Long-Term Care Insurance: State Oversight of Rate Setting and Claims Settlement Practices
Published: 2008-07-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: As the baby boom generation ages, the demand for long-term care services is likely to grow and could strain state and federal resources. The increased use of long-term care insurance (LTCI) may be a way of reducing the share of long-term care paid by state and federal governments. Oversight of LTCI is primarily the responsibility of states, but over the past 12 years, there have been federal efforts to increase the use of LTCI while also ensuring that consumers purchasing LTCI are adequately protected. Despite this oversight, concerns have been raised about both premium increases and denials of claims that may leave consumers without LTCI coverage when they begin needing care. This statement focuses on oversight of the LTCI industry's (1) rate setting practices and (2) claims settlement practices. This statement is based on findings from GAO's June 2008 report entitled Long-Term Care Insurance: Oversight of Rate Setting and Claims Settlement Practices (GAO-08-712). For that report, GAO reviewed information from the National Association of Insurance Commissioners (NAIC) on all states' rate setting standards. GAO also completed 10 state case studies on oversight of rate setting and claims settlement practices, which included structured reviews of state laws and regulations, interviews with state regulators, and reviews of state complaint information. GAO also reviewed national data on rate increases implemented by companies.
section_title: What GAO Found
paragraphs: Many states have made efforts to improve oversight of rate setting, though some consumers remain more likely to experience rate increases than others. NAIC estimates that since 2000 more than half of states nationwide have adopted new rate setting standards. States that adopted new standards generally moved from a single standard that was intended to prevent premium rates from being set too high to more comprehensive standards intended to enhance rate stability and provide other protections for consumers. Although a growing number of consumers will be protected by the more comprehensive standards going forward, as of 2006 many consumers had policies not protected by these standards. Regulators in most of the 10 states GAO reviewed said that they think the more comprehensive standards will be effective, but that more time is needed to know how well the standards will work. State regulators in GAO's review also use other standards or practices to oversee rate setting, several of which are intended to keep premium rates more stable. Despite state oversight efforts, some consumers remain more likely to experience rate increases than others. Specifically, consumers may face more risk of a rate increase depending on when they purchased their policy, from which company their policy was purchased, and which state is reviewing a proposed rate increase on their policy. Regulators in the 10 states GAO reviewed oversee claims settlement practices by monitoring consumer complaints and conducting examinations in an effort to ensure that companies are complying with standards. Claims settlement standards in these states largely focus on timely investigation and payment of claims and prompt communication with consumers, but the standards adopted and how states define timeliness vary notably across the states. Regulators told GAO that reviewing consumer complaints is one of the primary methods for monitoring companies' compliance with state standards. In addition to monitoring complaints, these regulators also said that they use examinations of company practices to identify any violations in standards that may require further action. Finally, state regulators in 6 of the 10 states in GAO's review reported that their states are considering additional protections related to claims settlement. For example, regulators in several states said that their states were considering an independent review process for consumers appealing claims denials. Such an addition may be useful as some regulators said that they lack authority to resolve complaints where, for example, the company and consumer disagree on a factual matter, such as a consumer's eligibility for benefits. In commenting on a draft of GAO's report issued on June 30, 2008, NAIC compiled comments from its member states. Member states said that the report was accurate but seemed to critique certain aspects of state regulation, including differences among states, and make an argument for certain reforms. The draft reported differences in states' oversight without making any conclusions or recommendations.

section_title: Letter
paragraphs: I am pleased to be here today as you examine oversight of long-term care  insurance (LTCI). About $193 billion was spent nationwide on long-term  care services in 2004. Most of this care was financed by government  programs, primarily Medicaid, and a small share of these costs—less than  10 percent—was paid by private insurance. Elderly people—those aged 65  or older—consume about two-thirds of all long-term care services used in  the United States. As the number of elderly Americans continues to grow,  particularly with the aging of the baby boom generation, the increasing  demand for long-term care services will likely strain state and federal  resources. Some policymakers have suggested that increased use of LTCI  may be a means of reducing the future share of long-term care services  financed by public programs.
Oversight of the LTCI industry is primarily the responsibility of states,  though federal efforts over the past 12 years have aimed to increase the  use of LTCI and ensure that consumers who purchase policies are  adequately protected. Members of Congress, state regulators, and other  interested parties have raised concerns that despite existing state and  federal consumer protection standards, increases in LTCI premiums or  denials of benefit claims may leave some consumers without LTCI  coverage as they begin needing long-term care, which could have fiscal  implications for Medicaid. My remarks today are based on our June 2008  report on the oversight of rate setting and claims settlement practices in  the long-term care insurance industry, Long-Term Care Insurance:  Oversight of Rate Setting and Claims Settlement Practices. In that  report, we examined (1) oversight of rate setting practices in the LTCI  industry and (2) oversight of claims settlement practices in the LTCI  industry.
To conduct the work for our June 2008 report, we reviewed information  provided by the National Association of Insurance Commissioners (NAIC)  and interviewed NAIC officials. We also completed case studies for a  judgmental sample of 10 states—which we refer to as the states in our  review. Our case studies included a structured review of state laws and  regulations, interviews with regulators from the selected states’ insurance  departments, and a review of information on LTCI consumer complaints  from the 6 states that were able to provide this information. In addition,  we were able to determine rate setting standards in place in all 50 states  and the District of Columbia by supplementing information from our case  studies with information provided by NAIC and our own review of relevant  state laws and regulations. We also reviewed national data collected from  companies and published by the California Department of Insurance on  rate increases proposed and approved in any state from 1990 through  2006. To identify federal requirements that affect oversight of rate setting  and claims settlement practices, we reviewed federal laws, regulations,  and guidance, and interviewed officials from the Internal Revenue Service  (IRS), the Centers for Medicare & Medicaid Services (CMS), and the Office  of Personnel Management (OPM). Finally, we interviewed officials from a  judgemental sample of six companies selling LTCI—that together  represented 40 percent of the market in 2006—regarding oversight of rate  setting practices and reviewed company documents describing claims  settlement practices. We performed our work in accordance with  generally accepted government auditing standards from September 2007  through June 2008. A detailed explanation of our scope and methodology  is included in the report.
In summary, we found that many states have made efforts to improve  oversight of rate setting practices in the LTCI industry, though some  consumers remain more likely to experience rate increases than others.  NAIC estimates that by 2006 more than half of all states had adopted new  rate setting standards that were based on amendments to its LTCI model  regulation in 2000. States that adopted new standards generally moved  from a single standard that was intended to prevent rates from being set  too high to more comprehensive standards intended to enhance rate  stability and provide other protections for consumers. Although a growing  number of consumers will be protected by the more comprehensive  standards going forward, as of 2006 many consumers had policies not  protected by these standards, either because they live in states that have  not adopted the new standards or because they bought policies issued  prior to implementation of these standards. While regulators in most of the  10 states we reviewed told us that they think the more comprehensive  standards will be effective, they recognized that more time is needed to  know how well the standards will work in stabilizing premium rates.  Regulators in the states in our review also use other standards or practices  to oversee rate setting, several of which are intended to help improve rate  stability. Despite state oversight efforts, some consumers remain more  likely to experience rate increases than others. Specifically, consumers  may face more risk of a rate increase depending on when they purchased  their policy, from which company their policy was purchased, and which  state is reviewing a proposed rate increase on their policy.
Regulators in the 10 states in our review oversee claims settlement  practices by monitoring consumer complaints and conducting  examinations of company practices in an effort to ensure that companies  are complying with standards. Claims settlement standards in these states  primarily focus on timely investigation and payment of claims, as well as  prompt communication with consumers about claims. However, the  standards adopted and how states define timeliness vary notably across  the states. This variation may leave consumers in some states less  protected than others. Regulators from all 10 states told us that reviewing  consumer complaints is one of the primary methods for monitoring  companies’ compliance with state standards. In addition to monitoring  complaints, regulators from all of the states we reviewed said that they use  market conduct examinations to determine whether companies are  complying with claims settlement standards. These examinations can  result in enforcement actions if the regulators identify violations of the  standards. State regulators in 6 of the 10 states in our review reported that  their states are considering additional protections related to claims  settlement. For example, regulators in several states said that their states  were considering an independent review process for consumers appealing  claims denials. Such an addition may be useful as some regulators said  that they lack authority to resolve complaints where, for example, the  company and consumer disagree on a factual matter, such as a consumer’s  eligibility for benefits.
In commenting on a draft of GAO’s report issued on June 30, 2008, NAIC  compiled comments from its member states. Member states said that the  report was accurate but seemed to critique certain aspects of state  regulation, including differences among states, and make an argument for  certain reforms. The draft reported differences in states’ oversight without  making any conclusions or recommendations.
subsections: section_title: Background
paragraphs: LTCI helps pay for the costs associated with long-term care services,  which can be expensive. However, the number of LTCI policies sold has  been relatively small—about 9 million as of the end of 2002, the most  recent year of data available. To receive benefits under an LTCI policy, the  consumer must not only obtain the covered services, but must also meet  what are commonly referred to as benefit triggers. Most policies provide  benefits under two circumstances (1) the consumer cannot perform a  certain number of activities of daily living (ADL)—such as bathing,  dressing, and eating—without assistance, or (2) the consumer requires  supervision because of a cognitive impairment. In addition, benefit  payments do not begin until the policyholder has met the benefit triggers  for the length of their elimination period. Elimination periods establish the  amount of time a policyholder must receive services before his or her  insurance will begin making payments, for example, 30 or 90 days.  Determining whether a consumer has met the benefit triggers can be  complex and companies’ processes for doing so vary. In the event that a  consumer’s claim for benefits is denied, the consumer generally can  appeal to the insurance company. If the company upholds the denial, the  consumer can file a complaint with the state insurance department or can  seek adjudication through the courts.
Many factors affect LTCI premium rates, including the benefits covered  and the age and health status of the applicant. For example, companies  typically charge higher premiums for comprehensive coverage as  compared to policies without such coverage, and consumers pay higher  premiums the higher the daily benefit amount and the shorter the  elimination period. Similarly, premiums typically are more expensive the  older the policyholder is at the time of purchase. Company assumptions  about interest rates on invested assets, mortality rates, morbidity rates,  and lapse rates—the number of people expected to drop their policies  over time—also affect premium rates.
A key feature of LTCI is that premium rates are designed—though not  guaranteed—to remain level over time. While under most states’ laws  insurance companies cannot increase premiums for a single consumer  because of individual circumstances, such as age or health, companies can  increase premiums for entire classes of individuals, such as all consumers  with the same policy, if new data indicate that expected claims payments  will exceed the class’s accumulated premiums and expected investment  returns. Setting LTCI premium rates at an adequate level to cover future  costs has been a challenge for some companies. Because LTCI is a  relatively new product, companies lacked and may continue to lack  sufficient data to accurately estimate the revenue needed to cover costs.  For example, lapse rates have proven lower than companies anticipated in  initial pricing, which increased the number of people likely to submit  claims. As a result, many policies were priced too low and subsequently  premiums had to be increased, leading some consumers to cancel  coverage.
Oversight of the LTCI industry is largely the responsibility of states.  Through laws and regulations, states establish standards governing LTCI  and give state insurance departments the authority to enforce those  standards. Many states’ laws and regulations reflect standards set out in  model laws and regulations developed by NAIC. These models are  intended to assist states in formulating their laws and policies to regulate  insurance, but states can choose to adopt them or not. Beyond  implementing pertinent laws and regulations, state regulators perform a  variety of oversight tasks that are intended to protect consumers from  unfair practices. These activities include reviewing policy rates and forms  to ensure that they are consistent with state laws and regulations;  conducting market conduct examinations—where an examiner visits a  company to evaluate practices and procedures and checks those practices  and procedures against information in the company’s files; and responding  to consumer complaints.
Although oversight of the LTCI industry is largely the responsibility of  states, the federal government also plays a role in the oversight of LTCI.  For example, the Health Insurance Portability and Accountability Act of  1996 (HIPAA) established federal standards that specify the conditions  under which LTCI benefits and premiums can receive favorable federal  income tax treatment. Under HIPAA, a tax-qualified policy must cover  individuals certified as needing substantial assistance with at least two of  the six ADLs for at least 90 days due to a loss of functional capacity,  having a similar level of disability, or requiring substantial supervision  because of a severe cognitive impairment. Tax-qualified policies under  HIPAA must also comply with certain provisions of the NAIC LTCI model  act and regulation in effect as of January 1993. The Department of the  Treasury, specifically the Internal Revenue Service (IRS), issued  regulations in 1998 implementing some of the HIPAA standards. However,  according to IRS officials, the agency generally relies on states to ensure  that policies marketed as tax qualified meet HIPAA requirements. In 2002,  90 percent of LTCI policies sold were marketed as tax qualified.
section_title: States Have Made Efforts to Improve Oversight of Rate Setting, Though Some Consumers Remain More Likely to Experience Rate Increases Than Others
paragraphs: In recent years, many states have made efforts to improve oversight of rate  setting, though some consumers remain more likely to experience rate  increases than others. Since 2000, NAIC estimates that more than half of  all states have adopted new rate setting standards. States that adopted  new standards generally moved from a single standard focused on  ensuring that rates were not set too high to more comprehensive  standards designed primarily to enhance rate stability and provide  increased protections for consumers. The more comprehensive standards  were based on changes made to NAIC’s LTCI model regulation in 2000.  While regulators in most of the 10 states we reviewed told us that they  expect these more comprehensive standards will be successful, they noted  that more time is needed to know how well the standards will work.  Regulators from the states in our review also use other standards or  practices to oversee rate setting, several of which are intended to keep  premium rates more stable. Despite states implementing more  comprehensive standards and using other oversight efforts intended to  enhance rate stability, some consumers may remain more likely to  experience rate increases than others. Specifically, consumers may face  more risk of a rate increase depending on when they purchased their  policy, from which company their policy was purchased, and which state  is reviewing a proposed rate increase on their policy.
subsections: section_title: Many States Adopted More Comprehensive Rate Setting Standards since 2000, but It Is Too Soon to Determine the Effectiveness of the Standards
paragraphs: Since 2000, NAIC estimates that more than half of states nationwide have  adopted new rate setting standards for LTCI. States that adopted new  standards generally moved from the use of a single standard designed to  ensure that premiums were not set too high to the use of more  comprehensive standards designed to enhance rate stability and provide  other protections for consumers. Prior to 2000, most states used a single,  numerical standard when reviewing premium rates. This standard—called  the loss ratio—was included in NAIC’s LTCI model regulation. For all  policies where initial rates were subject to this loss ratio standard,  proposed rate increases are subject to the same standard.
While the loss ratio standard was designed to ensure that premium rates  were not set too high in relation to expected claims costs, over time NAIC  identified two key weaknesses in the standard. First, the standard does not  prevent premium rates from being set too low to cover the costs of claims  over the life of the policy. Second, the standard provides no disincentive  for companies to raise rates, and leaves room for companies to gain  financially from premium increases. In identifying these two weaknesses,  NAIC noted that there have been cases where, under the loss ratio, initial  premium rates proved inadequate, resulting in large rate increases and  significant loss of LTCI coverage from consumers allowing their policies to  lapse.
To address the weaknesses in the loss ratio standard as well as to respond  to the growing number of premium increases occurring for LTCI policies,  NAIC developed new, more comprehensive model rate setting standards in  2000. These more comprehensive standards were designed to accomplish  several goals, including improving rate stability. Among other things, the  standards established more rigorous requirements companies must meet  when setting initial LTCI rates and rate increases, which several state  regulators told us may result in higher, but more stable, premium rates  over the long term. The more comprehensive standards were also  designed to inform consumers about the potential for rate increases and  provide protections for consumers facing rate increases. Table 1 describes  selected rate setting standards added to NAIC’s LTCI model regulation in  2000 and the purpose of each standard in more detail.
Although a growing number of consumers will be protected by the more  comprehensive standards going forward, as of 2006 many consumers had  policies that were not protected by these standards. Following the  revisions to NAIC’s LTCI model in 2000, many states began to replace their  loss ratio standard with more comprehensive rate setting standards based  on NAIC’s changes. NAIC estimates that by 2006 more than half of states  nationwide had adopted the more comprehensive standards. However,  many consumers have policies not protected by the more comprehensive  standards, either because they live in states that have not adopted these  standards or because they bought policies issued prior to implementation  of these standards. For example, as of December 2006, according to our  analysis of NAIC and industry information, at least 30 percent of policies  in force were issued in states that had not adopted the more  comprehensive rate setting standards. Further, in states that have adopted  the more comprehensive standards, many policies in force were likely to  have been issued before states began adopting these standards in the early  2000s.
Regulators from most of the 10 states in our review said that they expect  the rate setting standards added to NAIC’s model regulation in 2000 will  improve rate stability and provide increased protections for consumers,  though regulators also recognized that it is too soon to determine the  effectiveness of the standards. Some regulators explained that it might be  as much as a decade before they are able to assess the effectiveness of  these standards. Regulators from 1 state explained that rate increases on  LTCI policies sold in the 1980s did not begin until the late 1990s, when  consumers began claiming benefits and companies were faced with the  costs of paying their claims. Further, though the more comprehensive  standards aim to enhance rate stability, LTCI is still a relatively young  product, and initial rates continue to be based on assumptions that may  eventually require revision.
State regulators from the 10 states in our review use other standards— beyond those included in NAIC’s LTCI model regulation—or practices to  oversee rate setting, including several that are intended to enhance rate  stability. Regulators from 3 of the states in our review told us that their  state has standards intended to enhance the reliability of data used to  justify rate increases, and regulators from 2 states told us that they have  standards to limit the extent to which LTCI rates can increase. Beyond  implementing rate setting standards, regulators from all 10 states in our  review use their authority to review rates to reduce the size of rate  increases or to phase in rate increases over multiple years. While state  regulators work to reduce the effect of rate increases on consumers,  regulators from 6 states explained that increases can be necessary to  maintain companies’ financial solvency.
section_title: Some Consumers May Remain More Likely to Experience Rate Increases Than Others
paragraphs: Although some states are working to improve oversight of rate setting and  to help ensure LTCI rate stability by adopting the more comprehensive  standards and through other efforts, there are other reasons why some  consumers may remain more likely to experience rate increases than  others. In particular, consumers who purchased policies when there were  more limited data available to inform pricing assumptions may continue to  experience rate increases. Regulators from seven states in our review told  us that rate increases are mainly affecting consumers with older policies.  For example, regulators from one state told us that there are not as many  rate increases proposed for policies issued after the mid-1990s. Regulators  in five states explained that incorrect pricing assumptions on older  policies are largely responsible for rate increases.
Consumers’ likelihood of experiencing a rate increase also may depend on  the company from which they bought their policy. In our review of  national data on rate increases by four judgmentally selected companies  that together represented 36 percent of the LTCI market in 2006, we found  variation in the extent to which they have implemented increases. For  example, one company that has been selling LTCI for 30 years has  increased rates on multiple policies since 1995, with many of the increases  ranging from 30 to 50 percent. Another company that has been in the  market since the mid-1980s has increased rates on multiple policies since  1991, with increases approved on one policy totaling 70 percent. In  contrast, officials from a third company that has been selling LTCI since  1975 told us that the company was implementing its first increase as of  February 2008. The company reported that this increase, affecting a  number of policies, will range from a more modest 8 to 12 percent.  Another company that also instituted only one rate increase explained that  in cases where initial pricing assumptions were wrong, the company has  been willing to accept lower profit margins rather than increase rates.  While past rate increases do not necessarily increase the likelihood of  future rate increases, they do provide consumers with information on a  company’s record in having stable premiums.
Finally, consumers in some states may be more likely to experience rate  increases than those in other states, which officials from two companies  noted may raise equity concerns. Of the six companies we spoke with,  officials from every company that has instituted a rate increase told us that  there is variation in the extent to which states approve proposed rate  increases. For example, officials from one company told us that when  requesting rate increases they have seen some states deny a request and  other states approve an 80 percent increase on the same rate request with  the same data supporting it. While some consumers may face higher  increases than others, company officials also told us that they provide  options to all consumers facing a rate increase, such as the option to  reduce their benefits to avoid all or part of a rate increase.
Our review of data on state approvals of rate increases requested by one  LTCI company operating nationwide also indicated that consumers in  some states may be more likely to experience rate increases. Specifically,  since 1995 one company has requested over 30 increases, each of which  affected consumers in 30 or more states. While the majority of states  approved the full amounts requested in these cases, there was notable  variation across states in 18 of the 20 cases in which the request was for an  increase of over 15 percent. For example, for one policy, the company  requested a 50 percent increase in 46 states, including the District of  Columbia. Of those 46 states, over one quarter (14 states) either did not  approve the rate increase request (2 states) or approved less than the   50 percent requested (12 states), with amounts approved ranging from   15 to 45 percent. The remaining 32 states approved the full amount  requested, though at least 4 of these states phased in the amount by  approving smaller rate increases over 2 years. (See fig. 1.)
Variation in state approval of rate increase requests may have significant  implications for consumers. In the above example, if the initial, annual  premium for the policy was, for example, $2,000, consumers would see  their annual premium rise by $1,000 in Colorado, a state that approved the  full increase requested; increase by only $300 in New York, where a   15 percent increase was approved; and stay level in Connecticut, where   the increase was not approved. Although state regulators in our 10-state  review told us that most rate increases have occurred for policies subject  to the loss ratio standard, variation in state approval of proposed rate  increases may continue for policies protected by the more comprehensive  standards. States may implement the standards differently, and other  oversight efforts, such as the extent to which states work with companies,  also affect approval of increases.
section_title: States in Our Review Oversee Claims Settlement Practices Using Consumer Complaints and Examinations, and Several States Are Considering Additional Protections
paragraphs: The 10 states in our review have standards established by law and  regulations for governing claims settlement practices. The majority of the  standards, some of which apply specifically to LTCI and others that apply  more broadly to various insurance products, are designed to ensure that  claims settlement practices are conducted in a timely manner. Specifically,  the standards are designed to ensure the timely investigation and payment  of claims and prompt communication with consumers about claims. In  addition to these timeliness standards, states have established other  standards, such as requirements for how companies are to make benefit  determinations.
While the 10 states we reviewed all have standards governing claims  settlement practices, the states vary in the specific standards they have  adopted as well as in how they define timeliness. For example, 1 state  does not have a standard that requires companies to pay claims in a timely  manner. For the 9 states that do have a standard, the definition of “timely”  the states use varies notably—from 5 days to 45 days, with 2 states not  specifying a time frame. In addition, federal laws governing tax-qualified  policies do not address the timely investigation and payment of claims or  prompt communication with consumers about claims. The absence of  certain standards and the variation in states’ definitions of “timely” may  leave consumers in some states less protected from, for example, delays in  payment than consumers in other states. (See table 2 for key claims  settlement standards adopted by the 10 states in our review and examples  of the variation in standards.)
The states in our review primarily use two ways to monitor companies’  compliance with claims settlement standards. One way the states monitor  compliance is by reviewing consumer complaints on a case-by-case basis  and in the aggregate to identify trends in company practices. When  responding to complaints on a case-by-case basis, regulators in some  states told us that they determine whether they can work with the  consumer and the company to resolve the complaint or determine whether  there has been a violation of claims settlement standards that requires  further action.
Regulators from four states also told us that they regularly review  complaint data to identify trends in company practices over time or across  companies, including practices that may violate claims settlement  standards. Three of these states review these data as part of broader  analyses of the LTCI market during which they also review, for example,  financial data and information on companies’ claims settlement practices.  However, regulators in three states noted that a challenge in using  complaint data to identify trends is the small number of LTCI consumer  complaints that their state receives. For example, information on  complaints provided by one state shows that the state received only 54  LTCI complaints in 2007, and only 20 were related to claims settlement  issues. State regulators told us that they expect the number of complaints  to increase in the future as more consumers begin claiming benefits.
The second way that states monitor company compliance with claims  settlement standards is by using market conduct examinations. These  examinations may be regularly scheduled or, if regulators find patterns in  consumer complaints about a company, they may initiate an examination,  which generally includes a review of the company’s files for evidence of  violations of claims settlement standards. Some states also coordinate  market conduct examinations with other states—efforts known as  multistate examinations—during which all participating states examine  the claims settlement practices of designated companies. If state  regulators identify violations of claims settlement standards during market  conduct examinations, they may take enforcement actions, such as  imposing fines or suspending the company’s license. As of March 2008, 4  of the 10 states in our review reported taking enforcement actions against  LTCI companies for violating claims settlement standards and 7 reported  having ongoing examinations into companies’ claims settlement  practices.
In addition to their efforts to monitor compliance with claims settlement  standards, regulators from six of the states in our review reported that  their state is considering or may consider adopting additional consumer  protections related to claims settlement. The additional protection most  frequently considered by the state regulators we interviewed is the  inclusion of an independent review process, which would allow  consumers appealing LTCI claims denials to have their issue reviewed by a  third party independent from their insurance company without having to  engage in legal action. Also, a group of representatives from NAIC  member states was formed in March 2008 to consider whether to  recommend developing provisions to include an independent review  process in the NAIC LTCI models. Such an addition may be useful, as  regulators from three states told us that they lack the authority to resolve  complaints involving a question of fact, for example, when the consumer  and company disagree on a factual matter regarding a consumer’s  eligibility for benefits. Further, there is some evidence to suggest that due  to errors or incomplete information companies frequently overturn LTCI  denials during the appeals process. Specifically, data provided by four  companies we contacted showed that the average percentage of denials  overturned was 20 percent in 2006, ranging from 7 percent in one company  to 34 percent in another.
Mr. Chairman, this concludes my prepared remarks. I would be happy to  answer any questions that you or other members of the committee may  have.
For future contacts regarding this statement, please contact   John E. Dicken at (202) 512-7114 or at dickenj@gao.gov. Contact points for  our Offices of Congressional Relations and Public Affairs may be found on  the last page of this statement. Kristi Peterson, Assistant Director;   Krister Friday; and Rachel Moskowitz made key contributions to this  statement.
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