Life Health > Health Insurance

Some Regulatory Suggestions

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To The Editor:

I want to note that the opinions I express in this letter are mine and not necessarily those of my employer.

I believe laws and regulations work best when they mirror the United States decentralized form of government. An example of this came to me after a National Association of Insurance Commissioners Life and Health Actuarial Task Force conference call.

Recent changes to the NAIC model actuarial opinion and memorandum regulation (AOMR) did not reflect the fact that some indemnity health companies will begin using the orange health annual statement blank and instructions instead of the blue life and health annual statement blank.

The model AOMR includes a table of items and amounts with respect to which the actuary expresses a statement of actuarial opinion. The recommended language and items and amounts with respect to which the actuary expresses a statement of actuarial opinion submitted with a health annual statement appear on pages 27 and 28 of the 2003 NAIC annual statement instructions for the health insurance annual statement. These items clearly are not consistent with the life blank.

My suggestion was to remove the specific references in the AOMR model and direct the appointed actuary to the life and health or health annual statement instructions. The life and health annual statement instructions would then be amended to include the appropriate language deleted from the model.

The advantage is clear: Annual statement pages and line numbers are not the same from year to year. State regulations should change infrequently so that companies can plan ahead. Making changes in the annual statement instructions, where the NAIC has fixed procedures involving regulators and interested parties from companies and the public, allows greater flexibility and quicker action. This is similar to local governments placing and relocating traffic signals and stop signs in their towns.

In the opposite direction, it does not seem logical to me that there are so many state variations in accounting treatment, especially with regard to detail level, formula reserve calculations, and statute and regulation adoption date differences.

For future changes in reserve requirements, I propose that current regulations be given a sunset date and new effective dates be defined as the date 26 or more states adopt the change. The detailed requirements would be placed in the NAIC Accounting Practices and Procedures Manual and not in statutes or regulations.

It seems to me that a “race to the bottom” can be avoided. Individual state departments of insurance would “ratify” the amendments by annually adopting the current year manuals. The rule language adopting the manuals would spell out “high level” differences with the Accounting Manuals, thus not creating an unconstitutional delegation of statutory authority. NAIC accreditation standards would define how far a state could deviate (on the low side) and still receive accreditation.

Kerry Krantz, F.S.A.
Employed by the Florida Office of Insurance Regulation

Reproduced from National Underwriter Edition, June 9, 2003. Copyright 2003 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.