State insurance commissioners say 2006 will be the year of big resolutions.
Alessandro Iuppa, the new president of the National Association of Insurance Commissioners and Maine insurance superintendent, named three major initiatives during the recent winter meeting of the organization, based in Kansas City, Mo.
Iuppa cites as top priorities going into the new year: making the Interstate Compact fully operational, continuing efforts to challenge federal oversight of insurance that is being advanced in Washington and creating a plan for disaster preparedness.
With the recent addition of Pennsylvania to states that will participate in the compact, the NAIC has 20 of the 26 states needed to make the entity come to life. To become operational, the compact needs either 26 states to sign on or states representing 40% of national premium.
Another issue that several commissioners cited and that threaded its way through a number of sessions during the winter meeting was addressing the growing problem of providing affordable health care.
Sandy Praeger, NAIC vice president and Kansas commissioner, says the compact is still “front and center.” But she notes that “people are concerned about the cost of health care.” She says this cost is what is driving up premiums the public pays.
Praeger says that if the system of state regulation can be streamlined so that competitive new products can be brought to market more quickly, then that will be a concrete way regulators can help alleviate health care costs.
State regulation can meet consumers’ needs better than an optional federal charter, which she says NAIC continues to oppose.
For example, she cites questions and complaints insurance departments are receiving about the new Medicare prescription drug plans now available.
The plans are being regulated at the federal level, but “in reality, we will be the ones that consumers will be calling.”
Joel Ario, Oregon insurance administrator, cites health insurance as a major issue both at NAIC and in Oregon.
The issue was raised during the commissioners’ roundtable at the winter meeting, he says, and commissioners will be urging Congress to address the issues of access and affordability.
The role of state insurance departments ranges from improving access and affordability in both the individual and small group market to making health care costs more transparent, he says. That transparency centers on making information on the cost of procedures more available, Ario continues. Currently, “it is very difficult to get comparative information from hospitals.” Hospitals depend on payors, he says. “That opaqueness needs to be opened up.”
Jorge Gomez, Wisconsin commissioner, says his department is receiving complaints about the new PDP program. But, he adds that dialogue between NAIC and representatives of the Center for Medicare & Medicaid Services is a positive. Among the issues that are arising and will have to be monitored in 2006 is cross-selling of PDPs with other products, he continues.
On the issue of long term care, good dialogue is taking place on work to revise the LTC model regulation, he says.
Among the issues in which further discussion will be needed in the coming year, he says, are points on incontestability and underwriting.
Another issue that will come up in 2006, Gomez says, is selling annuities to seniors.
Jim Poolman, North Dakota insurance commissioner, also cites an examination of the suitability of annuity products as an area regulators will be interested in during 2006.
Poolman cites concern about indexed annuities both because it is a growing market and because the product is complex.
Other issues regulators plan to continue looking at are investor-owned life insurance and premium financing, he says.
Poolman says another major focus is the effort to create a principle-based approach for reserving.
Principle-based reserving relies more on stochastic modeling to determine necessary reserves than on formulaic reserving. An effort is being made to put a system in place by April 2007.
Nebraska Department of Insurance Director Tim Wagner also cites principle-based reserving as a major NAIC effort in 2006. “Principle-based reserving will be the biggest change in the life insurance industry in decades.”
The effort to modernize the approach to reserving will continue even as regulators make a broader effort to “effectively and efficiently provide oversight for regulatory modernization,” Wagner says.
Other issues that will be important to commissioners in the coming year, he continues, are an ongoing monitoring of market conduct issues, an examination of climate change and the development of a plan states can turn to if they are hit by a natural catastrophe.
Recovering from the impact of Hurricane Katrina will be an effort the Mississippi department focuses on during 2006, says Commissioner George Dale. There is still a “long way to go,” he continues. For instance, he says a bulletin will be issued requiring home owners in the three coastal counties to sign a form if they decide not to buy flood insurance. He says he hopes that aid similar to the kind available to foreign disaster relief will continue to be made to Gulf Coast residents.
Life insurers, through the American Council of Life Insurers, also offered their views on the important issues for state regulation.
A high-priority item, according to Bruce Ferguson, an ACLI senior vice president, is work on principle-based reserving. ACLI wants to work to make sure the timetable for the project is met. It will also continue to offer technical assistance such as making sure the proposal remains consistent with the Standard Valuation Law.
Ferguson says the compact is also a priority for the ACLI and that it will continue to encourage states to adopt it when the commissioner in that state supports its passage. In a number of states, he says, bills are either pending or there is intent to introduce a bill in 2006.
A major reason the ACLI supports the compact, he says, is because it will establish uniform guidelines for product filing in states. For instance, Ferguson says it is important that compact standards include a fraud exception in the incontestability guidelines in the compact.
While the current NAIC LTC model contains a fraud provision in its treatment of incontestability, the point is being argued even as regulators and industry examine revisions to that model in 2006. Insurers say it is necessary to prevent fraud, while consumer representatives say it makes it possible for companies to use it against consumers unfairly.
On the issue of market conduct reform, Ferguson says ACLI would like to see more recognition of the concept of domestic deference in which other states would defer to market conduct findings and decisions of a company’s domestic regulator.
Other efforts in 2006 will include seeing that NAIC’s effort to protect senior citizens who are sold annuities is put in place in states. Eight states have adopted an NAIC model, the Senior Protection in Annuity Transactions Model Regulation, and several more are considering it, he says.
Making sure state regulators are aware of tax policy issues such as the threat of changes to the inside buildup of life insurance will be ongoing in 2006, he adds.
In fact, educating new commissioners is something ACLI anticipates continuing through 2006, Ferguson says. In 2006, 36 governors will be up for re-election and in 32 of those states, governors appoint insurance commissioners, he says. Additionally, in three states commissioners are running for office, Ferguson notes. In California, he says, John Garamendi will run for lieutenant governor; in Montana, John Morrison is running for the U.S. Senate; and in Florida, Tom Gallagher is running for governor. Since January 2003, 35 new commissioners have taken office, according to ACLI.
Alessandro Iuppa, the new president of the National Association of Insurance Commissioners, cites three priorities for the group in 2006:
1. Making the Interstate Compact fully operational;
2. Continuing efforts to challenge federal oversight of insurance that is being advanced in Washington; and,
3. Creating a plan for disaster preparedness.