Health and Life Insurance Advisory Council

The business and regulatory environment for insurance is constantly changing, and part of our client service platform involves staying on top of those changes. One way we do this is by attending the periodic meetings of the industry-regulator-consumer liaison committees sponsored by the Wisconsin Office of the Commissioner of Insurance (OCI) for life, health, and property and casualty insurance. The following is our report on the discussion from the most recent meeting of the Health and Life Insurance Advisory Council.

Life and Health Insurance

Form F and Model Holding Company Revisions. Richard Wicka, OCI’s deputy chief legal counsel, reported that the revisions to the holding company rule to align it with the National Association of Insurance Commissioners (NAIC) model were adopted effective September 1, 2015, so the first Enterprise Risk Report (Form F) was due from insurance holding companies on October 1, 2015. Such reports will now be due annually on June 1.

Credit for Reinsurance. Wicka reported that the governor approved the statement of scope for revisions to the credit for reinsurance rule, so OCI is preparing a draft to conform the rule to the NAIC model, especially with respect to certified reinsurers. OCI hopes to have a draft by the end of this year or early in 2016.

NAIC Cybersecurity Task Force. J.P. Wieske, OCI’s director of legislative relations and communications, reported that this task force passed a consumer bill of rights on cybersecurity in the insurance industry. There was some controversy over the fact that the bill of rights is not based on state law or related to an NAIC model law. However, the task force will probably revise four different privacy model laws to deal with cybersecurity issues. The federal government is also looking at legislation in this area, and they want to include insurance. Task force chair Adam Hamm, the North Dakota Commissioner, is aggressive and has strong ideas on how the task force should proceed. OCI is also represented on the task force.

State Based Systems (SBS). Cari Lee, director of OCI’s bureau of market regulation, reported that OCI would switch to SBS for its back office system effective December 14, 2015. During the transition to SBS, there will be no agent licensing or appointments, but there would be a grace period for renewals during that time. One benefit of SBS is the use of emails for better communication.

Agents will use just one license number, their National Producer Number, which will be helpful once the National Association of Registered Agents and Brokers (NARAB) comes online. SBS will maintain all previous functionality, and will also allow agents to print their license online for free.

Continuing education providers will also retain the same functionality, but will pay a new transaction fee of $1 per credit hour per student for course roster submissions.

The biggest change for insurers will be paying for appointments at the time of the appointment through the NAIC's National Insurance Producer Registry (NIPR). Appointment renewals are still annual, but insurers can pay for them online.

Life Insurance

Life Claims Settlement. Jason Levine, an administrative policy initiatives advisor at OCI, reported that the Unclaimed Life Insurance Benefits Working Group at the NAIC was ready to expose for comment a draft model law requiring insurers to review Social Security’s death master file (DMF), and follow up on any matches with their insured lives. The following controversial issues are in brackets in the draft:

• Some of the coverages that are excluded from the requirement, such as credit life (group life is excluded but is not in brackets).
• The criteria for the DMF search and its frequency.
• Whether the requirement applies to existing policies, with possibilities including purely retrospective, purely prospective, and symmetrical (retrospective if the insurer has searched the DMF in the past).

The current working group favors the National Conference of Insurance Legislators (NCOIL) model law, but the committee to which the working group reports may favor the lead states model. Wieske noted that the membership of the committee changes in January as there are changes in NAIC members.

The Uniform Law Commissioners (ULC) is looking at an update to their Uniform Unclaimed Property Law, with the National Association of Unclaimed Property Administrators pushing them hard to include a DMF search requirement. OCI submitted a letter in opposition to the proposal, mainly dues to concerns about another agency having authority over insurers. There will be discussions between the ULC and the American Council of Life Insurers on the topic.

Contingent Deferred Annuities (CDAs). Wicka said that OCI chairs the NAIC’s CDA Working Group, which is finishing the third year of its one year assignment to revise various model laws to deal with CDAs. The Working Group is also preparing guidance for regulators on CDA issues, and hopes to release a final draft soon. Other groups are working on other CDA issues, such as reserving for them.

Annuity Mortality Table (AMT). Wicka reported that OCI finalized a rule effective September 1, 2015 adopting the 2012 AMT for determining reserves. The table will be optional for 2015 and mandatory in 2016.

Principles-Based Reserving. Wieske reported that OCI's technical bill -- which has passed the Senate and is scheduled to be taken up in the Assembly -- includes an NAIC model law requirement that life insurers change from the current formulaic approach to reserving to a principles-based approach that recognizes the complexity of current products. The small company exception is in the valuation manual instead of in the statute; some states put it in the statute, but then there is a question about whether the law is substantially similar to the model (which therefore might jeopardize NAIC accreditation for the state). The NAIC is looking for pilot states and vendors; the working group in charge of the effort reports directly to the Executive Committee, so it is clearly a priority.

Life Insurance Model Disclosure. Wieske noted that the NAIC working group that is revising this narrative summary of life insurance policies has released a draft for comments, which are due by the end of the month.

Long-Term Care. Wieske reported that Florida will become chair of the NAIC’s Senior Issues Task Force, which continues its charge of reviewing model laws for changes that affect long-term care. The task force also has a new charge to review long-term care marketing practices. Lee noted that she attended a long-term care forum that showed there are still issues with premium increases. Some states want to punish insurers, while others, like Wisconsin, keep in mind that the whole industry used the same rating assumptions. Consumers may assume rate increases will continue to be denied, but that may not be the case. The forum also heard from some who are very thankful for coverage they bought at the right time and then used. Lee noted that there is no easy solution, but that the NAIC is looking at the viability of new products. In response to a question, she noted that the key to the product is asset protection, not the health model.

Health Insurance

PACE Act. Wieske noted that OCI issued a bulletin on the Protecting Affordable Coverage for Employees Act, which changes the base federal small group definition to 1 to 50. The Wisconsin definition of 2 to 50 is consistent with this definition (because the federal definition includes the owner, and thus is really 2 to 50), so the Wisconsin definition will no longer be preempted in 2016. States can still define small groups as 1 to 100, but Wisconsin will not.

Most insurers filed 2016 small group rates by the May filing deadline. Wisconsin would allow refiling but, for the rates that must be filed with the Center for Consumer Information and Insurance Oversight (CCIIO), CCIIO takes the position that refiling of rates for the first quarter is not allowed, even with the change in the law.

OCI is still looking at the impact of the PACE Act on the medical loss ratio requirements in Wisconsin. CCIIO seems to say that there is only one small group definition for all Affordable Care Act (ACA) programs, but there is no statutory support for that position.

NAIC. Wieske noted that the health insurance committee was voting on proposed revisions to the Managed Care Plan Network Adequacy Model Act, which have been in the works for about a year and a half (the changes passed). The revised model act can now be adopted at the NAIC's meeting this month. The proposal includes a lot of drafting notes, many of which reflect the politics surrounding the model; a lot of bracketed language to give states flexibility; and substantial revisions, including authority for plans to post participating provider information online and consumer protection on surprise billing (which requires the plan and the provider to arbitrate over out-of-network providers used during hospitalization). OCI will look at what parts of the model make sense in Wisconsin, but the legislature is done in February and a lot of adaptation would be required to use the model.

Other activity in the health insurance committee includes:

• Updating the prescription drug access model act on pharmacy benefit managers;
• Lack of coverage for air ambulances, which results in huge bills for consumers, especially in Western states (it is not such a big issue here), though the federal government is pushing back;
• Updating the ERISA handbook, which hasn't been done for 10-15 years;
• Submission of recommendations on the summary of benefits and coverage (SBC) to the federal ACA agencies, though some were pushing for a model more useful for navigators; consumer testing on the SBC material went well, so perhaps the federal agencies will follow the recommendations when the rules take effect in 2017 or 2018;
• Revisions to the Medigap requirements.

Nonrenewals of Insurance Policies. Diane Dambach, chief of OCI's accident and health unit, said OCI has been receiving questions on changes in the individual market. Existing statutes allow discontinuation of a particular product (with a 90 day notice of nonrenewal) or in the market as a whole (with a 180 day notice to OCI and the policyholder, and a 5 year ban on reentry). The difference now is the guaranteed issue requirement. Changes in the market include:

• Time is exiting health insurance nationwide in 2016. It was not on the exchange, but it did have qualified health plans under the ACA. Time had about 15,000 preferred provider plan (PPO) members in Wisconsin in 2013, with a reduction in that number in 2014.
• Common Ground Healthcare Cooperative is dropping the broad Trilogy network but keeping the Aurora network. It was a new plan on the exchange, with mostly individual coverage (about 26,000 members in 2014, with a quarter or so in the Trilogy network), though about 11% of its members were in small groups.
• WPS Health is withdrawing from its Arise HMO markets in favor of its agreement with abouthealth, which competes with Integrated Health Network (IHN) and its HMOs, Network Health and MHS Health.
• Compcare (Anthem) is withdrawing from Milwaukee, Racine, and Kenosha counties in 2016. OCI doesn't have enrollment numbers, but there are a lot of options in those counties.

Wieske noted that OCI rating staff have looked at the availability of similar plans if auto-renewal goes through, and that OCI has an interactive map of plans available online. Dambach noted that a Department of Health and Human Services (HHS) report on the transition from 2014 to 2015 on the exchanges found that about 75% of exchange enrollees carried over (most through auto-enrollment), but many of them changed plans.

Wieske said that HHS is treating health insurance as a year-to-year process, unlike the renewal of coverage approach of OCI. For example, HHS takes the position that if an insurer drops more than half of the counties in its service area, then it is a market withdrawal, whereas OCI looks at enrollment figures (e.g., there is not a withdrawal if the insurer is keeping 90% of its enrollees). OCI also looks individually at each licensed entity, whereas HHS looks at all affiliates. He expressed hope that HHS would begin to take a more reasonable approach. In response to a question, he stated that insurers have the right to change service areas; that there are various reasons for doing so; and that OCI is not looking to force them to write anywhere. He noted that most counties still have at least three insurers to choose from.

Legislation. Wieske noted that the OCI technical bill was up for consideration today, and that OCI expected passage on a voice vote. The bill includes principles-based reserving and numerous other pieces.

A pair of bills (AB 418 and SB 336) extend the time for the Health Insurance Risk Sharing Plan (HIRSP) to dissolve. One reason is HIRSP's surprising $1.8 million in receivables.

Another pair of bills (AB 361 and SB 278) would allow localities to buy health insurance, including ancillary coverages, through the state's Group Insurance Board. OCI received some questions on the proposal, some of which may be due to the separation of dental coverage from health. It is up to the Department of Employee Trust Funds to determine what coverages are ancillary. The National Association of Insurance and Financial Advisors (NAIFA) is concerned about the proposal's interference with the market.

For more information on the Insurance Regulation Group, please contact William Toman at (608) 283-2434 / william.toman@quarles.com or your Quarles & Brady attorney.