As more states join the Child Support Lien Network (CSLN), insurers must be aware of specific insurance claim intercept laws and their impact on claim processes. Recent regulatory activities — whether mandatory or optional in nature — send a clear signal that efforts will continue to ensure that child support obligations are met through various means, including interception of, and liens on, certain insurance proceeds.
Claim departments are required to recognize, interpret, and apply state regulatory requirements applicable to issues such as acceptance, denial, investigative periods, disclosures, and payments in their claim-handling processes. In addition to these standard and expected issues that need to be accounted for, some states impose proactive requirements on insurers to notify the applicable state's child support enforcement agency when a claim is filed or in advance of settlement payment — or both.
This type of notification allows for the agency to verify if the claimant is listed in a database of delinquent child support obligors. A traditional notice of lien would follow, subject to various state exceptions as to priority. Some states, not yet embracing reporting and claim data matching across multiple lines of business, rely on definitions of income to permit garnishment of workers' compensation payments. Others have sought to encourage insurers to engage in voluntary reporting and validation of key claimant information prior to providing settlement proceeds.
Approximately two-thirds of the states have executed participation agreements with the CSLN. Rhode Island implemented this program in 1999 for its own use in enforcing its child support intercept law. It later became a framework for other states' participation in intercepting insurance settlement proceeds to satisfy child support arrears. The techniques used in the CSLN create efficiencies for insurance companies, a time-saving option for validation and matching. However, use by insurance companies varies. Some states require mandatory compliance with an insurance settlement match against a delinquent child support obligor database, which varies by applicable lines of business and reporting thresholds, while others are encouraging voluntary participation only. Oklahoma is one of the states that executed an agreement with the CSLN. In fact, one of the reporting options permitted by Oklahoma Child Support Services (OKOCSS) is through release of claim data to the CSLN.
Oklahoma enacted claim data reporting requirements in its 2007 legislative session. For any settlement of $500 or more on any personal injury, wrongful death, or workers' compensation claim, insurers must provide information to the Oklahoma Department of Human Services (OKDHS). Insurers have multiple options regarding reporting, including providing the OKDHS with information about the claimant directly, through participation in an industry database, or matching information made available by the OKDHS. Specific time frames for this data exchange apply and vary according to the method used. Assuming a match between a claimant and a delinquent child support obligor, the OKOCSS would send the insurer a notice of lien. Additional statutory provisions govern the insurer's responsibilities in withholding funds and remittance to the state and, depending on the specific circumstances, to the claimant. Penalties for failure to comply with requirements can be as costly as $10,000, in addition to being liable for child support amounts that should have been withheld from an insurance settlement and remitted to the OKDHS.
Addressing efforts on the national level, both the District of Columbia and Minnesota issued bulletins in 2008, informing insurance companies of the insurance match initiative available through the Federal Department of Health and Human Services, Administration for Children and Families' Office of Child Support Enforcement (OCSE). This agency's efforts are concentrated on its insurance match program, which provides key data to state child support agencies. In an effort to reduce the burden on insurance companies, OCSE provides reporting and validation options, as outlined in the District of Columbia and Minnesota bulletins.
In 2009, insurance companies need to continue to maintain an awareness of the changing requirements at the state level and may want to explore the opportunities presented to them, at both the state and federal levels, for claim reporting and validation.
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