|JOHN A. GREENE
ARIZONA DEPARTMENT OF INSURANCE
2910 North 44th Street, Suite 210, Phoenix, Arizona 85018-7256 · (602) 912-8456 · FAX: (602) 912-8452
|Executive Assistant Director||FOR IMMEDIATE RELEASE|
|602/912-8451||June 3, 1997|
John A. Greene, Director of the Arizona Department of Insurance, announced today that American Western Life Insurance Company, will provide a total of 180 days' notice of the termination of group health insurance coverage to Arizona employers and employees as required by Arizona law.
In March of this year, American Western sent "nonrenewal" notices to Arizona residents. The notices stated that health insurance coverage would terminate in 60 days, and indicated that the coverage would end on May 31, 1997. The company issued this notice even though Arizona law specifically requires insurers to provide 180 days prior notice of nonrenewal to employer-based group health
insurance plans. Discussions between the Department and American Western prompted American Western to extend the group coverage for an additional 120 days.
American Western, domiciled in Utah, issued various types of life and health insurance coverage to Arizona residents. The Utah Department of Insurance placed the company under administrative supervision in January 1997 to implement a "voluntary liquidation". On April 10, 1997, Arizona's Insurance Director suspended American Western's Arizona license based on the finding that the company is in an unsound financial condition.
"Although we are obviously concerned about American Western's financial condition and have suspended it from issuing new policies, we feel it is important to assure that Arizona residents, including those who may have difficulty obtaining equivalent replacement coverage, enjoy the rights granted under Arizona law to continue their present health coverage for 180 days after first receiving notice of nonrenewal. If the insurer becomes financially incapable of meeting its legal obligation to provide the coverage, Arizona law provides the means to protect to Arizona residents, including through the insurance guaranty fund," said Greene.
Arizona law permits an insurer that issues coverage to groups of three or more people to increase its premiums if the insurer provides 60 days' prior notice to its policyholders. An insurer must base its premium increases on actual and expected claims of those who remain insured by policies it issued. As fewer people remain insured by an insurer, the possibility exists that further premium increases may be required if only people with relatively higher expenses and claims remain insured by the company.
The Department has not yet determined how many Arizona residents may be affected by American Western's departure from the market. As many as 3,000 employees may have received the 60 day nonrenewal notice from American Western. Notification of the additional 120 days of coverage is expected to be sent to those employers who previously received notices.
American Western's continuation of group coverage will not affect the nonrenewal of individual health insurance policies.
Employers and consumers may direct questions regarding American Western's continuation of coverage to the company at 415-573-8041.