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Life Health > Health Insurance

Golden State Employers Join Disability Battle

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The California Chamber of Commerce is teaming with insurance groups to attack state disability insurance regulatory efforts in court.[@@]

The California chamber and the insurance groups are asking a state court in Sacramento, Calif., to stop the California Department of Insurance from imposing “underground regulations” on long-term disability insurers without going through a formal rule-making process.

The plaintiffs say in their complaint that the court should bar the California department from disapproving new LTD policies, from withdrawing approval for approved LTD policies, or from requiring insurers to identify LTD policies with provisions inconsistent with the department’s current standards;

The court also should require the California department to go through a formal rulemaking process before the department can take further steps to enforce new standards that the department wants to apply to all disability insurance policies, the plaintiffs say.

The California department cannot enforce the mandates until it goes through a formal rule-making process, the plaintiffs contend.

The suit names California Insurance Commissioner John Garamendi as the defendant.

In addition to the Sacramento-based California chamber, the plaintiffs include the Association of California Life and Health Insurance Companies, Sacramento; America’s Health Insurance Plans, Washington; the American Council of Life Insurers, Washington; and the California Chamber of Commerce, Sacramento.

The chamber joined as a plaintiff because many employers provide disability insurance as a benefit to their employees, the insurance groups say.

The insurance groups point to an actuarial study commissioned by AHIP that found that enforcing the proposed California disability policy requirements could increase group disability rates 46% and individual disability rates 33%.

“Left unchallenged, the commissioner’s actions would drive the cost of disability insurance beyond the reach of many employers who provide this benefit to their employees,” says Brad Wenger, president of the California life and health insurers’ association.

Gary Cohen, the chief counsel at the California insurance department, says Garamendi has the authority to withdraw approval of a policy, and that the proposed policy requirements are part of an effort to level the playing field between new players in the disability market and those with policies approved as long as 20 years ago, before many of the current restrictions were enacted.

Insurers can appeal the commissioner’s decision to withdraw approval from a policy, Cohen says.


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