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Life Health > Long-Term Care Planning

John Hancock to Pay $26.3M Over Canceled LTCI Policies

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What You Need to Know

  • John Hancock found that it miscalculated policy termination dates because it failed to extend benefits periods in certain instances.
  • Department officials allege that the errors happened partly because the John Hancock Partnership policy provisions were confusing.

New York state regulators are imposing a $2.5 million penalty on John Hancock Life & Health Insurance Co. for problems with 156 long-term care insurance policy terminations.

The Boston-based Manulife Financial unit will also have to pay $2.2 million to the New York state Medicaid program, and $21.6 million in extra benefits to policyholders and beneficiaries, in connection with the LTCI policy termination errors, according to a consent agreement posted online by the New York State Department of Financial Services.

John Hancock found that it miscalculated policy termination dates because it failed to extend benefits periods when insureds used less than the maximum daily benefits on a given day while on the claim, officials said Thursday.

What It Means

Advisors who have clients who are using long-term care insurance or other types of coverage for long-term care may want to work with policy analysts and policyholder advocates to verify that clients are getting the benefits promised.

Long-Term Care Partnership Policies

The New York announcement involves the New York State Partnership for Long Term Care policies.

Consumers who have Partnership LTCI policies and exhaust private benefits can exclude some or all assets from eligibility calculations if they end up applying for Medicaid nursing home benefits.

New York state set up its Partnership program in 1993. Insurers stopped writing new Partnership program LTCI policies in the state in January 2021.

It’s not clear how many Partnership program policies that John Hancock or other insurers have in force in New York state.

The Policy Terminations

New York department officials say they contacted John Hancock about Partnership policy terminations after a consumer complaint regarding a benefits termination decision that the department received in May 2019.

John Hancock resolved the first complaint, then agreed to search its records to see whether it had also ended the benefits of other Partnership insureds early, according to the consent agreement.

The company found that between February 2001 and July 2019 it had ended benefits payments for 156 insureds early because of errors similar to the errors related to the policy involved in the May 2019 complaint.

John Hancock approached the New York department with a plan to remediate the issue and make the policyholders whole, officials say.

The department found that only 21 of the insureds or policyholders involved in the early terminations are believed to be alive; 130 have died.

Department officials allege that the errors happened partly because the John Hancock Partnership policy provisions were confusing and because the company administered the benefits in a way that conflicted with what department officials expected when they approved the policy form.

Restitution Details

John Hancock has agreed to pay restitution to affected insureds, policyholders and policyholder beneficiaries, and to add 12% interest to the unpaid benefits amounts.

Recipients who dispute the amounts can go through an alternative dispute resolution process overseen by an independent individual or entity. John Hancock will pay the dispute resolution process expenses.

Reactions

Adrienne Harris, the New York financial services superintendent, said consumers need LTCI providers’ help to pay for long-term care services, which can be costly.

“It is critical that these companies operate in full compliance with the law to provide New Yorkers with the care and benefits they deserve,” Harris said.

John Hancock said in a comment on the consent agreement that it is committed to putting the needs of its customers at the forefront.

“As such, we have been working diligently with the New York State Department of Financial Services and the New York Department of Health to ensure customers with New York Long-Term Care Insurance Partnership policies impacted by this administrative error receive the benefits due to them,” the company said.


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