Forty-six state legislatures and the District of Columbia Council are holding legislative sessions in 2018, with eleven state legislatures adjourning at or before the end of March. (Montana, Nevada, North Dakota, and Texas are not holding legislative sessions in 2018.) State lawmakers have been active in introducing and considering legislation this quarter, including bills on auto insurance rates, reforms to health insurance markets and costs, and public pension plan funding, among other issues. State agencies have also continued to propose and adopt new regulations, including rules on auto insurance, prescription drugs, and rules adopting National Association for Insurance Commissioners (NAIC) model regulations.
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Several states introduced bills on auto insurance rates; for example, H.B. 5419, introduced in the Michigan House in January, would prohibit insurers from basing rates on any factors except for an insured individual’s driving safety records, annual miles driven, or years of driving experience. Several auto insurance bills were introduced in the Maryland House in January, including: H.B. 656, which prohibits insurers from using an individual’s occupation or education level as factors in determining auto insurance rates; and H.B. 657, which prohibits setting rates on the basis of an individual’s marital status or gender. (The Academy’s Senior Property and Casualty Fellow Kevin Ryan testified before the Maryland House Economic Matters Committee on both bills.) The Utah Administration of Insurance adopted a rule requiring insurers to have an actuary certify that auto, homeowners, and workers’ compensation insurance rates are not excessive, inadequate, or discriminatory.
A bill was introduced in the Maryland House in February 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. H.B. 2182, introduced in the Missouri House in January, requires all counties and municipalities in the state to participate in the National Flood Insurance Program, and to designate a state-certified floodplain manager.
Medical Professional Liability
A.B. 1568, introduced in the New Jersey Assembly in January, requires medical malpractice actions to be commenced within two years of the discovery of an injury, but no more than four years after the injury occurred, and would require actions for injuries sustained at birth to be commenced before the injured child’s 11th birthday. The bill also prevents insurers from increasing premiums of a medical malpractice liability insurance policy based on a claim of medical negligence or malpractice, unless the claim results in a medical malpractice claim settlement, judgment, or arbitration award against the insured.
A bill introduced in the Illinois Senate in February would create a state-sponsored workers’ compensation insurance fund. Wisconsin Gov. Scott Walker in February signed a bill into law allowing temporary help agency employees and loaned and leased employees the right to recover workers’ compensation benefits from their employer.
Oregon Gov. Kate Brown in March signed into law a bill establishing a task force that will study the potential effects of autonomous vehicles and propose legislation on deploying such vehicles on highways. S.B. 2334, passed in the Hawaii Senate in March and which is now under consideration in the House, would require the state and its counties to incorporate predictions of climate change hazards into their multi-hazard mitigation plans. The California Department of Insurance in January issued a notice to P/C insurers reminding them of their duty to cover damages from recent mudslides in the state. California Insurance Commissioner David Jones issued a statement announcing his order for a regulatory review of P/C insurers’ rates following a reduction in the U.S. corporate income tax from 35 percent to 21 percent.
S.B. 387, introduced in the Maryland Senate in January, would establish a reinsurance program, funded by an assessment on insurers that fail to offer individual health insurance on the Maryland Health Benefit Exchange, and require the Maryland Health Insurance Coverage Protection Commission to hire an independent actuarial firm to study and make recommendations for health insurance market stability. Several states have introduced bills requiring insurers to continue providing plans that cover essential health benefits, such as S.B. 562, introduced in New Jersey in February. Vermont Gov. Phil Scott signed a bill into law in February allowing insurers to offer silver-level nonqualified health benefit plans that do not include funding to offset the loss of federal cost-sharing reductions (CSR) reimbursements to individuals and employees of small businesses. Some states are considering legislation on catastrophic plans—for example, S.B. 964, passed by the Virginia legislature and under consideration by Gov. Ralph Northam, would require all health insurers to offer catastrophic plans in the individual market in any location where they offer health benefit plans. Legislation to establish reinsurance programs is also being considered in several states, including a bill signed into law by Wisconsin Gov. Scott Walker in February.
A bill to limit increases in long-term care insurance rates, H.B. 5209, was introduced in the Connecticut House in February. It would increase 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.
Two budget bills (H.B. 29 and H.B. 30) failed to pass the Virginia House after they were amended by the Senate to remove provisions that would expand Medicaid eligibility, with work requirements, to working-age adults with incomes below 133 percent of the federal poverty level. The Virginia legislature will hold a special session in April to reconsider the bills. Several states have introduced legislation that institutes Medicaid work requirements, such as H.B. 464, introduced in the Idaho House in February. H.B. 280, introduced in the Louisiana House in February, would institute a premium payment requirement as a condition of Medicaid eligibility. A bill introduced in the Idaho Senate in January expands Medicaid eligibility to working-age adults with incomes below 133 percent of the federal poverty level. A bill introduced in the Tennessee Senate in January would approve the application for a waiver to allow individuals ages 55 and older to purchase coverage through Medicaid. H.B. 672, introduced in the Vermont House in January, would require individuals enrolled in Medicaid with incomes above 100 percent of the federal poverty level to pay the maximum amount of copayments allowed under federal law. The Iowa Human Services Department adopted a rule in January eliminating the three-month retroactive Medicaid coverage for new applicants.
Oregon Gov. Kate Brown signed a bill into law in March that requires pharmaceutical manufacturers to report on pricing and cost information, including research and development costs and total sales revenue. Arkansas Gov. Asa Hutchinson in March signed into a law a bill establishing licensing requirements for pharmacy benefit managers and banning “gag” clauses that prohibit pharmacists from discussing a drug’s total cost or alternatives. A bill introduced in the California Senate in February 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. The Colorado Department of Insurance proposed a rule in March that establishes non-discriminatory cost-sharing and tiering requirements for prescription drugs.
Several states have introduced legislation to allow association health plans, such as H.B. 892, passed in the Vermont House in February and now under consideration in the Senate. Bills were introduced in several states in February to extend membership in life and health guaranty associations to health maintenance organizations (HMOs), such as H.B. 409, passed in the Utah legislature in March and now under consideration by Gov. Gary Herbert. A bill introduced in the New Jersey Assembly in February would impose a shared responsibility payment on any taxpayer who fails to maintain health insurance coverage. H.B. 7285, introduced in the Rhode Island House in January, establishes a single-payer health insurance system based on Medicare. The Connecticut Department of Insurance proposed an amended regulation in March to adopt changes to the NAIC Health Insurance Reserves Model Regulation.
Principle-based Reserving (PBR)
A bill to adopt PBR died in the New York Assembly in January and was returned to the Senate. The Illinois Department of Insurance in January proposed a rule to clarify that certain valuation standards for life insurance do not apply in cases where principle-based valuation is statutorily required in accordance with the NAIC Valuation Manual.
Synthetic Guaranteed Investment Contracts (GICs)
In February, the Nebraska Department of Insurance proposed an amendment to a rule governing the sale of synthetic GICs in Nebraska. The proposed amendment updates Nebraska regulations to match the current NAIC model regulation.
South Dakota Gov. Dennis Daugaard in February signed a bill into law requiring insurers to identify and locate life insurance and annuity beneficiaries. H.B. 224, introduced in the Kentucky House in January, would make unclaimed life insurance benefits retroactive and require the adoption of rules specifying what constitutes good-faith efforts to confirm the death of insured individuals. A bill introduced in the Tennessee House in January would require insurers to pay interest on life insurance proceeds between the time of a policyholder’s death and the date of payment.
Public Pension Plans
A bill passed in the Indiana legislature in March and now under consideration by Gov. Eric Holcomb would establish supplemental allowance reserve accounts within public pension plans to pay for post-retirement benefit increases and benefit adjustments. S.B. 2537, introduced in the Hawaii Senate in January would appropriate excess general fund revenues for the prepayment of accrued pension liabilities and other postemployment benefit liabilities. Several states introduced bills to bar new employees from participating in public pension plans, including a bill introduced in the New Jersey Assembly in January that would eliminate eligibility for enrollment for new employees, and terminate continued enrollment for employees with fewer than 10 years of service.
A bill signed into law by Vermont Gov. Phil Scott in March allows that the state’s reinsurance premium tax does not apply to the receipt of assets in exchange for assuming the liabilities of captive insurance companies’ parents or affiliates when the exchange is intended to renew or maintain business with a captive insurance company. A bill passed in the South Carolina House in February and now under consideration in the Senate would require 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
A bill passed in the Kentucky House in March and now under consideration by the Senate would establish 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. H.B. 4656, passed by the South Carolina House in February and now under consideration in the Senate, revises 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. West Virginia Gov. Jim Justice in March signed into law a bill amending requirements for credit for reinsurance, including requirements on capital, surplus, and reporting
Own Risk and Solvency Assessment (ORSA)
S.B. 187, introduced in the New Mexico Senate, would require insurers to establish a risk management framework if they do not already belong to an insurance group that maintains a relevant framework, and to conduct ORSAs.
H.B. 465, passed by the Florida legislature in March and now under consideration by Gov. Rick Scott, revises 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. A bill introduced in the Hawaii legislature in January would adopt the NAIC’s Corporate Governance Annual Disclosure Model Act; adopt 2014 revisions to the NAIC’s Insurance Holding Company System Regulatory Act; and give the state insurance department additional regulatory authority to supervise or liquidate a captive. S.B. 1101, introduced in the Oklahoma Senate in January, would specify procedures for the transfer and statutory novation of policies between insurers through an insurance business transfer without the affirmative consent of policyholders or reinsureds.