NAIFA Illinois Legislative Update

    by Chris Davis, VP of Government Relations

    June 15, 2017

    The Illinois General Assembly was scheduled to adjourn on Wednesday, May 31.  However, that date came and went, yet again, without a budget in Illinois.  After June 1, it will take supermajority votes to pass a budget, which will absolutely require bipartisan support, particularly in the House where Democrats maintain 67 members and 71 votes will be necessary to pass a budget.  Illinois has gone 22 months without a budget, and the deficit exceeds $14 Billion, as of this writing.

    There is little optimism that an agreement can be reached on the budget prior to the end of the Fiscal Year on June 30.  If a budget is not enacted by this deadline, Illinois’ bond rating will be reduced to “junk bond” status.  Therefore, the State will not be able to borrow in order to pay off the $14 billion in unpaid bills, resulting in a much larger tax increase than is already being considered.

    Speaker Madigan declared the House of Representatives in “continuous Session”, meaning that House Members can return to Springfield at the call of the Speaker.  It is expected the House will convene every Wednesday in June. 

    The Governor also has the ability to call “Special Session” and has called Legislators back to Springfield for a 10-day Continuous Special Session, beginning Wednesday, June 21.

    HB 3393 (Welch) and SB 1719 (Biss/Welch) were initiated by the Chicago Teachers Union to impose a 20% income tax on all Partnerships and S-Corporations that are paid fees on investments.  HB 3393 was never called before the full House.  However, SB 1719 passed the Senate by a vote of 32-24-1.  SB 1719 was then passed out of the House Revenue Committee and stalled.  The Coalition of Insurance Agents and Brokers joined additional organizations, including the Illinois Bankers Association, and Illinois Chamber of Commerce in opposing the Legislation.  It is widely expected that language extremely similar to HB 3393 and SB 1719 could be amended to any final budget tax increase legislation.  Representative Welch, the House Sponsor, has indicated a willingness to amend the tax increase to more appropriately exempt small investment advisors and financial planners.  The Coalition of Insurance Agents and Brokers worked extensively on the final day of Session to obtain clarification on the applicability of the tax.  We are anxious to see any potential future language that may get introduced.

    It is possible that the language could be added to SB 9, which has long been the omnibus tax increase component to the Senate budget package of legislation.  SB 9 passed the Senate 32-26.  However, it was never called for consideration by the full House, as Democrats were not willing to vote on any tax increases without Republican support or a full agreement on a budget.

    SB 9 would increase the personal income tax rate from the current 3.75% to 4.95%, and the current corporate tax rate from the current 4.8% to 7.0%.  Both of those increased tax rates would Sunset in 2024. 

    Coalition Initiative
    The Coalition of Insurance Agents and Brokers initiated SB 904, sponsored by Senator Hastings (D-Tinley Park). SB 904 creates a 5-person advisory council to the Department of Insurance on Continuing Education matters.  The advisory council could make recommendations to the Department on a variety of delineated issues.  The legislation passed the Senate unanimously.  However, the legislation was opposed in the House by a major insurance company.  The Company hijacked the legislation in order to get support from the Coalition of Insurance Agents and Brokers on reducing the ethics requirements in Illinois.  The Company wanted to eliminate the mandatory classroom requirement and enable any educational delivery format for ethics C.E., including self-study.  After a series of negotiations between the Coalition, the Company, and the Department, no agreement was reached on a standard for ethics education for licensed agents in Illinois.  SB 904 was re-referred to the House Rules Committee.

    Illinois is the only state that mandates classroom education for ethics and the Coalition was open to innovative technology delivery methods, including webinars.

    HB 302 (Martwick), legislation initiated by State Treasurer Michael Frerichs, to mandate that life insurance companies pay out lapsed or terminated policies, retroactive to 1996, passed the House by a vote of 68-47-0 on a mostly partisan roll call.  Two Democrats did not vote on the legislation, and 3 Republicans joined the Democrats in voting “Yes”.  HB 302 encountered intense opposition by the Senate Insurance Committee.  Therefore, the legislation was moved to the Senate Executive Committee on the last week of Session, where it was amended, to restrict the legislation’s retroactive application to the year 2000.  The amended version of HB 302 was approved by the Senate Executive Committee by a partisan vote of 10-6-0 and by the full Senate by a vote of 36-19-0, with 1 Republican voting with Democrats.  The legislation was then approved by the full House by a vote of 65-47-0.  The legislation awaits uncertain action by the Governor.

    The Department of Insurance initiated SB1723 (Munoz), the Insurance Industry Innovation Act.  The legislation, as introduced, was considerably esoteric and granted an individual Deputy Director of Innovation, a newly created position within the Department, extensive powers to grant an applicant immunity from laws or regulations.  The Coalition of Insurance Agents and Brokers was generally supportive of creating an environment where Illinois would be a driver of innovative products and services.  However, the Coalition maintained concerns about the broad and vague powers granted under the specific language contained in SB 1723.  As the Department held meetings and phone calls with stakeholders, the legislation was ultimately held from consideration and was never voted upon by the Senate Insurance Committee. 

    Representative Laura Fine decided to hold HB 502 from a vote in the House after extensive conversations with the industry.  HB 502 would mandate that individuals that are “not actively working” would be automatically covered by a new policy should an employer change group life insurance while the individual is on leave, including approved disability.  The Coalition of Agents and Brokers gathered a small working group on the issue that collectively submitted comments to Representative Fine.  Those efforts and comments played a significant role in Representative Fine’s decision to not advance the legislation.  However, the Representative remains committed to working on the issue in the future.  The initiative was recommended by a constituent of the Representative and an insurance agent.

    Four different initiatives to remove barriers to professional licenses for felons, including insurance producers, all failed to pass the House of Representatives.  The different proposals all addressed various professional licenses, while one, HB 2752, specifically and solely addressed licensing for insurance producers.  Other legislative measures included a wide variety of licensed entities, including insurance agents.

    HB 3244 was initiated by Representative Winger following a request from a constituent that owns a Premium Finance Company.  The legislation enables Premium Finance Companies to send notifications to insured’s, including cancellations and notice of non-renewals, via electronic document delivery.  The legislation was modeled after current law affecting insurers and ensures that the consumer must agree to receive notifications electronically, as well as protects that the Agent/Broker of record receives notification.  The legislation passed the House by a vote of 112-1-0 and passed the Senate unanimously, 50-0-0.

    Illinois State Medical Society initiated legislation, HB 311, to create the Network Adequacy and Transparency Act passed the House by a vote of 110-2-1.  The nearly unanimous role call reflected significant progress in negotiations between health insurers and medical providers on a number of issues, including adequate and accurate consumer notification when a medical provider is no longer “in network”.  HB 311 was ultimately amended in the Senate to reflect a full agreement between the health insurance carriers and the Medical Society.  The legislation passed the Senate unanimously by a vote of 53-0-0.  However, the House adjourned on May 31 prior to voting to concur on the Senate agreement. 

    Several legislative measures to significantly regulate the health insurance industry passed the House this week, including some extremely troubling mandates.

    HB 2959 (Fine/Biss) imposes a state prohibition on refusing health insurance coverage based on pre-existing conditions.  The legislation passed the House by a vote of 75-33-0. The insurance industry was successful in the Senate in getting the legislation amended to restrict the applicability of the mandate.  Significant lobbying efforts were focused on identifying that the legislation went far beyond the Affordable Care Act and included supplemental, disability, and cancer policies.  Agent/broker efforts to restrict the applicability of the legislation were successful and a critical amendment was adopted in the Senate.  The amended legislation then passed the Senate by a vote of 46-5-0 and was concurred upon by the House by a vote of 87-26-0.  Governor Rauner is expected to sign the pre-existing condition mandate into law. 

    HB 2624 (Fine) creates the Health Insurance Rate Review Act, including a quasi-government panel, independent of the Department of Insurance to review and approve (or reject) health insurance rates in Illinois.  Illinois is historically a “file and use” state; which creates an open and competitive marketplace.  The concept of “rate review” is anathema to the insurance industry in Illinois.  HB 2624 passed the House by a vote of 65-49-0.  HB 2624 was sponsored and held from consideration in the Senate by President Cullerton.

    Fortunately, HB 1796, legislation imposing a 1% tax on all health insurance claims, was never called for a vote in the House Appropriations – Human Services Committee.

    HB 2436 (Flowers) creates the MediCare For All Health Care Act and was held from consideration before the full House after passing the Healthcare Availability & Access Committee on a 3-2 partisan roll call.

    Various other health insurance coverage mandates, including treatment for Multiple Sclerosis, PANDAS/Pans (HB2721) , eating disorders, abuse deterrent opioids, and hearing aids were all either held or successfully negotiated. 

    Workers Compensation
    The business community collectively called this year “one of the worst for employers”.  Workers Compensation was a primary reason, and where the Insurance industry came under assault.

    Workers Compensation remained a core component of the Governor’s Reform Agenda, and a source of ongoing negotiations related to any potential budget deal.  Unfortunately, while a deal was close several times, none was ever reached. 

    Therefore, the House and the Senate both passed to the Governor two very troubling Workers Compensation measures.  HB 2622 (Fine) creates the Illinois Employers Mutual Insurance Company, a state operated Workers Compensation company.  HB 2622 passed the House by a strictly partisan vote of 67-51-0.  HB 2622 was then approved by the Senate by a vote of 32-20-1.  The legislation has been sent to the Governor for action, and is expected to be vetoed.  Additionally, the House passed HB 2525 (Hoffman) legislation mandating worker’s compensation insurance rate review and approval by the Department of Insurance.  Rate review is anathema to the insurance industry in Illinois.  HB 2525 passed the House by a strictly partisan vote of 66-50-0 and passed by the Senate by a vote of 35-19-1, after being amended.  Therefore, the legislation returned to the House where it was approved again by a vote of 64-51-0.

    SB 12 (Radogno) was the Senate’s Workers Compensation legislation, as a component of the “Grand Bargain” Budget negotiations.  As previously mentioned, it has been widely reported by business groups, that stakeholders are extremely close to an agreement on Workers Compensation legislation, that would be contained in SB 12.  Although very close, because no agreement was ever reached, Senate Republican Leader Radogno withheld SB 12 from consideration by the full Senate.  It remains on 3rd Reading in the Senate.

    Property & Casualty
    An industry initiative to create a program to implement the mandatory auto-insurance verification program passed the House nearly unanimously, by a vote of 111-1-0.  HB 2610 (D’Amico/Munoz) was introduced by the Secretary of State’s office, following the recommendation of the insurance industry, to create a cloud-based database, whereby insurance coverage can be verified in real-time, by law enforcement.  HB 2610 passed the Senate 58-0-0 with the full support of the insurance industry, including the Agent/Broker Coalition.

    The Illinois Insurance Association initiated SB 1444 (Haine/Lang) to delete provisions mandating arbitration proceedings in certain auto insurance claims.  The law has been ruled unconstitutional, and therefore has been abused by some companies, as a means to delay settlements.  Subsequently, this legislation was introduced to delete the law.  SB 1444 passed both Chambers unanimously and awaits action by the Governor.

    SB 1706 was introduced by Senator Collins to prohibit the use of zip codes as an underwriting standard.  The legislation was sent to Subcommittee and was never considered by the Senate Insurance Committee.  There will likely be a Summer subject matter hearing on the issue.

    Insurance Companies vigorously opposed an amendment to SB 809, that would create mandatory reporting requirements for voluntary supplier diversity programs implemented by the company.  The legislation failed to pass the Senate Insurance Committee. 

    The Coalition of Insurance Agents and Brokers tracked 125 legislative initiatives this year, alone.  These are just a few of the highlights of measures where we actively engaged in legislation.