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Insurance Dept. Opinions: Producer Compensation Disclosure and Others

What breaks up the mid-winter doldrums better than 13 new advisory legal opinions from the New York Insurance Department's Office of General Counsel? Okay, that was a rhetorical question; don't stuff the comments section with responses to that. Instead, devote your attention to the following opinions issued in November and December:

• An agent may not add terms or clauses to a certificate of liability insurance that alter, expand, or otherwise modify the terms of the actual policy unless authorized by the insurer that has filed an appropriate endorsement with the Insurance Department and obtained prior approval. An insurer is not required to provide notice of cancellation or nonrenewal to an additional insured, although it may provide notice if it chooses to.
• A homeowners’ insurer may not deviate from its filed and approved policy forms and rates without the Insurance Department’s approval even if the insured consents to the terms and rates.
• A life insurer may offer, in conjunction with an individual life insurance policy, and for no separately identifiable charge, a service that provides a second medical opinion based upon a review of an insured’s medical records when the insured is diagnosed with a certain serious or life-threatening condition, but only if it holds an accident and health insurance license and it specifies the service as a benefit in the policy.
• Where an insured here has a lien agreement with a union benefit fund that provided a disability benefit governed by ERISA, and the agreement requires re-payment of the disability benefit to the fund, a no-fault insurer may not deduct the amount of the disability benefit from the no-fault benefit.
• An insurance agent may not share commission on the sale of long term care insurance with an entity, such as a college, that is not licensed as an insurance agent or broker. An insurance agent may not pay a referral fee to a college that makes the referral by sending to its alumni and supporters correspondence that “explains the benefits” of long term care insurance.
• An appraiser who, in New York negotiates, on behalf of an insurer, with a body shop selected by an insured, to settle upon the cost of repair, must be licensed as an independent insurance adjuster.
• A captive insurer may be owned by an entity that is not licensed as an insurer if it has sufficient net worth.
• A life insurance policy owner who is not a New York resident may elect in writing to have the life settlement laws of the state in which the policy owner resides govern the life settlement contract when the policy owner signs the contract in New York. (Note: This opinion also answered five other questions.)
• Regulation 194, which requires insurance producers to disclose to their clients information about their compensation:
  • Does not apply to renewals unless the purchaser makes a request for more information
  • Applies if a producer procures insurance for identical coverage and limits with a different insurer
  • Does not apply when an insurer re-tiers a property/casualty policy upon renewal unless the purchaser makes a request for more information
  • Does not apply if an insurer issues or offers to issue a superseding policy previously issued by another insurer under common control unless the purchaser makes a request for more information
  • Applies If an insurance producer licensed in both New York and another state receives a telephone call in New York from an insured who is purchasing an automobile in the other state and seeking an auto insurance policy.

Also, an insurer may delegate to a broker the insurer’s obligation to maintain records pertaining to the producers' compensation. If an insurer has delegated the obligation to one of its appointed agents, the agent may in turn delegate it to an authorized broker. A wholesale broker or managing general agent that has no direct sales or solicitation contact with a purchaser has no obligation to maintain producer disclosure records.

The other three opinions pertained to coverage for an "enteral formula" under a health plan, and the permissibility of selling discount dental programs and repatriation and funeral contracts without an insurance license. All opinions the department has issued since 2000 are available on its Web site.

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A Look At Insurance Bills in the NYS Legislature

It's not all glamour being IIABNY's resident InsuranceGeek^®. I know what you're thinking -- "Tim, you have the geek cave, the Flip Cam, the freedom to travel to the Indy 500, Hogwarts Castle, and the beach." Well, yes, but -- leaving aside the association's failure to date to honor my rather modest job perk requests (50 pound boxes of peanut M&M's; bottled Alpine spring water with expiration dates no sooner than December 31, 2012; and a Swedish masseuse named Helga) -- still, there are times when even I must engage in tasks that are somewhat less than intellectually challenging. In the vernacular: Grunt work.

One of these tasks is updating the Insurance Legislation pages on the IIABNY Web site. When our legislative representatives (Michael Barrett, Jill Muratori and Peter Carr) send us the raw file for the Capitol Report, they include a list of insurance-related bills recently introduced in the New York State Legislature. I take that information and enter it on the legislation pages on our Web site so that members can peruse the list and get more information about any particular bills that interest them. When a bill gets introduced, I normally put it for one week on the list of new bills, then move it to its appropriate category (auto, life and health, workers' comp, etc.) afterword.

If you click the link in the last paragraph, you will find no bills listed as having been recently introduced. That is because the latest Capitol Report had a list of bills that went on for eight pages. Eight frackin' pages. If there's one thing our representatives in Albany really enjoy, it's introducing legislation. I decided, in the interest of keeping the list of new bills reasonable, to just skip that step and put all the new introductions on their appropriate pages. I'm not done yet, but I'm more than halfway finished.

This blog post actually has a point, and it's not about how oppressive my workload is. Rather, as I was updating these pages, the interesting ideas our representatives have for state laws jumped out at me, and I thought you might find some of the proposals 1) interesting; 2) terrifying; 3) laughable. Bear in mind that thousands of bills get introduced each year but only a few even make it out of committee, let alone gain passage from both legislative chambers and the governor's signature. So don't barricade the doors as you read some of these. This is just a sample of what at least some members of the Assembly and Senate would like to do:

• Reduces a retired or disabled owner's no fault insurance premium by providing appropriate automobile insurance rates to reflect a reduced exposure to loss due to situations where drivers either have no wages to lose or are covered for lost wages by another first payer insurance policy. (Bill numbers A.530, S.803, Assemblyman Thiele, Senator LaValle)
• Prohibits the inclusion of any advertisement or other information in any mailing sent by the department of motor vehicles. (A.617, Assem. Sayward)
• Provides that an insurer may not hold nor acquire interest in a motor vehicle repair shop. (A.960, Assem. Destito)
• Requires motor vehicle repair shops to provide written notice to customers that an insurance company cannot require a person to use a specific repair shop. (A.1192, Assem. Gantt)
• Provides that reduction in auto insurance premium for insured who completes defensive driving course shall not be less than fifteen percent. (A.1236, Assem. Colton)
• Provides that motor vehicles manufactured after December 31, 2011 and operated in New York state shall be equipped with an event data recorder. (A.1870, Assem. Jeffries)
• Relates to prohibiting rate variations of over ten percent between counties within the city of New York for non-business private passenger automobiles. (S.1344, Sen. Dilan)
• Provides for the revocation of insurers license, and prohibits the sale of new policies where insurer cancels or fails to renew two percent or more of home owner policies in high risk areas, including coastal areas. (S.1118, Sen. Parker)
• Provides that the maximum deductible allowed in catastrophic windstorms shall not be greater than fifteen hundred dollars and shall be stated in the policy in numerical terms; also provides that deductibles shall only be applicable to losses incurred in windstorms with speeds greater than 125 miles per hour. (A.1413, S.1460, Assem. Thiele, Sen. Lavalle)
• Requires notice of cancellation or non-renewal of property/casualty insurance policies to be sent by an insurer to an insured by registered or certified mail, return receipt requested. (S.833, Stavisky)
• Requires insurers to provide certificate holders with at least thirty days prior written notice of termination of group health insurance coverage. (A.2006, S.1167, Assem. Weprin, Sen. Parker)

That's just a smattering of the bills lawmakers have introduced. Probably very few of them will become law. What are your thoughts on these or some of the others you see listed on our Web site? Let me know in the comments.

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Health Care Rationing

Friday's NYTimes reports Arizona has decided to stop funding certain organ transplants under the state's Medicaid program. According to the article, "lung transplants, liver transplants for hepatitis C patients and some bone marrow and pancreas transplants, which altogether would save the state about $4.5 million a year" were ended in October.

via www.joepaduda.com

I highly recommend this post from Joe Paduda's Managed Care Matters blog on the State of Arizona's recent decision to stop covering certain medical procedures under Medicaid. His words are grim but well worth considering. It's true -- health care rationing is occuring now based on the patient's ability to pay. How we will ration it in the future, particularly as the federal government implements the Patient Protection and Affordable Care Act over the next several years, is something we as a community of Americans need to discuss.

All goods and services are rationed, normally by the buyer's ability and willingness to pay for them; that's why some folks buy 60-inch flat-screen HDTV's and others don't. The question of whether the U.S. should continue to ration health care services in that way was (and is) at the heart of this country's debate on health care reform. Some see that as the only efficient and objective way to do it, while others see it as unfair and possibly immoral. The first group, distrustful of government power, sees letting market forces ration care as preferable to giving government a larger role. The second group, distrustful of the power exerted by wealthy private interests, believes that government should play a significant part in helping people get the care they need, particularly since many injuries and illnesses are unrelated to behavior (see the recent story in Sports Illustrated about the young athlete in California who died from lung cancer despite never having smoked and having no family history of the disease.) Both sides of the debate make compelling arguments, and neither should be dismissed as "selfish" or "greedy" or "socialistic" or "taking away our freedoms." We need to have this discussion; the sooner, the better.

The first principle of economics is that unlimited wants collide with limited resources. How we resolve that conflict when it comes to health care will speak volumes about our character as a country and our ability to solve our long-term problems with controlling our public debt.

I'd love to hear your thoughts on this in the comments. Please discuss "rationing" in a "rational," civil and polite way. I have limited patience for flame wars. Thanks in advance for understanding.

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Health Care Reform Means Insurance Buyers Need Agents More Than Ever

NAIC News Release

The National Association of Insurance Commissioners has created a task force to study how the federal Patient Protection and Affordable Care Act (aka health care reform) will affect agents and brokers. The task force is a response to the Department of Health and Human Services decision to not exclude producer commissions from the calculation of insurer medical loss ratios. The PPACA requires a least 80 to 85 percent of insurer premiums to pay for medical costs, leaving the balance for everything else, including profit and producer commissions.

The IIABA fought strenously to have commissions excluded from the calculation, fearing that including them will give insurers further incentives to reduce producer compensation. I expect that we will see this become part of the discussion after the new Congress convenes in January, as lawmakers look for ways to improve on the PPACA (despite the calls by some to "repeal and replace.")

I always thought the case for keeping agents and brokers involved in health insurance was simple to make. Just give any random member of Congress a page from his health insurance policy and ask him to explain what it means. If (when) he can't, this should be all the explanation he needs as to why producers have to be involved. And since they have to be involved, they should receive fair compensation for the expertise they provide. Congress should view insurance producers as a valuable resource for households and businesses, not as more hands trying to get their slice of the health insurance premium pie. When the health insurance exchanges come, some people will surely try to go it alone, without advice, and unfortunately they will get burned. That's when people will see the wisdome of consulting an expert, and that's why Congress should be doing all it can to keep producers in the process.

Sound off in the comments, and stay tuned.

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Health Care Reform 101

Health reform's complicated - but it can be easily explained. The good folks at the Kaiser Family Foundation have produced a terrific video - that's entertaining to boot - laying out pros and cons, explaining the rationale behind and opposition to reform, and all from a neutral perspective.

via www.joepaduda.com

This post from Joe Paduda's Managed Care Matters blog lists several excellent resources for those of you trying to understand the Patient Protection and Affordable Care Act (aka health care reform.) I especially recommend the Kaiser Family Foundation's video. It's about 9 minutes long, illustrates the various features of the law, and points out the arguments of those on both sides of the debate. It's a good educational tool for both clients and insurance professionals trying to get a handle on the changes we'll see over the next several years.

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Health Care Reform Phase 1: Changes Effective Tomorrow

While much of the federal Patient Protection and Affordable Care Act (aka health care reform) does not fully take effect until 2014, some key provisions affecting health insurance apply to health plan years beginning on or after tomorrow, September 23, six months from the date the president signed the law. The changes include:

• Young adults can stay on their parents' plans until age 26 unless the parents have a group health plan and the young adult has the option to purchase a plan where he works.
• Plans created since March 23, 2010 must cover certain preventive care procedures such as cancer screenings, mammograms and colonoscopies and may not charge deductibles, co-payments or coinsurance. The plan may charge a fee if the patient uses an out-of-network provider. Plans created before March 23 are not subject to this requirement.
• Insurers may not rescind coverage after an insured gets sick. This was a larger issue in states, such as California, that have a large individual health policy market; New York's individual market is comparatively small, so it has not been a major issue here.
• New procedures for patients to appeal insurers' claims decisions and an external review process apply to plans created after March 23.
• Insurers may no longer apply lifetime dollar limits on "essential" benefits, such as in-patient care at hospitals, and new restrictions on annual limits apply. 
• Insurers may not deny coverage for children under age 19 who have pre-existing conditions.

These changes come on top of those implemented earlier this year, including small business health insurance tax credits, the closure of the so-called "donut hole" for Medicare prescription drug beneficiaries, funding to state governments for expanded Medicaid coverage, new screening procedures to reduce fraud in public health programs, an early retiree reinsurance program, and coverage pools for uninsured persons with pre-existing conditions.  

This law remains controversial six months after its enactment, particular the requirement beginning in 2014 that most individuals purchase health coverage or pay a tax penalty. That requirement is more than three years away. What do you think of the changes that take effect this month or that have already taken effect? Are they desirable? Too expensive? Too intrusive? Long overdue? Do they not go far enough? Leave your thoughts in the comments.

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