Georgia hit by company’s failure—Taxpayers on hook for over $61 million

March 22, 2017

But wait, we are told repeatedly that the taxpayers never, ever, ever have to pay when companies go under.  It seems as if it is Economic Development projects or other businesses, the State always comes to bail them out on the taxpayers’ back.

As usual, taxpayers are on the hook for a business failure. Do taxpayers ever get dividends when a business succeeds? Nope.

“Georgia law allows those insurance companies to receive state tax credits for the amount of the assessments, writing off 20 percent of the costs each year for five years from the tax on their premiums.  That write-off shifts the burden of liquidation to state taxpayers, some insurance experts note.”

Read the entire article from AJC:

http://investigations.blog.ajc.com/2017/03/21/insurance-company-failure-could-cost-georgia-61-million/

Georgia hit by company’s failure

State joins others that may be on hook for millions; many could be unable to pay nursing home bills.

By Lois Norder lois.norder@ajc.com

A massive insurance company failure is likely to cost Georgia millions of dollars and eventually could leave many who bought long-term coverage without enough money to pay nursing home bills.

Penn Treaty Network Insurance Company and its subsidiary American Network Insurance Company are short nearly $4 billion needed to pay out long-term care insurance benefits to policyholders nationwide, including 1,800 in Georgia. Earlier this month, a court ordered the liquidation of the Pennsylvania-based companies after years of legal battles failed to produce a plan to save them.

Now, the shortfall will have to be covered by insurance guaranty associations in states where the insolvent companies sold policies. Georgia is on the hook for about $61.2 million.

“This is clearly the largest health insurance insolvency ever,” said Mike Marchman, executive director of the Georgia Life & Health Insurance Guaranty Association.

Penn Treaty policyholders must continue to pay their premiums to maintain coverage. Then, as they make claims in coming years, the association will have to cover them up to the limit set by state law. In Georgia, that cap is $300,000 per policyholder.

“When you surpass the $300,000, that would be up to the individual (to pay),” Marchman said. “We can only pay what the Legislature told us to pay.”

Other Georgia health insurance companies will be assessed amounts to cover the obligations of the Georgia guaranty association. The companies cannot apply a surcharge to policyholders. The association’s board hasn’t yet decided whether to collect at once all the funds needed or to impose the assessments over a period of years, Marchman said.

Georgia law allows those insurance companies to receive state tax credits for the amount of the assessments, writing off 20 percent of the costs each year for five years.

That write-off shifts the burden of liquidation to state taxpayers, some insurance experts note.

Georgia is not the hardest hit state from the company’s failure. California’s guaranty association faces a $382 million liability; Florida’s, about $354 million; Virginia’s, about $189 million; and Texas’, about $117 million, according to estimates issued last summer.

Rates for long-term care insurance have soared in recent years as the cost of nursing home care has spiked and people are living longer. But Penn Treaty would have needed to raise rates an average of 300 percent to cover its shortfall, and state regulators wouldn’t approve that increase. No other company would agree to take over Penn Treaty’s long-term care line of business, Marchman said.

Penn Treaty has about 73,000 policies still in force nationwide, Marchman said.

The average policyholders is in his or her late 70s, but many are still in their 40s, he said. That means some will make claims on their policies for decades to come.

The National Association of Insurance Commissioners has committees examining long-term care insurance and regulatory changes that may be needed to address the issues in the marketplace, a member of the NAIC staff told The Atlanta-Journal Constitution in an email.

Many insurers are struggling with losses; among them is Genworth Financial, the largest seller of long-term care policies. To help deal with its massive debt, Genworth agreed to be acquired by a Chinese investor, the Richmond Times-Dispatch reported. Some other insurers have stopped writing long-term care policies.

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TWG

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