«

»

Apr 16

What happens if a LTC insurer goes out of business? How common does this happen?

Each state has a guaranty fund. Here is the national website:  http://www.nolhga.com/  It describes the entire insolvency process. Basically, the guaranty association cooperates with the commissioner and the receiver in determining whether the company can be rehabilitated or if the failed company should be liquidated and its policies transferred to financially sound insurance companies. Once the liquidation is ordered, the guaranty association provides coverage to the company’s policyholders who are state residents up to each state’s limit. There is a great FAQ section on the national site.

This is an extremely rare situation with LTCI.  Conseco Senior Health Insurance Company and Penn Treaty are the only ones not taken over by another carrier to my knowledge.  Conseco is in an independent trust managed by the state of Pennsylvania.  Penn Treaty’s home page addresses the issue in case they are ordered into receivership. http://www.penntreaty.com/Rehabilitation/GuarantyAssociationCoverage.aspx  There is also a link to the coverage limits for LTCI and Med supp from the Penn Treaty site.  Most states have at least $300K for LTCI.  These issues happened due to liberal underwriting, high commissions, low premium.  That formula simply doesn’t work for the LTCI market and it sure doesn’t work in a bad economy.   Companies can’t get away with that fatal combination anymore thanks to the NAIC Rate Stabilization that was passed back in 2000. It has taken a decade for states to adopt it but it has some teeth in it. However, NAIC is working on additional rate stabilization regulation. That section starts on p. 144 of my new book. You can get it here: https://www.gotltci.com/online-store/

19 comments

1 ping

Skip to comment form

  1. Kirk Semler

    Dear Phyllis,

    I see the advice above to Ross advising him not to give up his Long Term Care policies dated June 2015. Two aspects; first, same advice in Sept 2019? My wife and I have had our policies only about 4 years. I am 66, my wife 63. Second, is Pennsylvania different in their ability to cover bankrupt companies?

    Thanks
    Kirk Semler

    1. Phyllis Shelton

      Without knowing your entire situation Kirk, it’s hard for me to make a blanket statement. I rarely advise people to give up their policies. You are probably referring to Pennsylvania stepping in to rescue Penn Treaty, a company based in Pennsylvania that went insolvent. No, Pennsylvania is not different. That’s just what that state decided to do to help. All states as well have the state guaranty fund to help pay claims in the event of insolvency. You can read about that here. If you wish to contact me directly with more questions, please email phyllis@GotLTCi.com.

  2. Roger Chitty

    Sept. 11, 2019

    Hi – I just received a notice from Genworth Life that my Long Term Care Policy rates are going up 55% and will go up at least 140% in the next 5-7 years and I have been provided with 4 options on continuing. The 4th option is to select the Contingent Non-Forfeiture option of which I have $26,646.76 in (Paid-Up Policy Benefits). The first 3 options are so out of line – I would like to know what this 4th option means? Thank you.

    1. Phyllis Shelton

      Roger, that 4th option is the worst in my opinion. It means you lose most of your great benefits as Genworth will pay a claim at any point in the future equal to that amount of money…so maybe a few months of care. If you would like my advice on the other three options, please email your rate increase letter to me at phyllis@GotLTCi.com or fax it to me at 615-590-0307. Then book a time on my calendar so we can go over your situation together via phone and screenshare. https://www.gotltci.com/ltciconsultations/suzeorman/

  3. Judith Garrett

    Hi, my husband and I both have a long term care policy through Genworth. Genworth is being sold to Ocean Wide of China. We have had our policies for 20 years and they are projecting increases of 104% over the next 2-years. We live in Georgia and they approved an 18 percent increase for 2019. Our policy has over doubled and we are unsure what do. If this deal with China goes through, do we have any protection if they should go bankrupt or the if the company just decides to dump the long term care part? Unfortunately we do not have the partnership policy. We have to decide by 8-24-19 if we want to continue, select a reduced benefit or just stop paying. Please can you help. Thank you so much.

    P.S. We are 79 and 75 respectively.

    1. Phyllis Shelton

      Hello Judith, the Chinese company should give Genworth more financial stability with which to pay your claim. If you bought inflation coverage, you should have been grandfathered for a Partnership policy. The Georgia insurance department is fairly strict about the amount of rate increases it approved and you can see that as you only received an 18% increase this year. So regardless of what Genworth predicts, they can only implement what Georgia approves. The company can’t decide to dump LTCi coverage. You have a contract regardless of Genworth’s ownership. Buying your policies 20 years ago means you started with a low premium and even though it has doubled, it is still great compared to today’s prices. Considering your ages, my advice is to keep the coverage in place and pay the rate increases. You receive a letter with each increase giving you options, so if you would like my help with the 2020 increase, please send a copy of the letter to me at phyllis@GotLTCi.com or fax it to me at 615-590-0307 and I will be glad to help you analyze the options.

  4. Richard Vaughan

    Just received notice of an 80% increase in both our LTC policies. Is this to be expected every year now?

    1. Phyllis Shelton

      absolutely not Richard. If you will email or fax the letter to me, I will be glad to help you better understand what is going on. phyllis@GotLTCi.com or fax 615-590-0307

  5. Sue Sonkin

    Hi
    We are Genworth LTC policy holders. With the Chinese acquisition looking sad, we are concerned. We purchased these policies when we were residents of New York and do have the New York State Partnership. We now live in New Jersey , but not necessarily permanently. Do we have any protections if Genworth fails? Advice and guidance would be appreciated.

    1. Phyllis Shelton

      You were wise to buy a New York Partnership policy as the asset protection will transfer to 40 additional states. You can see a map of the states here. Each state has a guaranty fund, which is designed to help policyholders in the event the insurance company cannot pay claims. You can look up information for any state here.

  6. Suzanne stevens

    Genworth is selling its longterm insuraznce. Premiums are on the rise. We need help but are getting nowhere with this company. What should we do?

    1. Phyllis Shelton

      The Chinese acquisition is the best thing that could happen for Genworth to get it back on solid financial standing. It hasn’t happened yet though if you look at this article. I do know some people at Genworth if you would like to email me what you need. You can always call the policyholder service department at your state’s insurance department but I’m happy to try to help you before you do that. Please email me at phyllis@gotltci.com with your policy # and question(s). Phyllis Shelton

  7. Keith Steva

    Hi Phyllis,

    With a Genworth, New York Life, or OneAmerica Long Term Care (LTC) insurance is the “premium” insured or the benefits? Other words if I have paid $50,000 in premiums for $500,000 of benefits, and the company goes out of business, am I covered for $300,000 (South Dakota) of benefits when I enter the nursing home or only $50,000?

    1. Phyllis Shelton

      Hi Keith this is an easy one. The coverage is for benefits, not premium. Good answer, right?

  8. Chuck Paulson

    My wife and I both took out 15 year term life policies through Genworth Annuity and Life Insurance. We are both 72 and don’t want to look for a new company if possible. I have 8 years left on my policy and my wife has 10 years left. Does Genworth have a federal or state guaranty program for policyholders in place? Our understanding is that a guaranty program is required by law to cover policy payouts if the company goes out of business. Please advise

    1. Phyllis Shelton

      Every state has a state guaranty fund Chuck and it covers life insurance, health insurance, annuities and long-term care insurance in varying amounts. Simply go to enter your state to see how it works in your state. This is a state fund, not something set up by Genworth or any other insurance company.

  9. sara caracciolo

    thank you fr the information it was so helpful in eleviating my fers of genworth not continuing to fulfillthe contract for my long term care.

  10. Ross Reineke

    My wife and I both have LTCI policies with Genworth Financial. Genworth lost 1.2 billion dollars last year. What happens to our policies if Genworth goes bankrupt?
    We have paid our premiums for 10 years now. Wondering if it’s worth paying our premiums this year??

    Thank you,

    Ross Reineke

    1. Phyllis Shelton

      Hi Ross. I’m so glad you found me. Please do not give up your Genworth policies as you have paid on them 10 years now. Policies cost much more today than they did 10 years ago plus you and your wife are 10 years older. There is a state guaranty fund in every state to monitor companies that have severe financial issues. You can read about it here https://www.nolhga.com/policyholderinfo/main.cfm Genworth has many, many safeguards in place to protect the claims-paying ability.

      If you get a rate increase in the future that you find unaffordable, please request options to decrease your benefits to lower the premium instead of cancelling your policies. I just wrote a blog about that actually along with welcoming new subscribers like you: https://www.gotltci.com/2015/05/welcome-to-new-subscribers-and-how-to-evaluate-a-rate-increase/ Please let me know if I can help you further. Phyllis Shelton

  1. What Happens If Your Long-Term Care Insurance Company Fails? | Elder Law Center Blog

    […] a recent blog post, Phyllis Shelton, author of Protecting Your Family With Long-Term Care Insurance, called the […]

Leave a Reply

Your email address will not be published. Required fields are marked *