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All but four states—Montana, Nevada, North Dakota, and Texas—are holding legislative sessions this year. Eleven state legislatures are set to adjourn this month. Legislatures are considering a wide variety of bills of interest to actuaries, including the availability of health insurance inside and outside of state exchanges, Medicaid expansion, flood insurance, principle-based reserving for life insurance, and efforts to protect retirees’ pensions.
The Academy endeavors to monitor legislation and regulations of interest to the actuarial profession across all state jurisdictions, and makes appropriate comment as determined by its practice councils when warranted. Below are highlights of key issues and related legislation under consideration this year in state legislatures across the country. For a more comprehensive review of legislation, log in to access StateScan.
Casualty
Auto Insurance
A handful of state legislatures are considering changes to auto insurance policy requirements. In New York, for example, legislators introduced a bill to establish insurance requirements and limits on the sharing of private passenger autos.
Flood Insurance
Lawmakers in New Jersey introduced SB 1141 in February that would require insurers to provide policyholders with copies of all reports and documents relating to a claim for damage to property.
Medical Professional Liability
New Jersey lawmakers also filed legislation in February to establish a medical malpractice court. A second bill introduced in February would prohibit insurers from “increasing premiums or making other adverse underwriting decisions with respect to medical malpractice liability insurance under certain circumstances,” such as emergency assistance or any treatment or procedure performed on a charitable basis.
Workers’ Compensation
Several states have introduced new workers’ compensation legislation. South Carolina legislators are considering a bill introduced in February that would require insurers writing workers’ compensation policies to file its multiplier, any information relied upon by the insurer to support the multiplier, and any modifications to loss costs, and confirm the adoption of the most recently approved loss cost at least 30 days before using new rates.
Health
ACA Market Reforms
A handful of states have introduced bills to reform aspects of the Affordable Health Care (ACA) health insurance market. California has enacted a bill that would mandate that certain non-grandfathered health service plans comply with the ACA if they provide less than 60 percent minimum value in the large group market.
A Hawaii bill would allow the Hawaii Health Connector to offer large group coverage to insurers. Insurer participation in the connector would be mandatory if an insurer has a share of the small group market in the state that exceeds 20 percent. The law also would expand the potential small businesses market in the connector by amending the current definition of “small employer.” Insurers would have to provide notice to group health plans offering continuation coverage about securing affordable coverage under the Hawaii Health Connector.
Long-Term Care
Connecticut lawmakers introduced a bill in February regarding long-term care insurance policy premium rate increases. The legislation would require that insurers give policyholders a month’s notice to elect a reduction in benefits upon notice of a rate increase and would require that any insurance company or similar entity that “files a rate filing for an increase in premium rates for a long-term care policy that is for 20 percent or more shall spread the increase over a period of not less than three years in increments of not more than 7 percent in any single year.”
Medicaid Expansion
Several state legislatures continue to debate Medicaid expansion. Utah legislators are considering a bill introduced in January to expand eligibility of optional populations under the ACA. SB 1372 in Oklahoma would provide annual funding and authority to the state’s Health Care Authority to implement Medicaid expansion.
State Health Care Exchanges
Several states introduced legislation to create, end, or alter state health insurance exchanges. New Jersey legislators are considering a bill to expand health care coverage through the state exchange, and the Vermont House and Senate have passed H.524, which directs the state to seek a waiver to permit businesses to continue to purchase exchange plans directly from insurers.
Life
PBR
Numerous states are considering legislation to adopt the NAIC’s revised Standard Valuation Law, which would implement principle-based reserving for life insurance. These states include Alabama, Pennsylvania, and Washington. PBR will only take effect after a supermajority of states and territories (42), representing 75 percent of written premium, adopt the revised law and apply only to new life insurance business. Currently, 39 states that represent 72 percent of premiums have adopted new SVLs.
Pension
Pension De-Risking
Lawmakers in Rhode Island recently introduced a bill to “provide protection to retirees whose pension plans are divested of ERISA protections as a result of the sale of a group annuity by an insurance company.”
Public Pension Plan Funding
Many states have introduced legislation regarding public pension plan funding to allow retirement systems to improve oversight and management of their trust funds. California lawmakers introduced a bill in February to require public pension or retirement systems to require private equity fund managers, portfolio companies, and affiliates to disclose more information on fees and expenses in connection with limited partner agreements. A bill in Kentucky would change the frequency of actuarial valuations of small, local government pension plans.
Bills in Illinois would substantially amend the public pension systems in that state. One bill would create a Tier III benefit package for newly hired public employees where benefits may be annually increased or decreased in response to the retirement system’s investment earnings. Another bill would order the five state-funded retirement systems to establish self-directed retirement plans for all active participants. This bill would take away automatic increases in retirement annuities for most participants, and increase the minimum retirement age for active participants. HB 3828 would create a Tier III benefit plan that utilizes individual participant accounts, while allowing current Tier I and II participants to switch tiers.
In Massachusetts, a bill would create a new retirement system for newly hired state employees as part of a general overhaul of the state pension system.
Cross-Practice
Captives
Bills have been offered in several state legislatures on captives in 2016. In February, West Virginia lawmakers introduced a bill that would allow professional-employer organizations to insure certain risks through an insurance captive. An Alabama bill would allow captive companies to form as a series of limited liability corporations and alter the initial capital requirements needed to form a captive company. A bill in Georgia would make extensive changes to captive insurance company requirements.
Credit for Reinsurance
A handful of states introduced legislation regarding credit for reinsurance. HB 2568 in Tennessee would, in part, revise various provisions regarding the accreditation and reinsurance of insurance companies, including requiring the state insurance commissioner to assign a rating to each certified insurer. An Oklahoma bill would modify requirements necessary to become an accredited reinsurer and require reinsurers to demonstrate that they are financially stable.
Interstate Insurance Product Regulation Compact
Connecticut lawmakers are considering a bill introduced in February to join the Interstate Insurance Product Regulation Compact.
ORSA
Many states have introduced legislation on own risk and solvency assessments (ORSA) for insurers. Bills in Colorado and Arizona introduced in February call for adopting the NAIC’s Risk Management and Own Risk Solvency Assessment Model Act. Hawaii legislators are considering a similar bill.
Please contact John Pearis at 202-223-8196 or pearis@actuary.org if you have questions or need more information about StateScan Quarterly.
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