Ethics and Compliance - Going Above the Bottom Line

Alabama Bulletin 2009-03 says the state is suspending the effect of Regulation 482-1-144, which requires that insurer premium tax and surplus lines broker tax returns be filed, and certain fees paid, electronically. Those requirements are now voluntary, not mandatory.

They apply to insurers with more than $1 million in direct premiums in the state in any calendar year and more than 1,000 policyholders or certificate holders nationwide at the end of the calendar year.

• prohibit an independent certified public accountant from entering into an indemnification agreement with respect to the audit; but would

• permit the agreement between an insurer and its qualified independent certified accountant to include an arbitration and/or mediation provision.

New York has adopted, on an emergency basis, Regulation 153, which provides details for the state’s conversion from prior approval to flex-band rating for personal auto insurance. The new system, which took effect Jan. 1, allows periodic overall average rate changes up to 5 percent on a file-and-use basis, and requires the superintendent's prior approval of overall average rate increases above 5 percent during any 12-month period.

New Jersey Bulletin 09-08 announces the state is moving from quarterly to semi-annual reporting of policies in force and new business written for the Windstorm Market Assistance Program. Effective immediately, reports will be due Jan. 31 and July 31 for evaluation dates of the previous Dec. 31 and June 30, respectively.

Maryland Bulletin 09-05 provides details about emergency legislation that’s being drafted that will impact health insurers. The emergency legislation is being proposed to provide the protections of the American Recovery and Reinvestment Act of 2009 (ARRA) to Maryland residents who were:

• covered under small employer contracts that are subject to the Maryland “mini-COBRA” continuation of coverage requirements; and

Carriers would have to provide a special election period, similar to the special election period provided under the ARRA for individuals eligible for COBRA. Regulators are advising carriers to prepare to provide the required notice of the special election period to eligible individuals who aren’t currently covered under the Maryland mini-COBRA coverage.

Massachusetts Bulletin 2009-04 tells of changes to mandated mental health benefits that go into effect July 1. Eating disorders, post traumatic stress disorder, substance abuse disorders and autism have been added to the list of “biologically-based mental disorders” identified within state law. The complete list of biologically-based mental disorders now consists of:

New Hampshire Bulletin INS 09-019-AB tells of a new state law that requires the standard wellness benefit plan to be made available to small employer groups by Oct. 1. The bulletin notes that an additional actuarial review will not be conducted and that small group carriers will be expected to submit rate filings that meet a target rate that is 10 percent of the prior year’s median wage. There is other implementation guidance as well, including a passage that carriers’ filings must meet soon-to-be announced guidelines that will soon be posted on the Insurance Department’s Web site.

New Hampshire is clarifying Bulletin 08-079-AB, which deals with health insurance coverage written through professional employer organizations. As long as the coverage is written by a health carrier licensed in New Hampshire, the coverage is a valid and enforceable insurance contract. Neither does such coverage constitute “unauthorized insurance” within the meaning of state law, Bulletin INS 09-021-AB says. The Insurance Department is developing further guidance, and says it plans no action regarding existing coverage or coverage written while that is being written.

A March 23 notice out of the District of Columbia specifies that, starting April 1, insurers and HMOs must use one of three approved fraud warnings on all insurance applications and claim forms. Companies must file amended applications for approval for insurance and claim forms that lack the required language. Use one of these three fraud warnings:

WARNING: It is a crime to provide false or misleading information to an insurer for the purpose of defrauding the insurer or any other person. Penalties include imprisonment and/or fines. In addition, an insurer may deny insurance benefits, if false information materially related to a claim was provided by the applicant. [DC CODE]

Any person who knowingly presents a false or fraudulent claim for payment of a loss or benefit or knowingly presents false information in an application for insurance is guilty of a crime and may be subject to fines and confinement in prison. [NAIC MODEL]

Any person who knowingly and willfully presents a false or fraudulent claim for payment of a loss or benefit or who knowingly and willfully presents false information in an application for insurance is guilty of a crime and may be subject to fines and confinement in prison. [ALTERNATIVE LANGUAGE]

Two of the three states that haven’t made insurance fraud a specific crime are debating whether to end their holdout status. But Alabama’s HB 654 is identical to bills that have failed for several years andOregon’s HB 3092 is identical to a bill that failed in 2007; it only covers bogus claims, but leaves out schemes by agents, insurers and other industry people. The Coalition Against Insurance Fraud fears both bills are unlikely to pass this year. Virginia, the third holdout state, ended its legislative session without discussing any insurance fraud bills.

New Jersey’s governor signed a bill that could threaten fraud investigations, convictions and lawsuits involving illegal referrals by medical providers to outpatient surgical centers in which the provider has a financial interest. One provision of SB 787 retroactively legalizes referrals. Thus, says the coalition, it could legalize referrals that were illegal before the law went onto the books. The coalition and the National Insurance Crime Bureau earlier wrote Gov. Jon Corzine, urging him not to sign the bill. “We believe this bill will cause fraud to be increased in New Jersey, raising costs for insurers and insurance consumers in the state," they said then.

The recent omnibus spending bill that President Obama signed includes $2 million to help states clamp down on the illegal diversion of addictive prescription drugs – a crime trend that’s heavily financed by insurance fraud. The federal dollars will help fund the National All Schedules Prescription Electronic Reporting System. This will help states implement prescription monitoring programs that track usage patterns of addictive drugs such as OxyContin.

Iowa Bulletin 09-04 is a reminder to insurance carriers and licensed producers about Iowa laws and administrative rules that govern sales practices and replacement activity of life insurance policies and annuity contracts. The Insurance Division expects carriers to monitor all replacement activity by its producers and ex-producers and to monitor disbursements from existing policies and annuities. I The bulletin also includes a request for insurers to report any trend that indicates 2009 replacements or disbursements are increasing when compared with 2008.

Nevada Bulletin 09-002 has guidelines for including variable text in submitted policies and forms for life insurance, health insurance and annuity contracts. These guidelines reflect a rules exception that company/service center contact information, company logos and investment funds are now allowed to be denoted as variable text. This relaxation of the standards for certain common text changes reflects a recognition that carriers’ need to have these routine changes implemented in a timely manner.

New Jersey Bulletin 09-06 addresses form filings and suitability notice requirements for individual fixed deferred and immediate annuities.

Rhode Island is proposing four new regulations affecting life insurers, and will hold hearings April 30 to discuss them. On the agenda will be:

Utah Bulletin 2009-2 says the state will accept filings for forms that offer a cash benefit at a specific time, typically at the end of the level premium period, and usually referred to as a return of premium benefit. Such filings must comply with the NAIC’s Actuarial Guideline XLV.

Alaska Bulletin B 09-04 tells about recent processing changes and a regulation change regarding continuing education. Effective immediately, Alaska accepts electronic applications from residents or nonresidents for those seeking to obtain, renew, amend, or reinstate a license. Also, in a rule backdated to Dec. 28, a licensee can repeat a continuing education course, seminar or program of instruction for credit, provided it isn’t taken within the same license renewal period.

A Colorado notice give details of increased fees that will be assessed for producer licenses starting July 1. The new fee for resident licenses will be $32 for two years.

Hawaii Memorandum 2009-4LIC explains the state has combined its homeowner and vehicle personal lines licenses into a single license, PL-ALL, to conform with NAIC standards. All other aspects of personal lines licenses – the renewal data, fee and continuing education due date – are unchanged.

A Mississippi notice tells producers they can renew property/casualty, adjuster and title licenses at either www.sircon.com/Mississippi or www.nipr.com. Invoices not paid by May 31 will incur an additional 50-percent penalty.

New Hampshire has opened a link to the NAIC’s State Based Systems, which allows producers to print licenses and view continuing education transcripts of completed courses.

Iowa Bulletin 09-03 addresses actual cash value settlements in property policies that don’t define actual cash value. If the governing property policy does not have a definition, Iowa law allows insurers to take into consideration items including, but not limited to:

The Bulletin applies to all lines of insurance which offer coverage for loss or damage to personal or real property. For policies issued on or after March 1, 2010, regulators want insurers to provide a notice of valuation methods used in claims settlements for policies that don’t define ACV. The notice required by this bulletin may be provided prior to or at delivery of any such policy.

Louisiana Bulletin 09-06 gives property owners with a replacement cost provision in their insurance contract, one year from the date of the loss to complete repairs caused by Hurricanes Gustav or Ike.

New Jersey has adopted NJAC 11:27-11, dealing with medical malpractice reporting requirements. The rules went into effect March 16 and expire in June 2010.

New York Circular Letter 6 (2009) addresses expectations for disaster preparedness, planning and response for property/casualty insurers. It repeals Circular Letter 1 (2008). Similar instructions for life and health insurers are covered by separate circular letters.

Pennsylvania has approved its first energy-efficient discount for homeowners who use solar energy or thermal heat pumps. An announcement said the approval for the Donegal Insurance Group, which go into effect May 1, offers:

California is cutting your fees. Bulletin 09-3 announces a 6-percent reduction in fees for insurance companies and producers. The new rates go into effect July 1. The state wants companies to distribute the bulletin to all of its producers. Also, Bulletin 09-4 tells of a “fraud-general” annual billing rate reduction from $5,100 to $2,100, also effective July 1. But hold on: The state is increasing cost recovery rates for the filing or approval of policy forms and other documents. Those details are in Bulletin 09-5.

Maryland Bulletin 09-04 has the address of the new offices of the Insurance Administration and the Insurance Fraud Division. Both organizations move May 4. Starting that date, correspondence, paper filings, and similar correspondence should be sent to the new address:

Phone numbers will not change. The new address must be used no later than Jan. 1, 2010. Filings and mailings not sent to the new address starting Jan. 1 will be considered improperly filed. Additionally, notices or other public correspondence that refer consumers to the agencies should use the new address starting May 4, but in any case not later than Jan. 1.

New York has updated its Web page for insurer admission applications. It has links to two applications: a primary application for entities seeking to be a New York domestic or wishing to redomesticate to New York, and an expansion application for companies already licensed elsewhere.

Rhode Island Bulletin 2009-3 declares debt cancellation agreements are, in most cases, regulated by bank supervisors. They are not subject to state insurance laws unless the agreement, in addition to the extinguishment of the debt, provides an additional benefit over and above the cancellation of the debt. In that case, the transaction may be subject to Rhode Island insurance laws.

Washington is considering rule changes to clarify that that discretionary clauses are prohibited in life, annuity, disability income, Medicare supplement, long-term care and health policies. Details are in a rule change announcement for WAC 284-44-015.