A former unit of Conseco Inc. is raising rates 20% to 35% on a closed block of long-term care insurance business in California.
Senior Health Insurance Company of Pennsylvania, Carmel, Ind., insists the rate hikes are needed to keep its business afloat.
SHIP began notifying its 7,000 California policyholders in April that they would see a rate hike of up to 20% in July and another 20% in September.
In a follow-up mailing, however, the company notified the policyholders the July rate hike would be the last this year, although another one was planned for next year.
SHIP was formed in 2008 as a nonprofit by the Pennsylvania Department of Insurance to run off a closed block of unprofitable LTC insurance that Conseco wanted to spin off into an independent trust. The new entity covers a total of 140,000 LTC policies throughout the U.S. This includes servicing the LTC obligations issued by Transport Life Insurance Company, American Travelers Life Insurance Company, United General Life Insurance Company and Continental Life Insurance Company.
SHIP officials argue that because the company is operated without a profit, policyholders themselves will bear the brunt of any future rate increases or policy changes.
In California, SHIP announced the increases for nine different policies. The letters offered policyholders the option of keeping their existing coverage at the higher premiums, taking a policy with fewer benefits to keep their premiums down, or taking a one-time lump-sum payment equal to the total amount of premiums they had paid, less any claims paid.
The rate increase in July has been approved by state regulators, SHIP says.
According to SHIP officials, the California Department of Insurance required the company to disclose all future rate increases that were possible. SHIP, however, does not plan to raise rates above the increases already announced, says Holly Bakke, president and chief executive officer.
Brian C. Wegner, executive vice president and chief operating officer for SHIP, says the company projects it has adequate reserves to cover claims for at least the next 50 years. But those projections do include the announced rate increases, he said.
