By John Hilton
November 15, 2018
A long-term care
insurance company liquidation case could undermine the confidence in the entire
insurance industry, according to the American Council of Life Insurers.
Two coalitions of
health insurers are asking the Pennsylvania Supreme Court to limit policyholder
claims against Penn Treaty and American Network to 30 days after the date of
liquidation.
Allowing that limit
would threaten the integrity of every life insurance and annuity policy, the
ACLI said in a letter to state regulators.
“There would be
nothing to prevent a future court, or state guaranty association(s) for that
matter, from applying the decision not just to long-term care insurance
policies, but to all types of life and health insurance policies and annuity
contracts,” wrote Wayne Mehlman, ACLI senior counsel for insurance regulation,
in a letter to the National Association of Insurance Commissioners.
Penn Treaty and
American Network have been in court-supervised rehabilitation since 2009 due to
a projected inability to meet future obligations on long-term care policies. On
March 1, 2017, the companies were placed into liquidation, which led to the
current issue before the court.
The health insurer
coalitions are asking the court to apply a 2014 Pennsylvania Supreme Court
decision -- Warrantech vs. Reliance Insurance Co., an insolvent property and
casualty insurer -- in two ways, according to Mehlman.
• Denying policy
claims for benefits that have accrued more than 30 days after the liquidation
date, except for claims that are covered by the state’s life and health
insurance guaranty association.
• Preventing the assets of the insolvent estates from being used to pay any benefit claims that have accrued more than 30 days after the liquidation date and exceed the applicable guaranty association coverage limits (“uncovered benefits”).
• Preventing the assets of the insolvent estates from being used to pay any benefit claims that have accrued more than 30 days after the liquidation date and exceed the applicable guaranty association coverage limits (“uncovered benefits”).
An NAIC task force
is expected to discuss the issue during its meeting Friday in San Francisco.
ACLI referred the matter to the NAIC Receivership and Insolvency Task Force via
Mehlman’s letter.
LTCi
Guaranty Terms Revised
The NAIC has
already adopted one model law change
out of the Penn Treaty insolvency.
In December 2017, the NAIC adopted revisions to its Life and Health Insurance Guaranty Association Model Act (520) to “address issues and concerns with guaranty fund coverage and assessments for any future long-term care insurance insolvencies.”
In December 2017, the NAIC adopted revisions to its Life and Health Insurance Guaranty Association Model Act (520) to “address issues and concerns with guaranty fund coverage and assessments for any future long-term care insurance insolvencies.”
The changes broaden
the assessment base for LTCi insolvencies to include both life and health
insurers and splits assessments between both industries. Previously, the health
industry was responsible for LTCi insolvency assessments.
So far, at least 12
states have adopted the 520 model law changes.
A coalition of
health insurers helped bring these issues to the NAIC’s attention and assisted
with the solution, said Chris Peterson, a principal at Arbor Strategies, a
consulting firm specializing in health care and insurance regulation issues.
The coalitions of
major health insurers want the NAIC to stay out of the current Penn Treaty
litigation.
“The specific
matters related to that litigation are rightfully before the Pennsylvania
courts for determination,” Peterson wrote in a Sept. 28 letter. “It is
premature for NAIC engagement on the specific issues surrounding this
litigation and, in our view, the NAIC’s involvement in this matter encroaches
on state authority to administer estates in a manner that best meets the needs
of impacted citizens.”
The Receivership
and Insolvency Task Force discussed the Penn Treaty issues during an Oct. 1
conference call.
The Pennsylvania
version of the Insurer Receivership Model Act does not include the section that
allows continuation of coverage beyond 30 days until a date proposed by the
liquidator and approved by the receivership court, said Patrick Cantilo during
the call.
Cantilo, of Cantilo
& Bennett, an Austin, Texas law firm, served as special deputy
rehabilitator on the Penn Treaty/American Network case from 2012 to 2017.
In a letter to the
task force, Cantilo ripped the health care coalition.
“What is really
going on here is that the Coalition on whose behalf Mr. Peterson writes have
seized upon an unfortunate lack of clarity in a seldom-used provision of
Pennsylvania law to sponsor a denial of policyholder protection unprecedented
in the annals of U.S. insurance regulation,” Cantilo wrote.
Future options the
task force could consider may include guidance to the states or a request for
the NAIC to submit an amicus brief, members discussed on the call.
Like many insurers,
Penn Treaty and its sister company, American Network, underpriced LTCi policies
and ran into significant financial issues. Policyholders are due about $1.5
billion in benefits, Cantilo estimated.
The court has not
yet ruled on the case.
InsuranceNewsNet Senior Editor John Hilton has covered business
and other beats in more than 20 years of daily journalism. John may be reached at john.hilton@innfeedback.com.
Follow him on Twitter @INNJohnH.
© Entire
contents copyright 2018 by InsuranceNewsNet.com Inc. All rights reserved. No
part of this article may be reprinted without the expressed written consent
from InsuranceNewsNet.com.
No comments:
Post a Comment