State insurance regulators have stuck a stick in a hornet’s nest and are now reading the comment letters from the hornets.
The regulators are members of the Regulatory Framework Task Force, part of the Health Insurance and Managed Care Committee at the National Association of Insurance Commissioners (NAIC).
The task force has excited insurance groups, producer groups and consumer groups by posting early draft revisions of the NAIC’s Accident and Sickness Insurance Minimum Standards Model Act (Model 170) and the NAIC’s Model Regulation to Implement the Accident and Sickness Insurance Minimum Standards Model Act (Model 171).
The NAIC is a voluntary trade group for state insurance regulators. In states that choose to adopt the NAIC’s accident and sickness models, the models apply mainly to dental insurance, vision insurance, critical illness insurance, hospital indemnity insurance, short-term health insurance, travel medical insurance and other health-related products that fall outside the scope of the Patient Protection and Affordable Care Act (PPACA) major medical provisions and the major medical provisions in the Health Insurance Portability and Accountability Act of 1996 (HIPAA).
See also: 5 battles over the PPACA-free zone
The new proposed model revisions would exclude group supplemental products other than vision and dental products.
Efforts to increase sales of non-PPACA health products have been popular with insurers, agents and brokers that are leery of the underwriting restrictions and benefits mandates that PPACA has imposed on the major medical market.
In many cases, the non-PPACA products are the types of products that have been clashing with patient groups and consumer groups for decades. Commenting on the NAIC’s accident and sickness model revision drafts has given the players a chance to restart old fights.
For a look at five things commenters are saying about the model revision drafts, read on.
1. The American Council of Life Insurers (ACLI): Leave disability insurance alone.
Some interested parties have suggested that regulators should carve disability insurance products out of the accident and sickness models and create a separate category of minimum standards just for them.
Steven Clayburn, a senior director at the ACLI, says the ACLI opposes that idea.
Over the years, drafters of state laws and regulations have assumed that “accident and sickness” standards would apply to disability products and have not always bothered to spell that out, Clayburn writes.
“To carve out disability income insurance from these minimum standards models into its own models would appear to be creating more work for states than has been contemplated,” Clayburn says.
2. America’s Health Insurance Plans (AHIP): The NAIC has enough health-related subgroups and work groups.
Cindy Goff, a vice president at AHIP, touches on many points in her comment letter. Like Clayburn, for example, she says any new NAIC accident and sickness models should keep disability insurance in the models.
Goff objects to proposals that the NAIC should start a subgroup to create new notice and disclosure requirements for accident and sickness products, or a new work group to set minimum benefit levels for accident and sickness products.
She also objects to the idea that the NAIC needs new teams to consider those proposals.
“Updating the current notices should not require the creation of a new subgroup,” she writes.
3. AHIP: The current disclosure requirements for supplementary and voluntary products are fine.
PPACA requires issuers of major medical plans to provide standardized Summary of Benefits and Coverage (SBC) notices.
The idea of requiring issuers to provide SBCs has been one of the most popular PPACA provisions. Survey teams have found that the SBC concept is popular even with Republicans who say they want PPACA repealed.
In practice, insurers and state regulators have clashed with federal regulators over the need to squeeze all of the information required on four 8.5-inch by 11.5-inch sheets of paper. Insurers, consumer groups and regulators have also clashed over matters such as which typical health care use scenarios should be included in the standard examples of how a plan might work, and how much information an SBC should provide concerning how a plan handles certain types of patients, such as children, or patients with severe health problems.
Goff has objected to the idea of requiring accident and sickness product providers to produce SBCs for their products.
“This would create more, not less, confusion on the part of consumers as to the distinctions between supplemental and voluntary coverage products from major medical products,” Goff writes.
Consumers simply need a notice to make sure they understand that the supplemental product they are buying cannot help them meet the PPACA individual coverage mandate, Goff says.
4. 22 NAIC consumer reps: Why do model law and model regulation continue to allow the sale of specified disease insurance?
Ten years ago, consumer groups often opposed the sale of cancer insurance policies, hospital indemnity policies and other supplemental policies, arguing that the benefits those policies provided were too small compared with the premiums for the products, and that consumers would be better off buying better major medical policies.
PPACA seemed to create more need for “gap filler” products, by encouraging insurers to sell moderate-income consumers bronze-level policies with single deductibles over $6,000 and family deductibles over $12,000.
Twenty-one of the people the NAIC has designated to represent consumers in official NAIC proceedings say, in response to the new model revision drafts, that they would like state insurance regulators to look closely at products such as specified disease policies, which are now more commonly known as critical illness insurance products, to see if they should continue to be on the market.
“Given that individuals, at least in theory, now have access to comprehensive insurance coverage, we believe that a rationale must be presented for the continued need for these products,” 21 consumer reps write in a joint letter. “If they are in fact still necessary to supplement existing comprehensive health insurance coverage, the model law and regulation should ensure that they are designed to serve this purpose.”
The 21 consumer reps say the NAIC should conduct a thorough fact-gathering hearing — to fully understand the nature of critical illness insurance products and how they are being marketed — before they revise the models.
The reps say the NAIC should look at critical illness insurance loss ratios, lapse rates, and commissions.
A 22nd rep, Jackson Williams, has written separately to say he thinks “critical illness products are retrograde” and exploit consumers’ overestimation of their risk of suffering from catastrophic illness.
“To my knowledge, the only people who think that high deductibles are primarily a problem for those with catastrophic illness are the benefits sales force,” Williams writes. “Within the health policy community, it is felt that the most significant problems with high deductibles are financial distress from more common minor acute episodes and inhibiting enrollees with chronic illness from spending (e.g., on maintenance drugs, primary care and the like) to manage their condition. To purchase CI to cover a deductible for a catastrophic illness is to insure against one remote, contingent event — high expenses from an acute illness — by layering over it a bet on another remote and even less likely event, affliction with one of the serious illnesses specified in the policy. This doubles down the consumer’s dollars on a long shot rather than hedging for the far more likely need to pay for immediate expenses.”
5. Missouri: What about group supplemental products?
Molly White, a Missouri regulator, has written to say the accident and sickness product trend she has noticed is a “healthy proliferation of group limited accident/sickness, etc., type plans in [Missouri], which I think is spurred by those crazy federal regulations for group ‘wrap around’ plans.“
She notes that the current accident and sickness model revision drafts would exclude those types of group products. She wonders what models might apply to the new products that have been spawned by the limited wraparound product regulations.
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