TRENTON —Department of Banking and Insurance Commissioner Richard J. Badolato took action in conjunction with the New Jersey Life and Health Insurance Guaranty Association (NJLHIGA) to address the difficult circumstances caused by the insolvency of American Network Insurance Company (ANIC), a Pennsylvania insurer that sold Long Term Care (LTC) insurance policies in New Jersey. This was necessitated by the March 1, 2017 Order of Liquidation issued by the Commonwealth Court of Pennsylvania, which declared ANIC and its affiliated company Penn Treaty insolvent. The Pennsylvania court’s decision made NJLHIGA responsible for paying the claims of New Jersey residents with ANIC LTC policies.
“ANIC/Penn Treaty charged premiums that were far too low to cover all the claims of their policyholders. The companies’ poor pricing decisions, combined with increasing life spans and market circumstances like low interest rates, resulted in the companies having fewer assets than liabilities, compelling the Pennsylvania court to order liquidation,” said Commissioner Badolato. The LTC claims of ANIC and Penn Treaty combined are expected to total approximately $4.5 billion nationwide, and New Jersey is only one of over forty states affected. The NJLHIGA estimates the costs in New Jersey alone to be approximately $211 million over several years.
Now that the claims for New Jersey residents have become NJLHIGA’s responsibility under the Pennsylvania Liquidation Order, NJLHIGA – like all other guaranty associations throughout the nation – sought premium rate increases for ANIC’s LTC policies. Without these premium increases, NJLHIGA’s costs of covering these LTC claims would completely be borne by all New Jersey policyholders, including health insurance policyholders, and taxpayers through the assessments on all other LTC and health insurers doing business in this State.
The Department is balancing these competing interests by approving some premium increases, but only to levels sufficient to achieve prices commensurate with those that would be charged for this coverage today. The Department is further requiring LHIGA to offer NJ policyholders other options that will reduce or eliminate the burden of premium increases. As a result policyholders will be given Department-mandated options that will allow them to reduce or forgo potentially significant premium increases in exchange for reduced coverage. Policyholders may also choose to surrender the policy in exchange for a cash payment. No matter which option policyholders choose, they can also shop around for other plans made available by other insurers.
It is important to understand that these rate increases will not recoup past losses experienced by ANIC on these policies and will not eliminate the significant impact on all other LTC and health insurers. But since every ANIC policyholder has unique coverage needs and budgets, the options offered will mitigate the impact on ANIC policyholders and more equitably balance the costs of this insolvency among all affected parties. In accordance with Department requests, NJLHIGA will send written notices to New Jersey resident ANIC LTC policyholders explaining the various options available to them under their specific policy. Policyholders will have approximately four months to review the options, seek necessary legal and/or financial advice, and make a selection.
“It is a bad situation for all affected, and one that leaves only difficult and limited options,” said Commissioner Badolato. “We must take this action in order to ensure there are enough funds available to pay future claims for New Jersey policyholders of ANIC, and to mitigate the costs to all other New Jersey policyholders and taxpayers.”
The more than 1,800 New Jersey residents with ANIC policies are fully protected by the NJLHIGA which provides an unlimited benefit for LTC claims up to the amount of the selected benefit limit. New Jersey is one of only two states in the nation that have no lifetime limits on LTC benefits in cases of liquidation.
Penn Treaty did not conduct business in the state and therefore New Jersey residents with Penn Treaty LTC policies will be covered by the guaranty fund of its state of domicile, the Commonwealth of Pennsylvania. Former New Jersey residents with ANIC policies, more than 700, are covered by the guaranty fund of their current state of residence.
FAQs for ANIC LTC policyholders are available at the Department’s website:
www.state.nj.us/dobi/division_insurance/solvency/anic_faqs.html.
For questions about an existing ANIC LTC claim or policy, consumers should contact the ANIC/Penn Treaty Policy Service Center at: 1-800-362-0700.
Consumers may contact the Department at 1-800-446-7467 or 609-292-7272 or go online to: www.state.nj.us/dobi/consumer.htm.
More general information about LTC coverage is available at: www.state.nj.us/dobi/ins_ombudsman/ltcguide.htm. |
