Monday, October 23, 2006
To avoid becoming a financial burden to her children and grandchildren, Vera Smith bought long-term-care insurance. Like a growing number of Americans, the 87-year-old retiree saw it as a sensible way to cover caregiving costs not included in Medicare and conventional health insurance.
But nearly two years ago, Smith's insurer stopped paying benefits, contending that she violated the policy's terms by moving in with her daughter after she became too frail to take care of herself. That forced Veray Smith, the daughter, to quit her supervisory job and sell her mother's south Los Angeles house so she could afford to stay home with her.
"I'm the full-time caregiver now. It's hard," said Veray, who along with her mother has sued the insurer for bad faith. The insurer, Penn Treaty Network America Insurance Corp., declined to comment.
Consumer advocates and insurance regulators say that lawsuits and complaints like the Smiths' are likely to mushroom in coming years as more Baby Boomers and their ailing parents make claims on long-term-care insurance.
Sales of such policies grew by 65 percent between 2000 and 2004, but actual and projected payouts have caused a shakeout that could leave some policyholders with huge medical bills worried that insurers can't or won't pay. Some insurers who underestimated their potential obligations have sharply hiked their premiums or abandoned the market altogether.