3GenFamily Blog has moved to a new location on the web.
By CK Wilde for 3GenFamily Blog
My father only had a couple thousand dollars of life insurance in force by the time he turned 83. He outlived the term of one policy, so the insurance company paid him the cash value and terminated the policy.
As someone who was deeply affected by the Depression, Dad would probably have jumped at the chance to sell a life insurance policy for more than the cash value. But, as someone in the early stages of dementia, he was vulnerable to being swindled. We had one close call with his investments.
I want to alert you to the booming business in life settlements that is still largely unregulated.
Help for the Terminally Ill
It started out as a compassionate way to help someone who has large medical bills to pay. It’s called a viatical settlement. It gives a person, typically with less than two years to live, who owns a large cash value life insurance policy but does not have a spouse or children, a way to get cash out of the policy.
Cash value insurance policies (also called whole life) have provisions for the owner to cancel the policy and receive the “surrender value”. But, this amount is usually very small compared to the total amount of insurance. The settlement company is usually willing to pay much more. The viatical settlement became popular during the 1980’s as a way to help terminally ill AIDS patients deal with the high cost of medical care.
A New Investment is Born
The purchased insurance policies from those early viatical settlements were sold to individual investors. Because this new investment was unregulated, it attracted some unscrupulous dealers. Salesmen were paid high commissions to sell the policies to investors who did not always understand what they were buying. The investment community soured on buying settlements.
In 2001, the National Association of Insurance Commissioners released the Viatical Settlements Model Act which established guidelines for ensuring sound business practices and avoiding fraud. It was about that same time that settlement dealers began purchasing policies using institutional capital. The demand for settlements as an investment began to increase.
Better Than Mortgages?
From an investor’s standpoint, buying insurance policies is even better than buying mortgages. Everyone dies! As long as the insurance policy was written by a company that is solid, the investor gets paid.
Investing in mortgages, once considered much safer than stocks or bonds, is not as predictable. People can get sick or disabled, lose there jobs, or have other life events that prevent them from paying the mortgage. US economic problems today were caused in part by defaults on mortgages — many made by unscrupulous brokers who bent the rules.
Most mortgages today are combined into packages that re-sold to large institutional investors. It wasn’t long before some enterprising folks figured out that they could package these purchased policies, now called life settlements, and sell them to institutional investors for generous commissions.
Easy To Be Taken In By Easy Money
It happened to Larry King, CNN’s famous talk show host. King alleges in a lawsuit filed recently that he was the victim of a scam to buy and sell life insurance on himself, also called “flipping” policies. While King made $1.4 million on the deals, he now realizes that he would have been better off if he had kept the policies. He feels that he was cheated.
An insurance company owns the $15 million in policies, a company by the name of Coventry Insurance. Coventry was sued last year by the State of New York for alleged predatory practices.
Yesterday, our local newspaper, the San Jose Mercury News, reported that flyers were circulating at a San Luis Obispo, California senior center telling seniors they could get as much as $50,000 from “investors that want to speculate on our life expectancy.”
Although the NAIC issued the Viatical Settlements Model Act in 2001 and amended it in 2007 to strengthen consumer protections for “Stranger- Originated Life Insurance” only 35 states have officially adopted the guidelines. California, where I live, has not yet adopted any guidelines.
What’s The Harm?
If Larry King, who is a reasonably intelligent 73 year old, could be duped, anyone could be. Particularly someone in the early stages of dementia.
Life insurance is just one part of a total financial plan. Selling a life insurance policy really needs to be evaluated in terms of the person’s overall needs and financial status. These life settlement companies are not doing that.
So we caregivers need to be alert to these issues. If your parent tells you about a wonderful opportunity to sell an old life insurance policy, get to the financial planner or attorney to have the deal reviewed right away. Who is buying the policy? Will it be sold to a third party? Who is that?
The Mercury News article quoted Jay Adkisson, an attorney who writes a blog about financial fraud, “You ought to know who you are selling to. You don’t want Tony Soprano buying your life insurance policy.”
The mood was relaxed and happy on the five hour flight from California to New Jersey. It was Thanksgiving Day. The sun was just beginning to set on what must have been an unseasonably warm day on the East Coast. I smiled to myself. The plane had arrived ahead of schedule. I would be at my father’s home in time for dinner with him.
The airport shuttle driver let me off outside the patio of my Dad’s place. I could see Dad was sitting motionless in his recliner in the corner of the room. Only the kitchen light was on, but I could easily peer into this tiny garden apartment in an independent senior living community. It had been my father’s comfortable home for the past year.
The TV was off. Dad must have fallen asleep, again.
I knocked on the glass patio door and eventually woke him from his nap. He was overjoyed to see me. But, his mood went from gleeful to glum in only a minute. “I’m sorry. I’m afraid I don’t have dinner for you,” he said.
In our phone conversations over the past few days, my father had chatted cheerfully about preparing his favorite dish, baked turkey legs, for us for Thanksgiving. He had discovered a great recipe by accident and wanted to share it with me.
“I guess I fell asleep and didn’t hear the timer,” he continued. ” The turkey legs were totally burnt even though I had them in a low, 250 degree oven.”
“How long do you think you overslept?” I asked.
“Oh, it might have been six hours,” Dad said sheepishly.
“That’s ok. You have some hamburgers in the freezer that we can make, right?” I said trying to sound upbeat. (Did I hear that right, six hours?)
I walked into the kitchen to start preparing the hamburgers. The stove was dirty. Pots had boiled over and burnt remains littered the trays under the burners. I peered into the oven. It was just as dirty. The entire apartment smelled like burnt food. This was a major change since my last visit.
I tried to hide my uneasiness as the realization began dawning on me that Dad was not able to safely cook for himself anymore.
“Gee, Dad, it looks like you had a few pots spill over,” I said.
“Yeah, pots boil over from time to time. It’s no big deal,” he growled.
“Looks like you could use some help with the cleaning, Dad. ”
“I’m doing fine by myself! I don’t have extra money pay for cleaners. I have barely enough to live on! ” Dad’s growl had turned into a shout.
Lowering my voice, I turned to him with a big smile, “I know you have done a really great job managing your money. It is looking like you could use a little help here, that’s all.”
That was the beginning of a weekend-long argument. I gave my father all sorts of suggestions for ways he could get help. He rejected every one.
We met with a non-medical in home care provider. Dad turned pale when he heard the hourly rate. I got out the rate sheet for the additional cleaning services that the senior apartment complex offered.
“That’s too much! Dad shouted.
Finally, I hit upon the idea of Dad purchasing the meal plan from the dining room. Together, we figured out how much he spent on food. It looked like buying dinner on the meal plan would not cost much more than he was already spending.
I reasoned and cajoled. Dad finally agreed that he would enjoy getting his evening meal from the dining room. All that was left to do was for my father to sign up for the plan on Monday. He said he would do it.
I left for the airport on Sunday evening with a light heart.
On Monday, I phoned to remind him to sign up for the meal plan. He began to waffle. Maybe he would wait until December. Maybe he would wait until he finished the food in the freezer. Maybe he would wait until . . .
Of course, I knew these were just excuses. For each one, I countered with a reasonable argument. Dad thought up another. He wasn’t going to do it and I was too far away to exert the same kind of influence I had when I was physically there.
A November 2007 study by the National Alliance for Caregiving and Evercare found that the long distance caregivers spend an average of $8728 per year out of their own pockets to help an elderly family member. Local caregivers spend somewhat less — approximately $5000 annually.
And, it is no surprise to me that the largest percentage of this expense is going to provide care attendants, followed closely by medical expenses and long distance travel. I had already been spending money for travel to see my Dad. Once your parent needs care, but cannot or will not pay for help, the family may need to provide it. Those of us who work are forced to rely on paid helpers to to assist with eldercare. Bu, this can have a negative financial impact on the family members paying for care.
Fate took a different turn with my father. Later that week, he developed a nose bleed that the nurses at the retirement community could not stop. His trip to the hospital ended up lasting over three months.
The nurses also reported to the managers that Dad was having trouble keeping up the apartment. The managers said they would refuse to allow him back into his apartment when he was released from the hospital for his own safety.
Now instead of convincing him to eat in the dining room, I had to convince him to move to the next level of care. To be continued . . .
3GenFamily Blog has moved to a new location on the web.
By CK Wilde for 3GenFamily Blog
It wasn’t until Dad mailed me the collection notice that I realized he was losing his ability to track and pay his medical bills. He had complained during our phone chats on several occasions that the hospital had messed up his billing. They kept phoning him to get him to pay his bill.
He insisted that he had paid the bill– $124.34. The hospital billing staff asked him to send a copy of the cancelled check. But, Dad adamantly refused to go through the work of getting the cancelled check. It was the hospital’s mistake for losing the payment.
I was dumbfounded by his vehement refusal to deal with a straightforward problem. Ironically, in his younger days, my father had been a stickler for financial details. As a young adult, I would have gotten a scalding rebuke for failing to take action on something like this.
His unusual behavior was a warning that his dementia was beginning to impair his judgement, while his anemia left him so fatigued that even a trip to the bank seemed like an overwhelming task. I didn’t recognize it for what it was. I thought he was just being obstinate.
Being 3000 miles away, I tried to get my father to read his checkbook to tell me the check number for that hospital bill. Then, I went online to see if that check had cleared. The check number he gave me had been cashed but it wasn’t anywhere near the correct amount for the bill. I looked for another check with the amount $124.34. I didn’t see any in that month that matched.
I told my father that the only thing to do was pay the bill. He refused. No amount of reasoning worked. So I made a deal with him — I would pay the bill and he would reimburse me.
Grudgingly, he agreed.
My father had already signed a power of attorney giving me the authority to handle his finances and one for health care, too. So, I began learning first hand about Medicare, supplemental heath coverage and prescription drug benefits.
Dad had to sign a form to allow me to access his online medical insurance claims and to speak for him to the insurance representatives. I left instructions for them to phone me first since Dad’s hearing was poor.
I paid the bill. Dad eventually reimbursed me. The collection notices and phone calls stopped.
It wasn’t until a couple of months after my father’s death that I found the entry in his checkbook. Dad was right all along. He had paid the hospital within days of receiving the bill. But, he was so certain he remembered the correct check number that he never looked it up. I was too far away at that time to double check it myself.
The story doesn’t end there.
Another billing mistake almost happened today. I started to pay a doctor’s bill for my father’s estate and discovered that it was more than it should have been.
The doctor is supposed to bill Medicare first. After Medicare determines what it will pay, the doctor sends the bill to the supplemental insurance.
Only after the supplemental insuror has completed the claim, should the doctor bill the patient for any balance due. But this latest bill didn’t show any payment from the supplemental insurance, so I checked the online claims information.
The supplemental insuror had rejected the claim because documentation was missing. Well, sometimes paperwork does get lost. You need to follow up to get another copy sent.
I called and spoke to the medical billing person in the doctor’s office. She pulled up the records on her computer. She stated that my father owed this amount of money. I asked if she sent it to the supplemental carrier.
She said, “Yes.” And promptly read my father’s account number for the insurance.
I asked her, “Why do the online records say your claim was rejected for lack of documentation? The amount you are billing doesn’t appear to include any payment from the supplemental insurance.”
People do make mistakes (including me). Where there is an honest mistake, you can hear the surprise in the person’s voice. “How did that happen?” Sometimes, they laugh self consciously.
There was no surprise in this woman’s voice. There was no admission of a mistake. “We understand your concern . . . we will make sure it gets handled.” She was billing my Dad for the entire amount rather than resubmit the bill to the insuror with the information that was needed. Efficient but totally lacking in ethics.
I wish I could say this was the only mistake I have found. Unfortunately, billing mistakes have happened so many times in the past 9 months of settling my father’s estate.
How many elderly patients pay too much because they don’t have the patience or focus to follow up?
If you have been wondering how you can help your aging parents, discuss helping them with tracking medical bills. Have your parents collect everything (bills, medicare statements, supplemental insurance statements) in a folder. Set up online access to insurance if its available. Make a regular date to go over the bills each month before anyone writes checks.
You may need to make phone calls for your parents. Be aware that privacy rules prevent the insurors from talking with you about your parents’ account unless your parents have given permission in writing.
You’ll be providing peace of mind and possibly saving money for your parents, too.