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.
Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR’s business section. If you see notable business journalism, give him a heads-up at rc2538@columbia.edu. Follow him on Twitter at @ryanchittum.