Monday September 30, 2013

Flood Insurance Has Everyone’s Attention

Water, water everywhere, or at least it seems that way. This past week we were all inundated with information and news about the federal Biggert-Waters Flood Insurance Act of 2012 (commonly referred to as, “BW12”) and the impact it is having on homeowners, businesses and likely the overall economy. Granted, while the data appears to indicate that about 87% of Florida’s federal flood policyholders are already paying full risk premium, the remaining policyholders and many future coverage purchasers will be hit very hard by much higher rates. This past Friday afternoon (September 27th) U.S. Representative Rich Nugent (R-FL) filed a bipartisan bill delaying BW12’s flood insurance rate hikes. After filing his legislation Nugent issued a statement saying in part, “I am grateful to Congresswoman Kathy Castor (D-FL) for agreeing to be the Democrat lead on this bill.  To all of our colleagues whose constituents are facing these rate increases, this is not a partisan issue.  This is Congress working together to try and right a basic wrong.  We’re going to continue meeting with experts, working with the realtors, and reaching out to our colleagues in other states.  All of us want to see this fixed and we’re going to keep pushing until it is.” In related news, on Thursday the Mississippi Department of Insurance and Commissioner Mike Chaney filed a federal law suit against the Department of Homeland Security and FEMA asking a federal judge to bar FEMA from implementing BW12’s rate hikes until it fully complies with the law and provide Congress with the affordability study which was due this past April. We are keeping a close watch on the flood insurance crisis and will report major developments in our next newsletter.

As always, I want to thank each of you for all that you do daily to strengthen the insurance industry and provide outstanding products and services to Florida consumers and businesses. Many often forget the criticality of the industry to the overall economic health of our state and nation and the fuel it provides for other industries to grow. I’m very thankful for the role you allow me to play in supporting your endeavors and helping make Florida a more favorable environment in which to conduct your business. Now, let’s cover the other major insurance issues occurring recently…

Insurance Consumer Advocate Robin Westcott Leaving Post

In an unfortunate development for Florida’s insurance consumers, Robin Smith Westcott, the state’s very energetic and highly respected Insurance Consumer Advocate is leaving her position for a career opportunity in the private sector where she will serve as vice president of government affairs for the Illinois-based American Association of Insurance Services . Westcott’s last day in the position appointed by CFO Jeff Atwater will be October 31st.  Even though only in the position for a little over two years, Westcott has used forward thinking and innovation to bring about changes to some of the state’s most serious insurance problems adversely impacting consumers.  She vigorously Fought for and secured consumer-focused protections and improvements to Citizens Property Insurance Corporation. Westcott identified needed reforms to Florida’s Personal Injury Protection (PIP) system and helped secure their passage during the 2012 Legislative Session.  She also helped close loopholes allowing workers compensation fraud in the construction industry and strongly advocated on behalf of consumers regarding force-placed lender coverage. Westcott also fought hard to codify protections in law requiring adequate disclosures on annuity sales. Thanks to Robin’s tireless efforts on behalf of the state’s vulnerable population, Florida has a safer and much more information rich environment in which consumers can make important insurance purchases. Ms. Westcott will leave a positive and highly successful mark on the Office of Insurance Consumer Advocate and she’ll truly be missed. We wish Robin all the best in her next career endeavor.

Hurricane CAT Fund Holds Rule Workshop Addressing 2014 Reimbursement Contract

Thursday 9/26/13-

The Florida Hurricane Catastrophe Fund held a rule development workshop concerning Rule Chapter 19-8.010, F.A.C., to receive input concerning its proposed reimbursement contract for the 2014 Atlantic Hurricane Season. Under state law, the revised contract must be adopted by administrative rule. The main changes contained within the proposed 2014 contract from the 2013 contract appear to be as follows:

•The exclusions for policies covering specialized fine arts risks and collectibles are moved from Rule 19-8.028, F.A.C., Reimbursement Premium Formula, and are revised to encompass a broader range of policies that predominantly cover personal property with investment characteristics.

•References to the TICL (“Temporary Increase in Coverage Limits”) option have been deleted. By operation of law, this option will not be available for the 2014 or subsequent contract years.

•Clarification is provided to better enable participating insurers to distinguish between policies covering residential properties and policies covering non-residential properties.

•Provisions relating to reporting of exposure data have been amended to accommodate the online exposure reporting system that will be implemented beginning with the 2014 contract.

Later in the day on Thursday the Florida Hurricane CAT Fund Advisory Council met to review the above proposed contract amendments and vote on granting approval for the notice of rulemaking to be filed with the Department of State and for the filing of the rule for formal adoption if no member of the public timely requests a rule hearing . The last day for a member of the public to request a hearing on the rule adopting the 2014 reimbursement contract is Friday, November 1st. After being thoroughly briefed on all proposed contract changes by CAT Fund legal counsel the Advisory Council unanimously voted to approve the revisions and move the rule forward in the adoption process.   To review the proposed 2014 contract and proposed adoption rule please click HERE.


Senate Banking & Insurance Chairman Reveals Topics For Fall Meetings

Tuesday 9/24/13-

The Senate Banking and Insurance Committee held its first interim meeting prior to the 2014 Regular Session. Committee Chairman David Simmons (R-Seminole, Volusia) in his opening remarks made it clear that the committee will address a number of serious insurance issues in its meetings scheduled for October and November.  During its October 8th meeting Simmons said he and his fellow committee members will continue to focus strongly on Citizens Property Insurance Corporation and will take further steps, in addition to those measures passed last year in SB 1770, to ensure that the state-run insurer is doing what it was intended to do, being an insurer of last resort. In doing so, the committee will take a hard look at the corporation’s commercial-residential and commercial-commercial books of business in the belief that Citizens has far too much exposure in these areas. In discussing this issue, Simmons rhetorically asked why Citizens is such a huge insurer of the commercial risk and what can be done to get a lot of this exposure moved to the private market? During the October meeting the committee will also look at the issue of the rates non-resident property owners are paying as opposed to Florida residents. Simmons noted that people who do not live in Florida should not be getting subsidized coverage from Citizens and he estimates that about 180,000 non-residents with Citizens policies receive subsidized rates, most of which are in the coastal account. The Chairman also remarked that he and his colleagues will look at the disparity in rates people are paying between those residing in areas which comprise the coastal account who pay way less than actuarially sound rates with those living in the areas of the state which comprise the personal lines account and who are paying actuarially or near actuarially sound rates. In raising this issue Chairman Simmons stated, “There’s a significant amount of inequality and unfairness in this.”  The Chairman further confirmed that the November meeting will be used to seriously focus on Florida’s PIP system and the major reforms from almost two years ago which have been the subject of on-going litigation for some time now. Insurers have been unable to implement the 2012 PIP reforms because of the litigation filed by certain PIP providers which produced an injunction from Tallahassee Circuit Judge Terry Lewis.  The Senator said he was approached over the summer by several representatives of Florida auto insurers who said that now is the time to truly consider moving away from the state’s current PIP system and consider a mandatory Bodily Injury system. Chairman Simmons appears to agree and said it is doubtful the Senate will wait on a final court decision before taking further legislative action regarding required auto insurance.

Major Highlights From Citizens Committee Meetings

Friday 9/19/13-

Citizens’ Market Accountability Advisory Committee (MAAC) and Audit committee met to receive and discuss a number of important updates concerning corporate activities and data through June 30th of this year. Of significant importance was the approval of the revised agency agreement between Citizens and the insurance agencies writing business in the corporation as well as approval of a revised agent appointment agreement. Both agreements were unanimously approved by the MAAC and forwarded to the Board of Governors for consideration.  During the committee meeting one member asked corporate CEO and President Barry Gilway for an update concerning the transient occupancy issue which became the topic of considerable discussion early this past summer. CEO Gilway responded that the issue remains under review and discussion internally as well as with officials at the Office of Insurance Regulation and other stakeholders. He went on to say that no decisions have been made regarding how the issue might ultimately be addressed.  The Citizens Audit Committee met later in the day and members were provided with high-level financial update from then Deputy CFO Jennifer Montero.  Ms. Montero reported that as of June 30th of this year the corporation had $6.8 billion in surplus and a claims paying capacity of $18.5 billion. She also noted that the insurer’s total cash and assets on hand totaled $14.8 billion. Ms. Montero reinforced her comments from a committee meeting earlier this year noting that the corporation is extremely financially healthy at present.  During the review and discussion of financial data, one board member noted a 196% increase in litigation costs over data from June 30th of last year.  Citizens General Counsel Dan Sumner responded and attributed the significant increase to an increase in claims litigation costs associated with Assignment of Benefits cases.

Citizens Board of Governors Meeting Focuses On Shrinking Policy Counts, Cost Savings Measures

Friday 9/20/13-

Moving forward with two member positions remaining vacant the Citizens Board of Governors met to receive committee reports and discuss a number of issues, including being briefed on a report containing streamlining and restructuring recommendations which could save the corporation an estimated $10 million to $14 million, annually. The recommendations came from a recently issued report by the KPMG consulting firm which was engaged earlier this year to conduct an in-depth management review of the corporation. Prior to presenting the report’s findings and recommendations, however, Citizens CEO Barry Gilway made a few opening comments of significant interest. He noted that the corporation is currently experiencing unprecedented success with its take-out programs to reduce the size of the insurer. In fact, when considering the depopulation data thus far this year along with the approved take-outs scheduled for November and December, Citizens’ total policy count will likely drop to around 900,000, a policy count not seen since 2005.  For the purpose of providing context when considering the KPMG report’s findings, CEO Gilway asked report readers to remember that Citizens represents 71 percent of the total residual market premium in the United States out of a total of 33 such market of last resort insurers. Focusing on the report itself, Mr. Gilway noted that KPMG staff conducted an intensive and lengthy analysis of the corporation’s claims, underwriting, information technology and related business units.  The estimated $10 to $14 million in annual cost savings would be realized by rebalancing the insurer’s use of outside vendors and performing more core functions internally. Currently, Citizens outsources more than 90 percent of its claims handling activities and the insurer will continue to rely heavily on outside vendors for claims and underwriting duties, but Mr. Gilway reported that there is an opportunity to further reduce costs by shifting core functions from vendors to in-house staff. He further noted that the report confirmed that corporate leaders need to create a company that has the flexibility to operate efficiently with 1.5 million policies, 500,000 policies and after a major catastrophe. In addition to the above cost savings recommendations, KPMG’s report also recommended a realignment of key management structures to streamline operations and improve oversight in key areas. As a result, CEO Gilway presented to the board the following realignment strategies:

•Increase agency and consumer focus by consolidating Agency, Call Center, Clearinghouse, Depopulation and FMAP under a Vice President of Agent and Consumer Services.

•Redefine Chief Financial Officer Role to encompass Risk Transfer, Treasury/Investment, Accounting and Budget.

•Consolidate Actuarial, Product Development, Analytics and Risk Management under a Chief Risk Officer.

•Expand the Communication role to include internal, external, agent, technical and policyholder communications as well as all consumer correspondence and complaint handling.

•The new Inspector General role necessitates a strategic review of the Office of Internal Audit and the Ethics and Compliance business unit.

•General Counsel responsibilities expanded to include Procurement, Regulatory Affairs, OFAC (compliance) and Records and Insurance.

•Redefine Human Resources to centralize all organizational Training and Development and incorporate the additional responsibility of Facilities and General Services.

•Realign Citizens enterprise structure under a Systems and Operations Officer.  The Information Technology and Core program will be merged and aligned with Strategic and Business Planning, Vendor Management, Project Management Office, Process Improvement and Corporate Metrics.

•IT realignment results in separation of Application Services and Infrastructure Services.

•Create vendor management strategy, policy, and corporate level function.

•Centralized management of Business Analysts and Project Managers.

During its meeting the Board of Governors also approved a request from Citizens to alter corporate expense policy by replacing the use of corporate credit cards with purchasing cards, commonly referred to as “P-cards.”  The change will bring Citizens in line with the majority of state agencies and provide additional expense oversight as the cards can be programmed to allow only specific categories of purchases such as fuel and lodging. Under the program, Citizens will receive rebates of approximately $560,000 over the life of the contract. The board also gave approval to new policies to require a seven-day notice before corporate board or committee hearings are conducted and a public comment period prior to the board voting on a matter requiring its action. These new policies were necessitated by statutory changes which occurred during the 2012 Regular Session.

Vehicle Registration and Drivers’ License Fee Reduction Bills Now Filed In Both Chambers

The big unanswered question is, however, will the funding mechanism be amended later by again attempting to repeal Florida’s insurer employee salary credit on premium tax?  In our most recent newsletter we informed you about Senate Appropriations Chair Joe Negron (R-Indian River, Martin, Palm Beach, and St. Lucie) filing a bill (SB 156) for the 2014 Regular Session to reduce vehicle registration and drivers’ license fees from their increase in 2009. The funding in Negron’s bill to offset the cost of reducing the fees, however, does not at present come from repealing the insurer employee salary tax credit as was strongly pushed last session. Now newly elected Rep. Mike Hill (R-Escambia, Santa Rosa) has filed his first piece of legislation since winning office, HB 61 which will serve as the companion to Senator Negron’s SB 156. Both the Senate and House versions of the fee reduction bill will rely upon general revenue to offset the loss of fee dollars, as opposed to repealing the insurer employee salary tax credit. As we noted in a newsletter earlier this year, Rep. Hill will serve on the House leadership team and has indicated that he will not support relying on tax increases to fund his fee reduction bill. To add to the pre-session suspense, when Senator Negron recently filed SB 156 he said to reporters, “The bill as I filed it right now appropriates general revenue, but I still want to explore during session tax incentive programs that may have been great in 1983, 1986 or 2000 but have outlived their usefulness and maybe they’ve accomplished their objectives.” The Senator’s comment was obviously a strong signal to the insurance and business communities to be watching closely for amendments to both bills changing the funding mechanism. The filing of SB 156 and HB 61 coincided roughly with Governor Rick Scott’s state-wide tour to present and discuss with Floridians his proposed budget for next fiscal year which includes the reduction in vehicle registration and driver’s license fees as part of $500 million in tax reductions. We’ll keep a keen eye on this issue and report new developments when they occur.

Look For Re-Filed Adjuster Rule Amendments from DFS, Possibly This Fall

In our last newsletter published on September 16th, we informed you about DFS’s Agent & Agency Services Division abruptly withdrawing its proposed amendments to the rules governing public adjusters, public adjuster apprentices and ethical requirements for all licensed adjusters, Rule Chapters 69B-220.0521, Conduct of Public Adjusters and Public Adjuster Apprentices,  and Rule 69B-220.201, Ethical  Requirements for All Adjusters. Late in the day on the 16th we spoke with a member of the division close to the rulemaking process to obtain clarification about the reason for the withdrawal and were informed that division leadership was not completely happy with the final draft of the proposed rule amendments. We were also told that a likely legal challenge to the rules by one or more interests within the public adjusting industry factored into the decision to withdraw the rules. The division representative further indicated that rule amendments will perhaps be ready for re-filing sometime this fall in the hopes of having finalized rules in place to coincide with the beginning of the 2014 Hurricane Season. LMA will monitor this situation closely and let you know the moment the rule amendments are re-filed with the Department of State.

Health Insurers and HMOs File Federal Health Care Consumer Premium Notices With The OIR

Friday 9/27/13-

The Office of Insurance Regulation (OIR) released “Federal Health Care Reform Consumer Premium Impact Notices” on its website ( pursuant to provisions of Senate Bill 1842 passed during the 2013 Legislative Session. These consumer premium notices were filed by 27 health insurers and health maintenance organizations who will be offering major medical health insurance plans on the new Federal Health Exchange.  The notices show the impact of Federal Health Care Reform on health insurance plan costs in Florida by comparing the premium for the new coverages to the premium costs of the insurer’s most popular plan prior to Federal Health Care Reform. Consumers can view the summary sheet containing all companies and notices or select a particular health insurance company and look at the various health insurance plans available in either the individual and/or small group market. The plans vary by cost and by the level of benefits offered in each type of plan: bronze, silver, gold, and platinum. Consumers can view this information by accessing the Office’s Federal Health Care Insurance Reform website page.

Florida Health Choices Expanding Number of Vendors and Services Available Through Marketplace

During its September meeting the Florida Health Choices (FHC) Board of Directors approved the expansion of services that will be available on Florida’s Health Insurance Marketplace, which is scheduled to open for business early next year. The Marketplace is a centralized web portal where businesses and individuals will shop and compare prices from a variety of health plans and health service options. The expansion will bring limited benefit and discount plans to the Marketplace, offering consumers a broader array of health purchasing options. To secure the plans and make them available through the Marketplace web portal, the board has issued an invitation and solicitation for vendors and platform providers. Click HERE to see the Invitation to Negotiate. “With the changes to the Affordable Care Act, including the delay for large employers to meet the new health insurance requirements, we are accelerating our plans to expand the type and number of products offered when the Marketplace launches. This includes entities that are regulated by the Florida Office of Insurance Regulation, such as discount medical plan organizations, prepaid health clinics and prepaid limited health service organizations,” Florida Health Choices CEO Rose Naff said.

Health Plans Selected for the Statewide Medicaid Managed Medical Assistance Program

Monday 9/23/13-

The Agency for Health Care Administration (AHCA) announced its intent to award contracts for the Managed Medical Assistance (MMA) program, a component of the Statewide Medicaid Managed Care (SMMC) program. The Agency selected 10 general, non-specialty MMA plans. In addition, the Agency selected five companies to provide specialty plans, including specialty plans focused on HIV/AIDS, child welfare and foster care, severe and persistent mental illness, and adults with chronic conditions.

It is anticipated that there will be protest(s) and in some regions and where the maximum number of MMAs have already been awarded, the program roll-out will be put on hold until the protests can be resolved.

Additional information about the Statewide Medicaid Managed Care (SMMC) program can be found on the SMMC website at:

AHCA Reports On Status of Implementing State-Managed Health Care Programs

Monday 9/23/13- The Agency for Health Care Administration (AHCA) reported to both House and Senate sub-committees on the implementation status of the Statewide Medicaid Managed Care (SMMC) Program authorized by Part IV of Chapter 409, F.S., created in part by HB 7107 and HB 7109 during the 2011 Legislative Session.  There are two components to the SMMC program, the Long Term Care (LTC) Managed Care Program and the Managed Medical Assistance Program (MMA) to be implemented in two phases. Phase I, the Long-term Care (LTC) Managed Care Program began its roll-out August 1st in the Orlando area and is being rolled out on a regional basis with a statewide completion date of February 1, 2014.  It was reported that few glitches have occurred and lessons learned through each region roll-out are being utilized to improve the next.  From the beginning of the implementation, AHCA stated their focus has been on outreach and provider education through Choice Counseling, a 22 person highly specialized group of individuals in the field as well as 167 internal staff currently being trained.  Some Senators questioned AHCA’s characterization of few glitches and asked the agency some very pointed questions about how certain communications with the public were being handled, recognizing the frailty of many of the recipients and fear of any type of change.  Phase II, the Managed Medical Assistance Program (MMA) roll-out was on the day of the subcommittee meeting under a 72-hour blackout period due to the recent intents to award announcement; therefore, very little detailed information could be discussed.  Additional information about the Statewide Medicaid Managed Care (SMMC) program can be found on the SMMC website at:

AHCA also updated the Senate appropriations Subcommittee on Health and Human Services on the implementation status of: Diagnosis Related Groups (DRGs) which was implemented effective July 1, 2013 with few glitches reported however, it is still too early in the transition to know if it will be budget neutral as planned;  Statewide Medicaid Residency Program Implementation;  Prior to July 1, 2013, there was no specific dollar amount or portion of the hospital per diem rate specifically allocated to the Graduate Medical Education (GME) program.  Recognizing the increased need for highly trained physicians statewide, the agency was directed to re-allocate in accordance with SB 1520 enacted in the 2013 legislative session to more equitably distribute the funds and expand the Graduate Medical Education program; Status of Medically Needy Waiver request to CMS which is scheduled to sunset October 1, 2014, appears to be in peril after AHCA negotiations with CMS. AHCA is working to formulate a positive conclusion, hopefully by the beginning of session; Low Income Pool (LIP) Conversion and Waiver Request; This is another convoluted issue where it was first thought that these programs would sunset after PPACA was fully enacted, however, CMS has somewhat backed away from that theory, most likely due to the number of states that have not acted on Medicaid expansion.

Secondary Life Insurance Marketplace To Be Subject Of OIR Public Hearing

During last session the Florida Legislature directed the Office of Insurance Regulation (OIR) to review Florida law and regulations to determine whether there are adequate protections for purchasers of life insurance contracts in the secondary life insurance market to ensure that this market continues to exist for Florida seniors.  OIR is also required to report its findings from the review to the Legislature by December 1st. Pursuant to the authority contained within section 624.324, Florida Statutes, the Office will be holding a public hearing on October 25th in order to receive input from investors in the secondary life insurance market, insurers and other interested parties. Any material or information interested parties wish OIR to consider in formulating its report to the Legislature must be provided to the Office no later than October 15th. OIR requests that materials be sent to [email protected]. Materials received by the Office will be available to the public and posted on OIR’s website. Interested parties unable to attend the public hearing are requested to forward comments to the Office at [email protected] no later than October 30th.  Again, the public hearing will occur on October 25, 2013, at 10:00 AM in Room 412 of the Knott Building, Capitol Complex, 404 South Monroe Street, Tallahassee, Florida 32399. LMA representatives will attend the hearing and report key highlights in an upcoming newsletter.

My very best,


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