Senior Health Insurance Co. of Pennsylvania (SHIP), its rehabilitator, and the former Pennsylvania insurance commissioner have been found in contempt of court for violating a temporary injunction related to the company’s rehabilitation plan.
SHIP was placed into rehabilitation in January 2020 after the Pennsylvania Insurance Department determined its liabilities and long-tail claim exposures exceeded admitted assets by more than $474 million as of December 31, 2018. The insurer was created to manage a closed book of long-term care business previously owned by Conseco Inc.
In February 2022, Iowa Insurance Commissioner Doug Ommen (pictured above) filed a lawsuit to prevent SHIP from implementing a rehabilitation plan without his approval, aiming to stop policy modifications that would reduce coverage and increase premiums for Iowa consumers.
In March 2023, the Iowa District Court for Polk County issued a temporary injunction, blocking any implementation of the plan, including policyholder contact, unless approved by Iowa’s regulator.
Despite the injunction, SHIP’s rehabilitators told Ommen in January they planned to seek permission from a Pennsylvania court to proceed and contact Iowa policyholders. Ommen warned this would violate the injunction and could trigger sanctions. SHIP went ahead and received approval from a Pennsylvania court to implement the plan and contact Iowa residents.
The Pennsylvania court set an April 12 deadline for SHIP to contact Iowa policyholders, who had until May 31 to respond to plan modifications. Non-respondents would have their plans modified automatically.
SHIP and its rehabilitators argued they were following the Pennsylvania court’s order, but the Iowa court ruled this did not excuse their contempt, as they knowingly violated the injunction. The court found further violations in mailings sent to Iowa policyholders, which requested consumers select rates or benefits not approved by the Iowa commissioner.
The Iowa court ordered SHIP and its rehabilitators to stop violating the injunction and imposed a $481,500 fine – $500 for seeking the Pennsylvania court order and $500 for each of the 481 mailings sent to Iowa policyholders.
The Pennsylvania Insurance Department, led by Commissioner Michael Humphreys, regulates more than $139 billion in annual premiums and oversees over 220 domestic insurers.
The department denied record insurance rate hikes this year, emphasizing consumer protection and blocking excessive premium increases through its rate review process.
In March, a North Dakota court also blocked a proposed rate increase from SHIP, with the state’s regulator stating the company was attempting to bypass prior-approval laws.
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