Legal battle escalates over long-term care insurance policies sold to Iowans

A long-running dispute between insurance commissioners in Iowa and Pennsylvania has escalated, with Iowa regulators arguing that hundreds of elderly Iowans are now being put at risk due to a company’s willful violation of a court order.

In 2022, Iowa Insurance Commissioner Douglas Ommen sought an injunction against the financially struggling Senior Health Insurance Company of Pennsylvania, or SHIP, arguing the company intended to “coerce vulnerable Iowans” into paying confiscatory rate increases of 400% or more, even while imposing “draconian” cuts to policyholders’ benefits.

At the time, Ommen said SHIP, which had sold long-term care insurance policies to more than 880 Iowans, was financially insolvent with a $1.3 billion funding shortfall.

The injunction, which was later granted, barred SHIP from offering any rates, riders or policy documents to any Iowa policyholders that had not been previously authorized and approved by the Iowa insurance commissioner.

In January 2025, SHIP informed the Iowa insurance commissioner the company had filed a request with the commonwealth court of Pennsylvania to begin implementing a court-approved “rehabilitation plan” for the company, allowing SHIP to contact Iowa policyholders and to offer, or in some cases force, changes to their policies.

The Iowa commissioner then informed SHIP that even if the Pennsylvania court granted the request and the company followed through, it would be in clear violation of the injunction issued in Iowa. Under that scenario, the commissioner warned, he would authorize the Iowa attorney general to seek sanctions against SHIP.

According to newly filed court papers in the case, SHIP “did not back down” and now intends to “unilaterally modify all Iowa SHIP policies” between May 31 and Oct. 28.

Iowa commissioner cites North Dakota case

According to the Iowa commissioner, there are now 501 SHIP policyholders in Iowa who in April were the target of a mass mailing informing them of potential modifications to their policies.

One of those Iowans is Clarence Busch, who has maintained his policy for over 30 years, and currently relies on it to pay for his assisted living care. Busch reported to the Iowa commissioner that the letter from SHIP was difficult to understand, and that he is now “concerned that I will lose the benefits I am receiving.”

Another Iowa policyholder, 74-year-old retired attorney Janet Huston, says in court filings that she has paid premiums on her long-term care policy continually since purchasing it at age 47.  “Purchasing the SHIP long-term care policy was part of my plan to care for myself in retirement,” Huston says in an affidavit filed with the court. “Now, 27 years later, I am concerned that the benefits for which I have paid premiums since the inception of the policy in 1997 or 1998 will not be available to me when I need them.”

The Iowa commissioner alleges it never authorized SHIP to contact any Iowa policyholders and that the Iowa court has never modified its injunction barring such contact.

SHIP has been litigating a nearly identical case in North Dakota, where a trial court recently awarded summary judgment in favor of the North Dakota Commissioner of Insurance and permanently barred SHIP from modifying the policies of North Dakota consumers without the commissioner’s approval.

After that decision was rendered, SHIP wrote to the judge in the case and claimed the North Dakota insurance commissioner didn’t “recognize the realities facing SHIP” and was unfairly seeking a “result that is simply not possible.” The company said it intended to “discontinue” its participation in the North Dakota court proceedings, adding that it did so “without any lack of respect for this honorable court,” but in recognition of the “hard realities” it faced.

In pursuing a contempt-of-court finding against SHIP, the Iowa commissioner is arguing that SHIP’s conduct is “beyond the pale” and that the company’s response to the North Dakota court’s decision “shows their state of mind.”

SHIP, the Iowa commissioner says, has “no intention of respecting the laws or court orders of any jurisdiction outside of Pennsylvania. Their contact with Iowa policyholders was not a fluke, or an accident, or a one-off violation; it was a deliberate plan months in the making, with the full knowledge that it would violate the temporary injunction.”

The Iowa commissioner not only seeks a finding of contempt, it is also requesting a civil penalty of $500 for each of 503 acts on contempt. The company has yet to file a response to that request.