Policyholders Beware: Paying for the Insolvency of a Long-Term Care Insurance Company


November 19, 2019


For more information, contact: Bonnie Burns, Training & Policy Specialist at 831-438-6677


Sacramento, CA — In March of 2017 a long-term care insurance company was declared insolvent. The company, PennTreaty Network America (PTNA) and its subsidiary company, American Network Insurance Company (ANIC) were subsequently declared insolvent and are now administered by each state’s Guaranty Association. The reserves and assets of the two companies are woefully insufficient to pay the benefits promised to their policyholders; and far too deep to fill by the imposition of any reasonable amount of premium increases.


State guaranty associations are responsible for keeping long-term care coverage in force when a company becomes insolvent. They do this by collecting premiums, and paying claims up to each state’s cap on benefits. State guaranty associations also have the right to seek significant premium increases, which most states have granted. In addition, the guaranty associations can assess insurance companies doing business in a state for the cost of an insolvency; and under some states’ law, insurance companies are allowed to pass that cost along to their policyholders.


State guaranty associations charge an assessment to the other insurance companies doing business in a state for the cost of their competitor’s insolvency. This cost includes the administration of the insolvency and the difference between a company’s reserves and the costs of their claims. Each company’s assessment is calculated based on the amount of premium collected in a state.


PennTreaty/American Network policyholders living in California had already been notified of the premium increase imposed on their coverage by the guaranty association and given options to lower that increase by reducing their benefits. The amount of capped benefits a policyholder can collect in California is $554,556; certainly less than the amount of lifetime coverage some people purchased. At the same time, most other companies that sold long-term care insurance have also been notifying their policyholders of sizable premium increases and similar options to reduce coverage.


Recently CNA Insurance Company has begun notifying its policyholders in California that as a result of the insolvency of PTNA/ANIC, CNA was passing on the assessment imposed by the California Guaranty Association to their policyholders in the form of a surcharge. This surcharge is in addition to any prior or any future premium increase. It is unclear if this is a one-time surcharge, or one that will be imposed annually. It is likely that other companies will follow suit and that policyholders with other insurance companies will be notified shortly of an increase in their premiums based on this assessment methodology.


In addition to some recent jaw dropping premium increases for long-term care insurance, the necessity of giving up previously purchased benefits to reduce that premium increase, having their lifetime benefits capped, and now paying a insolvency surcharge imposed by their insurer, policyholders are financing much more than the cost of the original benefits they bought to pay for their care in later life.


California policyholders with questions about their options can contact their local Health Insurance Counseling and Advocacy Program (HICAP) at 1-800-434-0222. HICAP provides free, individual and unbiased assistance and information on Medicare and other health insurance related questions such as long-term care insurance.


Policyholders in other states can visit the federal State Health Insurance assistance Program (SHIP) website to find the contact for their local SHIP program: https://www.shiptacenter.org


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California Health Advocates is an independent non-profit organization that provides accurate and timely Medicare and related health care coverage information, education, and policy advocacy. CHA provides community organizations and government agencies with up-to-date information, and in particular to the 24 local HICAPs that provide individual benefits counseling and community education directly to Medicare beneficiaries and their families. For more information, visit its website at cahealthadvocates.org.

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.