Commerce & Insurance explains rate review, solvency oversight, PBM audits and mental-health parity findings

Commissioner and senior staff from the Tennessee Department of Commerce and Insurance on Feb. 25 briefed the House Insurance Committee on how the state regulates insurance rates, solvency and market conduct, and on recent work on pharmacy benefit manager (PBM) audits and mental-health parity enforcement.

Commissioner (Department of Commerce and Insurance) said Tennessee’s insurance division handles about $75 billion in premium volume with roughly 28 personnel directly in the insurance division and emphasized state-based regulation through the National Association of Insurance Commissioners. He described Tennessee as a competitive, pro-market state that focuses on solvency and consumer protection.

Zach Crandall, director of the department’s policy analysis section, summarized rate- and form-review procedures. "Prior approval means that any form or rate that an insurance company intends to utilize in this state for personal, property and casualty insurance and life accident health insurance must be submitted to the department and reviewed and approved by the department before they can utilize those," Crandall said. He noted the department receives over 5,000 submissions annually, reviews filings with a 12-person team and has up to 30 days to approve or object to a filing. He also cited Tennessee Code Title 56, Chapter 5, Section 103, requiring rates "neither inadequate, excessive, nor unfairly discriminatory."

Trey Hancock, director of financial affairs, described solvency oversight: on-site exams at least every five years for domiciled companies and quarterly financial-analysis reviews. The department receives audited financial statements and other investment disclosures to monitor insurer solvency and to allow reciprocal reliance with other states.

Scott McAnally presented the department’s fourth annual mental-health parity report. He said complaints rose from four in 2023 to five in 2024 while filings objections remained at zero for a second consecutive year; one company under examination will include mental-health parity findings in its exam report later this year. Crandall and McAnally also noted new federal mental-health parity rules finalized in September 2024 and linked those rules in the report available on the department’s website.

Assistant Commissioner Bill Huddleston described consumer-facing work: consumer insurance services receives roughly 25,000 initial contacts annually and about 3,600 formal complaints across lines in the last year. The department said mediation and enforcement produced a record $17.5 million in restitution to policyholders last year.

On PBMs, the department said it has implemented regulatory steps under Public Chapter 1070 (2022) and has completed five PBM audits to date, planning five audits annually. The department has promulgated emergency rules for appeals processes and audit procedures and said it continues to use the statutory authority to audit PBMs and to pursue enforcement where warranted.

Committee members asked about consumer outreach, insurer examinations, the role of credit in underwriting and whether Tennessee’s actions could affect domicile decisions by insurers. Staff said ZIP-code-based proxy discrimination is prohibited by state law and that companies must justify underwriting factors with actuarial support; the department does not currently recommend restricting credit scoring statewide and would defer to the General Assembly if members pursue changes.

Committee members thanked the department and then moved to other business.