Court battle over insurance coverage for Iowa seniors intensifies

Iowa’s seniors are being beaten by their state’s 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 the problems of the Senior Health Insurance Company. of Pennsylvania, financially insolvent.

Under a plan filed by Pennsylvania’s insurance commissioner, Ommen told the court that Senior Health could “coerce vulnerable Iowans” into paying confiscatory rate increases of 400% or more, even while imposing cuts. “draconian” to the benefits of policyholders.

Ommen is seeking a court order to block the plan from going into effect. Separately, insurance commissioners in North Carolina, North Dakota and New Jersey are making similar efforts.

Court battle over insurance coverage for Iowa seniors intensifies doug ommen official photo
Douglas Ommen is Iowa’s insurance commissioner. (Photo courtesy of the Iowa Division of Insurance)

Ommen’s lawsuit was recently transferred from state court to the U.S. District Court. Pennsylvania’s new Acting Insurance Commissioner, Michael Humphreys, along with Senior Health, asked the court Tuesday to dismiss Ommen’s petition and told a federal judge that the Iowa insurance commissioner has no right to pursue such a case on behalf of Iowa policyholders.

What’s more, Humphreys said, Ommen’s actions were not in the best interests of Iowans. Before the plan to address Senior Health’s financial problems was approved, Humphreys argued, insurance regulators across the country, including Ommen, had the opportunity to be heard on the matter and were invited to intervene and participate in the development of the plan. . Three state regulators weighed in and others filed formal comments, but Ommen chose not to, Humphreys argues.

Ommen, Humphreys asserts, “allowed the risk of harm to grow, which he now (wrongly) complains about,” when a Pennsylvania court considered the plan, approved it, and then ordered it to be implemented. He adds that Ommen waited six months after the plan was approved to “engage in shameless forum buying.”

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

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

‘Extreme’ increases in anticipated premiums

In March, a Pennsylvania judge reviewed Senior Health’s record and blamed the company’s financial problems on “underpricing policies.” The company also made bad investments and “exaggerated mortality” by relying on the fact that many policyholders would die before filing any 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 the collapse of Senior Health, court-appointed officials had the option of liquidating the company or going through a process called “reinstatement” in which 39,000 policyholders would retain some semblance of coverage. They opted for reinstatement, arguing that “downsizing” customers’ existing policies (increasing premiums or reducing benefits) was preferable to liquidation, which would result in taxpayers contributing hundreds of millions of dollars to payment of insured claims.

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

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

In court filings, Ommen says that choosing this approach over settlement benefits large insurance companies at the expense of “insureds who have paid premium for many years.” He says Senior Health has already begun contacting some of its 881 Iowa policyholders, most of whom are in their 80s and 90s, about “extreme” premium increases and potential benefit cuts.

Iowa’s senior policyholders “took the deal” presented to them years ago by Senior Health’s sales team, Ommen says. “It is unfair and contrary to Iowa law for defendants to now change that deal because of factors or events that they wish the company had known about or considered when the deal was made, and transfer that risk back to the policyholder,” Ommen told the Court.

States other than Pennsylvania where policyholders reside, including Iowa, were given the option under the rehabilitation plan to opt in or out. Although Ommen opted to exclude Iowa from the plan late last year, Senior Health subsequently sought approval of rate increases on 215 Iowans’ policies, saying 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 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 reportedly see her premiums increase by 256%. According to reports, a 69-year-old Iowa woman who has been paying premiums since March 1990 will 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 blocking implementation of Senior Health’s rehabilitation plan in that state. Last month, a Louisiana court followed suit, blocking implementation in that state.

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

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