Different Constituencies Have Their Say On The Interstate Compact Proposal

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Consumer representatives, insurers, trial lawyers and regulators all had their say at a public hearing held by the National Association of Insurance Commissioners last week on an interstate compact proposal for streamlined product filing.

The hearing was initially to have been followed by a vote of the full NAIC body on the proposal. After the hearing, however, Michigan Insurance Commissioner Frank Fitzgerald, who is heading up the NAIC working group on the compact, said a decision on the next step in the process would be made within a few days. (See www.NationalUnderwriter.com for an update.)

The working group has been developing a model draft of an interstate compact for product filing approval that would be in lieu of action by individual state insurance departments.

In concept, insurers, regulators and consumer advocates have supported more streamlined product filing and even a compact structure to implement this.

However, the details of the draft proposal have created divergence and concerns about a filing mechanism that is being described as a new body.

Consumer advocates said lack of representation and questions about compact standards raised serious concerns about the protections that would be afforded consumers.

The American Council of Life Insurers, Washington, noted that it wanted to see consumers protected. But ACLI said it had concerns over the existing draft and unless the language was brought in line with a Sept. 27 draft that its board has formally supported, ACLI would have to reconsider its support.

The strength of standards for long-term care insurance was raised by Bonnie Burns, an NAIC funded consumer and director of consumer education with California Health Advocates, Scotts Valley, Calif.

LTCI is intended to stay in place for all of a policyholders life and to be in place if that contract holder is no longer insurable, she said.

Consequently, the “highest possible standard” needs to be in place, she said, adding that the NAIC model that would be used as the compacts standard is five to seven years behind standards in states like California.

Burns also said that during the drafts development, concern was raised that if states could opt out of the compact too easily on particular product lines, uniformity would be hurt. But, she continued, little mention has been made about the right of a company to opt out of the compact and file with a state instead.

Alice Weiss, director of health policy with the National Partnership for Women and Families, Washington, said women and their families could be hurt if more thought was not given to the final form of the compact.

Some “critical flaws,” according to Weiss, could impact women who have ailing parents, spouses or children who need high quality long-term care products or who often outlive spouses and depend on strong standards for life insurance products.

Brendan Bridgeland, director with the Center for Insurance Research, Cambridge, Mass., raised concern over what he said was an expansion of the compacts duties as evidenced by an amended title to cover product regulation and not just product approval.

Regarding a comment made by a commissioner previously about the right of consumers who are not satisfied with a product to “walk with their feet,” Bridgeland noted that life insurance is meant to be held for life and “abandoning a policy can have serious consequences.”

Van Ellet, a senior legislative representative with AARP, Washington, said the issue of pre-emption was of “critical importance to us.”

And, Cathy Steinberg, Georgia consumers insurance advocate, urged a more thorough review, saying, “The last time I sped, I got a ticket.”

She said “pre-emption was never well received in a state like Georgia.”

Prentiss Cox, an assistant attorney general in Minnesota, also urged that the compact be “more seriously studied” given “its unprecedented nature” and “very troublesome questions” that are being raised.

And Ned Miltenberg, senior counsel with the Center for Constitutional Litigation, Washington, which counts the American Trial Lawyers Association as one of its constituents, raised strong concerns over the compacts constitutionality.

He said the compact draft was “virtually without precedent” and “rife with constitutional flaws.”

The potential to limit access to courts as well as the legislative authority the compact would in effect create “primary violations of the separation of powers doctrine,” Miltenberg said.

Birny Birnbaum, executive director of the Center for Economic Justice, Austin, Texas, urged more representation for consumers through a consumer oversight body. Insurers have government relations offices and trade groups to represent them and consumers need representation, he said.

He addressed questions raised over a $600,000 budget proposal for such a consumer body, saying that while it was an initial estimate, it was nothing in comparison to insurers financial resources.

The ACLI finds language granting a stay of compact requirements to states that are in the process of opting out of a product standard acceptable, said Patricia Parachini, ACLI senior director, office of the general counsel. But it has a more general concern that successive compact drafts have made it easier for states to opt out, she added.

Parachini explained that an important feature of the compact is that states would not opt out of the standards, but, rather, would act uniformly.

The compact draft exempts states that are going to opt out of a standard from conforming to that standard while the opt-out process is being implemented.

On the issue of pre-emption, the ACLI believes that courts would retain jurisdiction, Parachini said. Consequently, she said the ACLI was urging that new language listing types of jurisdiction that the courts would continue to have such as causes of action be left out. Rather, she said, language should simply state that the compact would not abrogate or restrict a persons access to the courts.

But Montana Commissioner John Morrison said he has questions regarding whether simply referring to access to courts and cutting out specific examples would be sufficient to preserve state civil remedies.


Reproduced from National Underwriter Life & Health/Financial Services Edition, November 18, 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.