Aug. 4, 20202–The National Organization of Life and Health Insurance Guaranty Associations filed to intervene July 30 in the rehabilitation plan for Senior Health Insurance Company of Pennsylvania, or SHIP. That plan was filed on April 22 by the Pennsylvania insurance commissioner, Jessica Altman.
The national guaranty association system is focused on SHIP’s proposed rehabilitation plan because of the possibility of a potential liquidation and the impact on the GA system, namely statutory obligations that could reach the hundreds of millions of dollars.
SHIP has a shortfall of between $500 million and $1 billion now, and if the rehabilitation plan can’t be eliminated,liquidation may be inevitable,” NOLHGA warned.
Its new filing to the Commonwealth Court of Pennsylvania, NOLHGA also pointed to what it called “uncertainties” about of the proposed rehabilitation plan, which has not yet been okayed by the court.
Generally, SHIP’s rehabilitation plan calls for benefit reductions and/or premium rate increases for policyholders in a attempt to keep policies in their hands even if they pay more and/or have benefits slashed — in the arena of LTC insurance payouts from beleaguered companies, there is only so much money to go around, as state regulators and policyholders have discovered, decades too late.
Decades-old LTC insurance policies were under written by life insurance companies with a different set of actuarial assumptions that proved drastically off mark and under an environment of rising interest rates.
NOLHGA also told the court that its limited intervention, if permitted, “would facilitate the efficient administration of this case.” When LTC companies liquidate, life insurers and many health insurers must foot the bill for the state guaranty funds. Some states have worked out a system where this is evenly divided, but it has still been a thorny issue of responsibility in the overall insurance industry.
There is also a chance the plan is not approved, in addition to the chance of its failure. In either scenario, the guaranty funds would need to step in to provide funds to policyholders up to the statuary limited mandated by individual states. These limits typically reach $300,000 on a state-by-state basis, sometimes more or less, but many times far short of the needed funds for elders’ long term care coverage needs.
“To the extent GAs provide coverage to SHIP policyholders, GAs would have claims against the SHIP estate,” NOLHGA argued, noting that the rehabilitation plan references guaranty associations 65 times.
“It is in the best interests of SHIP’s approximately 45,000 policyholders that the GA system be fully apprised of and potentially participate in the receivership proceedings related to SHIP,” the Virginia-based association argued.
If indeed the GAs are triggered by liquidation, NOLGHA should be there “to provide protection to policyholders, such benefits may be delivered, in as coordinated and comprehensive manner as is practicable, and with as little disruption as possible to policyholder services and claims payments,” it said.
Outside counsel for NOLGHA at the law firm Faegre Drinker Biddle & Reath LLP stated in the filing that it had discussed NOLHGA’s intervention with Patrick Cantilo, who serves as the special deputy rehabilitator of SHIP, and said that he does not oppose NOLHGA’s application for limited intervention.
The case management order with deadlines for review for the rehabilitation plan was filed June 12.