By Timothy J. Meenan, NAIFA-Florida Lobbyist
Session Dispatch #6 (End of Session Report)
NAIFA has finished a successful 2017 regular Florida Legislative Session. We have worked tirelessly on issues including assignment of benefits abuse, Stranger Originated Life Insurance, repeal of Personal Injury Protection Insurance, creating continuing education credit for your participation in NAIFA, and protecting agents and consumers against the unlicensed transaction of life and health insurance.
This session brought a few curveballs, including the resignation announcement by CFO Jeff Atwater along with political clashes and disagreements between the chambers and the Governor. The legislature was unable to adjourn on time (day 60) as budget negotiations between the House and Senate required a three-day extension.
Below is a summary of key legislation that passed as well as key legislation that failed during the 2017 session:
KEY LEGISLATION ENACTED THIS SESSION:
I. NAIFA Agent Continuing Education Credit Law (HB 925)
HB 925 was the Department of Financial Services (DFS) agent and agency legislation package. We worked with DFS and included NAIFA priority language in the department’s bill. The bill allows members of NAIFA Florida to receive up to two hours a year in continuing education credit for active participation in their professional or trade association. The bill extends this CE option to a few other identified organizations representing life, health and property insurance agents, public adjusters, and bail agents. To qualify for the credit, a member must attend four hours of association meetings each year; the credit cannot be used towards required ethics hours or in-class required credits. NAIFA members will still be required to submit documentation to the Florida Department of Financial Services to obtain the continuing education credits authorized under this law.
II. NAIFA Closes Loophole on Unlicensed Abstracting of Policies
NAIFA drafted and sought legislation clarifying the prohibition of the unlicensed transaction of life and health insurance. A loophole in current law allows anyone to be compensated for abstracting policies to employees of a company, members of a trade association, or trustees of a trust. Our language states that the existing exemption from agent licensure applies only if the person explaining coverage is an employee or a member of the group or business in question. With the amended language, now only an employee of the company, member of the trade association or union, or trustee may abstract policies without a license to members of their respective group or business. We amended this language onto HB 925, which was enacted and is on its way to the Governor.
III. Anti-STOLI Legislation Adopted! (SB 1600)
SB 1600 and HB 1205 revise the viatical settlement statutes making it more difficult for life settlement companies and others to engage in Stranger Originated Life Insurance (“STOLI”) policies. The bills define a STOLI transaction and makes agreements to further or aid a stranger originated transaction void and unenforceable.
The bills provide a fix for the Florida Supreme Court decision in the Pruco case by specifically stating that a life insurer may contest a life insurance policy that was obtained in STOLI transaction. The bill makes clear that the two-year incontestability clause does not prevent an insurer from contesting the issuance of STOLI policy on lack of insurable interest after the 2 years has passed. In addition, it prohibits the viatication of a policy procured with borrowed funds for five years after the policy inception date. This is a major victory for NAIFA, and hopefully ends a 13-year hard fought battle to fix this problem!!!
IV. FLAHIGA (HB 307)
HB 307 modifies the claim coverage caps for life insurance, deferred annuity contracts, and health insurance. The bill increases FLAHIGA’s liability from $300,000 to $500,000 for claims of insolvent health insurers for basic hospital expense, basic surgical, or major medical health policies. The domestic health plan association (FAHP) added an amendment to delay the doubling of the cap for medical coverages until 2020 due to their concerns regarding the impact of the Penn Treaty assessments on top of any health insurers that could become insolvent due to their sales on the federal exchange. The bill further provides FLAHIGA coverage for annuities held by a custodian or trustee as part of an individual retirement account.
V. Insurance Omnibus
HB 359 quickly became the vehicle of choice for last-ditch insurance-related amendment attempts. The bill permanently exempts medical malpractice insurance from the Florida Hurricane Catastrophe Fund assessments. The bill also authorizes insurers to impose a $15 fee for insufficient funds for policy premiums paid by debit card, credit card, electronic transfer, or electronic check if the payment is declined, returned, or unable to be processed. However, if the non-payment is due to fraud, the fee is not permitted. Additionally, the bill allows premium payments to be made by electronic drafts or electronic checks as well as other methods already permitted by law. However, the bill does not allow such methods of premium payment for reinsurance, wet marine and transportation insurance, title insurance, and credit life or credit disability.
The bill also updates current and makes electronic documents sent by insurers comply with font, size, and other requirements imposed on printed documents. Additionally, it allows FWCIGA assessments that are collected from policyholders to be included as an insurer asset for accounting purposes. The bill also amends the minimum surplus requirement for those insurers writing only renter’s insurance. It requires newly licensed and current insurers that write only renter’s, tenant’s, or cooperative unit owner’s residential property coverage to have a minimum surplus of $10 million.
VI. Transportation Network Companies (HB 221)
HB 221 creates a regulatory framework for Transportation Networking Companies (TNCs) like Uber and Lyft. The bill establishes insurance standards for TNC companies and operators/drivers. The bill establishes a tiered insurance scheme for drivers: (a) while the driver is logged onto the digital network but is not engaged in a prearranged ride; and (b) elevated coverage requirements for when a passenger(s) is in the car and the driver is engaged in a prearranged ride.
The bill requires TNCs to carry $100,000 of insurance for bodily injury or death and $25,000 for property damage while the driver is logged onto the system but does not have a passenger in the car. During the period when a passenger is in the car, drivers are required to have $1 million worth of coverage, which can be provided by the TNC, the driver, or a combination of the two. HB 221 further requires TNCs to have third-party local and national criminal background checks conducted on all drivers. The majority of the TNC insurance provisions in the bills match the TNC industry national compromise language that was agreed to in March of 2015. It is worth noting that provisions in the bills relating to coverage exclusions may affect stacking coverages. The coverage exclusions may not apply to other insurance policies that might otherwise provide coverage to the TNC driver, like an umbrella policy or any stacking UM/UIM coverage on other vehicles in the driver’s household.
The bill grants the Department of Financial Services authority to enforce the provisions enacted by the bill, which allows the department to assess fines on the TNC for non-compliance. Additionally, the bill requires the TNC and/or the driver to possess the statutory minimum uninsured and underinsured vehicle coverage required by drivers in the state.
VII. Financial Literacy Bill (SB 392- amended onto 833)
SB 392 adds a requirement for high school students to take one half of a credit hour in personal financial literacy and money management in order to graduate. The bill revises the requirements for the “Next Generation Sunshine State Standards” to include financial literacy and money management in the high school curriculum. The Senate initiative was named the Dorothy L. Hukill Financial Literacy Education Act, after Senator Dorothy Hukill, who has passionately advocated for this legislation for a number of years.
During the last week of session, the initiative was added onto SB 833 (Relating to High School Graduation Requirements) to ensure final passage by both chambers.
VIII. Private Flood Insurance Bill (HB 813)
HB 813 mandates that the Florida Commission on Hurricane Loss Prevention Methodology revise hurricane loss prevention models every four years. Current law requires that an agent notify the insured that if they choose to leave the National Flood Insurance Program (NFIP) and later return, they will pay the full-risk rate, not the NFIP-subsidized rate. Additionally, the agent must obtain a signed disclosure from the insured acknowledging such; current law requires the agent provide written notice to be signed by the applicant upon receiving the application to obtain private flood coverage. The new language allows the agent more flexibility by requiring the agent provide the signed notice at any point before the agent actually places flood coverage with a private insurer. However, the agent may avoid obtaining the acknowledgment if the NFIP allows insureds, at some point in the future, to return to the program at any time and still obtain the subsidized rate.
The bill extends the sunset for insurers not having to get private flood rates approved from October 1, 2019 to October 1, 2025. The bill also extends from 2017 to 2019 an exemption from the diligent effort search requirement for surplus lines insurers. Also, if fewer than three admitted insurers are writing flood on July 1, 2019 when the diligent search exception expires, the agent may only obtain a number of declinations that meet the number of admitted insurers providing coverage. For example, if only one flood insurer is writing private coverage, only one declination will be required.
IX. Discount Plan Organizations (HB 577)
The bill amends the definition of “discount plan” to also include any plan that does not charge a fee to members. It clarifies that any third-party entity that contracts with a provider to administer a discount plan must be licensed as a discount plan organization. The bill adds a recordkeeping requirement and requires each organization maintain records of each member for 5 years after issuing the plan.
The bill adds additional restrictions pertaining to plan cancellation. The organization must cancel the membership within 30 days after receipt of a cancellation request and may not charge the member any fees after the effective cancellation date. Further, the organization must provide pro-rata reimbursement of periodic charges made for a month after the effective cancellation date. It also clarifies that if a member cancels his membership within the open enrollment rules established by an employer, the member shall receive a pro-rata reimbursement of all periodic charges.
X. Insurance Fraud Prevention (SB 1012)
HB 1007 was the Department of Financial Services’ annual fraud package. The bill enhances existing fraud requirements and mandates that every admitted insurer in the state must establish a designated anti-fraud unit by December 31, 2017. The bill specifies that the insurer’s additional costs incurred in creating the fraud unit and fulfilling the reporting requirements established by law must be included as an administrative expense for ratemaking purposes.
The bill requires each admitted insurer and its dedicated fraud unit to provide extensive information to the state to ensure compliance. The fraud unit must provide a detailed description of the anti-fraud unit, the rationale of all staff and personnel involved. The report must also include the number of policies written, number of claims received on an annual basis, volume of suspected fraudulent claims, and details pertaining to the implementation and materials used in anti-fraud education and training. The bill requires admitted insurers to provide initial anti-fraud training at the creation of the unit and continuing education each year thereafter.
The legislature also passed a public records component which provides exemptions from the state public records law for reports and documents relating to the investigation and tracking of insurance fraud.
XI. Keys to Independence Act Helps Foster Children Obtain Driver’s Licenses (SB 60)
A program known as the “Keys to Independence Act” passed both chambers early on during the legislative session. The program assists minors in the child welfare system obtain driver’s licenses and learner’s permits. The pilot program has aided over 1,200 youth obtain licenses, find driver education courses and insurance coverage, and offers financial assistance. The bill also expanded the initial program to enhance eligibility and provides youth whose placement statuses has changed with a grace period to finish the program.
The bill was signed into law by the Governor on May 1.
XII. Pre-Owned Auto Inspection (SB 1316/ SB 1012)
SB 1316 and HB 1299 allow insurers to opt out of the current mandatory inspection requirements for pre-owned motor vehicles and permits insurers to voluntarily establish their own pre-insurance inspection requirements if they opt out. The bills create express authority for an insurer to elect not to participate in the required pre-insurance inspection and limits the consumer’s expense to $5 in those instances where an insurer opts out of the inspection and the insurer implements their own inspections instead. Neither the Senate nor the House bill made it out of their committees of reference to be heard by the full chamber. However, the substantive language was amended onto SB 1012, the DFS Fraud legislation, and was enacted.
XIII. Adjuster Licensing (HB 911)
HB 911 amends the licensing scheme for insurance adjusters. The bill reduces the number of public adjuster apprentices a firm may have at one time from 12 to 4. Further, a supervising public adjuster may only be responsible for one public adjuster apprentice at a time; current law permits a supervisor to be responsible for three apprentices. The bill removes the existing 48-hour “cooling off period” during which a public adjuster cannot contact an insured; the requirement of a cooling off period was struck down by the courts in previous years. Additionally, the bill prohibits anyone who is not a public adjuster or an attorney from filing, for compensation, an insurance claim for an insured or third-party claimant. The bill makes numerous regulatory changes to company and independent adjuster laws, as well.
The bill eliminates the current prohibition on public adjuster apprentices from soliciting new business for a public adjuster. Under the new scheme, all lines adjusters appointed as apprentices will be allowed to solicit door to door. The regulatory scheme includes a recordkeeping provision, and requires adjuster records be kept for 5 years following the completion of an adjustment; currently the records must only be kept for 3 years.
LEGISLATION THAT FAILED THIS SESSION:
I. NAIFA Helps Kill Self-Insurance Initiative
In a late night, end of session maneuver, the Senate attempted to bury a harmful insurance provision in a Division of Corporations bill. The bill would have permitted not for profit organizations, including the Boys’ Clubs of America, the National Audubon Society, the Humane Society, the Boy Scouts of America, the Girl Scouts of America, Goodwill Industries, the Young Men’s Christian Association, and other groups to participate in a self-insurance fund rather than going through a licensed agent and insurer. Ultimately, the amendment was withdrawn and those organizations must still obtain coverage through a licensed agent and insurance company.
II. PIP Repeal (HB 1063)
Legislation to eliminate PIP and replace it with mandatory bodily injury passed
through the full House, but stalled out in the Senate. The bill did not make it out of two committees, effectively killing it in the Senate. SB 1766 sought to repeal PIP, but included a $5,000 benefit for mandatory Med Pay, along with mandatory bodily injury and property damage liability coverage. The Senate bill would have phased in the bodily injury coverage over the next five years ultimately requiring $25,000 in liability coverage for bodily injury or death to one person; $50,000 in bodily injury coverage to more than one person in a given accident; and $10,000 coverage for property damage in any one accident (25/50/10).
HB 1063 eliminated the existing PIP requirement and replaced it with Mandatory BI coverage with limits of 25/50/10 (limit for death or injury to one person of $25,000, up to two persons of $50,000, and $10,000 of physical damage coverage. No medical payments coverage was required or contemplated in the House bill. The House bill passed a vote on the floor on April 19 with an implementation date of July 1, 2018, but died in Senate messages before being heard on the Senate floor.
III. Assignment of Benefits (HB 1421)
There were a number of variations of legislation and amendments to rectify the AOB abuse epidemic throughout Florida. Unfortunately, no good AOB measure was able to succeed. However, we were successful in fighting off measures by the trial bar that would have enhanced the already prevalent AOB abuse.
There were two main vehicles addressing AOB. HB 1421 by Representative Grant, and SB 1218 by Senator Farmer. The House bill was the preferred vehicle for insurers, whereas the Senate bill was a trial-bar friendly initiative. The House bill would have required disclosures be provided to the insureds before entering into an AOB. It also would have moved to a “loser pays” attorney fee system. The House legislation provided the insured with an opportunity to rescind the assignment within 7 days of entering into the contract with the vendor. Further, the bill increased consumer protections and required vendors to provide written estimates of the work to be completed and required the assignee to notify the insurer of the assignment within 3 days of it being executed.
The Senate bill was amended a number of times and ultimately was not heard in its final committee. Generally, the Senate measure neglected to change the current attorney fee law for vendors, essentially endorsing the notion that vendors under AOB assignments are eligible to receive unlimited attorney fees. The Senate bill was extremely unfriendly to insurers and did not contain any attorney fee language. It required insurers to eliminate the costs of attorney gees on cases in which they lose a claim case in litigation from being part of the base rate and would have, essentially, ended the ability to utilize a managed repair program or ability to invoke the right to repair on a particular claim.
IV. Workers Compensation
HB 7085 addresses the recent decisions declaring some components of Florida’s Workers Compensation law unconstitutional. The bill would permit direct payments of attorneys by or on behalf of claimants and increases the total combined temporary wage replacement benefits (TTD/TPD) from 104 weeks to 260 weeks. It also allows a Judge of Compensation Claims (JCC) to award an hourly fee that departs from the statutory percentage based attorney fee limitation of $1500 under certain situations. Among several other components, HB 7085 also permits insurers to uniformly reduce premiums by no more than 5% if they file an informational-only notice within 30 days. Insurance industry representatives believe that the ability of a judge to award additional attorneys’ fees above the standard fee of $1,500 makes this bill less than ideal, and likely means that litigation will continue to expand causing rates to increase.
SB 1582 requires insurance carriers to authorize or decline requests for
authorization from health care providers within a three-day period and provides that a request is deemed to be authorized if the carrier fails to respond. Like the House bill, the Senate bill increases the temporary partial disability benefits from 104 weeks to 260 weeks, in compliance with the Florida Supreme Court’s decision in Westphal v. City of St. Petersburg. SB 1582 eliminates the statutory fee schedule of $1,500 for setting claimant attorney’s fees but allows the judge to consider certain factors and permit deviation from the attorney fee schedule.
The two bills remained different between chambers through the end of session. The House sought to curb attorney’s fees and was more industry friendly than the Senate bill, which was seen as friendlier to the trial bar.
V. Prejudgment Interest (SB 334)
SB 334 and HB 469 sought to require the payment of prejudgment interest in certain court awards. SB 334 required the court to include backdated interest on each component of economic damages, in a negligence action in which a plaintiff recovers economic damages and costs as the result of personal injury. The Senate bill made it through its committees, but died on the calendar without receiving a second reading.
HB 469 allowed recovery of prejudgment interest on both economic and non-economic damages. Insurance and business lobbyists were successful in fighting to keep this bill off of a committee agenda and it died early on during session.
VI. Retroactive Denial Bill (SB 102)
SB 102 and HB 579 would have prohibited insurers and health maintenance organizations from retroactively denying claims if at any time the insurer or health maintenance organization had verified the eligibility of an insured for a particular charge and treatment at the time of treatment. The Senate heard and passed the bill and subsequently sent it to the House. However, because the House bill stalled out in committee, and the Senate bill was not brought out of messages to be heard by the House, and the bill died.
VII. Prior Authorization Fails (SB 530)
SB 530 mandated that health insurers and pharmacy benefit managers (on behalf of health insurers) must include on their website detailed descriptions of requirements and restrictions to obtain prior authorization for coverage of a procedure, treatment, or prescription drug in clear, easily understandable language. It mandated that prior authorization forms be made available on their websites, as well as mandating that the form may not require information that is not necessary for the determination of medical necessity for coverage. The bill also prevented the implementation of new requirements or restrictions to obtain prior authorization unless the changes have been made accessible for at least 60 days on the insurer’s website and affected policyholders and health care providers are given at least 60 days written notice before the changes are implemented. SB 530 additionally created a period of 72 hours for non-urgent care situations and 24 hours for urgent care situations to authorize or deny a prior authorization request.
SB 530 passed all three of its committees of reference and passed a vote on the Senate floor, but without a House companion, the bill died in House messages. This bill was attached to HB 161 late in session, but we were successful in getting it stripped off in the House.
XIV. Direct Primary Care (HB 161)
A direct primary care agreement is a contract between a primary care provider and a patient, or a patient’s legal representative, under which the patient pays a specified amount to the primary care provider for access to services. Generally, primary care services include the screening, assessment, diagnosis, and treatment of a patient conducted within the scope and competency of the primary care provider.
HB 161 exempts direct primary care agreements from the scope of the Florida Insurance Code and establishes regulatory guidelines for direct primary care plans. The bill emphasizes that direct primary care does not constitute insurance and does not satisfy the individual mandate required under the federal Affordable Care Act, and requires such disclaimers be given to consumers in writing.
VIII. Patient Savings Act (HB 449)
SB 528 and HB 449 created the Patient Savings Act, which sought to mandate health insurer’s websites to provide information to insureds regarding the contracted amount for shoppable healthcare service. A health insurer’s website would also have to include a way to compare average prices among other healthcare providers. The insurer also must provide an estimate to an insured of the contracted amount and estimated amounts of copays and deductibles for health care services. Finally, the bill mandates a health insurer to create a shared savings incentive program which would provide a cash payment to an insured when he or she obtains a shoppable health care service at a price that is less than the average for that service.
HB 449 moved fairly quickly through the first three of its four committee stops, but died without a hearing in its final committee stop.
IX. HMO Bad Faith (SB 262)
SB 262 and HB 675 would have repealed several provisions which provide that HMOs, health insurers, prepaid health clinics, and prepaid health service organizations are not vicariously liable for the negligence of non-employee healthcare providers. Additionally, the bills provided that civil causes of action may be brought against HMOs for violations of the Health Maintenance Organization Act and for acting in bad faith when failing to provide a covered service.
Both bills died in committees and we successfully prevented the language from being amended onto any other initiative.
X. Frozen Formulary (SB 182)
SB 182 and HB 95 prohibits health insurers and HMOs from removing a covered prescription drug from its formulary except during coverage renewal with some limited exceptions. The bills also prohibit an insurer or HMO from reclassifying a drug to a more restrictive drug tier during the policy year. These bills would have continued upward pressure on health insurance rates and reduced insurer flexibility on prescription drugs. The House bill passed its first committee of reference, but died soon after. During the final days of session, the initiative was amended onto legislation addressing direct primary care, but was ultimately not considered.