Stop-Loss Battle Expands to Four States

On March 12, 2013
March 12, 2013 – Utah has become the fourth state that is considering legislation that would make it more difficult for employers to operate self-insured group health plans by restricting the availability of stop-loss insurance.

Known as the Small Employer Stop-Loss Insurer Act, HB 160 applies to groups with 50 or fewer employees. Unlike stop-loss legislation in California, Minnesota and Rhode Island, attachment point requirements in this bill are not onerous, but does contain a provision requiring stop-loss carriers to pay claims incurred but not reported if the plan terminates. The bill would also prohibit lasering.

Other provisions include:

• Insurance Commissioner will create a standard stop loss application form for small groups
• Policy must guarantee rates for 12 months – only exception is to price for a change in benefits of the Plan
• Specific and aggregate coverage required
• Requires the stop loss to provide gapless coverage
• Minimum specific attachment point = $10,000
• Minimum aggregate corridor = 90%
• Contract basis no less favorable than 12/24

This is a developing story so please watch for further exclusive reporting from SIIA. The full text of HB 160, as well the other state stop-loss bills can be accessed on-line through the members’ only section of the association’s web site at www.siia.org. Please contact SIIA Chief Operating Officer Mike Ferguson at 800/851-7789, or via e-mail at  mferguson@siia.org should you have any questions or would be interested in helping to oppose the legislation in Utah.

February 2013 Newsletter

On March 4, 2013

Anti-Subrogation Bill Emerges in Texas

On February 28, 2013
Texas House Bill 1869 seeks to limit health subrogation recoveries! The bill allows a carrier to create the right to subrogation or the right to reimbursement by contract. However, the bill restricts the amount a carrier may recover to the lesser of the following:

a. one third of the insured’s total recovery; or
b. the total amount of benefits paid;
Additionally, the bill allows an insured to file a declaratory judgment action in an attempt to reduce the subrogation right or right to reimbursement even further. If the court finds the insured’s total recovery is less than 50 percent of the insured’s total damages, the carrier’s recovery shall be limited to an amount not less than 15 percent and not more than one-third of the insured’s total recovery. However, if the insured proves by clear and convincing evidence that the carrier’s recovery of an amount otherwise payable under this bill would result in a “recognized injustice”, the carrier’s recovery shall be limited to an amount that is less than 15 percent, but equal to or greater than 5 percent of the injured party’s recovery.

The bill clearly limits the carrier’s recovery to no more than one-third of the injured party’s recovery under any circumstance. But, even more alarming the broad language in the statute gives the court discretion to limit the carrier’s recovery to an amount less than 15 percent but not less than 5 percent of the injured party’s recovery.

The bill also requires a carrier, who is not actively represented in a third party action, to pay an attorney’s fees in accordance with the fee contracted for by the insured, as well as a pro rata share of expenses. If a contract does not exist, the court shall award reasonable attorney’s fees, not to exceed one-third of the payor’s recovery. If the court reduces the subrogation carrier’s recovery pursuant to a declaratory judgment action provided for in this bill, no fees or costs would be owed under any theory of law, including the common fund doctrine. An injured party shall not be required to pay fees or costs for filing a declaratory judgment action to reduce a carrier’s recovery amount.

This bill applies to claims or causes of action for personal injuries caused by the tortious conduct of a third party. The made whole doctrine does not apply to recoveries addressed under this bill. The provisions in this bill control in the event of any conflict in the law, including a rule of procedure or evidence. If enacted the bill would take effect January 1, 2014.

Thanks to Loren Smith with Kelly, Smith & Murrah, P.C in Houston, Texas and Ryan Woody with Matthiesen, Wickert & Lehrer, S.C. in Hartford, Wisconsin for identifying and submitting the above bill.

Additional Bills of Interest

Two bills have emerged in Texas, House Bill 1773 and House Bill 1810, which would prohibit insurance carriers from selling “named driver policies” and “permissive driver policies”. Named driver policies provide coverage, only for specifically named drivers and not for household members. Permissive driver policies exclude drivers who have received permission to drive the insured’s vehicle from receiving coverage under the policy.

Too often these policies are issued and an insurance card is copied and provided to everyone driving the vehicle. However, if the driver is in an accident and is not the “named insured”, the carrier denies coverage. Texas is proposing bills that would prohibit these policies from being issued.

Thanks to Laura Schmidt with Downs & Stanford and NASP Board Member for submitting and summarizing these bills for NASP.

Florida House Bill 897 and its companion, Senate Bill 1134, (the “Patient Injury Act”) would create a Patient Compensation System relative to avoidable personal injury or wrongful death due to medical treatment, including missed diagnosis. Any compensation paid under the Patient Compensation System would be offset by any past and future collateral source payments. Collateral sources include payments made by or pursuant to Medicare, Medicaid, health insurance, automobile insurance providing health benefits, disability insurance and workers’ compensation insurance. If enacted, the bill would become law on July 1, 2013.

Georgia Senate Bill 141 seeks to create a Patient Injury Act and redefine how medical malpractice cases are handled. It is virtually identical to Florida House Bill 897 and Senate Bill 1134.

Georgia House Bill 336 clarifies the requirements on an offer to settle prior to filing a lawsuit. Any settlement offer in a motor vehicle personal injury or wrongful death case in which the claimant is represented by an attorney shall include certain provisions relative to the time for acceptance, the amount to be accepted and the release to be provided. The recipient of an offer would have the ability to seek clarification regarding subrogation claims and other relevant facts. If enacted, the law would apply to motor vehicle personal injury and wrongful death claims arising on or after July 1, 2013.

Illinois House Bill 1460 would create the Motor Vehicle Ancillary Products Act. A motor vehicle ancillary product is defined as “a protective chemical, substance, device, system, or service that (i) is installed on or applied to a motor vehicle, (ii) is designed to prevent loss or damage to a motor vehicle from a specific cause, and (iii) includes an ancillary protection product warranty.” Examples of ancillary products include “protective chemicals, alarm systems, body part marking products, steering locks, window etch products, pedal and ignition locks, fuel and ignition kill switches, and electronic, radio, and satellite tracking devices” but “does not include fuel additives, oil additives, or other chemical products applied to the engine, transmission, or fuel system of a motor vehicle.” The bill expressly allows for an indemnification or subrogation claim brought by the ancillary product insurer against the provider of the ancillary product.

Kentucky Senate Bill 116 seeks to clarify the credit available to an underinsured motorist carrier when two or more individual claims are made against the bodily injury liability policy. If the two or more individual claims exhaust the bodily injury policy limits, the underinsured motorist carrier is only entitled to a credit for the actual settlement amount received by the individual seeking underinsured motorist benefits.

Maryland is considering the adoption of comparative fault! Maryland House Bill 1182, the Maryland Fault Allocation Act, would, while retaining both the contributory negligence and joint & several liability rules as they currently exists under common law, create a Commission to study the state’s Fault Allocation System. The Commission is to be comprised of various legislators, attorneys, law professors, state officials and business officials and is to be charged with studying whether to retain Maryland’s current fault allocation rules or to modify them. If the Commission recommends the adoption of comparative fault, it must also make a recommendation regarding the effect of comparative fault on workers’ compensation subrogation claims. The Commission shall report its findings and recommendations no later than December 1, 2013 to both the Governor and the General Assembly.

Maryland House Bill 1089 and Senate Bill 919 would grant a rental car company a subrogation right against a renter, the renter’s insurer, a driver and the driver’s insurer “for property damage, personal injury, and wrongful death claims paid by the rental vehicle company that arose out of the use or operation of the motor vehicle by the renter or driver. “ The bill would take effect on October 1, 2013 if enacted.

Thanks to Chris Sutton with Nationwide Insurance for identifying and submitting these bills.

Maryland House Bill 1117 would create a no fault coverage for automobile medical expenses with a minimum limit of $1,000. A carrier providing benefits under the coverage would not have a right of subrogation or a claim against the tortfeasor.

If an insured has both, medical payments coverage described in the bill and coverage from a collateral source provider, the insurers may coordinate benefits to avoid duplication of coverage. Also, the insured can coordinate the policies by electing which is primary or may reject coordination of the policies (the latter will likely cause the insured to pay a higher premium). If enacted, the bill would become effective
October 1, 2013.

Kammy Poff, Amicus Chair
Joseph Willis, Legislative Affairs Chair

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Missouri Slayer Law Preempted by ERISA

On December 26, 2012
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