hospitals try to send their patients, more and more frequently, home.” 

Future research may expand on how nursing homes are responding to this trend. 

The Future of Home Care

Houser, Ari, "The Future of Home Care," CSA Journal (Vol.1, 2018) pp. 33-37.

Researchers find Alzheimer's Threat Persistent Regardless of Age; Average Survival Confirmed as 6 Years

According to an article published in McKnight's Long Term Care News, first-ever studies are bringing new revelations about Alzheimer's Disease.  The studies were released as the Alzheimer's Association hosts its 2018 International Conference in Chicago. Among the findings: Dementia survival time is short, regardless of the age at onset.

Aiming to better understand survival times of those diagnosed at a relatively young age, Amsterdam researchers poured over data for some 4,500 early-onset dementia patients in one memory clinic. They found that median survival time, across all age groups, was six years, hardly different from those older than 65.

These findings suggest that, despite all efforts and despite being younger and perhaps physically "‘healthier" than older people, survival time in people with young-onset dementia is not greater and  has not improved since 2000

Another study, of dementia data from 11 countries tied to more than 4,100 ages 95-110 found that prevalence of the disease increased with age in all societies.  On the other hand, though, the risk for dementia and cognitive impairment varied “significantly” from country to country, “suggesting cultural and lifestyle factors play a role in remaining physically and cognitively health with age.  Those with higher levels of education, for one, expressed a lower prevalence of dementia than those with fewer years of education.

In yet another study, researchers from the University of California-San Francisco announced this week that the dementia rate of lesbian, gay and bisexual older adults was about 7.4%, compared to about 10% for the general population, according to study results. It was the first dementia prevalence data from a large population of LGB older adults and examined data from some 3,700 such individuals over age 60. 

The association also announced on Sunday that it is establishing the first-ever Dementia Care Provider Roundtable, as a means to gather thought leaders from across the U.S. to find ways to better treat the disease.  The group, which consists of key players in the skilled nursing and assisted living fields, Genesis HealthCare and HCR Manor Care among them, will meet for the first time Thursday, the last day of the five-day conference.