States Clash Over Long-Term Care Issuer Rehab Effort

What You Need to Know

Washington state is trying to keep Senior Health Insurance of Pennsylvania from offering a premium increase options package.
SHIP wants policyholder approval of the package soon.
Commissioner Kreidler said he would rather see regulators liquidate SHIP and have the insureds get benefits from state guaranty associations.

Washington state is trying to keep a failed long-term care insurance issuer — Senior Health Insurance of Pennsylvania — from offering a premium increase options package with a March 15 decision deadline.

Mike Kreidler, Washington state’s insurance commissioner, ordered SHIP to stop asking for approvals for the package from the 1,200 policyholders who live in Washington.

The History

Pennsylvania regulators put SHIP in rehabilitation in 2020. A Pennsylvania state court approved a rehabilitation plan in August 2021.

Kreidler has joined regulators from Maine and Massachusetts to appeal the rehabilitation plan. Regulators from 27 other states have signed a brief supporting the appeal.

Pennsylvania regulators have argued in their own court filings that about 96% of the in-force SHIP policies were written in Pennsylvania, California, Florida, Illinois and Texas, and that none of the regulators in those states has opposed the rehabilitation plan.

The Coverage Election Package

SHIP is now trying to get policyholder approval for a “coverage election package.”

The package offers policyholders a choice between LTCI premium increases, benefits changes, or a combination of premium increases and benefits changes.

“Neither the premium increases nor the benefits changes have been approved by Kreidler’s office, as required by state law,” Washington state officials said in an announcement about Kreidler’s order.

Kreidler said in a comment about the order, included in the announcement, that the average SHIP policyholder is 86.

Guaranty Funds

Kreidler said he would rather see regulators liquidate SHIP and have the insureds get benefits from state guaranty associations.

The Washington state guaranty association will protect up to $500,000 in LTCI benefits for the policyholders of a liquidated insurer, Kreidler said.

States use state-run guaranty associations to support life and health policy benefits, including LTCI benefits.

In most states, surviving insurers pay assessments to cover the costs associated with making good on a failed LTCI issuer’s policy obligations.