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Reading the Fine Print
Focus on Long Term Care Insurance

Will it meet the needs of Canadian families and communities?

BY: Wendy Armstrong
Raisa Deber


March 2006




Reading the Fine Print is an overview of the private health insurance sector in Canada with a
focus on new Long Term Care (and Critical Illness) policies being marketed in Canada and
their potential for meeting the needs of Canadian families. This examination of the relative
merits of long-term care insurance included a comparison of three different policies.


Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance



Consumer Proverb


"An education is what you get from reading the fine print; a
learning experience is what you get when you don't."
























This study was supported with grants from the Opportunities Fund, M -THAC (Medicare
to Home and Community Care) Research Unit at the University of Toronto, funded by
the Canadian Institute of Health Research (CIHR).

The author would like to sincerely thank Dr. Paul Williams and Jane Walker for their
reviews and comments on earlier drafts and Dr. Raisa Deber for her contributions and
insights. All errors and omissions are the responsibility of the author.

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Reading the Fine Print: Long Term Care Insurance
Table of Contents

Summary of Key Findings ...................................................................................................... 4
Context for the Study ............................................................................................................. 7
1. Overview of Private Health Insurance in Canada ............................................................... 9
The Canadian Regulatory Environment for Private Health Insurance................................ 14
Consumer Resources and Information in Canada............................................................. 17
2. Overview of Long Term Care Insurance in Canada.......................................................... 18
The Nature and Scope of Long Term Care Insurance....................................................... 20
Underwriting Requirements and Information Sharing ........................................................ 21
The Promise and the Realities of Long Term Care Insurance ........................................... 23
How Affordable is Long Term Care Insurance?................................................................. 28
What are the Odds of Needing Nursing Home Care and Making a Claim? ....................... 30
3. Sampling the Fare: The Trade Offs Among Three Policies.............................................. 32
4. Critical Illness Insurance Substitutes ­ and Best Doctors Inc. ......................................... 33
5. Market Failure in the Private Health Insurance Arena ..................................................... 37
6. Conclusions ..................................................................................................................... 39
Selected References............................................................................................................ 41
Appendix A - Comparison chart of features of 3 different policies ....................................... 48


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Reading the Fine Print: Long Term Care Insurance
Reading the Fine Print:
Focus on Long Term Care Insurance

Summary of Key Findings

Over the past decade, a number of Canadian provinces have limited hospital inpatient care
and removed or restricted coverage for health-related products and services outside hospital
walls, particularly in extended care situations. In order to protect family income, assets and
access to care options in this new environment, Canadians are being encouraged to
purchase new private health insurance products. The following are key findings from a
review of the private health insurance landscape in Canada and an in-depth analysis of one
such product ­ long term care insurance, including a comparison of three different long term
care policies. A lot can be learned from reading the fine print in private insurance policies.

· The health and life insurance industry in Canada has undergone significant
restructuring since the early 1990s. New trade agreements have led to a far more
integrated North American (global) industry. Accompanying de-regulation of the
financial services sector has resulted in increased concentration, overlapping lines of
business and new products and sales venues. Compared to other countries, there is
little government intervention in the practices of the health insurance industry in
Canada and limited protection for consumers. A similar gap in consumer information
and analysis is attributed by some observers to the lack of government involvement in
regulation of the industry. Consumers may also be put at risk due to required
authorizations for widespread collection and sharing of personal information.

· Surprisingly, Canadians already rely more on private health insurance (primarily
obtained through the workplace) to pay for medical expenses than do citizens in
many other industrialized nations. In 2000, private health insurance policies paid for
11.4% of total health care expenditures in Canada. This compares with 1.6% in
Denmark, 0.9% in Italy, 0.3 % in Japan, 6.3% in New Zealand and 3.3% (1996) in the
U.K. private out-of-pocket spending is also higher in Canada than many other
countries ­ almost 16% of total health care expenditures. (OECD 2004)


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Reading the Fine Print: Long Term Care Insurance
· Long-term care insurance is a complex, expensive and high-risk product. The
products reviewed offer limited protection from the high and sometimes catastrophic
costs associated with long term institutional or community care, and that only in
limited circumstances and settings. A confusing array of options influences monthly
premiums and value at time of claim. Pre-purchased limits, limitation and exclusion
clauses and company interpretations often restrict care choices - including
opportunities for highly desired home care and assisted living alternatives. The
marketing materials reviewed are often misleading. As one example (among many
others) the odds of making a claim on a policy are much lower than implied by
brochures, and the proportion/scope of costs covered by common policies
overestimated. Individuals with a greater risk of making a claim are usually unable to
purchase policies due to strict underwriting guidelines. Retirees may be forced to let a
policy lapse due to rising premiums before being disabled enough to make a claim,
and many policyholders will never make a claim. The costs of recommended policies
over time are beyond the reach of most Canadians.

· Critical illness insurance policies are often sold as a companion or substitute for long-
term care insurance. These policies are less complex, but appear to share some
common features with long term care insurance related to limitations and exclusions,
misleading marketing and rising premiums over time. While originally created to
cover income losses and non-direct costs associated with a major medical event, a
widely promoted feature of critical illness policies is access to the services of a
referral company called Best Doctors Inc. This company provides a "free" second
opinion based on a medical chart review and will arrange expedited diagnostic and
treatment services, a practice that may be fueling a parallel private medical market in
Canada. Decisions by provinces to limit portability appear to have been instrumental
in the growth of medical tourism inside and outside the country.

· Increased reliance on private long-term care (and critical illness) insurance does not
appear to be a viable alternative to protect Canadian families and communities from
the high costs of unpredictable care needs or effectively influence the price and
quality of suppliers. In order for private health insurance premiums to be affordable
enough to attract a sufficient number of purchasers in a voluntary market (i.e. enough
contributors to pay out claims and return benefits to investors), companies must be

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Reading the Fine Print: Long Term Care Insurance
able to refuse higher-risk applicants and cap claims. Significant public subsidies
appear to be required for companies to be in business. Limiting or restricting access
to public alternatives for those who choose not to insure as well as the "uninsurable"
may also be necessary in order to create sufficient demand. This has significant and
far-reaching consequences for a society.

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Reading the Fine Print: Long Term Care Insurance
Context for the Study

Over the past decade there has been a significant shift in who is responsible for the payment
of a range of products, services and environments required to manage an episode of illness
or injury in many Canadian provinces. Due to budgetary cuts in the early 1990s and new
technologies that have reduced the need for lengthy inpatient treatment, the roles of
hospitals have changed. The number of hospital beds has shrunk, people are less likely to
be admitted and the length of stay has shortened. For example, the number of reported
hospital beds in Alberta dropped from around 13,300 in 1989 to 9,400 in 1995 and 6,300 in
1999 while the population rose from about 2.4 to 2.9 million.1 Similarly, people with long-term
care needs are less likely to be placed in institutions; auxiliary hospital and nursing home
beds in Alberta have been limited and the bar for entry raised.2 All these changes have led to
longer periods of recovery and management of both minor and complex medical conditions
in home and other settings where families absorb most of the direct and indirect costs of
care. 3 Similar shifts in the site and costs of care are occurring in other provinces.

Changes in the site of care often translate into changes in who pays for what. This is
because the Canada Health Act 1984 only requires full coverage of all "medically necessary"
hospital and physician services.4 Provinces can, but are not obligated to fund programs and
services beyond these limits (e.g. nursing home programs, drug plans, ambulance services,
home nursing, chiropractic visits) in order to receive health care funding from the federal
government.5 As a number of research studies, as well as federal and provincial reports and

1 Hospital Care in Alberta Statistical Supplement, 1989; pages v and vi, Canada Health Act Annual Reports,
Health Canada, 1994-1995: page 53, 1998-1999: page 60

2 See The Alberta Centre for Health Services Utilization Research Report, "Trends in Uses of Health Care
Services by Elderly in Alberta", 1999. The number of long term care facility beds (i.e. approved auxiliary hospitals
and nursing homes) in 2004 was 14,065. This compares to about 13,650 in 1993.

3 Dr. Roger Palmer, former Alberta Deputy Minister of Health and Wellness, interview, summer 2005

4 An exception to full coverage of "hospital services" (defined as including "accommodation and meals") is that
Section 19.2 of the CHA allows "user charges for accommodation or meals provided to an in-patient who, in the
opinion of the attending physician, requires chronic care and is more or less permanently resident in a hospital or
other institution" without penalty to a province. Mental institutions are also excluded.

5 Note that in 1995, the federal government clarified that it interpreted the Canada Health Act as requiring
provincial governments to cover "facility fees" being charged to patients in private surgical clinics for otherwise
insured hospital procedures (e.g. cataract surgery, abortions) because these clinics were considered to be
replacement sites for insured surgical procedures performed by physicians in hospitals.

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Reading the Fine Print: Long Term Care Insurance
commissions have noted, the shift from hospitals can thus imply a shift from public payment
to individuals and their families.

To the extent such shifts occur, a growing number of Canadian families may find themselves
facing unexpected financial hardship, medical debt or the loss of assets along with new care
burdens for informal family caregivers. To date, the most affected populations have been
retirees and the estimated 50% of workers without employer-based benefit plans, particularly
Canadians with ongoing medical needs due to longer treatment regimes or a chronic
disabling or deteriorating medical condition.

One frequently proposed solution to alleviate these hardships is to place greater reliance on
private health insurance, particularly new "long term care" and "critical illness" insurance
policies purchased in the private sector. This report exams one such category of policies ­
long term care insurance, and to a lesser extent critical illness insurance.

Advocates of such policies argue that these alternatives will effectively fill the growing gaps
in public coverage outside hospital walls, ensure timely access to a wide array of required
and desired medical goods and services and provide good value for money. Other common
assumptions are that such policies are readily obtained and affordable and can be counted
on to provide reliable protection with minimal risk.

In order to test these assumptions a small research project was undertaken to explore the
availability, affordability, scope, value and risks associated with long term care insurance in
Canada. This was done through an environmental scan of the private health insurance
landscape in Canada; a review of available literature; interviews with key informants; and, a
comparative analysis of the long term care insurance policies of three different companies.
Information from previous research on changing long term care environments in Alberta and
B.C. and a companion project (A Case Study of the Conversion of an Alberta Nursing Home
to a Designated Assisted Living Program) helped to inform the analysis.

Findings from this project suggest that the majority of common assumptions related to long
term care insurance are erroneous. Significant deficits in the consumer information and
consumer protection landscape in Canada were identified as well as widespread "market
failure". In addition, this study found that critical illness insurance (often marketed as a

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Reading the Fine Print: Long Term Care Insurance
companion or substitute for long term care insurance) is being promoted as a vehicle for the
private purchase of expedited medical treatments.

1. Overview of Private Health Insurance in Canada

Most Canadians have little knowledge of the complexities of private health insurance as it
exists today - for good reason. Individuals purchase it infrequently (compared to other goods
and services) through a variety of intermediaries, the language and contract terms are
confusing and most Canadians have little experience making claims for major medical
expenses on private insurance policies.6 In addition, there have been considerable changes
in the nature of the private health insurance industry in Canada and the regulatory and public
policy landscape in which it operates.7

In Canada, legislative prohibitions, regulations, public expectations and generally accepted
industry practices have all limited private insurance coverage of "medically necessary"
hospital and physician services as well as certain services covered by provincial extended
health care programs.8 Outside these controlled arenas, however, private insurance to cover
medical related expenses has played a growing role in Canadians' lives. Examples of
insurance products covering direct and indirect costs arising from illness or injury include
disability (income) insurance, accident insurance, prepackaged travel or credit insurance,
auto insurance, supplemental medical and dental, and relatively new critical illness and long
term care insurance.9 However, the four most important types of insurance products often
classified as "health insurance" are:
a) Supplemental medical coverage
b) Disability (income) insurance

6 For example, in Canada's historic public hospital insurance system, tax dollars have funded a network of
"approved" public hospitals (owned and run by charities) with services provided free at point of service.

7 See M. Velia and R. Faubert, "Adapting to Change, Adapting to change: The life and health insurance industry
amidst a changing financial services landscape", Statistics Canada, June 2002

8 These restrictions were recommended by the "Hall Commission" in the 1960s to protect the opportunities for
price, access and quality controls inherent in a dominant publicly controlled payer system and incorporated into
the legislative framework for Canadian health insurance, at both the federal and provincial levels.
9 Supplemental plans typically cover some of the costs of products and services outside provincial plans such as
drugs, semi-private/private hospital room fees, ambulance services, and practitioners such as chiropractors and
physiotherapists. Public coverage for these services varies widely across provinces.


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Reading the Fine Print: Long Term Care Insurance
c) Critical Illness insurance, and
d) Long Term Care insurance 10

Most Canadians' experience is with supplemental medical insurance (i.e. health and dental)
and disability insurance (sick time) obtained through a place of employment. The trade
association for health and life insurers in Canada, the Canadian Life and Health Insurance
Association (CLHIA) estimate that about 21 million Canadians (out of 32.5 million) have
some kind of coverage with a supplemental health and dental plan. Of these, less than
750,000 are covered through individually purchased plans.

With employer sponsored health benefit plans, eligibility and enrollment are usually
automatic by virtue of employment and continue as long as the relationship lasts.11 Both
workers and employers usually contribute to monthly premiums. Premiums are kept down by
virtue of the fact that older persons and individuals with significant disabilities (who are more
likely to make claims) are unlikely to be part of the work force. Insurers' administration costs
are also lower due to economies of scale. In addition, contributions by employers to
supplemental health and dental plans are considered a non-taxable benefit for workers, a de
facto public subsidy that further reduces the burden (and visibility) of costs.12

Most of these workplace plans operate on a "community" or group-rated model where all
participants pay the same premiums and are eligible for the same benefits.13 Unlike shopping
for a health plan as an individual consumer in the open marketplace or being part of a small
employer plan, members of large employer plans are rarely individually assessed, refused
coverage or discriminated against based on age, sex or other characteristics. Nor are they
usually required to pay higher premiums or excluded from coverage for claims arising from
"pre-existing" conditions such as asthma, diabetes or a family history of cancer. Workers
leaving employer plans (voluntarily or involuntarily) and going out to purchase policies on

10 See textbook by Harrington et al, Risk Management and Insurance; Second Canadian Edition, McGraw Hill
Ryerson, 2004: page 300.

11 Some plans are "true" risk-rated insurance products provided by commercial insurance companies; other
employers self-insure (i.e. pay the costs themselves) and insurance companies simply administer the plan.
12 UBC health economist Robert Evans recently estimated these subsidies to be about 5 billion per year.

13 This is changing with the introduction of flexible benefit plans. It should be noted that a number of provincial and
federal laws also affect what is allowed within employer sponsored benefit plans.


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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
their own are often surprised to discover that insurance companies can (and do) refuse to
insure them if it appears that a company may be at risk for too many claims. Companies also
share information about their risk status (gathered during the application process) with other
companies, thus limiting access to other marketplace options. "Sticker shock" is also
common once monthly premiums are no longer cushioned by an employer's contributions.

Another reason for widespread lack of awareness about the discriminatory practices of
health and life insurance companies may be the abundance of pre-packed credit, accident
and travel health insurance policies sold by travel agents, banks or credit card companies in
conjunction with other products (i.e. airline flights, mortgages or lines of credit).14 Purchasers
of these "networked" insurance products also do not undergo an in-depth risk assessment by
the insurance company underwriting the policy at time of application, however, built-in
exclusions found in the fine print of policy contracts and company interpretations often
restrict opportunities to make a claim should a misfortune arise. Most people purchase such
policies in a hurry from poorly informed secondary sales agents and are often unaware they
may be automatically excluded from making a claim if they have not met certain eligibility
criteria - e.g. a complete exam by a doctor within the last 18 months - even if they have paid
all the premiums. Full-time professional insurance agents like to point out how insurance
companies tend to do the "underwriting" (i.e. determining eligibility for coverage) "at time of
claim" rather than "at time of purchase" with these types of policies, often leading to unhappy
would-be claimants. Premiums are usually higher as well, but the ease and convenience is
attractive to consumers. Banks often sell the products of a subsidiary or affiliate and the
Canadian Bankers Association is lobbying for banks to be allowed more sales opportunities.

The process of insurance companies assessing individual or group risk and determining
appropriate premiums based on degree of insurability is referred to "underwriting". Actuaries
are the behind-the-scenes statisticians who study and compute insurance risks and develop
strategies to minimize such risks and guide the underwriting process. The reason insurance
companies are allowed to discriminate against higher risk would-be purchasers is because
these companies operate in a voluntary market where not everyone chooses to purchase
insurance or can afford to purchase insurance. This limits the pool of dollars that can be
collected over time from policyholders to pay out future claims and keep a company in

14 Another factor may be that auto insurance is mandatory in all provinces except Newfoundland and companies
cannot refuse to insure someone who has a valid driver's license ­ albeit a higher premiums.

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business. Restricting high-risk applicants (and capping benefits) enables companies to
provide policies at an affordable price to a smaller segment of the market while still earning
the profits necessary to attract companies to get into the business. In voluntary markets, the
price of premiums is the primary selling feature.15

In some countries, private insurers operate under different rules. For example, private
insurers may be required to "take all comers" and/or provide community-rated policies.16 The
existence of such rules often depends on the role private insurers play in a country's health
care system - categorized in a 2004 international Organization for Economic Co-operation
and Development publication as either a primary, complementary, supplementary or
duplicate insurer role.17 Premium increases also often have to be reviewed by regulators
along with claims management practices.

Factors affecting monthly premiums for private health insurance include the frequency and
cost of claims experienced by the company, the costs of administration and marketing and
how well a company's investments (in mortgages and real estate, mutual funds, other
companies and government bonds) are doing. The attraction for investor-owned companies
to get into the insurance business is that premiums collected from policyholders provide a
significant pool of capital to invest and return dividends to investors.

Surprisingly, Canadians rely more on private health insurance to pay medical expenses than
do citizens in many other industrialized nations. In 2000, private health insurance policies
paid 11.4% of the total (public and private) health care expenditures in Canada. This


15 For an excellent overview of these issues see Raisa Deber et al, Why not private health insurance? 1.
Insurance made easy, Canadian Medical Association Journal, Sep 1999; 161:539 ­ 542, Why not private health
insurance? 2. Actuarial principles meet provider dreams, Canadian Medical Journal, Sep 1999; 161: 545 ­ 547

16 For example, duplicate private insurance in Australia (covering part of the costs of private hospital care and
choice of surgeons) is not tied to the workplace and insurance companies are required to "take all comers". The
near collapse of the Australian health insurance industry a few years ago due to high numbers of healthy families
dropping optional coverage because of rising premiums (related to more high risk individuals in the pool) led to
major government subsidies to encourage individuals to re-purchase policies.
17 Private health insurance is considered to fill a "primary" role when it is the primary source of coverage for a
population group without access to public health cover. It fills a "duplicate" role in countries where privately
funded providers operate parallel to the public delivery system and optional private insurance duplicates universal
public coverage. It fills a "complementary" role when it is used to cover any required cost sharing related to public
coverage (i.e. co-payments) and a "supplementary" role in those situations when it finances goods and services
excluded from public coverage (such as dental care in Canada). See reference below.


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compares with 1.6% in Denmark, 0.9% in Italy, 0.3 % in Japan, 6.3% in New Zealand and
3.3% (1996) in the U.K.18 Private out-of-pocket spending is also higher in Canada than many
other countries ­ almost 16% of total expenditures. This higher private spending is often
attributed to Canada's lack of a universal public drug program and the growing scope of
services outside the sweep of Canada Health Act as care has shifted outside hospitals.

Over the past decade employer sponsored private benefit plans have absorbed the costs of
a number of services and products decanted from public hospitals and public health plans
(e.g. physiotherapy, eye exams, intravenous therapy, drugs, diabetic equipment and
supplies, certain physician services). This has resulted in more frequent claims and
increased premiums for employers and workers. Prices for products and services paid by
private benefit plans are also usually more expensive than if the same service is paid by a
provincial health plan at a set price.

Employers have argued that this shift is now threatening the sustainability and continued
existence of such plans.19 In order to avoid rising private health premiums and labour costs
(which include the cost of benefits) a number of employers in Canada, including public
employers, are turning to part-time and casual workers and limiting the number of full-time
jobs with benefits or retiree benefits ­ echoing the experiences of workers and retirees in the
United States.20 Ironically, one of the frequently cited cost-savings of contracting out public
hospital services to private clinics is the opportunity to avoid the rising costs of public
workers' private health plans. (In B.C. and Alberta many employer benefit plans also pay all
or part of the monthly public health insurance premiums levied on residents.)
Workplace health benefit plans in Canada are also being restructured similar to worker
benefit plans in the United States. Strategies for reducing costs include deleting items,
introducing caps on categories of services, reducing total yearly maximums and/or moving to
"defined contribution" health plans. Similar to defined contribution pension plans, these plans
enable employers to limit their liabilities and costs by providing workers with a fixed or

18 See comprehensive details in OECD Health Project (ed.) 2004, Private Health Insurance in OECD Countries,
OECD Publications, Paris, September 2004.

19 As discussed in Employer Committee on Health Care (Ontario) and (Alberta)'s "A Presentation to
Commissioner Romanow and the Commission on the Future of Health Care", personal files, undated.
20 Note: Evidence of dropping coverage in Canada can be found in comparisons of 1996 and 2001 Worker and
Employee Statistics Canada surveys. (Personal correspondence, Colleen Fuller, 2006)


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reduced amount of dollars in return for more plan member control in the use of these funds.
Workers may be given a "defined" amount of money to shop and purchase a plan of their
own choosing (often with a high deductible) and/or a specified yearly amount in a health
spending account (HSA) or medical savings account (MSA) for incidental spending. While
such plans are appealing on the surface, there are many hidden risks and costs.21

It should also be noted that during the past fifteen years many employer sponsored disability
plans (originally used for income replacement and job retraining) began directly purchasing
expedited assessments and treatments from doctors and private clinics in an attempt to
reduce the costs of income replacement ­ similar to strategies pursued by a number of
provincial workers' compensation boards. Auto insurance schemes in some provinces are
also paying for more health care. This drives up the premiums for these products as well. 22

The Canadian Regulatory Environment for Private Health Insurance

In Canada, responsibilities for the market conduct of insurance companies and sales
intermediaries (brokers, agents, financial advisors, banks, travel agents, etc.) rest with
provincial governments. Each province has Superintendent of Insurance, however, most
responsibilities are delegated to arm's length organizations, trade associations and industry-
funded programs. Such responsibilities include licensing, policing, complaint handling,
dispute resolution, consumer information, consumer education and a compensation fund to
deal with insolvencies within the industry. The names, mandates and cultures of delegated
organizations differ among provinces. In Alberta, the Alberta Insurance Council (established
in 1989) licenses sellers and takes complaints about the business practices of companies,
agents and brokers. The Financial Services Commission of Ontario (established in1998) fills
a similar role in Ontario. Typically, professional agents and brokers are required to pass
certain knowledge tests and be sponsored by a specific company in order to be licensed.
Individuals selling policies secondary to another product usually do not have to be licensed
as individuals. In some cases, the institution or company (i.e. bank, travel agent) for which
they work may be licensed. There are a number of differences across the provinces.

21 For a better understanding of these hidden risks and costs see Forget et al, "Medical Savings Accounts: Will
They Reduce Costs?" Canadian Medical Association Journal 167(2): 143-147, 2002. Also see MSA and HSA
information on Families USA web site at http://www.familiesusa.org/index.html.

22 Note: Spending on health care by disability insurers (and auto insurers) is not currently captured in the private
spending data reported by CIHI. (Personal communication from Geoff Ballinger, CIHI, 2005)

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CompCorp (formed in1990) is an industry-run fund that provides prescribed compensation
for policyholders of insolvent member companies under certain circumstances. The industry-
sponsored Canadian Life and Health Insurance Ombudsmen Service (CLHIO) formed in
2002, offers a dispute resolution service for certain types of complaints. When it comes to
pre-purchase information, all requests appear to be directed to the Canadian Life and Health
Insurance Association's Consumer Assistance Centre, including referrals from the new
Financial Consumers' Agency (FCA). The Canadian Life and Health Insurance Association
(CLHIA) is a trade association for the health and life insurance industry in Canada. The FCA,
created in 2001 and funded by levies on financial institutions, is responsible for industry
oversight and enhancing consumer protection and education in the financial services sector.
Despite all these organizations, pertinent and relevant information about the private health
insurance sector in Canada is difficult to obtain. For example, access to information and
statistics related to the practices, issues and performance of the industry on the CLHIA site is
blocked to non-members and a formal request for access was denied.

The Canadian Council of Insurance Regulators acts as a forum for all the provincial
Superintendents of Insurance. Provincial Superintendents monitor the solvency of
provincially incorporated companies while the federal government monitors the solvency of
federally incorporated companies. Most are federally incorporated. This monitoring is done to
ensure that a company has enough capital (or re-insurance from another company) to cover
all potential claims associated with sold in-force policies. The federal government also plays
the lead role in determining the overall structure and activities of the financial services sector,
including who can underwrite and sell insurance. De-regulation of traditional players,
products and practices within the sector (e.g. banks, brokerages, insurers, trust companies,
credit unions, mutual funds) has been ongoing since the late 1980s. This has led to overlaps
of former distinct lines of business, increased concentration and widespread vertical and
horizontal integration.23 Many life insurance companies once owned by policyholders have
also been converted to investor-owned companies, a process called "demutualization".

Voluntary guidelines appear to dominate. In general, Superintendents of Insurance seem to
take the position that regulation of marketplace practices, similar to that found in the U.S. or

23 See "Wikopedia" for definitions, http://en.wikipedia.org/wiki/Vertical_integration.


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other countries, is unnecessary in Canada because "the industry manages things well, and
some of the onus has to be on consumers." 24 However, this perception may be influenced by
a lack of regulator visibility of complaints and concerns or contact with consumers. Two
provincial regulators contacted in a search for expertise related to evaluating long term care
insurance products had "never heard" of long term care insurance, despite it being in the
Canadian market since around 1994. Media stories, presentations by consumer advocates to
federal and provincial government committees over the past decade and a recent study on
the problems encountered by Ontario cancer patients with disability insurance policies
suggest there may be more below the water line.25

In most circumstances, consumers are left to turn to lawyers and the courts for redress and
remedies, an often expensive, lengthy and cumbersome approach. Insurance policies are
considered contracts in which one entity (an insurance company) assumes a risk in return for
regular contributions by another entity (a policyholder) and a duty of care. Regulatory and
dispute resolution bodies deal only with "process" complaints (not contract disputes) and a
number of them emphasized that insurance policies are unique contractual arrangements
between two parties; therefore "whatever the consumer buys is what has been sold."

Regulation, monitoring and consumer protection related to the collection and sharing of
personal medical and financial information within the industry also appears limited. The
Federal and Alberta Privacy Commissioner Offices, responsible for the federal Personal
Information Protection and Electronic Documents Act (PIPEDA) and the Alberta Personal
Information and Protection Act (PIPA) and Health Information Act (HIA), advise it is up to
individual consumers to question or complain to an insurance agent or company prior to filing
a formal complaint with them. However, it is difficult to determine just what kind of complaint
would be investigated and to what purpose. Given the power of insurance companies to
refuse someone services and the limited options and actions afforded consumers or
regulators, it is difficult to determine the practical value of existing laws in this area.

Most health insurance policies fall under the class of "accident and sickness" insurance for
the purpose of regulation, although whether a particular policy falls under the "accident and

24 Telephone interview, member of the Canadian Council of Insurance Regulators, 2005
25 For example, see Ellen Roseman, "Sisters hope to warn about long term care insurance", Toronto Star, April
17th, 2004

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sickness" or "life" classification will depend on how policies are structured. Tax treatment of
premiums and benefits is complex and convoluted with differing rules related to how policies
are designed, who pays the premiums (workers, employers, individuals, self-employed) and
how these are paid. Current tax policies support subsidies in the form of tax concessions in
order to increase access and improve sales.26

Consumer Resources and Information in Canada

There is a noticeable absence of independent consumer-focused information, analysis and
advice related to private health insurance in Canada in comparison to other countries. A
number of factors appear to have contributed to this situation. These include the role that
private health insurance has played in Canada in recent decades, the reduced capacity
(and/or existence) of independent consumer interest voices in Canada during the1990s and
a lack of government involvement in monitoring and regulating the industry. According to Dr.
Norma Neilson, a risk management expert at the University of Calgary, "The industry has
stepped up to the plate to avoid regulation and so keeps regulation to minimum, but it means
that regulators haven't gotten into consumer education."27

Other factors may limit critical analysis by consumer-type organizations. Similar to the way in
which pharmaceutical companies often seek out relationships with patient advocacy groups,
insurance companies often cultivate relationships with seniors, retiree groups and caregiver
organizations. Such relationships provide important opportunities for building good will as
well as for the distribution of a company's insurance products through affinity programs in
exchange for income to support an organization's advocacy goals. For example, the
Canadian Association of Retired Persons (CARP) has a "recommended" CARP Long Term
Care Insurance Plan underwritten by Combined Insurance Company of America as well as
other insurance products offered through a preferred insurance broker.

The CLHIA Consumer Assistance Centre provides very basic product descriptions and
directs consumers to individual brokers, agents and financial advisors for other advice and
information. While brokers and financial advisors like to claim independence, according to


26 Based on telephone interviews and correspondence with CCRA and Finance Canada officials, 2005
27. Norma Neilson, personal interview and correspondence, summer 2005.

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
one former regulator who agreed to speak off-the-record, "The word broker is a little bit of
misnomer because they are essentially insurance agents. Insurance brokers usually
represent three or four companies and are remunerated by commission from these
companies just like agents ­ and most financial advisors." Many factors can influence the
advice of agents, brokers and financial advisors, including their level of comfort and/or
familiarity with products and companies and which products carry the highest commissions.
"The dilemma" he points out, "is that while there are a lot of bright, educated and honest
people selling products, there are also a lot of bright, educated and dishonest people."
Without an independent source of information, it is difficult for consumers, who make such
purchases rarely, to tell the difference. It is also difficult to ask the right questions ­ or
understand the answers, given the complexity of financial contracts and language.28

Just recently, the Canadian Council of Insurance Regulators decided that Canadian
consumers do not need to know what their agent or broker makes on sales of specific
insurance policies.29 This issue of disclosure had originally arisen out of regulator and public
concerns in Canada over allegations and settlements in the U.S. related to bid rigging and
secret commissions paid to brokers to steer business to particular insurance companies.30
One company involved in these allegations, Aon, became the focus of public attention in
Alberta in the fall of 2005 when its Canadian consulting subsidiary won a 1.5 million dollar
Alberta government contract to examine the feasibility of private insurance models replacing
current public health care funding models and come up with concrete proposals in four key
areas: non-emergent services, drugs, health care products and continuing care services. 31

2. Overview of Long Term Care Insurance in Canada

Both long term care and critical illness insurance were first introduced into Canada in the
early to mid 1990s in tandem with cuts to federal and provincial health spending, new trade
agreements and de-regulation of the financial services sector. These trade agreements

28 See discussion in Industry Canada, "The Consumer Trends Report", 2005: page 126

29 See James Daw, "Insurance regulators propose new guides", Toronto Star, Feb. 15th, 2006

30 Both Qui Tam (whistle-blower) laws http://www.quitam.com/ and the role and structure of state Attorney-
General offices in the U.S. appear to play a significant role in such activities coming to light.


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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
removed previous ceilings on foreign investment, opening the door to American investors
acquiring Canadian companies and Canadian-based companies increasing their presence in
the more lucrative American and global markets.32 This created a far more integrated North
American industry and market. Both this integration and the relaxation of rules appear to
have played an important role in these new products coming into the Canadian marketplace.

Nonetheless, long term care insurance had a rocky beginning in Canada. For example, a
"comprehensive home health and long term facility care" policy, marketed by a Canadian
subsidiary of American Family Life Insurance Assurance Company (AFLAC) based in
Toronto, first appeared in Alberta around 1995. A year later, Great-West Life (part of the
Power Corp group of companies) signed a deal to market these AFLAC policies across
Canada. Two years later AFLAC Canada was sold to Ingle Health and Life Insurance, but
Ingle was ultimately forced to give up its insurance charter due to reported
undercapitalization. Great West Life no longer advertises long term care insurance.

Since 1999, the number of companies selling this type of insurance in Canada has grown
significantly. Company banners have included Combined Insurance Company of America
(Aon), Clarica, Manulife, Penncorp, RBC Life (another early entrant), Sun Life and
UnumProvident. This has occurred against a background of shrinkage of the overall number
of health and life insurance companies in Canada due to mergers and acquisitions, resulting
in a handful of major players and fewer choices for brokers and consumers.33 For example,
Sun Life has now taken over Clarica and RBC has purchased the Canadian operations of
Provident Life and Accident Insurance. In 2004 Manulife acquired U.S. based giant John
Hancock ­ which had previously acquired Maritime Life. Theses changes are not always
visible to the public because companies may continue to sell or service contracts under
already established names. "It is such a large industry ­ but such a small industry" one
broker commented, going on the explain the challenges he faced trying to do a good job for
his clients when the culture and policy interpretations can change so much when mergers
occur and there are so few alternatives.

31 See details in RFP Number 05-190, Health Benefit Design Options, Alberta Health and Wellness, 30/09/05.
32 In 2004, Canadian-based life and health insurers generated 54% of their premiums from foreign clients. (See
"Industry Information", CLHIA web site, http://www.clhia.ca/e4.htm.)

33 The number of health and life insurance companies operating in Canada dropped from 163 in 1990 to 105 in
2004 with 5 companies accounting for about 59% of domestic general assets. (Finance Canada and CLHIA)


19

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance

While the decreasing number of companies raises concerns about a lack of competitive
pressure and related higher prices and lower service quality (particularly when companies
become "too big to fail"), companies argue that such mergers provide economies of scale
and help avoid insolvencies.34

By 2003, 34,000 Canadians owned long term care insurance policies, a 22% growth over
2002, but a lower growth rate than the previous two years. Just two companies were
responsible for 80% of the new premiums in 2003 and the top three carriers accounted for
80% of all the in-force premiums. In general, long term care insurance sales in Canada have
been slow while critical illness sales have soared, while the opposite is true in the U.S.35

The Nature and Scope of Long Term Care Insurance

Designed originally to defray some of the high costs of nursing home care (and later home
health care and assisted living), long term care insurance policies have been marketed in the
United States for almost two decades. Benefits are usually described as a certain amount of
money or cash benefit (i.e. $20 to $300 per day) to be paid out on a daily or weekly basis
depending on the amount purchased at time of sale. Payments begin after a pre-selected
waiting (elimination) period of 0 ­ 30 ­ 60 - 90 or 180 days following company approval of a
claim based on a professional assessment of someone's functional deficits. These payments
continue for a chosen duration of 1 ­ 2 ­ 3 ­ 4 ­ 5 years or for the lifetime of the insured. The
two main components of long term care policies are often described as payment towards:

· "Home Care ­ i.e. care is provided to you in your home, assisting you with activities of
daily living (i.e. bathing, feeding, toileting, grooming, dressing), and

· Facility Care ­ care is provided in a certified facility in your province, by trained and
licensed staff." 36


34 Similar arguments have been made on both sides related to bank mergers; see Robert Kerton, "Consumers
Assess Mergers Among Big Banks", Consumers' Association of Canada, Dec. 31, 2003.

35 Interview with Executive Director of LIMRA International, 2005

36 Drawn from Harrington et al textbook: page 304.

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
Policies are packaged and sold in different ways and a complex array of options influence
both monthly premiums and the value of a policy at time of claim. Where and how this money
is spent (and claims are paid) is governed by specifics in a policy contract.

Underwriting Requirements and Information Sharing

Strict underwriting guidelines limit access to these policies for older individuals and those
with pre-existing conditions, particularly functional limitations. The degree of scrutiny and
assessment of one's medical and social history and capabilities at time of application
typically depends on the age at which one tries to purchase such a policy. At the lower-end
of the scale is completion of a short underwriting questionnaire and a telephone interview. At
the higher-end, there are face-to-face interviews and extensive questionnaires. There may
also be additional requirements related to medical records or medical tests.

For example, the Manulife Underwriting Guide has an extensive list of conditions and drugs
to be reviewed by the agent or broker with an applicant. These are identified as "acceptable",
"automatic decline" or "postpone". Listed automatic declines include a positive HIV status, a
history of alcohol abuse, having received home care in the last two years, severe or
uncontrolled anxiety, any cancer with evidence of metastasis or recurrence, history of TIA or
stroke, chronic renal failure, multiple sclerosis and Parkinson's disease (diagnosed or
suggested). A six-page list of medications and indications signaling uninsurability is attached
to the Guide. Ditropan, Taxol, Zyprexa, Urocholine, Talwin, L-Dopa, Prednisone and
Baclefen are some of the listed drugs. Applicants are to be advised by the agent that if an
impairment arises within two years of the date of issue, the company will do a full review to
ensure the medical history was fully disclosed, including writing to an individual's provincial
health plan for a list of all doctors seen and services rendered in the past ten years. If a
medical history has not been fully disclosed (deliberately or inadvertently) the company can
refuse to pay benefits.

On the other hand, factors considered to play a role in maintaining independence and
avoiding claims identified in the RBC Underwriting Guide include working full or part-time, a
spouse in good health, family or friends living in the household, volunteering, participating in
hobbies and activities outside the home, the ability to drive and the ability to travel without

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
accompaniment or assistance. These factors would work in an applicant's favor in applying
for long term care insurance.

All companies require applicants to sign a relatively standard "medical authorization" form
allowing access and sharing of personal, medical and financial information for range of
related purposes. Failure to sign such a form leads to automatic denial by the company. The
following are excerpts from one such form:

"I/We authorize any health care professional, as well as any health or social
service establishment, any insurance company, the Medical Information
Bureau, financial institution, personal information agents or security agencies,
my/our employer or any former employer and any public body holding personal
information concerning me/us, particularly medical information, to supply this
information to XXX Life Insurance Company and its reinsurers for the risk
assessment or the investigation necessary for the study of any claim...

I/We authorize XXX Life Insurance Company, or it's Reinsurer, to exchange
the personal information contained in this application with other insurers,
market intermediaries, financial institutions, or persons whom I/we have
indicated as references and to inquire of them for the appraisal of the risk or in
the event of a claim." 37

Another factor affecting approval of an applicant is an insurance company's use of the
services of the Medical Information Bureau (MIB). Based in Westwood, Massachusetts, the
MIB is an association of over 500 U.S. and Canadian health and life insurance companies. It
maintains a database of personal and medical information drawn from health and life
insurance applications and claims in order to prevent application fraud or omission. The use
of MIB services is also considered important to limit adverse risk selection against insurance
companies by agents selling policies to inappropriate candidates related to commission
incentives. Once access to one's information is authorized, information collected can be used
to deny or limit coverage and claims. Information collected by a company on each applicant
is sent to the MIB and past records of the Bureau are checked. Information is in the form of a

37 From RBC Medical Authorization Form. Note: A Reinsurer is a company that accepts part of another insurer's
risk in return for a share of premium income. Often these are affiliated companies.

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
code, which serves as a red flag for insurers to look closer. Files are kept for seven years
and include existing medical conditions, height and weight, blood pressure, ECG readings,
lab results that could be significant (including predictive genetic testing if in a medical chart)
and non-medical information such as an adverse driving record or participation in a
hazardous sport. There are over 230 codes with more planned.

There are many exceptions in Canadian privacy and human rights laws for insurance
companies and their affiliates (which often include banks, credit-reporting companies,
reinsurers, underwriting support organizations, contracted hardware and software companies
and internal fraud investigation units). Stories of cross-border trafficking of personal medical
and financial information by insurance companies (related to U.S. Homeland Security laws),
identity theft and the issue of insurer or employer discrimination based on predictive genetic
testing have all received some attention in Canada in recent years. However, there has been
little public discussion of how the current development of personal electronic health records
and linkages by governments in Canada will expand low-cost access to such information by
insurers and their affiliates ­ putting insurance applicants and claimants at risk of even more
networking of information. A proposed amendment to the Alberta Health Information Act
would allow disclosure of unspecified personal health information held by public "custodians"
to any third party payer for payment purposes without the knowledge or consent of the
person in question. 38

Information about the rate of refusal of long term care insurance applicants is closely
guarded by companies, however, a recent North American Long Term Care Insurance
Forum (LTCIF) E - poll with nine reporting insurers identified most rejection rates fell between
15% and 30%. There are also indications from the industry literature that approval
requirements will become increasingly strict, thus further limiting access to policies (and
claims) for many individuals. "Consumer fraud" is a big issue within the industry. Obtaining
an insurance contract for a certain price without fully disclosing one's known risk status (thus
leaving an insurer vulnerable to increased claims) is considered a deliberate attempt to
defraud them. Industry efforts to avoid both deliberate and inadvertent consumer fraud can
lead to delays in processing both applications and claims.

38 Circulated via E-mail to selected stakeholders in the summer of 2005.

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance

The Promise and the Realities of Long Term Care Insurance

A 2003 Consumer Reports investigation in the U.S. uncovered many problems with typical
long term care policies, including difficulties with claims, misleading marketing and poor
value for money. Their conclusion: "For most people, long-term care insurance is too risky
and too expensive." 39 Similar problems were identified here in Canada.

On web-sites, in hard copy promotional materials and in the "pitches" given by many sales
agents, descriptions of eroding public benefits and the high odds of requiring a lengthy
episode of nursing home care are typically followed by take-home messages that policies will
cover most of these expenses in a variety of circumstances such as:

"If you require care because of an illness, accident or deteriorating mental
abilities. . . "

The opportunity to avoid admission to a nursing home through care in one's own home and
being able to go to a facility of one's choice are featured prominently:

"With long term care insurance you can choose to stay at home and hire the
help you may need."

The words "choice and "independence" dominate, along with the opportunity to avoid
"government" facilities - a rather strange denigration given the fact that there are almost no
such facilities; the long term care sector in Canada has been heavily privatized since its
inception (Extendicare, Central Park Lodge), although such facilities are admittedly regulated
and heavily subsidized by governments.

The reality, however, is often quite different. In fact, the circumstances in which a paid up
policyholder would qualify to make a claim are limited by both the degree of one's functional
disability and the cause. The following is an abbreviated excerpt from one policy dealing with
exclusions and limitations:


39 For more details see Consumer Reports on-line, "Do you need long-term-care insurance?", November, 2003

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
"Benefits are not payable for any loss that results in directly or indirectly
from . . .an attempted suicide or self-inflicted injury while mentally
competent or incompetent, use or intake of any drug except as prescribed
by physician (does not include cigars, cigarettes or incidental use of
alcohol), nervous or mental disorders without demonstrable organic
cause, operating a motor vehicle while impaired . . ."

Most policies also restrict where and how funds can be used. Each is different. For example,
one standard long term care insurance contract reviewed includes:

"Long term care facility does not mean a hospital or institution that is operated
mainly for the treatment and care of mental conditions without organic cause,
tuberculosis, alcoholism, drug addiction, training, schooling or occupational
therapy. Covered care must be provided by a licensed agency and be outlined
in Plan of Care. Benefits are not payable if care is provided by family member."

The major way that insurers limit their risks, however, is by capping benefits. The amount of
money available once someone has qualified for benefits is limited to whatever daily cash
benefits one chooses to purchase. This could be a little as $10 to $20 per day. Benefits are
also limited by the maximum length of time chosen.

Few people are experts in interpreting population health statistics or the management of
diseases or conditions. If they were, they might recognize that the diagnosis of a disease or
condition does not necessarily mean that symptoms will be severe; many cases result in
relatively mild and manageable symptoms requiring limited interventions. Accordingly, the
odds of developing a diagnosed condition which are often cited in promotional literature (i.e.
X persons over the age of 65 will suffer from arthritis, cancer, dementia or a stroke) as a
reason for purchasing long term care insurance are far higher than the odds of making a
claim on such a policy related to the same disease or condition.

While it is true that a number of older Canadians may well require an intermittent or extended
period of treatment, recovery or rehabilitation outside hospital walls related to a diagnosed
condition, relatively few in comparison would qualify for long term care insurance benefits.
Why? Again, most people requiring such interventions will not experience the degree of

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
disability and dependence ­ or threshold - required to trigger payment of benefits in a long
term care policy.

In order to qualify for benefits, a policyholder typically has to be assessed as being unable to
perform 2 out of 5 to 7 company defined "activities of daily living"(ADLs) or have significant
cognitive impairment affecting his or her safety and/or ability to perform certain "instrumental
activities of daily living"(IADLs). ADLs include such things as such as bathing, dressing,
transferring, toileting, managing continence and feeding. IADLs include the ability to do
laundry, take medication, shop for necessities, do housekeeping, arrange for transportation,
use the telephone, manage personal finances and do cooking or meal preparation.

Although there are many situations (e.g. recovery from a stroke, or awaiting surgery) in which
one can imagine requiring assistance with such tasks due to medical-related functional
deficits, the definitions and interpretations of phrases in insurance contracts such as
"substantial assistance" or "an inability to perform" often enable companies to escape paying
claims. For example, requiring "substantial" assistance with eating could be interpreted as
requiring someone to cut up food on a plate and provide stand-by assistance in case of
choking or it could be restricted to requiring spoon-feeding ­ all the time. Not being able to
buy groceries or make meals is not considered an inability to eat or feed oneself. Thus,
simply moving into an assisted living complex, attending a day program or requiring help with
medications or bathing does not automatically (or necessarily) lead to benefits being paid.
Indeed, depending on interpretations, marginal gains in self-care capabilities of claimants
may even lead to the loss of benefits. (Similar problems often arise with individuals receiving
disability insurance benefits depending on contract wording and interpretation.)

As outlined earlier, there are also restrictions related to the cause of one's disabilities and the
location of care, details of which can only be found in the actual insurance contract. Some
policies are far more flexible than others related to the care setting for which benefits can be
used and one company has no restrictions on use of daily cash benefits. However, many
policies require that a facility, program, agency and/or person providing services are
government licensed or accredited. This is not always the case with private-pay options in
Canada. For example, some policies will only pay for care in facilities providing 24-hour
skilled nursing care by RNs, but such care is disappearing in Alberta and B.C. with the
substitution of Assisted and Supportive Living programs for traditional nursing home and

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
complex care clients. (RN availability on-site will depend on the model of staffing chosen by
the operator and/or health authority.) Unfortunately, many well-intentioned insurance agents
appear to be unaware of the changes in the Canadian continuing care landscape, many
which may limit the value of long-term care policies even more than in the United States.

The most discouraging aspect of these policies, particularly for those hoping these policies
might fill the gaps in public coverage is that the biggest selling feature - "care in one's own
home" in lieu of admission to a long-term care facility - is often an illusion.40 By the time
someone is disabled enough to qualify for benefits, he or she usually requires full-time
twenty-four hour around-the-clock care and oversight. This necessitates financial and human
resources far in excess of what most families and social networks can sustain except for a
very short period of time.

Most people purchase policies with lower daily cash benefits (or longer elimination periods)
due to the high premium prices. Such policies may only provide $20 to $100 or $200 per day,
but hourly fees for personal care aides (PCA) from private home health agencies in Canada
currently run around $18 to $22 dollars. RN care ranges from $43 to $48 per hour and LPN
care between $25 and $30. (Workers typically take home about half of these amounts and
usually do not have workplace health benefits.) If someone has complex care needs, families
often feel more comfortable with a more qualified care provider. A $100 daily benefit would
buy about four hours of LPN care at today's prices. Who pays or provides care for the other
twenty hours? Unless someone has a large family and social network at time of need (which
few people do) home care options are extremely limited. At best, such policies provide a
limited amount of respite for a family caregiver.

Inflation in the costs of care is an even bigger problem according to numerous U.S.
consumer analysts. Ten, twenty or thirty years from today, a $100 daily cash benefit might be
a drop in the bucket ­ barely enough to purchase an hour's worth of care, unless adequate
"inflation protection" is purchased at extra cost. Few Canadians seem to be making such
additional purchases. Indeed, according to LIMRA International, the average yearly premium
for policies purchased in Canada in 2003 was $1,356 per year, indicating correspondingly
low levels of coverage. The basic cost of a private-pay nursing home bed in one Edmonton
facility (The Devonshire) is already $5750.00 per month or about $190 per day.

40 See Consumer Reports Magazine "How to Judge a Policy", October 1997: page 44

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance

Having a private long term care insurance policy could also restrict one's access to public
benefits as provinces increasingly turn to public policies that make government a "payer of
last resort" - i.e. only providing public funding for services if no private insurer (or family) is
available to pick up the costs. In such situations, a low-value long term care policy may not
add benefits, but instead replace benefits or limit benefits.

Remarkably, it appears as though long-term care insurance policies often provide less choice
and less coverage than existing public programs in most (but not all) Canadian provinces.

How Affordable is Long Term Care Insurance?

Each company structures its policies somewhat differently, making head to head
comparisons difficult. Premiums for the three policies evaluated as part of this project
(Manulife, Sun Life/Clarica and RBC) start at around $100 to $130 per month for quite limited
benefits. More flexible or recommended policies have monthly premiums of about $250 to
$350 if purchased between the ages of 55 and 65. For a couple, this would translate into
$260 to $700 per month out of their family budget. Every five years, premiums can rise
unless one chooses a shorter fixed-term payment period with level and higher premiums.
Only one company, RBC, offers a cap on the amount that premiums will increase, but there
are trade-offs that are discussed later in this paper. Policies with more generous daily
benefits or purchased later in life can run to more than $1,000 per month.

Our analysis suggests that low premium policies provide false security. High premium
policies erode discretionary income and retirees' ability to maintain good health with proper
diet, recreational opportunities and good management of minor health conditions. The
challenge is often for someone to continue paying premiums until such as time as he or she
may need to make a claim. In the U.S., dramatic premium increases over time by some
companies, as well as company failures, have forced many seniors to let their policies lapse,
sometimes months away from admission to a nursing home. Similar problems have been
reported in Britain.41 Most respected U.S. sources suggest purchasing flexible policies with

41 See Guardian, "Watchdog to probe sales methods of long-term care plans FSA set to act following our
exposure of 100% premium increases", May 11th, 2005.


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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
short elimination periods (30 days) and good inflation protection; however, these policies are
often beyond the financial reach of families.

Some Canadian retirees may find themselves in a situation of double jeopardy. Many
provincial extended health plans and social security programs for seniors are decreasing
their scope of coverage or moving to family income testing. Therefore, retirees with incomes
above rather low "low-income" cut-offs may need to purchase additional private insurance to
cover more common risks and expenses required in either the long or short term ­ i.e.
prescription drugs, dental care, physiotherapy, vision care, ambulance services, assistive
devices and short-term home health aide or home nursing care. One such private plan with
three levels of coverage was reviewed for this project. Premiums for the lowest level range
from $62.10 monthly for someone aged 65 to 69 in B.C. ($96.80 for someone 90 plus) to $68
in Alberta, $71.70 in Ontario and $70.70 in the Atlantic provinces. Deluxe plan premiums run
from $118.40 per month for someone aged 65 to 69 in B.C. ($171.90 for someone 90 plus) to
$207.90 in the Maritimes. The yearly amount available for short-term home health or home
nursing in the basic plan is $1,000 (plus $1,000 each for prosthetic appliances and durable
medical equipment). In the deluxe plan, funding for each category rises to $3,500 per year.

According to Industry Canada's 2005 Consumer Trends Report, the median after-tax income
of elderly Canadian families was $31,103 in 2001 (almost unchanged from 1993) and the
median after-tax income of unattached seniors was $16,734 for women ($1395 per month)
and $18,232 ($1520 per month) for men. Increasingly, seniors are also expected to access
savings and/or assets tied up in their homes to cover medical bills and related expenses
through instruments such as reverse mortgages and lines of credit. But assets can quickly
disappear. Gary Keillor, an Edmonton-based financial planner explained the predicament
facing many retirees in the new millennium:42

"Most of my clientele are retired people. Many of them coming to me wanting
give up the hassle of home ownership - repairs and shoveling snow. They want
to sell their house and move into a condominium or one of the new rental
accommodations for seniors. When markets were treating us wonderfully this
was economically viable to do so. But these days with the volatility of the
market, the most you can get for a $165,000 tax paid capital investment from

42 Interview with Gary Keillor conducted by author for Eldercare on the Auction Block report, 2002.

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
the sale of your home with a fully guaranteed investment is about 4.5% paid
monthly. That's only about $619 dollars per month. After taxes they may be
lucky to have $500 per month. Add to that the Old Age Security of about $500
per month, and any CPP earnings and it's still not a lot, so it leads to people
going through their assets very quickly. With a longer life expectation and little
earning power, assets can disappear pretty quickly. I don't recommend people
sell their houses now. I encourage them to try and stay in their homes."

The Vanier Institute of the Family suggests there may even more financial challenges facing
baby-boomers and the next generation given growing debt loads. With the rising costs-of-
living and increasing out-of-pocket medical costs, it is also difficult to see how most retirees
would be able to maintain paying premiums. Recognizing the limited resources of many
retirees, some sales agents are encouraging high income working adult children to purchase
policies on a parent's behalf and pay the premiums as a way of protecting themselves from
having to leave a job in order to provide care should something unpredictable occur.

What are the Odds of Needing Nursing Home Care and Making a Claim?

Promotional materials often cite high odds of requiring a long episode of nursing home or
nursing home-type care, however agents themselves may be victims of bad information and
interpretations. For example, in a 2003 article, the founder of the Canadian Academy of
Senior Advisors is reported saying that "60% of all seniors will need long-term [residential]
care or home care, but less than one percent of those 65 and older have a policy."43 This
statement appears to imply that either most seniors would require nursing home care and/or
that long term care policies cover the costs of both short and long-term home care in all
situations. Another example can be found in an "Advisor's Guide" designed to motivate
agents and brokers to sell policies. It states: "Those who are 65 years old can expect, on
average to live in an institution for one year (men) and 2.3 years (women) during the
remainder of the lives." 44 This appears to imply that pretty well everyone over the age of 65
will require long term institutional care before they die ­ for a fairly long time.


43 See Mark Beaudry, "Products for Seniors: Long-term care is perfect, but poorly understood", The Insurance
Journal on-line, October 3rd, 2003.

44 See Manulife Financial, Living for Today. Caring for Tomorrow, Advisor's Guide to LivngCare: page 5.

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
Not so. Canada's population may be "aging", but disability is not a given. In fact, Canadian
seniors are overall healthier than ever and have less disability prior to death.45 Many people
die suddenly and not everyone living past the age of 65 will need extended institutional care
before they die. If "high needs" nursing home, extended hospital or palliative care is required
(i.e. the type of care situation and settings covered in typical long term care insurance
policies), for the vast majority it will be in the last few months or year of life.

In the United States, a recent 2002 InterCompany study of long term care insurance claims
by the U.S. Society of Actuaries found 75% of all claims (open and closed) had claims
duration of one year or less. Only 1.2% lasted more than five years. This is why policies with
longer elimination periods of 3 to 6 months (during which time the individual has to pay all the
costs of care) have lower premiums. Insurance companies do not disclose how many policy
holders die without making a claim, but many sell an optional benefit for return-of-premium-
paid should the policy not be used. Reliable and accurate Canadian data on claims or use of
licensed long term care facilities is difficult to find, however, available spot data from Alberta
and British Columbia reveals fewer licensed long term care beds per population, rising acuity
at time of admission and deceasing average lengths of stays.46 There are currently about
14,000 licensed long-term care facility beds in Alberta used for a variety of purposes
(including some short-term care) in comparison to an estimated 330,000 seniors.47

In contrast to the claims made by sales agents at the beginning of this section, Russell Todd,
an independent Calgary-based financial planner, suggests quite different odds. "While sales
of many of these policies play on the fear factor that we will all need a theoretical fortune to
pay for an episode of long term care, in fact, we think only about 10% of the population may
actually require such care." 48 While recognizing the need to protect such individuals and
families from the high costs of care, he is reluctant to encourage people to commit future
income they may need to live on in their retirement years to high premium insurance policies,


45 See Michael Rachlis et al in "Revitalizing Medicare: Shared Problems, Public Solutions", Tommy Douglas
Research Institute, January 2001.

46 For example, British Columbia (2002 Jeremy Tate and Andrew Butler paper entitled "What a Difference a Year
Makes") and Alberta sources (unofficial data from Capital and Chinook Health Authorities) suggest the average
length-of -stay has dropped more than half in recent years (down to 13 ­ 18 months in some cases).
47 See May 2005 Alberta Auditor-General's report on "Seniors Care and Programs".

48 Russell Todd, Personal telephone interview, summer 2005

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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
given the limited benefits. Instead, he suggests both putting aside some earmarked liquid
funds for more likely scenarios and making sure one's voice is heard in shaping the future of
the public sector given that most people will have little choice but to rely on the public sector.

3. Sampling the Fare: The Trade Offs Among Three Policies

In order to see just how useful these long term care insurance policies would be in the
current Alberta context for continuing or long term care situations, three were put to the test:
·
Manulife LivingCare
·
RBC Long Term Care Insurance, and
·
Clarica (now Sun Life) Long Term Care Insurance

Available information was obtained, reviewed and analyzed based on completed research
and interviews with informants. A summary of the features, trade offs and sample price
quotes from these different policies can be found in detailed chart in Appendix A at the end of
this paper. This chart demonstrates the complexities of these policies.

One of the big trade-offs among policies is that the more flexible a policy is related to the use
of cash benefits, the higher the price and greater potential for future premium increases. For
example, the RBC basic policy only covers "facility care", described as a licensed facility with
skilled care. While the company also offers a home care rider which can be bought at time of
purchase, this rider has a minimum two month elimination period, no optional inflation
protection and it only reimburses actual receipts for authorized services rather than full daily
benefits. Only these more limited home care benefits can be used in any "assisted living"
setting which most insurers (including RBC) consider someone's "home" rather than a long
term care facility even when the person is "placed" in such a setting by a public health plan
authorities as a substitute for nursing home care. Instead, home care benefits (to the
maximum amount purchased) can primary be used to pay for limited personal care and
clinical services currently provided or contracted by public health plans (i.e. regional health
authorities) in many settings. Depending on company and provincial/regional health authority
policies (related to who is the payer of first or last resort) funds may be used to "top up" or
add-on approved services.


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Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
However, RBC is the only policy reviewed which limits future premium increases to 50%
more than the original premium. There are no limits on premium increases with the
seemingly more flexible Manulife and Sun Life Policies. Given the performance of long term
care insurers in other countries (U.S. and England), there is a high probability that premiums
could rise substantially, forcing individuals to let their policies lapse before making a claim,
particularly if a company's investments do not do well.49

Another important factor is the responsiveness of an insurance company related to
processing and paying claims. While RBC appears to have the most restrictive policy of the
three compared, the company was also the most responsive to inquiries for information and
policy interpretations. Manulife was the least responsive and did not return repeated calls.

4. Critical Illness Insurance Substitutes ­ and Best Doctors Inc.

Critical illness policies are often sold as a substitute or companion to long-term care
insurance and many companies have leapt into the market since these policies were first
introduced into Canada. This type of insurance had its beginnings in South Africa with the
brother of pioneer heart transplant surgeon, Dr. Christian Barnard, who identified the need
for some protection from the non-medical costs associated with long periods of disability that
medical advances were creating. Similar to life insurance policies, critical illness policies pay
out the full face value of a policy (commonly $100,000) upon a confirmed diagnosis of one of
the defined illnesses or conditions listed in the policy - subject to a specified "survival period"
after the event. Survival periods are usually 30 days, but may be up to 6 months for a
diagnosis of paralysis or multiple sclerosis. The money can be used for any purpose,
however, if the policyholder dies before the survival period ends, no benefits are paid.

The most commonly covered diseases and conditions are cancer, heart disease and stroke
and 85% of claims in Canada reportedly arise from these conditions. Lists of covered
illnesses and conditions differ among companies, as do the definitions of conditions and
exclusions. Most policies are ten-year renewable policies. Premiums for $100,000 policies
range from about $300 to $900 per year for a 35-year-old non-smoking male or female, but

49 Commenting on a request by one company for approval of 35-50% increases in long term care premiums in
Pennsylvania (where approvals are required), an industry executive pointed out that "a 20% premium rate
increase is required for every one percent drop in interest rates." (Pittsburgh Business Times, 26.09.05)


33

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
are subject to increases. A recent case profiled by CBC Marketplace detailed the
unsuccessful battles of a small town farm couple in Saskatchewan taking on Combined
Insurance over continual increases in their critical illness insurance premiums after taking the
word of a salesman that premiums would not increase. Premiums began at $48 dollars a
month for each of them (for a $25,000 payout) but jumped to $58 dollars, then $75, in less
than three years. Despite letters, lobbies, the involvement of CBC Marketplace and a
meeting with the company's Vice President, nothing changed.50

Similar to long term care insurance policies; applicants with pre-existing conditions and/or a
family history of medical problems may have difficulties obtaining policies or policies to cover
certain illnesses. In a recent case profiled in the Edmonton Journal, a woman in her late 30s
in good health, whose father died of cancer and whose mother (still alive) was treated for
breast cancer 20 years ago, was sold a $100,000 face value critical illness policy for an initial
premium of $975 year. However, because of her family history, her policy excludes any
claims related to cancer, the very reason she first considered buying a policy.51

Although the stated purpose of these policies is to protect families from the high costs of non-
medical expenses at times of serious illness, policyholders are nonetheless encouraged to
use their lump sum payment or personal savings and credit to purchase expedited medical
assessments and treatment. This is done through a listed benefit provided in most critical
illness (and disability) policies for the services of a broker and case management company
called Best Doctors Inc. Using the enticement of a "free" second opinion based on a medical
chart review, the company will facilitate access to a roster of "best" Canadian and out-of-
country providers. It will also obtain quotes and arrange bookings. Services are described as
Interconsultation (medical review), FindBestDoc (physician locator) and FindBest Care (care
management). No information is readily available about the company's ownership, its
practices and financial relationships with the doctors or treatment centres in its referral
network. One agent bubbled over with enthusiasm describing this benefit:

"You can send them your chart and have Harvard trained doctors provide a
second opinion - or, and this is what most people would do, have them take

50 See CBC Marketplace, "Small town farmers take on big-city insurance company", January 8th, 2006.

51 Personal interview with policyholder J'Val Shuster, 2005


34

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
your file and farm it out to six different hospitals and send you the top three
quotes. You will have all the information you need about having a procedure
or operation, including the doctor's bio, where to stay and what it costs. We
know we have limitations in Canada. This allows us to jump the queue. It's not
so much about jumping the queue in Canada as forming your own queue by
going to the U.S."

Other professionals are less enthusiastic. Although a fan of critical insurance for its originally
intended purpose, Thais McKee, who has been in the business for almost two decades,
points out the downsides of this feature. "Prices of even the simplest procedures in the
States are far higher than the average purchased $100,000 benefit and claimants often end
up pulling additional money out of their RRSPs ­ perhaps up to $160,000 - and then are left
with nothing live on."52

Canadians seem to agree. Even a survey by Best Doctors found that most Canadians do not
want to be treated away from home.53 Currently, these critical illness insurance dollars can
also be spent a number of user-pay diagnostic and treatment clinics in Canada ­ usually
outside a patient's home province. This is due to a loophole in the Canadian Medicare
system. This loophole arose in response to aggressive cross-border marketing by a few
American and Canadian clinics in the early 1990s. These marketing practices led to some
provinces restricting inter-provincial and out-of-country portability by requiring residents to
obtain prior approval for elective treatments outside their home province.54.55 By limiting
coverage outside provincial boundaries, the field was left open for private clinics and
treatment centres outside Canada or in neighbouring provinces (depending on provincial
rules) to market private sales of otherwise publicly insured procedures to non-residents ­
leading to the growth of a new "medical tourism" industry.56


52 Personal interview with Thais McKee, 2005

53 Daniela Cambone reports on this in "Critical Illness insurance; Canadians speak out: We don't want
to be treated in the U.S.", The Insurance Journal on-line, February 2, 2004
54 Some provinces such as Alberta and Ontario also reduced benefits for out-of-country non-elective treatments.

55 For example, marketing by the Calgary-based Gimbel Eye Centre in Saskatchewan led to the Saskatchewan
government withdrawing former automatic benefits for out-of-province cataract surgeries in 1996.

56 See "Surgical Tourism and The Canada Health Act 1984", Surgical Tourism Inc., 2005.


35

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
The attraction for private clinics and doctors in Canada is the opportunities such a situation
presents for sales of procedures free from Medicare restrictions on extra-billing and public
oversight. Similar to the common business practice of a company requiring an employee or
contracted party to sign a "condition of employment" agreement that he or she will not market
the same services to the company's clients outside this relationship, some provinces have
legislation or regulations that restrict physicians moonlighting outside Medicare. Others do
not. More access to these critical illness insurance dollars may be a factor behind the current
push by private clinic owners, particularly outspoken members of CIMCA, an organization of
independent medical treatment centres in Canada, to allow private sales of Medicare-insured
procedures (by opted-in Medicare physicians) to residents of their home provinces.57

Critical illness insurance policies are particularly attractive to workers and small business
owners without sick time benefits, in that these policies provide a lump sum of money which
can be used to help keep a family or small business going during a time of illness, albeit
related to limited number of ailments. With two-income families now the norm in order to
maintain the same purchasing power families had in 1989, there is little flex in family budgets
to cope with the loss of one of these incomes through illness. Farmers, the self-employed,
small business and seasonal workers are particularly vulnerable.58

However, incentives inherent in these plans could have some undesirable consequences. A
2005 financial writer's column noted that these policies can create incentives to maintain
often futile treatment in order to keep an individual alive long enough to trigger an insurance
payout. The example given was a catastrophic stroke, where keeping that person alive
through the survival period of a critical illness policy would obtain a payout to help support a
surviving spouse. 59


57 The failure of governments to enforce legislative restrictions on sales to other third party payers has also
probably played a role. For example, at one time disability insurers primarily paid for income replacement, but
now many pay for expedited medical assessments and treatments. While these activities were kept relatively
quiet during the 1990s, the November 2005 Benefits Canada magazine openly promotes the role that private
case management companies plays in obtaining "front of line care" paid by disability plans.

58 The high number of these workers in Alberta may have influenced a recent 17-point proposal by the Calgary
Chamber of Commerce (Feb. 3rd, 2006). It calls for increasing public subsidies for individuals and small
companies to be able purchase higher cost expedited medical care from local suppliers outside Medicare.
59 See James Daw, "But will you live to collect it?" July 21, 2005.


36

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
The other risk with these policies is that the Best Doctors promotional material could
encourage frightened families to be rushed into spending their savings or the lump sum
benefit purchasing overpriced medical procedures or unnecessary and unproven tests and
treatments which do not deliver promised benefits. The need for immediate action following a
diagnosis is often not as "urgent" (or wise) as people assume.60 In such "critical" situations,
patients and families can be easily misled and held hostage for high prices and quick
decisions. In today's health care environment where commercial interests and objectives
have gained increasing influence, the need for caution is even more imperative.

The dramatic asymmetry of information between buyers and sellers and the potential "your
money or your life ­ or suffering" nature of such transactions are some of the reasons why a
high degree of societal intervention is considered essential in the area of sales of medical
products and services. These are also some of the underlying reasons why "normal market
forces" (which can positively influence access, fair pricing, responsiveness and quality)
simply do not exist when it comes to private medical markets. In the economics literature,
this phenomenon is described as "market failure" in meeting the needs of a population.61

5. Market Failure in the Private Health Insurance Arena

Faced with complex decisions in a world buffeted by a dizzying pace of technological and
social change, politicians (who also often suffer from asymmetry of information and pressure
from the vested financial services sector) have both deliberately and inadvertently shifted
significant new medical expenses to Canadian families, workers and employers. The
assumption has been that these costs will be picked up and paid through readily available
and affordable - and far less restrictive - private insurance dollars. However, this small study
of private long term care insurance policies in Canada provides compelling evidence of
widespread market failure in the private health insurance arena, similar to the phenomenon
found in private medical markets ­ for many of the same reasons.

For example, economic evidence has repeatedly demonstrated that in order for private
markets to be effective and efficient in meeting the needs of a population, purchasers need

60 See Dr. Susan Love's "Breast Book", multiple editions. Information at http://www.susanlovemd.com/

61 See J. Hurley, "An overview of the normative economics of the health sector", Chapter 2, Anthony J. Culver and
Joseph P. Newhouse (editors) Handbook of Economics, Volume 1, Part 1, Pages 55-118, Elsevier, 2000

37

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
to be able to make a reasonably informed choice among a number of competitively (similarly)
priced suppliers. These choices need to be based on accurate and understandable
information about the risks and benefits of a purchase without undue coercion or threat.
Effective remedies and redress mechanisms must exist to limit unscrupulous suppliers,
prevent harm from unsafe products and avoid wasted dollars. Shared rules and values, and
mechanisms to monitor and enforce these rules and values, are essential. There also needs
to be enough people who want (and can afford) to purchase the product or service at a price
that provides marginal benefits above the cost of production for suppliers in order to
encourage new market entrants and real competition.

Yet this analysis of long term care insurance ­ similar to many other evaluations of private
health insurance - identified a dramatic asymmetry of information, power and resources
between sellers and buyers. It also identified often misleading marketing (with implied threats
of misfortune for failing to purchase), high stakes, high prices and a lack of effective or timely
remedies for harm done ­ and limited value. Many people, particularly those most likely to
need protection (the product), are shut out of the market. It also appears as though this
method of financing can fuel a "seller's market" for care needs in which individual consumers
(patients) and families may be more subject to exploitative practices, high prices and
increased risks. Such situations require far more regulation and oversight than currently
exists to limit harm.

The underlying problem appears to be that in a voluntary insurance market, where many
people choose not to insure, few companies are interested, or able, to provide coverage to
higher-risk individuals at an affordable price. In fact, in order to keep policies affordable
enough to generate a sufficient number of purchasers to contribute to a shared pool of
money and earn enough profits for companies, significant public subsidies appear to be
required. These subsidies are paid in part to those who are "uninsurable" due to
circumstances beyond their control. Restricting widespread consumer access to alternatives
(such as public long term care benefits) may also be necessary to drive sufficient demand.

Universally accessible tax-funded "insurance" programs avoid this free rider problem of
people choosing not to insure (and then requiring services) as well as meeting the needs of
the uninsurable and those with changing employment circumstances by making participation
in financing care obligatory. Everyone contributes a little to a pool of money through taxes

38

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
(as they are able) over a long period of time in order to support the unfortunate few who
require significant services, recognizing that others contributing to the pool share an
obligation to support them should they become one of the unfortunate few.

UBC health economist Robert Evans reinforces these findings in a recent paper. In his
paper, he points out that in countries outside North America where commercial health
insurance plays a small but significant role, there are substantial regulatory regimes and
costs associated with managing these naturally dysfunctional markets. He also points out
that the reason universal public health systems dominate in industrialized countries, and the
reason why Canadians first introduced universal public programs for hospital and physician
care, is precisely because of the failure of private insurance regimes to effectively or
efficiently meet the needs of Canadian society.62 During the 1960s, 1970s and 1980s many
provinces voluntarily expanded universal programs to include coverage of a significant
portion of the costs of products and services (e.g. drugs, diabetic supplies, home care)
required outside public hospital walls - for the same reasons. Now both benefits for hospital
and physician services as well as these extended benefit programs are being eroded.

6. Conclusions

The findings of this brief study suggest that Canadians and public policy makers face a
conundrum. Clearly, there are no simple answers when it comes to meeting important moral,
social and economic imperatives related to helping families and communities weather the
storms of ill health, particularly in extended care situations. Increased reliance on private
long term care insurance does not appear to be an effective solution. There is no evidence
these products will effectively fill the growing gaps in benefits outside hospital walls, ensure
timely access to a wide array of required and desired medical goods and services or provide
good value for money. Furthermore, significant segments of the population cannot access
these products due to either price or pre-existing conditions.

However, continuing to shift increasing burdens and costs to only those individuals who need
care, and their families, also appears to be a flawed solution. This is supported by extensive

62 See Robert Evans, "Preserving Privilege, Promoting Profit: the Payoffs from Private Insurance" in Access to
Care, Access to Justice: The Legal Debate over Private Health Insurance in Canada, Edited by Colleen Flood,
Lorne Sossin and Kent Roach, University of Toronto Press, 2005.


39

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
research over the past decade by Janet Fast and Norah Keating et al at the University of
Alberta. Their research has demonstrated that shifting too many responsibilities for long term
care situations to families has significant hidden costs for family caregivers, the children,
spouses and employers of family caregivers, for society at large and even for recipients of
care. 63 Some of these costs include strained family ties due to forfeited income (and forgone
pensions) of family caregivers, deterioration of marital and family relationships and
deterioration of the health of informal family caregivers. Employers bear additional costs
when family caregivers come in late, leave early, drop back to part-time or give up work
entirely. Society bears extra costs through lost tax revenues, higher poverty rates, family
bankruptcies and new demands on the health system.

Shared public responsibility for the unpredictable and potentially crippling costs of a chronic
condition or long episodes of treatment, rehabilitation and palliative care (including lost
income) has always been the poor cousin within Canadian health care system ­ ameliorated
only by sufficient capacity within the public institutional sector for families to fall back on.
Now, this capacity has disappeared at the same time as family finances and capacity are
under stress due to rising costs for basic needs (e.g. utilities, transportation) and smaller
families. Instead of resolving problems, current strategies such as decreasing the
comprehensives of public care supports and shifting costs to affected families appear to be
creating a more costly and less responsive environment for all.

While there are serious challenges to ensuring Canadian society is able to effectively
manage the costs associated with illness or injury as well as avoiding harm from poorly
evaluated products and services or exploitative situations, this study suggests that sober
second thought needs to be given to the merits of encouraging families (or workers and
employers) to spend their dollars on expanding private health insurance alternatives.

A lot can be learned from reading the fine print in long term care insurance policies.

63See Janet Fast et al, "Conceptualizing and Operationalizing the Hidden Costs of Informal Eldercare", Final
Technical Report to the NHRDP Development Program, March 17th, 1997.

40

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
Selected References

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41

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
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42

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
Citizen Watch on Continuing Care in Alberta web site,
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Clarica web site http://www.clarica.com/e/index.asp

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Combined Insurance Company of America (Part of Aon) web site http://www.aon.com

CompCorp web site http://www.compcorp.ca/

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Dwyer, Steve, Flying Below the Radar, Insurance Networking News, November 2002.

43

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
Eales, Keating and Fast, Analysis of the impact of federal, provincial and regional policies on the
economic well-being of informal caregivers of frail seniors, prepared for F/P/T Ministers, 2001.

Evans, R., PhD, Preserving Privilege, Promoting Profit: the Payoffs from Private Insurance, Access to
Care, Access to Justice: The Legal Debate over Private Health Insurance in Canada, Edited by
Colleen Flood, Lorne Sossin and Kent Roach, University of Toronto Press, 2005.

Exploring the 70/30 Split: How Canada's Health Care System is Financed, Canadian Institute of
Health Information (CIHI) 2005.

Families USA Foundation web site http://www.familiesusa.org/

Fast, Keating, Oakes, Conceptualizing and Operationalizing the Hidden Costs of Informal Eldercare,
Final Technical Report to the NHRDP Development Program, March 17, 1997.

Flood, C., Chaoulli's Legacy for the Future of Canadian Health Policy, draft article, Jan 20th, 2006,
personal files.

Forget, Evelyn L., Deber, Raisa, and Roos, Leslie L. Medical Savings Accounts: Will They Reduce
Costs?, Canadian Medical Association Journal 167(2): 143-147, 2002.

Frontlines of Disability, Benefits Canada, November 2005, pages 86-91.

Fuller, Colleen, Home Care; What We Have, What We Need, prepared for the Canadian Health
Coalition, May 2001.

Fuller, Colleen, Caring for Profit, New Star Books and The Canadian Centre for Policy Alternatives,
Ottawa, 1998.

Great-West Life Enters Marketing Agreement with Aflac Insurance Company of Canada, Business
Wired, Jan. 11th, 1996.

Harrington, Niehaus, Kleffner, Neilson, Risk Management and Insurance; Second Canadian Edition,
McGraw Hill Ryerson, 2004.

How to judge a policy: Long Term Care Insurance Special Report, Consumer Reports Magazine,
October 1997.

Ingle Life and Health Makes Way for Trent, Ingle International, http://www.ingle-international.com

Kerton, Robert, PhD. Consumers Assess Mergers Among Big Banks, Presentation by the Consumers'
Association of Canada to the Minister of Finance, 2003-12-31,
http://www.consumer.ca/pdfs/bank_mergers.pdf

Kerton, Robert, PhD, This Deregulation May Be Hazardous to Your Health, Journal of Consumer
Affairs, American Council on Consumer Interests, 1997.

Krokas, M., Over 21,000 critical illness policies sold in 2000! Premiums up 63%!, The Insurance
Journal on-line, April 2, 2001.

Kushner, Carol, Interview with Robin Ingle, President of Ingle Insurance (Ontario), April 2005.

Letter to Premier Klein from Calgary Chamber of Commerce re: Third Way Call to Action, Feb. 3rd,
2006, Calgary Chamber of Commerce, http://www.calgarychamber.com/


44

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
LifeAdvance Brochures, Canada Life, November 2004.

Lifecheque Product Summary, broker information, Manulife Financial.

LIMRA International web site https://www.limra.com/default.aspx

Long Term Care Insurance Application, Underwriting Guidelines and Specimen Standard Contract,
Representatives Guide, Brochure, RBC Insurance, current 2005.

LivingCare Underwriting Guide and Product Summary, Living Care Application for Long Term Care
Insurance, Manulife Financial, 2002 and 2005.

Long Term Care Group Inc. web site http://www.lteg.com

Long Term Care Insurance Fact Sheet, Clarica, 2001, distributed by Investors Group.

Long Term Care Insurance in Canada: What is it and do I need it?, The Council on Aging of Ottawa,
2002.

Long Term Care Insurance: How to Judge a Policy, Consumer Reports, October 1997.

Long Term Care International Forum web site http://www.ltcif.com/index.html

M ­ THAC (Medicare to Home and Community Care) web site http://www2.m-thac.org/cgi-
bin/WebObjects/mthac.woa

Malhotra, H., Canadian Bank Act Revision to Target Transparency, Epoch Times Washington, D.C.
on-line Jan. 11th, 2006, http://english.epochtimes.com/news/6-1-11/36778.html

Mamula, Kris B., Long-term care coverage becomes more costly: Falling interest rates, more claims
prompt rate increase, Pittsburgh Business Times, September 26th, 2005 print edition.

Manulife CEO plots course for growth in John Hancock's home town, The Boston Globe, May 11th,
2005.

Manulife Financial completes three significant acquisitions, Press Release, Manulife Financial web
site, April 2, 2001

Manulife Financial web site http://www.manulife.ca/canada/canada1.nsf/public/homepage

Medical Expense and Disability Tax Credits Expense Deductions IT-519R2, CCRA, 2005.

Medical Insurance Bureau (MIB) Inc. web site
http://www.mib.com/

New Insurance Helps Canadians Prepare for Critical Illness and Long Term Care, Press Release,
Horizon Planning Group, January 24th, 2005

OECD Health Project (ed.) 2004, Private Health Insurance in OECD Countries, OECD Publications,
Organization of Economic Co-operation and Development, Paris, September 2004.



Pasternak, James, It's not just about life Insurance, (www.50plus.com )

Pape, Gordon, Long Term Care Insurance: Yes or No? (www.50plus.com)


45

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance
Penncorp Life Insurance Company web site http://www.penncorp.ca/

Pennsylvania Insurance Department web site http://www.ins.state.pa.us/ins/site/default.asp

Power Corporation of Canada Organizational chart,
http://www.powercorporation.com/index.php?lang=eng&comp=powercorp&page=orgchart, 2005.

Pratt, Sheila, Public deserves to be part of the decision on future of health care, Edmonton Journal,
November 13th, 2005

Private health cover; not all umbrellas are the same, CHOICE magazine on-line, Australian
Consumers' Association, August 2000,
http://www.choice.com.au/viewArticle.aspx?id=101689&catId=100501&tid=100008&p=1

Private Health Insurance in OECD Countries, Policy Brief, The Observer, Organization for Economic
Co-operation and Development, September 2004

Proceedings of the Standing Senate Committee on Banking, Trade and Commerce, Issue 32-
Evidence, October 22, 1998 (p.m.) and October 23rd, 1998 (p.m.)

RAPP (Research on Aging, Policies and Practices) web site http://www.hecol.ualberta.ca/rapp/

RBC Insurance (RBC Financial Group) web site http://www.rbc.com/rbcinsurance/

RFP Number 05-190, Health Benefit Design Options, Alberta Health and Wellness, 30/09/05.

Roseman, Ellen, How to find a Financial Advisor you can trust, Toronto Star, Jun.19, 2005.

Roseman, Ellen, Sisters hope to warn about long term care insurance, Toronto Star, April 17th, 2004.

Royal Commission on Health Care (Hall Commission) 1961 ­ 1964, Health Canada on-line,
http://www.hc-sc.gc.ca/hcs-sss/com/hall/index_e.html

Retired Company Tracer, Cowper Financial Corporation, http://www.cowperfin.com/retired.html

Shifting to Home and Community-based Care, Women and Health Care Reform, The Canadian
Women's Health Network, http://www.cwhn.ca/indexeng.html

Said, Carol, Guidelines for Shopping for Long-term Care Insurance, San Francisco Chronicle, May 22,
2005

Sroujian, C., Genetic testing creeps into underwriting, The Insurance Journal, October 2nd, 2003. .

Submission on the U.S. Patriot Act made to the British Columbia Privacy Commissioner, Canadian
Internet Policy and Public Interest Clinic, Aug. 2nd, 2004, University of Ottawa, www.cippic.ca/

Sun Life Financial web site http://www.sunlife.com

Sun Life Financial meeting Canadians' growing need for Long Term Care Protection, Press Release,
Toronto, April 6th, 2005.

Surgical Tourism and The Canada Health Act 1984, Surgical Tourism Canada Inc.,
http://www.surgicaltourism.ca

Task Force on the Future of the Financial Services Sector in Canada, Final Report, 1998,
http://www.fin.gc.ca/taskforce/index_e.htm

46

Missing Pieces of the Shift to Home and Community Care
Reading the Fine Print: Long Term Care Insurance

Tate, J., Butler, A., What a Difference a Year Makes, Assisted Living: Opportunities and Risks, paper
presented to SFU Conference on Health, Housing and Seniors, Vancouver, June 2002.

Taylor, D,, Study of Long Term Disability Claims Experience of Ontario Cancer Patients, Overhead
Presentation, 2005, personal files.

The new health insurance rebate; an inefficient way of assisting public hospitals, FORUM, Medical
Journal of Australia, May 1 2000, pages 339 ­ 414.

The Role of Disability Income Insurance Plans in Canada's Disability Income System, Submission to
the Commons Sub-Committee on the Status of Persons with Disabilities, The Canadian Life and
Health Insurance Association Inc., May 2003.

The Canadian Underwriter web site http://www.cdnunderwriter.com/default.asp

The Consumer Trends Report, Office of Consumer Affairs, Industry Canada, 2005,
http://strategis.ic.gc.ca/epic/internet/inoca-bc.nsf/en/ca02113e.html

The Insurance Journal web site http://www.insurance-journal.ca/index.html

The Stats, Manulife Financial, Information for brokers, obtained from broker, 2005.

Thomson, Graham, When's a five-minute background check too much? Apparently, when Alberta
wants to hire a private health insurance consultant, Edmonton Journal, November 5th, 2005

Todd and Associates Financial Knowledge Inc. web site http://www.todd-associates.com/

Trends in Uses of Health Care Services by Elderly in Alberta, The Alberta Centre for Health Services
Utilization Research, 1999, http://www.health.gov.ab.ca/Key/longterm/aging.pdf

Turchansky, Ray (Free-lance), Private health-care options closer to reality; Critical illness and long-
term care insurance may be prudent in light of recent court ruling, Edmonton, Journal, June 29th, 2005.

U.S. Society of Actuaries web site http://www.soa.org/ccm/content/

Vanier Institute of the Family web site
http://www.vifamily.ca/

Velia, M., Faubert, R. Adapting to Change, Adapting to change: The life and health insurance industry
amidst a changing financial services landscape, Statistics Canada, June 2002.

Watchdog to probe sales methods of long-term care plans FSA set to act following our exposure of
100% premium increases, Guardian, November 5, 2005.

Workplace and Employee Survey Compendium, Statistics Canada, 2001

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