Long-Term Care Insurance

GAO discussed the potential for abuse in marketing and sales of long-term care insurance policies. GAO found that: (1) of the 33 policies reviewed, 28 covered three levels of nursing home care, 21 covered home health care, and about half covered four levels of long-term care; (2) 32 policies were indemnity policies, which were generally not adjusted for inflation; (3) almost all of the policies contained restrictive clauses that established conditions of appropriate use; (4) none of the policies contained provisions to compensate policyholders for the premiums paid in the event of policy cancellation; and (5) insurers exclude coverage for certain chronic, debilitating conditions, such as nervous or mental disorders like Alzheimer's disease. GAO also found that: (1) ambiguous or complex policy language could mislead consumers about the coverage they are purchasing; (2) although there are no federal laws governing the long-term care insurance industry, some states have enacted minimum standards to reduce abuse and eliminate confusion in the sale of long-term insurance; and (3) an insurance association proposed legislation to strike a balance between consumer protection and insurance product innovation.