Penn Treaty Updates
1624 3rd Avenue North
Jacksonville Beach, Florida  32250
(904) 242-8893
(904) 242-0163 Facsimile

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Welcome to the website for Penn Treaty
Network America Insurance Company. On this
website, you can find information about how to
file a claim for benefits, download forms, learn
about the company's rehabilitation process,
and find answers to your questions. For
assistance, please contact Policyholder
Services at 1-800-362-0700, ext. 3190.
December 1, 2014
Company and
American Network Insurance Company:
The Policyholders Committee was appointed in 2013 to represent
the interests of
policyholders generally in connection with proceedings for the
rehabilitation of Penn
Treaty Network America Insurance Company (“Penn Treaty”) and
American Network
Insurance Company (“ANIC”).
The Policyholders Committee has reviewed the Second Amended
Plan for the
Rehabilitation of ANIC and Penn Treaty (the “Plan”), which the
Rehabilitator filed on
October 8, 2014. The Committee believes the Plan represents a
significant improvement
and treats policyholders far better than the Plan the Rehabilitator
filed on April 30, 2013.
Policyholders will be given choices and will be able to continue to
receive coverage.
Although the Plan appears technical and its details are
complicated, the essence of it for
policyholders is this:
a) The Plan does not change the terms and conditions of your
b) However, ANIC and PTNA are both insolvent and are going to
run out of funds to
pay claims in the next several years.
c) The great majority of policies are not charged enough premium
to cover the
benefits and expenses that ANIC and PTNA must pay in the future.
The Plan
provides that these policies will be turned over to the respective
state life and
health guaranty associations (unless they are voluntarily modified
d) Under the Plan, the Rehabilitator will divide the business of
ANIC and PTNA into
a so-called “self-sustaining” block of policies to be housed in ANIC,
and a “nonself-sustaining”
block of policies to be housed in PTNA. “Self-sustaining” means
the policy’s current premium rate is adequate compared to the
expected future
claims on the policy (taking into account the assets allocated with
respect to the
policy under the Plan). “Non-self-sustaining” means the policy’s
premium rate is not adequate (even after taking into account assets
allocated with
respect to the policy under the Plan).
e) The Rehabilitator estimates that the “self-sustaining” block will
start with
approximately 20% of all policyholders.2
f) The “self-sustaining” block will also be open to “non-self-
policyholders who voluntarily elect to pay more premium in the
future and/or
downsize their benefits.
g) By the same token, the “non-self-sustaining” block will be open
to “selfsustaining”
policyholders who prefer guaranty association coverage over ANIC
h) You do not have to make a decision about your policy at this
time. So long as
you continue to pay your premium when it’s due, you will continue
to receive
i) You will not have to make a decision about your policy until after
the Court
confirms the Plan.
j) If the Plan is confirmed, all policyholders will have the chance to
choose whether
to be in ANIC or in PTNA. However, moving a “non-self-
sustaining” policy
from PTNA to ANIC will mean agreeing to higher premiums and/or
k) When the time comes, the Rehabilitator will provide you with an
election form showing you information about your policy and
showing you your
l) The allocation of assets between ANIC and PTNA after their
business is divided
will make ANIC solvent, in the sense that the Rehabilitator
reasonably expects
that ANIC will be able to pay claims as they come due over the life
of the
m) PTNA and its block of policies will be liquidated, and the
policies will be turned
over to the respective guaranty associations. Policyholders can
expect to have
their coverage continue without interruption through their
guaranty association.
n) If you are a policyholder who chooses to be in PTNA, you will
continue to
receive coverage and benefits up to the statutory limit of your state
association, or the maximum benefit allowed under your policy,
whichever is less.
Based on assets and liabilities as of the end of 2013, approximately
half the
policyholders in PTNA will receive full policy benefits, and half will
have claims
that exceed the applicable guaranty association limit by some
amount. However,
the proportion of policyholders whose claims exceed the applicable
association limit is expected to go up as PTNA’s assets go down in
the future.
o) The Plan provides for a small amount of additional coverage for
claims that go
over the guaranty association limits. The assets available for such
additional 3
coverage are projected to be limited (from 10 to 20 cents for each
dollar of claims
over the guaranty association limit).
p) The few policyholders who are not eligible for guaranty
association coverage will
receive a pro rata share of the assets available for additional
coverage. Because
they are not eligible for guaranty association coverage, their entire
claim will be
treated as above any guaranty association limits.
q) For accounting and tax purposes, your policy will be
restructured to distinguish
between the benefits the Company can afford to pay out of its
assets and the
benefits it cannot afford to pay. But this restructuring will not
affect your
The Rehabilitator’s proposed method for allocating assets between
winds up taking some assets from PTNA to make ANIC solvent. As
a result, there will
be fewer assets available in PTNA for uncovered claims, meaning
just that part of a claim
which is above the guaranty association coverage limit. Based on
assets and liabilities as
of December 31, 2013, the difference would be: (a) roughly 11% less
assets for
issued by PTNA; and
(b) roughly 34% less assets for over-the-limit claims of
policyholders in PTNA whose
policies were issued by ANIC.
The Rehabilitator believes that dividing the business of ANIC and
PTNA into “selfsustaining”
and “non-self-sustaining” blocks and making the “self-sustaining”
solvent is the best way to comply with the Court’s orders, protect
policyholders from
drastic benefit cuts or premium increases without consent or
regulatory approval of the
kind proposed in the Plan filed on April 30, 2013, and preserve the
basic features of the
policies the policyholders chose. Among other things, the Court’s
orders directed the
Rehabilitator: (1) to file a plan of rehabilitation (as opposed to
liquidating both
Companies); (2) to address inadequate premium rates; and (3) to
“discriminatory” premium rates, whereby policyholders in some
states paid less than
policyholders in other states paid for the same policies. The Plan
rehabilitates the “selfsustaining”
block of policies. It addresses inadequate premium rates by
liquidating “nonself-sustaining”
policies. It addresses historical premium rate discrepancies by
the “self-sustaining block” solvent at the expense of the “non-self-
sustaining” block.
Finally, the Plan protects policyholders from drastic benefit cuts
and premium increases
by making rate increases and benefit cuts voluntary.
The Committee may decide to file objections concerning one or
more aspects of the Plan.
If so, it will only be with the intent of obtaining modifications for
the benefit of
policyholders and not with the intent of defeating the Plan.
Likewise, the Committee
may respond to proposals by other parties to modify the Plan, if
the proposed
modifications are not in policyholders’ interests.4
The Committee urges you to read the notice package carefully,
including the ten page
summary of the Plan included in the notice package, and also to
review the entire Second
Amended Plan and send written comments to the Rehabilitator
and the Court by February 13, 2015. This letter and the notice
package only provide partial information concerning
the Plan. To understand the Second Amended Plan fully, you must
read the Plan in its
The views, conclusions and recommendations expressed in this
letter are those of the
Committee and not necessarily those of the Rehabilitator or other
Thomas A. Leonard
Richard Limburg
Counsel for the Policyholders Committee