Twenty-five guaranty associations that are responsible for paying claims for a failed Penn Treaty American Corp. unit say 55% of the unit’s long-term care insurance policyholders chose compound inflation protection, and just 1.9% chose simple inflation protection.
The associations also report, in a rate increase application filed on the unit’s behalf in Connecticut, that:
- 56% of the long-term care insurance policyholders with inflation protection have policies with no elimination period, or time when an insured needs and uses long-term care services before benefits payments begin.
- 62% of the policyholders without inflation protection have policies with no elimination periods.
- Only about 19% of the policyholders with inflation protection, and about 27% of the policyholders with no inflation protection, have policy benefit periods with 36 or fewer months.
- About 42% of the policyholders with inflation protection, and about 39% with no inflation protections, have policies that are supposed to provide lifetime benefits.
Penn Treaty was an Allentown, Pennsylvania-based company that helped create the modern U.S. long-term care insurance market. It began to run into problems around 2000, when state insurance regulators argued that the company was reserving too little for the long-term care insurance business it was selling. At the time, regulators believed that long-term care insurance premiums should stay the same for the lifetime of the policyholder, and they resisted letting managers of American Network or Penn Treaty Network America raise prices.
A state court in Pennsylvania put the insurance company subsidiaries in rehabilitation in 2009.
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Regulators recently converted efforts to rehabilitate the parent-level holding company’s two life insurance subsidiaries, Penn Treaty Network America Insurance Company and American Network Insurance Company, into liquidation proceedings.
The details here come from a rate increase request for American Network.
A group of life and health insurance guaranty associations has filed the request for American Network with the Connecticut Insurance Department, through Long Term Care Group Inc.
Long Term Care Group Inc. filed the rate increase request through the Connecticut Life and Health Insurance Guaranty Association, on behalf of 25 state guaranty associations that believe they will have to back at least one American Network policy originally issued by American Network in Connecticut. The Connecticut department posted the filing on its website.
The associations say American Network ended 2016 with 66,741 policyholders throughout the country, including 531 policyholders in Connecticut.
Premiums now average $1,957 per year for the policyholders with inflation protection and $2,509 for the policyholders without inflation protection.