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Busy session for insurance forces: Compact passage highlights plethora of industry-related legislation considered by the General Assembly

May 30, 2005

State lawmakers also killed a bill that offers "mandate lite" health coverage and kept the topic of vicious dogs at bay during the 2005 legislative session.

Insurance lobbyists and regulators say they just wrapped up one of the busiest sessions in recent memory. Topics ran a wide gamut and crowded committee calendars.

Last year, five industry-supported bills made it through the General Assembly, according to Dan Tollefson, corporate counsel for the state Department of Insurance. This year, 15 did, and the department tracked more than 50.

"It was definitely the busiest session I've seen as far as insurance goes," added Insurance Institute of Indiana spokesman Marty Wood, who has been involved with legislative sessions about 12 years.

The session included plenty of victories and setbacks for all parties involved with insurance.

Introducing the compact

Indiana became the 15th state to join a multistate compact for life insurance, dis- ability, annuity and long-term-care products, thanks to a bill signed May 18 by Gov. Mitch Daniels. Indiana's enrollment pushes the compact one state closer to the 26 needed for it to go into effect.

The compact will create uniform standards and a single filing point for insurers. If one state approves a product, they all will.

Backers of Senate Bill 634 say it gives businesses in those fields a crucial edge when competing with banking and securities industries for the retirement investment dollar.

Without the compact, insurers must seek product approval in every state in which they operate. Each of those states has different standards, requirements and biases. The wait to move a product to market can sometimes last a year, Indiana Insurance Commissioner Jim Atterholt said.

"It puts them at a tremendous competitive disadvantage against the banks and securities firms," he said, noting that those industries can move a product to market within a month or two.

"If and when the compact comes into effect, it could literally revolutionize the insurance industry from a speed-to-market standpoint," Atterholt said.

Mulling the mandate option

A bill that would have allowed an insurer or HMO to avoid complying with all health care benefit mandates, under certain circumstances, died in committee this session.

The "mandate lite" bill, as it's known, came about as part of an effort to reduce the cost of health insurance for the smallbusiness employer. The thinking was, "It's better to have maybe Ford Taurus coverage for everybody than Cadillac coverage for a few," Atterholt said.

Many of the mandates came with protection from their own constituencies, "and when they banded together, they were a pretty effective force," the commissioner added.

Kim Dodson said she was thrilled the proposal died.

"The bill-there was no other way to describe it-was absurd," said the director of government relations and development for The Arc of Indiana, an advocacy organization for people with disabilities.

Several mandates that people with disabilities depend on could have been eliminated, and that worried Dodson. They include one that requires coverage of dental anesthesia for the disabled and another for autism treatments or therapies.

She said she saw no data on the cost of treatments, the number of people who need the mandates or whether the bill would reduce premiums.

Each mandate had been added over the years after people successfully argued its merits. Dodson thinks the mandates should be removed the same way, not with one sweeping bill.

"We thought that if they were going to be eliminated, they each need to stand on their merits again and be eliminated," she said.

That still may happen. A task force was created to examine the cost of these mandates, and the bill could reappear soon.

"I will be very surprised if we don't see it next session, again," Atterholt said.

Waiver bill moves forward

House Bill 1075, a distant cousin to the "mandate lite" proposal, passed through the General Assembly on wide margins in each house.

The bill allows individual insurance policies to permit policyholders to waive coverage for some conditions. The legislation limits waivers to no more than two per individual and requires the insurer to review the waivers at least once a year, according to Wood.

Essentially, the bill allows people to waive coverage for lesser conditions to avoid a coverage denial. That would force people to turn to the Indiana Comprehensive Health Insurance Association, a safety net program that offers higher-than-average premiums.

Wood said only a few states have yet to enact some sort of waiver bill.

The Arc of Indiana stayed quiet on this topic. Dodson said she's not convinced the waivers represent good public policy, "but I'm also not convinced they're horrible."

Getting tougher with fraud

Legislators unanimously voted to toughen the penalties for insurers and policyholders who commit insurance fraud.

House Bill 1403 establishes insurance fraud as a Class D felony and bumps it up to a Class C if the defendant has a prior, unrelated conviction for fraud or if the value of the fraud is at least $2,500.

Tollefson said the bill basically gives prosecutors "more to work with." Wood agreed.

Fraud has always been a Class D felony, he said. But this bill gives prosecutors the option of raising it to a Class C, even for a first-time offender if the case exceeds that dollar amount.

Wood said prosecutors had been less inclined to pursue these cases due to the softer penalties.

"The penalty just wasn't serious enough for them to put the time in to take it to trial, so plea bargains were happening if you could get the prosecutor to take the case in the first place," he said.

Places of worship

The General Assembly reminded courts that churches, synagogues and other places of worship are held to a lesser standard than the average commercial business when it comes to liability.

Senate Bill 132, which unanimously passed both houses, provides more limited liability for church premises used primarily for worship, according to Wood. For the past 100 years or so, churches were held to a lesser standard that basically said they had to only post a warning to visitors of a hazard on their property.

Most commercial businesses are obligated to fix the hazard as soon as possible.

The warning was considered sufficient because many places of worship lack the money a commercial business has to quickly fix things, such as broken steps, Wood said.

However, courts had started holding them to the same liability standards as commercial businesses.

Other bills considered

Insurance agents who serve in the military no longer have to worry about keeping up with their continuing education requirements if Uncle Sam calls them to active duty. Tollefson said he's seen some agents lose their licenses over what amounted to a technicality.

"It was breaking our hearts," he said.

Legislators took on vicious dog owners with House Bill 1759. That bill would have charged them with a misdemeanor or possibly a felony if their dog hurt someone, and the owner wasn't carrying a liability insurance policy that provides at least $100,000 in coverage.

Vicious dogs, as defined by the bill, include the usual suspect pit bulls and anything that would be considered a "wolf hybrid."

That bill wound up having little bite. House members referred it to the Committee on Courts and Criminal Code, and it was never heard from again.

Another bill that failed to survive would have offered tax credits for small businesses that provide health insurance. Dodson said The Arc of Indiana, with nine employees, faces double-digit premium increases every year, and the bill's failure disappointed her.

"That's something I hope comes back," she said.

Legislation that would have encouraged internal self-compliance audits never made it past the Senate committee level this session, Wood said. The bill stated that documents put together to conduct such an audit would be safe from litigation if the companies correct any wrongdoings they discovered.

"We think it's a really important bill because it encourages insurance companies to review the practices they are conducting," Wood said.

Looking ahead

The Insurance Institute of Indiana took a proactive agenda into the session, Wood said, because members saw a more favorable environment with Republican control of both houses.

"We were very aggressive, probably overly aggressive," he said, adding that they may have introduced too much for a new Legislature to digest in one session.

The next legislative session might include some insurance deregulation topics, but Wood said lawmakers will steer away from anything touchy, like tort bills.

All in all, he predicts a subdued followup to the 2005 session.
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