State insists that it can unilaterally revoke approval of policies
California Department of Insurance officials say the agency has the authority to unilaterally revoke its approval of policies that do not meet new specifications–and plans to exercise that authority.
It will do so even though industry officials are making it clear they will take the issue to court if the department acts because the industry doesn’t believe the department has the authority to act unilaterally, which is to say, without a notice-and-comment process.
Larry Akey, senior director of strategic communications with America’s Health Insurance Plans, Washington, said that as far as the industry is concerned the “situation remains fluid.”
Akey said AHIP continues to talk with its members and other trade groups representing disability insurers “as to our course of action. All options remain on the table, including legal action,” Akey said.
The current developments are prompted by a groundbreaking settlement between California and UnumProvident in October that required changes in the company’s disability insurance practices in the state. It covered areas such as the use of discretionary clauses, self-reported conditions, definition of ‘total disability’ and mandatory participation in rehabilitation programs, among others. (See NU, Oct. 10.)
The department took the position that the new rules applying to UnumProvident also applied to all insurers that sell long-term disability insurance in California.
Gary Cohen, chief counsel for the state Department of Insurance, said that based on a meeting Nov. 17 with disability industry officials, “We’re going to go back and take another look at what we had discussed and see if we want to do anything differently.”
Department officials implied that an imminent crisis in the sale of disability insurance products in the state of California likely has been averted.
Cohen made his comments in a telephone interview on Nov. 22 with National Underwriter.
He explained that the reason the department is acting in the near term “is actually about keeping the market fair and everyone on equal standing.
“If somebody wanted to come into California now, as a new disability insurer, they would be at a significant disadvantage,” Cohen said.
“They’re [the industry] acting like we are changing the law or making new law, and we’re not” he added.