Month: November 2021

Breaking–will be updated with any comments, new information

Update: Nov. 16, 2021: States have answered the Nov. 15th deadline to opt in or out of the rehabilitation. While no count is available at this time to us, some opposing states are electing to not recognize the two choices given, with South Carolina calling the rehab plan a “tragic injustice” for its state’s policyholders and filing an injunction, claiming the”punitive nature of opt-out provision not only renders this feigned deference to state laws meaningless but it already increases the already adverse effect of the plan on affected policyholders.” Once rates are imposed on states refusing to accept the rehab plan, expect the issue to go to court, backed by state attorneys general. For more before further court action, see (Paywalled) article: https://www.lifeannuityspecialist.com/c/3408034/434274?referrer_module=searchSubFromLASP&highlight=SHIP

Nov 12, 2021 — Nineteen state insurance department commissioners, including the president-elect of the state regulators’ association, intend tp file legal letters of support — amici briefs — on behalf on the three intervening states who oppose the rehabilitation plan of insolvent Senior Health Insurance Company of Pennsylvania and want it to go into liquidation, instead, to support policyholders.

Their filing Nov. 12 with the Pennsylvania Supreme Court comes three days before the Nov. 15 deadline for states outside of the commonwealth to officially opt-out of the rehabilitation plan for the failed long-term care insurer. The filing demonstrates that almost half the U.S. states, or 22 jurisdictions oppose the SHIP rehabilitation in favor of a liquidation, which they see as inevitable anyway., At least one has already signed a letter to opt out.

“The instant appeal involves issues of due process and constitutional importance to proposed amici, policyholders of SHIP, and policyholders of future insurer insolvencies. The state-based system of regulation exists for the protection of insurance policyholders,” the 19 states said in their filing.

Two of the state commissioners among the 19 have sued the rehabilitators who are led by Pennsylvania Insurance Commissioner Jessica Altman. Louisiana Insurance Commissioner Jim Donelon‘s lawsuit against the SHIP plan and its architects was dismissed and South Carolina Insurance Director Ray Farmer’s case is pending instate court after being remanded by federal court.

Idaho Insurance Director Dean Cameron president-elect of the National Association of Insurance Commissioners and Connecticut Insurance Commissioner Andrew Mais is NAIC Secretary-Treasurer, two of the 19 states, have both signed the letter intending to file amici on appeal, supporting the intervenors against the rehabilitation plan. Both Donelon and Farmer, as well as intervening state leader, Maine Insurance Superintendent Eric Cioppa, are ex- NAIC president.

They claimed that the SHIP rehabilitation plan contains issues “of extraordinary national impact and importance for the protection of insurance consumers.”

The rehabilitators maintain in that the plan is the best option as it provides policyholders choice, that it addresses inadequate and uneven pricing and rate increase decisions over the years by the industry and regulators and keeps the state guaranty association funds from being triggered, potentially causing a tax issue as the life and health companies pay into the state guaranty funds and could get some tax relief from the states. They argue that some policyholders might want more coverage than the average $300,000 benefit limit allowed in most states, and that the rehabilitation plan offers that –with, of course, a premium hike.

Liquidation would also include a request for rate increases but would offer policyholders across 46 states and the District of Columbia $800 million of the $1.2 billion shortfall, the intervenors argue.

However, “the Amici believe, as do Appellants, that rehabilitation of SHIP is unlikely, liquidation is inevitable, and the Plan circumvents the guaranty fund system that exists for the very reason to protect policyholders from insurer insolvencies,” the 19 states said.

The 19 states as well as the intervenors believe worry about the reduction in the benefits of the policyholders in that state unless policyholders agree to continue to pay more for less benefits or select a nonforfeiture option.

The amici will only come into play if the high court accepts the appeal from the three intervening state regulators in Maine, Massachusetts and Washington State. The states filed a stay pending appeal Nov. 8. Without a stay, the rehabilitation will go forward, pending , appeal, with packets sent out to policyholders for them to elect options for their abridged or truncated policies. These would be due back by mid-March, with rehabilitation occurring sometime in April 2022, according to court documents. Policyholders in the jurisdictions that do opt out and don’t allow the plan’s new rates will see their benefits cut.

The lower trial court, the Commonwealth Court of Pennsylvania, approved the plan in August, more than a year and a-half after the Pennsylvania commissioner filed to place the long-term care company with $1.2 billion in unfunded liabilities in rehabilitation on Jan. 23, 2020.

The three intervening states argue that the rehabilitation plan is unconstitutional and unfair to the remaining 39,000 or fewer policyholders, now, because it makes them fund the $1.2 billion hole on their own through a myriad of benefit cuts and/or higher premiums. The average age of the SHIP policyholder is 86 and there are a few thousand less of them than there were in 2020, based upon court documents.

For more on the intervening states’ legal actions and the rehabilitation plan itself, see here, here, here and most recently, here.

The bipartisan group of state commissioners who intend to file amici for Maine, Massachusetts and Washington State, are below, as identified in the legal filing Nov. 12. The states with the highest amount of policyholders did not sign on. According to legal documents, the states with the most policyholders are Texas, Florida and Pennsylvania, where SHIP is domiciled, followed by California and Illinois:

ARKANSAS INSURANCE DEPARTMENT, BY ALAN MCCLAIN, COMMISSIONER
CONNECTICUT INSURANCE DEPARTMENT, BY ANDREW N. MAIS, COMMISSIONER
IDAHO DEPARTMENT OF INSURANCE, BY DEAN L. CAMERON, DIRECTOR
DOUGLAS M. OMMEN, INSURANCE COMMISSIONER OF THE STATE OF IOWA
LOUISIANA DEPARTMENT OF INSURANCE, BY JAMES J. DONELON, COMMISSIONER
MARYLAND INSURANCE ADMINISTRATION, BY KATHLEEN A. BIRRANE, COMMISSIONER
MISSISSIPPI DEPARTMENT OF INSURANCE, BY MIKE CHANEY, COMMISSIONER
TROY DOWNING, MONTANA COMMISSIONER OF SECURITIES AND INSURANCE AND STATE AUDITOR
NEW HAMPSHIRE DEPARTMENT OF INSURANCE, BY CHRISTOPHER R. NICOLOPOULOS, COMMISSIONER
NEW JERSEY DEPARTMENT OF BANKING AND INSURANCE, BY MAUREEN CARIDE, COMMISSIONER
HON. RUSSELL TOAL, SUPERINTENDENT OF INSURANCE FOR THE STATE OF NEW MEXICO
NORTH CAROLINA DEPARTMENT OF INSURANCE,
BY MIKE CAUSEY, COMMISSIONER
NORTH DAKOTA INSURANCE DEPARTMENT, JON GODFREAD, COMMISSIONER
OKLAHOMA DEPARTMENT OF INSURANCE, BY GLEN MULREAY, COMMISSIONER

SOUTH CAROLINA DEPARTMENT OF INSURANCE, BY RAYMOND G. FARMER, DIRECTOR
SOUTH DAKOTA COMMISSIONER OF INSURANCE, BY LARRY DEITER, DIRECTOR
UTAH INSURANCE DEPARTMENT, BY JONATHAN T. PIKE, COMMISSIONER
WISCONSIN OFFICE OF THE COMMISSIONER OF INSURANCE, BY MARK AFABLE, COMMISSIONER
WYOMING DEPARTMENT OF INSURANCE, BY JEFFREY P. RUDE, COMMISSIONER

For all SHIP court filings, see here.

Unless intervening states win a stay pending appeal

UPDATE Nov. 18: A total of 12 states have opted out and a number of other states, likely about 10, have raised objections to the opt in/opt out question itself and are keeping open their legal options when and if the rehab plan is triggered

Nov. 11, 2021 — U.S. states have until Nov. 15th to decide whether to opt out of rate-setting provisions in the rehabilitation plan of insolvent long-term care insurer Senior Health Insurance Co. of Pennsylvania (SHIP) unless the Pennsylvania Supreme Court grants a stay pending appeal of the trial court’s approval of the plan.

Absent such a stay, the rehabilitators of SHIP –the Pennsylvania Insurance Commissioner Jessica Altman and special deputy rehabilitator Patrick Cantilo — will file rate increase applications with the opt-out states and then start by year-end 2021 sending SHIP policyholders their packet of five choices for coverage under two phases of the plan. These choices entail a combination of reduced benefits and coverages and/or higher premiums designed for different scenarios and have different coverage and cost outcomes.

Policyholders in the jurisdictions that do opt out and don’t allow the plan’s new rates will see their benefits cut.

The rehabilitator is arranging for video tutorials online to guide the policyholder through the election forms that will come with their packets, according to court documents. Decisions by policyholders among the options in the rehabilitation plan will be requested by mid-March 2022, with the rehabilaition plan going into effect for policyholders in April.

SHIP was licensed in 46 states as well as the District of Columbia and the Virgin Islands. According to legal documents, the states with the most policyholders are Texas, Florida and Pennsylvania, where SHIP is domiciled, followed by California and Illinois. Its rehabilitation plan, amended twice, was approved by the Commonwealth Court in late August.

The states of Maine, Massachusetts and Washington, who have strenuously opposed the rehabilitation plan in all its interactions, applied for a stay pending appeal with the state’s high court Nov. 8 after a stay attempt at the court which oversaw the rehabilitation proceedings. The Commonwealth Court of Pennsylvania rejected an expedited request from the three states Nov. 4th.

These three states’ insurance commissioners or superintendents allege that the plan is unfair to policyholders and defies insurance law and legal precedent and is unconstitutional.

The rehabilitation plan “places the entire $1.2 billion burden of the insolvency on 30,000 of SHIP’s remaining policyholders through benefit cuts and premium increases even though, in a liquidation, based on the rehabilitator’s comparison analysis, the policyholders would only bear a loss of $397 million, the stay request argues.

These three states argue instead for a liquidation of SHIP, under which state insurance GAs would provide over $837 million of additional support to policyholders, many of whom are elderly –the average policyholder age is 86 — and facing dire choices. They see a SHIP liquidation down the road as inevitable and worry about policyholders being locked into lower coverage choices should that happen.

The average and mean limits of the GAs in the states is $300,000, with a few outliers, some of which are as high as $500,000 (California). Under a liquidation, there could also be rate increases, at the discretion of the state guaranty association.

The legal argument for the intervening states claims that the policyholders’ best financial interest must be protected in an insolvency and that isn’t happening in most instances of the rehabilitation plan. They also argue that state regulators should control rates in their states, not an outside party.

The three states argue that the rehab plan is not feasible, that it won’t return SHIP to solvency, and is “an abuse of discretion and error of law because it violates the legal preened of Neblett v. Carpenter, which requires that policyholders are at least as good a position in rehabilaition as the would be in a liquidation. The three state intervenors also allege that the plan violates the”Full Faith and Credit Clause” of the U.S. condition by allowing one state’s regulatory authority over other states.

The rehabilitation team claims to bring policyholders choices not offered in liquidation by the state insurance guaranty associations, although their national organization argues that the GA system does indeed entail choices well. GAs have “flexibility in designing rate increase programs and offering benefit modifications to policyholders in the alternative—and have exercised that flexibility,” the National Organization of Life and Health Insurance Guaranty Associations argued in late June as an intervenor in the case.

The rehabilitates countered in court documents that the guaranty associations can’t offer options that maintain benefits above GA coverage limits, and some policyholders will still want such options.

The Commonwealth Court agreed with the rehabilitation team that since the SHIP’s policies were chronically underpriced –as most LTC policies have been since their inception — that historic liabilities and states’ patchwork of wildly varied LTC rate increases over the years, or lack thereof, must be right-sized to some extent, with policyholders taking a haircut on benefits and the value of their policy.

The rehab plan’s language to other insurance commissioners for the opt-out option states that calculations for reductions in benefits and rate increases “are performed individually for each long-term care policy.” The rehabilitator says that this”a key component of the Plan’s mechanism for eliminating discriminatory or inequitable premium rates and policyholder subsidization prospectively. In determining whether or not to “opt out” a state should carefully consider its ability to address the circumstances of each policy individually,” because the rehabilitator is already is doing this, too.

About 10 states through the MidAtlantic and the Midwest are expected to file amicus briefs on appeal if the state Supreme Court takes the case, even if it does not stay the rehabilaition itself, according to those familiar with the ongoing rehabilitation process.

Last year, two other state insurance commissioners sued the Pennsylvania insurance regulator as rehabilitation. Louisiana’s case has recently been dismissed. South Carolina’s case, brought Dec. 10, 2020, is now pending in U.S. District Court for the District of South Carolina. They argued that the plan wouldn’t protect the protect the contractual rights of policyholders of LTC policies in their states and that the imposition of the plan’s rates violates state insurance law and their jurisdictional authority to set and approve premiums.

Despite the fact that South Carolina gave SHIP requested rate increases over the past decade, some of its policyholders may face rate increases of over 400% in phase one of the rehabilitation and perhaps face additional increases in phase two, the insurance commissioner’s brief said.

Both Louisiana Insurance Commission Jim Donelon and South Carolina Insurance Commissioner Ray Farmer are former presidents of the National Association of Insurance Commissioners, as was intervenor Eric Cioppa, the Maine insurance superintendent.

Cioppa was instrumental in starting an executive level task force at the NAIC during his 2019 tenure as leader to address all the past, long-entrenched and current woes of the LTC industry and its future through various subcommittees and action strategies. Washington State Insurance Commissioner Mike Kreidler, who, like Donelon, holds elected office, is the longest-serving insurance commissioner in history, having been elected to a sixth term in 2020, 20 years after he was first elected to that office.

These three commissioners got letters of support filed in the docket from commissioners from Connecticut, Louisiana, Maryland, Mississippi, New Jersey, South Carolina, Vermont and Wisconsin earlier in the court case.

Sources indicate that a fair number of states are interested in the approved rehabilitation plan.

SHIP was placed into into rehabilitation in late January 2020 by the Pennsylvania insurance commissioner.

The Commonwealth Court judge, in her decision to approve the amended plan, said its aim is to increase revenues and reduce liabilities so as to narrow or eliminate the $1.2 billion funding gap through adjusting or modifying the 39,000 policies in force.

The judge reiterated that it is structured to”maximize policyholder choice, based on each person’s individual circumstances and preferences. ” Of interest, she noted that many policyholders have costly policies that provide far more coverage than the policyholders are reasonably likely to require, according to the rehabilitation, so part of the plan allows policyholders to remove coverages that are not essential or seen as necessary to cover reasonable expenses, cutting costs for both policyholder and the plan.

The average cost of a semi-private and a private room in a nursing home is a little under and a little above $100,000 annually accordign to Genworth Financial’s annual cost of care report. Homemaker serves, home health aides and assisted living facilities are roughly have that per year, according to the 2020 report.

SHIP was founded in 1887 as the Home Beneficial Society. Prior to the filing for rehabilitation in January 2020, it was licensed to do business by state regulators. It has not sold new policies since 2003 and was once part of Conseco Senior Health Insurance Co.

Other significant dates are below:

Sept. 30, 2021: Approved Rehabilitation Plan

May 3, 2021: Second Amended Rehabilitation Plan

Below are a few sample policyholder options presented in the exhibits in the second amended SHIP rehab plan.

They are three of 12 examples used by the plan to show how the various options would work for real-life policies. Following that is an exhibit from the three state insurance regulators as intervenors, asserting that under four of the five options, with the fifth one beinghigher premiums to keep present benefits, policyholders would be better off under liquidation.

Nov. 4, 2021 — The Allstate Corp. indicated that it would look at offers for the remains of its annuity business, but in the competitive word of private equity players vying for blocks of fixed and sometimes variable annuities, its CEO was clear about one thing. Although these blocks are a hot commodity, now, in the spirit of being a steward of insurance protections, Allstate won’t sell to or partner with just anyone.

Asset managers at private equity firms are hungry for the revenue streams these annuity businesses bring, and Allstate is”open to that … as long as it meets our two objectives,” stated president and CEO Tom Wilson during a call with analysts Nov. 5 to discuss third quarter earnings, according to The Motley Fool transcript.

Those who would acquire or reinsure Allstate’s annuities need to know a couple of things.

“One, you got to take care of our customers. So some of these customers are going to get paid for 30-plus years we don’t want to turn that somebody that’s going to take it all and go to Las Vegas and put it on red and then our customers are left [holding] the bag,” Wilson told analysts.

“One, you got to take care of our customers. So some of these customers are going to get paid for 30-plus years we don’t want to turn that somebody that’s going to take it all and go to Las Vegas and put it on red,” Wilson said.

The second thing is that any annuity deal benefit Allstate’s shareholder, of course.

The Illinois-based company has a couple chunks of annuity blocks left as it has been “whittling away” at its holdings for over decade. Wilson said that executives are open t ways to transfer the liabilities,, from “everything from reinsurance to sales, everything else.”

These annuity blocks “are becoming more scarce properties because you’ve seen the asset managers go out and they like having what I would call captive asset, Wilson explained on the call.

The company known for personal property and auto insurance has been but slowly but surely exiting the annuity business over the past 15 years. As executives described it, it reinsured the variable annuity business in 2006, exited the broker-dealer channel in 2010, and stopped issuing all remaining annuity products in 2014, and in the process sold off its Lincoln Benefit Life to Resolution Life Holdings, which has since sold it to a Nebraska company.

Back in January 2021, Allstate announced it would sell Allstate Life Insurance Co. (ALIC) to Blackstone managed companies for $2.8 billion. ALIC held 80% — or $23 billion– of Allstate’s life and annuity reserves. It generated net income of $467 million in 2019 and a net loss of $23 million in the first nine months of 2020, according to a company press release at the time.

The head of Blackstone Insurance Solutions added then that the firm’s skills with assets and its experience would significantly benefit policyholders and investors over the long term.

Annuity and life l now stand at $17.5 billion at the end of the third quarter, as opposed to $75 billion in 2005. The company lowered its long-term return assumptions for the business at the end of the third quarter after an actuarial review to match expectations of a continued low interest rate environment, reducing future investment income, it said.

#ALL #PEFIRMS #ANNUITYBLOCKSFORSALE