Penn Treaty Network America Insurance Company
American Network Insurance Company
Frequently Asked Questions
These Frequently Asked Questions were prepared by the National Organization of Life and Health Insurance Guaranty Associations and are intended to respond to common questions that policyholders of PTNA and ANIC may have concerning the companies’ pending receivership proceedings
Receivership Court Proceedings
1. Are PTNA and ANIC in rehabilitation or liquidation?
The companies are still in rehabilitation. They are not in liquidation. On January 6, 2009, the Commonwealth Court of Pennsylvania issued orders of rehabilitation for both companies and appointed the Pennsylvania Insurance Commissioner as rehabilitator. On October 2, 2009, the Rehabilitator filed petitions for liquidation of the companies with the Commonwealth Court of Pennsylvania. The Rehabilitator filed amended petitions for liquidation on October 23, 2009. A hearing on the liquidation petitions was held in 2011 and 2012. On May 3, 2012, the Commonwealth Court denied the liquidation petitions.
2. Why did the Rehabilitator recommend liquidation of PTNA and ANIC in 2009?
According to the Rehabilitator's court filings, the Rehabilitator, the companies' management and their consultants had determined that future claims will exceed future revenues and current reserves. They concluded that PTNA and ANIC will be unable to fund fully long-term future obligations.
3. Why did the Court deny the liquidation petitions?
While the Court acknowledged that the companies are insolvent, the Court found that the Rehabilitator did not meet the burden of proof required to move the companies from rehabilitation to liquidation.
4. What Court is overseeing the PTNA and ANIC receivership?
The Commonwealth Court of Pennsylvania is overseeing the PTNA and ANIC receivership under Docket Number 1 PEN 2009.
5. What is the current status of the court proceedings?
On April 30, 2013, the Rehabilitator filed proposed Rehabilitation Plans for the companies. The Rehabilitation Plans are now being reviewed by the Court. We expect that the Court will put in place a process for consideration of the Rehabilitation Plans, including receiving input from interested persons.
On October 6, 2012, the Rehabilitator filed a notice of appeal of the Commonwealth Court's order denying the liquidation petitions with the Pennsylvania Supreme Court. There has been no activity on the notice of appeal since it was filed. The Commonwealth Court’s proceedings on the Rehabilitation Plan will proceed separately from the appeal to the Supreme Court of the lower Court’s May 2012 order.
6. Is NOLHGA participating in the court proceedings? What is NOLHGA's position?
On May 28, 2013, NOLHGA filed an Application for Leave to Intervene for a Limited Purpose with the Commonwealth Court. If permitted to intervene, NOLHGA expects to make a filing in response to the proposed Rehabilitation Plans.
7. What is the impact of the appeal?
In the notice of appeal, the Rehabilitator asks the Supreme Court to reverse the Commonwealth Court's denial of the liquidation petitions. While the appeal is pending, the Commonwealth Court's May 2012 order remains in effect. It is not known when the Supreme Court will act on the appeal.
8. Is my local insurance commissioner participating in the court proceedings?
No state insurance commissioners (other than the Pennsylvania Commissioner as Rehabilitator) have participated in the court proceedings so far.
9. Who speaks for policyholders in court?
The Pennsylvania Insurance Commissioner, as Rehabilitator, is charged with protecting the interests of the policyholders. However, policyholders generally have the right to make statements about receivership proceedings to the Rehabilitator or the Court. The Court's May 2012 order stated that policyholders will be heard in the Court proceeding on the rehabilitation plan. On March 28, 2013, the Rehabilitator filed an Application to Facilitate the Creation of a Committee of Policyholders. The Court has not yet ruled on the Application.
10. Should I (as a PTNA/ANIC policyholder) participate in the court proceedings?
We cannot provide advice about whether you should participate in the Court proceedings. You can contact the Rehabilitator to ask questions about how to participate.
Rehabilitation PLAN
1. How are liquidation and rehabilitation different?
When an insurance company enters a period of financial difficulty and is unable to meets its obligations, the insurance commissioner in the company's home state initiates a process – dictated by the laws of the domiciliary state – generally whereby attempts are first made to help the company regain its financial footing. This period is known as rehabilitation. If it is determined that the company cannot be rehabilitated, the company is declared insolvent, and the laws of the state require the commissioner to ask the state court to order the liquidation of the company.
2. What will happen in rehabilitation?
At this time, the companies continue to pay benefits in full and to administer policies as they did prior to Rehabilitation. The Rehabilitator filed a proposed Rehabilitation Plan with the Court, but it has not yet been approved. If the proposed Rehabilitation Plan is approved, policy benefits could be modified or suspended and the Rehabilitator could seek premium rate increases. You can access the Rehabilitation Plan at www.penntreaty.com.
3. What is the status of the Rehabilitation Plan?
On April 30, 2013, the Rehabilitator filed a proposed Rehabilitation Plan. The Rehabilitation Plan is now being reviewed by the Court. We expect that the Court will put in place a process for consideration of the Rehabilitation Plans, including receiving input from interested persons.
4. How will the Rehabilitation Plan affect me if it is approved?
The proposed Rehabilitation Plan does not set forth how each individual policy would be affected by the plan. You could face benefit reductions or suspensions and premium rate increases.
5. Does NOLHGA have an opinion about the Rehabilitation Plan?
NOLHGA and its advisors are reviewing the proposed Rehabilitation Plan and considering the impact of the plan on NOLHGA's member guaranty associations and the policyholders they protect. If NOLHGA is permitted to intervene in the Court proceeding, NOLHGA expects to make a filing in response to the proposed Rehabilitation Plans.
Liquidation
1. Will PTNA and ANIC go into liquidation?
We cannot predict whether or when the Commissioner will petition for the liquidation of PTNA or ANIC. The governing statute says that the Commissioner can petition for liquidation when he has reasonable cause to believe that "further attempts to rehabilitate an insurer would substantially increase the risk of loss to creditors, policy and certificate holders, or the public, or would be futile."
2. What will happen to PTNA and ANIC policies if a liquidation order is entered?
The Pennsylvania liquidation statute states that policies will continue in force for thirty days after the entry of a liquidation order, with some exceptions. NOLHGA expects that the guaranty associations would continue coverage of PTNA and ANIC policies past that date, to the extent of the guaranty associations' statutory coverage limits, if an order of liquidation is entered against PTNA or ANIC.
3. What will happen to my insurance coverage if my state guaranty association becomes liable for my policy?
Protection can be provided in one of several different ways. The guaranty association may provide coverage directly by continuing the policies or issuing replacement policies with the guaranty association; in some situations, the association may work with other state guaranty associations to develop an overall plan to provide protection for the failed insurer's policyholders.
Life and Health Insurance Guaranty Associations
1. What is a life & health insurance guaranty association?
Life and health insurance guaranty associations were created to protect state residents who are policyholders and beneficiaries of policies issued by a life or health insurance company that has become insolvent. All 50 states, the District of Columbia and Puerto Rico have life and health insurance guaranty associations. All insurance companies (with limited exceptions) licensed to write life and health insurance or annuities in a state are required to be members of the state's life and health insurance guaranty association. If a member company becomes insolvent, the state guaranty association obtains money to continue coverage and pay claims from other member insurance companies writing the same line or lines of insurance as the insolvent company.
2. What is NOLHGA?
The National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) is a voluntary association made up of the life and health insurance guaranty associations of all 50 states and the District of Columbia. When an insurer, like PTNA and ANIC, licensed in multiple states is declared insolvent, NOLHGA, on behalf of affected member state guaranty associations, assembles a task force of guaranty association officials. This task force analyzes the company’s commitments to policyholders; ensures that covered claims are paid; and, where appropriate and feasible, arranges for covered policies to be transferred to a healthy insurer. Since its creation in 1983, NOLHGA has assisted its member guaranty associations in guaranteeing more than $27 billion in coverage benefits for policyholders and annuitants of insolvent companies. In that time, the associations have provided protection for more than 2.8 million policyholders and worked on more than 100 multi-state insolvencies.
3. Who do the guaranty associations protect?
Life and health insurance guaranty associations typically cover individual policyholders and their beneficiaries.
4. Which guaranty association will protect me? Does it matter where I live?
Guaranty associations provide coverage to residents of their states, subject to statutory exceptions and exclusions.
5. At what point do guaranty associations take over?
Guaranty associations are triggered to provide coverage when an order of liquidation with a finding of insolvency has been issued against an insurance company by the court. (Guaranty association statutes may also include other ways that guaranty associations may be triggered.) That means that the guaranty associations' coverage obligations begin at that point. When and how the guaranty associations will take over the administration of policies and payment of claims will depend on the structure of the liquidation plan for a company.
6. Are guaranty association laws uniform across all states?
Most guaranty association statutes are based on a Model Act drafted by the National Association of Insurance Commissioners; however, the state guaranty association statutes are not completely uniform. Some differences across states include coverage limits and certain exclusions from coverage.
7. Is long-term care insurance covered by the guaranty associations?
Yes, long-term-care insurance is typically considered health insurance for guaranty association coverage purposes.
8. Will guaranty associations pay my long-term care benefits in full?
Not necessarily. Like the FDIC, state guaranty associations have maximum benefit limits. These limits are established by state law and can vary from state to state, but all states provide at least $100,000 in long-term care insurance policy benefits. The overall benefit "cap" in most states for an individual life is $300,000, although some states have maximums that are higher. Benefits paid by an insurer prior to a guaranty association becoming “triggered” do not count against the limit on benefits which will be paid by the guaranty association.
9. Will guaranty associations protect me if the Court approves a rehabilitation plan that cuts my benefits?
Generally, guaranty associations are triggered to provide coverage to policyholders when an order of liquidation with a finding of insolvency has been issued against an insurer. At this time, no guaranty association has been triggered to provide coverage to PTNA/ANIC policyholders.
10. What if I am already receiving benefits under my long-term care policy? Will my benefits be affected by the rehabilitation plan? Will the GAs help?
The proposed Rehabilitation Plan, if approved and implemented, would modify or suspend benefits under policies that are already on claim. The Rehabilitation Plan does not specify how each policy will be affected if the plan is implemented. Generally, guaranty associations are not triggered to provide coverage during rehabilitation because an order of liquidation with a finding of insolvency is required to trigger the guaranty associations.
11. Will guaranty associations protect me if PTNA goes into liquidation?
Guaranty associations are triggered to provide coverage when an order of liquidation with a finding of insolvency has been issued against an insurance company by the court. If such an order is issued against PTNA and ANIC, the guaranty associations will provide coverage to PTNA and ANIC policyholders based on the state statutes applicable to each guaranty association. Guaranty association coverage determinations are made once the guaranty association is triggered to provide coverage.
12. Will my non-forfeiture or return of premium benefits be honored?
As a general rule, guaranty associations cover the benefits that would have been covered by the insurance company, subject to statutory coverage limits. However, certain exclusions from coverage are included in each guaranty association statute. Whether non-forfeiture or return of premium benefits will be honored will ultimately be determined by your state guaranty association.
13. If my long-term care claim under my policy is higher than my state guaranty association's coverage limit, do I lose my "over-limit" claim?
Any claims in excess of guaranty association limits are not within the scope of your guaranty association's responsibility. If an order of liquidation is entered against PTNA or ANIC, the order of liquidation (or a liquidation plan approved by the court pursuant to the order) will govern how claims, including claims in excess of guaranty association limits, will be handled.
14. Should I keep paying my premiums?
If you are paying premiums to the company, you must continue to do so even after the company has been placed into rehabilitation or liquidation in order to keep your policy in force and be eligible for guaranty association benefits if the guaranty association is triggered by a liquidation order. If you stop paying premiums, your insurance benefits and guaranty association coverage may be terminated. We cannot advise whether continuing to pay premiums and keeping your policy in force is the best option for you.
How to Seek Additional Information
1. Whom should I contact with questions about my policy?
You should contact your state insurance department or your state guaranty association with questions about coverage. Coverage will be provided by the guaranty association in your state of residence, even if the policy was purchased in another state. Policyholders who reside in states where the insolvent insurer was not licensed will be covered, in most cases, by the guaranty association of the company's domiciliary state, Pennsylvania.
While the companies remain in rehabilitation, you should continue to contact PTNA/ANIC Policyholder Services at 800-362-0700, x3190 for policy or claim information.
2. Who can answer questions about my guaranty association coverage?
The guaranty association in your state of residence can answer questions about coverage. However, guaranty associations cannot make coverage determinations for any particular policy until they are triggered by an order of liquidation with a finding of insolvency to provide coverage. You can find contact information for your guaranty association at http://www.nolhga.com/policyholderinfo/main.cfm.
3. How can I contact my local insurance commissioner?
You can find contact information for your insurance commissioner on the National Association of Insurance Commissioner's website at http://www.naic.org/state_web_map.htm.