Wednesday, May 8, 2013

Penn Treaty Update

It's been about almost exactly a year since we last checked in on the troubled Long Term Care insurance carrier. At the time, the Keystone State's Commonwealth Court had barred regulators from liquidating the company, insisting that it be "rehabilitated."

Fast forward twelve months, and it looks like there's finally a plan in place to do just that:

"The Pennsylvania insurance commissioner is seeking court permission to rehabilitate Penn Treaty ... in ways that could lead to big cuts in benefits, or big increases in premium rates, for the company's long-term care insurance (LTCI) policyholders."

Benefits cuts or rate hikes?

Count on both.

The carrier seems to be about $2 billion in the hole, and "has less than $1 in assets for every $3 that it should hold as reserves." Oopsies. And it's estimated that they'd have to jack up premiums by 300% to make up the shortfalls. Ouchies.

Some of the alternatives include increasing elimination periods to at least 90 days (which is pretty much industry-standard for new plans now), capping benefit periods and dialing down inflation protection increases.

Thing is, policyholders who've hung on this long probably don't have a lot of choices: those that could bailed early, those still on are probably stuck.

Doesn't seem like this will end well.

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