State moves to liquidate Penn Treaty: Insolvent Salisbury insurer's claims will be covered by government fund after a year.

The state is working to dissolve a Lehigh Valley-based long-term care insurer that's been slouching toward financial collapse for years.

A state spokeswoman said Penn Treaty Network American Insurance of Salisbury Township still has enough money to pay its policyholders' claims for about a year, and that a government-run fund set up to pay claims from failed insurers will cover those policyholders thereafter.

Penn Treaty, located on Lehigh Street, along with a subsidiary called American Network, has about 120,000 policyholders nationwide, including about 16,000 in Pennsylvania.

It also has more than 200 workers whose long-term employment status has grown ever murkier.

The state Insurance Department filed papers in Commonwealth Court last week to liquidate Penn Treaty after an analysis showed that the company would need an additional $1.3 billion to cover future claims.

Rosanne Placey, a spokeswoman for the department, said the company would have needed to pass "double-digit" rate increases along to customers in an attempt to regain solvency, but regulators were unlikely to approve such hikes.

The state has been worried about the company's future for some time, she said.

"The recession and poor investments didn't help," she said. "but they have been in financial difficulty for a number of years now, and they just weren't able to turn it around."

There is no time frame for when the liquidation could take place, Placey said.

Last October, Penn Treaty announced it had stopped selling new policies and faced possible insolvency.

Then, in January, a state court approved the Insurance Department's request to take control of the company. It began supervising Penn Treaty's finances as it worked to see if the company could be saved.

The company has 205 employees, Placey said, most of them in the Lehigh Valley. Those workers still have jobs, at least for the time being.

"We do not know if and when the liquidation order would be triggered," Placey said, "so I don't want to frighten the employees there."

Even if the court approves the state's liquidation request, she said, some of those employees could be kept on to help manage claims.

This is the first time in five years that the state has moved to have an insurance company liquidated.

In Pennsylvania, all long-term care policies are backed up to $300,000 in the event a company fails. The money comes from fees assessed on other insurance companies.

Long-term care insurance helps pay for certain medical and personal expenses, such as nursing home care. Placey said most of the claims filed on such policies can be satisfied for less than $300,000.

Policyholders with questions on claims or other matters can call 800-362-0700, ext. 3270.

brian.callaway@mcall.com

610-820-6168