The Senate is expected to continue voting on the Farm Bill until Thursday of this week. Therefore, it is vitally important that you urge your Senators to vote NO on all amendments that propose to cut, cap or limit crop insurance. We are particularly targeting an amendment offered by Sens. Dick Durbin (D-Ill.) and Tom Coburn (R-Okla.) which would cap premium support for farmers.The 2013 legislative session ended at midnight on May 20th, ending the first legislative session in 20 years where both bodies of the state legislature and the governor's office were all controlled by Democrats. The session will likely be remembered by some for legalizing gay marriage in the state and by many for the $2.1 billion in new tax revenues that are meant to put the state on sound fiscal footing. For those in the insurance industry, the session will be marked by the state's full adoption of the Affordable Care Act or ObamaCare which will begin to make its impact upon the state this fall. The following is a brief summary of the major insurance legislation debated by the state legislature this year.
Health Insurance Exchange
Given the fast approaching federal deadline, the state legislature passed legislation establishing a health insurance exchange, HIX, complying with the Affordable Care Act three months into the session. The proposal travelled through 18 separate legislative committees, with over 70 hours of testimony and 20 hours of debate on the House and Senate floors. The HIX debate dominated the first two and half months of the session.
The state HIX, now called MNsure, will be up and running by October 1. MIIAB along with other agent associations were able to assure an active role for insurance producers who wish to write individual or small group health insurance through the new exchange. The MNsure board is in the process of establishing certification criteria for insurance producers who wish to work with the HIX. Rules relating to producers and well as HIX navigators are being finalized. Check out the MNsure web site http://www.mn.gov/hix/
for up to date information on MNsure producer certification, health plan qualifications and HIX marketing and outreach.
Health Insurance Market Rules
The majority of this new law consists of numerous technical changes to conform Minnesota health insurance laws to the federal Affordable Care Act. This permits our state to accept enforcement of the ACA as an alternative to federal enforcement. The remainder of the new law establishes market rules that will apply to our major health carriers who will sell insurance inside and outside of the HIX. Controversies about the market rules were addressed by allowing smaller insurers to be exempted from some of the market rules relating to provider geographic access, quality assurance and product offerings. Eventually, these exemptions will sunset but not for the first several years of health care reform in the state.
Homeowner's and Auto Insurance Surcharge
A controversial proposal to institute a $5 premium surcharge on auto and homeowners' insurance policies was part of the debate on the 2013 tax bill. The legislature decided against the surcharge which was designed to help fund police and fire-fighters' pensions. These pension shortfalls were instead funded through state general revenue funds.
The legislature sided with sub-contractors in their fight with large general contractors and made "risk shifting" void and unenforceable. A new law prohibits agreements or contracts from requiring a subcontractor to provide insurance coverage to other parties, including third parties, for the negligence of intentional acts or omissions to those parties. The new law takes effect August 1, 2013.
Electronic Policies and Notices
A new law will give policyholders the option to receive their policies and required notices either through electronic means or in written form through first class mail. Policyholders must give prior consent to receive insurance notices through electronic means and if they do not opt for electronic delivery, notice must be provided by mail. The new law also allows policies to be delivered in foreign languages. Policies in languages other than English must be filed with the Department of Commerce along with an English language version of the policy.
The MIIAB expressed concerns about receipt by policyholders of certain notices that might be delivered electronically, such as cancellation notices. The law contains a provision that insurers must develop a method for verification and acknowledgement of electronic receipt of notices required by law. The law is effective August 1.
The legislature made some major changes to the state's workers' compensation system for the first time in nearly two decades. These changes to workers' compensation statutes were approved by the workers' compensation advisory committee made up of four members from business and four members from labor.
The new law expands the definition of occupational disease to include mental impairment which is defined as a "diagnosis of post-traumatic stress disorder by a licensed psychiatrist or psychologist." Mental impairment is not considered a disease if it results from a disciplinary action, work evaluation, job transfer, layoff, demotion, promotion, termination, retirement, or similar action taken in good faith by the employer.
The maximum weekly benefit amount for temporary total disability was increased from the current level of $850 per week to 102 percent of the statewide average weekly wage (the current average weekly wage is $916). The cap on cost of living adjustments for injuries after October 2013 may not exceed 3 percent.
No-Fault Auto Reform
A proposal for minor no-fault reform was brought forth from a handful of insurers working with a similar group of trial lawyers. The proposal among other things would have raised income and survivor weekly wage loss from $250 to $500 a week, increase the funeral benefit from $2000 to $5000 and prohibit the aggregation of claims to exceed the $10,000 arbitration cap. However the majority of state insurers opposed this proposal which was passed by the House of Representatives. The opposition of the Insurance Federation and others was enough to assure that this legislation was not approved by the Senate and was not enacted this year. Once again, there will be no auto insurance reform enacted by the legislature.
NAIC Annuity Suitability Regulation
Last year, Governor Mark Dayton vetoed the NAIC Model Annuity Disclosure Act after it was overwhelmingly passed by the Republican controlled state legislature. He did so at the urging of Minnesota Attorney General, Lori Swanson. This year, the legislation sponsored by NAIFA and the life insurance industry was overwhelmingly passed by the DFL controlled legislature. Once again, the Attorney General encouraged Governor Dayton to veto the model act. However, this year the Governor decided to let the bill become law without his signature.
The new law assures that all annuity products sold in Minnesota must be suitable for the consumer considering that individual's age and finances. It establishes a process for insurance companies to independently review policy applications to assure suitability determinations made at the point of sale and clearly makes the company responsible for the actions of its producers. The new law also specifies the proper maintenance of insurance records and their length of retention. It will take effect on June 1, 2013.
Insurance producers who wish to sell annuity products in Minnesota will be required to complete a four hour continuing education course on the new suitability regulations. Currently licensed producers will not need to complete the coursework until July of 2014.
The bill is based upon model legislation that was composed and adopted by the National Association of Insurance Commissioners, the national organization of 50 state insurance regulators. Its passage sends a clear message to Congress and supporters of national insurance regulation that state legislators and state insurance regulators are capable of regulating this insurance product. Minnesota becomes the twenty-ninth state to enact the NAIC model act.
Long-Term Care Tax Credit - Income and Sales Taxes
A proposal to repeal the state's $100 long-term care premium tax credit arose late in the session as part of the legislature's revenue proposal for the biennial budget. The House of Representatives proposed repeal of the tax credit in its 2013 tax bill. The Senate did not. Ultimately, the Senate's provision prevailed and the tax credit will continue. The legislature also backed-off its earlier proposal to tax accounting, brokerage and insurance services.
The legislature did enact a new fourth-tier income tax at 9.5% for incomes of $150,000 a year for single filers and $250,000 a year for couples. The cigarette tax was raised by $1.60, more than doubling the tax on a pack. The legislature added the state sales tax to a few business to business sales: warehouse storage services, electronic and commercial repair/maintenance, and telecommunications equipment.