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<DIV class=timestamp>March 26, 2007</DIV>
<DIV class=kicker></DIV>
<H1><NYT_HEADLINE type=" " version="1.0">Aged, Frail and Denied Care by Their
Insurers </NYT_HEADLINE></H1><NYT_BYLINE type=" " version="1.0"></NYT_BYLINE>
<DIV class=byline>By <A title="More Articles by Charles Duhigg"
href="http://topics.nytimes.com/top/reference/timestopics/people/d/charles_duhigg/index.html?inline=nyt-per">CHARLES
DUHIGG</A></DIV><NYT_TEXT></NYT_TEXT>
<DIV id=articleBody>
<P>CONRAD, Mont. — Mary Rose Derks was a 65-year-old widow in 1990, when she
began preparing for the day she could no longer care for herself. Every month,
out of her grocery fund, she scrimped together about $100 for an insurance
policy that promised to pay eventually for a room in an assisted living home.
</P>
<P>On a May afternoon in 2002, after bouts of <A
title="Recent and archival health news about blood pressure."
href="http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/bloodpressure/index.html?inline=nyt-classifier">hypertension</A>
and <A title="Recent and archival health news about diabetes."
href="http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/diabetes/index.html?inline=nyt-classifier">diabetes</A>
had hospitalized her dozens of times, Mrs. Derks reluctantly agreed that it was
time. She shed a few tears, watched her family pack her favorite blankets and
rode to Beehive Homes, five blocks from her daughter’s farm equipment
dealership.</P>
<P>At least, Mrs. Derks said at the time, she would not be a financial burden on
her family.</P>
<P>But when she filed a claim with her insurer, <A title=Conseco
href="http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=CNOPRB;CNOWS">Conseco</A>,
it said she had waited too long. Then it said Beehive Homes was not an approved
facility, despite its state license. Eventually, Conseco argued that Mrs. Derks
was not sufficiently infirm, despite her early-stage dementia and the 37 pills
she takes each day. </P>
<P>After more than four years, Mrs. Derks, now 81, has yet to receive a penny
from Conseco, while her family has paid about $70,000. Her daughter has sent
Conseco dozens of bulky envelopes and spent hours on the phone. Each time the
answer is the same: Denied.</P>
<P>Tens of thousands of elderly Americans have received life-prolonging care as
a result of their long-term-care policies. With more than eight million
customers, such insurance is one of the many products that companies are
pitching to older Americans reaching retirement.</P>
<P>Yet thousands of policyholders say they have received only excuses about why
insurers will not pay. Interviews by The <A title="New York Times"
href="http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=">New
York Times</A> and confidential depositions indicate that some long-term-care
insurers have developed procedures that make it difficult — if not impossible —
for policyholders to get paid. A review of more than 400 of the thousands of
grievances and lawsuits filed in recent years shows elderly policyholders
confronting unnecessary delays and overwhelming bureaucracies. In California
alone, nearly one in every four long-term-care claims was denied in 2005,
according to the state.</P>
<P>“The bottom line is that insurance companies make money when they don’t pay
claims,” said Mary Beth Senkewicz, who resigned last year as a senior executive
at the National Association of Insurance Commissioners. “They’ll do anything to
avoid paying, because if they wait long enough, they know the policyholders will
die.” </P>
<P>In 2003, a subsidiary of Conseco, Bankers Life and Casualty, sent an
85-year-old woman suffering from dementia the wrong form to fill out, according
to a lawsuit, then denied her claim because of improper paperwork. Last year,
according to another pending suit, the insurer <A title="Penn Treaty American"
href="http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=PTA">Penn
Treaty American</A> decided that a 92-year-old man had so improved that he
should leave his nursing home despite his forgetfulness, anxiety and doctor’s
orders to seek continued care. Another suit contended that a company owned by
the John Hancock Insurance Company had tried to rescind the coverage of a
72-year-old man when he was diagnosed with <A
title="Recent and archival health news about Alzheimer's."
href="http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/alzheimers/index.html?inline=nyt-classifier">Alzheimer’s</A>
disease four years after buying the policy.</P>
<P>In court filings, all three companies said the denials had been proper. They
declined further comment on the cases, though Bankers Life and John Hancock
eventually settled for unspecified amounts. </P>
<P>In general, insurers say criticisms of claims-handling are unfair because
most policyholders are paid promptly and some denials are necessary to root out
fraud. </P>
<P>In a statement, Conseco said the company “is committed to the highest
standards for ethics, fairness and accountability, and strives to pay all claims
in accordance with policy contracts.” Penn Treaty said in a statement, “We
strive to treat all policyholders fairly, and to deliver the best, most
efficient evaluation of their claim as possible.”</P>
<P>But policyholders have lodged thousands of complaints against the major
long-term-care insurers. A disproportionate number have focused on Conseco, its
affiliate, Bankers Life, and Penn Treaty. In 2005, Conseco received more than
one complaint regarding long-term-care insurance for every 383 such
policyholders, according to data from the insurance commissioners’ association.
Penn Treaty received one complaint for every 1,207 long-term-care policyholders.
(The complaints touch on a variety of topics, including claims handling, price
increases and advertising methods.)</P>
<P>By comparison, <A title="Genworth Financial"
href="http://www.nytimes.com/mem/MWredirect.html?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=GNWPRE">Genworth
Financial</A>, the largest long-term-care insurer, received only one complaint
for every 12,434 policies.</P>
<P>Conseco is among the nation’s largest insurers, collecting premiums worth
more than $4.2 billion in 2006, of which long-term-care policies contributed 21
percent. Penn Treaty focuses primarily on long-term-care products and collected
premiums of about $320 million in 2004, the last year the company filed an
audited annual report.</P>
<P>In depositions and interviews, current and former employees at Conseco,
Bankers Life and Penn Treaty described business practices that denied or delayed
policyholders’ claims for seemingly trivial reasons. Employees said they had
been prohibited from making phone calls to policyholders and that claims had
been abandoned without informing policyholders. Such tactics, advocates for the
elderly say, are becoming common throughout the industry.</P>
<P>“These companies have essentially turned their bureaucracies into profit
centers,” said Glenn R. Kantor, a California lawyer who has represented
policyholders. </P>
<P>Yet these concerns have been ignored by state regulators, advocates say, and
have gone unnoticed by federal lawmakers who recently passed incentives intended
to promote purchases of long-term-care policies, in the hopes of forestalling a
Medicare funding crisis.</P>
<P>Conseco and Bankers Life “made it so hard to make a claim that people either
died or gave up,” said Betty J. Hobel, a former Bankers Life agent in Cedar
Rapids, Iowa. </P>
<P>“When someone is 70 or 80 years old,” she said, “how many times are they
going to try before they just give up?”</P>
<P><SPAN class=bold>A Race to Sell Policies</SPAN></P>
<P>When Mrs. Derks bought her long-term-care policy from a door-to-door salesman
in 1990, she was unaware that she represented the insurance industry’s newest
gold mine.</P>
<P>Her husband had died eight years earlier of a stroke, leaving her to run a
barley farm in northern Montana, where she lived with her three children and her
aging mother. As she watched her own parent decline, Mrs. Derks became
preoccupied with sparing her children the expense of her final years.</P>
<P>“She was terrified that she would bankrupt us or get sent to a public nursing
home,” said Ken E. Wheeler, her son-in-law. </P>
<P>At the time, long-term-care policies, which can cover the costs of
assisted-living facilities, nursing homes and at-home care, were becoming one of
the insurance industry’s fastest-growing products. Companies like Conseco,
Bankers Life and Penn Treaty were aggressively signing up clients who were not
in the best health at rates far below their competitors’ in order to win more
business, former agents said. From 1991 to 1999, long-term-care sales helped
drive total revenue gains of roughly 500 percent each at Penn Treaty and
Conseco, including its affiliate Bankers Life. </P>
<P>Cracks in the business, however, soon started to appear. Insurance executives
began warning they had underestimated how long policyholders would live after
entering nursing homes. The costs of treating Alzheimer’s, <A
title="Recent and archival health news about Parkinson's disease."
href="http://topics.nytimes.com/top/news/health/diseasesconditionsandhealthtopics/parkinsonsdisease/index.html?inline=nyt-classifier">Parkinson’s</A>
and diabetes ballooned. </P>
<P>As insurers began realizing their miscalculations, they persuaded insurance
commissioners in California, Pennsylvania, Florida and other states to approve
price increases of as much as 40 percent a year. </P>
<P>By 2002, Conseco’s long-term-care payouts exceeded revenue. Those and other
disappointing results prompted the company to file for bankruptcy, from which it
emerged 10 months later.</P>
<P>That same year, Mrs. Derks entered Beehive Homes, a cheery, 12-bed center one
block from the Prairie View elementary school. In the previous four years, she
had been hospitalized more than two dozen times. She had once lain unconscious
in her living room for a day and a half. Her physician ordered her into an
assisted-living center.</P>
<P>Initially, Conseco told Mrs. Derks’s daughter, Jackie Wheeler, that her claim
would go through smoothly, Mrs. Wheeler said. The family began paying Beehive
Homes’s $1,900 monthly fee. </P>
<P>But three months after submitting her claim, Mrs. Derks received a letter
from Conseco saying she had waited too long, and her earliest costs would not be
reimbursed. Two months later, she received another letter denying her entire
claim because she had not submitted proof of illness. </P>
<P>Yet a copy of Mrs. Derks’s policy, sent to the Wheelers by Conseco in 2004
and reviewed by The Times, mentions no requirement for proof of illness. The
policy requires only that the confinement be ordered by a physician, and it
allows for a notice of claim to be sent “as soon as reasonably possible.” </P>
<P>Mrs. Derks’s daughter called Conseco and explained that her mother could not
recall the date or people’s names and had started multiple fires by forgetting
to turn off the stove. She sent letters stating that her mother needed
assistance to dress, eat, go to the bathroom and inject insulin. </P>
<P>“This is medically necessary!!!” reads a form signed by Mrs. Derks’s
physician in 2004. “This has been filled out three times! This person needs
assistance!”</P>
<P>Seven months later, Conseco sent another letter, this time denying Mrs.
Derks’s claim because her policy “requires a staffed registered nurse 24 hours
per day.” Her policy does not mention such a requirement. </P>
<P>Conseco also sent letters denying Mrs. Derks’s claim because her policy had
an “assisted living facility rider,” and because Mrs. Derks “does not have an
assisted living facility rider.” In all, the family received more than a dozen
letters from the company. Many contradict one another, and frequently cite
requirements that are nowhere mentioned in Mrs. Derks’s policy.</P>
<P>“There was always a new step in the runaround,” Mrs. Wheeler said. “It felt
like everything was designed to make me just go away.”</P>
<P>Over two years, Mrs. Wheeler estimated, she called the company about 100
times. Twice a month, she sent envelopes stuffed with medical records. Some
afternoons, she spent hours making calls. After one conversation, Mrs. Wheeler
slammed down the phone and started to cry. Then she drove to Beehive Homes,
where her mother was surrounded by faded photos of her childhood and boxes of
adult diapers. </P>
<P>“I wouldn’t tell her about the problems we were having with Conseco, because
I knew it would cause her so much worry,” Mrs. Wheeler said.</P>
<P>Eventually, the Wheelers sold part of their John Deere dealership to raise
money to pay for her mother’s care. In October 2006, they sued.</P>
<P>Conseco, asked by a reporter about the company’s handling of the Derks claim,
declined to answer, citing the pending litigation. In court documents, the
company denied Mrs. Derks’s allegations without specifying why her claim was
denied. </P>
<P>“We did everything they asked,” Mrs. Wheeler said. “And this company just
treats us like dirt.”</P>
<P><SPAN class=bold>Tales of Bureaucracy</SPAN></P>
<P>Inside the large Conseco headquarters in Carmel, Ind., scores of employees
receive the flood of documents and calls that arrive each day. At times,
according to depositions and interviews, that deluge became so overwhelming that
documents were lost, calls went unreturned and mistakes occurred.</P>
<P>Some employees describe vast mailrooms where documents appear and disappear.
One call-center representative said he was afforded an average of only four
minutes to handle each policyholder’s call, no matter how complicated the
questions. Employees said they were instructed not to say when the company was
behind in processing paperwork, even when the backlog extended to 45 days.
Workers were prohibited from contacting each other by phone, although such calls
might have quickly resolved obstacles, according to depositions.</P>
<P>Conseco, asked in detail about the company’s policies, declined to respond.
</P>
<P>Bureaucratic obstacles were pervasive, according to interviews with 10 former
Conseco employees and depositions of more than a dozen others. Robert W. Ragle,
a former Bankers Life branch manager, once contacted the claims department on
behalf of a client, and “they just laughed us off the phone,” he said. “Their
mentality is to keep every dollar they can.” Mr. Ragle was dismissed by Bankers
Life in 2002. He sued for wrongful termination and settled out of court. </P>
<P>In lawsuits, complaints and interviews, policyholders contend that Conseco,
Bankers Life or Penn Treaty denied claims because policyholders failed to submit
unimportant paperwork; because daily nursing notes did not detail minute
procedures; because policyholders filled out the wrong forms after receiving
them from the insurance companies; and because facilities were deemed
inappropriate even though they were licensed by state regulators.</P>
<P>In depositions conducted on behalf of angry policyholders, Conseco employees
described bureaucratic obstacles that prevented payment of claims. Those
depositions were sealed in settlement agreements but were obtained by The
Times.</P>
<P>In a 2006 deposition, a Bankers Life and Conseco claims adjuster, Teresa
Carbonel, testified that she denied claims because of missing records but was
prohibited from calling nursing homes or physicians to request the documents.
She also testified that when a claim was denied, she was forbidden to phone a
policyholder, but instead used a time-consuming mailing system.</P>
<P>Ms. Carbonel’s testimony, recorded during lawsuit on behalf of a 94-year-old
policyholder, Rhodes K. Scherer, also disclosed that if policyholders did not
mail requested documents within 21 days, Conseco might abandon their claim,
sometimes without informing them. </P>
<P>In the case of Mr. Scherer, who was institutionalized after a bathroom fall,
it was difficult to obtain a response, Ms. Carbonel said, because the company’s
requests were mailed to his home address, rather than the nursing center where
the company had been notified that he had moved. Ms. Carbonel, who is no longer
with the company, did not return calls. Conseco declined to comment on her
testimony. </P>
<P>In another deposition, Conseco’s then-senior manager for long-term- care
claims, Jose S. Torres, testified that Conseco would sometimes withhold payments
until it received documents not required by customers’ policies. In Mr.
Scherer’s case, Mr. Torres said, the company refused to pay his nursing home
costs unless he sent copies of the home’s license, payment invoices and medical
records, even though those documents had no bearing on approving his claim. </P>
<P>Mr. Scherer’s claim “was handled not in the best way, but it was handled
according to the processes and procedures placed at the time,” Mr. Torres
testified. “Mistakes are going to be made, you know.”</P>
<P>Other executives testified that when Conseco appeared to have lost important
documents in Mr. Scherer’s claim, no investigation was initiated. Shawn Michael
Schechter, a Conseco claims supervisor who left the company in 2005 on positive
terms, according to the deposition, testified that the handling of Mr. Scherer’s
claim violated the principle of good faith, which requires insurance companies
to treat customers fairly.</P>
<P>“The claim adjuster could have made that very easy and not have put the
burden back onto the policyholder,” he testified. </P>
<P>Mr. Torres did not return calls. Mr. Schechter declined to answer questions.
</P>
<P>Mr. Scherer died in 2004 without receiving benefits from Conseco. His estate
settled with the company in February for an undisclosed amount, according to a
lawyer representing the estate.</P>
<P>Conseco declined to discuss its complaint history or individual cases, citing
confidentiality agreements. In its statement, the company said that in 2006,
Conseco paid nearly $2.3 billion on 9.8 million claims in all types of insurance
sold by the company. </P>
<P>The company added: “Conseco, through training, education and process
improvements in all of its insurance companies, is continuously focused on
enhancing service and resolving any problems expeditiously. The Conseco
Insurance Group’s overall insurance department complaints decreased 20 percent
from 2005 to 2006.”</P>
<P>Depositions of executives at Penn Treaty also point to questionable
practices. In a 2005 lawsuit, a Penn Treaty senior vice president, Stephen
Robert LaPierre, testified that the company rejected one claim without informing
the policyholder why, asked for information that was not required to process a
claim, gave incomplete information about a claim’s status and said the company
was delaying payment because of an investigation while failing to take steps
that might have resolved the inquiry.</P>
<P>Mr. LaPierre declined to discuss his testimony. Penn Treaty settled the
lawsuit by paying the policyholder an unspecified amount, the policyholder’s
lawyer said. </P>
<P>Penn Treaty said in a statement that evaluating a company by measuring its
complaints was flawed, and that since 2003, the company has denied an average of
less than 1.7 percent of the up to 8,000 claims it received every year because
of reasons related to policyholder eligibility. “From time to time, Penn Treaty
is compelled to investigate fraud or questionable billing activities,” the
company added.</P>
<P><SPAN class=bold>Few Regulatory Inquiries</SPAN></P>
<P>Few of the cases or complaints filed against Conseco, Bankers Life, Penn
Treaty or other insurers have received much attention, in part because many
lawsuits filed against long-term-care insurers have been settled with the
requirement that depositions, documents and settlement terms be kept
confidential. Frequently, say policyholders’ lawyers, the companies have been
willing to pay millions of dollars in exchange for confidentiality. </P>
<P>Furthermore, despite the complaints against long-term-care insurers, few
states have conducted meaningful investigations. </P>
<P>Ron Gallagher, a deputy commissioner with the Pennsylvania Insurance
Department, said, “I don’t know that we have a real problem with improper claim
denials.”</P>
<P>Yet data from the National Association of Insurance Commissioners show that
from 2003 to 2005, Pennsylvania received more complaints regarding Conseco,
Bankers Life and Penn Treaty than any other state. Mr. Gallagher said he might
begin a new review of those companies.</P>
<P>Other states with large numbers of long-term-care complaints, including
California, Missouri, Maryland, Indiana and Washington have not begun
investigations, or have reviewed only small numbers of policies.</P>
<P>As a result, other seniors may end up like Mrs. Derks. </P>
<P>While she was waiting for her lawsuit to proceed, Medicaid began contributing
to Ms. Derks’s care. Taxpayers now pay Beehive Homes about $32 daily for her
care. </P>
<P>“Long-term-care insurance is supposed to result in less pressure on Medicaid,
not more,” said Ms. Senkewicz, the former executive at the insurance
commissioners’ association. </P>
<P>For Mrs. Derks’s family, things have already broken down. </P>
<P>“How many other people are out there who don’t have a family to fight for
them and have just given up?” asked Jackie Wheeler. “This company should be
ashamed.”</P></DIV></DIV></BODY></HTML>