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Hundreds of Iowans with long-term care insurance face huge premium hike

Health Overhaul Applying for Benefits
Posted at 11:50 AM, Feb 27, 2022
and last updated 2022-02-27 12:50:46-05

Iowa’s insurance commissioner is seeking an urgent court order to prevent a Pennsylvania insurance company from dramatically raising premiums and slashing benefits for elderly Iowans with long-term care policies.

Unless the courts intervene, Insurance Commissioner Douglas M. Ommen argues in a petition filed in Polk County District Court, the Senior Health Insurance Company of Pennsylvania will be allowed to “coerce vulnerable Iowans” into paying confiscatory rate increases of 400% or more even while imposing “draconian” cuts to policyholders’ benefits.

Ommen is taking Jessica K. Altman, Pennsylvania’s former commissioner of insurance, to Polk County District Court over the matter. Altman is the court-approved “rehabilitator” of the financially troubled Senior Health Insurance Company of Pennsylvania. In that role, Altman has been granted all the authority of the company’s directors, officers, and managers in an attempt to make the company solvent.

In his court petition, Ommen argues that he is concerned that with Altman at the helm, Senior Health has already begun contacting Iowa policyholders about “extreme” increases in premiums and potential cuts in benefits.

According to the petition, Senior Health’s business consists almost entirely of long-term care policies that pay for nursing home care. Court records indicate Senior Health has been insolvent since at least 2019, when it reported a deficit of approximately a half-billion dollars The company has not written any new policies since approximately 2003, and only a small fraction of its original business remains active, the petition claims.

State records indicate that are currently 881 Senior Health policyholders in Iowa. The average Senior Health policyholder age is 86 years old, and the average age of a policyholder with an active claim is 89, but the company is allegedly laboring under a funding deficit of $1.2 billion.

Ommen argues that despite Senior Health’s “dire financial condition,” Altman has decided not to place the company in liquidation — a process that would trigger coverage through state guaranty associations that protect policyholders when insurers go under. Altman has instead placed Senior Health in rehabilitation, which is a process that enables the company to reduce expenses and boost income by changing the terms of its 39,000 active policies.

In May of last year, a Pennsylvania court approved a rehabilitation plan put forward by Altman. In December, Senior Health filed notice of a premium rate increase in Iowa, in accordance with the approved plan.

Ommen rejected the proposed rate increase, arguing that the rehabilitation plan circumvents not only state laws regulating insurance rates, but also the laws that pertain to the payment of claims that are made against insolvent insurance companies. The rehabilitation approach benefits large insurance companies at the expense of “policyholders who have paid premium for many years,” Ommen argues.

In his petition to the court, Ommen states: “Iowa’s elderly policyholders accepted the bargain presented to them by (Senior Health): ‘If you pay the premium, we will accept the risk of future loss.’ It is unfair and contrary to Iowa law for defendants to now change that bargain because of factors or events they wish the company had known or considered when the bargain was made, and to transfer that risk back to the policyholder.”

69-year-old Iowan facing 403% rate increase

States other than Pennsylvania where policyholders reside, including Iowa, were given the option under the rehabilitation plan to either opt in or opt out. Although Ommen chose to opt Iowa out of the plan late last year, Senior Health subsequently filed for approval of rate increases on 215 policies held by Iowans, stating that it plans to increase the average annual premium for those policyholders from $2,307 to $4,648 annually, an increase of 201%.

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

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

The highest proposed premium increase is from $1,642 annually to $12,727, an increase of 675%, the petition states.

In all, Altman and Senior Health have asked for an increase of 100% or more for 90 of their Iowa policyholders, the petition states. If the policyholders refuse to pay those rates, Ommen alleges, plans call for Senior Health to simply reduce the benefits associated with those policies.

Even if policyholders decide to pay the premium increases outlined in phase one of the rehabilitation plan, they will face still face “draconian cuts in benefits,” Ommen says, despite the fact that they may already be in nursing homes and relying on policy benefits to pay for their care.

Court records indicate Senior Health’s deputy rehabilitator, Patrick H. Cantilo, has argued that the company’s policyholders have been enjoying an unreasonably low rate of premiums and that it’s not fair to have taxpayers, through state guaranty associations, pick up the tab for the financial losses incurred by Senior Health.

“The question that we were debating is: Is it reasonable, if a policyholder has been paying a quarter for a dollar’s worth of insurance for decades, to adopt, as the workout plan, a plan in which the taxpayers step up to pay the remaining 75 cents?” Cantilo testified at one hearing.

In response to that argument, Ommen says the Iowa Legislature, in creating a state guaranty fund, determined that it was “reasonable to spread the loss resulting from insurer insolvency” and not to place that burden solely on the backs of policyholders.

Ommen is asking the court to issue a temporary injunction preventing the defendants from implementing their rehabilitation plan in the state of Iowa.

Altman resigns as Pennsylvania insurance commissioner

The defendants in the case have not filed a response, and a hearing on the matter is scheduled for March 9. However, lawyers for Ommen’s office have filed a motion seeking more immediate action, noting that the matter is “urgent” and that under Iowa’s rules of civil procedure a court can grant a temporary injunction without first holding a hearing.

“Defendants have stated that they will not follow Iowa law in their plan,” the motion states. “The court does not need any further information to determine that defendants are violating Iowa law and should be enjoined to protect Iowa policyholders.”

The court has yet to rule on that motion.

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

As for Altman, who helped craft the rate-increase plan, she resigned Friday as Pennsylvania’s insurance commissioner, with Gov. Tom Wolf praising her for “protecting access to high-quality, affordable health care by holding insurance companies accountable.”

Altman will soon begin serving as CEO of Covered California, a free service that provides Californians with financial assistance in purchasing health insurance while steering others to coverage under the state-run Medi-Cal program. The service is sponsored in part by the state’s Department of Health Care Services.

Iowa Capital Dispatch is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Iowa Capital Dispatch maintains editorial independence. Contact Editor Kathie Obradovich for questions: Follow Iowa Capital Dispatch on Facebook and Twitter.

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