A Look at New Insurance Laws Taking Effect in 2013

With 2013 just around the corner, a number of states are preparing to implement new insurance-related laws. Insurance Journal highlights some of the changes that will take place around the country.

ALABAMA

Beginning January, Alabama will begin implementing a new law that will crack down on uninsured drivers who don’t follow the state’s mandatory insurance law.

To make this possible, Alabama’s revenue department will oversee an online verification platform that can instantaneously pull up auto insurance records. This online system will be available to the state police and state agency officials including the county license plate officials, according to the Associated Press.

Separately, also in Alabama, the state insurance department will be granted the additional authority to seek the fingerprinting of new insurance agents, according to the Associated Press.

CALIFORNIA

In 2013, the California workers’ compensation benefit delivery system will undergo regulatory changes as part of SB863, the Workers’ Compensation Reform Package, which was passed in the 2012 legislative session. SB863 is intended to reduce system costs as a set off for increased worker indemnity benefits.

SB 863 is designed to contain costs in several ways, while increasing permanent disability benefits for workers. Two prime goals the bill had in attempting to reduce costs were to change the way in which the system deals with permanent disability, and how medical liens and billing disputes are handled.

“SB863 is intended to reduce system costs as a set off for increased worker indemnity benefits, but overall projected savings are 1.4 percent. We believe that further savings must be found in the system,” Marjorie Berte, vice president of the American Insurance Association told Insurance Journal.

Specifically, SB 863: 1) Increases permanent disability (PD) benefits by about $740 million per year, with a two year phase-in, and removes future earning capacity for PD calculations; 2) Eliminates cost-driver sleep disorder, sexual dysfunction, and psychological add-ons; 3) Changes the medical fee schedule to Medicare-based RBRVS from the current official medical fee schedule; 4) Establishes fee schedules for ambulatory surgical centers, copy services and translators; 5) Eliminates double billing for implantable surgical hardware; 6) Removes medical decisions from workers’ compensation administrative judges; 7) Provides for an independent medical review process similar to that used in managed health care; 8) Streamlines medical provider network (MPN) process to encourage usage and going outside of MPNs, and simplifies the MPN approval process; and, 9) Imposes limitations on use of liens, and establishes lien filing fees.

COLORADO

HB 12-1071, regarding portable electronics insurance, is effective Jan. 1, 2013. The Act requires a vendor of portable electronics to hold a limited license to sell or offer portable electronics insurance. The limited license authorizes an employee or authorized representative of the vendor to sell or offer coverage to customers at each vendor location.

The commissioner of insurance is required to prescribe an application for insurance and accept applications from the vendors. Each vendor is required to pay a fee to the commissioner for a limited license. Each vendor is required to make written materials available to customers that disclose certain information, including: that portable electronics insurance may provide duplicate coverage; that the purchase of coverage is not required; and that the coverage may be cancelled at any time.

FLORIDA

HB 119 Motor Vehicle Personal Injury Protection (PIP) Insurance was signed into law by Florida Gov. Rick Scott last May. The law, which has been described by industry observers as most significant auto insurance law in years, seeks to clamp down on alleged abuse and fraud and improve the state’s no-fault, personal injury protection (PIP) system.

The medical benefits provisions of the law will take effect on Jan. 1, 2013. They include the requirement that accident victims report an auto-related injury and seek treatment within 14 days. Under the new law, those physicians and facilities able to diagnose individuals seeking treatment under PIP medical benefits are: licensed physicians, licensed osteopathic physicians, licensed chiropractic physicians, licensed dentists, hospitals, facilities that own or are owned by hospitals, or licensed emergency transportation or treatment providers.

The law also applies two coverage limits for PIP medical benefits, based on the severity of the individuals medical condition. Policyholders could receive up to $10,000 in benefits for emergency medical care and $2,500 for other less serious injuries. Followup medical care must also be consistent with the underlying medical diagnosis rendered when the initial services and care were received.

In addition to the $10,000 in medical and disability benefits, $5,000 in death benefits is offered. The death benefit was previously the lesser of the unused benefits, up to a limit of $5,000. The increase goes into effect in January. The PIP medical fee schedule revisions to help resolve alleged ambiguities in the schedule also take effect in January. Revisions include clarifying the reimbursement levels for care provided by ambulatory surgical centers and clinical laboratories. Insurers will be required to include notice of the fee schedule in their policies.

HAWAII

Act 32 (H.B. No. 994, H.D. 1), relating to motor vehicle insurance, goes into effect in January 2013. The Act excludes benefits paid or incurred under the workers’ compensation law from the covered loss deductible, according to the state’s Department of Commerce and Consumer Affairs.

Act 321 (S.B. No. 2655, S.D. 2, H.D. 3, C.D.), relating to portable electronics insurance, goes into effect in January. It establishes provisions for the sale of portable electronics insurance; requires vendors to hold a limited lines license to sell or offer coverage under a policy; establishes sanctions for violations; establishes requirements for termination of insurance; establishes fees for licensing.

Act 296 (H.B. No. 1967, H.D. 2, S.D. 2), relating to medical claim conciliation, amends the medical tort chapter of the Hawaii Revised Statutes. The Act, which also goes into effect in January, is designed to make the medical claim conciliation process less adversarial and to emphasize inquiry, conciliation, and settlement. It renames the panels as medical inquiry and conciliation panels.

IDAHO

Title 41, 1081-1089, on portable electronics insurance, will go into effect July 1, 2013. It will require that portable electronics insurers (insurers providing coverage for the repair or replacement of portable electronic devices and related accessories and services) and insurance producers who sell, solicit or negotiate the offer or sale of such insurance in Idaho be supervised and regulated by the department of insurance.

Portable electronics vendors may sell or offer portable electronics insurance to customers, provided that the vendors obtain a limited lines license to authorize its employees or authorized representatives to sell or offer such insurance.

Vendors will be required to make written materials available to customers that disclose that such insurance may provide duplicate coverage and that the purchase of coverage is not required. The insurer issuing the portable electronics insurance will either directly supervise or appoint a supervising entity who shall supervise the administration of the program for vendors.

Title 41, 1102-1104 on qualifications for adjusters license, will go into effect July 1, 2013. It will require that the insurance department director shall not issue, continue, or permit to exist any license as an adjuster as to any person not meeting specific qualifications including: being trustworthy, and be of good character and reputation; must be able to pass a written examination to test knowledge of the duties and responsibilities of an adjuster and of matters involved in transactions under an adjuster’s license; and must be a salaried employee of a licensed adjuster, or must have had experience or special education or training. A firm or corporation may be licensed as an adjuster if certain qualifications are met.

ILLINOIS

SB 0275 goes into effect on Jan. 1, 2013. It provides that each director of a department that issues an occupational or professional license is authorized to and shall issue an expedited temporary occupational or professional license to military service members and their spouses who meet certain requirements.

SB 0275 could make it easier for military veterans to enter the insurance profession.

It also provides that the temporary occupational or professional license shall be valid for 6 months after the date of issuance or until a license is granted or a notice to deny a license is issued in accordance with rules adopted by the department issuing the license, whichever occurs first. It sets forth provisions concerning requirements for application and credit granted for relevant experience.

HB 5047 will take effect on Jan. 1, 2013. The new law provides that a business entity that is a licensed insurance producer or insurer (supervising entity) shall maintain a registry of vendor locations that are authorized to sell or solicit portable electronics insurance coverage in the state and that, upon request by the insurance director and with 10 days notice to the supervising entity, the registry shall be open to inspection and examination by the director during the regular business hours of the supervising entity.

The law also makes changes to the provision requiring brochures or other written materials be made available to prospective customers at every location where portable electronics insurance is offered. It also sets forth provisions concerning policy termination notice requirements.

MARYLAND

HB 1059 (Chapter 627) / SB938 (Chapter 626) on personal automobile insurance – rescission of policy or binder, goes in effect Jan. 1, 2013. The new law will authorize an insurer — under certain specified circumstances — to rescind a policy or binder of personal auto insurance if the initial premium payment for the policy or binder is made by a check or other remittance that is not honored on presentation to the financial institution where the check or other remittance is drawn. To rescind a policy or binder, an insurer is required to send immediately after receipt of a notice that the check or other remittance was not honored, written notice to the applicant and any secured creditor, by certificate of mail and, if available, by electric means, to the applicant’s or secured creditor’s last known address.

HB 531 (Chapter 253) on discovery of material risk factor, goes into effect on Oct. 1, 2013. The law requires an insurer that discovers a material risk factor during the 45-day underwriting period to recalculate the binder or policy premium based on the material risk factor if the risk continues to meet the underwriting standards of the insurer in accordance with the insurer’s rates and supplementary rating information filed with the commissioner.

Material risk factors include factors that were incorrectly recorded or not disclosed by the insured in an application for insurance. The insurer will be required to provide written notice informing the insured of the amount of the recalculated premium, the reason for the increase or reduction in the premium, and the insured’s right to terminate the policy.

HB 301(Chapter 120), on the required disclosure statement, goes into effect Jan. 1, 2013. The law makes consistent the fraud disclosure statement required to be included on all claim and application forms for insurance with the description of a fraudulent insurance act under §27-406 of the Insurance Article.

MICHIGAN

Michigan, whose Supreme Court struck down an absolute ban on the use of credit information in insurance underwriting and rate-making decisions, is moving to slightly loosen its insurance scoring restrictions while still retaining significant consumer protections, said Ray Lehmann, senior fellow and public affairs director at R Street Institute, a Washington, D.C.-based research and consulting firm.

Republican Gov. Rick Snyder has signed a package of bills – House Bills 4593-4596 and Senate Bill 300 – that bring Michigan’s insurance scoring rules more in line with model legislation promulgated by the National Conference of Insurance Legislators, which has already been adopted by 26 states, according to Lehmann. The effective date is “91st day after final adjournment of 2012 Regular Session” which would be sometime in late March/early April.

Michigan currently only allows insurers to use credit information in offering “good credit” discounts, barring its use in underwriting decisions and in charging any sort of bad credit surcharge to a policy.

The new legislation would continue to bar the use of credit information in decisions to deny, cancel or non-renew auto, homeowners, casualty and fire and inland marine coverage. However, insurers would be permitted to use credit information and insurance scores to determine options and availability for premium installment payments, Lehmann noted.

The legislation also requires insurers to notify insureds or applicants whenever they take adverse actions based on credit information, with detailed explanations of which credit factors were utilized in making the decision. Consumers could protest if the decisions were based on incorrect or incomplete credit information.

Incorporating language from the NCOIL model law, consumers also could request exceptions from being subject to insurance scoring models due to certain life circumstances, including natural catastrophes; serious illness or injury of an immediate family member; death of a spouse, parent or child; divorce or interruption in alimony or child support payments; identity theft; temporary unemployment; or overseas military deployment.

MISSISSIPPI

HB 894, on portable electronics insurance, goes into effect on Jan. 1, 2013. The bill requires the licensure of any vendor to sell, solicit or negotiate coverage under a policy of portable electronics insurance.

MONTANA

In Montana, state agencies are continuing to implement a state law that aims to verify auto insurance for drivers. The change in the state law, originally made four years ago, calls for a statewide electronic verification system. The new system aims to verify whether people have liability insurance on a vehicle when they license it or renew its registration.

Under the system, insurers provide data on insured drivers to the state’s motor vehicle division, with the information also made available to law enforcement and country treasurers.

NEVADA

The NRS 691A.020 is scheduled to go into effect on Jan. 1, 2013. It will require each insurer which provides a policy for a personal line of property insurance covering a manufactured home or mobile home in Nevada that was manufactured within the immediately preceding 15 years shall offer to an insured, on a form approved by the Commissioner and in addition to any other insurance, the option of purchasing insurance to pay the replacement value of the manufactured home or mobile home in the event of a total loss of the manufactured home or mobile home.

It also requires that coverage to include transporting and installing a replacement home and debris removal. However, the provisions do not apply to a policy of insurance placed on a manufactured home or a mobile home by a creditor or lender.

NEW JERSEY

Updated on Jan. 4, 2013, with the latest court decision
The state’s Department of Banking and Insurance has begun implementing new rules regarding motor vehicle personal injury protection (PIP) insurance on Jan. 4, 2013. This follows the Jan. 3 decision by the New Jersey Superior Court to deny a medical group’s request for a stay of the new PIP regulations.

Back in November, the New Jersey Association of Ambulatory Surgery Centers filed for an injunction request for a stay of the new regulations in the Superior Court, Appellate Division. Previously, the state’s Department of Banking and Insurance had denied the group’s request for a stay of the regulations.

These new regulations were first proposed by the state’s insurance regulators some 17 months ago. Since then, the proposals have gone through two rounds of public comment periods and regulators have made a number of changes to the original proposals — including deleting over 100 price codes for spinal and neurosurgical procedures from the proposed fee schedules.

Marshall McKnight, spokesperson for the Department of Banking and Insurance, told Insurance Journal, “This is all about exerting downward pressure on auto insurance premiums for New Jersey drivers, by giving them more medial service access to the same premium dollars.” New Jersey regulators are required to evaluate the state’s PIP system every two years.

The department said that in recent years, increases in premiums requested by auto insurers were connected to PIP premiums rising. The department said additional regulations were needed to help create a downward pressure on auto insurance rates to try to rein in those PIP premium somewhat, to close the loopholes, and to provide some PIP premium relief.

New Jersey offers one of the most generous PIP coverages in the country. New Jersey drivers can buy as much as $250,000 of PIP benefits, the second highest in the country behind Michigan which has unlimited PIP.

The new regulations include adding more procedures to the physicians’ fee schedule in a bid to slow rising auto insurance costs. The last time an additional fee schedule was implemented was two years ago. The rules aim to close loopholes that are being exploited by some providers, and cap PIP expenses and control the rising medical costs that insurers pay for auto accident victims.

But critics say the new physicians’ fee schedule limits the types of procedures that could be reimbursed at ambulatory surgery centers (ASCs), and sets hospital outpatient surgical facility fees higher than ASC fees for certain services.

Additionally, under new regulations, claims that are less than $1,000 will now not receive an in-person hearing. Also, under the new rules, arbitration panels will be asked to ensure that lawyers’ fees are commensurate with the amount of the arbitration award and guard against outsized attorney fees.

NEW YORK

New York Gov. on Dec. 17 vetoed S.7787/ A.10784 concerning Supplemental Uninsured/Underinsured Motorists (SUM) coverage. The rejected bill would have required insurers to issue the policies with SUM coverage, with limits equal to the BI/PD Liability limits — with the coverage remaining on the policy unless the customer specifically requests that it be removed or reduced.

The bill’s sponsors will likely work on a modified bill and “try to get something more to the governor’s liking” when the state legislature convenes in January, said Tim Dodge, director of research at the Independent Insurance Agents & Brokers of New York Inc.

RHODE ISLAND

HB 2012-H7484A/SB 2012-S2597A will take effect Jan. 2013 and will be applicable to policies issued or renewed on or after Jan. 1, 2013. The legislation limits a hurricane deductible to only once per hurricane season, so that a homeowner cannot be hit with a second deductible in the unlikely event that a second hurricane hits the state during a hurricane season.

It also provides a hurricane mediation process as a non-adversarial and non-binding alternative dispute resolution process for claims arising from a hurricane in which the property owner and the insurance company will work to resolve potential claims.

And under the new law, the Department of Business Regulation will promulgate a regulation to address the declaration of a catastrophe in Rhode Island in which homeowners may not be able to receive notice from insurers. This regulation would provide the necessary procedure for reporting requirements for claims related to the emergency, provide a grace period for payment of insurance premiums, and provide a temporary postponement for cancellations and non-renewals for insurance policies.

UTAH

The bill SB 244, Reporting Options for Auto Insurance, passed the 2012 legislative session and is slated to go into effect July 2013. This bill, which modifies the Insurance Code and Motor Vehicles Code, will require that insurers that issue automobile coverage for certain motor vehicles shall, upon request, provide to the Department of Public Safety’s designated agent verification of whether or not an auto insurance policy is in effect for a specified vehicle.

It will also require that the insurer provide the verification using an electronic service established by the insurers, through the Internet, world wide web, or a similar proprietary or common carrier electronic system. The verification information provided by insurers may be provided to state and local law enforcement agencies and financial institutions.

VIRGINIA

HB 523(Chapter 235)/ SB 369(Chapter 346) will become effective on Jan. 1, 2013. The bill adds a section to the fire insurance policies chapter, requiring insurers issuing new or renewal policies of fire insurance, or fire insurance in combination with other insurance coverages, which exclude coverage for damage caused by earthquake, to provide a written notice that explicitly states that “earthquake coverage is excluded unless purchased by endorsement.” This notice must state that information regarding such coverage is available from the insurer or the agent if earthquake coverage is otherwise available from the insurer.

HB 209(Chapter 294) will go into effect on Jan. 1, 2013. The bill amends and reenacts the Continuing Education (CE) article of the insurance agents chapter. The bill provides a process by which an agent may correct errors and effect compliance with CE requirements; impacts credit hour requirements; eliminates certain monetary penalties; and changes the deadline for completing CE courses. The bill also eliminates certain requirements for a status report to agents and shortens the time for appeals to the Insurance Continuing Education Board.

HB 1139(Chapter 539) will go into effect on Jan. 1, 2013. The bill amends the reinsurance article of the reports, reserves and examinations chapter — setting forth the requirements for certified reinsurers; assignment of ratings; reduction in collateral; qualified jurisdictions; management of concentration risk; and diversification of reinsurance programs.

HB 872(Chapter 734) and SB 520(Chapter 735) goes into effect on Jan. 1, 2013. The bill adds a new article to the insurance agents chapter, which provides for the licensing and regulation of public adjusters by the State Corporation Commission. In addition to standards of conduct, the provisions address the fees that public adjusters may charge as well as the provisions which must be contained in a public adjuster’s written contract with the insured.