MEMORANDUM

RE: DOCUMENTS FOR CONSIDERATION AT THE 2007 NCOIL SPRING MEETING IN SAVANNAH, GEORGIA

Legislators will consider the following documents at the upcoming NCOIL Spring Meeting, scheduled for March 1 through 4 in Savannah, Georgia. The documents relate to reinsurance collateral; payday lending; the state children’s health insurance program (SCHIP); pharmacy benefit manager (PBM) regulation; secondary markets regarding physician discounts; rental vehicle insurance coverage; an Interstate Insurance Product Regulation Compact; the use of legal settlements to implement insurance public policy; a national mega-catastrophe system; building codes; professional employer organizations (PEOs); and life settlements.

The following memo reports briefly on those documents and identifies the committees that will address them. Documents that have been submitted in accordance with the NCOIL 30-day deadline rule may be voted on or discussed during the 2007 Spring Meeting. Documents that have not been submitted in accordance with the 30-day deadline would require a two-thirds vote of a committee prior to legislative consideration.

Any documents approved by a committee at the NCOIL Spring Meeting could be considered by the NCOIL Executive Committee at the same meeting.

On March 3, the Executive Committee will consider current proposals regarding reinsurance collateral, such as creation of a Reinsurance Evaluation Office (REO), in light of a proposed Approved List of Reinsurers Model Act that has been before the Committee since 2002. The Approved List, which has served as a placeholder for the Committee as it received reports from NAIC leadership regarding the progress of its Task Force on Reinsurance, would provide for reduced collateral requirements for non-U.S. reinsurers that meet certain financial solvency criteria.

A 2005 NCOIL Executive Committee Resolution Regarding Reinsurance Collateral Requirements requested that NAIC report to NCOIL on its reinsurance collateral activity and recognized the importance of both domestic and non-U.S. reinsurers. Among other things, the resolution supported 1) continuing to reassess credit for reinsurance rules in light of an evolving reinsurance market and changes to regulatory and accounting standards and 2) collateral rules that are effective and fair and that provide contract security while not increasing costs or reducing capacity.

On March 1, the Financial Services & Investment Products Committee will continue to consider items for possible inclusion in an NCOIL payday lending model law. The provisions, submitted by an NCOIL Payday Lending Subcommittee, address the length and amount of a payday loan, lender charges, collateral, partial payments, verification issues, disclosures and warnings, and lender reporting requirements.

The full Committee also is expected to examine issues not addressed by the Payday Lending Subcommittee. These issues include loan rollovers, loan repayment plans, and restrictions regarding the placement of payday loan establishments. In addition, the Committee will take a closer look at database verification language in use or pending in the States.

On March 2, the Health, Long-Term Care, and Health Retirement Issues Committee will consider a draft letter from the Committee to Congress urging federal lawmakers to reauthorize, and expand funding for, the State Children’s Health Insurance Program (SCHIP). The letter, sponsored by Rep. Brian Kennedy (RI) and Rep. George Keiser (ND), notes that SCHIP has been successful in achieving its goals of expanded health insurance coverage for children and cautions Congress that without additional funding, 14 states could run out of federal money for SCHIP by October, with six (6) states projected to exhaust their resources by May 7, 2007.

On March 2, the Health, Long-Term Care, and Health Retirement Issues Committee will consider an amended version of a proposed Model Act Regarding Pharmacy Benefit Managers, sponsored by Del. Harvey Morgan (VA). The model would, among other things, require that a PBM owe a fiduciary duty to a covered entity, provide transparency regarding financial and utilization information, disclose any conflict of interest presented by PBM activity, and follow drug substitution guidelines.

At the 2006 Annual Meeting, the Committee reviewed comments from interested parties and voted to further its consideration of the proposed model act at the Spring Meeting.

On March 2, the Health, Long-Term Care, and Health Retirement Issues Committee will consider a proposed Model Act Concerning Regulation of the Secondary Market in Physician Discounts, sponsored by Sen. Joseph Crisco (CT) and sponsored for discussion by Rep. George Keiser (ND). The model seeks to define the relationship between a “contracting agent” and a practicing physician. It would regulate the secondary market in physician discounts by, among other things, demanding comprehensive disclosures on contracts between physicians and contracting agents regarding the use of physician discount information.

At the 2006 Annual Meeting, the Committee voted to defer further consideration of the model until the 2007 Spring Meeting in order to give representatives of the health insurance industry and the American Medical Association (AMA) additional time to work toward consensus.

On March 2, the Property-Casualty Insurance Committee will consider a proposed Model Act Regarding Auto Liability Insurance and Rental Vehicles, sponsored for discussion by Sen. Alan Sanborn (MI). The issue of rental vehicle insurance is not a 2007 Committee charge and will require a two-thirds vote for members to consider the model act.

The draft model law would, among other things, require that every motor vehicle liability insurance policy that covers fewer than five private passenger motor vehicles registered in a state must 1) offer coverage for damage to or loss of a rental vehicle (including loss of use); 2) disclose to new policyholders and upon renewals that rental vehicle coverage is provided; 3) notify an insured that he/she has ten days following such notification to reject the rental coverage, if the insurer charges a separate fee for the coverage; 4) prohibit a policyholder from receiving rental vehicle payments under more than one auto liability policy; and 5) allow an insurer to pursue subrogation rights in connection with rental vehicle claims.

INTERSTATE INSURANCE PRODUCT REGULATION COMMISSION
On March 2, the State-Federal Relations Committee will consider a proposed Resolution Withdrawing Support of the NAIC Interstate Insurance Product Regulation Compact Model Legislation, sponsored by Rep. Shirley Bowler (LA). The resolution, among other things, recognizes the importance of speed-to-market for insurance products, questions NCOIL support for the IIPRC, and encourages discussions regarding additional methods to achieve efficiency and uniformity in state insurance regulation.

On March 1, the Subcommittee on Natural Disaster Insurance Legislation will further its consideration of a proposed National Association of Insurance Commissioners (NAIC) discussion paper entitled Natural Catastrophe Risk: Creating a Comprehensive National Plan, sponsored by Sen. Steven Geller (FL). The Subcommittee offered its initial comments to the NAIC following the 2006 Annual Meeting, with the intent of offering additional comments following the 2007 Spring Meeting.

The proposal supports a multi-layered system of catastrophe management. Layer One of the draft would call for a newly created Federal Natural Disaster Catastrophe Commission to evaluate whether public-sector involvement would be called for and, if so, what triggers might be appropriate. Optional state or regional catastrophe funds and a federal reinsurance program would follow should the Commission see a need for public participation.

The proposed system also would allow for creation of tax-deferred catastrophe reserves and would strongly promote mitigation efforts, including effective statewide building codes and land-use management.

On March 1, the Subcommittee on Natural Disaster Insurance Legislation will consider a proposed Model State Uniform Building Code, sponsored by Rep. George Keiser (ND). The model act would establish structural building requirements in order to minimize losses from wind, flood, and earthquake in areas with significant catastrophe exposure. It also would create a framework for a statewide system of building regulation.

Due to time constraints at the 2006 Annual Meeting, the Subcommittee deferred its consideration of the proposal until the 2007 Spring Meeting.

On March 1, the Workers’ Compensation Insurance Committee will consider a proposed Model Act Regarding Professional Employer Organizations (PEOs) in Workers’ Compensation Insurance, sponsored by Committee Chair Sen. Carroll Leavell (NM). The model requires, among other things, that a PEO register with an appropriate state authority and that the experience rating of a PEO client remain with the client regardless of its relationship with the PEO.

At the 2006 Annual Meeting, the Committee voted to establish a Working Group to review comments from interested parties and to consider recommending a revised version of the draft for consideration at the 2007 Spring Meeting. The Working Group’s recommendations address client-level rating provisions, experience-reporting to a statistical organization, and the definition of a PEO.

SUNSETTING LEGISLATION UP FOR REVIEW

Legislators also will consider formerly adopted NCOIL model laws, as per NCOIL Bylaws (Section VI.B):

The NCOIL committees shall review previously adopted NCOIL model laws in order to provide an appropriate sunset schedule. Such documents shall be reviewed in the following manner: Spring Meeting shall be Life Insurance & Financial Planning Committee and Health, Long-Term Care, and Health Retirement Issues Committee. Summer Meeting shall be Workers’ Compensation Insurance Committee and Property-Casualty Insurance Committee. The Annual Meeting shall be the State-Federal Relations Committee, Financial Services & Investment Products Committee, and Executive Committee. Model laws shall sunset every five years within the Committee. Committees shall have the authority to extend the model laws from meeting to meeting.

On March 2, the Life Insurance and Financial Planning Committee will hold a special meeting to discuss possible updates to an NCOIL Life Settlements Model Act and to query interested parties on comments submitted prior to the meeting regarding such issues as stranger-originated life insurance (STOLI), insurable interest, fraud, trusts, disclosure, and settlements regulation.

At the 2006 Annual Meeting, the Committee deferred review of the model until the 2007 Spring Meeting and established a Subcommittee on Life Settlements to work on developing an appropriate policy position on issues related to life settlements. The Subcommittee has recommended holding a special session to reevaluate the NCOIL model law.

The model act, which the Committee originally adopted on November 16, 2000, would, among other things, prohibit a person, wherever located, to (1) act as a provider or broker with an owner or purchaser who is a resident of the state without first having obtained a license from the commissioner; (2) use any form of sales contract or purchase agreement unless it has been filed and approved by the commissioner; and (3) enter into a sales contract if the policy was obtained by false, deceptive, or misleading means.

MODEL BILLS OR OTHER DOCUMENTS MUST HAVE A LEGISLATIVE SPONSOR AND MAY ONLY BE MOVED FOR ADOPTION BY A COMMITTEE MEMBER.

Copies of NCOIL working drafts are available on the NCOIL Web site at www.ncoil.org, on the Model Laws & Resolutions/Committee Working Drafts page.

Copies of previously adopted NCOIL model laws and resolutions are available for purchase by faxing a completed order form to the NCOIL National Office at 518-687-0401. The order form is available by clicking on the “Order Form” link on the Model Laws & Resolutions/Overview page.

Legislators from NCOIL-member states receive free access to these and all other NCOIL materials.

If you are a commissioner from an NCOIL state, or you are a member of the media, please contact the NCOIL National Office at 518-687-0178 or at info@ncoil.org to receive copies of restricted documents.