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NYS Insurance Fund Policies and Producer Compensation Disclosure

Question from an IIABNY member: Regarding Regulation 194 and producer compensation disclosure, do we need to send the mandatory initial disclosure letter to a client for a New York State Insurance Fund Workers' Compensation policy even though they pay us no commission? We may charge a service fee and we do get the service charge agreement signed by the insured.

Answer: Yes, you must make the initial disclosure. Section 30.3(a) of Regulation 194 states: 

…an insurance producer selling an insurance contract shall disclose the following information to the purchaser orally or in a prominent writing at or prior to the time of application for the insurance contract:

(1) a description of the role of the insurance producer in the sale; 

(2) whether the insurance producer will receive compensation from the selling insurer or other third party based in whole or in part on the insurance contract the producer sells; (emphasis added) 

(3) that the compensation paid to the insurance producer may vary depending on a number of factors, including (if applicable) the insurance contract and the insurer that the purchaser selects, the volume of business the producer provides to the insurer or the profitability of the insurance contracts that the producer provides to the insurer; and 

(4) that the purchaser may obtain information about the compensation expected to be received by the producer based in whole or in part on the sale, and the compensation expected to be received based in whole or in part on any alternative quotes presented by the producer, by requesting such information from the producer.

The rule requires you to tell the insured whether you will receive compensation for the sale. It does not limit the requirement only to those situations where you actually are receiving compensation from the insurer or third party.

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A Tail of One City

Question from an IIABNY member: We have a question about tail coverage we were hoping you could answer. We had a municipal policy for more than 10 years on occurance basis. The account then went to bid and the new broker wrote it on a claims made basis. The municipality is not happy and has requested we re-quote the risk. Our question is, since the current policy is claims made and we will re-write on a occurance basis, how much tail coverage is required?

Answer: New York Insurance Regulation 121 requires the insurer to automatically provide a 60-day tail, but the requirement is 90 days for public entity liability insurance. It also requires the insurer to notify the insured within 30 days after termination of coverage:

“...of the automatic extended reporting period coverage and the availability of, the premium for, and the importance of purchasing additional extended reporting period coverage. For policies subject to audit, retrospective rating or experience rating, the premium for extended reporting period coverage included in the above notices may be quoted on an estimated basis.”

This premium quoting requirement doesn’t apply if the policy cancels for non-payment, unless the insured requests. The insured has 60 days from termination or 30 days from the date the notice is mailed, whichever is greater, to respond.

In general, the insurer has to offer a three-year tail, but it has to offer only a one-year tail for public entity liability.

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Cancellation and Nonrenewal Notice Requirements for Workers' Comp

Question from an IIABNY member: With regard to Workers Compensation:
1)     What is the requirement for carriers for issuing either non-renewal or conditional renewal notices?  Are they required to give 60 days notice as with other lines of business or is it less?
2)     We have a carrier that is issuing a ‘cancellation’ notice, with only 30 days notice, in order to change the writing company on the renewal policy.  Should they be issuing a conditional renewal notice instead?

Answer: New York Insurance Law Section 3426, which provides the requirements for cancellation, nonrenewal and conditional renewal notices for most commercial lines policies, specifically states that it does not apply to Workers' Compensation policies. Rather, New York Workers Compensation Law Section 54 applies; it requires a carrier to provide no less than 30 days' advance notice of non-renewal. It does not require carriers to provide conditional renewal notices. 

Regarding cancellation, that same section of the law requires the carrier to give 10 days' notice for non-payment of premium or 30 days' notice for any other reason.

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Health Care Reform Primer: Exchanges -- Certifying Plans, Territories, and Rewards for Quality

Time to get back into the swing of Health Care Reform 101. Today is the one-year anniversary of the date that Pres. Obama signed the bill, and polls indicate that the public is just as divided about it now as it was one year ago. Its future will be fought out in the courts and the halls of Congress for a good while to come. In the mean time, let’s get back to the health insurance exchanges and how they will certify health plans as “qualified.”

An exchange may certify a plan as qualified if it meets requirements set by the federal Department of Health and Human Services and if the exchange determines that offering the plan will be in the interests of qualified individuals and employers in the states where the exchange operates. An exchange may not refuse to certify a plan:

• Because the plan is a fee-for-service plan
• By imposing premium price controls
• Because the plan “provides treatments necessary to prevent patients’ deaths in circumstances the Exchange determines are inappropriate or too costly.”

Plans seeking certification from an exchange must submit justifications for premium increases before implementing them and post the justifications on their Web sites. The exchanges must consider these justifications, any patterns or practices of excessive or unjustified premium increases, and excess premium growth outside the exchanges when deciding whether to certify the plans.

The plans must submit to the exchange, regulators and the public, in plain language, detailed information on topics including enrollment and disenrollment numbers, data on claim denials, rating and claims payment practices, and cost-sharing for out-of-network coverage. The plans must also provide to individuals upon request information about their cost-sharing responsibilities for specific items or services.

Exchanges may operate in more than one state if those states consent and HHS approves. In addition, states may create subsidiary exchanges serving different geographic areas within the state (for example, one for the New York City metro area and another for upstate) if the geographic area meets the law’s requirements for a valid premium rating area. Exchanges may subcontract out some of their responsibilities to state Medicaid agencies and to companies with demonstrated experience on a state or regional basis in the individual and small group health insurance markets and benefits coverage, but only if they are not health insurers or part of a group that controls one.

HHS must develop guidelines for strategies that use market-based incentives to reward quality. These strategies will be payment structures that increase reimbursements or provide other incentives for:

• Improving health outcomes through activities such as effective case management, care coordination, chronic disease management and others;
• Activities to prevent hospital readmissions, including patient-centered education and counseling, discharge planning, and post-discharge follow-up by health care professionals;
• Activities to improve patient safety and reduce medical errors;
• Wellness and health promotion activities;
• Activities to reduce health and health care disparities, including language services, community outreach and cultural competency training for staff.

Next time: Quality improvement.

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How Does New York Employers Liability Coverage Apply Out of State?

Question from an IIABNY member: Does the New York unlimited Employers Liability coverage in a Workers Compensation policy written by either the State Insurance Fund or a privagte insurer also apply to injuries to New York workers that occur out of New York state, or does the basic $100/500/100 EL limit apply to those injuries?

Answer: The New York Limit of Liability Endorsement makes the EL coverage unlimited for bodily injury arising out of and in the course of employment that is covered by the New York Workers’ Compensation Law. In most cases, an employee temporarily out of state can still claim New York workers' compensation benefits benefits for an injury, so the Workers' Compensation Law still covers that employment. In this case, the employer has unlimited EL coverage for an injury occurring out of state.

To illustrate, suppose a New York employee is working on a construction project in New Jersey. A guard falls off the tool he’s using and the tool cuts off two of his fingers. He collects New York workers' compensation benefits from his employer but also sues the tool’s manufacturer and distributor (he can do this under New York law because he suffered a “grave injury”; one meaning of that term is loss of multiple fingers.) The manufacturer and distributor in turn sue the employer. In this scenario, the employer has unlimited coverage for the lawsuit.

The unlimited coverage applies only to employments covered by the New York Workers' Compensation law. A private school is subject to the limits shown on its policy's declarations page if a math teacher falls down the stairs and breaks his ankle while leading his students to the lunch room.

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More Discouraging New York No-Fault Fraud Numbers

For those of you keeping score at home, 12,807 suspicious No-Fault claims in one year works out to one every 40 minutes. If you have a New York auto policy, this is money coming right out of your pocket.

Almost nine in 10 suspected health care fraud cases in New York last year came from no-fault auto injury claims, a cottage industry so rife with abuse that the state Insurance Department wants to tighten regulations.

Related Fraud Bureau investigations led to 159 arrests in 2010, including a Schenectady man who filed a no-fault claim, collected $5,300 for lost wages and was charged with insurance fraud and falsifying business records, the department said.

The 12,807 no-fault claims reported as suspicious in 2010 by insurers and others were down slightly from 13,433 the previous year, according to department reports.

via www.insurancejournal.com

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Heath Care Reform Primer: Requirements for Exchanges

Between being on the road three days last week, getting caught up once I got back, and getting ready for the two days I'm traveling this week, there has been little time for blogging. Before I head south to meet with the good folks on Long Island tomorrow, it's time for a little more Health Care Reform 101. We pick up at Section 1311(d), the requirements for American Health Benefit Exchanges.

An exchange can be either a governmental agency or a non-profit entity that a state creates. It can offer only qualified health plans to qualified individuals and employers, but it can also offer stand-alone dental plans that provide pediatric dental benefits. States can require their exchanges to offer plans that offer additional benefits beyond the essential health benefits, but if the covered individuals cannot claim tax credits or cost-sharing reductions to help pay the additional cost, the states must help them cover it.

The minimum functions of an exchange include:

• Implementing procedures for certifiying, recertifying and decertifiying health plans as qualified
• Providing toll-free telephone hotlines for people needing assistance
• Maintaining web sites through which present and prospective enrollees can obtain plan comparison information
• Assigning quality ratings to each plan offered
• Using a standardized format for presenting health benefits plan options
• Informing individuals of eligibility requirements for Medicaid, the Childrens Health Insurance Program, and state or local programs, and enrolling eligible individuals
• Establishing and offering a web-based calculator for determining the actual cost of coverage after factoring in tax credits and cost-sharing reductions
• Certifying that individuals are exempt from the individual coverage mandate because there is no affordable plan available through the exchange or the person's employer or because they are otherwise exempt
• Providing to the U.S. Department of Health and Human Services a list of individuals exempt from the coverage mandate and the names and taxpayer I.D. numbers of individuals who are employed but who are eligible for premium tax credits because their employer's don't offer insurance or whose coverage is unaffordable, and the identities of individuals who change employers and cease coverage
• Providing to employers the names of employees who ceased coverage
• Establishing the "Navigator" program (to be described later.)

Exchanges must be able to fund their own operations by 2015. They cannot use administrative and operational funds to pay for staff retreats, promotional giveaways, "excessive" executive compensation, or promotion of federal or state legislative or regulatory changes. In carrying out their activities, exchanges must consult with:

• Health care consumers who are enrolled in qualified health plans
• Individuals and entities with experience in facilitating enrollment
• Representatives of small businesses and self-employed individuals
• State Medicaid offices
• Advocates for enrolling hard-to-reach populations.

The exchanges have to report on their Web sites the average costs of licensing, regulatory fees, other payments the exchanges require, and administrative costs. They must also report "monies lost to waste, fraud, and abuse.

When next I blog (whenever that may be after I catch up from my upcoming trip,) we'll look at the criteria exchanges must use when certifying plans as "qualified."

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