Wednesday, September 28, 2016

No. 181: State Farm Insurance—Class Certification in a Lawsuit in Federal Court Alleging that the Company Subverted the Illinois Court System

On September 16, 2016, U.S. District Court Judge David R. Herndon issued a "Memorandum and Order" (Order) in an extraordinary case. He ruled that "the Court finds the class certification is proper and grants the motion for class certification."

Judge Herndon, a 1998 Clinton nominee, is in the Southern District of Illinois and is a former chief judge there. His Order grew out of a complaint filed in May 2012 and an amended complaint filed in November 2014 that describe, in significant detail, an allegation that State Farm Mutual Automobile Insurance Company (Bloomington, Illinois) subverted the Illinois state court system for the benefit of the company. (See Hale v. State Farm, U.S. District Court, Southern District of Illinois, Case No. 12-cv-660.)

The Avery Case
The underlying case—Avery v. State Farm—was a class action lawsuit filed in an Illinois state court in 1997. The plaintiffs were State Farm policyholders whose automobiles were repaired with parts that were not factory authorized or were not original-equipment-manufacturer parts, or who received compensation based on the cost of those parts. After a trial, the jury awarded the plaintiffs $456 million in breach-of-contract damages. The state court judge who presided over the trial added $130 million of disgorgement damages and $600 million of punitive damages, for a total award of $1.186 billion.

State Farm appealed the trial court ruling. In April 2001 the Illinois Appellate Court threw out the $130 million of disgorgement damages as duplicative, but affirmed the remaining $1.056 billion of the award.

In October 2002 the Illinois Supreme Court agreed to hear State Farm's appeal of the Illinois Appellate Court ruling. The case was fully briefed and argued by May 2003, but the decision was delayed more than two years. In August 2005 the Illinois Supreme Court, in a split decision, overturned the $1.056 billion judgment of the Illinois Appellate Court.

The Hale Case
Judges who serve on the Illinois Supreme Court are elected to their positions. In January 2005 the Avery plaintiffs allegedly received reliable information that State Farm had used financial and political influence to accomplish the election of Lloyd Karmeier, an Illinois trial court judge, to a vacant seat on the Illinois Supreme Court. Judge Karmeier won the election in November 2004 over Gordon Maag, an Illinois Appellate Court judge.

The Avery plaintiffs filed a motion to disqualify Judge Karmeier from participating in State Farm's appeal of the Avery ruling in the Illinois Appellate Court. State Farm's response to the motion allegedly misrepresented and concealed the magnitude of the company's involvement in the election of Judge Karmeier. The Illinois Supreme Court denied a motion by the Avery plaintiffs to disqualify Judge Karmeier. In August 2005 Judge Karmeier cast an important vote in favor of State Farm in the previously mentioned split decision that overturned the $1.056 billion judgment.

In December 2010 attorneys for the Avery plaintiffs began an investigation into State Farm's involvement in the election of Judge Karmeier. The investigation followed a U.S. Supreme Court decision overturning a West Virginia Supreme Court ruling in a case involving a party's financial and political influence to elect a judge whose vote it sought for an appeal. A retired special agent of the Federal Bureau of Investigation led the probe. It allegedly found evidence that State Farm had recruited Judge Karmeier, directed his election campaign, funneled as much as $4 million to the campaign ($4 million was the bulk of the campaign's funds), and concealed this information from the Illinois Supreme Court while the appeal was pending. The investigation also allegedly found evidence that State Farm had worked through Edward Murnane, president of the Illinois Civil Justice League, and William G. Shepherd, a State Farm employee who headed Citizens for Karmeier.

In May 2012 the plaintiffs filed the initial complaint in the Hale case alleging two counts of violations of the Racketeer Influenced and Corrupt Organizations (RICO) Act. In November 2014 the plaintiffs filed an amended complaint that alleged the same two RICO counts. The defendants are State Farm, Murnane, and Shepherd. The thrust of the allegations is that State Farm used financial and political influence to accomplish Judge Karmeier's election to the Illinois Supreme Court.

State Farm's Comment
I asked State Farm for comment on Judge Herndon's Order. A spokesman for the company provided this statement:
We are disappointed in the Court's decision on the class certification question, and respectfully disagree with it. We intend to ask the appellate court to review this ruling in the very near future. Plaintiffs have unsuccessfully asserted and reasserted these allegations for many years and should not be permitted to do so any longer.
General Observations
Readers of The Insurance Forum, my 2015 book entitled The Insurance Forum: A Memoir, and this blog are aware that I have reported over the years on many troubling cases. The Hale case, however, is one of the most troubling I have ever seen. Judge Herndon included, near the beginning of his Order and before his discussion of the class certification issues, a verbatim excerpt from the first six pages of the amended complaint in the Hale case.

The Hale case and its predecessor, the Avery case, have been around for almost two decades. Whether the end is near remains to be seen. If State Farm files an appeal of Judge Herndon's Order, presumably the company would do so in the U.S. Court of Appeals for the Seventh Circuit. However, Hale has the feel of a case that eventually may reach the U.S. Supreme Court. I plan to follow further developments in the Hale case and report on them.

Available Material
I am offering a complimentary 29-page PDF containing Judge Herndon's Order, which includes a lengthy verbatim excerpt from the amended complaint in the Hale case. Send an email to and ask for the Herndon/State Farm Order dated September 16, 2016.


Monday, September 19, 2016

No. 180: Long-Term Care Insurance—An Update on Senior Health Insurance Company of Pennsylvania

Senior Health Insurance Company of Pennsylvania (SHIP), formerly Conseco Senior Health Insurance Company (CSHI), is a long-term care (LTC) insurance company in runoff; that is, SHIP is not issuing new policies. In 2008 Indiana-based Conseco, Inc. (now CNO Financial Corp.) announced a plan to separate itself from Pennsylvania-based CSHI, a financially troubled LTC insurance subsidiary. Over 11 years, Conseco had poured $915 million into CSHI to keep the company solvent.

I wrote about Conseco's separation from CSHI in the November 2008, January 2009, and June 2009 issues of The Insurance Forum. I also wrote about SHIP in Nos. 123 (October 27, 2015), 125 (November 6, 2015), 174 (August 11, 2016), and 175 (August 18, 2016). This update is based on SHIP's recent financial statements and other developments.

The Plan of Separation
The plan of separation provided for Conseco to create an independent trust in Pennsylvania, transfer ownership of CSHI to the trust, and rename the company SHIP. The Pennsylvania insurance commissioner approved the plan, and Conseco implemented it. The commissioner testified later in another matter that he approved the plan because Conseco said it would otherwise allow CSHI to become insolvent.

SHIP still has a relationship with CNO. According to a reinsurance exhibit in SHIP's 2015 financial statement, SHIP reduced its reserve liabilities by about $1 million through reinsurance ceded to Washington National Insurance Company, a subsidiary of CNO.

SHIP's Backdated Surplus Infusion
In this post I refer to "surplus" and "total adjusted capital" interchangeably because they are similar. On March 1, 2015, SHIP filed its financial statement for the year ended December 31, 2014. According to the statement, SHIP borrowed $50 million on February 19, 2015, to obtain a surplus infusion. SHIP backdated the infusion seven weeks by including it on the December 31, 2014 balance sheet. SHIP borrowed the money by issuing a five-year surplus note with an annual interest rate of 6 percent. The lender (the buyer of the surplus note) was Beechwood Re, a Bermuda-based company with which CNO has a reinsurance relationship.

A surplus note is a debt instrument that increases the surplus of the borrowing company because the company is not required to establish a liability for the amount borrowed. A surplus note is subordinate to the borrowing company's other obligations, and can be issued only with the insurance commissioner's prior approval. Also, interest and principal payments can be made only with the commissioner's prior approval.

SHIP's Situation at the End of 2014
At the end of 2014, without the $50 million backdated surplus infusion discussed above, SHIP would have had total adjusted capital of $68 million. That would have been below regulatory action level RBC (risk-based capital) of $82 million, and the commissioner would have been required to conduct a confidential investigation. With the surplus infusion, however, SHIP's total adjusted capital was $118 million ($68 million plus $50 million), which was well above regulatory action level RBC of $82 million and slightly above company action level RBC of $109 million.

SHIP's Situation at the End of 2015
On March 1, 2016, SHIP filed its financial statement for the year ended December 31, 2015. The statement shows that the company has not paid any interest on the surplus note. I do not know whether the commissioner denied the company's request for permission to pay interest, or whether the company did not request permission.

At the end of 2015, including the $50 million surplus infusion discussed above, SHIP had total adjusted capital of $94 million. That was below company action level RBC of $117 million, and the company was required to file a confidential RBC report with the commissioner indicating how the company proposed to deal with the problem. I do not know whether the company filed the report, and if so, how the company proposed to deal with the problem.

Platinum Partners
Norman Seabrook is a former official of New York City's Correction Officers Benevolent Association (COBA). Murray Huberfeld is a founder of Platinum Partners, a hedge fund.

On July 7, 2016, U.S. Attorney Preet Bharara of the Southern District of New York filed a grand jury indictment charging Seabrook and Huberfeld with one count of conspiracy to commit honest services wire fraud and one count of honest services wire fraud. The indictment alleges that a "kickback scheme" deprived COBA members of Seabrook's "honest services" when COBA's annuity fund and COBA's general fund invested in Platinum offerings. (See U.S.A. v. Seabrook and Huberfeld, U.S. District Court, Southern District of New York, Case No. 16-cr-467.)

On July 26, 2016, The Wall Street Journal ran a front-page article about Platinum. Beechwood was mentioned because of ties to Platinum.

Exhibits of "other long-term invested assets" in recent SHIP statements show that the company has significant holdings of Platinum-related investments. On September 15, 2016, Reuters posted an article entitled "Long-term care insurer SHIP works to dump Platinum cargo," by reporter Lawrence Delevingne. The article says that, as of June 30, 2016, SHIP "had at least $100 million of its assets [3.6 percent of its $2.8 billion of assets and 106 percent of its $94 million of total adjusted capital at the end of 2015] invested in Platinum's funds or companies backed by Platinum." The Reuters article quotes Brian Wegner, SHIP's president and chief executive officer, as saying that "the company is in the process of reviewing and shedding all Platinum-related investments—now down to about $50 million—and would be done by the end of 2016," and that "SHIP has experienced no losses and fully anticipates that will be the case as the remainder is divested."

SHIP's 2015 Premium Volume
SHIP's statement for the year ended December 31, 2015 shows the company received $105 million of LTC insurance premiums in 2015. The ten leading states (in millions) were Texas ($9.9), Florida ($9.5), California ($9.5), Pennsylvania ($8.9), Illinois ($6.9), Ohio ($5.3), North Carolina ($3.8), Indiana ($3.2), Maryland ($3.0), and Michigan ($3.0).

General Observations
What will happen to SHIP remains to be seen. The company's recent net losses were $56 million in 2014, $9 million in 2015, $3 million in the first quarter of 2016, and $20 million in the second quarter of 2016. As discussed above, SHIP's total adjusted capital at the end of 2015 was below company action level RBC. It is unclear how a company in runoff and with inadequate total adjusted capital can afford to pay the interest on a surplus note, let alone repay the principal.

As I mentioned in No. 174 (August 11, 2016), Penn Treaty Network America Insurance Company, another Pennsylvania-based LTC insurance company in runoff, has been in rehabilitation for several years. The Pennsylvania insurance commissioner is the court-appointed rehabilitator. The state court judge overseeing the case is expected to rule soon on the commissioner's petition to liquidate Penn Treaty. If the judge grants the petition, state guaranty associations would become involved in the case, and other insurance companies would be required to pay assessments.

Available Material
I am offering a complimentary 20-page PDF consisting of the articles in the November 2008, January 2009, and June 2009 issues of The Insurance Forum (9 pages), and the indictment filed against Seabrook and Huberfeld (11 pages). Email and ask for the LTC/SHIP package dated September 19, 2016.


Thursday, September 15, 2016

No. 179: Annuities, Pensions, and the Theft of Benefit Payments—Another Recent Example

In No. 177 (posted August 31, 2016) I reported on the practice of life insurance companies using the Social Security Death Master File in their efforts to deal with the theft of annuity benefits. I said survivors of deceased life annuitants sometimes pretend the annuitant is still alive and thereby steal annuity benefits that should have stopped when the annuitant died. I said the same problem applies to pensioners receiving benefits from pension plans and recipients of Social Security benefits.

I included a recent example of the problem. An individual was charged with grand larceny for allegedly stealing over $100,000 of pension benefits intended for his mother, who had died more than 11 years earlier. After posting that item I learned of another recent example involving an extra dimension.

The New Example
On September 1, 2016, in a joint press release, New York State Attorney General Eric Schneiderman and Comptroller Thomas DiNapoli announced the unsealing of an indictment charging Robert J. Schusteritsch, a 71-year-old Florida resident, with grand larceny in the second degree, a class C felony, and criminal impersonation in the second degree, a class A misdemeanor. He allegedly stole over $180,000 in benefits from a New York State pension plan. The benefits were intended for his brother, Martin Petschauer, who retired in 1986 and died in 2008. The indictment was filed in the state court in Albany County. Here is an excerpt from the press release:
According to documents filed with the court today, Petschauer was a New York State pensioner who retired as Chief of the Pooling and Audit Review Section of the New York Metro Milk Marketing Area in approximately 1986. He passed away on July 9, 2008. At the time of Petschauer's death, his pension benefits were being direct deposited into a bank account held in a trust for the benefit of Petschauer; Schusteritsch was the sole trustee for his brother and had exclusive access to the bank account.
When Petschauer died, Schusteritsch concealed his brother's death from the bank and the Retirement System and kept the trust account open to maintain the direct deposits. He then routinely accessed the pension deposits and spent the money for his own benefit. All told, prosecutors allege Schusteritsch stole over $180,000 in pension benefits until the Retirement System discovered Petschauer's death in October 2015.
The prosecution also alleges that when the Retirement System learned of Petschauer's death and stopped paying benefits into the trust account, Schusteritsch called the customer help line on November 2, 2015, pretended he was Petschauer, and asserted that he was not actually dead, in an effort to maintain eligibility for the pension benefits.
Schusteritsch was arrested in Florida and brought to Albany. At his arraignment, he pleaded not guilty. Bail was set at $10,000 cash or bond, and he was remanded in lieu of posting. If convicted, he faces "up to five to fifteen years" in state prison.

General Observations
In No. 177, I said I have seen examples of legal actions against persons who allegedly stole annuity or pension benefits, but have not seen discussions of the magnitude of the problem. I expressed the belief that there are large numbers of such incidents, but many thefts may not be large enough to warrant criminal charges.

Longtime readers of The Insurance Forum know I dislike life annuities. One reason is that the cost of the "protection against living too long" cannot be readily ascertained, and I dislike buying something whose cost is unknown. Another reason is that benefits stop at the death of the annuitant, at the end of a "period certain," or, in the case of a joint and survivor life annuity, at the death of a second annuitant.

My preference is for systematic (usually monthly) withdrawals, allowing the annuitant's family to receive the funds remaining after the annuitant's death. The annuitant runs the risk of living so long that the funds are exhausted before the annuitant's death. However, the risk is small if the annuitant sets the withdrawals each year at the required minimum distribution (RMD) level, even where RMDs do not apply. I explained and illustrated the procedure in the August 1998, November 1998, August 2012, and November 2012 issues of the Forum.

Available Material
I am offering a complimentary 13-page PDF consisting of the 2-page September 1 press release issued by the New York State attorney general and the comptroller, the 1-page article in the August 1998 issue of the Forum, the 4-page article in the November 1998 issue, the 3-page article in the August 2012 issue, and the 3-page article in the November 2012 issue. Email and ask for the September 2016 package relating to the theft of annuity benefits and systematic withdrawals.


Thursday, September 8, 2016

No. 178: Iowa's Accounting Rules and a Petition Seeking Access to Documents

In November 2014 I posted three items about Iowa's accounting rules (Nos. 71, 72, and 73). Later I posted several other related items. Also, under Iowa's open records law, I obtained some documents from the Iowa Insurance Division (IID). However, the IID and Commissioner Nick Gerhart denied access to other documents relating to eight limited purpose subsidiaries that Iowa-domiciled life insurance companies have created.

On September 2, 2016 my attorney filed, in the Iowa District Court for Polk County, which includes Des Moines, a petition seeking judicial review of the IID's and Commissioner Gerhart's denial of access to the documents. My attorney also filed nine exhibits: my letter requesting documents, Commissioner Gerhart's letter denying the request, a report by the New York State Department of Financial Services, comments by the U.S. Financial Stability Oversight Council, a report by the U.S. Office of Financial Research, and four news stories.

Because I am a litigant, I will not comment on the case. However, I am making available two complimentary PDFs containing publicly available court documents: the petition (32 pages) and the exhibits (75 pages). Email and ask for the petition only, or the petition and the exhibits, relating to Belth v. IID and Gerhart.


Wednesday, August 31, 2016

No. 177: Annuities, Pensions, and the Theft of Benefit Payments

The August 1980 issue of The Insurance Forum carried an article about unclaimed death benefits. However, the subject did not catch fire until July 28, 2010, when Bloomberg News carried an article by reporter David Evans. The article, which dealt with life insurance owned by members of the military, strongly criticized life insurance companies for using the Social Security Death Master File (DMF) to help them stop the theft of annuity benefit payments while failing to use the DMF to help them pay unclaimed death benefits. The New York Times, The Wall Street Journal, and The Washington Post immediately picked up the story, and I wrote about it in the October and November 2010 issues of the Forum. I have never seen a discussion of the magnitude of the theft of annuity benefit payments.

The Notification Problem
A life annuity is a series of payments, often monthly, made to an annuitant. In many instances, the payments are contingent on the survival of the annuitant. Thus the benefits payable under many annuities are supposed to stop when the annuitant dies. When I refer to annuitants, I also have in mind pensioners who receive benefit payments from private employer-sponsored pension plans, from federal, state, and local government pension plans, and from the Social Security System.

Annuity and pension benefit payments are invariably made by mail or by direct deposit into the annuitant's or pensioner's bank account. Thus the insurance company or pension plan depends on a survivor to provide notification of the death of the annuitant or pensioner so that the company or the pension plan can stop the benefit payments. However, a survivor may pretend the annuitant or pensioner is still alive and thereby steal the continuing benefit payments. When the payment comes by check, a survivor may forge the deceased person's endorsement on the check and thereby steal the payment. When the payment goes into a joint bank account owned by the annuitant (or pensioner) and a survivor, it may be even easier for the survivor to steal the continuing payments.

A Recent Example
On August 15, 2016, in a joint press release, New York State Attorney General Eric Schneiderman and Comptroller Thomas DiNapoli announced an indictment charging John H. Eydeler III, a 66-year-old Arizona resident, with grand larceny in the second degree, a class C felony. He allegedly stole over $100,000 in benefits from a New York State pension plan. The benefits were intended for Eydeler's mother, a retired nurse, who died in October 1998. The indictment was filed in a state court in Albany. Here is an excerpt from the press release:
According to investigators, Eydeler concealed his mother's death in 1998 from the New York State and Local Employees Retirement System. As a result, between October 1998 and January 2010, over $100,000 in pension benefits were deposited into a bank account in the name of Eydeler's deceased mother. Eydeler then allegedly diverted these monies to himself by claiming to have power of attorney for his mother and writing checks to himself every month for over a decade.
At Eydeler's arraignment, he pleaded not guilty. If convicted, he would face "up to five to fifteen years" in state prison.

General Observations
Over the years I have seen examples of legal actions against persons who allegedly stole annuity or pension benefits. However, I have not seen any discussions of the magnitude of the problem. I think there are large numbers of such incidents, but many thefts may not be large enough to warrant criminal charges.

I am not mentioning this subject to defend life insurance companies who use the DMF to try to minimize annuity theft while not using the DMF to try to pay unclaimed death benefits. Rather, I am mentioning the subject to point out that the companies may have had—and may still have—a major problem in dealing with the theft of annuity benefit payments.

Available Material
I am offering a complimentary 12-page PDF consisting of the 1-page press release issued by the New York State attorney general and the comptroller, the 2-page article in the August 1980 issue of the Forum, the 4-page article in the October 2010 issue the Forum, and the 5-page article in the November 2010 issue of the Forum. Email and ask for the September 2016 package relating to the theft of annuity benefit payments.


Thursday, August 25, 2016

No. 176: Annuity Churning Leads to Federal Prison Time for an Agent

On September 14, 2016, Gary Edward Hibbing, a former insurance agent, will report to a federal prison to begin serving a sentence for actions related to the churning of annuities. The federal charges to which he pleaded guilty are wire fraud and unlawful monetary transactions, but his insurance license had been revoked earlier for, among other things, annuity replacements described as "twisting." Where the apparent sole motive for replacements is to generate agent commissions, I have used the securities industry's word "churning" instead.

The State Charges
On March 4, 2013, the Oklahoma insurance commissioner issued an order revoking the insurance licenses of Hibbing and his wife. According to the order, the respondents had sold replacement annuities to one particular senior citizen in 2007, 2008, 2009, and 2010, and to another senior citizen in 2010. The order said the respondents had provided false information not only to the senior citizens but also to the insurance companies that had issued the annuities. The order described the scheme as "a deliberate and concerted effort to receive exorbitant upfront commissions each year at the financial expense of senior citizens." The order also said the respondents had violated various Oklahoma statutes, including the prohibition against twisting.

The Federal Charges
On February 4, 2015, a U.S. Attorney in Oklahoma filed a 24-count grand jury indictment against Hibbing. It consisted of 15 counts of wire fraud, four counts of unlawful monetary transactions, and five counts of aggravated identity theft. (See U.S.A. v. Hibbing, U.S. District Court, Northern District of Oklahoma, Case No. 15-cr-29.)

Among the companies mentioned in the indictment are Allianz Life Insurance Company of North America, PHL Variable Insurance Company, Security Benefit Life Insurance Company, Aviva Life and Annuity Company of New York, Forethought Life Insurance Company, and National Western Life Insurance Company. Among the allegations in the indictment is that Hibbing had continued to engage in his scheme even after the Oklahoma insurance commissioner had suspended his license.

On April 4, 2016, Hibbing pleaded guilty to two counts of wire fraud and two counts of unlawful monetary transactions. In exchange, the government agreed to dismiss the other 20 counts in the indictment.

On August 18, 2016, the judge sentenced Hibbing to 27 months in federal prison, followed by three years of supervised release. The judge also ordered him to pay restitution of $356,000 divided among 16 clients and $129,000 to Allianz. Hibbing waived appeal and the case was closed.

The Plea Agreement
Hibbing's plea agreement includes the statement that "The sentence imposed in federal court is without parole." By signing the agreement, he expressed his understanding of that fact.

One of the attachments to the plea agreement is Hibbing's "statement of facts." Here are paragraphs 6 and 7 of the statement:
6. Between October 2007 and March 2013, I formulated and executed a scheme to defraud and to obtain money and property from the insurance companies I represented and from my clients by making various material false representations to them:
  • I caused some clients to buy multiple annuities, year after year, by telling them falsely that doing so was to their financial advantage when actually it was not.
  • I intentionally withheld important information from some clients about the surrender fees they would have to pay to terminate one annuity contract early and invest in the next.
  • I made material false representations to the insurance companies by submitting documents that incorrectly stated my clients' reasons for terminating annuities, that my clients understood the financial costs to themselves, and that the funds being used to buy the annuities were not derived from the termination of previous annuities.
  • I intentionally hid from the insurance companies the movement of clients' funds among annuity products by using different insurance companies and by fraudulently representing that some of the products were sold by my wife, who was an insurance agent, when in fact she had nothing to do with the transactions.
7. I caused the insurance companies to send my clients the proceeds of their surrendered annuities in the form of checks. Then I caused those clients to deposit their checks into their bank accounts, as opposed to having the funds sent directly to the insurance companies issuing the new annuities. By doing so, I fraudulently masked the movement of funds among annuities from the insurance companies.
General Observations
It is not often that we hear of an insurance agent going to prison for something other than felony theft. In this case, however, the churning activity was so brazen and extensive that it warranted the involvement of federal prosecutors. The extent of churning activity in the annuity market is not known, but I fear it is widespread.

Available Material
I am offering a 28-page complimentary PDF consisting of the Oklahoma insurance commissioner's order (6 pages), the federal grand jury indictment (11 pages), Hibbing's full statement of facts in his plea agreement (5 pages), and the judge's sentencing order (6 pages). Send an email to and ask for the August 2016 package relating to the Hibbing case.


Thursday, August 18, 2016

No. 175: Long-Term Care Insurance—A Follow-Up and a Correction

In No. 174 (posted August 11, 2016) I said I have long expressed the opinion that the problem of financing long-term care (LTC) cannot be solved through the mechanism of private insurance. I offered a complimentary package that included some of my articles explaining the reasons for my opinion. Some readers asked how I think the problem of financing LTC should be addressed. Although some of the articles in the package provide hints about my answer to the question, they do not spell it out adequately. Here I undertake to answer the question more fully. Before doing so, however, I will correct something I said in No. 174 and add additional information about matters discussed there.

A Correction
In No. 174, in the discussion of "The Conseco Separation," I said incorrectly that Beechwood Re is an affiliate of CNO Financial Group. I should have said that Beechwood and CNO have a reinsurance relationship. In December 2013, subsidiaries of CNO—Washington National Insurance Company and Bankers Conseco Life Insurance Company—ceded about $500 million of LTC insurance reserve liabilities to Beechwood. See, for example, page 16 of CNO's 2015 10-K report as filed with the Securities and Exchange Commission (SEC) on February 19, 2016.

Additional Information about Beechwood
In the same section of No. 174 I mentioned Beechwood's ties to Platinum Partners, a $1.25 billion hedge fund. According to a front-page article by Rob Copeland in The Wall Street Journal on July 26, 2016, Platinum and individuals associated with it are under investigation by the SEC and federal prosecutors. Details about those ties are in an 8-K (significant event) report that CNO filed with the SEC on August 1, 2016.

Additional Information about the FIO Roundtable
In No. 174 I mentioned the "Long Term Care Insurance Roundtable" convened on August 4 by the Federal Insurance Office (FIO). I have tried unsuccessfully to obtain the statements made by any of the presenters. Some of them said it was a "closed" or "off-the-record" meeting, perhaps to encourage participants to speak freely. I have seen the July 11 email in which organizations were "invited to attend," but it did not mention the meeting being closed. I question the idea of a closed meeting on a subject of such importance to the public.

The Enactment of Medicare
In the years leading up to the enactment of Medicare in 1965, it became clear there was no way for private insurance to solve the problem of financing the medical expenses of the elderly. I have seen extensive discussions of how President Lyndon Johnson accomplished passage of the Civil Rights Act and the Voting Rights Act, but I have not seen extensive discussions of how he accomplished passage of Medicare. I have always considered enactment of Medicare a political miracle. What happened prior to 1965 with the financing of medical expenses for the elderly is precisely what is happening today with the financing of LTC. It has become clear that private insurance cannot solve the problem of financing LTC.

The Latest Newspaper Article
On August 14, 2016, a lengthy article entitled "When Your Life Insurance Gets Sick," by reporters Julie Creswell and Mary Williams Walsh, appeared on the front page of the business section of the print edition of The New York Times. The article appeared online the day before under the title "Why Some Life Insurance Premiums Are Skyrocketing."

The article focuses on low interest rates as the primary culprit in the sharp cost-of-insurance increases on many universal life policies and mentions use of "various financial maneuvers." Low interest rates are certainly an important contributor to the problem, but there are other important contributors as well. For example, the article makes no mention of the impact of stranger-originated life insurance.

Near the end of the article is a discussion of premium increases on LTC insurance. While low interest rates are certainly a problem for LTC insurance companies, there are many other serious problems. Some of them are discussed on pages 58-61 in the July 2008 issue of The Insurance Forum.

In April 2010, following enactment of the Patient Protection and Affordable Care Act (PPACA), the Kaiser Family Foundation (KFF) issued a report describing "a national voluntary insurance program known as the Community Living Assistance Services and Supports program" (CLASS Act). The CLASS Act was part of the PPACA. The program would have allowed working adults to make voluntary contributions through payroll deductions or directly. Adults with multiple functional limitations or cognitive impairments would have been eligible for benefits after paying premiums for at least five years. With the CLASS Act, the federal government "put its toe in the water" on financing LTC. The voluntary nature of the program was a major problem, because the only way to address the problem adequately is through a mandatory program. The CLASS Act was never launched, and Congress later repealed it.

General Observations
It should come as no surprise to readers of this blog and my other writings that I favor a single-payer mandatory system of universal health insurance, or what is sometimes called "Medicare for All." See, for example, No. 12 (posted December 4, 2013) and Chapter 17 of my 2015 book entitled The Insurance Forum: A Memoir.

One suggestion would be to expand the current Medicare program to include the financing of LTC. Another suggestion would be to enact a universal health insurance program that would include the financing of LTC. I recognize that neither of these suggestions can be implemented under current political conditions. However, anyone who wonders about my suggestions for addressing the problem of financing LTC now knows where I stand.

In the absence of implementation of one of the above suggestions, I have one recommendation for consumers. I think they should embark on a savings program, such as that described in the concluding section of the July 2008 Forum article.

Available Material
I am offering a 22-page complimentary PDF consisting of the invitation to the FIO roundtable (1 page), the agenda for the FIO roundtable (8 pages), the KFF report on the CLASS Act (4 pages), the July 2008 Forum article (5 pages), and the CNO 8-K report filed August 1, 2016 (4 pages, without exhibits). Email and ask for our August 2016 FIO/KFF/Belth/CNO package.