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Commissioner Donelon obtains injunction to protect Louisiana long-term care policyholders

Judge Timothy Kelley of the 19th Judicial District Court has issued a preliminary injunction that will temporarily prevent the Pennsylvania Commissioner of Insurance from implementing her plan to rehabilitate a failed Pennsylvania long-term care insurer on the backs of elderly policyholders in Louisiana.

Insurance Commissioner Jim Donelon sought the injunction to protect long-term care insurance policyholders in Louisiana. The rehabilitation plan for Senior Health Insurance Company of Pennsylvania (SHIP), a failed long-term care insurance company based in Pennsylvania, would violate Louisiana law by allowing Pennsylvania’s insurance commissioner to unilaterally impose significant rate hikes and benefit cuts to elderly long-term care policyholders in Louisiana without obtaining approval from the Louisiana Department of Insurance (LDI).

The injunction will prevent SHIP from hiking rates and cutting benefits for Louisiana policyholders until the 19th Judicial District Court issues its final ruling on whether SHIP can bypass Louisiana’s authority to set coverage terms and premiums charged to its residents. A final decision in the case is likely to be issued later this year. A similar ruling was issued by a South Carolina court last week for policyholders in that state.

“Pennsylvania’s plan to force Louisiana policyholders to pay for SHIP’s failure through rate increases and benefit reductions is totally without precedent in insurer failures and strips Guaranty Fund protection from innocent policyholders,” said Commissioner Donelon. “The injunctions in Louisiana and South Carolina show there is real nationwide momentum for correcting this disastrously improper use of a rehabilitation proceeding.”

In addition to its ongoing case in Louisiana, LDI is leading a group of 27 states that filed an amicus brief in support of a challenge filed by Massachusetts, Maine and Washington in the Supreme Court of Pennsylvania that would declare the SHIP rehabilitation plan unconstitutional and block it from taking effect. In January 2020, SHIP was placed into rehabilitation by the Commonwealth Court of Pennsylvania with a projected $1.2 billion deficit.

“The most egregious aspect of Pennsylvania’s plan is that it would deprive 30,000 SHIP policyholders across America, who are on average 86 years old (premium paying) and 89 years old (drawing benefits), of their access to $800 million of Guaranty Fund protection in place in all 50 states that could be used to cover two-thirds of SHIP’s losses,” said Commissioner Donelon.

Ominously looming in the background of the discussion on SHIP is the state of long-term care insurer Genworth, which has about 10,000 policyholders in Louisiana and over 1.1 million nationwide. Genworth Life Insurance Company, which has most of Genworth’s long-term care policies, has been rated a “Marginal” C++ by AM Best rating agency, so the SHIP rehabilitation litigation could have broad implications for Genworth policyholders down the road.

If you or a family member have questions about a policy with SHIP, please email LDI at public@ldi.la.gov or call us at 1-800-259-5300. Senior Health Insurance Company of Pennsylvania should not be confused with the Louisiana Senior Health Insurance Information Program (SHIIP), a free LDI program that helps beneficiaries better understand their Medicare coverage options and benefits.