The House Committee on Insurance met on February 28th to hear invited testimony from the Texas Department of Insurance, the Office of Public Insurance Counsel, and the Texas Windstorm Insurance Association. An archive video of the hearing can be found here.
This report is intended to give you an overview and highlight the various topics taken up. It is not a verbatim transcript of the discussions but is based upon what was audible or understandable to the observer and the desire to get details out as quickly as possible with few errors or omissions.
Opening Comments
- Chair Oliverson – Will be reviewing insurance industry in Texas
- Highlights work of NCOIL, encourages legislators to attend
Panel 1 – Texas Department of Insurance
Cassie Brown, Commissioner of Insurance
- TX is the second largest insurance market in the US, 7th in the world
- Provides overview of TDI operations & organization; agency regulates business of insurance, protects consumers, and ensures fair market
Jamie Walker, TDI
- Highlights Financial Regulation Division at TDI & insurance markets; 2,337 admitted insurance carriers,
- Admitted Insurance market is the most regulated, have 2,337 in the state & subject to continuous solvency audit process, agreement review, etc.
- Highlights TDI communication with insurers and oversight/enforcement functions
- Surplus Lines insurers are safety valves for market, write unique risks not available in the Admitted market
- Captive Market allows policies bought in concert with or instead of Admitted or Surplus policies
Debra Diaz-Lara, TDI
- Provides overview of Life & Health Insurance division; products include life, annuity, disability, and LTC
- Do not regulate private employer self-funded ERISA plans, state & local gov, church plans
- With gold carding, conducted survey and found that number of services with PA overall had not changed
- Highlights teams & units, incl. Managed Care Quality Assurance Unit overseeing managed care plans in TX, network adequacy, etc.
Mark Worman, TDI
- Provides overview of Property & Casualty division; most forms must be approved by TDI prior to use at least 60 days before intended use
- TX is a file & use state for rates, rates must be adequate, not excessive, be based on sound actuarial principles, etc.
- Inspections Office covers TWIA policies, also oversees amusement ride program
Panel 1 Questions
- Julie Johnson – What is the rate of carriers leaving the state due to financial insolvency problems in other states?
- Brown, TDI – Several insolvencies in LA and FL over last several years
- Statute says guaranteed fund covers claims 30 days from when liquidation order is entered, standard procedure to cancel policies after that point & consumers would need to find coverage within that 30 day period
- J Johnson – Which could be hard; on surplus lines, seems to be a lot of concern about mandatory arbitration provisions in other states
- Insurance Code does not allow review & approval for surplus line forms
- J Johnson – So we need to act to give you the authority to regulate that?
- Yes
- J Johnson – On network adequacy and gold carding, concerned gold carding statute is not working; went to annual meeting of the Dallas County medical Society and no physician there was able to receive a gold card, why are they having a difficult time hitting standards?
- J Johnson – TDI rule imposing minimum thresholds may be a factor
- Diaz-Lara, TDI – This is part of the issue, rule includes threshold of 5 PAs within a 6 month lookback
- J Johnson – TDI rules?
- Threshold of 5 is TDI, 6 month lookback is statutory
- J Johnson – Why did TDI impose a threshold? 5 patients within 6 months on a specific plan is untenable for many
- Landed there based on comments received, something to consider as we revise the rule
- Brown – Gold carding survey was done to help inform on further implementation
- J Johnson – Physicians don’t want gold cards, but removing PA burden is important for patient access; what is TDI doing to ensure companies are adequately implementing these standards and there are no delays in approving physicians?
- Diaz-Lara – Asked for complaint data to understand where the barrier is for providers
- Per survey, found that number of times requiring PAs did not change
- J Johnson – Need to evaluate what we can do as session goes by
- J Johnson – Very concerned about network adequacy, what data do you have about how many waivers were applied for? Especially in areas with plethora of physicians; don’t see need for waivers in places like Harris County
- Have 65 HMO networks filed with us, 57 have an access plan, 114 PPO with 102 plans
- Access plans can only be reached with no providers in an area, or a plan could not contract with sufficient providers
- Don’t have authority to mandate contracts, access plan provides details on steps taken and how they plan to deal with it, also how enrollees are held harmless on costs
- Access plans aren’t perfect, but without would have very few networks in the state
- J Johnson – So access plan is a way to say, “we don’t have enough physicians and here is a plan to deal with it?”
- Yes, could be a plan for specific specialists, e.g. hand surgeons in El Paso and plan to transfer to Dallas
- J Johnson – Hard to travel to Dallas from El Paso
- If there isn’t a provider in the service area, will need to arrange for that care
- J Johnson – So bulk of plans have access plans
- Bulk of access plans are due to hospital based providers, may not have providers to fill out all services
- J Johnson – Network adequacy for worker’s comp is a crisis of physician access, can take 6-8 months
- Chair Oliverson – Worker’s Comp is not in jurisdiction of this committee
- J Johnson – What does TDI do to regulate network adequacy of comp providers?
- Certify the comp health care network, 2 ways via Any Willing Provider or employer-selected network
- Chair Oliverson – Can you comment on your budget and funding?
- Brown – Maintenance tax, self-leveling fund
- Chair Oliverson – Can you discuss approval process for file & use system?
- Worman, TDI – Most states are file & use rate states, some have use & file
- Not familiar with many states that have a prior approval system
- TDI can disapprove a rate when it is filed, but needs to be 30 days from when it is filed or prior to effective date of rate
- Chair Oliverson – What percent of policies are surplus line policies and what is the trend?
- Walker – Policies must be filed with Stamping Office, premiums are increasing
- Chair Oliverson – Surplus lines are there to provide a backstop for admitted carriers, asks for more info
- Can provide premium data
- Chair Oliverson – Not interested in costs, more interested in trends and possible changes in market
- Chair Oliverson – In wake of Rutledge decision with PBMs and ERISA, legislature passed, reforms, door is cracked for states to possibly have bigger role in regulating self-funded entities; where do you see your authority right now?
- Brown – Happy to have conversations, reviewing some complaints in regard to PBM steering law & will have more info in the future
- Chair Oliverson – Where is the state’s regulatory power particularly for surprise medical billing
- Can get back to you
- Chair Oliverson – Second largest for number of subscribers for ACA? Is this true?
- Not sure of rankings, have 2.4m on federal exchange
- Chair Oliverson – This is a lot; 17 issuers on the exchange, keep hearing we have healthy participation; how do we compare to other states with respect to the exchange?
- Diaz-Lara – Hands off except for the rate review piece
- Chair Oliverson – Raised premiums on silver level, made everyone’s premiums more affordable because there is more buying power; race to bottom affects everyone in terms of buying power, so we asked TDI to step in and provide some sanity
- Chair Oliverson – On network adequacy, what is the longest an access plan has been in effect without being resolved? Once network is adequate plan goes away
- Access plans are only good for a year
- Chair Oliverson – Longest string of consecutive re-filings?
- Can get this info
- Chair Oliverson – Do you ever get to see what was offered in the contracts?
- No, don’t ask for it either
- Chair Oliverson – You have access to market data for average contracted rates, if you had access you may be able to say if there was a good-faith effort
Panel 2 – Texas Department of Insurance cont.
Brian Rider, TDI
- Provides overview of what actuaries do at TDI
Randall Evans, TDI
- Provides overview of Customer Operations Division
Cindy Wright, TDI
- Provides overview of Consumer Protection Office & complaints portal on TDI website
- Highlights SB 1264 and Independent Dispute Resolution (IDR) program, designed to encourage plans and providers to reach agreements, provides for mediation or arbitration if necessary
Leah Gillum, TDI
- Provides overview of Fraud & Enforcement division and investigation process, typically investigating health care fraud, property & casualty fraud, agency crimes, illegal products, etc.
- Can take disciplinary actions against entities violating code, can be sanctions
Panel 2 Questions
- J Johnson – 234k people had filed complaints for assistance with balance billing?
- Wright, TDI – This is the number of requests that come through IDR portal, requests related to resolving a billing dispute
- J Johnson – But if they are in-network they have a contracted rate?
- IDR process is intended to resolve out-of-network disputes
- J Johnson – $1b in payments would not have been necessary if providers were in network?
- If there was a contracted rate, then provider would not have engaged IDR process
- Paul – Can we get the numbers on IDR sent to our offices?
- Yes
- Paul – Breakdown for services for the 234k?
- Don’t capture service codes associated with requests, but do capture type of provider that submitted the complaint; can include this info
- Brown – Part of annual report, should have been provided but will make sure you have it
Panel 3 – Office of Public Insurance Counsel
David Bolduc, Acting Public Insurance Counsel
- Provides overview of OPIC, office represents consumers as a class
- Noticing some trends; Insurers are beginning to try and eliminate right to appraisal in policies & legislature should keep an eye on this, rates in general are going up & could be related to price of materials or fixes, some companies are pinging members of the military and writing different policies
- Policies in general are getting more complicated, increasingly unlikely that consumers will understand what is in policies
- Chair Oliverson – Had one large carrier that wanted to eliminate appraisals, has essentially been no activity since a carrier recently expressed interest, have heard this is more to do with what is happening in other states & concerns about abuses of claims processes
- Have heard horror stories about claims processes abuses, have heard of some in Texas
- There are bad actors, possible way to deal with this is to discipline these bas actors
- Chair Oliverson – On P&C side cost of fixing things is likely due to COVID shortages, material cost, etc.; have you dug into the automobile repair issue at OPIC?
- Seen a couple things, parts are more expensive generally, COVID piled on top, insurance company more likely to resist request because of price, consumers can’t fix on their own
- Haven’t delved in how to fix this, can dig
- Chair Oliverson – Would be helpful to hear from you on this, constant issue
- Also hearing that repair times are getting longer and longer
- TDI is probably a better source on this info
- Chair Oliverson – Your perspective is very important, encourage members to reach out to you to hear a neutral, unbiased view on consumer impact
- J Johnson – In light of rapid increase in costs of replacement, have you noticed situations where coinsurance deductible is being applied even after annual issuance of policy?
- Haven’t heard this, but don’t look at commercial policies much; becoming increasingly important
Panel 4 – Texas Windstorm Insurance Association
David Durden, TWIA
- Providing overview of TWIA, investments, and insurance company insolvencies affecting TWIA
- Highlights history & organization of TWIA
- Legislature has established detailed procedures for funding claims after major hurricane and losses exceed funds, Catastrophe Reserve Trust Fund is available to fund these claims; currently $190m, will be depositing $75m in March
- If losses exceed CRTF, can issue bonds or surcharges; actions approved by Commissioner of insurance
- Board determines 1 in 100 Probable Maximum Loss, another way to say is Board is required to by coverage for 1% chance that amount exceeds purchased coverage; currently set at $4.5b
- TWIA premiums are significant expense for many property owners living on the coast, have held many Board meetings and hired consultant to examine rate adequacy
- Last year analysis indicated rates were inadequate by 15% for residential and 11% for commercial
- TWIA files rates each August, Board deferred rate increase for last year’s filing
- TWIA has strong track record of keeping operational expenses below budget, large expenses limited to IT system
- TWIA policy count as insurer of last resort is growing, >200k, suggest private market may be reducing exposure in TWIA coverage areas
- Chair Oliverson – Appreciate your work at TWIA and value TWIA brings to people on the coast
- Chair Oliverson – Did you use reinsurance during Harvey?
- No
- Chair Oliverson – Why would you buy policy and not use it?
- Reinsurance can’t attach below statutory funding, hadn’t exhausted statutory bonds and assessments
- Chair Oliverson – Where are we right now? Outstanding debt obligations?
- All paid off as of last year
- Chair Oliverson – What was the cost of the debt service?
- Not sure of exact number, prior to retirement of bonds TWIA was paying $40k in interest per day
- Chair Oliverson – Was money coming in from policy holders that could’ve been used to pay claims or deposited into the CRTF
- Chair Oliverson – Legislature is carefully looking at this, wants TWIA to be a healthy normally functioning insurance company, healthy affordable alternative to the private market
- Chair Oliverson – On reinsurance, are recommendations made internally by the Board, any external communication with TDI? Commissioner sign off?
- A bit of both, doesn’t require approval and is decision of TWIA Board, Board sets PML, hires vendor to make recommendations, members review actuarial analysis, etc.; Board decides PML & required to notify Commissioner of process
- Chair Oliverson – When you’re determining 1 in 100, etc. is that reinsurance statutory?
- Required to purchase up to 1 in 100 PML, beyond that no definition of PML or how to determine
- Chair Oliverson – How often do you do this? Common or rare?
- A couple of times they decided to purchase, most recently this year
- Chair Oliverson – Still a lot of bad feeling about how claims were handled during Harvey, particular with inability to begin repairing while claim was being assessed; have we fixed this?
- Not a current policy
- Paul – Cost of reinsurance?
- Budgeted number is about $225m
- Cain – Has TWIA heard from members about purchasing insurance in excess of PML?
- Yes, a group of trade association provided comment after adoption of the PML suggesting Board should not purchase additional coverage
Closing Comments
- Chair Oliverson – At beginning of next week’s hearing may have updates from others