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The Alaska Division of Insurance issued Bulletin B 10-08 recently to provide notice of Order R10-04 repealing the exemption of certain products, including disability, from filing and approval requirements. Beginning January 1, 2011, all new or revised forms must be filed for prior approval by Alaska. Forms not filed prior to January 1, 2011 are not required to be filed for approval unless they are amended.
Alaska now joins Michigan in the ranks of states that have rescinded relatively long standing exemptions from filing and approval requirements in 2010. As the Massachusetts Insurance Division collects survey data from disability insurers, it will be interesting to see what may come of their exemption for the filing of group disability forms for approval as well.
Tuesday, October 26, 2010
Monday, October 11, 2010
Delaware - EFT Required for SERFF Filings Starting November 1
On September 27th, the Delaware Insurance Department issued Bulletin No. 33 requiring use of Electronic Funds Transfers (EFT) for rate, form, rule and advertisement filings that are submitted using the System for Electronic Rate and Form Filings (SERFF). The new EFT requirement is effective November 1, 2010.
Tuesday, October 5, 2010
Senate Hearings on Disability Insurance
The Senate Finance Committee held a hearing in Washington last week on the question “Do Private Long-Term Disability Policies Provide the Protection They Promise?”
The hearing was attended by only 3 of the 23 Senators that make up the committee, a fact that was lamented by Senator Baucus (D-MT), the committee chairman, in his closing remarks.
The committee heard testimony from a vocational rehabilitation counselor, a judge from an AL district court, a prominent disability plaintiffs’ attorney, an ACLI representative and a deputy commissioner from the Social Security Administration.
The hearing was largely a forum on the extent to which there’s “something broken” with long term disability insurance and the degree to which ERISA serves to harm the interests of claimants.
Of note, one of the 3 senators attending remarked that ERISA jurisdiction does not rest with the Finance Committee and seemed more intent on discussing LTD as it pertains to the Social Security disability application process. Another senator suggested that the GAO study the 50 states to see if issues might be better addressed by alternative courses of action at the state level. Committee chairman Baucus did voice his determination to bring his findings to the Senate committee that has jurisdiction over ERISA, in the hope of fixing the perceived problem with private disability insurance.
Notwithstanding the sparse turnout by the committee membership, the hearing did represent at least another indication that the role ERISA plays in regulating employee benefit plans may yet be subject to a more searching examination in Congress.
The hearing was attended by only 3 of the 23 Senators that make up the committee, a fact that was lamented by Senator Baucus (D-MT), the committee chairman, in his closing remarks.
The committee heard testimony from a vocational rehabilitation counselor, a judge from an AL district court, a prominent disability plaintiffs’ attorney, an ACLI representative and a deputy commissioner from the Social Security Administration.
The hearing was largely a forum on the extent to which there’s “something broken” with long term disability insurance and the degree to which ERISA serves to harm the interests of claimants.
Of note, one of the 3 senators attending remarked that ERISA jurisdiction does not rest with the Finance Committee and seemed more intent on discussing LTD as it pertains to the Social Security disability application process. Another senator suggested that the GAO study the 50 states to see if issues might be better addressed by alternative courses of action at the state level. Committee chairman Baucus did voice his determination to bring his findings to the Senate committee that has jurisdiction over ERISA, in the hope of fixing the perceived problem with private disability insurance.
Notwithstanding the sparse turnout by the committee membership, the hearing did represent at least another indication that the role ERISA plays in regulating employee benefit plans may yet be subject to a more searching examination in Congress.
Wednesday, July 21, 2010
More State Activity on Discretionary Authority Provisions
Regulatory activity has been continuing in recent weeks on the discretionary authority front that we have written about in recent posts.
One insurance department issued a bulletin to clarify that its state's 2005 ban on discretionary clauses in health or disability insurance policies is applicable to new policies issued after 2005 as well as to policies renewed after that date.
Leaving aside the question as to whether policies technically "renew" or not, the department's bulletin advised in no uncertain terms that insurers who "continue to exercise discretionary clauses against their policyholders" are not in compliance with their state's laws and "will be held accountable and subject to regulatory action."
The phrasing of the bulletin is as curious as it is revealing. This is not a good thing for anybody - least of all the insurers who issue group policies, the employers who buy them or the employees whose incomes are protected by them.
Insurers do not "exercise" discretionary authority clauses in the same manner they exercise clauses, for example, that require a person to be disabled for 180 days under certain long term disability policies or that call for the LTD benefit amount to be reduced by the amount of Social Security benefits for that same disability. In fact, you would be hard pressed to find the phrase "discretionary authority" in any of the numerous and sometimes lengthy communications an LTD insurer sends its claimants.
Instead, it is typically the federal courts (where most claims under group policies are litigated) that fix on the inclusion or omission of discretionary clauses as a factor in determining what standard of review the court will apply in hearing a case. The presence of a discretionary clause generally leads the court to apply a standard that is considered more "deferential" to the insurer's claim determination.
This is the legal standard that has governed ERISA litigation for some time now, in an effort to rein in the legal free for all - and spiraling insurance costs - that would result if courts all over the country could substitute their own interpretations for the ones that the insurers' claims people had made. So it is disturbing to read regulatory pronouncements that appear out of touch with what happens in the real world of claim administration and litigation.
At another state insurance department's recent hearings on proposed rules to ban discretionary clauses in policies issued in their state, an insurance department legal representative questioned the evidence supporting the LTD industry's contention that a ban on discretionary authority provisions would lead to rising LTD plan costs, stating that in any event "carriers are free to apply a rate change due to the removal of the clause."
Another regulatory spokesperson at the hearing dismissed industry concerns about the impact a ban on discretionary authority provisions would have on costs, citing the small percentage of overall employee benefits costs that group disability plans represent and the belief that the ban would lead to better claim decisions and eliminate bad lawsuits. In any event, states of late seem more and more eager to push the envelope on the issue of just how important discretionary clauses are in helping to keep the cost of a typical group disability policy fairly modest.
As CA and NY move ahead with their own discretionary authority bans, it's hard to escape the conclusion that something has to give here, and soon, before the court system becomes logjammed with disability claim litigation from claimants and attorneys eager to take advantage of the new ground rules that result from the absence of discretionary authority provisions.
One insurance department issued a bulletin to clarify that its state's 2005 ban on discretionary clauses in health or disability insurance policies is applicable to new policies issued after 2005 as well as to policies renewed after that date.
Leaving aside the question as to whether policies technically "renew" or not, the department's bulletin advised in no uncertain terms that insurers who "continue to exercise discretionary clauses against their policyholders" are not in compliance with their state's laws and "will be held accountable and subject to regulatory action."
The phrasing of the bulletin is as curious as it is revealing. This is not a good thing for anybody - least of all the insurers who issue group policies, the employers who buy them or the employees whose incomes are protected by them.
Insurers do not "exercise" discretionary authority clauses in the same manner they exercise clauses, for example, that require a person to be disabled for 180 days under certain long term disability policies or that call for the LTD benefit amount to be reduced by the amount of Social Security benefits for that same disability. In fact, you would be hard pressed to find the phrase "discretionary authority" in any of the numerous and sometimes lengthy communications an LTD insurer sends its claimants.
Instead, it is typically the federal courts (where most claims under group policies are litigated) that fix on the inclusion or omission of discretionary clauses as a factor in determining what standard of review the court will apply in hearing a case. The presence of a discretionary clause generally leads the court to apply a standard that is considered more "deferential" to the insurer's claim determination.
This is the legal standard that has governed ERISA litigation for some time now, in an effort to rein in the legal free for all - and spiraling insurance costs - that would result if courts all over the country could substitute their own interpretations for the ones that the insurers' claims people had made. So it is disturbing to read regulatory pronouncements that appear out of touch with what happens in the real world of claim administration and litigation.
At another state insurance department's recent hearings on proposed rules to ban discretionary clauses in policies issued in their state, an insurance department legal representative questioned the evidence supporting the LTD industry's contention that a ban on discretionary authority provisions would lead to rising LTD plan costs, stating that in any event "carriers are free to apply a rate change due to the removal of the clause."
Another regulatory spokesperson at the hearing dismissed industry concerns about the impact a ban on discretionary authority provisions would have on costs, citing the small percentage of overall employee benefits costs that group disability plans represent and the belief that the ban would lead to better claim decisions and eliminate bad lawsuits. In any event, states of late seem more and more eager to push the envelope on the issue of just how important discretionary clauses are in helping to keep the cost of a typical group disability policy fairly modest.
As CA and NY move ahead with their own discretionary authority bans, it's hard to escape the conclusion that something has to give here, and soon, before the court system becomes logjammed with disability claim litigation from claimants and attorneys eager to take advantage of the new ground rules that result from the absence of discretionary authority provisions.
Thursday, June 10, 2010
Discretionary Authority – A House of Cards?
The U.S. Supreme Court on May 17th declined to review the 9th Circuit Court of Appeal’s 2009 decision that upheld the state of Montana’s ban on discretionary clauses in group health and disability policies. Standard Insurance Company sued in 2006 to challenge the state’s prohibition, arguing that state law in this instance should be pre-empted by ERISA, the primary federal law governing employee benefit plans. The MT ban was supported first by the ruling of the district court, and then by the 9th Circuit Court of Appeals.
The Supreme Court’s recent Conkright decision spoke of the important part that ERISA – and with it, the principal of deference to benefit determinations made by claim administrators - plays in promoting the efficiency, uniformity and predictability that recession-plagued employers need in order to continue benefit programs at current cost levels.
The Supreme Court in Conkright seems in one breath to be holding the line on the importance of deference to the decisions of claim administrators, in instances where the plan includes “discretionary authority” language such as the provision that MT banned. But in the next breath, electing to pass on reviewing the MT discretionary authority prohibition seems to be opening the door to more situations where plans will not have that language because of state laws forbidding it.
Maybe, as a Standard spokesperson stated, the Supreme Court “may feel further development in the lower courts is appropriate before it directly addresses the issue” of whether state bans such as the MT one are pre-empted by ERISA. But as the ranks of states barring discretionary authority provisions grow, how much “further development” will be too much?
The Supreme Court’s recent Conkright decision spoke of the important part that ERISA – and with it, the principal of deference to benefit determinations made by claim administrators - plays in promoting the efficiency, uniformity and predictability that recession-plagued employers need in order to continue benefit programs at current cost levels.
The Supreme Court in Conkright seems in one breath to be holding the line on the importance of deference to the decisions of claim administrators, in instances where the plan includes “discretionary authority” language such as the provision that MT banned. But in the next breath, electing to pass on reviewing the MT discretionary authority prohibition seems to be opening the door to more situations where plans will not have that language because of state laws forbidding it.
Maybe, as a Standard spokesperson stated, the Supreme Court “may feel further development in the lower courts is appropriate before it directly addresses the issue” of whether state bans such as the MT one are pre-empted by ERISA. But as the ranks of states barring discretionary authority provisions grow, how much “further development” will be too much?
Wednesday, May 26, 2010
Presentation: "Disability Hot Topics - Legislative and Litigation Update"
Here's a link to my presentation at the AICP New England Chapter's "Education Day" conference in Providence last week.
AICP Presentation
A couple of CT updates since the presentation was compiled.... the legislature amended SB 141 to require a separate and prominent disclosure to employees regarding offsets, instead of prohibiting offsets for dependent Social Security as the original version of the bill called for. And SB 194, a proposal to require rate filings for individual disability income products, died in the legislative session.
AICP Presentation
A couple of CT updates since the presentation was compiled.... the legislature amended SB 141 to require a separate and prominent disclosure to employees regarding offsets, instead of prohibiting offsets for dependent Social Security as the original version of the bill called for. And SB 194, a proposal to require rate filings for individual disability income products, died in the legislative session.
Friday, May 21, 2010
Association of Insurance Compliance Professionals (AICP) – New England Regional Chapter Education Day
Just back from Providence, where I presented last week on “Hot Topics in Disability Insurance – Legislative and Legal Update” at the annual Education Day sponsored by the New England chapter of the Association of Insurance Compliance Professionals (http://www.aicp.net/).
Several conference attendees confirmed that they too are running into new filing issues related to variability in MO and several other states, as regulators raise objections and impose requirements that were not raised on filings approved as recently as several months ago.
On another note, a MA Insurance Department representative stated at the conference that his department will soon be releasing a draft survey to insurers regarding disability insurance, a product not regulated by MA up to now (at least on the group side). There was no mention, however, of any imminent plans by the department to push for greater regulation or required filings of disability income products.
Learn more about CDS at http://www.customdisability.com/
Several conference attendees confirmed that they too are running into new filing issues related to variability in MO and several other states, as regulators raise objections and impose requirements that were not raised on filings approved as recently as several months ago.
On another note, a MA Insurance Department representative stated at the conference that his department will soon be releasing a draft survey to insurers regarding disability insurance, a product not regulated by MA up to now (at least on the group side). There was no mention, however, of any imminent plans by the department to push for greater regulation or required filings of disability income products.
Learn more about CDS at http://www.customdisability.com/
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