The popularity of various products offering Long Term Care (“LTC”) benefits have been increasing in the U.S. as the population ages, and so do the claim administration challenges – and fraudulent claims. Since the introduction of stand-alone LTC products in the 1980’s, products have evolved to include LTC-type benefits as riders to other policies.[1] Whatever the structure of the policies that provide LTC-type benefits, there are some common challenges. This includes detecting unwarranted claim requests due to an array of reasons that are discussed below.
According to the American Council of Life Insurance, LTC benefits have grown from approximately $8.04 billion in 2019 to approximately 9.5 billion USD in 2023.[2] On a sad note, benefits paid in 2021 and 2022 dropped to $6.167 billion USD, likely due to the effects of COVID which caused the death of so many vulnerable seniors, especially those whose health was already compromised.
LTC claims are complex by their nature. Policy language defining eligibility requirements vary by product and state. Unlike a death or accident claim, LTC benefits have more complex eligibility requirements to qualify for benefits. Benefit levels also vary greatly and may include in-facility coverage only, at-home assistance, and / or respite care depending on the specific policy purchased and its language. Policy language typically will also define the type of care provider that is eligible for reimbursement. State regulations may also impact a claim decision. Adding to this complexity is that LTC claims are not a “touch-once-and-done” type of claim found in some insurance policies. These are “living benefits” and the insured may qualify for benefits for years as long as the conditions leading to eligibility continue and the benefits are not exhausted (very few LTC policies issued today have unlimited benefit periods). Occasionally, insureds improve beyond the level of meeting the eligibility requirements hence the claim examiner must continually monitor the insured for continuation of benefits.
Filing LTC claims for claimants can also be complex since the claim examiner typically will require a plethora of information to determine eligibility based on the insured’s capabilities (or lack thereof), benefits provided, and the caregivers involved.
Unwarranted claims can come from a variety of reasons. Some of the more common and less concerning reasons include:
- The claim adjudication process finds the insured is not eligible per the terms of the policy purchased. The claim may have simply been filed out of a lack of understanding the policy benefits and does not involve any misinformation or deceit.
- The claim submitted contains incorrect information albeit due to carelessness on the part of the claimant but not necessarily intentional deceit.
- The insured who once qualified for benefits improves and simply fails to notify the insurer timely.
More concerning areas include the following:
- Fraudulently misrepresenting the insured’s condition when filing a claim.
- Account takeovers where someone other than the insured files a false claim pretending to be the insured.
- The use of in-home caregivers that are not qualified due to the relationship to the insured or licensing.
- Overinflation of the services provided to the insured by the caregiver. In these cases, the insured may not be involved in the deceit, or they may be participants, actively or passively, in the deceit. Examples include the caregiver inflating the time spent with the insured or the level of services provided.
- Using a synthetic or stolen identity to purchase a policy, and then filing a false claim by switching the identity with that of an unhealthy person.
Case Example One
John Smith was an insured of an LTC policy that provided reimbursement for home care if the insured was unable to perform three Activities of Daily Living (ADLs) as defined in his policy. His attending physician, Dr. Deborah Brown, provided medical records and forms substantiating the insured’s need for in-home assisted living care. Fraudulent receipts were then sent to the insurer who reimbursed the expenses. Unbeknownst to the insurer, Mr. Smith, was married to Dr. Brown. Further research found that Dr. Brown had legally changed her name, and she had a history of insurance fraud associated with her prior name albeit she still maintained a medical license. Surveillance was done on Mr. Smith to determine his activities which found him mowing his lawn amongst other activities. These activities clearly contradicted his claim that he was incapable of performing ADLs. The caregiver receipts were also found to be fraudulent. Based on the evidence, the insurer denied the claim, but the story didn’t end there. The insured filed suit against the insurer to which the insurer filed a counter-suit. The court found in favor of the insurer.
Case Example Two
Barbara Evans was an 85 year-old insured on an LTC policy that provided in-home care for those who were unable to perform a number of ADLs. Ms. Evans had limitations which were supported by her attending physician, and she qualified for in-home benefits based on this. Ms. Evans contacted an agency that provides in-home care, and through them, Samantha was hired. When Samantha was hired, she asked Ms. Evans about insurance coverage and was told about the LTC policy. In addition to assisting Ms. Evans, Samantha provided invoices and helped file claims on behalf of Ms. Evans. The invoices showed home care assistance for three hours a day, five days a week. In actuality, Samantha would come by Ms. Evans home a couple of times a week for no more than an hour or two at a time. The insurance company initially made payments based on the amounts being invoiced. The insurer later noticed inconsistencies in the invoices and began an investigation. Surveillance on Samantha found that she was not present at the times that she was billing for services. Ms. Evans was interviewed, and the investigator observed that Ms. Evans had limitations consistent with the claims filed. However, Ms. Evans acknowledged the times that Samantha was providing assistance were inconsistent with the invoices submitted. With that information, the insurer was able to show that the care provider was providing false invoices and inappropriately billed for services not rendered. The claim was denied and restitution sought.
These examples are relatively basic, but organized crime groups have been known to use LTC policies in sophisticated schemes as a way of profiting. Currently, there isn’t an industry-wide method of tracking LTC benefits fraud. This has been raised to the appropriate governing bodies and is being addressed; however, until it is, it is difficult to say how much is being lost due to fraudulent activities. Regardless, insurers must employ proper fraud identification techniques to control losses.
Some of the methods used to validate LTC claims include:
- Verifying that care providers and facilities are properly licensed for the services provided.
- Obtain medical records from physicians to ensure that the limitations claimed are consistent with the medical conditions diagnosed. AI can assist with the review of medical records and claim documents, provide summaries, and even insights based upon the applicable policy language.
- Telephone interviews with the claimant can assist in understanding the nature of the claims filed, limitations, and the overall assertions being made when filing a claim. Interviews can also be helpful to get clarifications on apparent inconsistencies or gaps in the information presented.
- Require that in-home caregivers use billing and invoice apps that geofence the caregiver’s phone to help ensure the caregiver (or at least their phone) is present at the time of the services provided.
- Audit in-home caregivers across claims. Occasionally, fraudulent caregivers will invoice for times that would be impossible to manage, such as being in different places at the same time.
- When doubts exist, surveillance can be a powerful tool to determine the activities of the insured and the times the caregivers are present.
Wrapping It Up
The popularity of LTC policies and the number of claims filed against these policies are increasing as our population ages. With this, LTC claim examiners have to determine which claims are payable and which may be unwarranted – or even fraudulent. Unfortunately, there are those who will provide false information with the intent of gaining benefits that are not due. We don’t know the true cost of fraud due to the lack of a mechanism to record this as an industry; however, we know it exists and is growing from experience. The false information can range from statements made to falsified medical records and invoices. Tools and vendors exist, such as AI and investigation vendors, to assist insurers in their efforts to validate claims. Don’t let claim experience slip due to unwarranted claims. Make sure you are using the latest tools and investigation providers that understand LTC products and how bad actors attempt to steal from insurers.
[1] For more information about LTC products, the American Academy of Actuaries has published an excellent paper which can be found at https://www.actuary.org/wp-content/uploads/2025/03/health-brief-2025-stateofltc.pdf
[2] The American Council of Life Insurers publishes an annual publication called the Life Insurer’s Fact Book, and these publications provide a tremendous amount of information related to the Life and Health insurance industry in the United States. The benefits paid are from the 2021 and 2024 Life Insurer’s Fact Book Tables 5.4.
About the Author
Kevin Glasgow has been in the insurance industry veteran with over 35 years working with both retail insurers and reinsurers in the United States and Canada. His roles have included leading claim teams in the United States and Canada, and as such, he has worked extensively collaborating with underwriters and others to mitigate fraud risks as well as defending companies against fraudulent activities. He has worked as an expert witness in insurance matters, and he is currently working with Diligence International Group which specializes in fraud mitigation and identification. He is also on the Advisory Board with Friendly, an AI company serving the insurance industry. He holds a bachelor’s and master’s degree in Business Administration and is the past president of the International Claim Association and the Eastern Claim Conference, and his designations include the ARA, FLMI, FLHC, CFE and CLU®.
