Maryland Proposal Would Require Short Term Disability Benefits For Pregnancy Leave

It can be hard to tell in the early stages of a state legislative session which proposals have a legitimate chance of passing and which ones are dead in the water.

That said, Maryland HB 1335 may be worth watching. It would require certain employers to offer short term disability benefits to employees who are pregnant and would require the employer to pay 80% of the premium cost for such coverage. Benefits would be provided for 125 work days for an employee who is unable to work due to a pregnancy-related condition and 30 work days for an employee on maternity leave. Benefit levels would be “graded” to afford higher income replacement levels for employees with more seniority.

Apart from the mandatory sick leave law that Connecticut passed a couple years ago, there has not been much legislative push at the state level for expanding state-required benefits for non-occupational sickness or injury. An Oregon proposal several years ago went nowhere. And with tenuous signs of an economic recovery only now beginning to appear, there may be little room for this sort of program in revenue-strapped state budgets. But it may be a sign of things to come, not tomorrow and probably not the day after that either. At some point though, once health care reform has dug itself in a little more firmly, don’t be surprised if insurance-related reform shifts over to proposals like the Maryland bill.

Electronic Commerce and Insurance Regulation

I saw a post recently on a blog run by a compliance consulting vendor, regarding state legislative efforts to regulate the use of electronic commerce in the insurance world.

Here's the link:

http://www.insurancecompliancecorner.com/electronic-developments/

For better or for worse, we are in the electronic age, with new ways of doing business and new tools to promote efficiency and convenience. And there's no going back. But it's not exactly supposed to be the Wild West out there either. It is important that compliance professionals ensure that their companies are aware of regulatory requirements and limitations on how electronic commerce is conducted. 

To Trust or Not to Trust?

A topic that always gets the tongues of Compliance folks wagging is the long standing use of trusts to write and issue group insurance business and what state filings are required to support that approach. Since a master trust policy is typically issued to a bank or other entity in a state besides the situs state of the employer group that is participating under the trust policy, questions arise as to the states where the trust policy provisions must be filed or whose laws will govern the coverage.

Is it only in the state where the master trust policy is issued? Or must filings be done in other states where the participating employer is located and/or where the insureds actually reside or work? And since many state’s laws – this being the United States – do not clearly address this issue, there are sometimes quite varied interpretations of the appropriate course of action for insurers on the filing question.

On that note, the Washington Insurance Commissioner recently issued a consent order holding that “beginning in 2005 Aetna [Life Insurance Company] issued unfiled group term life and short term disability plans to Washington consumers through the Rhode Island Trust.” WA fined $1,000,000 for “issuing, delivering and using unapproved policy forms,” cited Aetna for “failing to file copies of all certificate forms and other related forms providing coverage in Washington” and found that the insurer “engaged in unfair practices with respect to out of state group life and disability insurance.”

Auto Enrollment .... For LTD?

The ERISA Advisory Council, which advises the Department of Labor on ERISA issues, held a meeting this week to present its recommendations to the Employee Benefits Security Administration (EBSA). Its website says the EBSA’s mission is to assure the security of the retirement, health and other workplace related benefits of America's workers and their families, by developing effective regulations; assisting and educating workers, plan sponsors, fiduciaries and service providers; and vigorously enforcing the law.

The Council held several hearings this summer, including a couple that focused on the role that disability plans need to play in providing financial security for American workers.

Among the Council’s recommendations this week was one calling on the EBSA to issue guidance for plan sponsors and plan administrators on the permissibility of “auto-enrollment” for long term disability plans where employees pay some or all of the cost of coverage.

Long a staple in the retirement plan world, auto-enrollment is where employees are enrolled in a benefit plan requiring some level of employee contribution, without requiring the employee to affirmatively enroll in the plan. On the disability side though, employers have traditionally been reluctant to adopt such an approach, even though a person’s group LTD coverage is typically $20-25 per month.

While it may take some time for the DOL to actually make such recommendations and for all this to “flow down” through the employee benefits infrastructure, it seems like the climate on this may be changing. The DOL seems to be recognizing that the value of and need for disability coverage (for all stakeholders, including the government) is on par with that of retirement plans, and that maybe therefore the time has come to green light auto-enrollment in the effort to help swell the ranks of those with disability coverage.

Upcoming AICP Annual Meeting

Boarding pass printed.....check.

Out of office message ready.....check.

Voice greeting updated.... check.

Hope to see you on the Riverwalk in San Antonio this weekend as the 25th annual conference of the Association of Insurance Compliance Professionals (AICP) kicks off! Don't miss Session 14, "Trends and Transformations in Disability Income Insurance," featuring a panel with an AHIP representative, regulators from the CT and VA insurance departments, and myself.

Innovation, Technology and Compliance

Admittedly, those are not words you see in the same sentence very often.

Nonetheless, Colorado Division of Insurance Bulletin No. B-6.3, issued in mid-June, is an interesting example of the effort by regulators to contend with new insurance product development features and technologies that were just not contemplated when state insurance laws were written. In the absence of any CO law specifically permitting or prohibiting use of pre-paid debit or stored value cards as a method of paying benefits, the CO bulletin provides guidance about insurers’ use of such cards for benefit payment purposes.

Insurers must afford claimants the choice of whether to receive their benefits in the form of a stored value card or a traditional check, draft, or EFT, and the right to subsequently revoke that choice at any time.

Insurers remain liable to claimants for any outstanding amounts in the event of insolvency or insufficiency of the issuer of the pre-paid debit or stored value card.

Claimants cannot be assessed any fees, charges or surcharges for depositing, withdrawing or drawing down or accessing the funds on their card, and “there should not be burdensome obstacles to the claimant being able to access the funds.”

The insurer and the card issuer must make full written disclosure of all aspects of the card system to claimants at the time the claimant chooses the form in which he/she wants to receive his benefits, including:

• All fees associated with use of the card, including ATM, paper statement, card replacement, overdraft, balance inquiry or similar fees;

• Customer service and contact information, including a list of financial institutions that participate in the card system in the claimant’s area and ATM’s where funds can be accessed;

• Whether interest is paid on funds remaining on the card, and to whom the interest is payable; and

• That the funds on the card are subject to Colorado’s unclaimed property laws.

ERISA Stirrings?

The ERISA Advisory Council held hearings a couple weeks ago in Washington on “Managing Disability Risks in an Environment of Individual Responsibility.” Another hearing is slated for mid-August. The Council advises the Secretary of Labor on ERISA-related matters and is comprised of 15 appointees representing employee organizations, employers, the general public, and the insurance, corporate trust, accounting, actuarial, and investment fields.

The Council is examining the impact that the shift to Defined Contribution plans has had on access to employer-provided LTD coverage. The review is being conducted in the context of promoting conditions for a financially secure retirement for American workers, including how to protect employees’ retirement savings in periods of disability.

The broad questions that the council is reviewing and attempting to answer are:

1) What are employees offered?

2) What retirement income gaps are created during a period of disability?

3) What role can the DOL adopt to assist participants with respect to managing disability risks?

4) What role can the DOL undertake with respect to assisting employers to develop and offer effective disability benefit designs?

In regard to the last item, the Council is specifically looking at how LTD insurers adjudicate claims for persons going through the Social Security disability claim and appeal process and also “what revisions, if any, can be made to the [ERISA] claims regulations to explicitly address the application of the full and fair review standard as applied to disability plan,” including offset provisions.

This is no surprise, as regulators at the state and federal levels have had Social Security and other LTD policy offsets in their cross-hairs for the last couple years. What is not always well understood, though, is the crucial role that offsets play in keeping LTD premiums down and claimants from being over-insured relative to their normal work earnings.

It will be interesting to see if the August hearings bring more calls from consumer groups (and their allies in the plaintiff bar) for changes in the regulatory framework that governs employee benefit plans, including ERISA.