Health Insurance Update
The Kansas Insurance Department's Health Insurance Exchange planning process is continuing its work this summer. All workgroups have met with the exception of the Medicaid Integration workgroup which is now being chaired by Representative Brenda Landwher. Rep. Landwher is meeting with individual members and anticipates meeting in the next few weeks. All other workgroups continue to meet but work has slowed while members await new regulations from HHS that will provide additional direction on the exchange planning process. In addition, the Steering Committee continues to meet and will meet again on July 28th to discuss the new KMed system. This is the new and improved Medicaid system that was made possible by a federal grant. This new KMed system will be integral to the state-based exchange and may even be able to provide many of the exchange functions.
Three workgroups have presented to the Steering Committee and many of the recommendations have been sent back for further consideration and refinement by the workgroups. Work has been very slow at the Steering Committee level and not much progress has been made.
The timeline initially presented by the Kansas Insurance Department (KID) stated that an RFP for the development of the exchange would be issued this summer. This timeline has been revised and an RFP is not expected until next year or later. Lt. Governor Colyer, in conversations with Kansas Insurance Department representatives, strongly recommended that the RFP not be issued until the legislation authorizing the exchange passed the Kansas Legislature. There is also speculation that exchange legislation may not be passed until early in the 2013 Legislative Session which would make the issue a political tool for the 2012 election year.
This new timeline pushes workgroup decisions and exchange development off until the spring of 2012 or later. Delaying state action allows more time for a potential Supreme Court ruling on the constitutionality of the measure.
The KID has requested four legislative days this summer to present information to Legislators. However, the interim legislative committee assigned the topic - the Financial Institutions and Insurance Special Committee - has been given 3 topics and only 3 days to meet; so it doesn't appear the KID will get 4 days for the one topic.
Finally, the KID is working with the Kansas Chamber and other business groups to plan several meetings this fall across the state to inform Kansas businesses about the federal law, the exchange process, and to solicit input on the exchange.
KAIA has several members on the work groups to help monitor and shape recommendations and outcomes. Watch for updates in Capitol Notes and Kansas Agent newsletters.
Health Insurance - the sad news:
On the national side, the current administration continues to attempt to eliminate consumer choice in health insurance.
According to Consumers for Health Care Choices at the Heartland Institute, new regulations issued by the Centers of Medicare and Medicaid Services are accelerating the demise of so-called "mini-med" health care insurance plans by eliminating a waiver program the plans needed to survive regulations within the federal health care law. You can read the full article here.
The Department of Health and Human Services has decided it can regulate private insurance companies must now get permission from the federal government to increase premiums if the proposed increase is more than 10%. They claim it is an effort to rein in health costs and limit wasteful spending on insurance company profits. This opinion from the federal government that loses as much as $60 billion each year in Medicare fraud alone. Utilizing stringent price controls on private insurance companies will not control health care costs - it will only lead to the disappearance of insurance companies and decreased access. Of course, decreased access will lower health care costs as citizens wait longer for care. In Massachusetts where rate increases were denied, many primary care practices have closed to new patients and wait times for specialists can be as long as 2 to 3 months.
The first appellate court decision is in - and it upheld the individual mandate to buy health insurance. The three-judge panel agreed with the Federal District Court in Detroit who concluded that choosing not to buy health insurance was a consequential commercial decision that could be regulated by Congress under the Commerce Clause of the Constitution. If that opinion holds, then it would seem that auto insurance would be the next in line for federal takeover.
Health Insurance - the good news:
The best news shared recently is the upswing in enrollment in high-deductible plans with health savings accounts. These plans allow consumers to manage their own health care and decide where they will be treated. Businesses have begun using them to bring their employees more control and more choice in their health care.
The Big I and KAIA continue to work for exemption of agent commission from the Medical Loss Ratio. Agent commission has always been a pass through - not part of insurance company profits. You can read the Big I press release on the introduction of the "Access to Professional Health Insurnce Advisors Act of 2011" here. The NAIC recently voted to support legislation that would achieve this exemption. If the NAIC puts its full weight behind H.R. 1206 it will help the momentum of the legislation. Seventy-five percent of insurance brokers have seen their fees decrease since the MLR was announced - companies were cutting commissions even before implementation.
In the meantime, agents continue to find innovative ways to stay in business as companies slash commissions at the same time that they are raising premiums. If consumer interest groups truly had consumers' interests at heart, they would raise awareness of the disservice that is being done to consumers when agents who are the consumers' advocate in the health insurance system are being cut out of that process. Consumers will be left without professional advocates who know and understand the health insurance system.
Flood Insurance - the good, the bad, and the ugly
The Big I and KAIA continue to support reform to the National Flood Insurance Program. Most recently, the U.S. House of Representatives Committee on Financial Services passed H.R. 1309 which is the "Flood Insurance Reform Act of 2011 that the Big I has been instrumental in getting introduced. The legislation would bring needed reforms to put the program on sound financial footing. The program is due to expire at the end of September and instead of a short renewal, H.R. 1309 would extend the program for 5 years, lending some stability and predictability for homeowners, home buyers, and agents. You can read the Big I press release here.
H.R. 1309 continues to meet resistance from those who would either eliminate the program or want to expand coverages. In addition, flooding across the country is putting additional strain on the program. FEMA has issued a rash of WYO bulletins that brings into question whether NFIP policies will cover clients. The confusion has brought Congressional attention to FEMA, but the issue remains muddy.
One of the bulletins FEMA recently issued was W-11030 on floods in progress. The bulletin has caused a lot of controversy as it appears to alter interpretation of a flood in progress.
The bulletin states that the NFIP policy "does not insure a loss directly or indirectly caused by a flood that is already in progress at the time and date: 1. The policy term begins; or 2. Coverage is added at your request."
Spurred by highly publicized events involving opened spillways and levees, the memo appears to muddy the water as to coverage eligibility, increasing the number of potentially excluded events, leading some agents to suspend flood insurance sales altogether.
FEMA has now issued a clarifying bulletin W-11045, encouraging producers:
· to continue selling flood insurance,
· to discuss the exclusion with clients, and
· to avoid committing to coverage for any specific events. FEMA emphasizes that each claim will be individually reviewed to determine the applicability of the flood-in-progress exclusion.
Agents should not assume how the NFIP policy will respond to a claim, or interpret when the flood started.
GM, in an effort to spur car sales, recently announced that it would pay for the insurance of any customer who purchases or leases a new 2010, 2011, or 2012 vehicle (currently in Washington and Oregon only). The insurance policies will be provided by MetLife Auto & Home. Here are some of the details:
- Qualifying customers on a lease OR new purchase of 2010, 2011 or 2012 GM
- GM will offer/provide a 1 year PAID auto policy (dealers being trained this week in Detroit)
- Standard package
- 100,000 liability limits
- Rental, tow, replacement cost for total loss, etc
- Customer can "buy up" if they want more coverage on the policy
- Existing MetLife Auto & Home IA policy holders
- Intent will be to pay full commission for the year
- After 1 year, the policy will be transferred back to the agent
- Non MetLife Auto & Home Customer (with an IA)
- Met will not pay commissions and the policy will not be transferred automatically back to the agent - Met will call policy holder to offer Met policy after one year.
- This is a PILOT Program
- July 6 - Sept. 6 (60 day pilot by GM)
- 2 States: Washington & Oregon (MetLife will be in touch with IIABA pilot state execs by July 6 to relay news)
- After pilot, GM will determine whether to end program or expand/extend
- Currently filed and approved in 17 states
- 3 states rejected: California, Montana & South Dakota
- Customer "Qualifying" Criteria:
- Valid Driver's License (no MVR will be ordered for pilot program)
- Car must be registered in pilot state
- Car cannot be used for commercial use
The Big I has raised many questions with MetLife about the program including issues of producer licensing and anti-rebating law violations. In Washington, one of the two test states, the Office of the Insurance Commissioner ruled in favor of the program stating that the premium is paid by GM so it is not "free". If an independent agent currently writes the customer through MetLife, the auto insurance for the customer's new GM vehicle will be written on a separate annual policy and included in this program. The agent of record will be notified by phone or email. At the end of the one-year term, that policy will be realigned with the original writing agent. The agent will also be compensated at the regular commission rate during the year that the customer is receiving insurance through the GM program.
This is a group policy issued to GM for the benefit of their new car buyers. If the individual has questions or claims, they are referred to MetLife. It is our understanding that GM is not acting as a producer so doesn't need to be licensed.
Other questions that the Big I has posed include:
- What if the purchaser already has an auto policy on existing vehicles and now has a separate policy on this one. How do the policies respond when the insured and a family member borrow or rent a non-owned auto?
- What if the insured has an umbrella? It's unlikely to respond to claims to an auto insured under another personal auto policy.
- The auto cannot be used for "commercial use. What does that mean and how is it excluded in the policy? If the owner runs mail to the post office for her/his employer, is that "commercial use"?
- Current policy contract gives automatic coverage for a new purchase for so many days. Loss happens in the first few days, who is on it?
KAIA is in contact with the Kansas Insurance Department regarding the program and the KAIA Consumer and Technical Advocacy Committee will review the program in its committee meeting this month. We will keep you updated as information becomes available.
KAIA advocates for independent insurance agents every day - whether its government affairs or consumer and technical advocacy. Watch for updates and articles on industry issues in Capitol Notes, Kansas Agent Newsletter, and KIA&B magazine.