For Consumers

Kreidler orders Senior Health Insurance Company of Pennsylvania (SHIP) to stop interfering with the rights of Washington policyholders

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March 1, 2022

OLYMPIA, Wash. – Insurance Commissioner Mike Kreidler has ordered the insolvent Senior Health Insurance Company of Pennsylvania (SHIP) , of Pennsylvania, to immediately stop soliciting signatures from Washington’s 1,200 plus policyholders for unapproved benefit and rate changes.

SHIP’s appointed rehabilitator sent letters to policyholders in Washington and other states containing a “Coverage Election Package” that requires they choose a reduced benefit or premium increase by March 15, 2022, with an effective date as soon as April 1. Neither the premium increases nor benefits changes have been approved by Kreidler’s office, as required by state law. 

SHIP sold long-term care insurance policies to seniors throughout Washington. The financially troubled company was placed into rehabilitation by Pennsylvania’s Commissioner of Insurance in January 2020. A rehabilitation plan for the company was approved by the Pennsylvania Commonwealth Court in August 2021. Kreidler, along with commissioners from Maine and Massachusetts, appealed the rehabilitation plan, claiming it was unfair to policyholders. Their appeal is pending before the Pennsylvania Supreme Court. Twenty-seven other insurance regulators signed an amicus brief in support of the appeal.

In the meantime, any SHIP policyholder who has already received a Coverage Election Package from SHIP must select an option and postmark their response to the company by March 15 if they want to keep the reduced policy. 

“I’m hopeful the Pennsylvania Supreme Court will see the facts of this case and grant our appeal,” said Kreidler. “The average SHIP policyholder is 86 years old. It’s critical they have the best option possible in the face of this company’s demise. The rehabilitator’s plan puts the burden of filling a $1.2 billion funding gap entirely on elderly consumers who put their faith in the company to be there when they needed them.” 

Individual states have the sole authority to approve or deny rates and forms for companies doing business in their jurisdiction. Kreidler and the other objecting regulators believe the rehabilitation plan disproportionately puts the burden of the company’s insolvency unfairly onto policyholders and ignores their rights under states’ guaranty fund associations. State guaranty associations are set up in each state to pay claims when an insurer is placed in liquidation. Washington’s guaranty association pays claims up to $500,000 for a policyholder of a liquidated insurer. This provides some limited protection for policyholders but is no panacea. SHIP will not recover from its financial insolvency, but liquidating the company and triggering the states’ guaranty associations will offset some of the impact on policyholders. The rehabilitator letter directs SHIP policyholders to select one of five coverage options, with an accompanying premium change:

  • Downgrading your policy
  • Converting to a basic policy
  • Converting to an enhanced basic policy
  • Converting to an enhanced paid-up policy
  • Keeping your current policy

But two of the options—downgrading your policy and keeping your current policy—advertise that the Maximum Lifetime Benefit is “unlimited.” Kreidler’s office found this claim to be misleading at best, because the company will not have the funds to fulfill this promise. The package also requires policyholders to attest that any selection they make is voluntary, however if someone does not select an option, one is made for them.  

“Given that the March 15 deadline is pending, and we cannot wait for the court to decide, I’m encouraging all SHIP policyholder who have received notice from the company to make the best decision they can for their own situation,” said Kreidler. “If you’re confused by the notice you’ve received, contact your agent or file a complaint with our office.”