November 6, 2023
OLYMPIA, Wash. — Insurance Commissioner Mike Kreidler petitioned the Thurston County Superior Court on Monday to declare his cease-and-desist order against Senior Health Insurance Company of Pennsylvania (SHIP) valid. The order requires SHIP, an insolvent company that sold long-term care insurance policies, not enforce any premium increases to Washington consumers due to the misleading coverage election packages it mailed in March 2022.
In addition to misrepresenting benefits, SHIP’s election packages did not accurately reflect the company’s financial condition, which violated state law.
Pennsylvania’s Commissioner of Insurance placed the company in financial rehabilitation in January 2020, and the state’s Commonwealth Court approved a rehabilitation plan in August 2021.
Kreidler, along with insurance regulators from Maine and Massachusetts, appealed the rehabilitation plan, claiming it was unfair to policyholders. The Pennsylvania Supreme Court, however, upheld the plan.
The Commonwealth Court ordered Kreidler to not take any action that interfered with the rehabilitation plan in an August 25, 2022 ruling. The court, however, didn’t identify a single action that interfered with the plan. The court also ordered the rehabilitator to “continue implementation of the Approved Plan without regard to the administrative orders … which the Court concludes are nullities.”
Kreidler does not believe that the Pennsylvania court has jurisdiction to determine the validity of Washington’s cease-and-desist order.
“As Washington’s insurance regulator, it’s my duty to look out for policyholders in our state,” Kreidler said. “SHIP is in dire financial straits and offered people benefit options they simply cannot deliver. I’ll request the Washington courts declare the order to cease and desist against the company valid, to stop the implementation of decisions consumers made based on misleading information the company provided.”
SHIP’s financial statements show a $1.2 billion deficit. The deficit will grow as policyholders make claims, reducing the amount available to pay future claims. SHIP mailed letters in 2022 to all policyholders — including 1,200 in Washington state — announcing a premium increase and directing them to select one of five coverage options:
- Downgrade their policy;
- Convert to a basic policy;
- Convert to an enhanced basic policy;
- Convert to an enhanced paid-up policy; or
- Keep their current policy.
But two of the options — downgrading their policy and keeping their current policy — advertise an “unlimited” maximum lifetime benefit.
Kreidler believes this statement is misleading because the company hasn’t provided a projection that shows how, after the elections are implemented, the deficit will be reduced enough to consider the company rehabilitated. Rather, all publicly provided discussions and projections indicate that the company will eventually need to be liquidated and shuttered, meaning those “unlimited” and “lifetime” benefits will be capped at a maximum of $500,000.
The election package also required policyholders to attest that any selection they made was voluntary. However, if someone didn’t select an option, the Pennsylvania rehabilitator made a selection on their behalf.