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Proposed Changes To GLBA Privacy Regs Raise Red Flag Among Insurers

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The American Insurance Association has registered concerns with regulators over proposed changes to a privacy regulation that went into effect last year.

The insurance trade group, based in Washington, is among several that are concerned over changes that are being considered by a privacy working group of the National Associaton of Insurance Commissioners in Kansas City, Mo.

Privacy guidelines that put insurers in compliance with requirements under the Gramm-Leach-Bliley Act of 1999 became effective a year ago, on July 1, 2001.

Amendments are being considered for the Privacy of Consumer Financial and Health Information Regulation, a regulation adopted by the NAIC in September 1999.

Additionally, regulators at the NAIC summer meeting in Philadelphia discussed a privacy regulation developed by the Department of Health and Human Services and how it compares with the NAIC Health Information Privacy Model Act.. The issue was touched on by regulators but no decisions have been made on a direction to take concerning Health Insurance Portability And Accountability Act privacy.

Currently, 36 states have promulgated regulations based on the latest NAIC model, while 13 states have laws based on the NAICs Insurance Information and Privacy Protection Model Act, from the early 1980s.

Regulators broached the amendments during a discussion at the privacy issues working group. During the discussion, insurers in the audience were assured that the proposed amendments were clarifications and not changes to the existing model.

The concern among insurers was an amendment requiring a notice to covered individuals. The amendment (Section 9-A(b)) says providing a notice to a covered individual is optional unless the individual is an insurers consumer or the individual requests a notice.

However, a section addressing the definition of consumer states that if an insurer provides notice to the plan sponsor or group policyholder or workers compensation policyholder, and does not disclose individual nonpublic personal financial information to a nonaffiliated third party, individuals would not be consumers because they would be covered by the group notice.

Insurers are assessing these amendments.

In a letter dated July 8, Steph Zielezienski, AIA assistant general counsel, writes that the AIA believes that the group is not charged with amending the privacy model, but rather interpreting it so that it is consistent with Gramm-Leach-Bliley.

He notes that the proposed amendment of 9A(b) is not a clarification, but rather, a change.

The American Council of Life Insurers, Washington, is still reviewing the working group proposals, says Jack Dolan, an ACLI spokesman.

The Health Insurance Association of America, Washington, opposes reopening the health privacy model because it does not want to see a model already in place in a number of states reopened, according to Joseph Luchok. However, on the amendments to the 1999 NAIC model, Luchok says that “we agree with the intent but we have not looked at the precise language.”

Reproduced from National Underwriter Life & Health/Financial Services Edition, July 15, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.