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Florida Helps Conseco Restructure Home Care Block

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NU Online News Service, April 21, 2004, 6:27 p.m. EDT – Florida insurance regulators are helping a unit of Conseco Inc., Carmel, Ind., restructure its block of Florida home health care policies.[@@]

Conseco says 18,653 holders of Florida home health care policies have been responsible for more than $337 million in losses at its Conseco Senior Health Insurance Company Inc. subsidiary since 1988.

The losses amount to an average of about $18,000 per Florida home health care policyholder.

Kevin McCarty, director of the Florida Office of Insurance Regulation, has rejected a proposal that Conseco Senior Health cope with the losses by increasing premiums for all Florida home health care policyholders 211.6%.

Instead, McCarty has asked Conseco Senior Health to give all home health care policyholders throughout the United States 3 choices:

- Policyholders who want to stop paying any premiums will get a contingent benefit equal to 100% of the sum of all premiums paid.

- Policyholders who want to keep their existing benefits could pay a rate increase of as much as 50% for the first year after Conseco Senior Health restructures the block. McCarty’s order would not impose a cap on future rate increases, but Conseco Senior Health would have to provide actuarial justification for any increases.

- Policyholders who are willing to accept a stricter replacement policy will be rewarded with permanent limits on policy rate increases. Policies that replace contracts with lifetime benefit periods will offer a maximum of 7 years of benefits. The new policies also will require insureds to meet claim requirements for at least 20 days before the insureds can begin collecting benefits. Another change will require claimants to get licensed health care providers to certify that they will be unable to perform at least 2 activities of daily living for a period of at least 90 days. In exchange, regulators will cap rate increases at 25% for the first year and 15% per year in later years.

Insurance regulators in states other than Florida will have to approve use of the order in their states, McCarty says.

Conseco President Bill Shea has welcomed McCarty’s order.

McCarty’s course of action “protects policyholders while providing Conseco Senior Health with the ability to both mitigate its losses and enhance its ability to pay future claims,” Shea says in a statement.

Conseco acquired American Travellers Life Insurance Company and Transport Life Insurance Company, the companies that eventually merged to form Conseco Senior Health, in December 1996.

Some policyholders accused Conseco of looting Conseco Senior Health, but McCarty notes in his order that the parent company pumped $534 million into Conseco Senior Health over the past 5 years to subsidize the unit’s home health care losses.