NAIFA Illinois Legislative Update

    May 23, 2018

    With one week left until the May 31st scheduled adjournment, the Governor and legislative leaders continue to work on a state spending plan for Fiscal Year 2019, which begins July 1st. There is certainly some optimism that the General Assembly reach an agreement on revenue and spending as no one wants to have a repeat of last year and there are some additional issues that have created an atmosphere where everyone would like to move on to the next big thing, the fall elections.

    For the insurance industry, it remains relatively quiet but work comp rate regulation, SB 2863-Raoul, remains under active discussion and a new issue, personal car facilitation transaction regulation, has just been dropped into the legislature - think Airbnb for your own personal car. An amendment has been filed to SB 2641-Munoz, regulating companies like San Francisco-based Turo, which facilitates personal car rental transactions. It is not clear if this issue will pass by the end of session as there are many questions from stakeholders, including the insurance industry from a liability standpoint. To learn more about Turo, click here

    Also, health insurers had been split over the issue of Short Term Limited Duration individual health insurance policies in light of the Trump administration’s proposal to expand them from 91 days to a year. An amendment was filed to keep Illinois at the 91-day limit but that was opposed by several health insurers active in the short-term market who favored the Trump position. Other health insurers opposed the expansion to a year. Our Agent Broker Coalition offered NAHU’s well thought-out position of six months. That language was adopted this week onto HB 2624-Fine and was supported by all the major health insurers in Illinois. HB 2624 passed out of committee unanimously and is expected to reach the Governor’s desk. Finally, our Agent Broker Coalition initiative, SB 2513-Hastings, passed both chambers and will be sent to the Governor for his consideration shortly.

    Agent & Broker

    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 shortly.

    SB 2439-Bennett eliminates the current requirement that professional licenses, including a producer’s license, be suspended when an individual defaults on a student loan. This bill is part of a larger effort in the General Assembly to remove certain existing sanctions on professional licensure categories. The bill has passed the Senate and is on third reading in the House.

    SB 3451-Munoz is the Department’s Innovation Act legislation. The bill did not advance this year but the Director has created an Innovation Division within the Department.

    Premium Fund Trust Account Regulation - Due to Deputy Director Brett Gerger taking a new position with another agency, the rewrite of the PFTA regulation was stalled for several weeks. We spoke with the Department staff recently and it is now under final review. We expect the changes will be sent to the Joint Committee on Administrative Rules (JCAR) in the near future.

    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.

    Life & Investments

    HB 4293-Welch, SB 3189-Biss Identical to legislation introduced last year these bills would impose a 20% tax on partnerships and S corporations engaged in investment services. Our Agent/Broker Coalition joined with a broader coalition in opposition to the bills. Neither bill was called for a hearing and there is no indication the sponsors plan to move them for the remainder of the session.

    SB 2437-Weaver/Anderson   Amends the Illinois Marriage and Dissolution of Marriage Act. Provides that if a judgment of dissolution of marriage is entered after an insured has designated the insured's spouse as a beneficiary under a life insurance policy in force at the time of entry, the designation of the insured's former spouse as beneficiary is not effective unless: (1) the judgment designates the insured's former spouse as the beneficiary; (2) the insured re-designates the former spouse as the beneficiary after entry of the judgment; or (3) the former spouse is designated to receive the proceeds in trust for, on behalf of, or for the benefit of a child or a dependent of either former spouse. Provides that if a designation is not effective, the proceeds of the policy are payable to the named alternative beneficiary or, if there is not a named alternative beneficiary, to the estate of the insured. Provides that an insurer that pays the proceeds of a life insurance policy to the beneficiary under a designation that is not effective is liable for payment of the proceeds to the entitled person or estate only if: (A) before payment of the proceeds to the designated beneficiary, the insurer receives written notice at the home office of the insurer from an interested person that the designation is not effective; and (B) the insurer has not filed an interpleader. The bill has passed the Senate and has been amended in the House to exempt policies provided under ERISA plans.

    Health & Benefits
    The focus of significant activity this session are several bills impacting individual and group health insurance plans. Many of the bills are part of the democratic majorities in both chambers reacting to the Trump administration’s efforts to modify the ACA. In addition, coverage for mental/emotional conditions continues to receive considerable attention although it is not clear at this point what final form those mandates will take.

    HB 68-Lang, HB 5464-Feigenholtz would make significant expansion of coverage for mental emotional disorders and provides for enhanced enforcement by the Department of Insurance and the Attorney General’s office. The bills continue to be the subject of negotiations between health insurers, employers, providers and state agencies.

    HB 1337-Fine Short-Term Health Insurance Policies. Introduced in reaction to the Trump administrations proposed changes, the original amendment would keep the current 91-day limitation for short term plans under the ACA in place in Illinois. The 2nd amendment, authorizing six-month short-term policies was adopted. This represents the NAHU position on temporary policies.

    SB 2444-Haine/DeLuca Amends the Illinois Insurance Code in an Article concerning accident and health insurance. Provides that "policy of individual or group accident and health insurance" does not include any coverage or policy that provides an excepted benefit, as defined in the federal Public Health Service Act. The effect of the bill is to clarify that mandated benefits do not apply to short-term travel, disability income, long-term care, accident only, or limited or specified disease policies. The bill has passed the Senate and is awaiting a hearing in the House.

    HB 4165-Harris Would prohibit the Rauner administration from applying for an ACA waiver from HHS unless both chambers of the General Assembly approve by resolution. The bill failed on a third reading roll call but may be called for another vote prior to the end of session.

    HB 4166-Harris The 1% tax on all health claims was not moved this session.

    HB 4146-Fine Amends the Managed Care Reform and Patient Rights Act. In provisions concerning transition of services, provides that the health care plan shall not modify an enrollee's coverage of a drug during the plan year if the drug has been previously approved for coverage by the plan for a medical condition, the plan's prescribing provider continues to prescribe the drug for the medical condition, and the patient continues to be an enrollee of the health care plan. Provides specific prohibited modifications of drug coverage in the health plan. Provides that the provisions do not prohibit a health care plan from requiring a pharmacist to effect generic substitutions of prescription drugs. Provides that the provisions do not prohibit the addition of prescription drugs to a health care plan's list of covered drugs during the coverage year. The bill has passed the House and a tentative compromise had been reached in the Senate.


    The following bills would mandate coverage or expand existing coverage on individual and group health plans. All are under active consideration: HB 3375-Lang & SB458-Manar, Telehealth Services, HB 2617-Gabel Fertility Preservation Services, HB 3223-Williams Multiple Sclerosis, HB 4821-Fine, Cancer Drugs, HB 4516-Fine Hearing Aids.     


    Property & Casualty

    SB 2863-Raoul Work Comp Rate Regulation, HB 4595-Fine State Run Work Comp Company. Identical to last year’s bills, both have passed the originating chamber on a partisan roll call. SB 2863 is on third reading in the House and discussions are taking place to see if some type of “rate review” agreement, short of rate regulation, is possible. HB 4595-Fine, remains in the Senate Judiciary Committee. These are absolutely two bad concepts and fall under the description of fake reform and would have a negative impact on Illinois’ work comp system and continue to send the wrong message to employers in Illinois. If they do reach the Governor’s desk we anticipate the Governor will veto them like he did last year. We will request that action at the appropriate time.    

    HB 5160-Lang Creates the Domestic Stock Company Division Article in the Code. Provides that a domestic stock company may divide into 2 or more resulting companies pursuant to a plan of division. Contains provisions concerning the contents of the plan of division, approval of the plan of division by the Director of Insurance, effects of a division, certificates of division, liabilities, and shareholder rights. This legislation was introduced on behalf of several domestic stock companies and was supported by the Department. It did not pass the House before the deadline but may be resurrected.

    HB 1336-Lang Prohibits an insurer that sells a policy of automobile insurance from increasing the policy premium, canceling the policy, or refusing to renew the policy solely because the insured or another person who customarily operates an automobile covered by the policy has had an accident while operating a motor vehicle in response to an emergency when the insured was responding to a call to duty as a volunteer EMS provider. Provides that the prohibition also applies to all personal umbrella policies. Passed the House.

    SB 1286-Mulroe/Unes Makes several updates and changes to Illinois’ Captive Insurance Article of the Insurance Code. The bill passed the Senate last year and is in the House Rules Committee.

    SB 2953- Cullerton,Tom Amends the Illinois Insurance Code and the Automotive Collision Repair Act. Provides that the use of non-original equipment manufacturer aftermarket crash parts may not be included in an estimate for repair of a motor vehicle unless the customer is advised of that fact in writing. Requires the use of original equipment manufacturer specifications. SB 2953 is on second reading in the Senate.

    HB 4472-Stewart/Curran Provides that no person shall operate a motor vehicle registered in another state upon the highways of this State unless the vehicle is covered by a liability insurance policy issued by the state where the vehicle is registered. Provides that the operator of the vehicle shall carry within the vehicle evidence of the insurance. Passed the House.