Long-Term Care Insurance

Gao ID: T-HRD-87-21 August 6, 1987

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.

The Justia Government Accountability Office site republishes public reports retrieved from the U.S. GAO These reports should not be considered official, and do not necessarily reflect the views of Justia.