NAIFA Illinois Legislative Update

    June 11, 2018

    The Illinois General Assembly and Governor Rauner reached a budget agreement and adjourned on time for the first time in four years. The budget allocates $38.5 billion in spending and estimates slightly more in revenue. However, some of the revenue estimates and cost savings measures, like pension reform, include very optimistic projections. The House and Senate sent over 500 bills to the Governor for action, including several impacting the insurance industry.

    SB 2513 Hastings/Burke - our Agent Broker Coalition initiative which creates an Education Advisory Council within the Department of Insurance and allows webinars as an acceptable method for Ethics CE, has passed both chambers and will be sent to the Governor for his consideration soon.

    American Family vs Walter Krop - This litigation, which is currently before the State Supreme Court, imperils two very important Statutory protections for insurance producers passed in 1996-97; the Insurance Placement Liability Act and the two-year statute of limitations on professional liability claims against insurance producers. IIA of Illinois has filed an Amicus Brief in the case. Oral arguments were held on May 22nd. Our counsel, Pretzel & Stouffer, is following the case closely. Click here for more background and here for a video of the oral arguments.  Unfortunately, since IIA of Illinois was not a party to the litigation, our only recourse was to file an Amicus Brief. We are disappointed in both the direction of the appeal and the competency of counsel utilized by American Family in this most important case. The State Supreme Court will issue a verdict this fall.

    While health insurance issues dominated most of the session, there was a significant amount of activity on the property and casualty side, specifically work comp, during the last few days of session. Instead of passing SB 2863 - Work Comp Rate Regulation and HB 4595 - State Operated Work Comp Company (which passed last year, and the Governor vetoed), the House democratic leadership incorporated Work Comp “Rate Review” language into an omnibus insurance bill, SB 1737, which included several different measures sought by the industry.

    Life Insurance

    SB 2437 Weaver/Anderson - Makes changes to the beneficiary designation of the insured’s spouse after a judgement of dissolution of marriage has been entered. Passed both chambers. 

    Health Insurance
    There was a great deal of activity with health insurance this session and several bills passed - almost all of which were agreed to by the industry and employers.

    HB 2617 Gabel/Murphy - Mandates coverage for fertility preservation services when medical treatments may cause iatrogenic infertility to an enrollee. Passed both chambers.

    HB 2624 Fine/Steans - Short Term Limited-Duration Health Insurance Act. Authorizes temporary health insurance policies of up to six months. Passed both chambers.

    HB 3223 Williams/Link - Mandates coverage for preventative physical therapy for insureds with multiple sclerosis. Concurrence in the House.

    HB 4146 Fine/Steans - Prohibits modification of drug coverage during the plan year. Passed both chambers

    HB 4165 Harris/Koehler - Prohibits state agencies from applying for an ACA waiver unless both chambers of the General Assembly approve by resolution. Passed both chambers.

    HB 4516 Fine/Morrison - Mandates coverage for hearing aids for individuals under 18 when prescribed by a hearing aid professional. Passed both chambers.

    HB 4821 Fine/Morrison - Mandates coverage for drugs used to treat stage 4 advanced, metastatic cancer. Passed both chambers.

    HB 5868 Ford/Munoz - Permits coverage by health plans for residential extended care services. Passed both chambers.

    SB 682 Mulroe/Feigenholtz - Creates the Emergency Opioid and Addiction Treatment Access Act. Mandates coverage for and treatment limitations for opioid and substance use disorders. Passed both chambers.

    SB 1707 Raoul/Lang - Clarifies existing mandate and expands coverage for mental, emotional, nervous, or substance use disorders. Passed both chambers.

    Property & Casualty/Work Comp
    SB 1737 Munoz/Hoffman - as amended in the House contained five different insurance related changes to the insurance code.
    The most significant change for agents and brokers is the new Work Comp Rate Review language.     First, it implements a prior approval of rates system for workers’ compensation rates; this is a major reversal of IL law and practice.  Effective February 1, 2019, insurers and rating organizations are required to “pre-file” workers’ compensation rates with the Director of the Department of Insurance for approval before they can take effect, if the director does not disapprove the filing within 30 days the filing is deemed approved and presumably can be used.  Whenever, for whatever reason, an insurer does not have effective rates, the director shall specify “interim rates for the insurer that are high enough to protect the interests of all parties and may order that a specified portion of the premiums be placed in an escrow account approved by him or her.”

    Second, it imposes a new “premium increase notice” requirement.  Effective January 1, 2019, an insurer is required to provide notice, 30 days in advance of the policy’s expiration date, to a workers’ compensation customer and the producer, if the renewal premium for the policy will be “in excess of 5% above the rate recommendation filed with” the Department of Insurance, subject to some exceptions. Insurers are already required to provide a customer with notice 60 days before the policy’s expiration date if the renewal premium is going to exceed 30 percent, but this percentage is not calculated as a part of the rates.
    This new language raises several questions that will have to be clarified by the Department of Insurance prior to implementation. We will provide that clarification/guidance when it becomes available.

          • - The bill includes language modernizing Illinois’ Captive Insurers law which was introduced last year (SB 1286) on behalf of the Illinois Manufacturers’ Association 

          • - The bill includes language sought by domestic stock insurers creating the Domestic Stock Company Division Law allowing such companies to divide into two or more companies.

          • - The bill includes NAIC Model language on credit allowed a domestic ceding insurer.

          • - The bill includes agreed language creating The Short Term Limited-Duration Health Insurance Act. The act limits short term policies to six months. The language was developed by the National Association of Health Underwriters and was a compromise between the three months in the ACA and a year, which was supported by several health insurers. This language was also included as a standalone provision in HB 2624, which passed both chambers and will be sent to the Governor.    

    SB 904 Hastings/Hoffman - Introduced on behalf of medical providers, this legislation will allow doctors and other medical providers to file claims for interest on payments of workers’ compensation bills in Circuit Court without having to seek remedy at the Illinois Workers’ Compensation Commission.  It also raises the interest rate on late payments from 1 to 2%. Lastly, the bill creates a penalty for insurers and self-insurers who do not comply with the existing electronic billing requirement.

    SB 2641 Munoz/Turner - Creates regulations for personal car facilitation transactions. Insurance provisions include; that an owner's insurer: (1) may exclude any and all coverage and the duty to defend or indemnify for any claim made under a car facilitation transaction; (2) shall have the right to seek contribution against the insurer of a car facilitation company; and (3) may deny issuance of, cancel, void, terminate, rescind, or deny renewal of an insurance policy if the applicant or policyholder of the insurance policy fails to provide complete and accurate information about the use of a motor vehicle through a car facilitation transaction. Provides that an owner's insurance policy: (1) is not invalidated or limited regarding any exclusions contained in the policy; and (2) is not required to include specific provisions, implications, or preclusions.