HB 445 PROHIBITING STRANGER ORIGINATED LIFE INSURANCE (STOLI) PASSES FIRST HOUSE COMMITTEE
HB 445 by Rep. Stevenson would explicitly prohibit STOLIs and would render any transaction that meets the definition of STOLI to be void. The bill would also make numerous changes to the products, requirements, and business of viatical arrangements. STOLIs are a scheme where unscrupulous investors prey on elderly life insurance policyholders. These investors loan money to an elderly individual to purchase life insurance, then at the end of 2 years, the investor forgives the loan and pays the future premiums, in exchange for being named as the beneficiary. In addition to creating a moral hazard of giving benefits to someone who has no insurable interest, this scheme harms the elderly person because it can prevent them from qualifying for other life insurance that they can actually use for their chosen beneficiary. If the STOLI product uses up the limit for which the person would otherwise qualify, he or she would not be eligible to purchase life insurance for their real need. Further, when the loan for the initial premium is "forgiven" by the investor, this becomes a taxable event for elderly person, who will have to pay the tax out-of-pocket, for a product that provided no benefit to them.
HB 445, a NAIFA priority, was passed by the House Insurance and Banking Subcommittee on January 13, with only one "no" vote. One amendment was adopted with technical revisions.
AVAILABILITY OF CITIZENS' UNDERWRITING AND CLAIMS FILES INFORMATION
SB 958 and HB 931 affect the ways that underwriting information from Citizens can be used by licensed agents. Current law allows Citizens to release underwriting and claims files to an authorized insurer, if the insurer is considering underwriting the policyholder and agrees in writing under oath to maintain the confidentiality of the files. Citizens can also release such files to the staff and board of governors of the market assistance plan (MAP), which must retain the confidentiality of the files. The MAP can release the files to an authorized insurer, if the insurer is considering underwriting the policyholder and agrees in writing under oath to maintain the confidentiality of the files. Finally, current law allows Citizens or the MAP to release to licensed general lines agents the following information: name, address, and telephone number of the residential property owner or insured; location of the risk; rating information; loss history; and policy type. The agent receiving the information must retain the confidentiality of the information.
SB 958 by Senator Benacquisto and HB 931 by Representative Passidomo place several restrictions on the use of the information obtained under this statutory provision. SB 958 and HB 931 provide that this information is available to a licensed agent only for the purposes of developing a take-out plan to be submitted to the OIR for approval, or for analyzing the underwriting of the risks on behalf of the private insurance market.
The bills specify that the licensed agent and an insurer receiving this information under this subparagraph cannot use the information for the direct solicitation of policyholders.
Finally, the bills provide that an authorized insurer, a reinsurer, a licensed reinsurance broker, a licensed rating organization, or a modeling company can receive the information that's available to a licensed general lines agent for the sole purpose of analyzing risks for underwriting or developing rating plans in the private insurance market, and these entities must retain the confidentiality of the information. The bills specify that none of these entities can use the information for the direct solicitation of policyholders.
LEGISLATION ALLOWS THE SALE OF INTERSTATE INDIVIDUAL HEALTH INSURANCE
During the 2011 legislative session, HB 1117 by Representative Wood and SB 1566 by Senator Alexander sought to allow the sale to Florida residents of interstate insurance policies governed by the laws of any other state. The policies would have been exempt from rate approval, form approval, underwriting restrictions, coverage mandates, and many other requirements of the Florida Insurance Code. Both of those bills died in the Insurance Committees of their respective chambers. NAIFA - Florida is not aware of any other such bills being attempted until now.
This year, HB 1317 filed by Representative Miller, would provide that a foreign insurer from any state can sell individual health insurance in Florida if:
- The foreign insurer holds a valid certificate to transact individual health insurance in its domicile state.
- Individual health insurance offered for sale under these provisions must comply with all laws of the domicile state and is offered for sale in the domicile state.
- The foreign insurer files an annual report that includes the state of domicile, the number of individual health insurance products sold in Florida, a list of the Florida counties in which the foreign insurer sold individual health insurance, the number of individuals covered, and the total premium collected on individual health insurance sold in this Florida.
The policy must include a statement in 12-point type that it is being issued by a foreign insurer and is governed by the laws of another state and is not subject to any insurance laws or rules of Florida. The statement must recommend that before purchasing, the consumer should review the terms of coverage and consult their agent.
Finally, the foreign insurer must establish a grievance procedure for Florida residents.
NAIFA-Florida is concerned that this legislation would open up problems in the marketplace. Notwithstanding the caveats included in the policy, many Florida consumers would expect the fundamental protections that are available through Florida laws.
HEALTH INSURANCE REGULATORY MODERNIZATION IS IN PLAY
Health insurance companies are continuing to try to clean up existing Florida requirements that are costly to the insurers, but are no longer relevant in light of changes imposed by the Affordable Care Act. SB 1170 by Senator Detert and HB 951 by Representative Cummings would repeal three general areas of Florida law: certification of creditable coverage, outline of coverage, and conversion and continuation of coverage.
CERTIFICATION OF CREDITABLE COVERAGE. Because Federal law now prohibits health insurers from imposing pre-existing condition restrictions for coverage (45 CFR 147.108), health insurers want to repeal Florida laws requiring the issuance of a certification of creditable coverage. Other methods of proving creditable coverage, such as a letter from the former employer, or documentation from unemployment compensation are accepted today by insurers.
OUTLINE OF COVERAGE. Federal law requires health insurers to provide a Summary of Benefit of Coverage (45 CFR 147.200). The requirements for this SBC overlap the current State requirements for Outline of Coverage. Health insurers want to repeal the overlapping Florida law.
CONVERSION AND CONTINUATION COVERAGE. Because Federal law requires coverage on a guaranteed basis, health insurers want to repeal Florida's provisions for conversion and continuation as being irrelevant.
PROPOSED AMENDMENT TO ALLOW AGENT FEES IN LIEU OF COMMISSIONS ON INDIVIDUAL HEALTH INSURANCE
Current law drafted and enacted in 2004 by NAIFA (Section 626.593) allows an agent to receive a fee for advising a client on group health insurance or a group health benefit plan, in lieu of receiving the commission from the insurer or health benefit plan. Given the dwindling or non-existent commissions available to agents who counsel clients about individual health coverage, the current allowance to charge a fee should be extended to individual health coverage, as well as group. NAIFA-Florida supports an amendment that would make this possible, and is working with NAHU to attempt to find a vehicle for this amendment.
PROPOSED LEGISLATION TO OVERRIDE OF STEP THERAPY PROTOCOLS FOR PRESCRIPTION DRUG USE
NAIFA-Florida continues to oppose all of the legislative efforts that continue to erode health insurers' and HMOs' ability to manage costs. Advancing technologies and inflationary pressures keep health care costs on the rise. Insurers and HMOs are expected to implement cost containment measures to keep coverages affordable. Every year, however, there is proposed legislation that would hamstring these cost containment measures.
SB 1084 by Senator Gaetz and HB 963 by Representative Harrison would impose a major limitation on the use of drug step therapy protocols by managed care plans for Medicaid, by health insurance plans, and by HMOs. The bills require that all such plans must provide a "clear and convenient process" for a prescribing physician to request an override of the plan's step therapy protocols for prescribed drugs. The plan must grant the prescribing physician's override within 24 hours if the physician concludes that the preferred treatment has been ineffective or the physician believes that the preferred treatment is likely to be ineffective or cause an adverse reaction. If the prescribing physician does follow the preferred treatment protocol, the duration of that treatment cannot exceed a period deemed appropriate by the physician.
NAIFA-Florida opposes this proposed legislation. It would place significant upward pressure on health insurance rates. The marketplace is already at the point where many question the affordability of health coverage, and eroding the insurers' and HMOs' ability to contain costs simply worsens an already difficult situation.
KEEP THE DEFINITION OF SMALL EMPLOYER AT 50 EMPLOYEES FOR HEALTH INSURANCE COVERAGE
Recent Federal legislation provides that each state can define the term small employer as it relates to the Affordable Care Act's health insurance coverage requirements. Florida law currently defines small group to be employers with 1 - 50 employees. Expanding the definition to include up to 100 employees would likely result in decreased plan-design flexibility, adverse selection, and higher premiums.
NAIFA-Florida has written the Office of Insurance Regulation and Commissioner Kevin McCarty urging that agency to maintain the current definition for small group. Our input achieved the assurance we were seeking. In his personal response to NAIFA's letter, Commissioner McCarty said: "The Office appreciates your comments and shares your concerns, and continues to support current law." NAIFA will watch for and oppose any legislation which seeks to change the small group size.
REGULATORY AND INSURANCE STANDARDS FOR TRANSPORTATION NETWORK COMPANIES (TNC)
The proliferation of TNCs (such as Uber) has generated considerable debate over regulatory authority and insurance requirements to be applied to this growing industry. NAIFA - Florida is neutral on the issues of general regulatory authority, but strongly supports efforts to establish clear insurance requirements. Until clear requirements are established, an agent is in an extremely difficult situation advising clients that provide TNC services what kinds and what levels of coverage they need to protect themselves. SB 1118 by Senator Simmons and HB 509 by Representative Gaetz both impose the following insurance standards.
When a TNC driver is logged into the TNC's digital network and available to receive transportation requests, but not actually providing TNC service, there must be:
- Primary automobile liability coverage of $50,000 for death or bodily injury per person and $100,000 per incident, and $25,000 for property damage;
- Personal injury protection benefits meeting minimum coverage requirements of sections 627.730 - 627.7405, F.S. (Florida No-Fault Law).
When a driver is engaged in service, there must be:
- Primary automobile liability coverage of $1 million for death, bodily injury, or property damage; and
- Personal injury protection benefits meeting the minimum coverage requirements for a limousine under sections 627.730 - 627.7405, F.S.
The specified requirements may be met by insurance maintained by the company, or by insurance maintained by the driver, or by a combination of the two. Insurance meeting these requirements is deemed to satisfy the financial responsibility requirements of section 627.733 and chapter 324, F.S., and may be placed with an authorized insurer or with a surplus lines carrier.
Both bills are moving early. HB 509 has already passed both committees that it was referred to, and SB 1118 is scheduled to be heard on January 19 by the Senate Banking and Insurance Committee.
MAJOR CHANGES IN REGULATION OF SINKHOLE COVERAGE
SB 1274 by Senator Latvala and HB 1327 by Representative Ingoglia would establish new standards for domestic insurers that solely transact personal residential property insurance for the peril of sinkhole.
In order to obtain a certificate of authority, an insurer that sells personal residential property coverage only for sinkhole would be required to have surplus as to policyholders of $2.5 million, and to maintain its certificate it would need $1.5 million. By comparison, a residential property insurer must have $15 million to obtain a certificate and $15 million to maintain its certificate.
The bills requires Florida Commission on Hurricane Loss Projection Methodology (FCHLPM), which currently establishes the reimbursement rates for the Florida Hurricane Catastrophe Fund, and approves the models that may be used by private insurers to establish rates for hurricane losses. By recent law, the FCHLPM soon will also approve the models that may be used by private insurers to establish rates for flood losses. SB 1274 and HB 1327 would require that the FCHLPM must also establish standards for approving models that project personal lines residential sinkhole losses by July 1, 2018, and would require OIR to consider projected sinkhole losses that are estimated using a model approved by the FCHLPM.
For filings before October 1, 2019, an insurer can file rates based on 627.062 standards and use the rates by notifying OIR within 30 days of the rate change. The insurer must retain its actuarial data for the rates for 2 years.
The bills also provide that:
- The coverage must include additional living expenses.
- Any loss that is repaired or replaced must be adjusted on a replacement cost basis.
- That a surplus lines agent can export sinkhole insurance to surplus lines insurer without the "diligent effort" to seek coverage from authorized insurers.
- An insurer providing sinkhole coverage must notify OIR at least 30 days before writing the insurance, and file a plan of operation and financial projections or revisions to the plan.
- Citizens cannot issue or renew personal lines residential property insurance for sinkhole coverage after July 1, 2018, but will provide coverage for catastrophic ground cover collapse.
- The CAT Fund cannot reimburse for personal residential property losses caused by sinkhole.
FUNERAL DIRECTOR'S AUTHORITY TO SELL LIFE INSURANCE INCREASES LIMIT
Current law allows a funeral director to obtain a license limited to selling life insurance covering the prearranged cost of a funeral up to $12,500, updated annually for inflation by the CPI since 2003. At this point, we believe that amount to slightly exceed $16,000.
The NAIFA Legislative Committee recognizes the rising cost for funerals, and that small dollar life policies are becoming less common. In this light, the Committee believes that the limit for this license could be increased by a reasonable amount, continuing to cover only prearranged funeral costs.
SB 1386 by Senator Richter and HB 1303 by Representative Jones, would increase the limit to $22,500. Initially, the parties seeking this legislation pushed to increase the limit to $25,000. NAIFA opposed this as being excessive. In light of NAIFA's involvement, Senator Richter and Representative Jones reduced the increase to the current $22,500. NAIFA will continue to be involved in the issue.
FLORIDA HEALTH CHOICES PROGRAM EXPANDS
At their October 30th meeting, the Florida Health Choices Board of Directors approved an expansion of its program to allow additional insurance agents licensed by the State of Florida to sell comprehensive health insurance products through the Marketplace.
Approved on a pilot basis, a limited number of agents will be trained and provided with access to the Marketplace to obtain quotes and enroll clients in selected health plans. The Marketplace is designed to enable agents to provide comparisons of all available insurance plans and rates, and predict out-of-pocket costs based on the client's specific needs.
Participating agents will be compensated by the program with three categories of consulting fees ranging from $50 to $100 based on the number of sales generated. Interested agents can apply or obtain more information at [email protected]
