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Paul Zimmerman
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State Bar Insurance Law Regulatory Update

The information below is current as of the date of the report. Additional information about any of these proposals may be obtained from the California Department of Insurance (CDI) web site at http://www.insurance.ca.gov/0250-insurers/0500-legal-info/0200-regulations/proposed-regulations.cfm.

Department of Insurance Regulations Currently Under Review by OAL – The following CDI regulation is currently under review by the California Office of Administrative Law (OAL).

  • Credit for Reinsurance, OAL File # 2015-0212-01 N. This regulation implements non-substantive changes to 10 CCR §§ 2303-2303.25, which establish requirements for reporting reinsurance transactions. The regulations are submitted to OAL pursuant to 10 CCR 100, which allows the adoption of non-substantive changes to regulations without public participation. Final OAL action is due by 03/27/2015.

Recently Approved Department of Insurance Regulations – OAL has approved the following CDI regulations in the past 45 days.

  • Health Insurer Provider Network Adequacy, OAL File # 2015-0120-03E – On January 30, 2015, OAL approved CDI emergency regulations which impose new rules upon health insurance provider networks. According to CDI, the regulations are necessary “to assure that health insurers promptly establish and maintain adequate medical provider networks to meet the health care needs of their policyholders, maintain accurate provider directories, and avoid surprising consumers with huge charges for out-of-network providers who provide planned care, without prior disclosure to the insured person.” The regulations took effect immediately.

Currently Proposed CDI Regulations – CDI currently has two substantive rulemaking proposals subject to regular APA rulemaking.

  • Independent Medical Review System Fee Assessment – CDI File # REG-2013-00021. This regulation provides a mechanism for the costs of the Independent Medical Review System for insureds to be borne by disability insurers. The public hearing on this proposal occurred on March 9.
  • Assigned Risk Program Commercial Rates – CDI File # REG-2015-00002. This proposal implements a commercial insurance rate increase for commercial risks insured by the CA Auto Assigned Risk Program (CAARP). The proposed average increase is 20.5%. A public hearing on this proposal will be held in Los Angeles at 10:00am on 4/15/15. Since this proposal sets rates, it will probably be submitted to OAL as exempt from OAL disapproval pursuant to CA Gov. Code 11340.9.

Informal Rulemaking Activities – Pursuant to CA Gov. Code 11346.45, state agencies are permitted and encouraged to conduct informal workshops and discussions with interested persons when they are considering adoption of “complex” regulations.

  • Group Plans Under Prop. 103. On 2/19/15 CDI published draft regulations to govern the approval of “affinity groups” pursuant to Insurance Code § 1861.12. A workshop on this draft proposal is scheduled for 3/23/15. The draft proposal, among other changes, provides that an affinity group must be a membership organization rather than a general classification of risks. Since this is a pre-notice discussion, the formal rulemaking process has not yet been invoked. Actual adoption of the regulation would require a formal rulemaking proceeding.
  • Labor Rate Surveys and Steering – CDI File # REG-2012-00002. On 3/20/15 CDI published a notice of two workshops to be held in April for discussion of regulations which would deal with auto body shop labor rate surveys and steering. The text of the draft regulations will be published at an unspecified future date. One workshop will occur in Los Angeles on April 3, 2015. The other will be in Sacramento on April 16, 2015.

Regulatory Notice. On February 18 CDI issued a Notice Regarding Unfair Discrimination In Rating: Price Optimization. The Notice advises admitted property and casualty insurers that California law prohibits insurance rates from being based upon “price optimization”. The term “price optimization” is defined as “as any method of taking into account an individual’s or class’s willingness to pay a higher premium relative to other individuals or classes.” The Notice requires “any insurer that has a factor or factors based on Price Optimization in its rating plan” to submit a new rate plan which does not employ price optimization. The revised plans must be submitted “no later than six months from” February 18.
The Notice may be retrieved from https://www.insurance.ca.gov/0250-insurers/0300-insurers/0200-bulletins/bulletin-notices-commiss-opinion/upload/PriceOptimization.pdf 

This article is not offered as, and should not be relied on as, legal advice. You should consult an attorney for advice in specific situations.