Mansell, Engel & Cole

Scary proposition: when the LTC company you've long funded tanks

Most residents across Oklahoma and the rest of the country buy various forms of insurance for a logical and obvious reason: they need safeguards and some assurance against the downsides posed by risk.

Among all the groups that purchase that protection, there is arguably one demographic that stands above all others for being especially vulnerable and justifiably concerned with the integrity and promises of insurance companies that are eagerly taking premiums from its members.

That group comprises the mass of policyholders -- individuals and couples -- who for years have duly honored their contractual obligations regarding long-term care-care health insurance. That insurance protects against the harsh financial exactions that come into play routinely for people who lack coverage and need to enter nursing homes or other care facilities in their advanced years.

What do you do if your LTC insurer turns out to be insolvent or otherwise has such crushing burdens that it states it will be unable to honor its part of the contractual bargain?

Could a more nightmarish scenario be envisioned for any policy holder, especially one who has paid in huge sums of money over many years to guarantee the contracted-for performance of its insurer?

As noted in a recent New York Times article, that reality is in fact now staring LTC policyholders of one "good-size American insurer" directly in the face. Penn Treaty has been ordered to liquidate its business, which the Times states "will orphan tens of thousands of policyholders."

The report on the insurer notes that all states have so-called "guarantee funds" to compensate insureds when their insurers fail, but, notably, those funds top out at levels that often don't come remotely close to the amounts paid into LTC policies over many years by policyholders.

Dramatically rising health care costs have spiked in recent years at a rate that most individuals and families couldn't remotely have fathomed.

And the same appears to be true for insurers calculating coverage obligations.

The Times notes in a most sobering vein the possibility that Penn Treaty's failure could be "a signal of more trouble to come in the long-term-care sector."

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