In an effort to educate our policyholders in preventing or mitigating losses from occurring in the future, this Large Loss Lessons Learned bulletin both illustrates specific details of the loss and reviews factors which contributed to the loss.
We believe it is important to inform our customers of past losses so that we both can learn from these accidents. This Large Loss Lessons Learned bulletin evaluates the controls that were missing at the time of the loss. More importantly, it addresses key recommendations that if implemented would have prevented, eliminated or mitigated the loss.
Personal Vehicle Usage Bulletin: Employee/Volunteer Use of Personal Vehicles
Non-Owned Auto Liability
An employer can be held liable for the actions of its employees and volunteers while driving on the employer’s business. Any time an employee or volunteer operating his or her own vehicle on agency business is involved in an accident, the agency will almost certainly be sued. Employer’s Non-Owned Auto coverage protects your agency in the event that it is named in a law suit arising out of the use of a vehicle owned by an employee or volunteer driving on behalf of your organization.
This coverage is designed to protect only the agency, not the employee or volunteer operator of the vehicle. It also does not pay for damage to the vehicle being driven by the employee or volunteer. Non-Owned Liability coverage can be written either as a part of the automobile policy for the agency’s vehicles or as a part of the agency’s general liability policy, if the agency does not own any vehicles.
Important: Remember that a loss suffered by an employee or volunteer utilizing their personal auto for agency business will be experience rated for their future premium just as it would if they suffer a nonagency related loss.
Recommendations:
1) Personal auto use should be restricted where possible (use agency vehicle for medical appointments, deliveries or pick ups or any time consumer transported).
2) Employees and volunteers using their personal vehicles for agency business should be reviewed as any staff member using an agency vehicle would:
a. MVR checked and analyzed on annual basis.
b. Ensure proper driver training to include DDC, PAT, Emergency Evacuation, other
c. Annual Update of primary insurance and MVR
d. Follow agency’s standard policies and procedures when using personal vehicles; ie: driver eligibility, use of seatbelts, etc.
3) Employees and volunteers using a personal vehicle should provide proof of insurance, confirmation that there are no exclusion regarding vehicle use, proof of inspection and the agency should determine appropriateness of personal vehicle (condition, type, etc.)
4) Agencies should have a policy in place to require both employees and volunteers to maintain minimum liability limits on their personal auto policies. The preferred limits should be at least $300,000 unless the person is transporting clients, in which case the limit should be $1,000,000.
5) Insured’s can institute periodic checks on employees’ and volunteers’ personal insurance and require copies of their declaration showing limit of liability carried.
6) Verify that applications submitted include the volunteer count so we may charge accordingly.
Summary of Employee / Volunteer Use of Personal Vehicles
1.Employee using “Agency” vehicle– Liability coverage is Primary and provided for the insured and the employee.
2.Volunteer using “Agency” vehicle– Liability coverage is Primary and provided for the insured and the volunteer.
3.Employee using “Own” vehicle on Agency Business– Employees’ Personal Auto Policy is primary for Agency and self, the Agency’s policy is Excess Only for the agency and the employee. (Employee is included due to “Additional Insured Employee Endorsement”). In most states UM/UIM coverage is only applicable to bodily injury. However, there are a few states that require coverage for property damage also. It is important to determine if your underwriting state requires this coverage.
4.Volunteer using “Own” vehicle on Agency Business– Volunteers’ Personal Auto Policy is primary for Agency and self, the Agency’s policy isExcess Only for the agency NOT for the volunteer. In most states UM/UIM coverage is only applicable to bodily injury. However, there are a few states that require coverage for property damage also. It is important to determine if your underwriting state requires this coverage.
Driver Eligibility Criteria Bulletin
MVR Guidelines:
No driver under the age of 25 or over the age of 75 is eligible to drive 15-passenger transporation vehicles or buses.
No driver over the age of 79 is eligible unless the special exceptions are met as outlined.
No statutory or major violations listed on the MVR
Ages 21-70
A. Any driver with any of the following the past three years does not meet our underwriting criteria and is an unacceptable driver:
1. More than three moving violations in the past three years
2. More than two accidents in the past three years
3. More than one accident in any one year
4. Speeding over 80 miles per hour or 21 miles per hour over the posted speed limit
B. Any driver with any of the following is unacceptable:
1. Operating a motor vehicle during a time of suspension or revocation
2. Operating a motor vehicle without a license
3. Driving under the influence of alcohol or drugs
4. Careless driving
5. Negligent homicide arising out of the use of a motor vehicle
6. Aggravated assault with a motor vehicle
Ages 71-74
A. Any driver with any of the following over the past three years does not meet our underwriting criteria:
1. More than two moving violations in the past three years
2. More than two accidents in the past three years
3. More than one accident in any one year
4. Speeding over 80 miles per hour or 21 miles per hour over the speed limit
B. Any driver with any of the following is unacceptable:
1. Operating a motor vehicle during a time of suspension or revocation
2. Operating a motor vehicle without a license
3. Driving under the influence of alcohol or drugs
4. Careless driving
5. Negligent homicide arising out of the use of a motor vehicle
6. Aggravated assault with a motor vehicle
C. A physician's statement is required for any driver operating a passenger transportation vehicle (i.e. vans or buses). Physician's statements are required on an annual basis.
Ages 75-79
A. Review MVR - driver is subject to same MVR criteria as above
B. Physician's statement is required on an annual basis.
C. Ineligible to drive passenger transportation vehicles
Ages 80 and over
A. Ineligible*
* Exception:
Approval will be considered providing the following conditions are satisfied:
1) Provides evidence of a strong Risk Management program
2) Physician's statement is required on an annual basis.
3) Review MVR – driver is subject to the same MVR criteria as ages 21-79 above.
4) Ineligible to drive passenger transportation vehicles.
Driver Training and Motivation Bulletin
Training and motivating drivers is an important part of any Fleet Loss Prevention Program. An effective program will integrate both activities into the role of the fleet manager and will serve to enhance the knowledge, skills and performance of the drivers.
Training is necessary to supplement the driver selection process because individuals cannot always be selected who have all of the knowledge and skills required for the job.
Driver Training
Training should be used to supplement your driver selection process. The amount of training needed varies directly with the complexity of the job as well as with the knowledge and experience of the driver. An effective driver-training program will highlight the knowledge and skills necessary for an employee to perform at a satisfactory level. Proper training will help reduce operational disruptions and minimize unnecessary costs due to accidents and equipment abuse.
When implementing or enhancing a driver-training program, there are three levels of training that need to be addressed:
Orientation training – to indoctrinate new drivers to your company and your policies/procedures
Refresher training – to update drivers on specific changes in relation to driving routes, cargo, equipment, regulations, company procedures and other pertinent information
Remedial training – to address substandard performance issues
At a minimum, your company’s driver training program should include specific instruction on topics such as:
• Government regulations
• Company policies and rules
• Familiarization with company vehicles
• Driving routes and schedules
• Client handling procedures
• Emergency procedures and warning devices
• Accident reporting procedures
To facilitate the driver training program, a driver trainer should be designated. In larger companies, several driver trainers may be designated. The use of designated trainers tends to make training more consistent and uniform. It is not always necessary to maintain a full-time driver trainer, depending on the size of your fleet. Many companies designate a part-time trainer from the existing drivers. An individual selected as a driver trainer should be one who commands the respect of the other drivers, has a good driving record and has the ability to convey information in a stimulating manner. If the
appropriate resources needed to hire an outside driver trainer are unavailable, please contact your local insurance agent or PIC Production Underwriter for assistance.
Driver training can be completed either in a classroom or in-vehicle setting. Classroom training can be accomplished using either a one-on-one or group training approach. This setting is effective for presenting topics such as government regulations, accident reporting procedures and company policies and rules. In-vehicle training provides one of the best methods of giving practical instruction to a driver under closely controlled conditions. This setting is effective for presenting topics such as familiarization with company vehicles, driving routes and schedules, client handling procedures,
emergency procedures and warning devices.
To establish a driver training program or to enhance an existing one, several training programs are available from agencies such as the National Safety Council and the American Trucking Association.
Driver Motivation
Some drivers will perform exceptionally for wages alone or the self-satisfaction of accomplishing the task, while other drivers require additional forms of motivation. One motivational technique commonly used is a driver incentive program. Incentive programs can be used for accident-free driving, fuel efficient driving, or whatever other parameter is suitable for your particular operations.
A driver incentive program can provide many different types of awards (pins, belt buckles, patches, gift certificates, etc.) and may provide a substantial return on your investment if they are administered properly and stimulate driver interest. The goal of the incentive program can only be reached if there are established rules and procedures to assure that the drivers and supervisors alike understand the program. Awards should be made promptly upon reaching established goals, preferably by top management, and in the presence of peers. Whenever possible, publicity should be arranged through local newspapers, company newsletters and other forms of communication.
Friday, February 26, 2010
Thursday, February 25, 2010
U.S. House Passes Repeal of Health Insurers' Antitrust Exemption
The U.S. House of Representatives voted Wednesday to take a 65-year-old antitrust exemption away from health insurance companies, leaning hard on an industry that has been the focus of criticism for fast-rising rates.
The chamber voted 406 to 19 to effectively repeal an antitrust exemption that has meant that states take the lead in enforcing antitrust law for health insurers. Consumer groups say states often lack the resources to effectively regulate insurers.
"Just recently 80,000 Iowans were told that their insurance rates would go up 18 percent,'' said Rep. Leonard Boswell in debate before the vote. "Iowans in the 3rd district are struggling to make ends meet.''
The debate took place on the margins of a larger healthcare debate. On Thursday, President Barack Obama will host a healthcare summit, the latest step in his uphill battle to break an impasse in Congress over a sweeping overhaul of the $2.5 trillion industry, one of his domestic policy priorities.
Supporters portrayed the bill as a way to tamp down sharply rising health insurance costs, such as those from WellPoint Inc , which raised rates an average of 25 percent for some Anthem Blue Cross customers in California.
WellPoint Chief Executive Angela Braly, at a hearing on the issue Wednesday, said the company was concerned that it would lose the ability to share data with other companies. ''It's not going to affect healthcare costs one way or another,'' she said.
The Senate Judiciary Committee's version of the legislation is narrower in some ways than the House version, although the Senate bill also strips medical malpractice insurers of their antitrust exemption. Obama has said that he would sign the repeal into law.
The chamber voted 406 to 19 to effectively repeal an antitrust exemption that has meant that states take the lead in enforcing antitrust law for health insurers. Consumer groups say states often lack the resources to effectively regulate insurers.
"Just recently 80,000 Iowans were told that their insurance rates would go up 18 percent,'' said Rep. Leonard Boswell in debate before the vote. "Iowans in the 3rd district are struggling to make ends meet.''
The debate took place on the margins of a larger healthcare debate. On Thursday, President Barack Obama will host a healthcare summit, the latest step in his uphill battle to break an impasse in Congress over a sweeping overhaul of the $2.5 trillion industry, one of his domestic policy priorities.
Supporters portrayed the bill as a way to tamp down sharply rising health insurance costs, such as those from WellPoint Inc , which raised rates an average of 25 percent for some Anthem Blue Cross customers in California.
WellPoint Chief Executive Angela Braly, at a hearing on the issue Wednesday, said the company was concerned that it would lose the ability to share data with other companies. ''It's not going to affect healthcare costs one way or another,'' she said.
The Senate Judiciary Committee's version of the legislation is narrower in some ways than the House version, although the Senate bill also strips medical malpractice insurers of their antitrust exemption. Obama has said that he would sign the repeal into law.
Wednesday, February 24, 2010
Obama Backs Repeal of Health Insurers' Antitrust Exemption
The Obama administration on Tuesday threw its weight behind a bid to repeal an anti-trust exemption protecting health insurers, keeping the industry in its crosshairs as it prepares to host a bipartisan summit on revamping U.S. healthcare.
"Today the president announced the administration's strong support for repealing the anti-trust exemption currently enjoyed by health insurers,'' White House spokesman Robert Gibbs said at a daily news briefing.
On Thursday, President Barack Obama will host a healthcare summit, the latest step in his uphill battle to break an impasse in Congress over a sweeping overhaul of the $2.5 trillion industry, one of Obama's domestic policy priorities.
"At its core, health reform is all about ensuring that American families and businesses have more choices, benefit from more competition and have greater control over their own healthcare. Repealing this exemption is an important part of that effort,'' Gibbs said.
Health insurers for about 65 years have been exempt from federal antitrust laws, which are designed to protect consumers from price fixing and other anti-competitive acts.
The insurance industry said the exemption is narrow in scope and warranted and that its repeal would not lower health care costs.
"Health insurance is one of the most regulated industries in America at both the federal and the state levels,'' said Karen Ignani, president and chief executive of the industry trade group America's Health Insurance Plans.
"The real focus should be on addressing the rising cost of medical care, which is putting an unsustainable burden on families, employers, and the federal budget,'' she said.
Gibbs said he expected the House to vote on legislation to revoke the exemption over the next few days. Obama's support was transmitted to Congress as a statement of administration policy.
INDUSTRY IN THE CROSSHAIRS
The Obama administration has stepped up its rhetorical attacks on health insurers as it fights to push through the healthcare overhaul. New regulation of health insurers was a key part of the overhaul plan Obama announced on Monday, and administration officials have pointed repeatedly to a premium increases of up to 39 percent set by WellPoint Inc.'s Anthem Blue Cross unit in California as evidence of the need for a healthcare overhaul.
A number of House Democrats have said repealing the antitrust exemption is a high priority.
"We want to open up competition. This bill is about making sure that anyone in America who wants to offer health insurance will do so in a free and open market,'' House Democratic Leader Steny Hoyer said.
"I surely hope it will pass with a significant bipartisan vote.''
Democrats said revoking the exemption would prevent health insurance price-fixing or other anti-competitive practices, but did not offer evidence of any. The industry said state laws already forbid such practices.
The American Medical Association released a study on Tuesday showing that many U.S. insurance markets are dominated by just one or two insurance companies. In 24 of the 43 states covered in the report, the two largest insurers had a combined market share of 70 percent or more, up from 18 of 42 states in last year's report.
The House version of the healthcare revamp bills that have stalled in Congress included a repeal of the exemption. The Senate version did not. Obama's proposal in general more closely resembled the Senate plan, and did not address the antitrust exemption.
A number of consumer groups support repeal, saying states often lack the resources to effectively regulate insurers.
"Today the president announced the administration's strong support for repealing the anti-trust exemption currently enjoyed by health insurers,'' White House spokesman Robert Gibbs said at a daily news briefing.
On Thursday, President Barack Obama will host a healthcare summit, the latest step in his uphill battle to break an impasse in Congress over a sweeping overhaul of the $2.5 trillion industry, one of Obama's domestic policy priorities.
"At its core, health reform is all about ensuring that American families and businesses have more choices, benefit from more competition and have greater control over their own healthcare. Repealing this exemption is an important part of that effort,'' Gibbs said.
Health insurers for about 65 years have been exempt from federal antitrust laws, which are designed to protect consumers from price fixing and other anti-competitive acts.
The insurance industry said the exemption is narrow in scope and warranted and that its repeal would not lower health care costs.
"Health insurance is one of the most regulated industries in America at both the federal and the state levels,'' said Karen Ignani, president and chief executive of the industry trade group America's Health Insurance Plans.
"The real focus should be on addressing the rising cost of medical care, which is putting an unsustainable burden on families, employers, and the federal budget,'' she said.
Gibbs said he expected the House to vote on legislation to revoke the exemption over the next few days. Obama's support was transmitted to Congress as a statement of administration policy.
INDUSTRY IN THE CROSSHAIRS
The Obama administration has stepped up its rhetorical attacks on health insurers as it fights to push through the healthcare overhaul. New regulation of health insurers was a key part of the overhaul plan Obama announced on Monday, and administration officials have pointed repeatedly to a premium increases of up to 39 percent set by WellPoint Inc.'s Anthem Blue Cross unit in California as evidence of the need for a healthcare overhaul.
A number of House Democrats have said repealing the antitrust exemption is a high priority.
"We want to open up competition. This bill is about making sure that anyone in America who wants to offer health insurance will do so in a free and open market,'' House Democratic Leader Steny Hoyer said.
"I surely hope it will pass with a significant bipartisan vote.''
Democrats said revoking the exemption would prevent health insurance price-fixing or other anti-competitive practices, but did not offer evidence of any. The industry said state laws already forbid such practices.
The American Medical Association released a study on Tuesday showing that many U.S. insurance markets are dominated by just one or two insurance companies. In 24 of the 43 states covered in the report, the two largest insurers had a combined market share of 70 percent or more, up from 18 of 42 states in last year's report.
The House version of the healthcare revamp bills that have stalled in Congress included a repeal of the exemption. The Senate version did not. Obama's proposal in general more closely resembled the Senate plan, and did not address the antitrust exemption.
A number of consumer groups support repeal, saying states often lack the resources to effectively regulate insurers.
Tuesday, February 23, 2010
NAIC Would Fight Obama Plan For U.S. Insurance Rate Regulation
The National Association of Insurance Commissioners is ready to oppose any provisions in proposed health care reform legislation that would allow federal preemption of state insurance rate regulation, an official said.
Oklahoma Insurance Commissioner Kim Holland, the NAIC Secretary-Treasurer, said rate regulation is a prerogative of the states.
If White House health care reform proposals grant power to a federal rate authority to disallow increases approved by the states, Commissioner Holland said, “I think we would work hard to make a strong case to not do that.”
Yesterday the White House released a proposal by President Barack Obama designed to help bridge the gap between plans passed in the House and Senate.
The president’s plan would create a new “Health Insurance Rate Authority” that would provide “needed oversight at the federal level and help states determine how rate review will be enforced and monitor insurance market behavior.”
Commissioner Holland said the NAIC is in a “wait and see” mode at the moment and she had not yet seen the details of President Obama’s plan.
She is pleased, she said, that Health and Human Services Secretary Kathleen Sebelius is charged with engaging state regulators, as Ms. Sebelius has previously served as Kansas insurance commissioner and understands state regulation and authority.
Renewed attention has been given to rate regulation in the wake of the recent announcement by Anthem Blue Cross in California proposing rate increases of as much as 39 percent for individual health policies.
Commissioner Holland said a federal approach to address the rate increases should not be “one size fits all.” She said in Oklahoma, the individual market covers just four-and-a-half percent of residents, and there are 19 companies competing for that business.
She contrasted the Oklahoma market with California, where the individual market makes up a greater percentage of the health insurance marketplace but there are fewer companies providing that coverage.
She also maintained that rate increases cannot be addressed in a vacuum, but rather must be addressed alongside the rising costs of health care. “All pieces must work together,” Commissioner Holland said. She added, “You can’t beat the drum of rate increases without beating the drum of rising health care costs.”
Regarding rising health care costs, Commissioner Holland said there have not been discussions about hospital surpluses or Medicare fraud, for example. “There are a lot of issues causing dramatic cost increases,” she said.
She noted the NAIC will continue to judge reform proposals against the set of principles the association released early last month (online at http://www.naic.org/Releases/2010_docs/health_reform_insight.htm).
Oklahoma Insurance Commissioner Kim Holland, the NAIC Secretary-Treasurer, said rate regulation is a prerogative of the states.
If White House health care reform proposals grant power to a federal rate authority to disallow increases approved by the states, Commissioner Holland said, “I think we would work hard to make a strong case to not do that.”
Yesterday the White House released a proposal by President Barack Obama designed to help bridge the gap between plans passed in the House and Senate.
The president’s plan would create a new “Health Insurance Rate Authority” that would provide “needed oversight at the federal level and help states determine how rate review will be enforced and monitor insurance market behavior.”
Commissioner Holland said the NAIC is in a “wait and see” mode at the moment and she had not yet seen the details of President Obama’s plan.
She is pleased, she said, that Health and Human Services Secretary Kathleen Sebelius is charged with engaging state regulators, as Ms. Sebelius has previously served as Kansas insurance commissioner and understands state regulation and authority.
Renewed attention has been given to rate regulation in the wake of the recent announcement by Anthem Blue Cross in California proposing rate increases of as much as 39 percent for individual health policies.
Commissioner Holland said a federal approach to address the rate increases should not be “one size fits all.” She said in Oklahoma, the individual market covers just four-and-a-half percent of residents, and there are 19 companies competing for that business.
She contrasted the Oklahoma market with California, where the individual market makes up a greater percentage of the health insurance marketplace but there are fewer companies providing that coverage.
She also maintained that rate increases cannot be addressed in a vacuum, but rather must be addressed alongside the rising costs of health care. “All pieces must work together,” Commissioner Holland said. She added, “You can’t beat the drum of rate increases without beating the drum of rising health care costs.”
Regarding rising health care costs, Commissioner Holland said there have not been discussions about hospital surpluses or Medicare fraud, for example. “There are a lot of issues causing dramatic cost increases,” she said.
She noted the NAIC will continue to judge reform proposals against the set of principles the association released early last month (online at http://www.naic.org/Releases/2010_docs/health_reform_insight.htm).
Monday, February 22, 2010
Obama Health Care Reform Bill Calls For Health Insurer Rate Regulation
Authority to regulate health insurers at the federal level—including the power to roll back rate increases—will be included in President Obama's proposal for a new health care reform bill.
The new proposal attempts to “bridge the gap” between the current House and Senate bills, according to a copy of the proposal obtained by National Underwriter.
Among other provisions, it includes a requirement that everyone have health insurance or pay a penalty, as well as elements of both the House and Senate health care bills restricting the compensation rate for private providers who serve the Medicare Advantage program.
It also would extend prescription drug program coverage. At present Medicare stops paying for prescriptions after the plan and beneficiary have spent $2,830 on prescription drugs, and only starts paying again after out-of-pocket spending hits $4,550. This gap or “doughnut hole” would be removed under the proposal.
It would also implement health insurance exchanges but does not indicate whether these would be state, regional or nationally based.
The president’s proposal would also include the Community Living Assistance Services and Supports (CLASS) Act, which would amend the Public Health Service Act to create a national, voluntary disability insurance program.
The summary said the president’s proposal “makes a series of changes to the Senate bill to improve the CLASS Act program’s financial stability and ensure its long-term solvency.”
Concerning the Senate’s so-called “Cadillac tax” on expensive health insurance plans, the president’s proposal changes the effective date from 2013 to 2018 to provide additional transition time for high-cost plans to become more efficient.
It also raises the amount of premiums that are exempt from the assessment from $8,500 for singles to $10,200 and from $23,000 for families to $27,500, and indexes these amounts for subsequent years at general inflation plus 1 percent.
The proposal imposes a responsibility on employers to shoulder the cost of health insurance for employees.
Under a complex process, the bill does not impose a mandate on employers to offer or provide health insurance, but does require them to help defray the cost if taxpayers are providing a subsidy. At the same time, small businesses will receive $40 billion in tax credits to support coverage for workers beginning this year.
“Consistent with the Senate bill, small businesses with fewer than 50 workers would be exempt from any employer responsibility policies,” the summary said.
In dealing with health insurer rate increases, the president’s proposal would seek to ensure that, if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.
“A new Health Insurance Rate Authority will be created to provide needed oversight at the federal level and help states determine how rate review will be enforced and monitor insurance market behavior,” the summary said.
In responding to the proposal, a spokesman for America’s Health Insurance Plans defended the current spate of large increases in health insurance, especially in the individual and smaller markets.
“Premiums are increasing because of soaring medical costs and a weak economy that is causing younger and healthier people to drop their health insurance,” said Robert Zirkelbach, an AHIP spokesman.
He explained, “In every state, health plans must provide data showing that requested premium increases are necessary to meet the expected rise in health care costs.”
He added, “Creating a new duplicative layer of federal premium regulation on top of what states are already doing is unnecessary and will only add regulatory complexity and increase health care costs.”
Currently, only 26 state insurers have the power to set rates.
The summary also said the president’s proposal would seek to strengthen a provision of the Senate bill that includes a “grandfather” policy allowing people who like their current coverage to keep it.
The president’s proposal would add certain important consumer protections to these “grandfathered” plans.
Specifically, the summary said, “Within months of legislation being enacted, it requires plans to cover adult dependents up to age 26, prohibits rescissions, mandates that plans have a stronger appeals process, and requires state insurance authorities to conduct annual rate review, backed up by the oversight of the secretary of the Department of Health and Human Services.”
When the exchanges begin in 2014, the president’s proposal adds new protections that prohibit all annual and lifetime limits, ban pre-existing condition exclusions, and prohibit discrimination in favor of highly compensated individuals.
Beginning in 2018, the president’s proposal requires “grandfathered” plans to cover proven preventive services with no cost sharing.
Regarding Medicare Advantage, the president’s plan creates a set of benchmark payments at different percentages of the current average fee-for-service costs in an area.
“It phases these benchmarks in gradually in order to avoid disruption to beneficiaries, taking into account the relative payments to fee-for-service costs in an area,” the summary said.
It provides bonuses for quality and enrollee satisfaction and adjusts rebates of savings between the benchmark payment and actual plan bid to take into account the transition as well as a plan’s quality rating.
Under the proposal, plans with low quality scores receive lower rebates (i.e., can keep less of any savings they generate).
Finally, the president’s proposal requires a payment adjustment for unjustified coding patterns in Medicare Advantage plans that have raised payments more rapidly than the evidence of their enrollees’ health status and costs suggest is warranted, based on actuarial analysis.
“This is the primary source of additional savings compared to the Senate proposal,” the summary said.
Joel Kopperud, a director of government relations at the Council of Insurance Agents and Brokers, reacted to the president’s proposal by voicing concern rate regulation “in a vacuum.”
He explained, “It is hard to tease out that piece while leaving the rest of the state regulatory oversight authority intact. We don't fear federal oversight; we fear Balkanization of the oversight.”
The new proposal attempts to “bridge the gap” between the current House and Senate bills, according to a copy of the proposal obtained by National Underwriter.
Among other provisions, it includes a requirement that everyone have health insurance or pay a penalty, as well as elements of both the House and Senate health care bills restricting the compensation rate for private providers who serve the Medicare Advantage program.
It also would extend prescription drug program coverage. At present Medicare stops paying for prescriptions after the plan and beneficiary have spent $2,830 on prescription drugs, and only starts paying again after out-of-pocket spending hits $4,550. This gap or “doughnut hole” would be removed under the proposal.
It would also implement health insurance exchanges but does not indicate whether these would be state, regional or nationally based.
The president’s proposal would also include the Community Living Assistance Services and Supports (CLASS) Act, which would amend the Public Health Service Act to create a national, voluntary disability insurance program.
The summary said the president’s proposal “makes a series of changes to the Senate bill to improve the CLASS Act program’s financial stability and ensure its long-term solvency.”
Concerning the Senate’s so-called “Cadillac tax” on expensive health insurance plans, the president’s proposal changes the effective date from 2013 to 2018 to provide additional transition time for high-cost plans to become more efficient.
It also raises the amount of premiums that are exempt from the assessment from $8,500 for singles to $10,200 and from $23,000 for families to $27,500, and indexes these amounts for subsequent years at general inflation plus 1 percent.
The proposal imposes a responsibility on employers to shoulder the cost of health insurance for employees.
Under a complex process, the bill does not impose a mandate on employers to offer or provide health insurance, but does require them to help defray the cost if taxpayers are providing a subsidy. At the same time, small businesses will receive $40 billion in tax credits to support coverage for workers beginning this year.
“Consistent with the Senate bill, small businesses with fewer than 50 workers would be exempt from any employer responsibility policies,” the summary said.
In dealing with health insurer rate increases, the president’s proposal would seek to ensure that, if a rate increase is unreasonable and unjustified, health insurers must lower premiums, provide rebates, or take other actions to make premiums affordable.
“A new Health Insurance Rate Authority will be created to provide needed oversight at the federal level and help states determine how rate review will be enforced and monitor insurance market behavior,” the summary said.
In responding to the proposal, a spokesman for America’s Health Insurance Plans defended the current spate of large increases in health insurance, especially in the individual and smaller markets.
“Premiums are increasing because of soaring medical costs and a weak economy that is causing younger and healthier people to drop their health insurance,” said Robert Zirkelbach, an AHIP spokesman.
He explained, “In every state, health plans must provide data showing that requested premium increases are necessary to meet the expected rise in health care costs.”
He added, “Creating a new duplicative layer of federal premium regulation on top of what states are already doing is unnecessary and will only add regulatory complexity and increase health care costs.”
Currently, only 26 state insurers have the power to set rates.
The summary also said the president’s proposal would seek to strengthen a provision of the Senate bill that includes a “grandfather” policy allowing people who like their current coverage to keep it.
The president’s proposal would add certain important consumer protections to these “grandfathered” plans.
Specifically, the summary said, “Within months of legislation being enacted, it requires plans to cover adult dependents up to age 26, prohibits rescissions, mandates that plans have a stronger appeals process, and requires state insurance authorities to conduct annual rate review, backed up by the oversight of the secretary of the Department of Health and Human Services.”
When the exchanges begin in 2014, the president’s proposal adds new protections that prohibit all annual and lifetime limits, ban pre-existing condition exclusions, and prohibit discrimination in favor of highly compensated individuals.
Beginning in 2018, the president’s proposal requires “grandfathered” plans to cover proven preventive services with no cost sharing.
Regarding Medicare Advantage, the president’s plan creates a set of benchmark payments at different percentages of the current average fee-for-service costs in an area.
“It phases these benchmarks in gradually in order to avoid disruption to beneficiaries, taking into account the relative payments to fee-for-service costs in an area,” the summary said.
It provides bonuses for quality and enrollee satisfaction and adjusts rebates of savings between the benchmark payment and actual plan bid to take into account the transition as well as a plan’s quality rating.
Under the proposal, plans with low quality scores receive lower rebates (i.e., can keep less of any savings they generate).
Finally, the president’s proposal requires a payment adjustment for unjustified coding patterns in Medicare Advantage plans that have raised payments more rapidly than the evidence of their enrollees’ health status and costs suggest is warranted, based on actuarial analysis.
“This is the primary source of additional savings compared to the Senate proposal,” the summary said.
Joel Kopperud, a director of government relations at the Council of Insurance Agents and Brokers, reacted to the president’s proposal by voicing concern rate regulation “in a vacuum.”
He explained, “It is hard to tease out that piece while leaving the rest of the state regulatory oversight authority intact. We don't fear federal oversight; we fear Balkanization of the oversight.”
Thursday, February 18, 2010
Louisiana Insurance Commissioner rejects a rate revision filed by State Farm
Louisiana Insurance Commissioner Jim Donelon has rejected a rate revision filed by State Farm that would have raised homeowners insurance rates by a statewide average of 19.1 percent.
After reviewing the request, filed in December 2009, the Louisiana Department of Insurance determined the increases, which would provide the company with an estimated $67,625,043 in additional premiums, were unreasonable and that in its filing, State Farm relied on an excessive loss trend, as well as an unreasonable hurricane risk provision.
Regulators noted State Farm relied heavily on the latest version of the EQECAT hurricane model in justifying its revision. The EQECAT model’s projected hurricane loss provisions are 150 percent higher than projected hurricane loss provisions in two other industry hurricane models used by State Farm in this filing, without adequate supporting evidence, the department said.
“In this case, State Farm Fire and Casualty falls short of proving the need for an increase of this magnitude,” Donelon said in a statement.
With a market share of 27 percent, State Farm is the largest homeowners policy provider in the state. The company received an average 8.3 percent increase last year in Louisiana after asking for 13.7 percent.
Meanwhile, in Florida, where State Farm also dominates the property insurance market, policyholders are seeing increased premiums – but not as a result of the 14.8percent rate increase the state Office of Insurance Regulation (OIR) approved in December, part of an agreement to keep the insurer in Florida.
Many customers have lost marketing discounts that could cause premiums to rise in addition to the pending 14.8 percent rate increase. The subsidiary of State Farm Mutual Insurance Co. announced last July that it would discontinued the discounts in an effort to bolster the company’s solvency.
“The notice to the customer is the renewal notice,” said State Farm Florida spokesman Justin Glover. “That way they have time to look at the renewal notice before the bill is due.”
Multi-line and claims-free discounts, among others, will no longer be offered for customers who also insure their autos through the firm. Because of the change, policies renewed beginning in December increased by a statewide average of 28 percent.
OIR spokesman Jack McDermott acknowledged that State Farm notified state officials of the plan to discontinue the market discounts, and that the state does not regulate such discounts.
”There’s no requirement they tell you exactly what discounts are discontinued,” he said. ”They just need to notify the office if there is a premium effect.”
Both Glover and McDermott recommended that State Farm Florida customers contact their insurance agents to confirm their policy information.
On February 1, State Farm began sending out letters of nonrenewal to thousands of homeowners.
The 125,000 dropped policies are part of the settlement reached with the OIR. The company claimed it needed to dramatically reduce its hurricane exposure in the state to remain solvent.
The notifications, to be sent out on a rotating basis, give policyholders at least six months to find another insurer.
Most of the policies will be dropped on the west coast of Florida rather than in South Florida, as State Farm no longer insures many homes in the area.
At least 13 companies, including American Integrity, Florida Peninsula, Security First and United Property & Casualty, have been approved by State Farm to work with its agents to provide new coverage for the policies being dropped.
After reviewing the request, filed in December 2009, the Louisiana Department of Insurance determined the increases, which would provide the company with an estimated $67,625,043 in additional premiums, were unreasonable and that in its filing, State Farm relied on an excessive loss trend, as well as an unreasonable hurricane risk provision.
Regulators noted State Farm relied heavily on the latest version of the EQECAT hurricane model in justifying its revision. The EQECAT model’s projected hurricane loss provisions are 150 percent higher than projected hurricane loss provisions in two other industry hurricane models used by State Farm in this filing, without adequate supporting evidence, the department said.
“In this case, State Farm Fire and Casualty falls short of proving the need for an increase of this magnitude,” Donelon said in a statement.
With a market share of 27 percent, State Farm is the largest homeowners policy provider in the state. The company received an average 8.3 percent increase last year in Louisiana after asking for 13.7 percent.
Meanwhile, in Florida, where State Farm also dominates the property insurance market, policyholders are seeing increased premiums – but not as a result of the 14.8percent rate increase the state Office of Insurance Regulation (OIR) approved in December, part of an agreement to keep the insurer in Florida.
Many customers have lost marketing discounts that could cause premiums to rise in addition to the pending 14.8 percent rate increase. The subsidiary of State Farm Mutual Insurance Co. announced last July that it would discontinued the discounts in an effort to bolster the company’s solvency.
“The notice to the customer is the renewal notice,” said State Farm Florida spokesman Justin Glover. “That way they have time to look at the renewal notice before the bill is due.”
Multi-line and claims-free discounts, among others, will no longer be offered for customers who also insure their autos through the firm. Because of the change, policies renewed beginning in December increased by a statewide average of 28 percent.
OIR spokesman Jack McDermott acknowledged that State Farm notified state officials of the plan to discontinue the market discounts, and that the state does not regulate such discounts.
”There’s no requirement they tell you exactly what discounts are discontinued,” he said. ”They just need to notify the office if there is a premium effect.”
Both Glover and McDermott recommended that State Farm Florida customers contact their insurance agents to confirm their policy information.
On February 1, State Farm began sending out letters of nonrenewal to thousands of homeowners.
The 125,000 dropped policies are part of the settlement reached with the OIR. The company claimed it needed to dramatically reduce its hurricane exposure in the state to remain solvent.
The notifications, to be sent out on a rotating basis, give policyholders at least six months to find another insurer.
Most of the policies will be dropped on the west coast of Florida rather than in South Florida, as State Farm no longer insures many homes in the area.
At least 13 companies, including American Integrity, Florida Peninsula, Security First and United Property & Casualty, have been approved by State Farm to work with its agents to provide new coverage for the policies being dropped.
Wednesday, February 3, 2010
House to Vote on Repeal of Health Insurers' Antitrust Exemption
The U.S. House of Representatives will vote next week on repealing the antitrust exemption for health insurers, but Democrats remained uncertain Tuesday on how to proceed on a broader healthcare overhaul.
Senate Democratic leader Harry Reid and House Speaker Nancy Pelosi during a Tuesday meeting reached no decisions on the sweeping healthcare legislation that has been in limbo since Democrats lost their crucial 60th Senate vote in a Republican election upset in Massachusetts last month.
"We have a number of options,'' Reid told reporters after the meeting with Pelosi. "We are going to proceed. We just don't know at this time how we are going to proceed.''
Democratic leaders are searching for a strategy to merge the two versions of the healthcare bill passed last year by the House of Representatives and Senate and pass it again before sending it to President Barack Obama for his signature.
The repeal of the antitrust exemption for health insurance companies was included in the House-passed healthcare overhaul bill but not in the Senate's version. The repeal has been a top priority for some House Democrats.
Health insurers for about 65 years have been exempt from federal antitrust laws, which are designed to protect consumers from price fixing and other anti-competitive acts. The insurance industry has said the exemption is warranted because health insurers are regulated by states.
But a number of lawmakers and consumer groups support repeal of the exemption. They argue that states often lack the resources to regulate the insurance industry effectively.
"Eliminating this industry giveaway will create more choice for consumers and create more competition for insurance companies,'' said Representative Louise Slaughter, chairwoman of the House Rules Committee and one of the authors of the repeal language included in the broader House bill.
"Getting this done is critical to getting real meaningful health insurance reform that will benefit all Americans by lowering costs,'' she said.
'HAPPY TO TAKE A LOOK'
If the House passes the antitrust exemption repeal bill, the Senate would have to approve it before sending it to Obama to sign into law. "We'll be happy to take a look at it,'' Reid said.
Pelosi spokesman Nadeam Elshami said the House antitrust vote scheduled for next week did not signal the House would break up the broader healthcare reform measure and try to move it piecemeal through Congress.
That has been one suggested strategy for the healthcare bill. Under another strategy, the House would pass the Senate bill without changes, eliminating the need for another Senate vote, and use a process known as budget reconciliation to make final changes in the two measures.
That process requires only a simple majority of 51 votes in the Senate.
Obama has urged lawmakers to pass the healthcare bill but has shifted his domestic agenda to make job creation and economic recovery his top priority.
"It's not over,'' Obama said of the healthcare debate during a town hall meeting in Nashua, New Hampshire Tuesday. "We just have to make sure that we move methodically and that the American people understand exactly what's in the bill.''
Reid said reconciliation remained an option for passing the bill, but refused to say if a strategy would be agreed upon before Congress leaves town for a one-week break at the end of next week.
"As I've learned, especially on healthcare -- no arbitrary deadlines. It just doesn't work,'' Reid said.
Senate Democratic leader Harry Reid and House Speaker Nancy Pelosi during a Tuesday meeting reached no decisions on the sweeping healthcare legislation that has been in limbo since Democrats lost their crucial 60th Senate vote in a Republican election upset in Massachusetts last month.
"We have a number of options,'' Reid told reporters after the meeting with Pelosi. "We are going to proceed. We just don't know at this time how we are going to proceed.''
Democratic leaders are searching for a strategy to merge the two versions of the healthcare bill passed last year by the House of Representatives and Senate and pass it again before sending it to President Barack Obama for his signature.
The repeal of the antitrust exemption for health insurance companies was included in the House-passed healthcare overhaul bill but not in the Senate's version. The repeal has been a top priority for some House Democrats.
Health insurers for about 65 years have been exempt from federal antitrust laws, which are designed to protect consumers from price fixing and other anti-competitive acts. The insurance industry has said the exemption is warranted because health insurers are regulated by states.
But a number of lawmakers and consumer groups support repeal of the exemption. They argue that states often lack the resources to regulate the insurance industry effectively.
"Eliminating this industry giveaway will create more choice for consumers and create more competition for insurance companies,'' said Representative Louise Slaughter, chairwoman of the House Rules Committee and one of the authors of the repeal language included in the broader House bill.
"Getting this done is critical to getting real meaningful health insurance reform that will benefit all Americans by lowering costs,'' she said.
'HAPPY TO TAKE A LOOK'
If the House passes the antitrust exemption repeal bill, the Senate would have to approve it before sending it to Obama to sign into law. "We'll be happy to take a look at it,'' Reid said.
Pelosi spokesman Nadeam Elshami said the House antitrust vote scheduled for next week did not signal the House would break up the broader healthcare reform measure and try to move it piecemeal through Congress.
That has been one suggested strategy for the healthcare bill. Under another strategy, the House would pass the Senate bill without changes, eliminating the need for another Senate vote, and use a process known as budget reconciliation to make final changes in the two measures.
That process requires only a simple majority of 51 votes in the Senate.
Obama has urged lawmakers to pass the healthcare bill but has shifted his domestic agenda to make job creation and economic recovery his top priority.
"It's not over,'' Obama said of the healthcare debate during a town hall meeting in Nashua, New Hampshire Tuesday. "We just have to make sure that we move methodically and that the American people understand exactly what's in the bill.''
Reid said reconciliation remained an option for passing the bill, but refused to say if a strategy would be agreed upon before Congress leaves town for a one-week break at the end of next week.
"As I've learned, especially on healthcare -- no arbitrary deadlines. It just doesn't work,'' Reid said.
Monday, February 1, 2010
Travelers Sees Record Profits
The Travelers Cos. saw its fourth-quarter profits climb 60 percent, driven largely by investment gains.
The insurer posted record net income for the quarter of $1.285 billion and full year net income of $3.622 billion. It marked the best quarter for profits Travelers has seen since 2002.
“Our retention rates remained high and the impact of renewal rate changes on premiums remained positive across all three of our business segments,” said Jay Fishman, chairman and chief executive officer of Travelers.
Total revenue in the fourth quarter was $6.456 billion, up 11 percent from the year-ago period. The insurer saw a 4-percent decline in net written premiums from the fourth quarter a year ago, which the insurer attributed to reduced insured exposures due to lower levels of economic activity.
Travelers fourth-quarter combined ratio was 83.4, down from 85.9 in the fourth quarter of 2008. For the year, Travelers combined ratio was 89.2, down from 91.9 in 2008.
Travelers Business Insurance segment had a combined ratio of 78.8, down from 85.7 in the prior-year period. “Business Insurance achieved strong underwriting results in the quarter as evidenced by its combined ratio. Although the impact on net written premiums from the economic downturn remained evident during the quarter, we once again produced positive renewal rate changes, strong retentions and stable new business levels,” said Brian MacLean, president and chief operating officer.
Travelers Personal Insurance segment had a combined ratio of 90.4 in the fourth quarter, up from 85.6 in the prior-year period. Personal Insurance net written premiums for the fourth quarter increased 3 percent to $1.735 billion. The company attributed the increase to continued positive renewal premium changes and strong retention rates. “Although we experienced a seasonality impact within our automobile business, we are pleased with our rate levels and new business quality,” MacLean said.
The insurer posted record net income for the quarter of $1.285 billion and full year net income of $3.622 billion. It marked the best quarter for profits Travelers has seen since 2002.
“Our retention rates remained high and the impact of renewal rate changes on premiums remained positive across all three of our business segments,” said Jay Fishman, chairman and chief executive officer of Travelers.
Total revenue in the fourth quarter was $6.456 billion, up 11 percent from the year-ago period. The insurer saw a 4-percent decline in net written premiums from the fourth quarter a year ago, which the insurer attributed to reduced insured exposures due to lower levels of economic activity.
Travelers fourth-quarter combined ratio was 83.4, down from 85.9 in the fourth quarter of 2008. For the year, Travelers combined ratio was 89.2, down from 91.9 in 2008.
Travelers Business Insurance segment had a combined ratio of 78.8, down from 85.7 in the prior-year period. “Business Insurance achieved strong underwriting results in the quarter as evidenced by its combined ratio. Although the impact on net written premiums from the economic downturn remained evident during the quarter, we once again produced positive renewal rate changes, strong retentions and stable new business levels,” said Brian MacLean, president and chief operating officer.
Travelers Personal Insurance segment had a combined ratio of 90.4 in the fourth quarter, up from 85.6 in the prior-year period. Personal Insurance net written premiums for the fourth quarter increased 3 percent to $1.735 billion. The company attributed the increase to continued positive renewal premium changes and strong retention rates. “Although we experienced a seasonality impact within our automobile business, we are pleased with our rate levels and new business quality,” MacLean said.
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