Pending in Pennsylvania: Updates on ‘those’ LTC insurance companies

Aug. 22, 2019: Months have quietly passed for three Pennsylvania long-term care insurance companies seeking to resolve their solvency status. Here’s a quick look at where they stand even as a fourth in liquidation, Penn Treaty* is undergoing benefit battles between health insurers and its liquidators over funding benefits beyond the guaranty associations. 

While regulators continue to work with the other state-domiciled distressed LTC companies, the lack of a public and regulator-approved plan for the largest of the three points to unresolved issues at a time when its solvency is in question.

Senior Health Insurance Company of Pennsylvania, commonly known as SHIP,  was running a surplus deficit of $466.9 million at year-end 2018, an amount which analysts say is only growing. When the statutory numbers revealing the ballooning deficit came in at the beginning of March, it had to submit a plan to the Pennsylvania Insurance Department, which was expected in 90 days. Thus far, that has not happened. 

A spokeswoman for the insurance department said Aug 21 that SHIP “has not submitted a plan that remedies the shortfall. We continue working closely with the company on a plan to resolve the deficit issue. “

As Fitch Ratings shared in an Aug. 20 note on overall LTC industry health, SHIP is among a few LTC companies with below-average reserve adequacy. SHIP, the former Conseco Health Insurance Co., became an independent trust  in 2008, with $3 billion in reserves to its name. Governed by five trustees including former insurance commissioners, SHIP was designed to run off the closed book of LTC business.  

 Fitch warned in its research note that it sees SHIP “as remaining on-track to becoming the industry’s next insolvent LTC writer requiring guarantee fund assessments from the industry.”  In various state rate filing requests seeking 40% premium increases, SHIP reported it had 76,165 active member policies comprised of 70 distinct policy forms  including home health care, nursing home care, and comprehensive plans, covering both home health care and nursing home care back in 2016.

SHIP’s policies “are among the oldest in the industry with much richer benefit schedules than would be found in more recently designed policies,” it stated in a rate filing in Pennsylvania a few years ago

Fitch believes that in the industry overall, “statutory LTC reserves continue to be based on a number of overly aggressive assumptions, despite recent risk management efforts taken by insurers to strengthen reserves through the implementation of premium rate increases and benefit reductions on legacy-related blocks of business.”

The petition for liquidation for another distressed LTC insurer in Pennsylvania, Senior American Life Insurance Co., or SAIC, was originally filed June 18. This follows from a case management order issued by Pennsylvania’s Commonwealth Court. An amended petition was filed July 31.  The court issued an order on  Aug.15, 2019 with an effective liquidation date for SAIC of Sept. 3, 2019.

The spokeswoman for the Pennsylvania Department said that the SAIC petition for liquidation is proceeding in Commonwealth Court and that the company has consented to liquidation. [Post-August UPDATE: SAIC Liquidation Date: Sept. 3, 2019]

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The third Pennsylvania long-term care insurer under solvency scrutiny is SAIC’s affiliated company, AF&L. The AF&L petition for liquidation has been stayed and the regulators in the state “continue to work with the company for a resolution,” the department’s spokeswoman said.

The Pennsylvania Insurance Department petitioned for liquidation of both SAIC and AF&L in April 2018. Both AF&L Insurance and SAIC have the same address in Fort Washington, Pa. and have the same CEO, Benedict Iacovetti, named. They are both subsidiaries of AF&L Inc. 

*Penn Treaty refers to the combined Penn Treaty and American Network insurers. On March 1, 2017, the Commonwealth Court of Pennsylvania issued orders placing them in liquidation.