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Health and Life Insurance Advisory Council

Insurance Regulation Law Update William J. Toman

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 quarterly 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 Working Group. Gina Frank, Division Administrator at OCI, reported that this group is currently researching whether to regulate the due diligence a life insurer must undertake to determine when an insured has died. Currently, this is regulated through legal action and settlement, but OCI generally prefers more transparent regulation and is therefore exploring alternatives. The group is in the early stages of this process, and is looking at best practices in the industry and the interplay with unclaimed property laws. If OCI determines that regulation is needed, they will likely make a proposal in the next legislative session.

Long-Term Care Commissions Working Group. OCI Legislative Liaison J.P. Wieske reported that this group is currently looking at the commission limits found in Section Ins 3.46(13) of the Wisconsin Administrative Code that were promulgated when Wisconsin became a Long-Term Care Partnership State in 2007. At the time, OCI felt that commission limits were necessary because there had been reports of abuse. However, OCI reports that they have not seen an uptick in claims under the commission limits regulation, and several other states have since repealed the limits. The working group is researching whether these limits are necessary and whether they may be having a negative effect in slowing the sale of long-term care policies. Guenther Ruch, formerly with OCI and now a private citizen, gave some perspective on the rule and stated that he believed the limitations were not having a negative effect on the market. He recommended a careful approach. Mr. Wieske noted that any action on the commission limits would be at least a year from now.

Health Insurance

Health Insurance Exchange. Mr. Wieske discussed the implementation of an exchange under the federal health insurance reform law ("ACA") in light of Governor Walker's decision to postpone working on the exchanges until after the results of the November 6, 2012 election. Mr. Wieske discussed the various paths that OCI might take with regard to an exchange: a Wisconsin exchange, a Wisconsin-federal partnership exchange and an exchange with little or no Wisconsin involvement operated by the federal government. Mr. Wieske noted that, should Wisconsin decide to have its own exchange, OCI would need to file a blueprint for the exchange by November 16, 2012. Although OCI has not yet drafted a blueprint, they believe that can file a blueprint by the November 16 deadline should the Walker administration decide to take that path. Mr. Wieske noted that OCI's blueprint would likely borrow heavily from the work already done in other states that will have exchanges, but he did not mention any states in particular. Mr. Wieske also noted that even if the exchange itself is operational by the deadline, it is very likely that many of the background systems would not be 100 percent  complete at that point, including the Medicaid systems and other automatic electronic systems. He stated that much of the behind-the-scenes functionality may have to be manual for a time while the integrated system was completed.

Mr. Wieske also reported that, even if Wisconsin does not decide to operate the exchange, the implementation of an exchange would likely require at least a technical bill to amend certain statutes and regulations to account for the exchange, including the role of the federal Office of Personal Management, the actuarial impact of the ACA, open enrollment periods outside the exchange, unlicensed sales, and other issues.

A member of the public asked what OCI's plans were for communication of any decision on this, and what the timeline was for a decision and rules implementing the exchange. Mr. Wieske stated that there would not be any special communication process for a decision on the exchanges, but that they would post information as available on OCI's website at www.oci.wi.gov. Mr. Wieske noted that communication may be limited if OCI is rushing to filing a blueprint by the November 16 deadline.

External Review. OCI attorney Julie Walsh said that OCI is still waiting for the Center for Consumer Information and Insurance Oversight ("CCIIO"), the federal entity charged with implementing many provisions of the ACA, to provide some Wisconsin-specific guidance for insurers on external review, but that they still have not gotten any word on when that will be. Ms. Walsh stated that there is a split in Wisconsin between insurers that have gone with the process from the U.S. Department of Health & Human Services ("HHS") and those that have gone with the process from the U.S. Department of Labor. While we are awaiting CCIIO's input, insurers with grandfathered plans should follow OCI's current process, and all insurers should comply with Wisconsin law where it is more favorable than the new federal law. OCI will continue to certify independent review organizations, but cannot require their exclusive use. Questions in this area should be directed to her or the market regulation bureau.

Essential Health Benefits. Mr. Wieske said that OCI asked the federal agencies for state-specific guidance on the essential health benefits and for time to determine the steps it needs to take. However, the federal agencies have not provided any information yet, other than a promise that the information provided would be detailed and state-specific. There is speculation that the federal agencies were waiting until after the election to issue any ACA-related information. The group discussed how the results of the election could affect the implementation of the ACA regulations, including the traditional tolling of all regulations promulgated in the 60 days before the inauguration of a newly elected president.

Wellness Plans. Sue Ezalarab, Director of OCI's Bureau of Market Regulation, said that OCI has approved a rating case characteristic for wellness plans for the purpose of determining rates in the small group market. The rate reduction for a wellness plan is approximately 3 percent - 5 percent. Most wellness plans mirror what is required by the ACA.

Other Issues

Small Business Regulatory Review Board. Mr. Wieske said that this group will examine the impact of old, current, and new regulations and statutes on small business.

Stakeholder Outreach. OCI Examiner Ashley Natysin gave an update on OCI's efforts on education and outreach. OCI has been working with the tribes on member issues such as health plans, property and casualty insurance, and availability of insurance. OCI has also sought input from urban and elderly populations. In general, these stakeholders are mostly worried about accessibility and affordability, especially as individuals move to family plans. She noted that the 30-day right to return the policy is not being followed for elderly populations, and that OCI needs to do more education and outreach on this issue. Mr. Wieske noted that OCI is also reaching out on the topic of veterans programs, including at Madison College where they are working on accelerated certificates for returning veterans. Other veteran's issues that OCI is working on are transitioning back to civilian life and issues arising during any reserve period. He noted that there needed to be additional outreach and education on these issues.

Next Meeting

J.P. Wieske said the Council's next meeting will be next quarter if there are issues to discuss and a desire to meet. He also noted that they might schedule a meeting earlier than this if OCI has information to share about any of the ACA-related issues before the next meeting.

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.

UPDATE: HHS has given states an extension on part of its health insurance exchange deadline. November 16 remains the deadline for states to declare whether they are going to run their own health insurance exchanges in 2014 or, at least initially, default to a federal one. However, HHS Secretary Kathleen Sibelius issued a letter on November 9, a copy of which is attached, saying that the deadline to submit blueprints for state-based exchanges has been extended to December 14. She also said HHS intends to issue further guidance on exchanges "in the very near future."