Penn Treaty plan would lower benefits, halt agent commissions for LTCi


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.

Michael Consedine

Michael Consedine

“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.

6 Responses

  1. HarryWitsen Says:

    Would I not be better served by the Company going into bankruptcy and then I would be covered by the New Jersey Guaranty Fund?

  2. David Malm Says:

    Why was this company permitted to carry out such a scam for so long? They previously increased premiums and cut benefits and appear to be going to be permitted to do this again. The state guaranty funds appear to be a much safer approach for the already scammed policy holders. The officers and other executives and sales people of Penn Treaty should be put in prison and the insurance examiners should be tried to determine if they were under the influence of Penn Treaty.

  3. Gerald Bellotti Says:

    With regard to Mr. Witsen’s comments, policy holders in each state where policies were written would be covered by that state’s Guarantee Fund. Coverage does have maximum payouts for each contract, but I am sure this would be better than what the “plan” is proposing. The judge who denied this option should also go to jail

  4. Tom Says:

    To insurance Michael Consedine: Please outline your plans for civil and/or criminal charges that the state is considering against the CEO and other corporate officers of this company.

  5. Don Gottwerth Says:

    This dragged out issue raises my hypertention, as my wife and I have been
    in this plan here in NJ for several years. About either late February or early March someone representing the company (or Pa?) called and took a survey. I remember the last question, like would I accept a payment or buy-out of $13,000 to which I gladly said yes, but the last I heard and
    could not get Penn Treaty to tell me where are these options? I believe I was treated out of a payment I made, in one case mistaking my wife’s account number on one of them, but they never rectified the error and said I missed the payment….this take-over is mismanaged and I blame Pennsylvania~!! I want my money back! You mean if I were to use the policy, I could be paying out $5,000 more a month?!!

  6. David Malm Says:

    The perodic correspondence from Penn Treaty (and the Penn Treaty website) continue to describe the back and forth correspondence from lawyers but do not offer any substantial information to policy holders. Any remaining financial resources will probably be consumed by the lawyers and Penn Treaty will continue to encourage policy holders to keep paying their premiums for policies that Penn traeaty will likely not honor. Why must policy holders have such great uncertainty about policiies that they may have been paying for for decades? Why can’t the Federal Government intervene to end this continuing scam and to give policy holders confidence that their policies will be honored?

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