The Hummel Report

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Where's the State?

With a rapidly increasing elderly population, Rhode Island has many residents exploring insurance options for long-term in-home or nursing home care. This week: the story of one couple whose unexpected skyrocketing insurance premiums have them asking: Where are the state regulators? Jim Hummel goes to the new director of the Rhode Island Department of Business Regulation for some answers.


For DBR's suggestions about long-term healthcare click here.



Hummel: With a rapidly increasing elderly population, Rhode Island has many residents exploring options for long-term medical care.This week: the story of one couple whose skyrocketing insurance premiums have them asking: Where are the state regulators?

Theriualt: ``It was something we were looking forward to getting our retirement set up and it was a nice piece of the retirement puzzle, so we decided to take it out.’’

The `it’, for Ray and Elaine Theriault, was a long-term insurance policy from Genworth Insurance they first took out 15 years ago. Like many companies Genworth talks in its literature about how insurance can protect assets against exorbitant nursing home bills.

Elaine’s family has a history of the women living long lives, so the couple took out an unlimited nursing home care policy for her - and four years of coverage for Ray. It seemed like a reasonable deal at the time back in the late 1990s.

Theriault: ``A couple of years ago we had an increase of about maybe $100 or $120 and that there got my attention so I called them. They said it’s increases due to this and that for the longterm care. I felt I could manage it.’’

But last fall the company notified them that Elaine’s semi-annual payment was increasing from $692 to $1,231 - a 78 percent increase; and Ray’s from $490 to $800, a 63 percent increase. The news came with a 60-day notice to pay.

Theriault: ``It’s a chunk of change, so I had to do some restructuring ‘cause I had to pay the last one, had to do some restructuring of my finances in order to meet that because it was unexpected, and obviously we had to do some restructuring for our future.’’

And Ray wanted to know: where was the state, specifically the Department of Business Regulation? He called the department and says the woman who answered abruptly replied there was nothing DBR could do.

Theriault: ``They have to go through the state in order to have it approved for them to increase their rates in the state of Rhode Island.’’

Hummel: ``Because otherwise they could be 200, 300, 500 percent.’’

Theriault: ``It’s supposed to be a protection gap for people like us.’’

Hummel: ``So you want to know what your government is doing?’’

Theriault: ``That’s correct.’’

McCleary: ``This is not just Ray’s issue, this is actually an issue that we’ve been concerned about for quite some time.’’

Macky McCleary, the newly-appointed DBR director, spoke with Ray Theriault after we contacted the department.

McCleary: ``Ray is also an example of someone for whom at the end of the day sometimes the consumer winds up in a difficult place when you have an insurance product that may have been mispriced a long time ago.’’

McCleary says companies like Genworth set too low a price when they issued their policies years ago and are now having to make up for burgeoning healthcare cost increases.

McCleary: ``For the first 15 to 20 years of that issuance based on the relative cost, it wasn’t priced properly, so a lot of people got products absolutely within their rights to presume that this product would be something they could rely on from a price point of view - although it was clearly stated in all of the documents that the prices could changed, and then as the system has been altering itself to fix the price mistake, there are many, many folks like Ray who are going to continue to have challenges. Folks got a great deal, but it turns out that it may be that too many folks got a great deal.’’

Hummel: ``Yeah, but isn’t that the insurance company’s problem? When you enter a contract, people are elderly they get worn down, quite frankly, they get tired of arguing. So the insurance company entered into a contract. It’s triangular here, you have Mr. Theriault and others, you have the insurance company and others, and you have the state. So at the end of the day all he wanted was a chance to at least stand before somebody and say this going to be a problem, and he never got that chance.’’

McCleary: ``Well, he did. And so we’ve had a great conversation…’’

Hummel:  No, prior to his getting the increase’’

McCleary: ``Right.’’

McCleary said the department does not look at individual policies, but signed off on an overall increase last year that was much smaller than the Theriaults, meaning some policyholders saw more modest increases.

McCleary added that the Theriaults’ case has prompted DBR to consider extending the length of notification time and to cap individual increases within the larger increase approved by the state.

McCleary: ``Even when somebody writes on a piece of paper that we can change the rates, we have what I call settled expectations. Once you’re used to buying a product on a year-to-year basis, as a consumer you expect that the next year, even if they tell you it might change, there’s a reasonable expectation that it wouldn’t change.

Theriault: ``How do you take people who are 70 years old add $2,000 to their retirement fund and say: `Oh, that’s the actuary tables. That’s not the actuary tables, there are people behind those actuary tables and that’s what we’re missing.’’

McCleary: ``Yes it is the insurance company’s problem that they made a mistake. At the same time if we were to allow those companies to become insolvent and all of the policy holders then lose their policies because of that, that’s not good for anyone. The challenge for us has been figuring out a way to walk that line between forcing that bad choice to have costs for those companies and making sure the resources are still there for those who have paid into the system.’’

McCleary said that while the Theriault’s have little recourse now, the department does have suggestions for those who are exploring long-term care options. And he made this pledge:

McCleary: ``If you feel as if though you’ve been wrong, do exactly what Mr. Theriault did, which is call us and I promise we will do a better job of handling them.’’

Jim Hummel for The Hummel Report.