Have You Received a “Surcharge” from Your LTC Insurance? Learn What It Is & Whether You Need to Pay It

Elderly Asian couple looking at a bill with computer open and puzzled expressions.

Some policyholders with a long term care insurance policy have received a notice from their insurance company advising them of an additional charge on their policy.  This charge could be for a one-time payment of less than $50, or for a small monthly amount spread over less than 18 months.  Each notice and amount is different, depending on the insurance company issuing the notice.  Some of the notices specify that the charge is not part of the premium, and that the payment, or non-payment, won’t have any effect on their policy. The notice references the insolvency and liquidation of another insurance company as the reason for the extra charge.  By law, policyholders are not required to pay this surcharge.


An insurance company can be declared by a court to be insolvent and subsequently liquidated when the amount of the benefits they’ve promised to pay are greater than the reserves set aside to pay those promised benefits.  Each state has a guaranty association that becomes responsible for a portion of the insolvent company’s liabilities based on the policyholders that live in their state.  Life and health insurance companies that have sold insurance in California are required to be members of the state’s guaranty association to protect policyholders from losing benefits when a company is liquidated.  PennTreaty Network America was declared insolvent by a court in Pennsylvania in March of 2019.  That court decision began the process of distributing the cost of the liquidation among the state guaranty associations.

When the process of liquidation begins, each life and health insurance company in the state is assessed some portion of the difference between the insolvent company’s reserves and their liabilities by the state guaranty association.  The amount of a company’s assessment is calculated on the amount of the premiums they’ve collected in California.  California law also allows insurance companies to recoup that assessment over a reasonable a period of time by imposing a surcharge on their policyholders.  A surcharge is allowed by law and some insurance companies choose to assess one while others don’t.  

A small number of long term care insurance companies elected to assess a surcharge following the PennTreaty Network America liquidation. Those surcharges are the amounts in the notices that policyholders have received and that other policyholders may receive as their annual premiums come due. There have been many questions about these notices and whether policyholders have to pay them and what happens if they don’t pay the surcharge.

The Surcharge and California Law

The bottom line is that policyholders cannot be required to pay the surcharge, and their long term care insurance cannot be cancelled or non-renewed as a result. 

California law specifies that these surcharges are not part of the premium or connected to the premium in any way.  And, long term care insurance is guaranteed renewable and cannot be canceled for any reason except for non-payment of premium. Therefore, policyholders do not have to pay this surcharge and cannot lose their coverage as a result.  Nothing in California law requires a policyholder to pay a surcharge.   The California Department of Insurance issued a notice in August of 2020 clarifying that a surcharge is: a) not part of the premium, and b) that nonpayment is not a permissible basis to cancel or non-renew a long term care insurance policy under California law.

This article was written by Bonnie Burns, our Training and Policy Specialist.

Karen Joy Fletcher

Our blogger Karen Joy Fletcher is CHA’s Communications Director. With a Masters in Public Health from UC Berkeley, she is the online “public face” of the organization, provides technical expertise, writing and research on Medicare and other health care issues. She is responsible for digital content creation, management of CHA’s editorial calendar, and managing all aspects of CHA’s social media presence. She loves being a “communicator” and enjoys networking and collaborating with the passionate people and agencies in the health advocacy field. See her current articles.