Insurance coverage

Court battle over insurance coverage for Iowa seniors escalates

Iowa seniors are being harmed by their state insurance commissioner in a fight over long-term care insurance, Pennsylvania officials told a federal judge this week.

In March, Iowa Insurance Commissioner Douglas M. Ommen filed a petition in Polk County District Court seeking to intervene in the state of Pennsylvania’s efforts to address Senior Health issues. Insurance Company of Pennsylvania, financially insolvent.

Under a plan presented by Pennsylvania’s insurance commissioner, Ommen told the court that Senior Health would be allowed to “force vulnerable Iowans” to pay confiscatory rate increases of 400% or more, even imposing penalties. “draconian” reductions in policyholder benefits.

Ommen seeks a court order to prevent the plan from taking effect. In addition, the insurance commissioners of North Carolina, North Dakota and New Jersey are pursuing similar efforts.

Douglas Ommen is the Iowa Insurance Commissioner. (Photo courtesy of Iowa Division of Insurance)

Recently, Ommen’s lawsuit was moved from state court to the US District Court. Pennsylvania’s new acting insurance commissioner, Michael Humphreys, along with Senior Health, on Tuesday asked the court to dismiss Ommen’s motion, telling a federal judge that the Iowa insurance commissioner lacked standing. to pursue such a matter on behalf of the Iowa policyholders.

Additionally, Humphreys said, Ommen’s actions were not in the Iowans’ best interest. Before Senior Health’s financial resolution plan was approved, Humphreys alleged, insurance regulators across the country, including Ommen, were given an opportunity to be heard on the matter and were asked to intervene and participate in the development of the plan. . Three state regulators have intervened and others have submitted formal comments, but Ommen chose not to, Humphreys argues.

Ommen, Humphreys claims, “allowed the risk of harm — which he now (mistakenly) complains about — to grow” as a Pennsylvania court reviewed the plan, approved it and then ordered it to be implemented. He adds that Ommen waited six months after the plan was approved to “indulge in blatant forum buying.”

Ommen’s lawsuit “is designed, in theory, to prevent 215 of Iowa’s 881 policyholders from being asked to pay rate increases,” Humphreys claims, but the action “can only cause harm to policyholders.” of Iowa and elsewhere.

Ommen’s office has yet to file a response to Humphreys’ motion. The insurance commissioner’s office did not immediately return messages seeking comment.

“Extreme” increases in planned premiums

In March, a Pennsylvania judge reviewed Senior Health’s history and blamed the company’s financial troubles on “policy underpricing.” The company also made bad investments and “overstated mortality” by betting that many policyholders would die before submitting claims, the judge found. The company is now considered insolvent, the judge found, with $1.4 billion in assets and $2.6 billion in liabilities, resulting in a $1.2 billion deficit.

With Senior Health’s collapse, court-appointed officials had the option of liquidating the company or going through a process called “rehabilitation” in which 39,000 policyholders would retain some semblance of coverage. They opted for rehabilitation, arguing that “adjustment” of clients’ existing policies – increasing premiums or reducing benefits – was preferable to winding up, which would result in taxpayers contributing hundreds of millions of dollars to paying claims. of the insured.

The court-approved rehabilitation plan that Ommen is challenging is an attempt to partially fill Senior Health’s funding gap by changing the terms of the 39,000 long-term care insurance policies the company has in place. Without such a plan in place, Senior Health would face $3 billion in claims in the coming years while collecting only $230 million in premiums.

Humphreys’ office argued that the rehabilitation plan is structured “around the fundamental principle of policyholder choice” in that all policyholders will have the choice of preserving their current coverage by paying more premiums or preserving their current premiums by accepting reduced benefits.

In court filings, Ommen claims that choosing this approach over liquidation benefits large insurance companies to the detriment of “policyholders who have paid premiums for many years.” He says Senior Health has already started contacting some of its 881 policyholders in Iowa — most of whom are in their 80s and 90s — about “extreme” premium increases and potential benefit reductions.

Iowa’s elderly policyholders “have accepted the bargain” presented years ago by the Senior Health sales team, Ommen says. “It is unjust and contrary to Iowa law for defendants to now alter this bargain because of factors or events they wish the company had known or considered at the time the bargain was entered into, and transfer that risk to the policyholder,” Ommen said. to research.

States other than Pennsylvania where policyholders reside, including Iowa, were given the option under the rehabilitation plan to opt-in or opt-out. Although Ommen opted to drop Iowa from the plan late last year, Senior Health later sought approval for rate increases on 215 Iowans-held policies, saying it planned to increase the average annual premium for these insureds from $2,307 to $4,648 per year, a 201% increase.

For some policyholders in Iowa, “even more drastic premium increases” are planned, according to Ommen. For example, an Iowan is an 89-year-old woman who has been paying premiums since November 1990. The plan calls for her premiums to increase by 234%, Ommen alleges.

A 91-year-old Iowa woman who has been paying premiums since March 1991 would see her premiums increase by 256%. A 69-year-old woman from Iowa who has been paying premiums since March 1990 would see her premiums increase by 403%.

In January, a South Carolina court issued an order granting that state’s insurance commissioner’s request for a temporary injunction that blocks the implementation of Senior Health’s rehab plan in that state. Last month, a court in Louisiana did the same, blocking implementation in that state.

Although a Pennsylvania court’s order approving the plan is now under appeal, the Pennsylvania Supreme Court has denied requests to stay the lower court’s order that the plan be implemented. as quickly as possible.