Is Your Long-Term Care Policy Safe?

From US news & World Report:

Conseco's move earlier this month to shift roughly 150,000 of its
older long-term care policies to a trust overseen by Pennsylvania
insurance regulators is a shocker.


Notwithstanding a comforting letter to affected policyholders from
C. Everett Koop, former U.S. surgeon general, the jettisoning by
Conseco of a longtime money-losing book of business means that the
policies are now self-funding and can no longer look to Conseco to
provide financial support.....

Older LTC policies have been an industry problem. Many were sold years
ago when the concept of long-term care insurance was relatively new.
With scant actuarial evidence about ultimate policy costs, the industry
in general badly underpriced the early policies. Over time, LTC
policyholders have exhibited sustained longevity gains, meaning
policyholders are living longer than expected and posting
correspondingly higher claims for their LTC policies....

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I believe that the Pennsylvania Insurance Commissioner concluded that it was in the best interest of the Conseco LTCi policyholders to set up this trust, with the goal of more effectively serving the current and future claimants.

The PA Dept of Ins. is facing a very difficult situation with a different insurer that might go into conservatorship next month. I think the PA DOI's conclusion regarding the Conseco policies, is that a well-managed trust now is better than trying to mop up a big mess through conservatorship later.

At least by putting the policies into a trust, the PA Ins. Commissioner can cut administrative costs and eliminate waste, including executive compensation. The roughly two hundred million dollars of annual premiums paid by the policyholders can go towards current and future claims.

Insurance companies don't have the authority to "transfer policies into a trust". It was the PA DOI that had the authority to do this. They did it for the benefit of all the policyholders because Conseco Senior Health was on the road to insolvency.

As with any insurance purchase, it's very important to check the financial ratings of the LTC insurers you are considering.
— Scott A Olson, CLTC