The attached press release announcing the insolvency and liquidation orders for the Penn Treaty and American Network Insurance Companies underscores the important role reserves play in protecting insureds. There are roughly 2,000 New Jerseyans who hold long-term care policies from the now insolvent entity and under guarantee laws, New Jersey health insurers will be assessed for the monies needed to meet Penn Treaty and American Network Insurance’s unfunded liabilities.
Cited as one of the largest insurance failures in U.S. history with liabilities exceeding $2 billion dollars, the portion of the total New Jersey liability (~$150 million) to be covered by Horizon BCBSNJ is estimated at $50-$55 million. This insolvency comes on the heels of the Health Republic liquidation announced by NJ DOBI in February. That insolvency cost Horizon and our members approximately $17 million. Unfortunately, other long-term care insurers are under financial duress for the same reasons that caused the demise of Penn Treaty/ American Network and more insolvencies could follow.
There has never been a more volatile time in the health insurance market. Health Republic went bankrupt because of their inability to withstand the risk in the individual market. Two other carriers, Oscar and United, withdrew from New Jersey’s market and a third, AETNA, reversed plans to enter the market citing risk. Their customers – the very ones that cost them so much that they went bankrupt or left the individual market – are now either with Horizon or the other plan serving the FFM exchange market in NJ. Reserves play a critical role in safeguarding insureds not only from the risk their carrier must manage, but also from adverse financial consequences caused by the insolvency of unrelated companies.