October 18, 2005
The Honorable Joe Barton
Chairman, Committee on Energy and Commerce
U.S. House of Representatives
Washington, DC 20515
Dear Chairman Barton:
As Congress considers Medicaid changes, there is discussion of encouraging more purchase of long term care insurance (LTCI). To be eligible for tax breaks, LTCI must meet certain consumer protections, but Consumers Union believes that there are a number of areas where state LTCI consumer protections are inadequate. The lack of effective protection against large premium increases is particularly egregious and warrants immediate attention. The ability of companies to raise premiums for what are sold as “level premium” policies, allows companies to underprice the policies, raise premiums, and benefit from policyholders dropping their coverage just when the risk of needing LTC increases. The result is a huge waste of consumer dollars—and no relief for Medicaid.
Premium increases would be particularly bad for middle and lower income families who are mostly likely to need Medicaid’s help with LTC costs. Projected savings to Medicaid from the purchase of LTCI will not materialize if middle and lower income buyers are confronted with premium increases that force them to drop their policies.
In your own State of Texas, there have been dramatic examples of this problem. Attached is an example of how Texas taxpayers and consumers were hurt.
We hope that as you consider LTCI changes, you will ensure more consumer protections and premium stability.
Thank you for your consideration.
Senior Policy Analyst