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.