Duke de Haas “blogs” from the NAIC meetings in National Harbor, Maryland
1. Long-Term Care Insurance Takes the Spotlight
On November 28, 2012, the NAIC Senior Issues Task Force held a public hearing on long-term care insurance. The meeting was well attended and highlighted some of the issues associated with sweeping demographic changes occurring in the United States, and the challenges for industry and regulators in ensuring that affordable long-term care insurance is available. As a number of states, such as Virginia, focus on the substantial rate increases being requested and implemented by insurers, the NAIC’s public hearing brought to the forefront of the public debate the policy and practical challenges associated with this important product. It is likely that long-term care issues will continue to percolate at the federal level as well, notwithstanding the public death of the CLASS Act last year.
2. Elections Have Consequences
Health insurance issues continued to feature prominently at the NAIC meetings, and it is interesting to see the deepening federal involvement at all levels of the health insurance market. As debates regarding health insurance exchanges in the states continued to rage, Gary Cohen and Teresa Miller from the Center for Consumer Information and Insurance Oversight (CCIIO), the implementer of many provisions of the Patient Protection and Affordable Care Act (PPACA), faced detailed and hard questions from state regulators on timeframes, system implementation issues, and many other matters. CCIIO officials stated firmly that it will be ready by October 1, 2013, to begin operating exchanges in those states choosing or defaulting to a federal option. While my last NAIC blog noted that the states continue to divide further and many states are falling further behind (intentionally, in many cases) in the process of implementing health care reform as legislated by the PPACA, many states are beginning to move forward, now that much of the legal and political debate has been settled.
The U.S. Department of Health and Human Services, perhaps eager to have the states do as much of the heavy lifting as possible, pushed back a November deadline for states to inform the federal government whether they plan to operate a state exchange. The new deadline is December 14, 2012. It now appears that the states are divided about equally among those who will operate a state exchange, those who will default to a federal exchange, and those who will engage in an exchange partnership with the federal government. The implementation of exchanges and the further implementation of PPACA, as additional rules roll out, will represent an ongoing challenge for industry, consumers, and state and federal regulators for years to come.Additional issues that were discussed at the Exchanges Subgroup Meeting on November 28, 2012, and the Health Care Reform Regulatory Alternatives meeting on December 1, 2012, included navigators, user fees, the new multistate plans overseen by the Office of Personnel Management, and even the applicability of some of the PPACA provisions and regulations to US territories.
3. Loss of a Leader Continued
After 3 1/2 years as the CEO of the NAIC, Dr. Terri Vaughan accelerated her departure to the end of November 2012, and speculation swirled around who her successor would be. No decision has been announced as of this writing, but the NAIC remains, for the time being, in the capable and sturdy hands of Andy Beal, formerly the Chief Operating Officer and Chief Legal Officer, who will be the acting CEO until Vaughan’s successor is announced. As previously noted, at a time of massive changes to our insurance markets at all levels of governance, the NAIC will need a sharp-minded leader with the technical and diplomatic skills required for an increasingly important position.
4. And Speaking of Leaders . . .
The NAIC elected the 2013 officers on Sunday, December 2, 2012. The officers, who will assume their duties on January 1, 2013, are:
- President: Jim Donelon, Louisiana Insurance Commissioner
- President-Elect: Adam Hamm, North Dakota Insurance Commissioner
- Vice President: Monica Lindeen, Montana State Auditor and Commissioner of Securities and Insurance
- Secretary-Treasurer: Michael Consedine, Pennsylvania Insurance Commissioner
Further down at the regional level, most of the zonal officers remained the same; however, Julie Mix McPeak, Commissioner of the Tennessee Department of Commerce and Insurance, was elected to the Southeast Zone, replacing Wayne Goodwin, North Carolina Insurance Commissioner and State Fire Marshal.
Additionally, the states welcomed new commissioners Susan Donegan, Insurance Commissioner for the Vermont Department of Financial Regulation, and Germaine Marks, Director of the Arizona Department of Insurance.
5. Increased Importance of Financial Regulation and Globalization of Insurance Markets
An NAIC blog would not be complete without a reference to international developments, or, as Iowa Insurance Commissioner Susan Voss likes to say, “G [Committee] is for Global.” Notwithstanding the missing Federal Insurance Office (FIO) report, it is apparent that the FIO is increasing its voice and presence at the important international fora considering insurance issues, including the International Association of Insurance Supervisors. Debate continued on Solvency II equivalence and the Reinsurance Task Force heard a report on international reinsurance issues, which included a reference to the recent draft report on the differences between the U.S. and EU systems of regulation. Over the next several years, as states implement the amendments to the Model Holding Company Act and other updates to their insurance codes, it will be important to watch the development of the NAIC’s initiatives, as well as the FIO’s, at the international level, as they will undoubtedly trickle down to the states.
6. Deepening Federal Involvement in Insurance
With the enactment of PPACA, the federal government has been thrust into a prominent role in our nation’s insurance markets, albeit mostly limited to the health insurance market, for now. While the federal government has been involved for years in flood insurance, crop insurance, and terrorism risk insurance, it is apparent that the implementation of PPACA, coupled with FIO and other Dodd-Frank initiatives, such as orderly liquidation authority, demonstrates that a brave new world of heavy federal involvement in insurance initiatives is here to stay. Thus, on November 29, 2012, Commissioner Kevin McCarty of the Florida Office of Insurance Regulation, and President of the NAIC through the end of 2012, addressed Congress regarding the impact of the proposed rules to implement Basel III capital standards. While many consider the state “patchwork” of regulation of the insurance industry to be quaint, it is apparent that state regulators are making strong efforts to keep up with the rush of rules and guidance from HHS, OPM, CCIIO, FDIC and the Federal Reserve. The question is whether the federal government can learn the nuances of the insurance industry - whose markets often vary widely from state to state and even within states - quickly enough to avoid damaging markets in the years ahead.
7. High-Level Debate on Life Insurance Reserves
Those participants and guests who did not stay around until Sunday, December 2, 2012, missed an important debate among the states regarding the adoption of the Valuation Manual as adopted by the Life Insurance and Annuities Committee. A spirited debate ensued among the states over the merits of implementing a principles-based approach to establishing insurance company reserves. This approach, less prescriptive than what had traditionally been employed, was supported by the industry and most state regulators. Rhode Island Deputy Director and Superintendent of Insurance, Joe Torti, was one of the most passionate defenders of the PBR approach, contending that to not act could undermine the credibility of the state regulatory framework, and, it was noted that this process was nearly a decade in the making. On the other side, Commissioner Dave Jones of the California Insurance Department and Superintendent Ben Lawsky of the New York Department of Financial Services contended that the states should be careful not to repeat the mistakes of the recent financial crisis and opposed the effort. Ultimately, with an affirmative vote of 43 of the states and territories, the motion to approve the adoption of the Valuation Manual carried the day. The ability of insurance commissioners to passionately argue their position, while being respectful in their tone and treatment toward opponents, was heartening, and hopefully the partisans in Washington were watching and took some lessons from the state insurance regulators.
Next stop: NAIC meeting in Houston in April 2013.