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Long-Term Care Insurance Claim Denial and Appeal – Keystone Elder Law – Mechanicsburg, PA

This is the third in a series of articles to explain how some of our clients have experienced claim rejections from long-term care insurers for care in a licensed Personal Care Home. There are a few consistently problematic issues which may be unintended consequences of the Department of Human Services’ complex regulations.  State regulations do not specifically define the term “long-term care facility,” although most long-term insurance policies do.

In June 2011, we complained to the Pennsylvania Insurance Department about a specific company’s intent to deny coverage for assisted living care, which they defined as help with two or more activities of daily living, unless the care was provided by a licensed Assisted Living Residence and not a licensed Personal Care Home. We suggested that new licensing regulations, which made it illegal for Personal Care Homes to continue to refer to themselves as assisted living facilities, were creating confusion with long-term care insurance claims.  After our extensive follow up, the Department eventually responded a year later in August 2012.

The Insurance Department’s response said they had investigated the thirteen carriers of long-term care insurance which collectively accounted for 80% of all coverage in Pennsylvania. The Department said that insurance companies’ practices of paying claims was unchanged since the Title 50 Chapter 28 Assisted Living Residence regulations were adopted.  However, the Department admitted that its investigation resulted in policy endorsements being filed by some companies to clarify ambiguous language resulting from regulatory changes. The Department claimed that insurers operating in Pennsylvania are aware that the Department expects them to continue to pay for claims for care for assisted living services, even when that care is provided in a licensed Personal Care Home.

Especially since state regulations offer no succinct definition of a long-term care facility, it helps to consider a typical insurance company’s definition of a long-term care facility:  1) Licensed by the state where it is located; 2) Provides skilled, intermediate or custodial nursing care under the supervision of a physician; 3) Has 24-hour-a-day nursing services provided by or under the supervision of a registered nurse (RN), licensed vocational nurse (LVN) or licensed practical nurse (LPN); 4) Keeps a daily medical record of each patient; and 5) May be either a freestanding facility or a distinct part of a facility such as a ward, wing, unit or swing-bed of a hospital or other institution.

Arguably, as a matter of licensing or standard market practice, Personal Care Homes comply with these policy requirements. However, in absence of supportive state regulations which enable strong advocacy by the Insurance Department, insurance companies have required paperwork and used “confidential” results as a reason for claim denial.  Paperwork must be completed by Personal Care Home staff, and not the claimant or their legal counsel.  Some staff members do not realize that the daily charting of the dispensing of medication is an example of a medical record, or that supervision does not require continuous presence.  Resulting claims can be denied or renegotiated on terms that are not favorable to the policy holder.

The Insurance Department asked to be notified if we found a situation where benefits for covered services rendered in a Personal Care Home were improperly handled. Subsequent complaints to the Department have generated mixed results.  This is true both with respect to the procedure used to respond to complaints, as well as the analysis and level of advocacy of the Department’s investigative personnel.

In one case, a Department’s investigator responded promptly in writing and got a large insurance company to reverse its position, and to pay the full claim of an insured party who was receiving care in a Personal Care Home. But this was only after the claimant had assumed the risk of moving into the facility before the long-care insurance company would respond in writing to a claim.  The insurance company did not admit to the Department that its pre-admission verbal communications, to both the claimant and our office, had been discouraging about their eventual willingness to pay the claim.

Another complaint resulted in a less favorable response from the Insurance Department. Despite the Department’s assurance in 2012 that insurers operating in Pennsylvania are expected to continue to pay for covered long-term care services provided in a licensed Personal Care Home, the Department’s investigator concluded not only that a Personal Care Home is not an assisted living facility, but also that a licensed Personal Care Home is not necessarily a licensed long-term care facility because of limiting language in Title 55 Chapter 2600.1.b.

The decision of the Department’s investigator, who was not a lawyer, essentially pressured the claimant to accept an alternative plan of care arrangement. The Department’s investigator did not offer to meet with or interview either the claimant or Personal Care Home.  The Department offered no internal process to appeal the investigator’s decision.  After months of being paid less than bargained for in the insurance policy, excessive paperwork eventually caused the claimant to be relocated to a skilled nursing facility.  Although the claimant’s need for dementia care was safely and adequately met by the Personal Care Home, relocation to the nursing home eliminated all claim ambiguity and it was fully paid.

Both examples result from pre-admission telephone inquiries to separate insurance companies. Each claimant needed hands-on help with activities of daily living and supervision due to the effects of dementia. Each claim was initially dismissed by the insurance company because a Personal Care Home “is not a long-term care facility contemplated by the insurance policy’s benefits for assisted living or dementia care.”  Each company offered to consider an alternate plan of care, but only after the claimant assumed the risk and otherwise financed the cost of moving into the licensed facility.

These claim denials are transparently ridiculous since, when the policies were written decades before Pennsylvania’s changes to assisted living regulations, Personal Care Homes were the only licensed facilities available in Pennsylvania for assisted living care. Next week’s article will conclude the series and suggest both possible regulatory changes and best interim practices for consumers.

By Dave Nesbit, Attorney