With politicians proposing various private and public-private partnerships and insurances for long term care insurance, a story from the US is a warning.
Pennsylvania insurance regulators have filed petitions with a state court seeking to liquidate long-term care insurers Penn Treaty Network America Insurance Co and its subsidiary, American Network Insurance Co.
Penn Treaty Network and American Network sold long-term care insurance to more than 120,000 policyholders and did business in all 50 states.
If liquidated, the Penn Treaty companies, with about $1.1 billion in total assets, would become the largest insolvency of a life and health insurer in the United States in the past five years.
In January, Pennsylvania Insurance Commissioner Joel Ario received court approval for placing the two insurers into rehabilitation under the department's control, "We have been on site analyzing the organizations' assets, liabilities, reserves and surpluses since we began our rehabilitation action in January. Our comprehensive, independent evaluation has determined that the companies do not have the ability to pay future claims without significant rate increases that would have to be requested and approved in all 50 states. In the current circumstances, those rate increases simply would not be fair to policyholders. When you get to a point where the current rates don't provide adequate money to handle claims, you're kind of between a rock and a hard place."
Earlier this year, the department gave Penn Treaty time to find a buyer and seek new capital, but it failed to do so. If the court decides the company should be liquidated, the policies would be transferred to a state's guaranty fund. All insurers pay into the funds, which are maintained to pay the claims of defunct companies.