The Journal has a nice story today shining a light on the Conseco insurance company offloading some unprofitable long-term-care policies into a trust that may not be able to cover them.
The trust will pay claims from a pool of funds transferred to it from Conseco, including $175 million in capital. But A.M. Best Co., the insurance-rating firm, warns that the trust may need to raise rates and reduce benefits and has no access to additional capital. If the trust were to become insolvent, some policyholders might ultimately have to rely on the Pennsylvania state guaranty association to pay any claims, up to limits set by state laws, other experts said.
I don’t understand this, though. If a company writes an insurance policy and it turns out it actually has to lose money on it, why is it okay for it to just unload it? Isn’t it obligated to make sure all benefits are paid? Here, the company seems to have decided it’s just not going to lose any more money—so take that, old people in nursing homes!
Pennsylvania Insurance Commissioner Joel Ario defended the transfer, saying in a written statement, “There were no good choices here, only bad ones and worse ones.” Mr. Ario said Conseco already had plowed more than $900 million into Conseco Senior Health Insurance, and its corporate board had made it clear no more money was coming. “The likely result would have been either substantial rate increases or insolvency,” he said.
This story comes a year and a half after a great Times story on Conseco denying claims on the long-term-care policies.
I hope the Journal and the rest of the press looks deeper into this story.
UPDATETrudy Lieberman has much more on this over at the Campaign Desk. Make sure to check it out.
I believe that the PA Insurance Commissioner concluded that it was in the best interest of the Conseco LTCi policyholders (and the PA taxpayers) for PA to set up this trust, with the goal of more effectively serving the current and future claimants.
PA DOI is facing a very difficult situation with a different insurer that might need to go into conservatorship next month.
I think the PA DOI's conclusion regarding the Conseco policies, is that a well-managed trust now is better than trying to mop up a big mess through conservatorship later.
As with any insurance purchase, it's very important to check the financial ratings of the LTC insurers you are considering.
Scott
Posted by Scott A Olson on Wed 3 Dec 2008 at 02:14 PM
We are hoping that the media will cover this more. It affects all of us, our parents, grandparents and us. LTC is Senior Health Insurance and maybe the new administration will look closely at this as well and help protect our seniors.
If anyone is in this situation, get competent free advice. Darras, who was quoted in the article can be reached at 800-458-4577 or through his web site at www.darrasnews.com.
Posted by Robin Nolan on Wed 3 Dec 2008 at 02:42 PM
We are hoping that the media will cover this more. It affects all of us, our parents, grandparents and us. LTC is Senior Health Insurance and maybe the new administration will look closely at this as well and help protect our seniors.
If anyone is in this situation, get competent free advice. Darras, who was quoted in the article can be reached at 800-458-4577 or through his web site at www.darrasnews.com.
Posted by Robin Nolan on Wed 3 Dec 2008 at 02:43 PM
Feb 27, 2009
Conseco included a $125,000,000 senior unsecured note in its 175 mil contribution to the trust.
Conseco is responsible (over a 5 year period) to pay down this obligation.
In the event of default on the note, the trust, which was touted by Conseco to be a "best" solution, dedicated solely to the welfare of policyholders - the policyholders may have a collective case for fraud if the note does not have first claim, superior to lenders, on conseco's assets.
Posted by Bill Silverman on Sat 28 Mar 2009 at 12:03 PM