Call to Order and Roll Call
The 4th meeting of the Interim Joint Committee on Banking and Insurance was held in conjunction with the 114th Annual Convention of the Independent Insurance Agents of Kentucky, on Friday, November 12, 2010, at 10:00 AM, at the Brown Hotel, Louisville, Kentucky. Representative Jeff Greer, Chair, called the meeting to order, and the secretary called the roll.
Present were:
Members: Representative Jeff Greer, Co-Chair; Senators Julian M. Carroll, Julie Denton, John Schickel, Dan "Malano" Seum, and Tim Shaughnessy; Representatives Dwight D. Butler, James R. Comer Jr., Will Coursey, Ron Crimm, Robert R. Damron, Ted Edmonds, Tim Firkins, Mike Harmon, Dennis Horlander, Brent Housman, Dennis Keene, Brad Montell, Sannie Overly, Jody Richards, Steve Riggs, Arnold Simpson, Kevin Sinnette, Wilson Stone, John Tilley, and Ken Upchurch.
Guests: Sharon Clark, Commissioner, and D.J. Wasson, Legislative Liaison, Kentucky Department of Insurance.
LRC Staff: Rhonda Franklin, Jens Fugal, Emily Bottoms, and Jamie Griffin.
There was a motion made by Representative Richards, seconded by Senator Shaughnessy to approve the minutes of the October 26, 2010, meeting.
Chairman Greer recognized Senator Shaughnessy to make a statement regarding the recent findings of the State Auditor relating to the Passport Medicaid Health Plan. He asked that committee members read the State Auditor’s report and requested for the committee discuss the findings at a future meeting. He stated that the executive leadership at Passport must answer and be held accountable for the outrageous abuses.
Chairman Greer recognized leadership of the Independent Insurance Agents Association: Peggy Porter, President and CEO; Phillip Hunt, President-Elect; and Mike Miley, National Chairman. Mr. Hunt stated that there are 3,000 licensed insurance agents in Kentucky and 300,000 agents nationwide. The association was established in 1896, and Kentucky agents were among the original founders of the association.
Update on Federal Health Care Reform Implementation
Sharon Clark, Commissioner, Kentucky Department of Insurance, stated that over the past three months progress has been made, but, there are still many issues that are undecided. The rate review process requires the United States Department of Health and Human Services, in conjunction with the states, to develop a process for annual review of unreasonable premium increases for health insurance coverage. Insurers will be required to submit to states and Health and Human Services a justification for an unreasonable premium increase and post it online. Guidance on “unreasonable” is being developed by Health and Human Services and the timeline for receiving guidance is unclear, but Health and Human Services has acknowledged the need to provide guidance before the end of the year. In regard to medical loss ratios, insurers must report to Health and Human Services the ratio of incurred losses plus loss adjustment expense to earned premiums. Reports must include percentage of premium revenue expended on the following: reimbursement for clinical services, activities that improve health care quality, all other non-claims expenses excluding taxes and licensing and regulatory fees. Insurers must issue a refund to enrollees if the percentage of premium expended for medical claims and health care quality improvement is less than 85 percent in the large group market and 80 percent in the small group and individual market. She stated that the National Association of Insurance Commissioners approved recommendations to Health and Human Services on October 21, 2010.
The National Association of Insurance Commissioners worked through committees “E” and “B”. The “E” committee worked on the “blanks.” Blanks are the forms submitted by insurance companies to report financial information to state regulators. Regulators will then review this data to calculate medical loss ratio and any rebate required under the new federal law. The “B” committee worked on the medical loss ratio and rebate calculations. She stated that credibility remained at 50 percent, aggregation will be maintained at state level by entity, and that an executive committee was formed to address the issue of agent commissions with Health and Human Services. The issues outside the scope of the National Association of Insurance Commissioners include: agent commissions, transitional rules, payment rebates, and expatriate policies. These will be determined by Health and Human Services. The association is developing a glossary of health insurance and medical terms, coverage facts, explanations of coverage, and standard definitions.
Commissioner Clark stated that Kentucky was awarded a premium review grant of $1 million dollars on August 16, 2010, which will be used to increase the categories of data required to be filed by large groups and expand the Department of Insurance’s review of large group filings to include analysis of rate factors, modify the review process to include consideration of plan years, underwriting issues, and policy forms. The department will also be developing a publication to explain the rate review process, including the information submitted by insurers and reviewed by the department, and will be conducting surveys and holding open meetings for consumers to determine what information would be useful for them in understanding the rare review process.
The department was awarded a $1 million dollar exchange planning grant on September 30, 2010. It will be used in a collaborative effort between the department and the Cabinet for Health and Family Services to do county level market research (demographics, income, and insured status). The department also was awarded a grant for a consumer assistance program in the amount of $215,784, on October 19, 2010. It will be used to assist consumers with health insurance access issues and coverage denials. The Department has been notified of a supplemental grant for the consumer assistance program in the amount of $270,280. That money will be used for advertising, ombudsman travel, webinar technology, and an interactive classroom responder system. Commissioner Clark gave a brief summary of issues that might be addressed in the 2011 Regular Session.
In response to a question from Representative Damron asking if the National Association of Insurance Commissioners expects the federal government to sign off on the recommendations for the medical loss ratio and, if Kentucky does not make the necessary changes for the exchange program, whether the state follow the national exchange rules, Commissioner Clark stated that the federal government is expected to sign off on the medical loss ratio recommendations by the end of the year. If the state does not address the exchange program, it will default to the national exchange. She stated it would be very beneficial for Kentucky to address the exchange program.
In response to a question for Senator Seum asking if an exchange is the same as a pool, Commissioner Clark stated that it is more like a marketplace for insurance, and will provide more consumer protection, choice, and make it easier to obtain information.
Representative Greer thanked Commissioner Clark for the presentation and guidance on this issue.
With no further business, the meeting adjourned at 11:20 a.m.