Bonnie Burns, our Training and Policy Specialist, provided the following oral testimony at the National Association of Insurance Commissioners Consumer Liaison Committee meeting on April 10, 2017 in Denver, Colorado.
I represent consumers, those who bought the PennTreaty policies. This liquidation is where the theoretical meets reality. The Pennsylvania department and the PennTreaty receiver have been in contact with policyholders over the last seven years. They’ve had time to build a relationship with policyholders and they’ve kept them informed during an evolving process. This liquidation is not a surprise to those remaining policyholders. That is unlikely to be the case if there is another insolvency involving long term care insurance.
Consumers who bought PennTreaty policies in the 1990s and 2000s placed their faith in the company’s promise that they would have benefits in later life if they were unable to care for themselves. A Consumer Reports article placed PennTreaty’s long term care policy at the top of their ratings, at a time when dozens of companies were selling long term care insurance. Consumers evaluated their choices and picked PennTreaty. ‘
Only later would they discover their mistake when PennTreaty was taken under state supervision in 2010. Still, most policyholders continued to pay their premiums. Really, they had little choice since by that time their coverage couldn’t be replaced at their current age and or state of health. Now, following liquidation they face penalties for having made that bad choice, some more than 20 years ago.
Those bad choice penalties range from:
- A cap on their lifetime benefits
- More rate increases
- A reduction in benefits if the Moodys discount is applied to the assessments on insurers by their state guarantee association
- An annual premium assessment, or
- Some combination of all of these
PennTreaty policyholders are on average 79 years old. Claimants are an average 84 years old.
They will all begin receiving notices from their state guarantee association and the receiver concerning the liquidation, and later notices with each new action that occurs. The notices will come from the guarantee association in the state they live in, not from the state where they bought their policy, and perhaps not the state where the adult children might live. At best these notices are likely to be confusing and policyholder responses are uncertain. Our goal is to get information to all the sources that policyholders, or their family members, might reach out to for information and to ensure that coverage is maintained.
You have in your materials a one page document designed to help advocates and others unfamiliar with the process of liquidation to get policyholders to the best place to answer their questions and concerns so that their coverage is not lost. We encourage you to distribute this one page document widely to all the sources within your state that serve elderly clients, to ensure that no policyholder is left without the coverage they have so faithfully paid for all of these years.
Future notices will likely contain options to mitigate or reduce premium increases. Policyholders will need experienced help to make the right choices for their unique set of circumstances and available options. We hope to continue providing information to help advocates and others direct policyholders to the most appropriate resources so that the choices they make are the right ones for them.
For more information on this situation, see: