Interstate Compact Modifications Sought

Bob Hunter, director of insurance for the Washington-based Consumer Federation of America, asked regulators what will hold this compact together when others haven't worked.

Commenting on Mr. Hunter's point, NAIC President Terri Vaughan said that "it goes to the heart of the political challenge of getting this done in the states." Although a poll of states has not been taken, during the spring NAIC meeting in March states showed strong support for proceeding to draft a compact, according to Ms. Vaughan.

Birny Birnbaum, executive director with the Center for Economic Justice in Austin, Texas, said that compact standards need to be examined to ensure that they adequately protect consumers. He also stressed the importance of an interstate consumer advocate, since some states have consumer advocates at the state level, but existing state processes would be removed and replaced with a centralized, national form. Failure to include this provision is a "deal-breaker" for consumer advocates, he said.

Additionally, Mr. Birnbaum said protections would have to be put in place to avoid a "revolving door," where members on the compact's commission or managing committee would take jobs in the industry or for consumer organizations.

The point was also raised that the compact might need Congressional action. Previously, the NAIC said that it thought that no congressional action would be needed.

The reason cited during the NAIC discussion was that, in the event of a dispute among states, the dispute could end up in the state court of one of the participating states rather than in a U.S. District Court.

Meanwhile, the American Council of Life Insurers in Washington expressed support for the draft, but urged that long-term care be added to the compact. If LTC is not included, and the compact is adopted by states verbatim, then it would have to be amended in legislatures at a later point for LTC to be included, according to Patricia Parachini, ACLI's senior director for state relations.

In written comments submitted to the NAIC, the ACLI noted the importance of the product as a financial planning tool. It is close in nature to disability insurance products, the ACLI says.

Other concerns expressed by the ACLI include ensuring that companies have the option of either filing product forms through the compact or through individual state filings.

Additionally, Ms. Parachini raised a concern that standards be developed before 12 states–the number needed to make the compact operational–sign on to the plan. Waiting until there are 12 states, "puts us out a long time," she said.

Jim Connolly is a senior editor with NU's Life & Health/Financial Services edition.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, June 10, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.