The following information highlights just some of the legislation we passed this year pertaining to insurance issues, with a strong focus on the State Health Plan and the Coastal Property Insurance Pool, presently known as the Beach Plan.
If you have any questions or if I can be of assistance, please feel free to contact me. Thank you as always for your interest in the work of the General Assembly and state government and thank you for your support.
This legislation maintains a financially stable State Health Plan to ensure that all members of the plan have affordable access to health benefits and services (SB 287 – S.L. 2009-16). The General Assembly put $250 million into the plan so that it could meet its current obligations and then had to make changes and increase rates to keep it solvent going forward. These decisions were not easy to make, but they help ensure the plan’s financial integrity and allow us to continue providing the plan free of charge to state employees.
Estimates show that over 70,000 plan members use tobacco, resulting in a cost to of $2,000 per member per year more than the cost of providing coverage for nonusers of tobacco.
_ More than 60 percent of North Carolina adults are obese or overweight. Obesity is linked to an increase in health care spending of $2,445 per member per year.
_Weight management and cessation of tobacco result in improved health and substantial savings in health care costs. We have put smoking cessation and weight management programs in place and will ask those who use tobacco or those who are obese to pay some of the increased cost of their health care coverage.
The General Assembly has strengthened the state’s Coastal Property Insurance Pool, presently known as the Beach Plan (HB 1305 – S.L. 2009-472). Among other things, the law decreases the maximum coverage limit per home from $1.5 million to $750,000 and caps the amount of money that private insurance companies who participate in the plan are liable for at $1 billion. Homeowners outside of the 18 coastal counties that participate in plan could be asked to pay up to 10 percent more a year only if storm damage in a season exceeded $3 billion. The most the plan has ever paid out in claims in a previous year is $150 million.
The law will not allow rates to increase until three conditions are met: 1) the Beach Plan surplus would have to be exhausted. Right now, that stands at $800 million. 2) Reinsurance held by the plan would have to be spent. Currently, the plan holds $1.2 billion of reinsurance. 3) Homeowner insurance companies doing business in North Carolina would have to pay $1 billion in assessments toward claims. Then, only after that $3 billion was gone, would the plan assess homeowners statewide.
Under the former plan, only homeowner insurance companies doing business in North Carolina could have been assessed for losses due to storm damage. The assessment would be based on how many policies they have in the state. Some companies doing business in North Carolina could not withstand those assessments. Some companies left the state or reduced the number of homeowner’s policies they sold in North Carolina in order to reduce potential losses. For smaller companies, the assessments could exceed the premium earned. That wasn’t tenable for us and we didn’t believe it was a good business model.
As availability of homeowner’s policies decrease, prices increase. North Carolina needs as many companies writing homeowner’s insurance in North Carolina as possible so that consumers are able to choose from many companies and shop for the best price available.
The new law also requires the Beach Plan to retain any surplus it may generate and to use that money as an additional buffer to future assessments. This was a consensus bill intended to protect our insurance market and to help the working and middle-class people who live along our coast. If insurance carriers continued to leave our state, as many did in Florida, taxpayers would ultimately bear a larger share of the burden.
Counties interested in establishing health insurance pilot demonstration projects to provide a model for affordable employer-based health insurance would be authorized to do so under a new state law (HB 212 - S.L. 2009-568). Specific Demonstration Projects, the goal of which is to reduce the number of uninsured North Carolinians and to reduce the cost of health insurance for all purchasers of health insurance in the Demonstration Project areas, may begin not later than April 1, 2010, and may continue through December 31, 2014. There is a provision in this law that allows the Commissioner of Insurance to recommend early termination of a specific Demonstration Project or the Demonstration Project authority to the Joint Legislative Health Care Oversight Committee if the Commissioner determines that a specific Demonstration Project or the Demonstration Project authority is not in the public's interest or is detrimental to the small group or large group health insurance markets.
A new state law reduces the financial loss to counties and cities for unreimbursed county of city ambulance services provided to members of the State Health Plan by requiring the plan to make payments for county or city ambulance services directly or co-payable to the county or city ambulance service provider (HB 439 - S.L. 2009-83).
A new state law establishes a Survivor’s Alternate Benefit for survivors of law enforcement officers killed in the line of duty. The principal beneficiary of an officer who has completed 15 years of service would be entitled to the Survivor’s Alternate Benefit should that officer be killed in the line of duty (SB 411 – S.L. 2009-109). Previously, officers had to have served at least 20 years before their survivors were eligible for the benefit.
The Department of Insurance (DOI) has seen an increase in the number of insurance fraud cases as the economy worsened. They have 20 sworn law enforcement officers dedicated to investigating insurance fraud. Lately, many of their cases involve agents not forwarding premiums to insurance companies. They are advising consumers to never pay in cash and to write checks to the insurance companies and not the agents or agencies. The department is also advising consumers to be extra cautious in confirming policies and directing them to contact the department if a company can’t come up with a record of their policy.
Prepared with the assistance of the Speaker’s Office of Communications
