NAIC Property and Casualty Committee Meeting Report: August 25

On Monday, August 25, 2008, the National Association of Insurance Commissioners (“NAIC”) held a Property and Casualty Insurance Committee (“Committee”) meeting to discuss proposed amendments to the Medical Professional Liability Closed Claim Reporting Model Law (“Model Law”). To view the meeting agenda, click here.

Committee Chairman and Florida Insurance Commissioner Kevin McCarty called the meeting to order with a quorum of members in attendance.

Commissioner McCarty provided an overview of the Model Law, which has been drafted as result of a 2003 Government Accountability Office report that exposed a lack of access by lawmakers to medical professional liability market information. This lack of information hinders lawmakers’ ability to answer consumers’ questions about market performance, or explain the causes of rising losses over time.

Eventually enabling policyholders to view industry drivers by providing necessary information to lawmakers through a central state depository is one of the goals of the Model Law.

The Model Law requires claims reporting from first dollar-loss payees, which may include captive companies, but not captives that operate solely as reinsurers. Current Model Law language is consistent with a model already in place in Florida, which also collects data from risk-retention groups and self-insureds. Twenty-three states currently have some form of closed-claim reporting requirements for medical malpractice claims. Of those states, 10 require either captives or risk-retention groups to report information as well.

To view a copy of the Model Law, click here.

At issue during the meeting were two amendments to the Model Law proposed by Washington Insurance Commissioner Mike Kreidler.

One amendment (Option 1) would add a paragraph to Section 4A(4) of the Model Law providing states with an additional method of information gathering in the event that a captive insurer asserts a federal exemption or other jurisdictional preemption to data reporting. This amendment would require the facility or provider covered by such an insurer to report all required date on behalf of the captive insurer.

The second amendment (Option 2) merely adds “captive insurer” to the types of insurers already listed in the Model Law.

To view a copy of the proposed amendments, click here.

To view comments regarding the amendments from Commissioner Kreidler, click here (July 7) and here (July 29).

Vermont Commissioner Paulette Thabault spoke in support of Option 1, saying that the additional language would prevent jurisdictional issues for captive companies and protect the states from litigation by providing an alternate method of data collection. The proposed amendment would also reduce data gathering costs for the states, as providers can obtain information much more quickly than the states through their contractual relationships with captive insurers or risk-retention groups.

To view Commissioner Thabault’s complete comments in support of Option 1, click here.

To view additional comments from certain Vermont entities, click on the hyperlinks below:

• Vermont Delegation of the National Conference of Insurance Legislators (June 27 and August 20)
• Vermont Captive Insurance Association

Missouri Commissioner Linda Bohrer voiced concern that providing an “opt-out” of data reporting for large market segments would present enforcement problems. Her arguments focused on:

• The current model language affords state regulators flexibility in terms of enforcing reporting requirements for non-licensed and self-insured entities
• Most states currently collecting claims data do not exempt non-licensed and self-insured entities
• The opt-out proposals would make the model unenforceable by the states, and would greatly impair their ability to collect meaningful data
• Self-insurers, surplus lines, and risk-retention groups constitute a significant share of the market in most states and should not be exempt from data reporting

To view complete comments from Commissioner Bohrer, click here.

To view comments from Utah Commissioner Don Spann, click here.

The National Risk Retention Association (“NRAA”) requested that the Model Law be amended to exclude risk-retention groups from the list of entities required to report information. To view NRAA comments, click here.

Commissioner McCarty asked the Committee what actions the individual states’ Departments of Insurance could take against healthcare providers that refuse to submit information, since those providers are not regulated by insurance departments.

The Committee decided that a provision should be added enabling enforcement by the appropriate regulatory entity for each state.

After discussion, the Committee voted to accept an amended version of Option 1 which includes addition of a notice from either risk-retention and captive insurance groups or the domiciliary state’s Commissioner to individual policyholders that information must be collected and provided to the state. The Commissioners from New Mexico and Oklahoma voted against it, and South Dakota’s Commissioner abstained. The Committee will further consider the Model Law at the upcoming NAIC Fall 2008 National Meeting.

The meeting was then adjourned.

Should you have any questions or comments, please do not hesitate to contact Colodny Fass.