Preying on the Elderly

Tough legislation--too tough in its present form for the insurance industry to accept--has been approved by the California Assembly to control the outrageous abuses of senior citizens by some unprincipled promoters of so-called medigap insurance. This is an important opportunity to address a persistent problem for which, we are convinced, no other remedy exists.

The measure, AB 1108 by Lloyd G. Connelly (D-Sacramento), is tough because the problem is tough. And important. Americans 65 and older rely on Medicare for health and hospital protection, but they soon discover that the government program covers only about 40% of their health-care needs. So, quite prudently, many people purchase insurance to help pay the gap left between Medicare payments and actual medical and hospital costs. Much of that medigap insurance is useful and effective, with some policies paying benefits equal to 85% or more of the premiums.

But fast-buck artists have entered the field as well. Agents, driven by high commissions, have encouraged older citizens to buy more coverage than they have needed--sometimes duplicate coverage, sometimes useless coverage--or to cancel old policies and buy new ones just to aggrandize agents’ fees. Furthermore, false-front organizations, with names that sound either like governmental agencies or nonprofit public-interest organizations, have been used to further confuse older Americans into unwise insurance purchases.

The Connelly measure passed the Assembly on a bipartisan vote of 55 to 21, but it faces heavy going when it reaches the Senate Insurance, Claims and Corporations Committee on July 15. The Assn. of California Life Insurance Companies, while insisting that it supports the overall objective of ending abuses, wants extensive amendments. The association opposes restrictions on agents’ commissions on new policies. It opposes provisions to facilitate court actions, both civil and criminal. And it opposes the measure’s extension of requirements for “honesty, good faith and fair dealing.” What the industry has not yet proved is how these changes can be made while preserving the legislation as an effective instrument to protect a vulnerable segment of the population from unprincipled exploitation.