California Insurance Commissioner Dave Jones (D) outlined his top three priorities in his inaugural speech on his first day in office January 3, 2011:
- Implementation of federal health care reform
- Protection of consumers
- Ensuring that California has a competitive and viable insurance market
Commissioner Jones discussed specific actions related to each of these three priorities.
First, regarding health care reform implementation in California, Commissioner Jones proposed emergency regulations requiring California health insurers in the individual insurance market to spend at least 80% of their revenue on policyholders' medical claims. Existing California law requires insurers to spend at least 70% of premiums from the individual market on medical care. Jones' proposal aligns California regulations with national Medical Loss Ratio (MLR) rules established under the federal health reform law. The federal MLR regulations took effect this January 1, 2011 (see Interim Final Regulation Implementing the PPACA Medical Loss Ratio Rules).
Jones said his proposed regulations would allow him to enforce the new federal requirements at a time when Republicans in the US House of Representatives are leading the effort to dismantle the reform law. If California's Office of Administrative Law approves Jones' proposal, the regulations will take effect this month and remain in place for six months while the state Department of Insurance (DOI) develops permanent rules.
Second, concerning consumer protection, Commissioner Jones wants to "level the playing field for consumers and businesses as they deal with insurance companies." He implemented his consumer-focused agenda by taking three immediate actions: (i) reinstating a branch of the California DOI devoted to consumer education, (ii) initiating the development of regulations to protect elderly Californians from abusive sales tactics related to the sale of annuities, and (iii) initiating the development of regulations to ensure that Retained Asset Accounts (RAAs) are properly disclosed and implemented by insurers.
With respect to the new regulations the Commissioner directed the California DOI to prepare and file by no later than January 30, 2011 annuity suitability regulations to protect Californians when efforts are made to sell them annuities and directed the California DOI to develop regulations and initiate the rule-making process to protect life insurance beneficiaries from the "abusive" use of RAAs. We expect that the California DOI will conduct pre-notice public discussions regarding the regulations prior to the end of January.
Third, Jones stated that he wants to ensure California has a viable and competitive insurance market. He said he wants to make sure companies are able to bring new products like "Green Property Insurance" to market to provide more choice to consumers and businesses. The Commissioner nevertheless emphasized that he will work to keep the market healthy in a way that is fair to consumers. Jones also noted, "It is essential that we root out fraud, which is a burden on the market, insurers and consumers alike -- fraud by policy-holders, fraud by scam artists, fraud by vendors, and fraud by insurers and agents who promise one thing and deliver another -- or don't deliver it at all."