Pennsylvania’s insurance commissioner has filed rehabilitation plans for Penn Treaty Network American Insurance Co., and its subsidiary, American Network Insurance Co., that includes cuts to benefits, rate increases and suspension of agent commissions to shore up its long-term care insurance (LTCi) business and protect consumers.
“Policyholders are our first priority,” said Insurance Commissioner Michael Consedine, saying the plans submitted to a Pennsylvania court are designed “to minimize the amount of financial hardship to policyholders.”
Penn Treaty is an Allentown, Pa.-based provider of long-term care, disability and Medicare supplemental insurance. The company went into receivership by the state in 2009, and a request by Consedine to liquidate the company was denied by a state court last year.
Only LTCi products and policyholders would be affected by the proposed plan.
Penn Treaty and ANCI are credited with helping to establish the country’s long-term care insurance industry. The company’s ran into trouble when regulators determined sales and assets could not support obligations.
In his application for plan approval, Consedine outlined several significant modifications for Penn Treaty long-term care insurance policy benefits, including increased elimination periods, reduced maximum benefit periods, reduced or eliminated inflation protection, modified benefit triggers, and the opportunity for policyholders to opt-out of the plan and receive a paid-up policy with reduced benefits or cash in return for foregoing all other rights against the company.
In addition, Consedine proposes the suspension of payments of commissions to agents, premium taxes and guarantee association assessments.
Suspended payments could be restored “in the event the financial condition of the company permits,” the application states, noting that other sources of revenue such as the sale of certain assets and administrative services.
According to documents filed with the court, an actuarial analysis shows that Penn Treaty faces a deficit of about $2 billion, and the company has less than $1 for every $3 that it should hold as reserves.
According to the documents, if benefits are not decreased, premiums could rise by as much as 300% depending on the nature of the policy, when it was written, and in which state it was written.
The plan is open for public comment, and requires court approval before being implemented.
The Pennsylvania Insurance Department also submitted an application with the court to create a policyholder committee to ensure client input.