Most states have adjourned for the 2018 legislative session, but 10 state legislatures and the District of Columbia Council are still holding sessions. Over the past quarter, state lawmakers have been active in considering and adopting legislation, including bills on climate risk, reforms to health insurance markets and costs, and public pension plan funding. State agencies have also continued to propose and adopt new regulations, which include rules on auto insurance, prescription drugs, and model regulations from the National Association for Insurance Commissioners (NAIC).
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The Colorado Division of Insurance proposed a rule in August that would establish payment standards for claims on rental vehicle collision damage waivers and for the valuation of total loss claims under private passenger auto insurance policies. The Pennsylvania Public Utility Commission proposed a rule in July that would increase the minimum insurance requirement for passenger carriers operating vehicles capable of transporting fewer than 16 passengers.
Flood Insurance and Climate Risk
California Gov. Jerry Brown signed two bills into law in September that affect P/C insurers: SB 824 prohibits insurance companies from canceling or refusing to renew a homeowner’s policy for one year if he or she lives in a county with a declared state of emergency, and SB 917 clarifies 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. Massachusetts Gov. Charlie Baker signed a bill in part in August authorizing $2 billion in environmental bonds that will be used to improve climate -resilient infrastructure and implement climate adaption programs. The six sections of the bill that were vetoed or returned with amendments by Gov. Baker focus on issues related to agriculture, natural resources, and transportation and flood infrastructure.
Illinois Gov. Bruce Rauner vetoed a bill in August that would have allowed interest to be paid on workers’ compensation payments that are delayed by disputes between insurers and health providers. Gov. Rauner returned the bill to the Legislature with a message containing several recommended changes. New York Gov. Andrew Cuomo signed a bill into law in July extending workers’ compensation coverage to drivers of ride-sharing companies, including drivers that are logged into the ride-sharing network but are not on an arranged trip.
Other Casualty Issues
Delaware Gov. John Carney signed a bill into law in July updating the Delaware Insurance Guaranty Association Act to more closely align it with the NAIC and National Conference of Insurance Guaranty Funds model acts.
Association Health Plans (AHPs)
State authority over AHPs has been a topic of interest and concern for some, including state insurance regulators. Regulators in states such as Oregon and Pennsylvania have issued new guidance to insurers or outlined their approach in letters to the U.S. Department of Labor. Oregon and Pennsylvania are among the 11 states and the District of Columbia in which the Democratic state attorneys general have filed a lawsuit challenging the final rule on AHPs and asking that it be vacated. In Vermont, which is not involved in the lawsuit, the Department of Financial Regulation has filed an emergency rule and a proposed final rule to establish a regulatory framework to ensure that AHPs sold in the state provide comprehensive coverage and do not compete unfairly with the state’s individual market. Other states, such as Iowa, are moving in the opposite direction and have begun the process of implementing new AHPs under the new final rule.
AB 2472, approved by California Gov. Jerry Brown in September, requires the board of the California Health Benefit Exchange to conduct a study on the feasibility of a public health care coverage option in the state. New York Gov. Andrew Cuomo announced in July that the state will not accept proposed increases in health insurance premiums that result from the reduction of the penalty to $0 for individuals who do not maintain health insurance coverage (known as the individual mandate).
California Gov. Jerry Brown signed a bill into law in September requiring 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. In addition, the bill requires the California Life and Health Insurance Guarantee Association to provide an annual financial report to the Legislature that includes the maximum amount of coverage that the association may provide based on its assessments of member insurers.
Idaho Secretary of State Lawerence Denney announced on July 17 that a ballot initiative to expand Medicaid eligibility will appear on the state’s November 2018 ballot. The initiative will ask Idaho voters to decide whether to expand Medicaid eligibility to working-age individuals with incomes up to 133 percent of the federal poverty level, consistent with the Medicaid expansion criteria established by the Affordable Care Act.
California Gov. Jerry Brown signed a bill into law in September eliminating the sunset of a law capping out-of-pocket costs for a prescription at $250 every 30 days and creating permanent formulary standards that prohibit insurers from regularly placing specialty drugs in their highest pricing tiers. The Colorado Department of Health Care Policy and Financing proposed a rule to add alternative payment model files and prescription drug rebate files to the reporting requirements for the Colorado All-Payers Claims Database.
Other Health Issues
HB 6285, introduced in the Michigan House in August, would establish a universal, single-payer health care system in the state. A bill was introduced in the Pennsylvania Legislature in July that would prohibit insurers from discriminating against consumers on the basis of a pre-existing medical condition.
Principle-Based Reserving (PBR)
Alaska Gov. Bill Walker signed a bill into law in July that implements PBR and updates to the NAIC Credit for Reinsurance Model Law.
Other Life Issues
A bill passed by the California Legislature and approved by Gov. Jerry Brown in September requires 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. The Louisiana Department of Insurance adopted an amended rule (Title 37 Insurance - Part XIII. Regulations - Chapter 41. Regulation 60―Advertising of Life Insurance) in August removing a requirement that life insurers complete a certificate of compliance for advertisements.
Public Pension Plans
SB 1413, passed in the California Legislature and approved by Gov. Jerry Brown in September, establishes 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 bill introduced in the Pennsylvania House in September would establish an Unfunded Liability Solvency Reserve Fund, funded by surplus revenue from the state’s General Fund, to address the state’s public pension liabilities. The Oregon Public Employees Retirement System proposed a rule in July to allow public employer lump-sum payments into side accounts to be considered for matching funds from the Employer Incentive Fund.
Credit for Reinsurance
The New Mexico Department of Insurance adopted the NAIC Credit for Reinsurance Model Regulation in July.
Other Cross-Practice Issues
The Idaho Department of Insurance proposed a rule in August to adopt provisions of the NAIC Annual Financial Reporting Model Regulation #205 requiring an independent internal audit function for insurance companies with over $500 million in annual premiums written. Rhode Island Gov. Gina Raimondo signed a bill into law in July allowing domestic insurance companies to enter into voluntary restructurings, including the use of a protected cell, with the approval of the commissioner. The Wisconsin Office of the Commissioner of Insurance proposed an amendment to a rule to implement both the updated NAIC Model Holding Company Regulation and the NAIC Corporate Governance Annual Disclosure Model Regulation.