Many state legislatures have ended or are beginning to wrap up their 2019 legislative sessions, with 15 states and the District of Columbia Council currently holding legislative sessions. In states that are continuing to hold legislative sessions, lawmakers have been active in introducing and considering legislation this past quarter, including bills on flood insurance coverage, prescription drug 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, workers’ compensation, and internal audit functions for large insurers.
A more comprehensive review of state legislation and regulations of interest to actuaries is available through our online portal, StateScan.
Louisiana Gov. John Bell Edwards signed a bill into law in June requiring auto insurance companies to submit information on commercial motor vehicles, including total direct paid losses less all deductibles, number of policies written, and direct written premiums, to the state insurance department, which would be required to publish the information and a general description of the ratemaking methodology for commercial vehicles on its website. Michigan Gov. Gretchen Whitmer signed a bill into law in June amending the state’s auto insurance laws, including: changes to personal injury protection (PIP) health benefit coverage; prohibiting the use of ZIP code, occupation, educational level, homeownership, or credit score as a factor in auto insurance rates; mandating premium reductions based on PIP coverage levels; and increasing required liability coverage limits. Colorado Gov. Jared Polis signed a bill into law in May regulating peer-to-peer car sharing, including: requiring cars to be covered by insurance; requiring car-sharing programs to carry insurance to cover a lapse of coverage when 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. Maryland Gov. Larry Hogan signed a bill into law in May allowing rental vehicle owners to satisfy the minimum security required by law for their vehicles by maintaining the minimum security on the vehicle that is secondary to a renter’s personal insurance coverage.
Florida Gov. Ron DeSantis signed a bill into law in June allowing autonomous vehicles to be operated without a human operator present in the vehicle.
Flood Insurance and Climate Risk
Texas Gov. Greg Abbott signed a bill into law in June eliminating a requirement for consumers to first search the admitted market before obtaining a private flood insurance policy from a surplus lines carrier. The California Senate passed a bill in May, now under consideration in the Assembly, which would authorize the governor to purchase insurance, reinsurance, or other related alternative risk-transfer products to help the state mitigate costs incurred in response to natural disasters, including earthquakes, wildfires, and floods. Florida Gov. Ron DeSantis signed a bill into law in April requiring insurers issuing homeowner’s insurance policies that do not include flood coverage to provide a notice at the issuance and every renewal of a policy informing homeowners that they may need to obtain flood insurance coverage.
Medical Professional Liability
The Connecticut Legislature passed a substitute bill in June, now under consideration by Gov. Ned Lamont, which would increase the state’s claims commissioner’s threshold for settling claims from $20,000 to $50,000, permit the claims commissioner to hold hearings on liability only, and allow certain medical malpractice claims to be initiated in state court instead of the Office of the Claims Commissioner.
Legislation enacted in Texas in June establishes travel insurance as an inland marine line of insurance and places a tax on travel insurance premiums paid by Texas residents. A similar bill was signed into law in Arkansas in April.
Connecticut Gov. Ned Lamont signed a bill into law in June establishing a task force to study solutions regarding potential liability for unreasonably contested or delayed workers’ compensation claims and to clarify the law regarding bad faith handling of claims. The Illinois legislature passed a bill in May, now under consideration by Gov. J.B. Pritzker, which would prohibit employers with two or more violations of the state’s Workers’ Compensation Act from self-insuring or purchasing an insurance policy from a private broker for one year or until all penalties are paid, during which time they must purchase insurance from the Assigned Risk Pool through the National Council on Compensation Insurance. Arizona Gov. Doug Ducey signed a bill into law in April making 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. The New York Workers’ Compensation Board has proposed a rule (pp. 32-34) that would allow small and midsized businesses that are jointly and severally liable for their obligations to meet these obligations themselves and thereby avoid becoming insolvent and shifting those obligations to unrelated self-insurers and/or the state.
Other Casualty Issues
Oregon Gov. Kate Brown signed a bill into law in June prohibiting a personal injury protection insurer from receiving reimbursement for payments made on behalf of a person unless the person receives full compensation for their injuries from an action or settlement, and the reimbursement is paid from the excess amount of compensation received. Florida Gov. Ron DeSantis signed a bill into law in May addressing post-loss assignments of benefits (AOBs) for property insurance claims. The bill: prohibits certain fees and alters policy provisions regarding managed repairs in an assignment agreement; transfers pre-lawsuit duties under an insurance contract to the assignee; requires insurers to report data on claims paid under assignment agreements; allows insurers to make available a policy prohibiting assignment; revises the state’s one-way attorney fee to incorporate an attorney fee structure for suits by an assignee against an insurer; and requires service providers to give insurers and consumers advance notice before filing suit on a claim. Montana Gov. Steve Bullock signed a bill into law in May allowing surplus lines insurers to provide disability income insurance. Tennessee Gov. Bill Lee signed a bill into law in May expanding crop insurance coverage offered under a limited lines producer license to include damage to crops caused by unfavorable weather conditions, fire or lightning, flood, insect infestation, disease, or other yield-reducing conditions or perils.
Colorado Gov. Jared Polis signed a bill into law in May requiring the state to seek a waiver from the U.S. Department of Health and Human Services to establish a reinsurance program aimed at reducing claims costs according to geographic variations in health insurance premiums across the state. Maryland Gov. Larry Hogan signed a bill into law in May requiring the Maryland Health Insurance Coverage Protection Commission to study and make recommendations on whether the state’s reinsurance program should be extended after 2023, as well as on how such an extension should be funded. A bill passed by the Missouri Legislature in May and now under consideration by Gov. Mike Parson would establish a health insurance innovation task force charged with making recommendations for a Section 1332 waiver application under the Affordable Care Act (ACA), with recommendations to be focused on improving access to health care, lowering premiums, and increasing the number of carriers.
Washington Gov. Jay Inslee signed a bill into law in May establishing a social insurance program to fund a long-term care insurance benefit for Washington residents, to be funded by a payroll tax on employees. The state will begin collecting employee contributions in 2022, and the program will begin to pay benefits starting in 2025. A bill passed by the California Assembly in May and now under consideration in the Senate would establish a Long Term Care Insurance Task Force chaired by the commissioner of insurance and charged with recommending options for establishing a statewide long-term care insurance program by July 1, 2021. The Department of Insurance would also be required to produce an actuarial report of those recommendations, to be shared with and approved by the task force, by July 2022.
Tennessee Gov. Bill Lee signed a bill into law in May requiring the state to request a waiver from the Centers for Medicare & Medicaid Services to receive funding for its Medicaid program in the form of a block grant. The Indiana Family and Social Services Administration has proposed an amendment to its Section 115 Medicaid Waiver, which would create a Healthy Indiana Plan (HIP) Workforce Bridge Account through which individuals enrolled in the state Medicaid program would receive $1,000 to transition from Medicaid to commercial health insurance.
The New Hampshire Legislature convened a conference committee in June to resolve differences between House and Senate versions of a bill that would establish a commission to study greater transparency in pharmaceutical costs and drug rebate programs and require the state insurance commissioner to license regulate pharmacy benefits managers (PBMs). The New York Legislature passed a bill in June, now under consideration by Gov. Andrew Cuomo, which would require similar licensing and regulation of PBMs by the state’s insurance commissioner. Texas Gov. Greg Abbott signed a bill into law in June requiring prescription drug manufacturers, PBMs, and insurers to share information with the state on drug price increases of more than 10 percent in year, or 40 percent over three years, for drugs costing at least $100 for a 30-day supply. Such information would be disclosed by the state on a public website.
Public Health Insurance Option
A bill signed into law by Colorado Gov. Jared Polis in May requires 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. Washington Gov. Jay Inslee signed a bill into law in May creating a public health insurance option that will be available to residents through the state’s individual market, making Washington the first state to establish a public health insurance option. New Mexico Gov. Michelle Lujan Grisham signed a bill into law in April allocating $132,000 to the state Human Services Department to study and develop a plan for a Medicaid buy-in program, as well as a separate bill allocating an additional $10,000 to the department for its study.
Other Health Issues
Texas Gov. Greg Abbott signed a bill into law in June prohibiting health care providers from sending surprise bills to patients for out-of-network emergency services and creating an arbitration process for insurers and providers to resolve disputed claims. Nevada Gov. Steve Sisolak signed a bill into law in May authorizing the state’s insurance commissioner to enter into types of interstate health insurance compacts and to allow reciprocal licensure with certain states. The California Assembly passed a bill in May, now under consideration in the Senate, which would implement a penalty for individuals who do not maintain health insurance coverage. New Mexico Gov. Michelle Lujan Grisham signed a bill into law in April ensuring that consumer protections under the Affordable Care Act (ACA) are codified under state law. The South Dakota Division of Insurance adopted an amendment to a rule expanding the availability of fully insured and self-funded association health plans.
Principle-Based Reserving (PBR)
Maryland Gov. Larry Hogan signed a bill into law in April allowing the state’s insurance commissioner to exempt an insurer from certain PBR requirements if the company meets the life PBR exemption criteria that is published in National Association for Insurance Commissioners valuation manual.
Other Life Issues
The Rhode Island Senate passed a bill in May, now under consideration in the House, which would prohibit insurers from denying a life insurance policy to any consumer on the basis that the consumer has a prescription to carry the drug naloxone. Arizona Gov. Doug Ducey signed a bill into law in May prohibiting 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. Texas Gov. Greg Abbott signed a bill into law in June requiring 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 Illinois Legislature passed a bill in May, now under consideration by Gov. J.B. Pritzker, which would prohibit direct-to-consumer genetic testing companies from sharing personally identifiable consumer information with health and life insurance companies without the consumer’s written consent. The Colorado Division of Insurance adopted 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 Pennsylvania Department of Insurance issued a notice in June addressing concerns about insurance treatment of individuals possessing prescriptions for opioid overdose reversal agents, and urging insurers to determine why a consumer has obtained such a prescription before making an underwriting or rating decision based on the individual’s prescription.
Public Pension Plans
A bill signed into law by Oregon Gov. Kate Brown in June makes several changes intended to lower public employers’ pension costs, including: redirecting a portion of employee contributions of Public Employees Retirement System (PERS) members to the employee pension stability account; transferring proceeds of sports betting games to the employer incentive fund; requiring the PERS board to report to the Legislature on proposed changes to actuarial methods and assumptions; and allowing participating employers making contributions through a lump sum to choose the year in which they begin using the lump sum payment to offset required contributions. Georgia Gov. Brian Kemp signed a bill into law in May allowing eligible participants in the state Employees’ Retirement System to use funds from their 401(k) plan or 457(b) plan to purchase an annuity. Legislation passed in the North Carolina Senate and now under consideration in the House would require stress testing of public retirement systems in the state, to be conducted once every five years. A bill was introduced in the Michigan House in April that would require actuarial valuations of the state’s retirement system to use the most recent mortality assumptions provided by the Actuarial Standards Board, and to assume a discount rate and rate of return on investments of no more than 6 percent. In addition, the bill would require that the retirement system use layered amortization using a level dollar method. Legislation introduced in the Delaware Senate in April would implement an annual cost-of-living adjustment (COLA) for qualified state retirees equal to the COLA used for Social Security benefits The Illinois Department of Insurance has proposed a rule (pp. 7-10) that would direct the Public Pension Division to prescribe a rate of interest in cases when pension benefit payments are mistakenly set too low, and apply that interest rate to a lump sum make-up payment.
Georgia Gov. Brian Kemp signed a bill into law in May allowing goodwill from insurer acquisitions to be treated as an asset, and allowing mutual insurers to charge policyholder dividends directly to surplus. Legislation introduced in the New York Senate in May would make changes to the state’s insurance law to clarify that the cost of reserve investments in bond exchange-traded funds should not be calculated in an insurer’s aggregate equity investments, and should be treated like other fixed-income investments. The Washington insurance commissioner has issued a preproposal statement of inquiry to obtain public comment on a possible proposed rule that would establish a requirement for large insurers writing more than $500 million, or insurance groups writing more than $1 billion in annual premium, to maintain an internal audit function regarding the insurer’s governance, risk management, and internal controls. Comments on the preproposal are due July 19.