House Business Committee introduces RS 31911 to revise Life and Health Insurance Guaranty Association rules

The House Business Committee on Tuesday voted to introduce RS 31911, a draft statutory rewrite presented by Representative Jeff Ehlers that would update the state's Life and Health Insurance Guaranty Association.

Representative Jeff Ehlers, R.-Meridian, told the committee the guaranty association functions like the FDIC for banks: it protects original policyholders when an insurer becomes insolvent. "They act sort of like the FDIC does for your bank account, where if the bank becomes insolvent, then the consumer is protected," Ehlers said. He said the RS aims to focus protection on original policyholders and to remove coverage for investors who buy policies from those original owners.

The RS would (as described by Ehlers) explicitly exclude factoring or investor-owned purchasers of life insurance policies from association coverage, clarify how long-term care policies are treated when an insurer fails, permit the association to roll interest rates back to a market or standard rate in some insolvency situations, and allow co-ops created under the Affordable Care Act to join the guaranty association. The RS also would remove a statutory cap on association member fees and instead allow the association's board to set the cap.

Why it matters: the guaranty association exists to make policyholders whole when a life or health insurer fails. Excluding secondary investors aims to preserve limited association resources for original insureds, and changing fee-setting authority shifts certain governance decisions from the Legislature to the association's board.

Committee action and next steps A motion to introduce RS 31911 was offered and carried by voice vote; committee members answered'brief questions after the presentation. Representative Ehlers said industry experts would appear at the formal committee hearing to answer technical questions. The committee recorded the motion as adopted and the RS will be assigned a bill number and scheduled for hearing.

Background and detail provided to the committee Ehlers said the guarantee association was established in the 1970s and "needs some updates." He told members that some companies that buy existing policies do so speculatively and are not the intended beneficiaries of the association. On long-term care policies, he said the RS would allow the guaranty association to "roll the interest rate back to a standard rate or a market rate" when insolvent carriers had charged above-market rates. Ehlers also said there are "very few" ACA-created co-ops remaining but that one based in Montana does business in Idaho; the RS would allow such co-ops to join the association.

Committee context The item was presented early on the committee's agenda and the committee took only limited clarifying questions before the motion to introduce. Representative Cannon moved to introduce RS 31911; the motion carried on a voice vote. Representative Ehlers said the RS will be followed by a hearing where additional industry witnesses will appear.

Ending The committee formally introduced RS 31911; staff will post the assigned bill number and schedule a subsequent hearing where the proposal will receive further testimony and technical questions.