Return to the main page | Previous document


Program B: Market Compliance Program

Program Authorization: La. Constitution, Article IV, Sec. 11; Title 22 of Louisiana Revised Statutes; Act 83 of 1977 (Reorganization Act); Act 850 of 1984 (Equal Opportunity in Insurance); 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 scrutinize the Louisiana insurance market by continually overseeing the financial condition of licensed companies; the licensing of new companies, agents, solicitors and brokers; and regulation of the rules and rates of certain insurers, as mandated by Title 22 of the Louisiana Revised Statutes of 1950, as amended. It will also continue to evaluate the program's effectiveness and efficiency for providing the highest standard of services to the citizens of Louisiana and the insurance industry.

The goals of the Market Compliance Program are:

1. Protect he policyholders of Louisiana by monitoring the financial condition of all licensed insurance companies.

2. Ascertaining that insurance rates are not excessive, inadequate, or unfairly discriminatory.

3. Ensure that only those qualified to transact insurance do so.

4. Eliminating unfair trade practices and misrepresentations in the industry.

The Market Compliance Program includes the following activities (organizationally expressed as offices): Office of Financial Solvency, Office of Insurance Compliance, Office of Health Insurance, and Office of the Insurance Rating Commission.

The Office of Financial Solvency must meet its statutory obligations defined in Title 22 of the Louisiana Revised Statutes of 1950, as amended, which requires that the financial examination of licensed insurance companies be conducted to ensure the following: produce solvency of insurance companies, fair and proper treatment of policyholders; adherence to all statutory requirements; to minimization of losses; reduction in the number of companies placed in liquidation; ensure that reserve requirements are maintained; and ensure that investments are made in accordance with Louisiana insurance statutes.

The Office of Licensing/Market Compliance regulates the licensing of individuals, partnerships, and corporations engaged in the insurance business in Louisiana, in accordance with the provisions of Title 22 of the Louisiana Revised Statutes of 1950, as amended. This office assists consumers with property and casualty and life and annuity insurance complaints. When statistics warrant, these consumer complaints are referred to the Market Conduct Examination Division of the Office of Financial Solvency in order that they may determine if an on-site examination is necessary. Consumer complaints against agents, solicitors, brokers, or surplus lines brokers are reviewed and, when appropriate, requests for legal action are made that could result in administrative, criminal, or civil penalties. All new property and casualty and life and annuity insurance contracts and changes in existing contracts are required by statute to be approved by this office. Efforts are made to prevent misrepresentation of such insurance contracts through advertising or sales misrepresentations by agents. As required by statute, this office also reviews fraudulent insurance claims referred by insurance companies, consumers, and other divisions of the Department of Insurance for referral to the Department of Justice or other appropriate state or federal law enforcement agencies. It also conducts investigations and background checks on all applicants desiring to transact the business of insurance in Louisiana. This office assists minorities by establishing educational and informational services to foster a greater awareness of the opportunities available in the insurance industry.

The Office of Health Insurance consolidates the administration of insurance and government programs related to health. Major changes in Louisiana's insurance laws have been made to comply with federal requirements and establish Louisiana's options for implementation and enforcement. The Department of Insurance will most likely develop health insurance pilot programs for children and adults in the forthcoming fiscal years. The Office of Health Insurance reviews the services provided by health maintenance organizations (HMOs). Standards will be established to ensure policyholders and health care providers are protected by appropriate quality standards. This office also must promote effectiveness and efficiency in all related health insurance functions. The Office of Health Insurance assists residents, health insurers, HMOs, government health benefit plans, and public programs in resolving disputes over health benefits or coverage requirements and ensures that Louisiana residents covered by these services receive quality health care services. Counseling on Medicare, Medigap, Medicare HMOs, Long-term care insurance and Medicaid programs for Medicare beneficiaries is provided. Functional supervision must be provided over the review of HMO provider networks by the Department of Health and Hospitals.

The Office of the Insurance Rating Commission is comprised of a seven-member commission (six members are appointed by the governor and the seventh member is the commissioner of insurance) and a state office that is part of the Louisiana Department of Insurance and is administered by the elected commissioner of insurance. The office must regulate 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

1. In FY 1998-99, the Market Compliance Program, through the Office of Financial Solvency, will monitor the financial condition of all licensed or otherwise approved insurance companies, including ensuring that all filings required by the Louisiana Insurance Code are made as mandated by the code.

1 Domestic insurance company is an insurance company formed under the laws of the State of Louisiana that has been approved by the Louisiana Department of Insurance to transact business. To obtain approval, an application, using the department's forms, must be filed.

2 Foreign insurance company is an insurance company formed under the laws of any state other than Louisiana, or territory of the United States, or the District of Columbia. A foreign insurance company must apply for a Louisiana Certificate of Authority and comply with applicable provisions of the Louisiana Insurance Code in order to be admitted and legally transact business in Louisiana.

Alien insurance company is a company formed under the laws of ay country other than the United States. An alien insurance company must apply for a Louisiana Certificate of Authority and comply with applicable provisions of the Louisiana Insurance code in order to be admitted and legally transact business in Louisiana.

Certificate of Authority is evidence of approval to operate in Louisiana. A Certificate of Authority is issued to a domestic, foreign, or alien insurance company that has filed a complete, appropriate application with the Department of Insurance, and after thorough review of the applicant's information, has been approved to operate the Louisiana.

3 Surplus lines company is an approved, unauthorized insurer; an insurer without a Certificate of Authority but that has met certain qualifications under the provisions of the Louisiana Insurance code, including filing an application for approval. Upon obtaining approval to operate as an approved, unauthorized insurer, a surplus lines company is placed on the list of approved, unauthorized insurers compiled and maintained by the Department of Insurance.

4 The program will perform desk examinations of licensed and approved companies' financial filings, with more in-depth financial and actuarial reviews performed on each company's Annual Statement and less detailed reviews on interim filings. Annual statement is the year end statement of condition and results of operations that every admitted insurer and surplus line insurer must file annually with the Department of Insurance.

2. In FY 1998-99, the Market Compliance Program, through the Office of Financial Solvency, will monitor the financial condition of each company under administrative supervision in an effort to successfully remove each company from administrative supervision.

1 Administrative supervision is supervision of an insurer by the Commissioner of Insurance when the condition of that insurer renders the continuance of its business hazardous to the public or its insured; if an insurer has failed to comply with applicable provisions of the Louisiana Insurance Code; if business is being conducted fraudulently; or if the insurer grants its consent for supervision for any other reason. This is a confidential proceeding.

3. In FY 1998-99, the Market Compliance Program, through the Office of Financial Solvency, will ensure that each licensed company maintain a statutory deposit required by the Louisiana Insurance Code.

4. In FY 1998-99, the Market Compliance Program, through the Office of Financial Solvency, will perform reviews of financial information submitted by companies applying for a Certificate of Authority or approval to operate in Louisiana within 60 days.

1 Certificate of Authority is evidence of approval to operate in Louisiana. A Certificate of Authority is issued to a domestic, foreign, or alien insurance company that has filed a completed, appropriate application with the Department of Insurance and, after thorough review of the applications information, has been approved to operate in Louisiana.

2 Domestic insurance company is an insurance company formed under the laws of the State of Louisiana that has been approved by the Louisiana Department of Insurance to transact business. To obtain approval, an application, using the department's forms, must be filed.

5. In FY 1998-99, the Market Compliance Program, through the Office of Financial Solvency, will perform market conduct examinations of insurance companies and agents to assure compliance with laws, rules, and regulation governing advertising and sales practices, underwriting, claims handling and policyholder service.

1 When a market conduct examination reveals an apparent violation of laws, rules or regulations, a hearing must be held to determine if a penalty must be assessed or a license revoked or if a licensee must pay restitution to consumers harded by unfair and illegal practices.

6. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Compliance, will oversee required insurance pre-licensing education, the administration of examinations for all potential insurance agents; licensing all insurance agents; overseeing continuing education required for renewal of such licenses; and appointing licensed agents to companies authorized to do business in Louisiana.

1 As part of the licensing function, the Office of Insurance Compliance handles telephone calls and in-house visits by prospective license applicants in order to properly inform the inquirer.

7. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Compliance, will accept and review within an average of 90 days of receipt, all new company applications for a Certificate of Authority to operate in Louisiana, with such reviews assuring that complete filing were made as mandated by statute and that the condition of each applicant is in compliance with the Louisiana Insurance Code.

1 Certificate of Authority is evidence of approval to operate in Louisiana. A Certificate of Authority is issued to a domestic, foreign, or alien insurance company that has filed a complete, appropriate application with the Department of Insurance and, after thorough review of the applicant's information, has been approved to operate in Louisiana.

2 Includes risk purchasing group, viatical settlement broker, viatical settlement provider, and dental referral plan applications.

8. In FY 1998-99, the Market Compliance Program, through the Office of Insurance compliance, will accept and review, within an average of 60 days from receipt, amendments to certificates authority of foreign and alien companies doing business in Louisiana.

1 Certificate of Authority is evidence of approval to operate in Louisiana. A Certificate of Authority is issued to a domestic, foreign, or alien insurance company that has filed a complete, appropriate application with the Department of Insurance and, after thorough review of the application's information, has been approved to operate in Louisiana.

Foreign insurance company is an insurance company formed under the laws of any state other than Louisiana, or territory of the United States, or the District of Columbia. A foreign insurance company must apply for a Louisiana Certificate of Authority and comply with applicable provisions of the Louisiana Insurance Code in order to be admitted and legally transact business in Louisiana.

Alien insurance company is a company formed under the laws of any country other than the United States. An alien insurance company must apply for a Louisiana Certificate of Authority and comply with applicable provisions of the Louisiana Insurance Code in order to be admitted and legally transact business in Louisiana.

9. In FY 1998-99, the Market Compliance Program, through the Office of Insurance compliance, will respond to and assist in the resolution of written complaints filed regarding property and casualty and life and annuity insurance-related problems within 90 days of receipt of complaint.

1 If it is determined that complaints involve violations of law, administrative actions to address such violations are initiated.

2 The Office of Health Insurance was established during FY 1997-98. Statistics for this performance indicator are now being segregated for property and casualty and life and annuity.

10. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Compliance, will monitor complaint activity in order to identify trade practices and/or unfair claim settlement practices as well as take appropriate measures to eliminate such occurrences.

1 The Office of Health Insurance was established during FY 1997-98. Statistics for this performance indicator are now being segregated for property and casualty and life and annuity.

11. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Compliance, will preapprove forms, including advertising materials, to be used by licensed property and casualty and life and annuity insurers in Louisiana for the protection of Louisiana policyholders.

1 The Office of Health Insurance was established during FY 1997-98. Statistics for this performance indicator are now being segregated for property and casualty and life and annuity.

2 Forms are reviewed for compliance with Louisiana statutes and to assure no inclusion of ambiguous, misleading, and deceptive clauses/language.

12. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Compliance, will review suspected fraudulent insurance claims referred by insurance companies or consumers for possible referral to appropriate law enforcement agencies and investigate any suspected fraudulent activity of a person, company, or other legal entity engaged in the business of insurance.

13. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Compliance, will perform background checks on all applicants seeking a license, certificate of authority, or other approval to transact business of insurance in Louisiana.

14. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Compliance, will conduct 55 educational and training sessions to adequately educate small, minority, or otherwise disadvantaged agents and agencies that are licensed to operate in Louisiana; and hold meetings with church officials to assist in insurance needs, focusing on any current areas of concern, such as arson.

15. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Rating Commission, will accept and review rate change submissions from insurance companies licensed to sell property, casualty, surety and inland marine insurance in Louisiana; have the proposed changes reviewed by an actuary; and present the proposed change(s) to the Insurance Rating Commission at its monthly meeting for consideration and approval or disapproval.

16. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Rating Commission, will complete rate change requests, including sending final notification to the requesting insurance company of action taken, within an average of no more than 90 days.

17. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Rating Commission, will issue annual experience rating modifications to all companies issuing commercial automobile and/or general liability coverage.

1 Modifiers are based on the premiums and losses of individual policyholders and are used by the company in calculating the policy premium for qualifying individual policyholders.

2 Declaration page is the portion of an automobile and/or general liability insurance policy issued that lists the coverage type and limits purchased as well as the exposure basis used in premium determination and calculation of the actual premium charged.

18. In FY 1998-99, the Market Compliance Program, through the Office of Insurance Rating Commission, will audit the declaration page of all commercial automobile and/or general liability policies to ensure compliance with approved rates; audit all changes by endorsement to existing declaration pages for rate compliance; and audit all policy cancellation requests made by insurance companies.

1 Declaration page is the portion of an automobile and/or general liability insurance policy issued that lists the coverage type and limits purchased as well as the exposure basis used in premium determination and calculation of the actual premium charged.

19. In FY 1998-99, the Market Compliance Program, through the Office of Health Insurance, will pre-approve forms to be used by licensed health insurers in Louisiana for the protection of Louisiana policyholders.

1 The Office of Health Insurance was established during FY 1997-98. Statistics for this performance indicator were previously kept in total with all other insurance lines.

2 Forms are reviewed for compliance with Louisiana statutes and to assure no inclusion of ambiguous, misleading, and deceptive clauses/language.

20. In FY 1998-99, the Market Compliance Program, through the Office of Health Insurance, will assist the public with health needs by providing counseling services and educational presentations and workshops, which will be conducted to keep the public informed on current health insurance issues, as well as by answering questions presented in telephone calls, face-to-face interviews, and through written complaints filed regarding health insurance-related problems.

1 The Office of Health Insurance was established during FY 1997-98. Statistics for this performance indicator were previously kept in total with all other insurance lines.

21. In FY 1998-99, the Market Compliance Program, through the Office of Health Insurance, will assist senior citizens with health-related counseling through telephone calls, personal interviews, group presentations, distribution of education publications, and training of statewide health counselors, who can be of daily assistance to local citizens.

22. In FY 1998-99, the Market Compliance Program, through the Office of Health Insurance, will review all authorized Health Maintenance Organization Provider Network and/or accreditation bodies for quality assurance.

1 Health Maintenance Organization (HMO) is any corporation organized and domiciled in Louisiana that undertakes to provide or arrange fro the provisions of basic health care services to enrolls in return HMOs must obtain a Certificate of Authority from the Department of Insurance prior to operation.

HMO Accreditation Organization is an entity that reviews management care organizations for quality care and appropriateness of health care services delivered to their subscribers.

2 The Office of Health Insurance was established in FY 1997-98; the HMO quality assurance review function will be established in FY 1998-99.

RESOURCE ALLOCATION FOR THE PROGRAM

SOURCE OF FUNDING

This program is funded from self-generated revenues and federal funds. Self-generated revenues are derived from various fees and licenses authorized by R.S. 22:1419. Federal funds are received from the United States Department of Health and Human Services for counseling the elderly regarding health insurance.

ANALYSIS OF RECOMMENDATION

GENERAL FUND

TOTAL

T.O.

 

DESCRIPTION

 

 

 

 

 

$0

$11,997,730

153

 

ACT 18 FISCAL YEAR 1997-1998

 

 

 

 

 

 

 

 

 

BA-7 TRANSACTIONS:

$0

$74,799

0

 

Carryforward of federal funds for the Senior Health Insurance Information Program (SHIP)

$0

$227,733

5

 

Implementation of Act 1433 which provides funding for the Council on Automobile Insurance Rates and Enforcement

$0

$232,188

14

 

Implementation of Act 1138 which provides for insurance portability

$0

$684,298

0

 

Provides for building repairs

 

 

 

 

 

$0

$13,216,748

172

 

EXISTING OPERATING BUDGET - December 10, 1997

 

 

 

 

 

$0

($74,799)

0

 

Nonrecurring Carryforward for the Senior Health Insurance Information Program

$0

($1,159,473)

0

 

Equipment/Major Repairs Adjustment(s)

$0

$163,257

0

 

Annualization of 1997 -'98 Merit Pay Adjustment(s)

$0

$147,178

0

 

1998 -'99 Merit Pay Adjustment(s)

$0

($116,512)

0

 

Attrition Adjustment(s)

$0

($28,343)

0

 

Retirement Rate Adjustment(s)

$0

($172,919)

0

 

Reductions in various Expenditure Categories; Including Reductions to fully fund Salaries

$0

$150,348

0

 

Annualization of BA-7 which provides for insurance portability

$0

$268,842

6

 

Implementation of Act 238 which provides for quality assurance review of health maintenance organizations

 

 

 

 

 

$0

$12,394,327

178

 

TOTAL RECOMMENDED

 

 

 

 

 

$0

($822,421)

6

 

DIFFERENCE (TOTAL RECOMMENDED AND EXISTING OPERATING BUDGET)

The total means of financing for this program is recommended at 93.7% of the existing operating budget. It represents 9.7% of the total request ($126,666,109) for this program. Significant adjustments include removal of nonrecurring major repairs expenditures, annualization of insurance portability expenses and implementation of Act 238 which provides for a quality assurance review for health maintenance organizations.

PROFESSIONAL SERVICES

$645,033

 

Actuary services for determining potential rate adjustment and financial solvency

$2,216,297

 

Financial examinations of insurance companies

$49,000

 

Software maintenance and computer programming

$52,670

 

Legal services needed in conjunction with financial examinations

 

 

 

$2,963,000

 

TOTAL PROFESSIONAL SERVICES

OTHER CHARGES

 

 

Interagency Transfers:

26,578

 

Office of Information Services

4481,893

 

Maintenance of state buildings

$10,740

 

Department of Treasury

$500

 

Department of State

$13,520

 

Civil Service

$62,500

 

Dept. of Health and Hospitals for review of provider networks and/or accreditation bodies for health maintenance organizations quality assurance

 

 

 

 

 

 

$605,731

 

TOTAL INTERAGENCY TRANSFERS

ACQUISITIONS AND MAJOR REPAIRS

$21,000

 

Computers

$6,990

 

Office furniture

 

 

 

$27,990

 

TOTAL ACQUISITIONS AND MAJOR REPAIRS


Return to the main page | Previous document