Louisiana Insurance Commissioner Jim Donelon said he would file a lawsuit to stop a ‘rehabilitation’ plan for an insolvent out-of-state insurance company that was selling long-term care policies to elderly Louisianans.
Donelon said the plan presents an unreasonable choice for vulnerable residents who have paid their premiums: “potentially disastrous rate increases or benefit cuts.”
The Senior Health Insurance Company of Pennsylvania (SHIP) was taken over by Pennsylvania insurance regulators last year after posting a loss of $466 million and could no longer meet its mandatory capital requirement.
“When this happens, insurance regulators are required to take control of an insurer for the protection of policyholders and creditors,” the Pennsylvania Department of Insurance said.
Donelon said Monday the company had a deficit of $1.2 billion.
Rather than face liquidation, where a defunct company’s assets are sold and police claims are bailed out, Pennsylvania regulators have opted to rejuvenate the struggling insurance company under a court-approved plan. of state.
The recently approved 195-page proposal aims to “reduce or eliminate” SHIP’s funding gap for most of its 39,000 policies.
Donelon, however, called the plan an “insurance industry-friendly proposal” that would raise rates by up to 500% or dramatically reduce benefits for those who need it most.
“The situation is untenable for policyholders in Louisiana,” Donelon said. “Despite buying long-term care insurance to ensure their independence in old age and paying for their policies which have been protected by state guarantee funds for decades, they now risk – at the average age of 86 – to be forced into bankruptcy and thrown out of their current living situations.
Twenty-two other states also oppose the Pennsylvania-brokered plan, which bypasses state insurance departments that once allowed SHIP to sell long-term care and home health care insurance products.
Donelon said he would seek an injunction in Louisiana state court to stop the rehab plan from taking effect.
“I will do everything in my power to prevent these Louisiana consumers from having the Guarantee Fund protection rules changed in their hour of need by a Pennsylvania regulator,” he said.
The Louisiana Department of Health previously sued for an injunction in federal court, but the case was dismissed because the plan had not yet been approved.
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