| A Puzzling Start to the 2017 Session |
| The Senate President Pro-Tem and Chair of the Banking and Insurance Committee filed a puzzling bill on Friday, March 3, the weekend leading into 2017 Florida legislative session with a proposed comprehensive reform of insurance regulation and practices in the Sunshine State. Most in the insurance industry were unaware of the bill (SB 1746) before it was filed. Often, as is customary, legislators will convene with certain representatives of an industry to discuss and brainstorm bills of the magnitude of Senator Flores’ to get feedback and to understand the financial consequences of the measure. Even if an industry disagrees with the member, having a pre-meeting of this nature early in past legislative sessions has been seen as professional courtesy. We look forward to educating Senator Flores and her team on the impact of this bill and the costs to policyholders should it pass. |
| Bill Watch |
| This week in the Florida Legislature was a week of firsts: the House and Senate passed the first of its kind bill that requires 12 jurors to unanimously agree to sentence a capital felon to death (vs 10); and the House for the first time said no more state government dollars would be devoted to business recruitment and severely curtailed spending on tourism. While legislative leaders and the Governor debate the merits of economic incentives, tax breaks, government cost savings, higher education funding, and water supply and runoff issues, there are nonetheless significant insurance issues in this 2017 session.Rather than bombard you with a list of dozens of bills (there have been 2,945 bills filed between the two chambers), we will instead report the action we think you want to know! Remember, too, that it’s not a badge of honor for our legislature to pass legislation in our opinion (1 in 4 bills are estimated to pass this session, but only one – the state budget for 2017/2018 – is legally required). So we begin our weekly newsletter schedule with this Bill Watch on the major legislation we’re following so far:
Assignment of Benefits (AOB) – HB 1421 (Grant/Plasencia) was filed last week and will get its first hearing tomorrow before the House Insurance and Banking Subcommittee. It joins four other bills (below) targeting to various degrees the abusive practices of third-party contractors and lawyers using AOBs to force insurance companies to pay greater claims than often justified, which is driving up property insurance rates. HB 1421 allows AOBs to exist under certain conditions, requires a 21-day notice prior to filing suit and allows the prevailing party to be reimbursed for attorney fees. SB 1038 (Hukill/Passidomo) allows only the named policyholder to file suit over an AOB claim, requires an itemized work estimate and 3-day AOB notification to the insurer, prevents balance billing the policyholder, and allows them to rescind an AOB within seven days. Diligent Effort – HB 191 (Beshears) and related SB 208 (Passidomo/Mayfield) eliminates an insurance agent’s legally required diligent effort to find and place a commercial residential (condo) policy with an admitted carrier before going to the Surplus Lines market. This bill would eliminate consumer protections as Surplus Lines in Florida are not regulated by rate, form, or coverage. Proponents argument of “greater choice” would lead to “predatory pricing” instead, say opponents. Flood Insurance – SB 420 (Brandes) extends rate deregulation from 2019 to 2025 and relaxes eligibility requirements to write flood lines. It allows commercial lines coverage (residential & nonresidential), excess flood coverage, and more surplus lines participation by removing the capital/surplus requirement in favor of a stronger financial strength rating. Note that this and Diligent Effort represent a strong push this year by the unregulated lines to gain a stronger foothold in Florida’s currently stable P&C market. HB 813 (Lee) contains elements of both the Flood and Diligent Effort bills. Healthcare – SB 262 (Stuebe)/HB 675 (Byrd) expands vicarious liability of HMOs and commercial health plans, while specifying they are not liable for other medical negligence except under certain circumstances. It also creates a bad faith cause of action for HMOs and specifies persons authorized to bring civil actions against HMOs for certain violations. The bills are supported by the trial bar and doctors. The Senate version has passed the Banking and Insurance Committee but was postponed from a vote last week by the Judiciary Committee. The House version hasn’t been heard. Insurance Fraud – SB 1012 & SB 1014 (Brandes) and HB 1007 & HB 1009 (Raschein) is being pushed by outgoing CFO Atwater as providing needed tools to help DFS stay ahead of criminals who seek to defraud Floridians. The measures would create a dedicated Insurance Fraud Prosecutor, require insurers to adopt an anti-fraud plan and designate primary anti-fraud employees, and require that those plans and statistics be submitted to DFS annually. Insurance Litigation/Prejudgment Interest – HB 469 (Harrison)/SB 334 (Steube) establish a requirement for an insurer’s interest payment and the timeline those monies are due. The Senate version didn’t make it past its committee hearing this week and may be taken up again but the Senate committee support for it may not be there. This bill, sponsored by Senator Greg Steube, is a priority of the Senate President’s according to sources familiar with the bill. The House version is much stricter in its provisions than the senate version. The only supporter of this bill was the Florida Justice Association/trial bar. All other groups to speak opposed it. LMA had conversations with senators about the bill and our opposition to it. Insurance Premium Tax – SB 378 (Flores) repeals the insurance premium tax credit of up to 15% on the salaries that insurers pay to their Florida-based full-time employees. This is a long-standing priority of the Senate President who has stated the credit was a good jobs incentive when enacted 30 years ago but is unnecessary now. The $297 million in resulting savings to the state will go to pay for a 2% reduction in the Communications Services Tax paid by almost all Floridians on cellular phone, cable, and satellite television services. The bill will get its first hearing on Wednesday before the Senate Appropriations Subcommittee on Finance and Tax. Medical Marijuana – The number of bills keeps getting higher (now 6) as the Legislature attempts to regulate last fall’s state constitutional Amendment 2 that approved marijuana for anyone deemed to have a “debilitating medical condition.” SB 406 (Bradley) would allow the number of growers/dispensaries to grow to 27 once the patient registry has 500,000 names and those facilities could also operate as “medical marijuana treatment centers” as defined in Amendment 2. The 90-day treatment requirement under previous Department of Health rules would go away, but written parental consent for minors would be required and the bill would ban edible marijuana products “in a format designed to be attractive to children.” Meanwhile, the Department of Health is in the process of promulgating its own rules to meet a fall deadline, as the Amendment is self-executing. Among the rest: SB 614 (Brandes) is the most free market approach allowing organizations who meet high financial, medical quality, and organizational standards entrance into the market with little to no oversight except in the medical quality arena. SB 1388 (Artiles) allows both an edible and smokeable version of marijuana be prescribed and provide quality control. SB 1472 (Galvano) establishes a Coalition for Medicinal Cannabis Research and Education within the H. Lee Moffitt Cancer Center and Research Institute in Tampa to serve in a future advising role for state policymakers. HB 1397 (Rodrigues), the latest bill released last week, includes a sales tax exemption for medical marijuana. We expect no action this week but there is a Senate workshop the week of the 21st. The House’s single bill is different than any other in the Senate and each of the Senate bills represent a different regulatory scheme so the negotiation between the chambers on this issue will be key. Our readers will remember that the constitutional amendment passed in November 2016 with 71% of Floridian’s vote, the highest margin of any constitutional amendment ballot initiative in the state. The amendment is “self -executing” meaning if the legislature doesn’t agree on a bill when it adjourns, all details of how medical marijuana will be grown, cultivated and distributed in this state must be launched on October 1, 2017. Personal Injury Protection (PIP) – HB 461 (Hager) repeals the Florida Motor Vehicle No-Fault Law & eliminates the requirements for PIP coverage, along with a series of self-insurance provisions. In lieu of PIP, SB 156 (Brandes) requires auto policies to provide certain property damage liability and bodily injury liability coverage, to replace PIP coverage. Florida has been a no-fault state since 1972, yet despite significant reforms in 2001, 2003, and most recently under 2012’s HB 119 intended to reduce fraud, rates keep rising – up 13% in 2015. Workers’ Compensation – By far one of the most contentious – and by court rulings, most immediate – issues facing the legislature after the state Supreme Court last year ruled our workers’ comp system unconstitutional. SB 1582 (Bradley), based on a proposal from Associated Industries of Florida, addresses the Court’s attorney fee cap issue by keeping the current fee schedule but allowing a judge to decrease or increase attorney fees to a maximum hourly rate of $250. The bill also increases temporary total disability benefits and temporary partial disability benefits from two years to five years, the Court’s other point of contention. It also converts Florida to a loss cost state to encourage greater competition among carriers, following a recent 14.5% average rate increase. The House Insurance and Banking Subcommittee discussed two draft bills last week, which clarify additional attorney costs to be paid by the worker but do not include changing to a loss cost rating system. Please see the chart below for a side by side comparison of the House and Senate plans. Meanwhile, SB 1684 (Farmer) disallows attorney fees and costs from being figured into workers’ comp rate requests. General Insurance Bills – SB 454 (Brandes)/HB 359 (Santiago) are insurance “catchall” bills, also called “omnibus” bills. They provide insurers a $15 insufficient funds fee when a customer’s electronic payments bounce with some exceptions and add electronic checks and drafts to the list of allowable e-premium payments; allow medical malpractice insurers flexibility on their annual rate filings and a permanent exemption from having to pay assessments into the Florida Hurricane Cat Fund; and specifies procedures for insurance companies to send documents electronically to policyholders. The House version of this bill has not been heard yet but is slightly different. More on this bill as its legislative journey progresses. SB 1746 (Flores) The Senate President Pro-Tem and Chair of the Banking and Insurance Committee sent shockwaves through the P&C industry the weekend leading into session with this proposed comprehensive reform of insurance regulation and practices in the Sunshine State: Rates & Coverage
Hurricanes & Cat Fund
Citizens Insurance
Insurance Advocate
The bill also changes the venue of Surplus Lines civil suits to the county court where the property is located. As of now, there is no House companion to the bill. |
| Back to the Future |
| Senator Flores’ bill (SB 1746) just referenced, together with Senator Farmer’s (SB 1684) disallowing attorney fees and costs from being figured into workers’ comp rate requests appear to be a “full frontal attack on insurance companies,” according to a longtime political observer.Filed a week ago last Friday (just two business days before the session’s start), these bills were a surprise, but not unfamiliar. Components of these bills have been debated in past years and now are back on the front page of this session. The bills mostly limit insurers from seeking to recoup their attorney’s fees expenses in their rate fillings. On this, the Democrat Farmer – a trial lawyer and former President of the Florida Justice Association – and Republican Flores – herself a lawyer and Chair of the Senate Banking and Insurance Committee – have found common ground.
Other provisions of Senator Flores’ bill places more scrutiny of company-specific managing general agencies, expands the role of the insurance consumer advocate, changes the takeout process of “opt-outs” for Citizens policyholders who are offered alternative coverage, and extends the 3 year limitation on filing hurricane claims to 5 years with claims payment required to be made without holdback or depreciation after a storm. Because Senator Flores’ bill allows a policyholder to stay in Citizens Property Insurance Corporation, even after receiving an offer of coverage from a private insurer that is equal to or less than the premium charged by Citizens, the bill could have a big impact on the state’s ongoing mission to depopulate Citizens to become a true “insurer of last resort” and as a result, create potentially lasting taxpayer burdens. We are still analyzing these bills and will be following them closely. |
| “Beating Back Flood Rates” – The Podcast! |
| While the legislature under Senator Brandes’ leadership considers extending rate deregulation and relaxing eligibility requirements to create a stronger private flood insurance market here in Florida, work is accelerating in Washington to essentially do the same thing on a national level. That involves fixing the National Flood Insurance Program (NFIP). Leadership there is moving ahead to reform and reauthorize NFIP before its September 30 expiration.Representatives Dennis Ross and Kathy Castor of Florida have joined with Senator Dean Heller of Nevada and Jon Tester of Montana to re-introduce the Flood Insurance Market Parity and Modernization Act. The bill passed through the House unanimously last year but not the Senate. Its goal is to pare down NFIP’s $23 billion debt, ensure rate adequacy going forward, increase private carrier participation, and improve the quality of flood zone maps, many of which are decades-old. All of this is receiving hearty support by many insurance industry groups.
One of the driving forces in this effort are the Florida Realtors. We had the privilege of sitting down recently with their president Maria Wells to talk about her personal advocacy efforts in Florida and in Washington D.C. with NFIP. Our conversation was the making of our very first episode of The Florida Insurance Roundup, a podcast on the people, issues, and regulations shaping Florida’s insurance market, from Lisa Miller & Associates. It was honest and insightful and you can listen to it by clicking this link: Listen to “Beating Back Flood Rates” podcast. Maria shared her views on NFIP reauthorization and how some in Congress are pushing for debt forgiveness and want the private market in mitigation. She said both Republicans and Democrats want the same thing and that the differences have to do with timing. “We don’t have good maps. The burden is put on the homeowner if they have to get an elevation certificate. The question is ‘can we do good mitigation before an event rather than afterward?’” she said. Maria told us she’s not sure there’s going to be an agreement by September 30 and that if not, Congress will need to resort to passing extensions as they’ve done before. She also reminds us on the podcast of a very important lesson for all who live or own property in Florida: You’re probably in a flood zone. “X” is a flood zone and requires flood insurance; maybe not by your mortgage company, but for your peace of mind and to protect your family’s investment. 50% of those homes in last year’s Louisiana floods were in an “X” zone. |
| Congress Looking at the McCarran-Ferguson Act |
| Congress’ plan after tackling NFIP is to move on to the bigger picture of financial regulatory reform of the Dodd-Frank Act, which includes the Federal Insurance Office. The Chairman of the House Financial Services Committee, Jeb Hensarling of Texas has said he intends to reintroduce the Financial Choice Act that would have stopped the Financial Stability Oversight Council from designating insurers as systematically important financial institutions (SIFI) and repealed the SIFI label from MetLife and Prudential.Meanwhile, the House Judiciary Committee late last month passed the Competitive Health Insurance Reform Act of 2017. The bill is part of the broader effort to replace the Affordable Care Act and specifically repeals anti-trust provisions for health insurers provide under the McCarran-Ferguson Act. The committee did this to allow companies to sell health insurance across state lines, as well as address other marketplace issues including lack of competition and high market concentration. Fixing these issues has been identified as key to improving the current system.
Given President Trump’s regulatory reform stand, his stated belief in and defense of the 10th Amendment (what is not spelled out as a Federal right/responsibility thus belongs to the states), and given our long-established state-based insurance regulation system in this country, we would fully expect the time has come to eliminate the Federal Insurance Office as part of the President’s reform of Dodd-Frank, as FIO is one of its creations. We welcome your feedback and comments on this! |
| Dream a Little Dream… |
| Each day our team walks into the Capitol, we want to see things improve. There is a certain rhythm that must occur over the next 60 days in order for “the people’s business” to get done, meaning that even if regulatory and legislative philosophies are different, well-intended professionals make decisions based on fact and analysis. In a meeting with a Senator on Tuesday, he said, “Lisa, there’s good public policy and then there’s politics and you have been around long enough to know the former rarely trumps the latter.” Perhaps we can change history this session? Stay close to us to see!Lisa and the team |
