NAIFA-TX eNewsletter -- April 2009

2009 Legislative Update

Of the record number of bills filed in the 81st Regular Session of the Texas Legislature, a large number are directed toward the insurance industry and, in particular, agents and financial advisors. The Sunset Review of the Texas Department of Insurance (TDI) and the funding crisis for the Texas Windstorm Insurance Association (TWIA) provide a backdrop for the many issues affecting agents and advisors including limitation by TDI of compensation for annuity producers; diminution of the role of the agent in providing health insurance; consumer protections for insurance products under the Guaranty Association law; continuing education and/or certification for the sale of "complex products;" life settlements; restrictions on third party administrators (TPAs) in 403(b) plans; use of senior-specific designations; and additional mandates for group health insurance, among others.

With just more than a month remaining in the 81st Session, NAIFA-Texas continues to offer daily updates at http://www.naifa-texas.org on these and other issues.

Sunset Review of TDI
The Senate bill (S.B. 1007) relating to the continuation of the Texas Department of Insurance has made its way through the Senate Government Organization Committee and now awaits action by the entire Senate.

The identical House companion bill (H.B. 2203) is scheduled for public hearing on Tuesday, April 14, 2009.

NAIFA-Texas is monitoring these bills to insure that no amendments are added that would adversely affect the way agents and advisors do business in the State of Texas.

TX Windstorm Insurance Association
NAIFA-Texas has monitored two meetings of the House Insurance Committee focused on bills relating to the Texas Windstorm Insurance Association (TWIA), the insurer of last resort for Texans living in high-risk areas along the Gulf Coast.

The major issue at hand is the funding for the association, which sustained severe losses in the wake of Hurricanes Ike and Dolly in 2008 and remains a point of great economic exposure as the State prepares for the 2009 hurricane season.

Last year, the $500 million trust fund that serves as the first line of defense against windstorm losses was completely wiped out by the two storms that made landfall on the Texas coast. Lawmakers are considering options to recapitalize the fund, including the sale of public securities or acceptance of funds from the American Recovery and Reinvestment Act of 2009.

Additionally, lawmakers are considering options for the State's reinsurance policy, which expires in May. A new policy will cost the State more than $200 million, while doubling the current $500 million deductible.

Annuities
Annuities have garnered much attention this session, as lawmakers consider methods to curb the deceptive and harmful sales practices of a small number of unscrupulous advisors using high-commission annuities to prey upon seniors.

House and Senate Committees have received public testimony related to a proposal to authorize the TDI Commissioner to limit the commission paid to an agent for the sale of annuity. NAIFA-Texas participated in both meetings to testify against the bills. In his testimony, NAIFA-Texas CEO/Chief Legislative Officer called the proposal "unprecedented" in its attempt to interfere in a contract between an insurer and an agent and warned that it is, "a slippery slope which the state need not go down."

Further, bills filed in the Texas House and Senate would require any agent or advisor selling an annuity to first obtain eight hours education credit specifically related to annuities. The proposal would require an additional four hours of continuing education related to annuities on an annual basis. NAIFA-Texas, in meeting with lawmakers and staff, worked to insure that any education requirement would fall under the current requirement of thirty hours every two years.

C.S.H.B. 1919 would establish the "70-10" rule limiting the maturity date of an annuity to the later of the next anniversary of the annuitant's seventieth birthday or the tenth anniversary of the contract. The bill was approved by the House Insurance Committee and is on the House calendar for April 15, 2009.

H.B. 2652 would increase the so-called "free look" or rescission period of an annuity to thirty days. The bill was left pending following public testimony in the House Insurance Committee on March 24, 2009.

Agent Role in the Sale of Small Employer Group Health Insurance
C.S.S.B. 6 seeks to create the "Healthy Texas Program" to provide TDI-approved health insurance products for certain small businesses.

The creation of the program would require the Texas Department of Insurance (TDI) to create the "Healthy Texas Fund," from which health benefit plan insurers may receive reimbursement for claims paid for individuals covered under the qualifying group health plans.

The bill states that TDI may use up to 8% of the fund to develop and implement public education, outreach and enrollment strategies for the program, but does not recognize agent participation in the marketing and enrollment process.

In testifying on the bill, NAIFA-Texas asked that the measure be amended to specify agent participation. However, the amendment was not included in the bill as it was passed by the Senate.

403(b) Plans and Third Party Administrators
C.S.H.B. 3480 was approved by the House Committee on Pensions, Investments and Financial Securities on April 9, 2009. The bill would limit the type of companies eligible to provide 403(b) plan administration to those companies that are independent TPAs and would impact agents providing services to the 403(b) market.

Consumer Protections under
Guaranty Association Law

Three House bills and one Senate bill seek to modify the level of protections afforded consumers of insurance products under the Texas Life, Accident, Health, and Hospital Service Guaranty Association.

On March 31, 2009, NAIFA-Texas testified in support of H.B. 969, to increase the protections on annuities and the cash value of life insurance from $100,000 to $250,000. The bill was left pending in committee.

The other bills related to the Guaranty Fund caps have not yet been scheduled for a committee hearing.

NAIFA-Texas supports measures that would increase the consumer protections on annuities.

Life & Viatical Settlements
A bill filed in the House (H.B. 2663) would require that insurers notify policy holders that a life settlement contract or viatical settlement is available if he/she is chronically or terminally ill, or is at least sixty years of age.

Additionally, identical companion bills filed in the House and Senate (H.B. 2739, S.B. 1550) would establish additional regulations on life settlement contracts and viatical settlements, including provisions on what may be disclosed to insurers.

None of the bills has been set for committee hearing.

Continuing Education
H.B. 2456 would grant the TDI Commissioner the authority to develop increased education requirements for an agent selling "complex insurance products." The bill has yet to be scheduled for a public hearing before the House Insurance Committee.

C.S.S.B. 964 would require agents selling certain Medicare related products first obtain eight hours of education credit and an additional eight hours of continuing education annually thereafter. NAIFA-Texas worked with lawmakers and staff to insure that any education requirement would fall under the current requirement of thirty hours every two years. The bill was passed by the Senate on April 9, 2009.

Senior-Specific Designations
C.S.H.B. 1294, passed by the House Insurance Committee on April 9, 2009, would establish standards for the use of senior-specific designations in the sale of life insurance and annuities.

With approval from the committee, the bill now awaits action by the House of Representatives.

Health Mandates
A large number of bills have been filed that would require insurers to cover additional conditions under group health insurance plans.

Currently, Texas has the highest rate of uninsured citizens in the United States and the fifth highest health insurance premiums.

NAIFA-Texas opposes additional mandates of health coverage that drive up the cost of health insurance plans and would, ultimately, price-out a larger portion of the Texas population.