California Insurance Commissioner Seeks Disability Insurance Changes
As reported by the Associated Press, for the second time in two months, California Insurance Commissioner Steve Poizner is being accused by his predecessor, Lt. Gov. John Garamendi, of proposing regulatory changes that will weaken consumer protections. The latest dispute involves Poizner's proposal to roll back regulations that prohibit insurers from reducing group disability insurance benefits to account for pensions, workers' compensation payments or wages that the policyholder might receive.
Poizner, a Republican who succeeded Garamendi as California's chief insurance regulator in January 2007, said the regulations are unnecessary. He maintains the insurance commissioner already has the authority under state and federal law to ban insurers from including so-called offset clauses that reduce benefits in disability policies.
"Given that it's already illegal, it strikes me that we should be striving to simplify the government code and not layer additional regulations to make something even more illegal," said Darrel Ng, a Poizner spokesman. "This is the essence of cutting red tape."
But Garamendi and some attorneys who deal with disability insurance issues say the state would be treading on shaky legal ground if it attempted to control the offsets without the regulations. Garamendi, a Democrat, said removing the regulations would be a "disaster for policyholders."
The regulations, drafted by Garamendi and implemented after he left the Commissioner's office, cover group disability policies and prohibit insurers from cutting benefits to account for the following factors:
- The estimated amount of pension payments the policyholder would receive if he or she retired.
- Temporary disability benefits that the policyholder could receive from the workers’ compensation system, but that had not been awarded.
- Permanent disability benefits from the workers’ compensation system, which are designed to help make up for lost earning potential created by job-related illnesses or injuries.
- Estimated earnings received by a policyholder while disabled unless there was a "good faith reasonable basis" for the calculation.
- The Association of California Life and Health Insurance Companies and the American Council of Life Insurers, whose members write the majority of disability insurance policies in California and the United States, support scrapping the regulations.
