One Sees Great Things From the Valley; Only Small Things From the Peak!
The third week of the legislative session is over and next week our senators, representatives, and all their staff, take a break for Passover and Easter. We hope you and your family also take a break from all the activity of this time of year; relax and reflect on all the wonderful blessings of living in our great United States of America. Here are some of the happenings from this past week “on the hill.”
Insurance Company Employee Tax Credit Threatened in the Senate
The Senate Appropriations Committee, chaired by Joe Negron (R-Stuart) proposed reducing annual vehicle registration fees and offsetting the cost of this proposal by eliminating a 15% insurance company employee premium tax credit. Some companies I spoke with indicated the dollars saved on their premium tax bill go directly to company surplus which, as you know, pays claims. We will be communicating that message loudly but we will have to convince senate leadership. Senate President Don Gaetz, who supports the tax credit elimination, said, “The purpose of the Senate’s intensive budget review is to assess current state spending to determine if we are appropriately focused on the needs of today’s economy and the priorities of today’s senators. In 2009, during a difficult budget year, the Legislature made the hard choice to increase certain fees associated with driving a vehicle in lieu of raising taxes, or making draconian cuts to critical state services; however, times have changed and it is time that we reprioritize and evaluate ways to keep more money in the pockets of hard working Floridians.” Annual vehicle registration fees were raised during the height of Florida’s economic decline in 2009, a year when state revenue collections had declined more than 25 percent since their high in 2006-2007. Legislators touted that reducing the registration fees is expected to save Florida taxpayers up to $220 million per year but as those of you reading this know, this tax credit elimination could be a deterrent to insurance capital and others insurance investors who want to invest in our state.
This is an all hands on deck fight. Please provide us your ideas and REAL examples of how this tax credit elimination changes your company’s business plan, and other expansion plans in our state so we can share those stories, anonymously of course. There is a team of us working on messaging why this proposal is bad public policy if the intent of our state is to expand insurance capital in Florida.
Last Session’s PIP Auto Reform Law Takes a Hit
On March 15th Leon County Circuit Judge Terry Lewis struck down portions of Florida’s new no-fault auto insurance law (2012′ House Bill 119) designed to lower premiums and combat fraud in the personal injury protection (PIP) system. Although the Office of Insurance Regulation filed an appeal of the Lewis Injunction which holds off the impact of the injunction, the Circuit Court’s ruling has brought about renewed calls from some state leaders to “stop trying to fix Florida’s (PIP) insurance system and end it!” State Senator Joe Negron, (R-Stuart), the sponsor of the Senate companion to last year’s HB 119, commented that the Court’s injunction voiding the $2,500 ceiling on non-emergency care and a 14-day deadline for treatment has him thinking about a proposal to scrap the PIP system in favor of mandatory bodily injury coverage.
Federal Healthcare Mandates Beginning to Move in the Senate
Some of the points, under the Senate PPACA Committee PCB 7038, are that the Office of Insurance Regulation will not regulate health insurance rates, and instead, those will be regulated by the federal government. Regulation of policy forms will remain with the Office. One big change that is long overdue is that health insurance policies will be offered to the state of Florida’s OPS employees (those that are not part of the more permanent career service system and are considered temporary). Like many of you are experiencing in the private sector, exploring ways to provide the federally mandated health insurance to previously uninsured populations is costly and for Florida, insuring this group of temporary employees will hit over $200 million a year. The Committee also discussed how to mediate when there are conflicts between state and federal health insurance laws and it was determined the federal laws will take precedent, except on issues regarding forms, since that portion remains with OIR. The Senate continues to discuss how Florida can use the $51 billion in federal Medicaid dollars over ten years to provide premium support to Floridians who aren’t currently covered by health insurance. The plan is to start enrolling Floridians by 10/1/2013 with an effective date of coverage as of 1/1/2014. The administration of this program would be handled through the Florida Healthy Kids, Inc. Also this past week, the PPACA Senate committee cleared Negron’s proposal to put approximately one million uninsured Floridian’s on the private subsidized private health plans. His plan is aimed at uninsured individuals making $15,415 a year, or a family of three earning $26,344. The program would require $1.25 billion from the federal government in 2013-14. The plan would require 85 percent of premiums to go toward care, versus administrative costs. Senator Joe Negron states that a proposed committee bill will be introduced in the Senate Appropriations Committee next week. Gov. Rick Scott has pledged openness toward Negron’s plan and has called for lawmakers to expand Medicaid to 900,000 or more poor Floridians as part of the federal health care overhaul.
Citizens Property Insurance Corporation- Driving for Change to Stop the Growth
In the Senate: The Senate Banking & Insurance Committee approved CS/ SB 378 (mobile home coverage), which requires Citizens to expand its mobile home coverage. This bill will amend s. 627.351, F.S., to require Citizens to provide insurance at a minimum insured value of at least $3,000 to mobile and manufactured homes, and how coverage will apply to screened enclosures, carports and patios. Citizens testified at the podium that the addition of this coverage will have a minimal effect on Citizens growth and this coverage should be provided because no private market alternative exists. There were those in the audience who refuted this assertion saying that there could be a private market alternative if those seeking this legislation would just sit down with some carriers and ask! If you know of companies who would like to explore this segment of Florida’s market, please let me know.
At the Citizens Board meeting on March 22, a myriad of topics were discussed including the proposed “clearinghouse plan” which is designed to stop new and renewal business from entering/staying in Citizens if there is a private market alternative. Some of the high points of the clearinghouse discussed in the March 22 Citizens board meeting:
• If there is an offer of coverage by an insurer, the insurer’s obligation to the producing agent is a one year appointment and one year commission. Citizens commission is approximately 6 percent compared to direct market that pays an average of 12 percent
• Participation in the clearinghouse is voluntary for insurers;
• Policyholder information is protected and kept confidential by the clearinghouse and there is proposed legislation to ensure this protection;
• Fifty-three percent of policies in Citizens come from captive agents with no other markets, and 28 percent of those agents have three or less appointments;
• There are indications of solid legislative support for the clearinghouse concept, but there is much work still to be done because some agents and insurers still see “issues” with the concept;
• Renewal and new business would go through the clearinghouse in 2014. It is estimated that between 200,000 and 240,000 policyholders in Citizens were not adequately shopped and could receive an alternative coverage offer for less;
• Questions were raised as to whether the policies would be “rewritten” and therefore, would a new application and underwriting be needed or would it be a “transfer” using the data from Citizens only. The consensus is that this is, in fact, a new application process and therefore policies would be re-underwritten when passing through the clearinghouse.
• Options of a “private market clearinghouse” which would be in addition to the Citizens clearinghouse are still being considered by the legislature. Under this idea, the agreement would be between the agent and insurer; therefore, those agreements would not be statutorily approved.
I encourage you to study closely the March 22, 2013 Citizens board meeting packet. There was approval for Citizens to get back into the wind only builder’s risk coverage for homes $1 million and less; approval for Citizens to offer wind-only personal lines coverage for transient rental property despite a vociferous argument by some board members that this will disrupt multi-peril private market coverage (with wind) offerings; approval to allow homes who have had prior sinkhole damage repaired according to the engineer’s original plan to be insured by Citizens (Citizens for the past two years excluded coverage for these homes); and a plan to have Citizens work WITH private insurers collaboratively post-storm for resources such as generators and satellite services. Chairman Lacasa said, “The idea to share our excess capacity for the takeout and other companies we work with in an innovative ways to leverage our industrial might so they too will be successful after a storm.”
FIGA Assessment Reform
This year, there is a team of groups working on changing the way the Florida Insurance Guaranty Association (FIGA) collects assessments when FIGA needs to fund its coffers to support the claims of failed property and casualty insurance companies. The bill is to be heard next week in its second committee stop and just missed getting its first hearing in its first Senate by four minutes! So…picture this… The FIGA bill was on the 2.5 hour Senate Banking and Insurance Committee agenda, there were 17 bills to be heard and the FIGA bill came up in the last four minute window of the committee’s time slot. FIGA bill sponsor Senator Jeff Brandes, an incredibly gifted senator, stood before the Committee listening to the Committee Chairman discussing a technical amendment (clerical error) in the language. Before we knew what happened, the Chairman decided there was all wrong and POOF… the window for the bill to be heard blew away. Those of us in the audience cringed because it means the senate version of the bill will not be heard until the week of April 1 leaving a tight window for this version to make its way through the entire Senate. As one insurance company executive put it, the $143 million assessment that FIGA invoiced in November 2012 hit many insurance companies working to shore up their 4th quarter financials, so writing multi-million assessment checks to FIGA didn’t exactly help that! While this bill only has two insurance companies opposing it (I can discuss that with you personally) I may need to have some of you call your local legislative contacts to continue to push for this bill’s passage. Representative Jake Raburn, the House’s youngest member at 28 years old, is our house sponsor and is doing a phenomenal job of carrying this bill in the house; diligently doing his homework and lobbying his fellow legislators for its passage! Those of you from Hillsborough County – please reach out to his district office and thank him! In a nutshell, the bill follows the precedent of a 2012 Citizens assessment reform that allowed a portion of Citizens assessments to be collected via a direct assessment on policyholders and remitted to Citizens by the insurers who collect them.
What’s Your Bet?
I’ve received several emails from you asking “what are the odds of any substantial property and casualty insurance legislation passing this year?”. There are almost 25 proposed property and casualty insurance bills attempting to move through committees before they hit the house and senate floors. Next week is the fourth week of an eight week session. My thinking is that the governor’s push to reduce the size of citizens, i.e., establishing a clearinghouse to stop citizens growth is a sure bet. Proposed CAT Fund reform in its second year is a huge fight between those who want to use the Cat Fund more efficiently and reduce insurance rates now vs. those who want to reduce the size of the fund which, in turn, reduces future assessments. In the past 15 years, insurance legislation has been among the last of the bills to clear the legislature during the last hours of session. It’s ALWAYS a cliff-hanger. Check out the bills at the following websites and tell us what your bet is.
• Florida House Legislative Bill Tracking
• Florida Senate Legislative Bill Tracking
Thank you for what you do – every day – and for sending us who will spend the next 5 weeks in the Capitol your good karma and feedback!
Until next week…Lisa Miller
Don’t Cry Because They’re Still Here, Smile Because They’re Almost Gone!