Louisiana Secures Temporary Injunction in Connection with the SHIP Rehabilitation Plan

Senior Health Insurance Company of Pennsylvania (“SHIP”) was placed in rehabilitation in Pennsylvania in January 2020.  On August 24, 2021, the Commonwealth Court of Pennsylvania approved the Rehabilitation Plan (the “Plan”), which includes a nationwide premium increase and several benefit modification options that will be presented to policyholders to avoid or mitigate the rate increase.  The Plan includes an opt-out for state regulators who elect to review the proposed rate increase, but if an opt-out state does not approve the full rate increase the options available to policyholders of policies issued in that state would not include an option for the policyholder to retain the full benefit amounts set forth in their policy.  Because of the novel strategy to pursue a rate increase/benefit modification through the rehabilitation court, the Plan has proven to be controversial.  For example, the chief insurance regulators in Massachusetts, Maine and Washington have filed an appeal in the Supreme Court of Pennsylvania to challenge and block the Plan (and a group of 27 other state insurance regulators filed an amicus brief in support of this challenge). The Pennsylvania Supreme Court recently denied an application for a stay of the approval of the Plan while the appeal is pending.

Opponents of the rehabilitation plan have also pursued litigation challenging it in jurisdictions other than the Pennsylvania Commonwealth Court, which is the court presiding over the SHIP’s rehabilitation.  On December 3, 2021, Commissioner Donelon and the Louisiana Department of Insurance filed a declaratory judgment action in Louisiana state court against SHIP and Commissioner Jessica Altman (as Rehabilitator), together with a petition seeking temporary and permanent injunctive relief.  Commissioner Donelon alleges that the Plan bypasses premium rate increase approval statutes and usurps the authority of the Louisiana Commissioner and seeks an injunction enjoining the Rehabilitator from: (i) soliciting Louisiana policyholders to select options under the Plan; and (ii) implementing any aspect of the Plan that would affect the rates paid by or benefits enjoyed by Louisiana policyholders.  On January 25, 2022, the 19th Judicial District Court in Louisiana granted a preliminary injunction providing such relief.  In a press release issued by the Louisiana Department, Commissioner Donelon highlighted that some of the concern around the SHIP plan relates to concern over Genworth’s financial condition “[o]minously looming in the background.”

Notably, this is the second temporary injunction granted in recent months in connection with the Plan.  On January 20, 2021, Director Farmer (South Carolina) secured a similar injunction enjoining the implementation of the rehabilitation plan in South Carolina at least until such time that there has been a final adjudication on the merits in the Pennsylvania Supreme Court.  See Order Granting Preliminary Injunction.

We previously covered SHIP’s rehabilitation plan in November 2020, and we will continue to bring you updates as they develop.

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