What You Need to Know
- SHIP has 31,693 insureds, $1.4 billion in assets and $2.6 billion in policyholder liabilities.
- Regulators in Louisiana and South Carolina have sued, saying the rehabilitation plan is unfair.
- The Pennsylvania insurance commissioner says the suits are without merit and inappropriate.
A state insurance regulator is heating up his fight against the current rehabilitation plan for a failed long-term care insurance (LTCI) issuer, Senior Health Insurance Company of Pennsylvania (SHIP).
South Carolina Insurance Commissioner Ray Farmer said Tuesday that he told Pennsylvania Insurance Commissioner Jessica Altman — who is acting as SHIP’s statutory rehabilitator — that he will decline either to opt his state in or to opt it out of her SHIP rehab plan.
Farmer has sued to block the SHIP rehabilitation plan. He said in the announcement about his refusal to opt in or out of the plan, that implementing the rehabilitation plan would be a tragic injustice for SHIP policyholders in South Carolina.
“Ultimately, this will be an issue decided by the courts, but my job is to protect South Carolina policyholders and that’s what I am going to do,” Farmer said.
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“Until I am directed by a court of competent jurisdiction, I will not participate in implementing a plan that seeks to put the interests of the industry over those of 87-year-old policyholders at a point in their lives when they may need their policyholder benefits the most.”
Insurance regulators in Louisiana have taken a similar position on the rehabilitation plan and filed a similar suit.
Altman has argued that the suits are without merit and are inappropriate.
For financial professionals, the outcome of the fight could shape how states handle future LTCI issuer failures. The fight also may shape the state response to other problems resulting from inaccurate insurance company product pricing assumptions.
SHIP is the modern incarnation of American Travellers Life Insurance Company, a company that helped create the modern U.S. LTCI market in the 1980s.
Conseco, a company that’s now known as CNO Financial Group, acquired American Travellers in 1996. CNO ended up with a block of LTCI business built both from direct policy sales and from reinsurance arrangements.
CNO pumped $534 million into the LTCI business in an effort to stabilize it, but, by 2004, regulators were already deeply concerned about the business, and Florida insurance regulators were helping the company restructure the LTCI obligations.
The Pennsylvania Insurance Department agreed in 2008 to let Conseco set up SHIP in Pennsylvania and move 140,000 American Travellers-related LTCI policies there. SHIP was a nonprofit company that was supervised by a trust. The oversight trust board included former U.S. Surgeon General C. Everett Koop and two former state insurance commissioners.
The performance of the business continued to deteriorate.
At the end of 2020, SHIP had 31,693 premium-paying policyholders and 4,971 insureds on claim, according to Altman’s quarterly report on SHIP’s status.