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Health and Life Insurance Advisory Council

Insurance Regulation Law Update William J. Toman, Cristina M. Choi

The business and regulatory environment for insurance is constantly changing, and part of our client service involves staying on top of those changes. One way we do this is to attend 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. Following is our report from the most recent meeting of the Health and Life Insurance Advisory Council:

Life Insurance

Life Claims Settlement. Mollie Zito, OCI's Chief Legal Counsel, reported that OCI is finalizing a draft legislative proposal that, at last report, would require insurers to review Social Security's death master file, and follow up on any matches with their insured lives. The draft would not change proof of death requirements.

Long-Term Care. J.P. Wieske, OCI's Legislative Liaison and Public Information Officer, reported that OCI is still looking at a new structure for long-term care commissions that would provide more freedom for insurers, but impose some suitability requirements.

He said another issue is insurers that file long-term care rate increases nationally, and then may receive conflicting determinations by different states. Mollie Zito said the National Association of Insurance Commissioners ("NAIC") has issued a draft model bulletin on the actuarial assumptions to be used in such filings, whether they relate to policies before or after "rate stability" under the 2000 NAIC model regulation. The bulletin contemplates insurers and regulators working together on the applicable assumptions; allows for rates to increase all at once or over time; includes consumer transparency provisions; and provides for a contingent benefit upon lapse for pre-"rate stability" policies. The NAIC will consider the draft at its August meeting, and in an interim call.

In response to a question, Mr. Wieske said the NAIC is using a model bulletin because it has been difficult to adopt changes to the model regulation. He said there is something of a conflict between states that want to punish insurers for past transgressions and those that are seeking to attract more long-term care insurers. Ms. Zito noted that having America's Health Insurance Plans ("AHIP") on board is a huge factor in making the model bulletin possible.

Legislative Issues. Mollie Zito noted that the new state budget moved responsibility for unclaimed property to the Department of Revenue, and OCI is meeting with them to coordinate the insurance implications of the move. J.P. Wieske said the budget also reduced nonresident agent fees, which should start to limit the impact of retaliatory fees by other states.

NAIC. Mollie Zito noted that Insurance Commissioner Ted Nickel chaired the Contingent Deferred Annuity ("CDA") Working Group, which issued draft recommendations on items such as defining CDAs and regulating their marketing. She said the Working Group's parent committee has not yet approved the recommendations, but may do so at the August meeting.

Ms. Zito also noted that implementation of principles based reserving ("PBR") and the related Valuation Manual will not occur until at least 42 states have changed their laws to adopt PBR. She said that so far only 16 states have done so.

Health Insurance

OCI Public Outreach. J.P. Wieske reported that Commissioner Nickel wants broad public outreach by OCI in September regarding the federal health insurance reform law ("ACA"). To that end, OCI has created three teams that will travel statewide with town hall-style meetings that will offer daytime and evening hours at each location. Notice of the meetings will be as broad as possible. This will be in addition to the outreach planned by the federal Department of Health and Human Services ("HHS"), which will concentrate mostly on the Milwaukee area.

OCI Agent Outreach. J.P. Wieske noted that, under the state budget, individuals at 100% to 200% of the federal poverty level will transition off Medicaid on January 1, 2014. OCI is reaching out to agents, through their trade associations and otherwise, to help them enroll these individuals - especially the 92,000 who will no longer be eligible for BadgerCare - in individual health plans through the Wisconsin federally-facilitated exchange ("FFE"). OCI is working closely with the Wisconsin Department of Health Services ("DHS") to develop a "one-touch" approach, which it hopes will allow individuals coming off of Medicaid to get information about FFE plans from one source. Although OCI and DHS will have more information on the planned outreach in the next few weeks, DHS won't know which individuals will no longer be eligible for Medicaid until the end of September.

There will be federally required online training for agents selling through the FFE. Since OCI is not sure how agents will participate in the FFE, it is not clear whether that training will include a Medicaid component; however, OCI believes such a component is important so that agents can discuss all the options with consumers. There was some discussion about whether DHS could tell consumers which agents had participated in this training; OCI wants to give consumers access to the right agents to help ensure a smooth transition, because delays could mean gaps in health care coverage.

Navigators and Non-Navigator Assisters. The state budget includes provisions regulating FFE navigators and assisters.  Mollie Zito noted that OCI is working on a draft bulletin on these provisions, which OCI is reviewing in light of the recent federal rule on this subject. Any comments on the draft should be directed to OCI attorney Julie Walsh.

Navigators and certain non-navigator assisters (certified application counselors) must be licensed and will be required to complete 16 hours of pre-licensing training, though HHS may require more. J.P. Wieske noted that OCI is working with DHS to prepare the training, and it will likely include about eight hours on Wisconsin insurance laws, about four hours on the FFE (most of which will be provided by vendors), and about four hours on the Medicaid program from DHS. OCI is currently planning to offer the training online only, and hopes to offer it at no cost (although there will be a fee to take the licensing exam).

The training and the licensing exam should be available on or around August 15, 2013, though Julie Walsh noted that OCI just initiated the underlying rulemaking process (which may be delayed while OCI reviews recent federal guidance). OCI is planning to offer a study guide to assist individuals in preparing for the licensing exam. While this study guide should allow an applicant to pass the exam, Ms. Walsh encouraged applicants to complete the prelicensing training before taking the exam.

Mr. Wieske said OCI has no idea how many navigators or assisters there will be, but that the agency expects only a small number of navigators with assisters more broadly available. At a recent enrollment panel, there was not much concern about not having enough navigators and assisters. Instead, the main concern was with hard-to-reach populations. At the panel, DHS Medicaid director Brett Davis said he expects some county-level involvement in addition to DHS's role in dealing with individuals moving between Medicaid and the FFE.

Exchange Insurers. Although J.P. Wieske noted that there is considerable interest in which insurers will be participating in the FFE, he said OCI will post that information (perhaps with some analysis) only after all filings are reviewed and closed (which will be on or after July 31). While Mr. Wieske said he wouldn't go into numbers, he noted that there were "a bunch" of filings; that there will be "a good number" of insurers on the FFE (OCI anticipates that there will be coverage across the state, but we will have to see if there will be multiple carriers in all regions); and that there will be more plans available off the FFE than on it. Only one insurer had enough market share to be required to offer both individual and small group coverage on the FFE.

While OCI anticipates releasing the names of insurers that want to participate in the FFE on or after July 31, carriers will not sign contracts with the FFE until early September.

In response to a question, Mr. Wieske stated that consumers will first be able to access information about premiums when the FFE opens in October, and that this information will not be easily available from the filings OCI publishes. It is very difficult to translate rate filing information into a premium for a specific situation and, of course, information on whether an individual will be eligible for assistance or tax credits is only available through the FFE.

Finally, Mr. Wieske noted that county health departments that have provided immunizations would like to qualify as essential community providers ("ECPs") and contract with FFE insurers to provide those services. While OCI has no problem with such contracts, it is up to DHS to determine what entities qualify as ECPs.

Bulletins. Mollie Zito noted that OCI's April 2, 2013 bulletin arose out of a federal determination that plans off the exchange did not need to provide pediatric dental coverage if the insurer is "reasonably assured" that plan buyers will also purchase stand-alone dental plans. The bulletin requires pre-sale notice for any plan that does not provide pediatric dental coverage, and thereby provides the reasonable assurance required by the federal determination.

She said OCI's April 16, 2013 bulletin on habilitative services noted that the Wisconsin benchmark does not define such services, but that they must be on par with covered rehabilitative services, and must not unfairly discriminate against individuals who may have acquired a functional deficit.

Ms. Zito said OCI worked with HHS to issue the July 2, 2013 bulletin interpreting federal law as allowing the maximum small group deductibles to be increased, outside the exchange, by payments available to an enrollee under a health reimbursement arrangement ("HRA"). She noted that, for market conduct purposes, it would behoove insurers to document the validity of such increases in deductibles. This may be difficult, given that the amount of payments available to an enrollee under an HRA may vary for a variety of reasons.

NAIC. The FFE issues paper published by the Health Care Reform Regulatory Alternatives Working Group, which is chaired by Commissioner Nickel, has been adopted by the working group's parent committee. The group is continuing to work on ACA issues, including possible 2017 waivers of ACA requirements due to state innovation. Commissioner Nickel has also assumed the chair of the Regulatory Framework Task Force, which considers broader health insurance issues, such as revisions to model laws in light of the ACA and revisions to the coordination of benefits (COB) model regulation.

J.P. Wieske reported that there has been continuing discussion on accounting for the ACA tax on health insurers that will amount to $8 billion in 2014 and $12 billion in 2015. Generally accepted accounting principles say it should be booked in 2014 because it is to be paid in September of that year, while statutory accounting principles indicate that insurers should take the charge in 2013 since it's based on 2013 premium. The federal government says insurers should account for it in 2014 for medical loss ratio purposes; the NAIC's Statutory Accounting Principles Working Group proposed a four-year phase-in beginning in 2013; and AHIP and the Blue Cross Blue Shield Association have proposed recognizing the tax as a special surplus item in 2013, and then booking it in 2014. The plan is for the working group to vote on an approach at or before the August NAIC meeting, after which it would have to go to the group's parent committee, and then to the Executive Committee (unless it is referred to the Health Insurance and Managed Care Committee for comment).

HIRSP. Amie Goldman, CEO of the Health Insurance Risk Sharing Plan ("HIRSP"), reported that the budget sunsets HIRSP with coverage ending December 31, 2013. She said that HIRSP is implementing a communication and outreach plan for enrollees, and will handle the runoff until OCI takes over on March 1. Any remaining funds will be returned to the contributors. HIRSP is sending notice to insurers affected by a special enrollment for Medicare members. Insurers are still required to give notice of HIRSP availability till the end.

Other Issues

Office of Business Development. Joe Knilans and Nancy Mistele of the Office of Business Development explained that they were from the government and were there to help - really. The Office listens to and advocates for business within government, and works closely with the Small Business Regulatory Review Board to repeal unnecessary regulations. They encouraged suggestions from the insurance industry.

OCI Technical Bill. J.P. Wieske said OCI will be offering a technical bill late this year or early next year. It will deal with corporate governance issues that are more relevant to property and casualty companies; adoption of the Own Risk Assessment and Solvency (ORSA) model law, which OCI is aware has raised confidentiality concerns with insurers; changes to the holding company model law, which the financial bureau is working on; and proposals specific to health insurance reform, which involve more deletions than additions at this point. The model laws are not required for OCI to maintain accreditation, so there is no need to offer the technical bill earlier.

Publications. Terri Carlson of OCI noted that OCI is updating its older publications (2009-2010), especially those that are subject to changes due to the ACA and state legislation. The OCI web site also has helpful links and answers frequently asked questions, including ACA questions specific to Wisconsin.

For more information on the Insurance Regulation Group, please contact William Toman at (608) 283-2434 / william.toman@quarles.com, Cristina Choi at (608) 283-2463 / cristina.choi@quarles.com, or your Quarles & Brady attorney.