Long-Term Care Insurance: Better Controls Needed to Protect Consumers

GAO discussed long-term care insurance policies and the standards developed by the National Association of Insurance Commissioners (NAIC) that govern them. GAO noted that: (1) consumers purchasing long-term care insurance are still vulnerable to considerable risks, because many states have not adopted minimum NAIC regulatory standards and some NAIC standards fail to sufficiently address long-term care insurance features that have important consequences for consumers; (2) although insurance companies adopted NAIC standards more quickly than did states, most policies reviewed did not meet more recent NAIC standards, particularly standards regarding disclosure and inflation; (3) although some insurance companies do little to prevent the sale of long-term care insurance to low-income people, long-term care insurance is expensive and generally not appropriate for people with limited financial resources and Medicaid will pay for care for those people covered. GAO believes that in addition to the current NAIC standards, new standards need to be developed that: (1) promote uniform terminology and definitions for eligibility criteria, long-term care services, and long-term care facilities; (2) address the relevance of eligibility criteria for different types of impairments, and establish formal grievance procedures; and (3) protect consumers against forfeiture of their investments in premiums if their policies lapse, options for policy upgrading, and a structure for agents' sales commissions.