All 50 state legislatures and the District of Columbia Council are holding legislative sessions in 2019. 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 also have continued to propose and adopt new regulations, including rules on life insurance policy illustrations, prescription drugs, and rules adopting National Association of Insurance Commissioners (NAIC) model regulations.
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Legislation passed in the Colorado Senate in February and now under consideration in the House would regulate insurance requirements for peer-to-peer car-sharing, including provisions that: require the shared car to be covered by insurance, with the required coverage set at three times the normal required coverage when the insurance is provided by a car-sharing program; requiring that a car-sharing program must carry insurance to cover a lapse of coverage when the required insurance is provided by the owner or driver; and prohibiting insurers from refusing coverage for a shared car outside of the car-sharing program solely because the covered car has been made available for car-sharing. The Colorado Division of Insurance has proposed an amendment to a rule that would prohibit insurers from refusing, canceling, reclassifying, or increasing premiums for auto insurance coverage on the basis that a policyholder is involved in not-at-fault accidents, or has a physical impairment that has an adverse effect on the insured’s ability to drive safely and cannot be corrected by the use of medication or special equipment. The Texas Department of Insurance has proposed an amendment to a rule that would require insurers to provide lienholders at least 10 days’ notice of the cancellation of an auto insurance policy.
The Utah legislature passed a bill in March that would allow the operation of autonomous vehicles on state roads. The legislation now goes to Gov. Gary Herbert for consideration.
Flood Insurance and Climate Risk
Legislation under consideration in the Florida House would require insurers issuing homeowner’s insurance policies to include a notice at the issuance and every renewal of a policy informing homeowners that they may need to obtain flood insurance coverage. A bill introduced in the Hawaii House in February would require the Social Science Research Institute at the University of Hawaii at Manoa to conduct a study to determine whether the use of parametric disaster insurance policies for the state is “feasible, practical, affordable, and in the public interest, ” with its findings to be submitted to the legislature by 2021.
Virginia Gov. Ralph Northam signed a bill into law in March establishing travel insurance as an inland marine line of insurance and placing a tax on travel insurance premiums paid by Virginia residents. A bill passed by the Arkansas House, akin to the Virginia travel insurance law on inland marine, is now under consideration by the Senate, and similar bills have been introduced in Georgia, New York, Rhode Island, and Texas.
Medical Professional Liability
The Pennsylvania Department of Insurance announced in February that it is “conducting a medical professional liability insurance study to determine whether sufficient capacity exists to increase the basic coverage limits of insurance required by the Medical Care Availability and Reduction of Error (MCARE) Act.”
The Arizona House passed a bill, now under consideration in the Senate, which would make the state’s Special Fund the successor in interest to all excess workers’ compensation insurance policies, and require excess insurers to make payments to the fund for all covered amounts spent. A rule regulating workers’ compensation high-deductible policies that was finalized by the California Department of Insurance in 2018 took effect on Jan. 1. The Academy’s Committee on Property and Liability Financial Reporting submitted comments on the proposed rule in August 2018.
Association Health Plans (AHPs)
South Dakota Gov. Kristi Noem signed a bill into law on Feb. 14 revising the state’s rules for association health plans (AHPs) to match a federal rule, finalized in June 2018, which broadened the scope and availability of AHPs.
Virginia Gov. Ralph Northam vetoed a bill in March that would have directed the Virginia Department of Insurance to apply for a waiver from the Centers for Medicare & Medicaid Services to allow the sale of catastrophic health insurance plans on the state’s individual market.
A bill introduced in the California Assembly would establish a Long Term Care Insurance Task Force in the Department of Insurance charged with recommending options for establishing a statewide long-term care insurance program by July 1, 2021. The Department of Insurance would then be required to produce an actuarial report of those recommendations, to be shared with and approved by the task force, by July 2022.
Georgia Gov. Brian Kemp signed a bill into law in March allowing the state to apply for a Section 1115 Medicaid waiver requesting the extension of Medicaid eligibility to working-age adults with incomes below 100 percent of the federal poverty level (FPL). Utah Gov. Gary Herbert signed a bill into law in February extending eligibility for Medicaid coverage to working-age adults with incomes below 100 percent of the FPL, rather than to those with incomes below 138 percent of the FPL as approved by voters in a November 2018 ballot initiative. Alaska Gov. Michael Dunleavy introduced a fiscal year 2020 budget proposal in February, including a proposed reduction in funding for the state’s Medicaid program by approximately $270 million. Maine Gov. Janet Mills signed an executive order in January calling for the “expeditious implementation” of a November 2017 ballot initiative expanding eligibility for Medicaid coverage to working-age adults with incomes below 133 percent of the federal poverty level. Mills’ predecessor as governor, Paul LePage, refused to implement the initiative after it was approved, and refused to comply with court rulings to require his administration to begin implementing the state’s Medicaid expansion.
West Virginia Gov. Jim Justice signed a bill into law in March requiring pharmacy benefit managers (PBMs) operating in the state to obtain a license from the Department of Insurance and prohibiting PBMs from reimbursing participants in the federal 340B drug discount program for pharmacy-dispensed drugs at a lower rate than similar pharmacies that are not 340B entities. A bill passed by the Idaho Senate in March, now under consideration in the House, would require PBMs operating in the state to register with the Department of Insurance, and allow pharmacists more flexibility in informing patients of options to pay less out of pocket for prescriptions. The Delaware Department of Health and Social Services has finalized a rule restoring the state’s Prescription Assistance Program following its elimination in 2018. The program provides prescription and over-the-counter drug coverage, as well as Medicare Part D premium assistance, to seniors and people with disabilities.
Public Health Insurance Option
The Colorado House passed a bill, now under consideration in the Senate, in March that would require the Department of Health Care Policy and Financing and the Division of Insurance to develop and submit a proposal for “the design, costs, benefits, and implementation” of a state health insurance option. Minnesota Gov. Tim Walz introduced the FY 2020-21 Governor’s Budget Recommendations in February, including a proposal that would direct the Minnesota Department of Human Services to establish a public, platinum-level buy-in product in the state’s individual health insurance exchange. The new option, called OneCare, would be financed by an initial startup investment, and then fully funded by consumer premiums. Wisconsin Gov. Tony Evers signed an executive order in January directing the Wisconsin Department of Health Services to develop a plan for expanding eligibility for coverage under the state’s Medicaid program.
Short-Term, Limited-Duration Insurance (STLDI)
District of Columbia Mayor Muriel Bowser approved a bill requiring insurers to receive approval from the D.C. Insurance Commissioner before selling STLDI plans and to prominently display any disclosures regarding such plans in policy and application materials, as well as ensure multiple employer welfare arrangements are covered by small employer market rules. Arizona Gov. Doug Ducey signed a bill into law in March extending the maximum coverage period allowed for STLDI plans from one year to three years. The Vermont Department of Financial Regulation finalized a rule in February clarifying that STLDI plans should only be used for temporary gaps in health insurance coverage, and do not constitute comprehensive coverage.
Other Health Issues
The Georgia Senate passed a bill, now under consideration in the House, in March that would prohibit surprise billing in emergency situations by health insurers, and establish a mediation service through the Georgia Department of insurance for consumers that receive bills over $1,000 for elective procedures. The Maine Legislature passed emergency legislation in March ensuring that consumer protections under the Affordable Care Act (ACA) are codified under state law. A similar bill was passed in the New Mexico Legislature in March and is now under consideration by Gov. Michelle Lujan Grisham. A bill passed by the Kansas Senate in March and now under consideration in the House would allow the Kansas Farm Bureau to sell health benefit plans that would not be considered insurance or regulated by the state’s insurance commissioner.
Principle-Based Reserving (PBR)
With legislation signed into law by Massachusetts Gov. Charlie Baker in January, all 50 states have adopted a new Standard Valuation Law to enact principle-based reserving.
Other Life Issues
A bill passed in the Arizona Senate in February and now under consideration in the House would prohibit life, long-term care, and disability insurers from using an individual’s status as a living organ donor to determine policy conditions, acceptance, or pricing. Legislation under consideration in the Texas House would require life insurers to notify policyholders when their policy is subject to an increase in insurance charges that are based on the current schedule of mortality rates. The Colorado Division of Insurance has proposed an amendment to a rule that would require insurers to provide consumers with the basic policy illustration used in a life insurance policy when the consumer applies for the policy. The New York Department of Financial Services issued a circular letter in January providing guidance to insurers authorized to underwrite life insurance. The letter advises insurers that they should not use external data sources for underwriting or rating purposes unless they can establish that the data source does not use discriminatory information. In addition, the letter clarifies that insurers should be transparent about the use of external data by providing consumers with their reasoning for adverse underwriting decisions based on external data, as well as the source of the data on which such decisions are based.
Public Pension Plans
South Dakota Gov. Kristi Noem signed a bill into law in February limiting maximum annual cost-of-living adjustments (COLAs) for public pensions to 3.5 percent in years when the state’s retirement system is 100 percent funded, and creating a “restricted COLA maximum” for years when the funding ration falls below 100 percent. The Georgia legislature passed a bill in March, now under consideration by Gov. Brian Kemp, which would allow eligible participants in the state’s Employees’ Retirement System to use funds from their 401(k) plan or 457(b) plan to purchase an annuity. Legislation introduced in the Illinois House would require state-funded retirement systems to establish a Tier 3 plan that aggregates state and employee contributions in individual participant accounts, and allow participants of Tier 1 and Tier 2 plans to choose to participate permanently in the Tier 3 plan. The Washington Department of Labor and Industries adopted an amendment to a rule in January lowering the pension discount rate for state fund pensions from 6.1 percent to 4.5 percent and instituting a discount rate of 6.0 percent for self-insured pensions. In addition, the amended rule provides that pension tables be calculated based on the higher of the two discount rates so that benefits for both state funded and self-insured recipients use the same reduction factors for the calculation of death benefit options.
Credit for Reinsurance
A bill passed in the Georgia Senate in March, now under consideration in the House, would provide for the incorporation of the NAIC reinsurance model law into the Georgia Insurance Code, and would provide domestic ceding insurers credit as either an asset or a deduction in liability on account of reinsurance purchased only when the purchase meets new requirements. The West Virginia Insurance Commission has proposed an emergency rule to adopt the NAIC’s Credit for Reinsurance Model Law.
Own Risk and Solvency Assessment (ORSA)
A bill introduced in the New Mexico Senate in February would require domestic insurers writing more than $500 million in gross premium, and domestic insurance groups that collectively write more than $1 billion of annual direct written and assumed premium, to conduct an annual ORSA consistent with the guidance manual developed and adopted by the NAIC.
Other Cross-Practice Issues
Arizona Gov. Doug Ducey signed a bill into law in March allowing insurers to offer ancillary services related to insurance policies, and exempts such products from statutes relating to prohibited inducements or rebates. The Georgia Senate is considering a bill passed by the House in March that would allow goodwill from insurer acquisitions to be treated as an asset, and allowing mutual insurers to charge policyholder dividends directly to surplus.