NAIC ADOPTS PRIVACY AMENDMENT OVER INSURERS' OBJECTIONS.

Over the objections of insurers, the National Association of Insurance Commissioners adopted an amendment to its privacy model regulation Dec. 8 at its national winter meeting in San Diego.

"The amendment clarifies the original intent of the model regulation, and ensures that individuals covered under group policies can receive notification - either directly or through their group policyholders - of how their personal information will be disclosed," said Gregory Serio, New York insurance superintendent and chair of the NAIC privacy-issues working group.

Robert Zeman, senior vice president of government affairs for the National Association of Independent Insurers, called the amendment "burdensome and confusing."

"States will now have to consider whether it is appropriate to amend their existing privacy regulations to add an amendment that clearly goes beyond the intended language in the Gramm-Leach-Bliley Act," he said.

If insurance departments consider adding the amendment, he said insurers would "strongly oppose this action."

Serio said the amendment was adopted by his working group in September "after months of discussion with interested parties and solicitation of comments on several drafts."

He said the amendment was necessary to clarify that insurers are to provide initial and annual notices to group policyholders and that individuals covered under group plans are provided with notices if their information is disclosed outside the legal and business exceptions outlined in the model regulation.

He said insurers will "continue to have the option of providing initial and annual notices directly to individuals covered under group plans, in lieu of contacting the group policyholders."

NAIC's credit-scoring working group voted to postpone a vote until Jan. 6 on a brochure for consumers on the use of credit scoring in rating and underwriting, as well as an options paper on recommended insurer practices.

The group also voted to consider conducting a study into the impact of insurers' use of credit information on minorities and low-income consumers.

The viability of NAIC's Interstate Insurance Product Regulation Compact was questioned by the National Conference of Insurance Legislators president, Rep. Kathleen Keenan (VT).

She said NCOIL questioned the constitutionality of a state's ceding authority to a quasi-government entity whose rules and decisions would have the full force and effect of state law and the possibility of an unintended expansion of the compact's scope due to its vagueness of purpose and scope.

She said there also was concern among legislators that much of the compact commission's structure and operation had not been determined yet, raising questions about the civil-service implications of state insurance department employees being "loaned" to the Commission and the structure and powers of the Commission's management committee.

NAIC is to conduct a hearing on the interstate compact at its spring meeting in Savannah, GA.

Steven Larsen, Maryland's insurance commissioner and chair of NAIC's health insurance and managed care working group, urged NAIC to focus on stricter regulation of abuses in health insurance sold through associations and to require insurers to disclose their ties to associations selling their insurance.

The group postponed further discussion until after Mila Kofman, a professor at Georgetown University's Institute for Health Care Research and Policy, has completed a survey on the association insurance market.

The health insurance and managed care working group also decided to form the Blue Cross-Blue Shield working group to identify and analyze legal and policy issues involving the role of Blue Cross-Blue Shield in its for-profit conversion. The group agreed to coordinate its efforts with the National Association of Attorneys General and to have a report finalized in 2003.