The life and health insurance industry asked a state court in California on Nov. 30 to stop the state insurance department from enforcing “underground regulations” regarding long-term disability insurance policies without a formal rulemaking process.
In its complaint, the insurance industry seeks to have the court bar the department from enforcing these regulations, whether through data calls requiring insurers to identify policies with provisions inconsistent with the standards, through disapproving new policies, or through withdrawing approval of already approved policies.
Further, the lawsuit asks the court to require the department to undertake a formal rulemaking process before taking further steps to enforce seven uniform standards on all disability insurance policies “past, present or future.” The lawsuit contends that the department can’t enforce these mandates unless it goes through a formal rulemaking process.
The suit was filed in the Superior Court of California in Sacramento and names Insurance Commissioner John Garamendi.
It was filed against what the complaint says is the decision of the department not to approve “on what appeared to be a case-by-case basis” disability income insurance policy provisions that fail to meet “certain subjective and unpublished standards” set by the department.
The complaint was filed against Garamendi by the Association of California Life and Health Insurance Companies, America’s Health Insurance Plans, the American Council of Life Insurers and the California Chamber of Commerce.
The chamber joined as a plaintiff, the trade groups said, because many employers provide disability insurance as a benefit to their employees.
In a statement, the groups said they were filing the suit because if the department’s policies are not modified, “Californians will face sharp increases in the cost of disability insurance.”
Premiums will increase as much as 46% for group disability insurance and 33% for individual coverage if the requirements are enforced, the groups said in citing a study released in mid-November by Milliman Inc., an actuarial consulting firm.