More than 140 Montana policyholders of a Pennsylvania-based company received a troubling message recently: Pay as much as 600 percent more in premiums or face being cut off from a program many have invested in for decades.
And, even with the increases, the troubled company is warning customers that it may still have to reduce services.
Commissioner of Securities and Insurance Troy Downing has joined with nearly 30 other states to stop Senior Health Insurance Company of Pennsylvania – or “SHIP” – from implementing the increases that have not been approved by his office, as required by law.
Senior Health Insurance Company of Pennsylvania is insolvent and has been for years. Even though it quit issuing new policies in 2003, it continues to charge premiums to residents nationwide for senior health care. The company mainly wrote policies that would cover long-term care.
However, the Pennsylvania Supreme Court allowed the insolvent company, which reported a deficit of around $500 million – to “rehabilitate.” That state’s high court allowed a plan that called for drastically increasing premiums and cutting service. SHIP began charging the new rates and leaving residents with the choice, violating state law, including in Montana, that requires rate approvals through the state.
Downing’s office reported that the average premium increase for 141 Montanan policyholders was 70 percent, while others face a nearly 600 percent increase. For example, a 77-year-old Montanan who paid premiums for 21 years faces 412 percent increase, translating to a hike of nearly $8,000 per year.
Downing reported that the average Montanan participating in SHIP has paid premiums for 25 years and is 88 years old.
“These unapproved rate increases could force senior citizens to choose between the long-term care they rely on or their financial security,” Downing said. “In complete disregard for Montana law, SHIP placed their financial burdens on the backs of their customers by giving them an ultimatum – pay up or lose your benefits.”
Downing said that in addition to not submitting rates for review or approval, that SHIP “engaged in unfair and deceptive acts and practices intended to mislead policyholders and misrepresent the benefits, conditions and terms of SHIP’s policies.”
“The Pennsylvania court’s decision to allow an out-of-state company to circumvent Montana law threatens the found of state-based regulation and the Montana insurance market. The rehabilitation plan approved by the Pennsylvania court places the wants of this failing insurance company over the needs of senior citizens,” Downing said.
The Iowa Capital Dispatch reported the company has about 39,000 active policies, and regulators there have filed for an injunction stopping the company from taking action, as has at least one other state, Louisiana.
Instead of a “rehabilitation plan,” which allowed the company to hike premiums and decrease service, the company could have opted to declare insolvency, which would have triggered a number of state-based “guaranty” policies that would have then helped cover the policies that SHIP’s own officials have said were kept at an “unreasonably low rate of premiums” for years.