Policy Delivery State Requirements

I saw an industry reference tool this week showing state requirements on time frames for delivery of policies.

With no small amount of nostalgia, I was reminded of my early years as a group life and disability benefits analyst, where I was close to the “hand to hand combat” that seemed to break out in haggling with the broker and the employer’s Benefits/HR rep over the wording of provisions in the new policy we were issuing vs. the one they had just terminated. In extreme examples, the process could drag on for months, with multiple iterations of the policy being swapped back and forth in what sometimes came to resemble a hostage exchange.

In fact, the laws of most states require that a policy be delivered “within a reasonable amount of time” after it is issued, “except where a condition required by the insurer has not been met.”

FL requires mail or delivery of a policy “not later than 60 days after the effective date of coverage.”

KY requires the policyholder’s agreement for delivery of the policy in electronic form, a common practice in the group world these days.

MD requires delivery of individual health insurance policies (including long term care) within 60 days of the effective date of the policy.

MN requires that agents deliver a policy, certificate or other evidence of coverage to the insured within 30 working days of the agent’s receipt, unless the insured agrees in writing that the agent may retain it.

NJ requires that agents deliver a policy, certificate or other evidence of coverage to the insured within 10 calendar days of the agent’s receipt, unless the insured agrees in writing that the agent may retain it for a longer period.

In addition, many states have laws requiring long term care policies to be issued within 30 days after approval of the application.

Interstate Compact Soon To Develop Group Disability Product Standards

Having completed development of the Product Standards for individual disability income products, it looks like the Interstate Insurance Product Regulation Commission (IIPRC) will soon begin work to draft and refine the Product Standards for group disability income products. As noted in prior posts here, approvals of product filings submitted to the IIPRC are extended to all the states that belong to the IIPRC for that product. I am looking forward to being part of the group working with IIPRC staff in the effort to develop the group disability standards that will serve as the guide to future state filings of group disability products.

There are presently 39 states that belong to the IIPRC (plus PR and DC), with legislation pending in several other states. Holdouts include AR, AZ, CA, CT, DC, DE, FL, MT, ND, NY and SD.

2012 Regulatory Stirrings

As state legislators and regulators kick into gear for 2012, here are some recent items of note for disability carriers …. NJ AB 1562 proposal would replace existing language in a current law requiring disclosure of broker commissions in “health insurance policies or contracts” with a more narrow reference to “health benefit plans”, thereby exempting disability policies….MA SB 452 proposal would  require a conversion provision in all group health, accident and sickness policies, including STD and LTD .… GA HB 736 wins the award for first 2012 state proposal aiming to ban discretionary clauses in disability policies…. CA Insurance Department just announced the formation of a new unit within the  Policy Approval Bureau to focus solely on health insurance policy reviews. The CA DOI also affirmed its commitment to improving its organizational effectiveness. The department is scheduled to meet today with industry representatives regarding ongoing policy form review and approval issues

MA and RI Regulatory News

A number of disability-related proposals have been languishing on the MA state legislative docket since early 2011. These included prohibitions on Social Security offsets, behavioral health disorder limitations and discretionary clauses in group LTD policies. Now it looks like the MA Joint Committee on Financial Services will hold hearings on these proposals January 24, 2012. For some time, MA has been a state that does not require filing for approval of new group disability products, and has very few regulations for such products. Stay tuned.

On another New England state regulatory note, we want to congratulate Phil Sheridan of the RI Insurance Division for receiving the Arlene Violet Award for Consumer Protection. Phil is one of the truly good people in the insurance regulatory world and a deserving recipient of this award. Way to go Phil!

Notes From The State Filing Desk

As we head into the holiday season, here are a couple recent news items on the topic of state filings:

CA - The Department of Insurance (CDI) has a hearing scheduled for next week on its proposal to increase filing fees for most product lines. The proposed new fees for group disability filings will more than double the current filing fees for those products. The CDI last month also announced the retirement of the assistant chief counsel who had been overseeing the Policy Approval Bureau for the last several years, and appointed attorney Leslie Tick as the acting chief.

IN - In a letter to the Interstate Compact dated October 27, 2011, Insurance Commissioner Stephen Robertson advised that the Compact’s recently adopted uniform standards for individual disability income products “do not provide sufficient protections to the citizens of Indiana” and informed the Compact that IN planned to “opt-out” of those standards. Under Interstate Compact rules, a state such as IN that has approved the Compact may still “opt-out” of the Compact for specific products. in the event of an “opt-out”, insurers would still be required to submit their product for approval by the state that opted out, instead of deeming that state approved once the compact has approved the product filing.

Interstate Compact – a Compact representative stated at last week’s annual meeting of the National Conference of Insurance Legislators (NCOIL) that the Compact has completed the uniform standards for individual products ands will now begin development of uniform standards for group products. It is anticipated that group life will be the first product on the Compact’s docket.

Social Security Administration Announces Cost of Living Increases

For the first time since 2009, Social Security beneficiaries will receive a cost of living adjustment (COLA) increase to their benefit amount. Starting in January 2012, SS benefits will be upped by 3.6%, for an average increase of $39 per month for recipients of SS disability and retirement benefits. The annual COLA provision of Social Security is tied to certain inflation indices, but because inflation ran low in 20010 and 2011, there were no COLA increases for SS beneficiaries in those years.

Group Long Term Disability policies typically reduce (“offset”) the LTD benefit amount payable by the amount of Social Security disability benefits the insured receives. However, LTD policies do not offset for amounts received as a result of COLA increases.

The down side for SS recipients, though, is that Medicare is expected to announce increases in Medicare B premiums shortly. Those premiums are deducted automatically from monthly SS checks.

NY Pre-Existing Conditions Provisions

The New York Insurance Department sent shock waves through the LTD industry in 2007 with Circular Letter 14, which followed close on the heels of the New York Court of Appeals decision in the “Benesowitz” case. The circular letter advised that pre-existing conditions provisions in LTD policies were not a permanent bar to payment of any benefits for disability caused by a pre-existing condition during the limitation period (i.e. most often the 1st 12 or 24 months of a person’s coverage), but should instead serve to merely delay or “toll” the time until which benefits for that pre-existing condition should be payable. This interpretation was at odds with the prevailing approach to pre-existing conditions provisions in the LTD industry and resulted in many carriers adjusting rates accordingly, passing along to employers the increased cost associated with the NY directive.

Now comes news that the NY state senate has passed S. 2557, a legislative proposal that would require insurers to offer employers the industry standard, pre-Benesowitz version of the pre-ex provision alongside the version that was mandated by Circular Letter 14. We have been watching this bill for some time, but had given it little chance of moving ahead in the legislature. It will be interesting to see if the proposal picks up any steam in the coming weeks.