Penn Treaty and Conseco Long Term Care Insurers In the News
Long term care insurance policyholders for two companies with ties to Pennsylvania will need to stay tuned for developments relative to their long range fiscal health.
On January 6, 2009, the Pennsylvania Insurance Department issued a Press Release, “Insurance Department Takes Control of Struggling Allentown-based Insurer & Subsidiary,” relative to Penn Treaty Network America Insurance Company and its subsidiary, American Network Insurance Company.
On December 3, 2008, the Wall Street Journal reported in an article “Insurer Casts Off Long-Term-Care Policies,” that Conseco, Inc. transferred many of its long-term care policies to a new state-supervised nonprofit trust, Senior Health Insurance Co. of Pennsylvania. Conseco, Inc., as reported by the article, is headquartered in Carmel, Indiana, but its Senior Health long-term care unit was based in Pennsylvania making it subject to Pennsylvania’s state regulators.
What this means is that Pennsylvania’s government is going to take a more prominent role in the running of these companies which placed some of the older long term care insurance policies.
Both Penn Treaty and Conseco failed to take into account several later developments. For one, policyholders lived longer than expected. Then, they generated higher medical expenses than anticipated. Finally, more policyholders stayed with the policies over the years meaning that the companies would eventually have to pay out. Early long term care insurance underwriting anticipated that many policyholders would let their policies lapse before collecting.
Long term care insurance policies are purchased prior to disability to defray or help to defray the cost of long term skilled nursing care and, now increasingly, for assisted living and in-home care.
As described in the Wall Street Journal article, about eight million Americans own a long term care policy. Most are purchased by people in their 50’s and 60’s for protection against claims that may occur decades later.
In 2000, the National Association of Insurance Commissioners issued new rules to stabilize long-term care insurance policies. Insurers limited benefits in some cases, tightened eligibility and underwriting requirements for new applicants, and raised premiums. Many older policies, however, including many of Penn Treaty’s and Conseco’s policies, continue in effect.
Penn Treaty. Penn Treaty is undergoing a process described by the Commonwealth as a “rehabilitation.” The order places the company under the direct statutory control of the Pennsylvania Insurance Department with explicit authority to preserve the company’s assets and oversee its financial situation and operations while continuing to pay policyholder claims. Pennsylvania is careful not to describe this action as bankruptcy.
Policies remain in effect and premiums must continue to be paid in order to maintain coverage. For more information, readers can consult the website of the Pennsylvania Insurance Commission at www.ins.state.pa.us. Scroll down to “What’s Hot” for the Press Release, and consult “Frequently Asked Questions.”
Conseco. Conseco’s arrangement involved transfer of policies regarded as a “drag on the company’s earnings” (Wall Street Journal) to Senior Health Insurance Co. of Pennsylvania. The trust is to pay claims from a pool of funds transferred to it from Conseco but, according to the Wall Street Journal report, A.M. Best Co., the insurance-rating firm, warned that the trust may need to raise rates for policyholders and reduce benefits since there is no access to capital other than that transferred.
If the Senior Health Insurance Co. trust fund were to become insolvent, some policyholders may need to depend on the Pennsylvania state guaranty association to pay claims up to the limits set by state laws. Both Conseco and Penn Treaty policyholders should also follow closely any developments regarding their companies.
Conclusion. The Penn Treaty and the Conseco actions place their policyholders in a position where they could eventually need to claim against the State Guaranty Association in order to recover. Some State Guaranty Associations guarantee long term care insurance policies up to $100,000, some up to $300,000 and six cover policies up to at least $500,000.
It would seem that Conseco policyholders are more likely to be faced with earlier higher increases in premiums and change in policy terms. Penn Treaty’s “rehabilitation” will place on hold lawsuits that were brought against it. Neither of these companies is currently placing long term care insurance policies.
For those who are seeking to invest in long term care insurance now, it is important to explore the fiscal solvency of the companies in advance. A.M. Best is a frequently used rating source. Some companies that have multiple lines of business such as Genworth and not just long term care insurance seem to be better able to weather the storm. Other companies should also be explored with a knowledgeable agent.
About the Author Janet Colliton
Esquire, Colliton Law Associates, P.C. Janet Colliton has practiced law for over 38 years, 37 of them in Chester County, Pennsylvania, a suburb of Philadelphia. Her practice, Colliton Law Associates, PC, is limited to elder law, Medicaid, including advice, applications and appeals, and other benefits planning including Veterans benefits, life care and special needs planning, guardianships, retirement, and estate planning and administration.