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Program B: Market Compliance Program

Program Authorization: La. Constitution, Article IV, Section 11; Title 36, Chapter 17 and Title 22 of Louisiana Revised Statutes; Act 83 of 1977 (Reorganization Act); Act 850 of 1984 (Equal Opportunity in Insurance Act); Act 477 of 1992 (Reorganization Act); Act 517 of 1992 (Operations of Louisiana Insurance Guaranty Association with the Department of Insurance); Act 238 of 1997 (HMO Quality Assurance Act); Act 1138 of 1997 (Insurance Portability Act)

PROGRAM DESCRIPTION

The mission of the Market Compliance Program is to regulate the insurance industry in the State of Louisiana by analyzing and examining regulated entities, licensing individuals, partnerships, and corporations engaged in the insurance business, ensuring that rates charged are not excessive, inadequate, or unfairly discriminatory, and reducing fraud against consumers and the insurance industry; and to assist small, minority, and disadvantaged agents and agencies to increase their knowledge and participation in the industry.

The goals of the Market Compliance Program are:

  1. Enforce the existing laws and propose new laws that promote the protection of the public related to matters involving insurance.
  2. Better meet the needs of the public and improve customer services by increasing efficiency, fairness, consistency, and timeliness in the enforcement of applicable laws and regulations.
  3. Maintain and expand the knowledge of staff and the technological infrastructure to respond to current and future consumer and industry needs.
  4. Promote a healthy insurance market in the State of Louisiana.
  5. Work with other states and the National Association of Insurance Commissioners (NAIC) to standardize insurance regulatory efforts.

The Market Compliance Program is organizationally comprised of three offices and one division: the Office of Financial Solvency, the Office of Licensing and Insurance Compliance, the Office of the Insurance Rating Commission, and the Division of Health.

The Office of Financial Solvency meets its statutory obligations by analyzing and examining regulated entities. The Office of Financial Solvency monitors the following: the solvency of insurance companies; the fair and proper treatment of policyholders; the adherence to all statutory requirements by regulated entities; that reserve requirements are maintained; and that investments are made in accordance with Louisiana insurance statutes.

The Office of Licensing and Compliance issues licenses to individuals, partnerships, and corporations engaged in the insurance business in Louisiana. This office assists consumers who have complaints against property and casualty and life and annuity insurers. When warranted, consumer complaints are referred to the Market Conduct Division of the Office of Financial Solvency for appropriate action. Consumer complaints against agents, solicitors, brokers or surplus lines brokers are reviewed and, when appropriate, referred for legal action. The Office of Licensing and Compliance must review and approve all new property and casualty and life and annuity policy forms as well as changes to existing policy forms before the forms can be used in Louisiana. Efforts are made to prevent advertising or sales misrepresentation by the insurance industry. The office reviews fraudulent insurance claims referred by insurance companies, consumers, and other division of the department for referral to the Louisiana Department of Justice or other appropriate state or federal law enforcement agencies. Also, the office is responsible for conducting investigations and background checks on all applicants desiring to transact the business of insurance in Louisiana. Further, this office assists minorities by establishing educational and informational services to foster a greater awareness of the opportunities available in the insurance industry.

The Division of Health consolidates the administration of insurance and government programs related to health insurance. Major changes in Louisiana's insurance laws have been made to comply with federal requirements and establish Louisiana's options for programs to implement and enforce those laws. The division will monitor and approve insurers seeking to qualify to participate in insurance programs for children and adults in forthcoming fiscal years. The division reviews the services provided by health maintenance organizations (HMOs). Appropriate quality standards will be established to assure that policyholders and health care providers are protected. This division assists residents, health insurers, HMOs, government health benefit plans, and public programs in resolving disputes over health benefits or coverage requirements and assures that Louisiana residents receive the health care services to which they are entitled. The division provides counseling on Medicare, Medigap, Medicare HMOs, Medicare Choice, Long-Term Care Insurance, and Medicaid programs for Medicare beneficiaries. (The Department of Health and Hospitals provides functional supervision over the review of HMO provider networks.)

The Office of the Insurance Rating Commission is a seven-member commission consisting of the elected commissioner of insurance and six members who are appointed by the governor. The office, which is administered by the commissioner of insurance, regulates rules and rates of property, casualty, surety, and inland marine insurance to ensure that rates are not excessive, inadequate, or unfairly discriminatory.

OBJECTIVES AND PERFORMANCE INDICATORS

Unless otherwise indicated, all objectives are to be accomplished during or by the end of FY 1999-2000. Performance indicators are made up of two parts: name and value. The indicator name describes what is being measured. The indicator value is the numeric value or level achieved within a given measurement period. For budgeting purposes, performance indicator values are shown for the prior fiscal year, the current fiscal year, and alternative funding scenarios (continuation budget level and Executive Budget recommendation level) for the ensuing fiscal year (the fiscal year of the budget document).

 

RESOURCE ALLOCATION FOR THE PROGRAM

SOURCE OF FUNDING

This program is funded from Fees and Self-generated Revenues, Statutory Dedications and Federal Funds. The Fees and Self-generated Revenues are derived from various fees and licenses authorized by R.S. 22:1078 and the La. Insurance Rating Commission assessment authorized by R.S. 22:1419. The Statutory Dedications are from the Administration Fund (Health Insurance Portability Administrative Act) comprised of penalties and an assessment not to exceed .0002 of the amount of premiums received in this state by Health insurers during the preceding year ending December 31. (Per R.S. 39:32B(8), see table below for a listing of expenditures out of each Statutory Dedicated Fund.) The Federal Funds are provided under the Health Information, Counseling and Assistant Grant Award made under the authority of Section 4360 of the Omnibus Budget Reduction act of 1990 (Public Law 101-508).

 

ANALYSIS OF RECOMMENDATION

GENERAL FUND

TOTAL

T.O.

DESCRIPTION

 

 

 

 

 

$0

$13,376,449

180

 

ACT 19 FISCAL YEAR 1998-1999

 

 

 

 

 

 

 

 

 

BA-7 TRANSACTIONS:

$0

$40,462

0

 

Carry forward for Senior Health Insurance Information Program

$0

$69,059

0

 

Carry forward for completion of Waterproofing project at the Insurance Building

$0

$102,284

6

 

BA-7 approved for Forms Review, including 6 positions

 

 

 

 

 

$0

$13,588,254

186

 

EXISTING OPERATING BUDGET November 20, 1998

 

 

 

 

 

$0

$371,685

0

 

Annualization of FY 1998 1999 Classified State Employees Merit Increase

$0

$172,936

0

 

Classified State Employees Merit Increases for FY 1999 2000

$0

258,146

0

 

Acquisitions and Major Repairs

$0

($37,490)

0

 

Nonrecurring Acquisitions and Major Repairs

$0

($109,521)

0

 

Nonrecurring carry forward

$0

$154,470

0

 

Maintenance of State-owned Buildings

$0

$233

0

 

UPS Fees

$0

($358,728)

0

 

Salary Base Adjustment

$0

($184,708)

0

 

Attrition Adjustment

$0

$125,839

0

 

Other Adjustments Additional funding for Y2K Software

$0

($5,160)

0

 

Other Adjustments Reduction of required Professional Services for Consulting Services

$0

($174,729)

(5)

 

Other Technical Adjustments - Transfer of the Fraud Unit from the Market Compliance Program to the Administrative/Fiscal Program to correctly align the unit with the Legal Division of the Department

$0

$60,353

0

 

New and Expanded Adjustments Senior Health Insurance Information on Medicare

 

 

 

 

 

$0

$13,861,580

181

 

TOTAL RECOMMENDED

 

 

 

 

 

$0

$273,326

(5)

 

DIFFERENCE (TOTAL RECOMMENDED AND EXISTING OPERATING BUDGET)

The total means of financing for this program is recommended at 102.0% of the existing operating budget. It represents 85.9% of the total request ($16,131,861) for this program. Significant adjustments include funding provided for Year 2000 computer compliance software, and the federally funded increases for the Senior Health Insurance Information on Medicare activity.

PROFESSIONAL SERVICES

$199,600

 

Actuary services for determining potential rate adjustment and financial solvency of the insurance industry and companies doing business in La.

$2,194,272

 

Financial examinations of insurance companies and related business

$434,382

 

Legal services needed in conjunction with financial examinations and departmental requirements

 

 

 

$2,828,254

 

TOTAL PROFESSIONAL SERVICES

OTHER CHARGES

$60,653

 

Senior Health Insurance Information on Medicare

     

$60,653

 

TOTAL OTHER CHARAGES

     

 

 

Interagency Transfers:

$3,710

 

Office of Information Services

$533,501

 

Maintenance of state buildings

$8,055

 

Department of Treasury

$500

 

Department of State

$17,623

 

Civil Service

$6,457

 

Uniform Payroll System

$36,000

 

Miscellaneous maintenance on building

$56,431

 

Public Safety Capitol Complex Security

$28,000

 

Department of Public Safety for background checks on agents and companies

 

 

 

$690,277

 

TOTAL INTERAGENCY TRANSFERS

ACQUISITIONS AND MAJOR REPAIRS

$199,000

 

Replacement of broken/obsolete computer equipment, personal computers, NT Servers, tape drivers, and printers

$4,146

 

Replacement of broken/obsolete office furniture

$55,000

 

Replacement of carpet in the basement of the Insurance Building

 

 

 

$258,146

 

TOTAL ACQUISITIONS AND MAJOR REPAIRS


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