As policyholders were previously notified, the Commonwealth Court of Pennsylvania issued an Order of Liquidation for American Network Insurance Company (ANIC) and Penn Treaty Network America Insurance Company on March 1, 2017. Liquidations are governed by laws specific to troubled insurance companies, but they are similar to bankruptcies. At the time of the liquidation, all ANIC/Penn Treaty LTC policyholders were notified that the future handling of these policies and claims would be transferred to the guaranty associations in the states where ANIC/Penn Treaty LTC policyholders reside, and that those guaranty associations may seek premium increases for the ANIC or Penn Treaty LTC policy to ensure adequate funding to pay future claims.  New Jersey’s guaranty association is the New Jersey Life and Health Insurance Guaranty Association (NJLHIGA).

ANIC/Penn Treaty mispriced their premiums for the LTC benefits provided under their policies, and when combined with increasing life spans and market circumstances like low interest rates, this resulted in the companies having fewer assets than liabilities. This situation compelled the Pennsylvania court to order liquidation.

Yes.  NJLHIGA exercised its statutory ability to request premium rate increases for its ANIC policyholders residing in New Jersey, and submitted a plan to provide various options to lessen or eliminate premium increases. 

Yes.  The New Jersey Department of Banking and Insurance (DOBI) has worked with NJLHIGA to ensure payment of any current or future claims filed by New Jersey residents with ANIC policies, while balancing the costs to all New Jersey LTC and health insurers and all New Jersey taxpayers.  After months of review, adjustments and discussion regarding NJLHIGA’s premium rate request and plan of policyholder options, the Department has approved a plan for premium increases that allows NJLHIGA to charge increased premiums for ANIC LTC policies to approximate what would be charged for similar coverage in the LTC market today.  The Department also required NJLHIGA to offer ANIC LTC policyholders various options to reduce or eliminate any proposed rate increase.  All policyholders will receive a written notice of changes to their specific premiums for the ANIC policy that includes an offer to choose reduced benefits in exchange for a lesser or no premium increase, or to surrender their long term care insurance in exchange for a cash payment specified in the offer.

Current New Jersey residents who hold LTC policies issued by ANIC will be impacted the ANIC premium rate increase.  Those NJ ANIC policyholders are protected by NJLHIGA up to the full amount of the policy limit if they continue to pay the increased premium, or to the full amount of any reduced policy limit or cash payment that is selected by those NJ residents in response to the options discussed above.

New Jersey residents with Penn Treaty policies are not impacted by the ANIC premium rate increase, and those Penn Treaty policyholders will be covered by the guaranty fund of its state of domicile, the Commonwealth of Pennsylvania, because Penn Treaty never conducted business in New Jersey.

Former New Jersey residents with ANIC policies purchased in New Jersey who now live elsewhere will be impacted by the [premium rate increase; however, their claims will be paid by the guaranty association of their current state of residence.

To be eligible for NJLHIGA coverage, it is very important that ANIC policyholders continue paying their policy premiums in full and on time. Unless otherwise notified by ANIC or LHIGA, premium payment methods and payment addresses, as well as policy and claims administration contact numbers, remain the same.

Previously, the premiums ANIC/Penn Treaty charged were far below the cost of the benefits that had been promised. This partly contributed to the need to liquidate the companies. The LTC industry as a whole made assumptions about future costs and priced premiums based upon those assumptions. While premiums remained stable for many years, increases in how long people live, the level of LTC care needed, the cost of long term care services, and other changes in the economy – like sustained low interest rates - during the last decade proved earlier assumptions inaccurate.  Therefore, the LTC policies for ANIC and Penn Treaty were mispriced.  These developments have affected every company offering LTC plans and required all companies to reevaluate the premiums needed to ensure claims payments were made.

Are these premium increases related to my claims history or the amount of my expected claims?

No.  When LTC plan premium adjustments such as this prove necessary, they must be based on the insurer’s “class” or “category” of policies, meaning increases are instituted by product and may not be related to the claims history or expected claims of any individual policyholder.

Here in New Jersey, as in many other states, the amount needed to pay LTC policy claims will be borne by other insurance companies, their policyholders, and State taxpayers.  NJLHIGA estimates the costs in New Jersey alone to be approximately $211 million over several years.  Because of the mispricing and market issues discussed above, New Jersey resident ANIC policyholders can expect very significant premium increases, possibly in excess of 400% of the premium charged for current coverage.  These amounts will approximate the cost of similar LTC coverage if it were sold today, and will not recoup past losses under the ANIC policies. As noted above, affected policyholders will be given options to reduce or eliminate these increases by choosing lower levels of coverage, or by surrendering their policy in exchange for cash.

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.  Many other states’ guaranty funds are filing similar premium rate increase requests and each will be evaluated by their states’ Insurance Departments.

It is important to closely review the options in the notice of the premium increase and to seek any needed financial, legal and/or tax advice. Certain options, such as a lump-sum cash payment, may have other financial planning consequences.

LTC costs are substantial and typically outstrip cumulative LTC plan premium payments. Presently, the cost for long term care in New Jersey can exceed $65,000 a year. The average length of stay in a long term care facility is two-and-a-half years.

Yes.  No matter which option policyholders choose, they can also evaluate other plans made available from other insurers.

For questions about an existing ANIC LTC claim or policy please 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.