After eight long years of undergoing the legal processes, Penn Treaty Network Insurance and American Network Insurance Co. have been designated to be liquidated. This decision was made by the Commonwealth Court of Pennsylvania. Both of these providers offered long-term care insurance policies to citizens in the state of Pennsylvania and various other states.

The liquidation order was in response to a long effort of looking into other possible solutions. Due to the Government changes in long-term insurance requirements, the industry has been dealing with much uncertainty for the past few years. The original policy pricing structures are becoming insufficient to cover the claims each company receives. In simple terms, insurance providers are receiving low to no return on their investments.

The Big Problems Facing Insurance Providers

Many insurance providers did not correctly plan for the following:

1.)The number of policyholders that would drop their coverage.
2.)The number of policyholders that would utilize the benefits their policy offered.
3.)The actual cost of the services covered under the policy greatly exceeded the estimated costs made by insurance providers.

What Most Providers Are Doing To Financially Recover

As we are sure you have noticed over the past couple of years, many providers are drastically increasing their premium amounts. With much of the nation forced to seek insurance to avoid harsh financial penalties, higher insurance prices are a hot topic of debate. The Commonwealth Court estimated that in order for both of these companies to recover financially they would need to increase premium rates in excess of 300 percent. State regulators deemed that an increase in this amount would be harmful to the policyholders and instead decided on the only other alternative, liquidation.

What Does This Mean For Current Policyholders

It is estimated that these insurance companies have over 76,000 policyholders, with about 9,000 residing in Pennsylvania. All of these policyholders will be covered by their individual State’s Guaranty Association System. This system was established in each state of the U.S. as a way to protect policyholders in the event that a company goes insolvent. This system is funded by the insurance providers in each state. Each insurance provider is expected to pay in their mandatory two percent annual surcharge.

Each policyholder will remain to have the same policy that they signed up for. They should continue to file for their benefits as they usually would. Policyholders must also continue to pay their premiums in order to retain coverage. The State Guaranty Association System will pay for the benefits of the policyholders up to a capped amount of $300,000.

Any claims that are submitted above this level will be assessed by the liquidator and the court. They will deem if the liquidated assets of the companies will be able to cover the remaining claim amount. There is no guarantee that policyholders will receive benefits over what the State Guaranty Association System will offer them. It’s estimated that about 50 percent of policyholders will file for additional benefits over the $300,000 cap.

Looking Into The Future

Due to the 76,000 consumer increase in the State Guaranty Association Systems across the nation, it’s very likely that many states may file for higher premium rates in the future. This is a process that will take some time for approval as it involves altering the premium limits stated in the state laws.

This entry was posted on Friday, July 21st, 2017 at 5:31 pm and is filed under Insurance. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.