A 2017 court order forced one of the largest long-term insurance companies in America, Penn Treaty, to liquidate because Penn does not have enough assets to pay anticipated future claims. People who have paid expensive insurance premiums faithfully for years, are left wondering what will happen to them, if they must move into long-term care one day . When such a large company goes under, there is usually a significant ripple effect. Experts warn Americans to beware the downfall of long-term care insurers.
Penn Treaty and the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) prepared answers to Frequently Asked Questions (FAQs) on the Penn Treaty website to address the understandable panic of the Penn Treaty long-term care policyholders. Some topics Penn and NOLHGA covered include:
What Happens to the Long-Term Care Policies After the Liquidation
Every state has a guarantee fund that protects policyholders when insurance companies go belly up. The guaranty association for your state will administer your long-term care policy and handle your claims. Some states place limits on your claims they will pay. These limits vary from state to state. Other states have no limitation on claims when a long-term insurer liquidates. Regardless of where you lived when you bought your long-term care policy, your limitations of coverage will be determined by the state where you lived when Penn Treaty liquidated. In Alabama the limit is $250,000.
You must Keep Paying Your Premiums
Even though it feels like they are forcing you to throw good money after bad, if you stop paying your premiums, they will cancel your policy and you will get no help from the guaranty association of your state. As if that were not enough bad news, Penn warns that the premiums may be “adjusted” later, which of course, means they can raise your payments.
The Demise of a Long-Term Care Insurer Can Hurt Other Companies
Long-term care insurance is a form of health insurance, so when the long-term care company folds, the health insurance company with whom they had a contract gets stuck with some bills. To recoup some of their losses, the health insurance companies then jack up their premiums.
Alternatives to Buying Long-Term Care Insurance
Although it is rare when a long-term insurer closes, Penn Treaty shows it can happen. Many people now wonder, if there are other options to help pay for nursing home care .
Some people recommend that you buy a hybrid form of asset-based long-term care funding by combining annuities and life insurance policies, so you will get a guaranteed amount of benefits you can use on whatever you want. Some long-term care policies only pay for the expenses of being in a nursing home or other long-term care facility. If you never need to live in a nursing home, you will get no benefit from the premiums you paid for the LTC policy.
Whether you choose long-term care insurance or something else, investigate the company carefully. The laws vary from state to state, so be sure you talk with an elder law attorney near you.
Penn Treaty. “Liquidation FAQs.” (accessed October 5, 2017) https://www.penntreaty.com/Liquidation/LiquidationQuestions.aspx