The Commonwealth Court of Pennsylvania placed Penn Treaty American Corp., an Allentown, Pa.-based long-term care insurer, and its two subsidiaries in liquidation March 1. As a result, health insurers in the states Penn Treaty is licensed to do business assumed responsibility for hundreds of millions of dollars in claims, Kaiser Health News reports.
Here are five things to know.
1. Under state groups known as insurance guaranty associations, insurance companies protect members of other insolvent insurers by ensuring the failed payer's claims are reimbursed. Market share determines the amount each insurer contributes.
2. Industry analysts predict Penn Treaty has nearly $4 billion in long-term claims liabilities and roughly $700 million in assets, the report states. A.M. Best credit rating firm said Penn Treaty's insolvency reflects a "potential shock to the health marketplace."
3. California's insurance guaranty association may face the most in claims liabilities at $400.6 million, according to a report obtained by Kaiser Health News from the Long Term Care Group for the National Organization of Life & Health Insurance Guaranty Associations. Florida follows with an estimated $360.4 million.
4. Two of the nation's biggest payers are projected to pay hundreds of millions of dollars to cover Penn Treaty's claims liabilities. Indianapolis-based Anthem projects it will pay $253.8 million and Hartford, Conn.-based Aetna predicts it will pay $231 million.
5. The payments could be recovered through various means, including increased premium surcharges and decreases in state premium taxes, the report states. In a June 30 filing with the Securities and Exchange Commission, Anthem reported payments will be "largely recovered through premium billing surcharges and premium tax credits over future years."
For the full report, click here.