Dive Brief:
- The possible upcoming liquidation of Pennsylvania's failing Penn Treaty Network America Insurance Co., which has been in rehabilitation since 2009, has raised a more general debate about the health insurance industry's role in managing the fallout of failures in the long-term care sector, SNL reported.
- UnitedHealth Group has led a group of insurers in petitioning for changes to the guaranty fund that would support Penn Treaty.
- The health insurers aim to shift the way Pennsylvania will cover PennTreaty's $4 billion in liabilities if it goes into liquidation by creating a hierarchy -- with health insurers at the bottom -- for what different insurers would be required to pay into the pool.
Dive Insight:
Health insurers have argued long-term care is a distinct industry more akin to life insurance, and that health insurers should therefore not be held accountable for a significant amount of the long-term care industry's commitments.
UnitedHealth has initiated the push given the increasingly unstable prospects of the long-term care sector in recent years, due to longer life expectancies and very low interest rates. The conditions have resulted in "massive" liabilities and steep rate increases in long-term care prices. Health insurers are particularly concerned about the potential impact if a national player goes down and they have to pay into state guaranty funds.
The implications for long-term care are as yet unclear; regulators noted that any action in the Penn Treaty case could set a precedent, and that any changes in favor of health insurers would "almost certainly anger the life insurance industry left on the hook for a growing proportion of the costs," according to SNL.
As a result, "We support the current model law," American Council of Life Insurers spokesman Jack Dolan told SNL. "We would not support any proposal to completely exempt health insurers from being assessed for long-term care."