Currently, 15 state legislatures and the District of Columbia Council are still holding sessions, while most states have adjourned for the 2018 legislative session. Over the past quarter, state lawmakers have been active in considering and adopting legislation, including bills on workers’ compensation, reforms to health insurance markets and costs, and public pension plan funding. State agencies have continued to propose and adopt new regulations, which include rules on autonomous vehicles, life insurance, and model regulations from the National Association for Insurance Commissioners (NAIC).
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Auto Insurance and Autonomous Vehicles
Florida Gov. Rick Scott signed a bill into law in April that authorizes insurers to refuse to insure individuals who have failed to purchase motor vehicle services from a membership organization that, since Jan. 1, 2018, is affiliated with an admitted P/C insurer. H.B. 636, passed in the Louisiana House in April and referred to the Senate Committee on Insurance, would prohibit insurers from using an individual’s ZIP code as a sole factor in determining automobile insurance rates. The California Department of Insurance has proposed a rule that would address insurance issues associated with ride-sharing by creating a liability exclusion for insured individuals who are logged into a “transportation technology platform” as a driver, whether or not a passenger is occupying the vehicle. The New York Department of Financial Services adopted on an emergency basis a rule in May requiring insurers to provide supplementary uninsured/underinsured motorists limits in an amount equal to the bodily injury liability insurance limits of their motor vehicle liability insurance policies. The Nevada Transportation Authority adopted a rule in April that allows autonomous vehicle companies to operate in the state.
Flood Insurance and Climate Risk
The California Senate passed two bills in May that would affect P/C insurers: SB 824 would prohibit insurance companies from canceling or refusing to renew a homeowner’s policy for one year if they live in a county with a declared state of emergency, and SB 917 would clarify that an insurance policy covers loss or damage from a landslide or similar earth movement that results from a condition already covered by the policy. Both bills are now under consideration in the Assembly. Maryland Gov. Larry Hogan signed a bill into law in May that requires new construction and reconstruction to implement siting and design criteria that address sea level rise and coastal flood impact on state and local projects. S.B. 1131, introduced in the Pennsylvania Senate in April, would establish a landslide insurance and assistance program within the Pennsylvania Emergency Management Agency, with the goal of providing actuarially sound and universally available insurance coverage for landslides.
Medical Professional Liability
H. 5404, introduced in the South Carolina House in May, would expand membership in the Medical Malpractice Liability Joint Underwriting Association to all insurers authorized to write professional liability insurance.
H 8234, introduced in the Rhode Island legislature in May, would adopt the National Council of Insurance Legislators (NCOIL) Travel Insurance Model Act. Maryland Gov. Larry Hogan signed a bill into law in May that requires insurers to pay a premium tax on premiums paid by individual or blanket policyholders who purchase travel insurance.
The Illinois legislature passed a bill in June, now under consideration by Gov. Bruce Rauner, that would require the preapproval of workers’ compensation rates by the Department of Insurance. A. 10970, introduced in the New York Assembly in May, would extend workers’ compensation coverage to drivers of ride-sharing companies, including drivers that are logged into the ride-sharing network that are not on a pre-arranged trip. Pennsylvania Gov. Tom Wolf vetoed a bill in May that would have amended the state’s workers’ compensation act to establish a formulary of drugs for injured workers. Maine Gov. Paul LePage signed a bill into law in April that amends workers’ compensation laws for self-insurers, requires group self-insurers to maintain actuarially determined fully funded trusts as security for self-insurance, requires that the Workers’ Compensation Board retain control of the required security of a group self-insurer that has its status terminated until claims against the group self-insurer have been discharged, and removes a requirement that reinsurance contracts name a self-insurer as a coinsured with the Maine Self-Insurance Guarantee Association.
Other Casualty Issues
Minnesota Gov. Mark Dayton signed a bill into law in May that prohibits residential contractors from paying rebates to homeowners or covering deductibles for homeowner’s insurance. South Carolina Gov. Henry McMaster signed a bill into law in May adopting the NAIC Insurance Data Security Model Law, making South Carolina the first state to implement the NAIC’s recommended legislation on cybersecurity protections for insurance. Vermont Gov. Phil Scott signed a bill into law in May that aligns state law with the NAIC Property & Casualty Model Law regarding permissible investments and board requirements for insurance companies by clarifying that although insurance rates are set by market competition, the Department of Insurance has the authority to intervene when a rate is unfairly discriminatory. HB318, passed in the Delaware House in April and now under consideration in the Senate, would update the Delaware Insurance Guaranty Association Act to more closely align it with the NAIC and National Conference of Insurance Guaranty Funds Model Acts.
AB 2472, passed in the California Assembly in May and now under consideration in the Senate, would require the board of the California Health Benefit Exchange to conduct a study on the feasibility of a public health care option in the state. New Jersey Gov. Phil Murphy signed a bill into law in May creating a penalty for individuals who do not maintain health insurance coverage, known as an individual mandate. Gov. Murphy also signed a bill establishing a reinsurance program in New Jersey that will be funded with revenues from the new individual mandate penalty. Maryland Gov. Larry Hogan signed a bill into law in April establishing a reinsurance program, funded by an assessment on insurers that fail to offer individual health insurance on the Maryland Health Benefit Exchange, and requiring the Maryland Health Insurance Coverage Protection Commission to hire an independent actuarial firm to study and make recommendations for health insurance market stability. Virginia Gov. Ralph Northam vetoed a bill in May that would have required all health insurers to offer catastrophic plans in the individual market in any location where they offer health benefit plans. The Colorado Department of Insurance proposed a rule in June that would provide guidance to insurers on the rate filing requirements for short-term, limited-duration health insurance policies.
Connecticut Gov. Dannel Malloy signed a bill into law increasing the period over which insurers are required to spread a long-term care policy rate increase of 20 percent or more from three years to five. AB 2395, passed in the California Assembly in May and now under consideration in the Senate, would require insurers with long-term care insurance contracts covering more than 10,000 lives to file annual reports with the Department of Insurance’s office of principle-based reserving, and require the California Life and Health Insurance Guarantee Association to provide an annual financial report to the Legislature that includes a list of insurers writing long-term care insurance that may experience a future insolvency. The Louisiana Department of Insurance approved a rule in April adopting changes to the NAIC’s long-term care insurance model regulation.
Virginia Gov. Ralph Northam signed a budget bill into law in June, including a provision to expand the state’s Medicaid program in accordance with the Affordable Care Act and calling for a federal waiver to implement work requirements and copayments as a condition of Medicaid eligibility. AB 2427, passed by the California Assembly in May and now under consideration in the Senate, would require the State Department of Health Care Services to decline contracts with for-profit Medi-Cal managed care plans that have been found engaging in anticompetitive conduct or practices. Colorado Gov. John Hickenlooper signed a bill into law in May authorizing the Department of Health Care Policy and Financing to pursue cost-control strategies, value-based payments, and other approaches to reduce Medicaid expenditures, and to apply for a federal waiver to implement an evidence-based hospital review program. The Delaware Department of Health and Social Services proposed to apply for a Section 1115 Medicaid Waiver to allow the state to continue providing Medicaid coverage for substance use disorder treatment services when provided in a setting that qualifies as an institution for mental diseases.
SB 517, introduced in the Louisiana Senate in April, would require insurers offering qualified health plans to offer at least one plan in each metal tier (excluding bronze and catastrophic plans) that does not require an enrollee to pay a prescription drug deductible or a greater co-insurance payment than specified in the summary of benefits posted on the health issuer’s website. A bill passed in the California Senate in May and now under consideration in the Assembly eliminates the sunset of a law capping out-of-pocket costs for a prescription at $250 every 30 days and would make permanent formulary standards that prohibit insurers from regularly placing specialty drugs in their highest pricing tiers. Vermont Gov. Phil Scott signed a bill into law in May allowing for the wholesale importation of drugs into the state from Canada, subject to approval by the U.S. Department of Health and Human Services.
Other Health Issues
S 2785, passed by the Rhode Island Senate in June and now under consideration in the House, would seek a waiver allowing self-employed individuals and sole proprietors to purchase health insurance through the Small Business Health Options Program. Connecticut Gov. Dannel Malloy signed a bill into law in May requiring that health insurance plans cover essential health benefits and expanding mandated health benefits for women and children. A bill passed by the Illinois legislature in May and now under consideration by Gov. Bruce Rauner would establish an independent, quasi-judicial Health Insurance Rate Review Board charged with ensuring reasonable and justified health insurance rates. Vermont Gov. Phil Scott signed a bill into law in May directing the commissioner of financial regulation to adopt rules regulating association health plans and short-term, limited-duration health insurance.
Principle-Based Reserving (PBR)
The Alaska Legislature passed a bill in May, now under consideration by Gov. Bill Walker, that would implement PBR and updates to the NAIC Credit for Reinsurance Model Law. A 11116, introduced in the New York Assembly in May, would implement a valuation manual providing for PBR, subject to the approval of the superintendent of insurance.
Synthetic Guaranteed Investment Contracts (GICs)
The Nebraska Department of Insurance adopted an amendment to a rule governing the sale of synthetic GICs in Nebraska. The new rule updates Nebraska regulations to match the current NAIC model regulation.
Other Life Issues
A bill passed by the California Assembly in May and now under consideration in the Senate would require insurers to notify policyholders of flexible premium life insurance policies whenever a policy is subject to an increase in the cost of insurance charge or administrative expense charge. A3914, introduced in the New Jersey Assembly in May, would prohibit insurers from engaging in unfair discrimination on the basis of transgender or gender identity information when issuing life insurance policies. The Maryland Insurance Administration has proposed a rule to implement the NAIC’s Accelerated Benefits Model Regulation #620, which regulates accelerated benefits provisions of group and individual life insurance policies and provides required standards of disclosure. The New York Department of Financial Services proposed an amendment to a rule in May to clarify that the sections of the insurance law that requires any recommended transaction to be in the best interest of the consumer apply to life insurance recommendations as well as annuity recommendations.
Public Pension Plans
SB 1413, passed in the California Senate in May and now under consideration in the Assembly, would establish a trust fund to allow state and local public agency employers that sponsor a defined benefit pension plan to prefund their required pension contributions. A 10351, introduced in the New York Assembly in April, would provide a defined benefit cost-of-living adjustment for New York public retirement systems, effective September 2018, that would be payable to pensioners age 55 or older who have been retired for at least five years. A bill that was passed by the Minnesota Legislature in May and is now under consideration by Gov. Mark Dayton would make a number of changes to state pension plans, including increasing employee and employer contributions and lowering cost-of-living-adjustments. The Oregon Public Employees Retirement System proposed a rule in June to clarify the administration of a new law that allows employers that make a lump sum payment of at least $10 million, that is not sourced from pension obligation bonds, to select an amortization period of 6, 10, 16, or 20 years for that payment.
Vermont Gov. Phil Scott signed a bill into law in May authorizing the formation of a new kind of captive insurance company, called an affiliated reinsurance company. H 8163, introduced in the Rhode Island House in May, would allow domestic insurance companies to enter into voluntary restructurings, including the use of a protected cell, with the approval of the commissioner. South Carolina Gov. Henry McMaster signed a bill into law in May requiring captive insurance companies to possess and maintain free and unimpaired paid-in capital and/or surplus, allow for captive insurance companies to make loans to their parent company and affiliate, and allow the Department of Insurance to reduce capital requirements for an inactive captive insurance company.
Credit for Reinsurance
Kentucky Gov. Matt Bevin signed a bill into law in April establishing requirements on capital, surplus, financial reporting, and financial strength ratings for assuming insurers that have been certified or seek to be certified as a reinsurer. South Carolina Gov. Henry McMaster signed a bill into law in May revising requirements for credit for reinsurance, including provisions allowing for the reduction of a trusteed surplus for an assuming insurer who has permanently discontinued underwriting new business, and would allow for assuming insurers who are not licensed, certified, or accredited in the state to become eligible for a credit under certain circumstances. The South Carolina Department of Insurance finalized a rule in June conforming South Carolina regulations to the NAIC’s credit for reinsurance model law.
Own Risk and Solvency Assessment (ORSA)
A bill was introduced in the District of Columbia Council in May that would establish requirements for maintaining a risk management framework and completing an ORSA.
Other Cross-Practice Issues
Florida Gov. Rick Scott signed a bill into law in March revising several provisions affecting insurers, including the surplus lines tax and capital and surplus necessary to waive a requirement to be an eligible surplus lines insurer. Oklahoma Gov. Mary Fallin signed a bill into law in May specifying procedures for the transfer and statutory novation of policies between insurers through an insurance business transfer without the affirmative consent of policyholders or reinsureds.