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TESTIMONY
HOME
HEALTH CARE INSURANCE
HOUSE
INSURANCE COMMITTEE
AUGUST
15, 2000
HARRISBURG,
PA
ROSS
SCHRIFTMAN, RHU, LUTCF
LEGISLATIVE
CHAIR
PENNSYLVANIA
ASSOCIATION OF HEALTH UNDERWRITERS
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- 1250
Easton Road #270
- Horsham,
PA 19044
- 215/682/7075
- FAX
215/682/7076
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- TESTIMONY
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- My name
is Ross Schriftman. I
serve as Legislative Chair of The Pennsylvania Association of Health
Underwriters. Our
membership is primarily composed of insurance agents and brokers who
sell health insurance products including long term care insurance.
Personally, this is my 15th year in the sale of
long term care insurance to my clients.
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- The
insurance product for long term care has evolved over the years.
Originally, it was a facility only plan covering nursing home
stays. Today’s
product is much more comprehensive covering home care, adult day
care, assisted living facilities as well as nursing facility stays. When we say long term care insurance today we include home
care insurance as well.
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- It is
important to note that long term care and long term care insurance
are two separate items. Long
term care is provided by home health agencies, assisted living
facilities and nursing homes. Long
term care insurance is a financing mechanism in order to pay for
long term care services. For
most people long term care insurance is the most cost effective way
to pay for these services. Other
ways to pay include self insuring or as I refer to, the 100% plan.
What that means is that every dollar of service provided
costs one dollar out of a person’s pocket. When comparing self insuring to purchasing long term care
insurance and letting the insurance company pay these costs, most
people are better off with the insurance.
Another way to pay for long term care services is by having
family members or friends pay for it or take the time themselves to
provide it. This is the least likely to happen in today’s world.
Friends and family members need to work and have other family
responsibilities. The
last way to pay for long term care is through the Medicaid program.
People need to “spend down” their life savings in order
to qualify and even then, law restricts the benefits.
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- You can
tell that we have a bias toward the purchase of long term care
insurance as the appropriate choice in most cases.
People may be able to keep their assets, choose the
facilities and types of care they receive and not be a burden to
their families. People
also prefer their home as the setting for their care as opposed to
being institutionalized. It is rare that someone will say, “I’d rather be in a
nursing home if I need care, than my own home.”
Unfortunately, there may be a time when someone needs to be
cared for 24 hours a day and then care at home could be enormously
expensive.
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- What is
the cost of home care? I
have heard the figure $12,000 per year used quite often when the
Medicaid program is being discussed.
This is used as a reason to increase the number of home care
waivers under Medicaid since it is felt that the cost to the
taxpayers will be less with home care benefits than with nursing
facility benefits. However,
consider this. $12,000
per year equates to only $33 per day.
In the Philadelphia area, the home care agencies I have
surveyed charge $15 to $17 per hour for a home health aide.
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- Therefore,
using the $12,000 per year figure, only 2 hours per day of
assistance would be available.
Perhaps the $12,000 amount is an average that includes short
term stays. Just an
8-hour shift at $15 per hour comes to $120 per day or $43,800 per
year. As you can see,
providing a continuum of home care can be enormously expensive. Dr. Spock, the famous pediatrician who raised a generation
spent over $100,000 for home care services during the last year of
his life and died destitute.
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- Now to
the issue at hand. Our
Association is very concerned about the development of home care
plans that claim not to be insurance.
We commend Chairman DeLuca for introducing HB2198 to address
this issue. We would
suggest that the Insurance Department needs to regulate pre-paid
plans whether they be for home care, nursing care or other long term
care services. The
public needs to be protected and regulations need to be in place to
enforce those protections. We
would suggest that HB2198 be
revised to read “long term care including pre-paid plans”
instead of “long term care and home care”
It is important to know that home care insurance is a form of
long term care insurance and that comprehensive long term care
insurance includes both home care and facility care coverage.
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- Recently,
I was approached by mail by the marketers of one of these home care
plans to sell their product. Since
I knew this hearing was scheduled and since I try and review
products that I may want to offer to my clients, I sent in the reply
card and received a packet of information.
Although touted as not being insurance, the applicant would
need to qualify medically to be approved to receive a contract.
Also, benefits would be activated when the person could not
perform their activities of daily living.
Furthermore, there is a premium set by age groups.
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- All these
factors indicated to me that this is an insurance product despite
the statement of the promoters.
It was similar to an HMO in that selected providers would be
the ones providing the services.
The key factor to me was that monies are paid to the plan before
services are rendered. A
non-insurance contract to provide a service is normally paid at the
time the service is used. Insurance
is something you pay for today so that if an event occurs in the
future, the insurance will pay for the cost of that event.
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- I have
sent a copy of the materials I received to the Insurance Department
and asked for an opinion. Here
are some of the criteria I believe should be used to determine
whether the product is truly insurance and thus be regulated by the
Department:
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- Indemnification
of the insured by the insurer
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- Profit
motive on the part of the insurer
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- A
future occurrence of a specific, fortuitous event over which the
insured and the insurer have no control and the occurrence of which
triggers payment.
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- An
element of risk assumed by the insurer which is spread among a large
group of insured's with similar risks at stake.
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- Present
payment by the insured of a premium to the insurer which is
allocated to a general fund, maintained by the insurer to which all
premiums in the same risk group contribute and from which the
reimbursement payments are made by the insurer.
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- I must
point out that there are plans that are not insurance in our
opinion. They are
discount plans. This
simply means that participants pay a fee in advance and when they
need services they choose from a list of participating providers who
are included in a network and then pay for that service at a
discounted rate. This
is similar to prescription discount programs and other affinity
offerings to members of organizations.
These types of arrangements are not insurance and need not be
regulated by the department.
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- The growth of the long term care insurance product is important to
consumers and to the government.
Without this growth, the burden on government programs like
Medicare and Medicaid will continue to dramatically increase the
cost to taxpayers. Without
the growth of the private long term care insurance market, providers
such as home care agencies and nursing homes will continue to feel
the pressure of payment cutbacks like those that occurred under the
Federal Balanced Budget Amendment. The long term care insurance
industry is growing rapidly. The
group market for this product has had tremendous growth as well.
Employers such as the Federal government and many State governments
have enacted legislation to offer this product to their workforces.
Pending legislation both in Congress and here in the General
Assembly would provide tax incentives for the purchase of coverage.
Now, HR5002 has been introduced in Congress that would allow
Pennsylvania to go forward with our Long Term Care Partnership
legislation. The one
thing that could sour all this effort is a loss of public confidence
in purchasing this product. Therefore,
we are very concerned about products that are being promoted as not
being insurance. Will the benefits be there when the purchaser needs to access
them? What protections
do consumers have if this happens?
Properly regulated products are the protection that the
consumers have.
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- We
commend the Committee for its work on this issue and offer to be
part of your eyes and ears to help regulated our industry.
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