The Florida Insurance Intelligence Report JANUARY 27, 2012 Contact Cecil Pearce cpearce@flains.org or Sam Miller smiller@flains.org PIP in Senate, Life Insurance Bills, Special FIC Conference Highlight 4 th Week PIP reform deliberations likely begin late next week in the Senate in the Banking & Insurance Committee. The House Insurance & Banking Subcommittee, which has already approved the House s PIP reform legislation, takes up two important FIC-backed life insurance measures Monday. Significantly, it will not be considering the proposal to right-size the Florida Hurricane Catastrophe Fund. The Florida Insurance Council conducts its members only 2012 Special Legislative Briefing Wednesday at the Doubletree Hotel Downtown, featuring Senate Banking & Insurance Chairman Garrett Richter, House Insurance & Banking Subcommittee Chair Bryan Nelson and other legislators and high-level state leaders. The program includes an up-to-the-minute briefing on top insurance issues by the FIC lobbying core Charlie Dudley, Gary Guzzo, Robert Reyes, Paul Sanford and Don Brown. The legislative briefing is preceded on Tuesday night by a special reception. PIP Reform Package Expected to Move in Senate Next Week A package (CS/HB 119) has cleared two House committees in recent days, including the House Civil Affairs Subcommittee on Wednesday. A significantly different PIP reform package (SB 1860) is expected to be taken up by the Senate Banking & Insurance Committee Thursday, February 2, in Room 412, Knott Building. FIC members and other insurance groups believe the House package is much stronger, including eliminating PIP clinics, chiropractors and massage therapists from the PIP system and requiring emergency treatment within 72 hours of the accident in an emergency room at or owned by a hospital. The House plan also caps attorneys fees and repeals the attorney fee multiplier and restores the ability of insurers to require examinations under oath, although some FIC members have identified problems with this language. Sen. Joe Negron, R- Palm City, developed the Senate plan. PIP clinics and chiropractors are still in the PIP system, although not massage therapists. It is supported by the trial law-
PAGE 2 THE FLORIDA INSURANCE INTELLIGENCE REPORT Next Week continued. yers, chiropractors and physicians who are fighting the House plan and the trial lawyer and chiropractor friendly consumer group, the Florida Consumer Action Network. The Office of Insurance Regulation supports the House plan 110 percent. Governor Rick Scott favors the House approach and, according to FIC lobbyist Robert Reyes, has expressed his disappointment in the Senate bill. Scott, Chief Financial Officer Jeff Atwater, Insurance Commissioner Kevin McCarty and many other officials demanded effective PIP reform at a Capitol rally this week. During the rally, the theme was, the House and Senate must reach agreement on an effective package. FIC lobbyists expect amendments before Banking & Insurance to strengthen the Senate plan. Their fate is unclear. There does seem to be optimism that neither chamber is wedded to everything in its current packages and strong, effective middle ground language might be possible. Defeat of Insurer Bad Faith Bill Makes Passing a Good PIP Bill Harder A new hurdle to a good strong PIP reform bill was raised with defeat of the insurer bad faith bill Thursday in the House Civil Justice Subcommittee. Gerald Wester, veteran lobbyist for the American Insurance Association, Associated Industries of Florida and other fine clients, says the trial bar was committing almost all of its resources to killing the insurer bad faith bill (HB 427.) With that bill dead and the issue out of the way so early in the session, the powerful trial bar will turn everything loose to fight the House PIP package, Gerald notes. The House Civil Justice Subcommittee voted 7-8 to defeat Rep. Kathleen Passidomo s bill providing insurers a reasonable time to settle third party claims and avoid gottcha bad faith lawsuits consistent with other states. This was one of the highest priority bills for FIC, other insurers, Associated Industries of Florida, the national and Florida chambers and other business associations. This year s bill extended to third party claims the 60-day civil remedy notice and right to pay policy limits in current law for first party claims. The business/insurance coalition launched a major initiative for insurer bad faith reform during the 2011 session with a much broader bill. That proposal was defeated in this same committee the House Civil Justice Subcommittee. Coalition leaders were encouraged by key legislators to develop a much more limited package for 2012 and they complied, with only the same disappointing result. Proponents of a rational Florida law on civil remedy against insurers will come back in 2013.
PAGE 3 Three Top Life Insurance Issues Addressed FIC lobbyist Paul Sanford, ACLI Lobbyist Curt Leonard and others met with Rep. Rachel Burgin, R-Riverview, late this week on her bill including life insurance cash value and accelerated benefits in the buy down for Medicaid eligibility for nursing home care. Rep. Burgin agreed to withdraw the bill (HB 1005); although she remains convinced the issue deserves further review and is calling on the industry to work on a study between now and the 2013 session. Rep. Burgin is very concerned about senior citizens that need nursing home care having a method to use the cash value of their life insurance polices to assist in providing such care until they qualify for Medicaid, FIC lobbyist Sanford says. She has asked the life industry and other affected industries to participate in a study group to determine the possibility of using accelerated benefits of a life insurance policy for that purpose. The Senate bill (SB 1476) is still under consideration, but there is now no House bill. FIC lobbyists will be monitoring development of the state budget to ensure the issue does not resurface in that process. The Senate sponsor is Joe Negron, R-Palm City, Senate point person on Medicaid issues. The bills are strongly opposed by FIC and its Life Committee. Concerns include notices which would be required to policyholders and the requirement that life insurers have an accelerated benefits provision in their policies. The House Insurance & Banking Subcommittee, on Monday at 2 p.m. in Room 404, House Office Building, takes up a bill (HB 1065) implementing the NAIC Model Regulation on Annuities Suitability. This is supported by FIC and its Life Committee and Sanford has been working to get it agendaed. The Senate bill is SB 1476, sponsored by Banking & Insurance Chairman Garrett Richter, R- Naples. It is expected to be taken up by Richter s committee soon. The House committee also takes up HB 409, which allows alien life insurers, under certain circumstances, to issue policies to foreign non-residents of Florida. The Senate companion (SB 1844) is pending in the Banking & Insurance Committee. The bills restore a law which, in the old F.S. 624.402(8), had provided an exception from Certificate of Authority requirements for life insurance and annuity contracts issued by qualifying alien insurers to foreign non-residents in Florida, subject to certain market conduct standards. FIC and its Life Committee support this legislation. Cat Fund Bill Stalled in House Committee Florida Hurricane Catastrophe Fund Chief Operating Officer Jack Nicholson s plan to right-size the Cat Fund appears to be stalled in the House Insurance & Banking Subcommittee, according to FIC lobbyist Don Brown. Another key property bill, reducing Citizens Property Insurance Corporation assessments on private insurers and their policyholders, continues with momentum. Here is Don s status report on HB 833 & SB 1372: On January 12, HB 833 was workshopped in the House Insurance and Banking Subcommittee, presumably setting it up for formal consideration and a vote at a future meeting. Just after four p.m. Thursday, the Insurance and Banking Subcommittee meeting agenda for Monday, January 30, was released and HB 833 was on it. Rep. Bill Hager s bill was removed from the agenda about an hour later. At this time it is unclear when or if the bill will be heard in the House. At this time the Senate companion (SB 1372) by Budget Chairman J.D. Alexander has not been placed on the agenda of it's first committee of reference. Stay tuned. The Cat Fund proposal was
PAGE 4 THE FLORIDA INSURANCE INTELLIGENCE REPORT Cat Fund continued. opposed by Insurance Consumer Advocate Robin Westcott during the House Insurance workshop. Ms. Westcott spoke against the bill, saying it would produce significant increases in rates which might harm small insurers in addition to having to be absorbed by consumers. The Office of Insurance Regulation also has opposed the plan in other legislative committee hearings. The Cat Fund bill (HB 833 & SB 1372) reduces the limits of the FHCF mandatory coverage layer from the current $17 billion over a three-year period. For the 2012 contract year, the limit is reduced to $15.5 billion; for the 2013 con- tract year, the limit is reduced to $14 billion; and for the 2014 and subsequent contract years, the limit is reduced to $12 billion. It increases the participating insurer copay by reducing the maximum available coverage percentage from the current 90 percent over a three -year period. It includes other provisions as well. The Cat Fund Advisory Council has formally declared a $3 billion shortfall for the 2011 hurricane season and shortfalls three of the last four years because of a collapse of New York bond markets and the worldwide economic crisis. Nicholson s plan is intended to get the Cat Fund to a level where its bonding needs are more likely to be met each year regardless of national economic disruptions. Ms. Wescott and OIR have called the plan too aggressive without being specific and have not really addressed Nicholson s warning that the Cat fund is dangerously overexposed and might be unable to deliver on almost one-third of its contracted capacity after a huge hurricane. The result of that failure could be the financial collapse of several significant property insurers in the state, Nicholson says. OIR, Citizens Backing Assessment Cuts to Attract New Property Insurers Here is Don Brown s status report on an OIR and Citizensbacked bill (HB 1127, SB 1346) eliminating the regular assessment in Citizens Commercial Lines Account and Personal Lines Account and reducing it from 6 percent to 2 percent in the Coastal Account: Rep. Ben Albritton, R- Bartow, and Sen. Steve Oelrich, R- Gainesville, propose to significantly reduce the regular assessment authority of Citizens Property Insurance Corporation. The House bill was heard in the Insurance and Banking Subcommittee on January 24 and received a favorable vote of 11 Yeas and 2 Nays. The bill is now in the Government Operations Appropriation Subcommittee and then should move to the Economic Affairs Committee. In the Senate, the bill was heard in the Banking and Insurance Committee on January 19 and was reported out favorable with 11 Yeas and 0 Nays. On January 26 it received a vote of 6 Yeas and 0 Nays in the Budget Subcommittee on General Government Appropriations. It will now move to the full Budget Committee which will be it's final Senate committee of reference. Insurers must pay the regular assessment to Citizens within 30 days and usually out of their surplus. They recoup this through their rate base but that could take 18 months to two years. The emer- gency assessment, which now would be activated much sooner does not require a hit on an insurer s surplus. It is remitted only as companies recoup it from policyholders in their rate base. Citizens has testified it could handle this dramatic shift in cash flow because of surplus and a good credit rating it has accumulated in recent years. OIR has testified repeatedly that in almost every case when it is recruiting a major insurer or group of investors, the danger of surplus being drawn down by the Citizens regular assessment is mentioned as a barrier to doing business in Florida.
PAGE 5 Speaker: House Moving on State Budget & Redistricting House Speaker Dean Cannon this week said he expects the House to finish its initial work on both redistricting and a new state budget within the next two weeks. Cannon outlined a schedule that has the House voting on its redistricting maps either next Thursday or Friday. The House Appropriations Committee will take up the House's $69.1 billion budget on Wednesday with a floor vote expected the week of February 6, the fifth week of the session. This could set the stage for the Legislature to finish its redistricting work for now since Senate President Mike Haridopolos has discussed the possibility of having the Senate meet in session on redistricting late next week, on Friday, February 3. There are many GOP leaders who want to finish redistricting now out of concerns that the state Supreme Court - which has the power to review new maps for legislative districts - could reject them and force the Legislature to draw up new ones. The Legislature might be able to do this during the current session instead of having to return in a special session this spring. The outlook for the 2012/13 state budget is a lot less clear. Cannon says he sees "no cause for concern" that the Senate has not yet begun drawing up its spending plan. Haridopolos has been skeptical about the current tax collection estimates for the current year and is considering whether to delay action on the budget until a special session closer to the July 1 beginning of the 2012/13 fiscal year. It was Tough Medicine for a Doctor-Opposed Ban on Balance Billing not be a stand alone bill in the Senate but it can be tagged onto other measures as an amendment. At the insistence of Senate President-Designate Don Gaetz, R -Destin, the Senate committee struck the bill down by a 4-3. Because it was a committee bill, the sponsor was, in effect, Health Regulation Chairman Rene Garcia, R-Hialeah. It is most unusual for a The Senate Health Regulation Committee on Wednesday voted not to introduce a bill that would require doctors, urgent care clinics and ambulatory surgical centers to post certain charges. The proposed committee bill (SB 7186) also would have precluded hospitalbased providers from balance billing certain insured patients. The move means the idea cancommittee to refuse to introduce a bill at the behest of its chairman. Hours earlier, the House Health & Human Services Quality Subcommittee met and tagged a strike-everything amendment onto its version of the bill, CS/ HB 1329. The House bill passed by a 10-5 vote. Don t forget to keep up-to-date during the Session with our website: www.flains.org.