Department of Banking and Insurance FY 2012-2013
Discussion Points
1a. The FY 2012 Appropriations Act included an $8.49 million increase in federal funding for the department. The increase in federal funding included three grants related to the “Patient Protection and Affordable Care Act,” Pub. L.111-148, and the “Health Care and Education Reconciliation Act of 2010,” Pub.L.111-152, collectively more commonly known as the “Affordable Care Act.”
The first grant provided $982,000 from federal FY 2011 and $1 million from federal FY 2012 for the Consumer Assistance Program (CAP), which is a federally funded program that enhances and expands many of the services currently provided by the department’s Consumer Assistance Unit. The Consumer Assistance Unit, currently employing 9 investigators, two supervisors and a manager, is responsible for responding to consumer calls about health insurance issues of a technical or emergent nature. The staff also investigates inquiries and complaints involving all lines of insurance. According to the department’s response to the Office of Legislative Services (OLS) Discussion Points during the FY 2012 budget process, the enhancements funded with the federal monies include: increased staffing with two newly created positions devoted exclusively to consumer assistance; enhanced activities of existing staff; additional communications features; new consumer education programs and materials; additional training for staff; enhanced computer database systems and needed office supplies and materials. These enhancements are needed due to the changes to the health care system pursuant to the Affordable Care Act. For example, the State may now accept complaints from and advocate on behalf of persons covered by self funded health benefits plans, an area in which the State was precluded from interceding prior to enactment of the Affordable Care Act.
Question: a. Please provide details on the activities funded by the Consumer Assistance Program grant, including the number of customer inquiries, by subject area.
Response: The federal government awarded only one grant to the Department to fund a Consumer Assistance Program (CAP) under the Affordable Care Act. That grant was for the period from October 1, 2010 to September 30, 2011 and was for $928,000. The Department spent $265,019 of the grant funds primarily to fund staff salaries and fringe benefits for two new employees of the Consumer Protection Services area of the Department as well as to partially fund salaries of staff handling health insurance inquiries related to the Affordable Care Act. The two new employees conducted consumer outreach activities which included meetings with a variety of community organizations, local governments, provider groups, legislators, religious organizations, educational institutions and others to educate them about the health care options available in New Jersey. The employees developed resource lists for members of the public, trained current Department employees on various health related issues, and assisted in setting up the data reporting system required by CAP grant recipients.
1 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
The Department handled 2,185 health related inquiries during the grant period and which are broken down by category as shown below. For the purposes of the chart, this is a description of the nature of the calls.
Uninsured – A consumer with no health insurance.
Insured in Transition – The consumer is insured at the time of initial contact with the program, but faces an imminent (within the next 12 months) loss of coverage.
Insured Other Problems – An insured consumer who intends to keep current coverage but is having difficulty affording the premium or is experiencing adequacy problems.
Information Only – Typically an insured consumer seeking general information, definitions, contact information, but not seeking assistance related to a specific health insurance problem.
Other Assistance Referred – A consumer whose needs are outside of the scope of the program. Scenarios where this would apply include, but are not limited to: • a Medicaid recipient with questions about coverage; • a Medicare recipient with Part D having difficulty paying for prescriptions; or • a VA beneficiary seeking an expedited appointment with a doctor.
Appeals – Consumers who have appeals due to denials of claims, termination of coverage when there was a claim represented and who seek information on options for appeal of carrier claim determinations.
Nature of Call Number of Calls
Uninsured 379 Insured in Transition 332 Insured Other Problems 558 Information Only 290 Other Assistance Referred 33 Appeals 593 Total 2,185
2 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
b. Please provide the department’s plan to maintain CAP staff and activities in the absence of additional federal funding in FY 2013.
Response: The Department has reassigned the employees that were hired as part of the CAP grant to the rate review grant as of October 2011 as that grant continues through the end of calendar year 2013. Remaining staff in Consumer Protection Services are responding to consumer and provider inquiries relating to health insurance, including external appeals.
c. Please detail any new staff hired in FY 2012 or anticipated to be hired in FY 2013; and anticipated time of funding period.
Response: The Department expects staffing in Consumer Protection Services to remain at current levels throughout FY 2013 and expects to hire only to replace departing employees.
1b. The second grant for $1 million from federal FY 2011 and for $3 million from federal FYs 2012 through 2014 will enhance the department’s ability to review insurance companies’ rate proposals. Pursuant to the Affordable Care Act, the federal Department of Health and Human Services must work with state insurance departments to review unreasonable rate increases for health insurance plans. (Please see the OLS background paper, beginning on page X of this analysis book, “Health Insurance Rate Review; Federal Health Care Reform Law Requirements” for more information.) These grants are being used to hire a consultant group to study the actuarial information that should be included in the rate filing and develop an automated process for receiving and analyzing the numerical information in rate filings. The funding is also being used, in cooperation with other states’ funding, to assist the National Association of Insurance Commissioners (NAIC) to modify the State Electronic Rate and Form Filing (SERFF) system to allow direct capture of the information on rate increases. The State will also hold annual rate forums and prepare a report on the effectiveness of its rate review process, training and outreach efforts to stakeholders. Additionally, New Jersey has been awarded “workload” funding of $546,261 and a “performance” award of $600,000.
Question: a. Please update the Legislature on the work of the Hays consultant group hired to develop an automated process for receiving and analyzing the numerical information in rate filings and the progress of the NAIC in modifying the SERFF system.
Response: The Hay Group was engaged and began work in early 2011. The following projects have been completed or are nearly completed:
1. met with major New Jersey health carriers on March 15-16, 2011 to elicit their concerns on the rate review process.
2. met with stakeholder groups (such as consumers, brokers, medical care providers, legislative staff) on June 1-2, 2011 to learn about concerns on the rate review process. These meetings were 3 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
moderated by the Rutgers Center for State Health Policy (RCSHP). The Department previously contracted with RCSHP to conduct regional meetings with stakeholders.
3. developed rate filing “templates” (Excel work books for standardized filing of rate data) and an instruction manual. These templates went into use January 2012.
4. developed a data base for maintaining the uniform information submitted in the templates. This data base is currently undergoing testing.
There are also several pending projects: 1. completion of testing and finalization of the data base; 2. train Department staff in use of the data base; 3. drafting a report on methods and considerations for filing rates; 4. uniform formats for summarizing benefits in rate filings and 5. special reports on rate errors, loss ratios, pre-reform rate filings, and large group rate filings.
The SERFF modifications have been completed.
Cycle I modifications completed in late 2010 and early 2011 provided for summary rate data to be directly entered into the SERFF filing and automatically reported to HHS on a quarterly basis. This relieves states with rate review grants from the burden of collecting and reporting rate data.
Cycle II modifications completed in late 2011 allow carriers to include in their filing the “justifications” required to be posted by HHS.
b. Please provide an update on any changes the department is anticipating to the process of rate review currently used by the department for health insurance rates.
Response: The Department believes that it is too early in the process to answer this question. The Department anticipates that our new process will be faster and that the questions asked will be more specific and informed by the available data.
c. Please detail the specific activities to be performed with the “workload” and “performance” funding.
Response: The distinction of the funding into “basic”, “workload”, and “performance” was misleading. New Jersey received a total of $4.15 million in Cycle II rate review funds in addition 4 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
to the $1 million in Cycle I rate review funds. The $4.15 million was calculated as the sum of basic, workload and performance funds. However, the uses to which these funds can be put do not depend on the source – it is a single pool of funds used for all Cycle II activities.
The activities that will be funded are described in item 1b., and this includes the SERFF enhancements, actuarial reviews, forums on rates, as well as the additional employees described in the question below.
d. Please detail any new staff hired in FY 2012 or anticipated to be hired in FY 2013; and the anticipated duration of their employment.
Response: In October 2011 (FY 2012) the Department hired two professionals to staff the Rate Information and Oversight section (RIO). These are full time employees who are 100 percent funded by the Cycle II rate review grant and whose employment is scheduled to terminate when funds are expended or the grant period ends (currently, September 30, 2014).
The Department anticipates hiring a full time clerical/administrative employee for the RIO section prior to the end of FY 2012, on the same conditions.
The Department anticipates hiring one additional professional employee for the RIO section within the next 6 months (late FY 2012 or early FY 2013) on the same conditions.
1c. The third grant of $1 million from federal FY 2011 and $7.67 million from federal FY 2012, is to be used to plan and explore the possibility of establishing a State Health Insurance Exchange to be operational in 2014. The Affordable Care Act made expansive changes to the way that consumers and businesses will obtain health insurance. One such change was the opportunity for states to establish state-based “American Health Benefit Exchanges” for individuals, and “Small Business Health Options Program Exchanges” for small businesses. (Please see the OLS background paper beginning on page X of this analysis book, “State Health Insurance Exchanges; Federal Health Care Reform Law Requirements” for more information on the Exchanges). A portion of the $1 million Exchange planning grant was awarded to the Center for State Health Care Policy at Rutgers, the State University, for a report outlining the State’s options to establish an Exchange and to facilitate stakeholder forums. The report was issued in September 2011 and provided information on implementation options, including the possible design of a health insurance exchange. The forums were held throughout the State until October 2011 to obtain the input of stakeholders with interest in the healthcare delivery and financing systems on different options the State may select from in establishing an Exchange.
The $7.674 million awarded in federal FY 2012, is intended to “close the identified Informational Technology gaps, gather stakeholder input on specific decision points, detail a financial management plan, establish audit and fraud detection procedures, develop reinsurance 5 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
and risk adjustment plants, research Medicaid network issues, analyze projected plan costs and utilization, and further develop plans and standards for plan management, including options for defining Essential Health Benefits.”
Additionally, it appears that the federal government is acting to provide more funding for states in the future. Guidance from the Centers for Medicare and Medicaid Services in the United States Department of Health and Human Services indicates that the federal government plans to continue to award Exchange Establishment grants through 2014 to give “states maximum flexibility and ensures that states can move forward on their own timetables as they work to build an Exchange.”
Although both of the grants are intended to fund the exploration of the steps needed to establish an exchange, there has been no confirmation from the Executive Branch that it supports the establishment of an exchange, thus far. According to press reports, the Governor will decide by June 29 whether to have the State establish the exchange or let the federal government establish an exchange in New Jersey. Meanwhile, the Legislature has several pieces of legislation introduced that would establish an exchange in New Jersey, including A1801, A2171(1R), S551, S847 and S- 1319(1R).
Question: a. Please provide a spending plan and timetable for the four remaining planning activities, including: total funding for each part; the status of each analysis; and any action taken by the department in response to the analysis.
Response: Details on the planning activities for the recent grant award are outlined in Attachment 1c-a. The Department will use the balance of the grant for personnel, supplies, travel and equipment. The duration of the grant is one year, but continuation of activities under the grant may be affected by the outcome of the challenge to the Affordable Care Act currently before the United States Supreme Court. As the award is recent, activities to date are limited to the early stages of procurement.
b. Please detail any new staff hired in FY 2012 or anticipated to be hired in FY 2013; and anticipated duration of their employment.
Response: The Department hired no staff in FY 2012. The grant anticipates two positions to be hired in FY 2013. Employment would be for the one-year duration of the grant, contingent upon the Supreme Court decision, a state decision of whether to run a State-based Exchange, and whether the State seeks further funding.
c. Please detail the department’s plans to submit further applications to the federal government for Exchange planning grants. What is the timeline for these submissions?
Response: The Department is committed to only spending the minimum necessary to maintain the State’s options moving forward. The Department does not anticipate any grant submissions 6 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
prior to a decision by the United States Supreme Court. There are multiple opportunities for applying for subsequent grants pursuant to rules recently adopted by HHS. Establishment applications will be due June 29, 2012; August 1, 2012; November 1, 2012; February 1, 2013; May 1, 2013; August 1, 2013; November 1, 2013; February 3, 2014; May 1, 2014; August 1, 2014; and November 3, 2014.
d. Does the department support the establishment of an exchange in New Jersey? Please elaborate. Has the department taken a position on any of the introduced bills intended to establish an exchange in this State?
Response: The Department’s role is to support the planning process, with any decision ultimately made by the Governor. The Department has not taken any positions on the introduced bills.
2. In 1992, New Jersey enacted two laws establishing two programs, the New Jersey Individual Health Coverage Program and the Small Employer Health program, that gave individuals and small employers in the State guaranteed access to health coverage, regardless of health status, age, claims history, or any other risk factor.
The New Jersey Individual Health Coverage Program (IHCP), P.L.1992, c.161 (C.17B:27A- 2 et seq.), was established to provide access to a broad choice of private health insurance products to any New Jersey resident who does not have access to employer-based or other group health coverage. (Please see the OLS backgrounder on the IHCP program, included in the FY 2011 departmental budget analysis for more information on the program.) At first, the IHCP market was robust, but starting in the mid 1990’s there was a steady increase in the premium and a change in participation toward older and potentially higher risk insureds. In 1993, its first year of reporting, the IHCP detailed 156,565 covered lives. This increased to a maximum of 220,384 lives covered in 1995 and then began to gradually decrease to 77,465 lives in 2003, the first year a new program developed by the Legislature to address cost issues, the Basic and Essential Health Care Services Plan, began to operate.
P.L.2001, c.368 (C.17B:27A-4.4 et seq.) requires health insurance carriers to offer a limited health care services plan, known as the Basic and Essential Health Care Services Plan (the “B&E Plan”) that is more affordable, although it is not as generous in coverage, as the standard IHCP plans. The act permits carriers to rate the B&E Plan by using factors for age, gender, and geographic location, but by no more than a 3.5 to 1 ratio between the highest and lowest rated plans. The B&E Plan was successful for those individuals who could choose a plan with limited coverage, it covered 814 lives in the first year of implementation (2003), increasing to 84,944 in the second quarter of 2011.
In 2008, the Legislature recognized a need for more affordable policies with full coverage. P.L.2008, c.38 (C.26:15-1 et al) modified the requirements on policies available under IHCP to make them more affordable and therefore attractive to younger uninsured persons. These modifications, such as: modified community ratings; reduction in the number of plans required to be offered; and the addition of optional riders on the policies, were intended to control policy 7 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
costs for the insureds. However, the changes do not appear to have increased the number of people choosing standard IHCP coverage, which has continued to decline each year from the maximum of 220,384 covered lives in 1995 to 48,920 covered lives in 2011.
Also in 1992, the Small Employer Health (SEH) program, P.L. 1992, c.162 (C. 17B:27A -17 et seq.) was established to provide small employers, (those with 2 – 50 employees) with the option to purchase standardized health benefits plans. The plan can be modified based on the age, gender and family status of the employees and location of the business. But, the ratio for the highest rates for a SEH plan to the lowest rates may not exceed 2:1. In 1994, its first year of reporting, the SEH program reported 694,312 covered lives. This increased to a maximum of 919,953 covered lives in 2005 and has gradually decreased to 714,106 covered lives reported in the second quarter of 2011.
Question: a. Please provide sample policy costs for individuals purchasing policies through the IHCP, for the most recent year available and for as many previous years as possible. Please explain the difference in the cost of policies over the previous years. Please comment and provide analysis on the decline in the number of covered lives through the IHCP. What factors does the department believe caused the decline in the number of lives covered through the IHCP?
Response: Please see Attachment 2a for the costs of coverage.
Rates are increasing in the standard IHC market because of the increasing cost of medical care. IHC rates are directly tied to the cost of caring for the population covered in the IHC market. Medical cost increases include more frequent incidents of medical care, increasing cost for each medical service, and the introduction of more expensive medical services. The introduction of Basic and Essential Plans (B&E) in March 2003 may also contribute to the increasing cost because healthier people are more likely to choose B&E, leaving the less healthy in the standard plans.
Enrollment in the standard IHC market appears to be stabilizing at around 50,000 after a long period of decline. The Department thinks that this decline was largely caused by an assessment spiral that was the result of guaranteed issue and pure community rating. In such a spiral, the healthier insureds are overcharged and at least some of them leave the market, causing rates to increase and additional relatively healthier insureds to leave. The introduction of B&E policies may have contributed to some extent, as noted above. In addition, the economic conditions of 2008 and 2009 probably contributed to the enrollment decline since some people may have lost the ability to pay for coverage.
Over the many years of this decline, it was suggested that age rating (a shift from “pure” to “modified” community rating) might address this problem. Age rating became an option in the 8 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
standard market beginning in 2009 as a result of S1557. It is interesting that enrollment in the standard market appears to have stabilized at around 50,000 around that time even though, especially in 2009, the economy was still difficult.
b. Please provide sample policy costs for individuals purchasing policies through the B & E program for the most recent year available and for as many previous years as possible. Please explain the difference in the cost of policies over the previous years.
Response: Please see Attachment 2b for the costs of B&E coverage.
The B&E Plan is an option available to individual market consumers. Consumers may purchase a standard health benefits plan that provides comprehensive coverage or may purchase the B&E plan that features limited benefits and is thus offered at a lower cost. The B&E policies can be issued in both a basic form and with riders that increase the benefits. For some carriers, the premiums for these policies have increased slowly (less than 5 percent) in most years or even in some cases declined. This reflects a number of factors, including that the limited benefits (including the use of provider networks) controls costs and that people with serious health problems tend to buy standard plans. B&E Plans with riders to increase benefits have sometimes had rate increases in the standard plan range (generally 10 percent – 15 percent). The ability to charge rates that depend on age, gender, and location probably helps moderate rate increases for B&E plans.
c. Please provide sample policy costs for businesses purchasing insurance through the SEH program, for the most recent year available and for as many previous years as possible. Please explain the difference in the cost of policies over the previous years. Please comment and provide analysis on the decline in the number of covered lives through the SEH program.
Response: Please see Attachments 2c-1 and 2c-2 with policy cost information.
The primary driver of rate increases in the small employer market was trend in medical costs. As in the IHC market, this reflects increased number of medical services, increasing cost of each service, and the introduction of new medical services that either replace (at a more expensive level) or add to existing services.
Additionally, rates may increase more than trend if past experience was poor or the pool of covered risks has declining average health. In recent years, the SEH market has faced the following challenges: 1) declining employment due to economic conditions; 2) an aging covered 9 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
population as people with less seniority lose their jobs; 3) employers dropping coverage due to a poor business climate; 4) low cost limited plans available in the individual market that might be less expensive to young, healthy employees; and 5) options to self-fund coverage which are more likely to be less expensive for employers with younger and healthier employees.
The combination of these factors has driven a decline in enrollment and increase in premium above medical trend. This begins a self-perpetuating assessment spiral although in theory there is more built in stabilization in the group than in the individual market.
In 2008 and 2009, carriers increased rates more than trend to reflect poor experience. Rates in early and mid-2010 were based on experience from 2009 and late 2008. In 2010 many rate increases exceeded 20 percent, and in some cases they approached 30 percent. As experience improved, rate increases moderated. Annual rate increases for 2011 were in the range of 10-15 percent, significantly lower than those in 2010. However, some of the residual effect from the 2010 rate increase was reflected in 2011 rates. In other words, the calculation of annual increases in 2011 partly includes the large rate increases that occurred in 2010. We anticipate that rate increases will continue to decline in 2012, as the effects of the 2010 increases wear off. Through early 2012, some carriers have filed rate increases in the single digits.
3. In 2010, NJ Protect was launched as a new health insurance option for uninsured New Jerseyans with pre-existing medical conditions. Eligibility requirements were established by Federal law. Section 1101 of the “Affordable Care Act” established a temporary national high-risk health insurance pool to provide health coverage to individuals with pre-existing medical conditions. The new pools may be administered directly by the state, or states may defer to the federal government to administer the new programs. These pools are to accept clients until 2013 and conclude in 2014. In 2014, the Exchanges will be implemented and will provide alternatives for individuals with pre-existing conditions to access health benefits coverage.
To be eligible for NJ Protect, an individual must be: a U.S. citizen, or lawfully present in the United States; a New Jersey resident; without creditable coverage for at least six months; and have a pre-existing condition. The State offers NJ Protect through two private carriers, Ameri Health of New Jersey and Horizon Blue Cross Blue Shield of New Jersey. The carriers began accepting applications in August 2010.
The federal law appropriated $5 billion nationally to finance the high risk pool program. The department, in response to the OLS discussion points in the FY 2012 budget process, indicated that New Jersey’s share of those monies will be approximately $112 million through 2013.
10 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Question: a. Please provide the number of enrollees (by age group) for NJ Protect in Calendar Years 2011 and 2012 and estimated for Calendar Year 2013.
Response: Please see Attachment 3a.
b. Please provide a report detailing the specific number of plans chosen by enrollees in Calendar Years 2011 and 2012 and estimated for Calendar Year 2013.
Response: Please see Attachment 3b.
c. Please provide an accounting of federal funds received by the State for NJ Protect in FY 2011 and estimates for the remainder of FY 2012, and FY 2013. Please detail the uses of federal funding received.
Response: Please see Attachment 3c.
Federal funds received for Fiscal Year 2011 totaled $6,376,194. Premium received in FY 2011 is estimated at $1,426,774. These combined funds were used to pay administrative expenses of $420,426 and estimated claims of $7,382,542. The administrative expenses are largely the cost of processing claims. (These numbers are characterized as estimates solely because of questions of timing in payment of premiums, claims, expenses and reimbursement make it difficult to precisely allocate to different time periods.)
Estimates for FY 2012 Federal funds received $24,130,917 Premiums received $ 5,073,343 Uses Administrative Expenses $ 547,921 Claims Paid $28,656,340
Estimates for FY 2013 Sources Federal funds received $46,917,713 Premiums received $ 9,190,533 Uses Administrative Expenses $ 992,578 Claims Paid $55,115,668
4. The “Interstate Insurance Product Regulation Compact,” P.L.2010, c.120 (C.17B:37-1 et seq.), made New Jersey a member of the Interstate Insurance Product Regulation Commission (“Commission”). The Commission is a joint public agency that administers the Interstate Insurance Product Regulation Compact (“Compact”) on behalf of compacting states and develops uniform standards for certain insurance products, including annuities, life insurance, and disability income insurance.
By entering into the Compact, a state facilitates prompt review of these insurance product filings by providing insurers a single office to which a filing of an eligible insurance product may 11 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
be submitted for approval. If the insurance product is approved by the Commission in accordance with its standards, the product will be accepted by the regulatory agencies in all the states that have joined the Compact. Information from the Commission indicates that 41 states and Puerto Rico will be members of the Compact as of January 2012. Business in these states represent approximately 70 percent of the premium volume nationwide.
There are over 60 uniform standards in individual life, annuity and long-term care product lines already adopted and available. Additional standards are in development for disability income and group life and annuities. In September, 2011, the Commission adopted certain uniform standards pertaining to various aspects of the acceptable terms and filing practices for individual disability income insurance policies. This adoption followed a period during which state regulatory authorities and other interested parties had the opportunity to comment on the proposed standards. By virtue of this adoption, the Commission’s standards are binding and will be used to determine if individual disability insurance products are acceptable to be sold in all Compact states.
Question: a. How do the uniform standards adopted by the Commission differ, in major respects, from the standards that insurers previously had to comply with to have their individual disability insurance products approved by DOBI in order to sell policies in New Jersey?
Response: In terms of major respects there are no substantive differences.
The Compact has established standards for Buy-Sell Plans, Key Person Plans and Business Overhead Expense Plans. In contrast, New Jersey has adopted a “File and Use” position with respect to these same forms. (The Compact standards benefit consumers, but create some additional work for carriers.)
The Compact requires a Readability Score of 50. New Jersey requires a score of 40. (The Compact standards benefit consumers, but create some additional work for carriers.)
The Compact has adopted definitions for terms not included in New Jersey’s statutes and regulations. Generally, New Jersey will permit the inclusion of terms and the benefits they represent if they are to the benefit of the consumer. Examples include but are not limited to: Cost of Living Index; Death Benefits; Earnings; Presumptive Disability; and Rehabilitation. (The Compact standards benefit consumers and provide flexibility to carriers).
The Compact has adopted a Payment of Claim provision that will pay up to $5,000 if any indemnity of the policy is payable to the estate of the insured or to an insured or beneficiary who
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Discussion Points (Cont’d)
is a minor or otherwise not competent to give valid release. New Jersey’s statute does not permit the amount to exceed $1,000. (This is a benefit for consumers.)
b. Please update the Legislature on the impact of the new standards approved by the Compact on the sales of individual disability income insurance policies in New Jersey. Has there been an increase or decrease in the number of companies selling such policies in New Jersey? Has there been an increase or decrease in the types of such policies offered for sale in New Jersey?
Response: The Compact has not yet seen its first IDI filing. The Compact expects very few DI filings for the balance of 2012. Their budget forecasts a total of 10 filings for the year. The Department has received twelve (12) submissions in the first quarter of 2012.
c. Please update the Legislature on the development of uniform standards for group life and annuities. If already developed, please comment on the new standards as compared to the current standards implemented in New Jersey.
Response: The Product Standards Committee is actively working on uniform standards for employer group term life insurance policies. It is unlikely that these standards will be adopted before the end of the year. So far, the draft standards closely track the New Jersey rules. The Committee is scheduled to conduct its first public conference call for the standards addressed during the week of April 2, 2012.
5. P.L.2011, c.25 (C.17:47B-1 et seq.), more commonly known as the “Captive Insurers Act” took effect in May 2011 and permits a captive insurance company to be licensed by the department to do business in the State in any of the lines of insurance in subtitle 3 of Title 17 of the Revised Statutes (R.S.17:17-1 et seq.) or Title 17B of the New Jersey Statutes (N.J.S.17B:17-1 et seq.), generally including contracts or policies of life insurance, health insurance, annuities, indemnity, property and casualty, fidelity, guaranty and title insurance, and reinsurance, provided the captive meets certain requirements. “Captive insurance companies are insurance companies established with the specific objective of financing risk emanating from their parent group or groups.” (DOBI PRN 2011-192) The act regulates captive insurance companies, which include pure captive insurance companies, association captive insurance companies, sponsored captive insurance companies, and industrial insured captive insurance companies. Prior to this time, captive insurance companies were not permitted to be domiciled in New Jersey.
The department asserted in Bulletin No.11-08 that the Captive Insurers Act “provides significant new opportunities for New Jersey business to better manage their own risk by insuring themselves through a New Jersey-based captive, instead of a captive domiciled in another state or by purchasing insurance in the commercial market.” The addition of captive insurance companies to New Jersey is also intended to increase the number of professionals dedicated to the captive insurance market, such as: accountants; actuaries; and managers who may all become registered service providers with the department. 13 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Pursuant to the act, a premiums tax is collected from captive insurance companies, but the companies are excluded from the requirement to pay the special purpose apportionment, (discussed in more detail in Discussion Point #9b). The tax is collected at the following rate on direct premiums for all lines of insurance, except reinsurance premiums: 0.38 of one percent on the first $20,000,000; 0.285 of one percent on the next $20,000,000; 0.19 of one percent on the next $20,000,000; and 0.072 of one percent on each dollar thereafter. Companies are required to pay the following tax rate on reinsurance premiums: 0.214 of one percent on the first $20,000,000; 0.143 of one percent on the next $20,000,000; 0.048 of one percent on the next $20,000,000; and 0.024 of one percent of each dollar thereafter. The tax is due on March 1 each year, on the premiums the company earned in the previous calendar year. The minimum aggregate premiums tax to be paid by a company is established at $7,500 and the maximum tax will be $200,000 per company.
Section 13 of P.L.2011 c.25 (C.17:47B-13) establishes the "Captive Insurance Regulation and Supervision Fund" to provide the department with a funding source to administer the Captive Insurers Act. Pursuant to statute, the commissioner is responsible for establishing the fees and assessments necessary for the administration of the act and all fees and assessments established in the act must be deposited into the fund.
In August 2011, the department proposed regulations implementing the act (N.J.A.C. 11:28-1.1 to 23), with a comment period open until November 11, 2011. Included in the proposal was a maximum $4,000 fee for registering a captive insurance company, and a $300 license renewal fee.
Question: a. Please provide the number of captive insurers, by type, that have submitted applications to be licensed in New Jersey. How many of these have completed the application process and are licensed in New Jersey?
Response: Currently four applications have been submitted with the Department licensing three to date; the fourth is in the review process and the Department anticipates approval in the near future. Of the four, three are pure captives and one is an industrial captive.
b. Please provide the number of other professionals--i.e., accountants, auditors and managers, that have registered to be service providers for the captive market.
Response: There are 17 actuaries, representing six firms; eight captive managers (with two applications pending) and seven accounting firms registered to date. Applications typically come in once it appears imminent that one of the service provider’s clients will form a captive in New Jersey. The Department established “Captive Courses” on the Department’s website to facilitate the availability of this information for interested companies. c. Please provide an estimate of premiums tax and registration fees the department anticipates from captive insurers in FY 2012 and FY 2013.
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Discussion Points (Cont’d)
Response: The Department estimates that State will receive approximately $20,000 in admission and license fees, and $275,000 in premium taxes in FY 2012.
The Department estimates that State will receive approximately $24,000 in fees, and $600,000 in premium taxes in FY 2013.
d. Please detail the expenditures made by the department for the administration of the Captive Insurers Act.
Response: The cost to administer the Captive Insurers Act since enactment is approximately $151,000 and consists primarily of salaries, fringe benefits and overhead.
e. Please provide an update on the Captive Insurance Regulation and Supervision Fund, including balances and disbursements, since inception.
Response: Since inception, all admission and licensing fees are deposited into an account. To date there have been no disbursements and the balance is approximately $11,100.
6. Historically, New Jersey has struggled with containing the costs of motor vehicle insurance. Several reforms by the Legislature have attempted to resolve this problem. In the past, P.L.2003, c.89 (C.17:30A-2.1 et al) was enacted, following the “Automobile Insurance Cost Reduction Act,” (AICRA) P.L.1998, c.21 (C.39:6A-1.1 et al), both of which established reforms to increase the availability of motor vehicle insurance and contain costs of that insurance. Prior to AICRA, the “Fair Automobile Insurance Reform Act of 1990,“ P.L.1990, c.8 (C. 17:33B-1 et al), (FAIR Act) was enacted to provide comprehensive reform of the automobile insurance system in the State. The legislation has been successful to varying degrees in containing costs. However, some requirements established pursuant to these reforms, and discussed in more detail below, have expired or have been amended since enactment and there have been reports that the cost of automobile insurance has again begun to increase in the State.
Question: a. Please provide the total number of automobile insurers offering automobile insurance in the State in 2009, 2010 and 2011. Please indicate those that do not accept all applicants. For the same years, please indicate any automobile insurers that have withdrawn from the market, and any that have entered the market in New Jersey.
Response; The total number of insurers offering automobile insurance in the State in 2009 was 74, in 2010 was 67 and in 2011 was 68. Companies are not required to submit their acceptance criteria so therefore we do know whether they do not accept all applicants. With the end of “take all comers” companies were no longer required to accept all applicants. Please note that companies use criteria such as excessive accidents, driving under the influence, motor vehicle points, and membership criteria to determine acceptance. 15 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Please see Attachment 6a for the insurers that have withdrawn from the market and those that have entered the market from 2009 thru 2011.
b. Please provide the rate increases filed by these companies in 2009, 2010 and 2011. Please comment on the reasons stated for these rate increases and provide an estimate for automobile insurance rates for the next several years in New Jersey.
Response: Please see Attachment 6b for the rate increases filed by these companies from 2009 thru 2011.
Insurers have been implementing rate increases over the last several years due to increasing PIP costs. The average rate increase for 2011 was +6.24 percent, 2010 was +6.41 percent and 2009 was +6.52 percent. The industry average PIP indication was +21.63 percent in 2011; however, during that time insurers only implemented PIP increases averaging +12.51 percent. If no changes are made, the Department would expect future rate activity to be similar to recent levels. However, the Department has introduced regulations expected to contain the rising cost of PIP; these regulations are expected to be adopted in 2012, and will likely put downward pressure on future rate need.
7. The “Fair Automobile Insurance Reform Act of 1990,“ P.L.1990, c.8 (C.17:33B-1 et al), (FAIR Act) enacted a comprehensive reform of automobile insurance regulation in the State. Section 27 of the FAIR Act (C.17:33B-15) provided that no insurer be permitted to refuse to insure, refuse to renew, or limit coverage available for automobile insurance to an eligible person who meets its underwriting rules, as approved by the commissioner. This provision, otherwise known as the “take all comers law” was subsequently amended by P.L.2003, c.89 to become inoperative on January 1, 2009.
Question: a. Please detail any consumer complaints that have resulted due to the expiration of the “take all comers law.”
Response: The Department cannot specifically attribute complaints to the elimination of the “take all comers” law; however, the Department reviewed the consumer complaint files related to refusal to insure, cancellation or nonrenewal of auto. As shown below, the number of complaints in these categories has decreased since 2008:
16 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Complaints For Complaints for Complaints for Year cancellation Nonrenewal Refusal to Insure Total 2008 157 169 16 342 2009 144 130 4 278 2010 162 **324 9 495 2011 139 121 8 268
**256 of the nonrenewal complaints in 2010 were related to the Allstate Companies for nonrenewal for failure to return underwriting questionnaires. The Department was able to have some of the notices rescinded due to technical violations on the notice of nonrenewal. The Department also worked with the company to make sure the process was clearer for policyholders.
b. Please discuss the impact of the expiration of the “take all comers law” on New Jersey citizens’ ability to access affordable automobile insurance.
Response: The Department has not seen any significant changes since the elimination of the “take all comers” law. The Department has noted that insurers are competing for business; a review of the residual market shows that there has been no significant growth in residual exposures – in 2008 there were 14,641 Standard Policies in PAIP (the residual market), in 2009 there were 13,952 and in 2010 there were 15,102.
8. Section 10 of P.L.1988, c.119 (C.39:6a-4.6) provides that the commissioner is responsible for the promulgation of medical fee schedules to be used in the reimbursement of health care providers for medical expense benefits under the personal injury protection (PIP) coverage of automobile insurance policies. Additionally, “the commissioner may contract with a proprietary purveyor of fee schedules for the maintenance of the fee schedule, which shall be adjusted biennially for inflation and for the addition of new medical procedures.”
On August 1, 2011, the department proposed new rules, repeals and amendments to revise the regulatory framework for the provision and payment of PIP benefits. The changes, among other things: add new procedures to the PIP medical fee schedules; require PIP vendors to be licensed in the State; implement standardized forms to be used by insurers; amend the internal appeals process; and amend the alternate dispute resolution process. The comment period on these changes was extended until October 17, 2011 and a public hearing on the changes was held on October 6, 2011 by the Assembly Financial Institutions and Insurance Committee. The main concern expressed at this hearing was the need to balance the market reality of the insurance companies’ profit margin with maintaining access to quality care for individuals injured in motor vehicle crashes.
17 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Over 820 persons submitted written comments on the proposed rules and, based upon the comments, the department proposed several substantial changes to the new and amended rules on February 21, 2012. Comments on these changes are due to the department by April 21, 2012. Among the many changes to the proposed rules is a new schedule for hospital surgical facility fees, establishing the fees at 300 percent of the 2011 geographically wage-adjusted Medicare Outpatient Department fees for Bergen County (north region) and Atlantic County (south region). Additionally, the department excluded emergency rooms from the imposition of these fees and excluded certain services performed in Ambulatory Surgical Centers from reimbursement and made many other technical changes.
The expansion of the PIP medical fee schedules was intended to lessen the reliance of providers and insurers on determining reimbursement for procedures on the “usual, customary and reasonable fee” (UCR) in those instances in which a procedure is not included in the PIP medical fee schedule. The expansion to include many more procedures on the PIP medical fee schedules is intended to standardize the cost of procedures for both providers and insurers. The standardization leads to certainty in the marketplace and less administration and cost incurred by both parties in establishing a payment for a service. Previously, the department had issued Order A10-113, which allows the Ingenix MDR database to be used by insurers to determine the reasonableness of fees billed for services that are not on the PIP fee schedule.
Question: a. Please update the Legislature on the adoption of new PIP fee schedules, and the impact of the schedules on the cost of private passenger automobile insurance to consumers in New Jersey.
Response: As indicated above, the Department is currently in the comment period for the rule proposal published on February 21, 2012. The Department had proposed amendments to the fee schedule rules on August 1, 2011. However, in response to comments received, the Department proposed a Notice of Substantial Change. These changes only affect 25 percent of the proposed rule. The comment period on the amendments and new rules contained in the Notice of Substantial Change expires April 23, 2012. The Department will then review all of the comments received. After review the Department can issue one adoption notice for both the original proposal and the amendments and new rules contained in the Notice of Substantial Change.
The Department expects that the new schedules will put downward pressure on PIP costs. While most of the fees on the current schedule have been increased to reflect changes in the cost of living, the addition of nearly 1,000 codes to the Physicians’ Fee Schedule will enhance efficiency by increasing predictability for insurers and providers and reducing disputes about these codes that result in costly arbitrations. Thus, the Department believes that the proposed changes will exert a downward pressure on PIP costs and therefore the ultimate cost of private passenger automobile insurance for consumers.
18 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
b. Please provide specific information on the effect of changes to the alternate dispute resolution process. Has there been an increase or decrease in consumers needing alternate dispute resolution?
Response: As noted above, the proposed amendments have not been adopted so they have not yet had any effect on alternate dispute resolution. The Department notes that virtually all arbitrations are requested by providers acting on the assignment of benefits from insureds. The Department anticipates that the addition of more CPT codes to the medical fee schedules will reduce arbitrations regarding disputes over fees.
c. Please provide information on the use of UCR fees for services not included in the PIP medical fee schedule. Has there been a significant decrease in the reliance on the UCR fees due to the inclusion of more procedures on the fee schedule? Which database, or databases, are currently used by insurers to determine the UCR fee? Does the department anticipate changing any aspect of this process in the next year?
Response: As noted above, the Department has not yet adopted the amendments to the rule that would add approximately 1,000 new codes to the physicians’ fee schedule. The Department anticipates that the addition of more codes to the fee schedules will decrease the use of UCR fees. In fact, the Department notes that some codes were added to the fee schedule in the most recent proposal because some providers were changing the codes that they billed to similar codes that were not on the fee schedule in order to be reimbursed at the UCR rate instead of according to the fee schedule.
Concerning UCR databases, the Department’s rule states that insurers may use national databases of fees to determine the reasonableness of a provider’s usual and customary fee. As examples of national databases, the current rule includes Ingenix and Wasserman. The August, 2011 proposal added Fair Health, the successor to Ingenix, to the list of examples. It should be noted that the insurers are not limited to the national databases listed in the rule and the Department does not monitor which databases insurers use. Other than adopting the proposed amendments to the rule referenced above, the Department has no current plans to change the process for determination of usual, reasonable and customary in the future.
d. Does the department plan to analyze the provision of services over the next year to track the changes that may occur due to modified funding structures as proposed in the regulations? For example, will the department track the details of procedures (as referenced in “Exhibit 7,”) that, based upon criteria issued by the Centers for Medicare and Medicaid Services (CMS), will no longer be reimbursed if performed in a Ambulatory 19 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Surgical Center, but are reimbursable, pursuant to the fee schedule, if conducted in a Hospital Outpatient Surgical Facility and are not subject to the fee schedule if they are conducted in an emergency room?
Response: There is no formal reporting requirement in the PIP medical fee schedule rule. However, the Department can and often does make special data calls for information on PIP medical expenses.
9a. The mission of the Department of Banking and Insurance is to regulate the banking, insurance and real estate industries in a professional and timely manner that protects and educates consumers and promotes the growth, financial stability and efficiency of those industries. The funding used to support the department is generated primarily through the collection of assessments and premiums taxes on the industries that it regulates. Please see the OLS backgrounder, in the FY 2012 Budget analysis, “A Historical Analysis of Revenues and Expenditures of the Department of Banking and Insurance” for more information.
P.L.2005, c.199 (C.17:1C-33 et seq.) established an assessment on all financial entities the department charters, licenses and registers for all services related to the department’s financial regulation, supervision and monitoring of these entities. The Division of Banking imposes two assessments on financial entities on, or around, October 1 of each year: a Banking Licensing Assessment and a Banking Depositor Assessment. The assessment is based on calendar year business for the companies and fiscal year expenditures for the Division of Banking. The department, in its response to the OLS questions during the review of the FY 2012 budget, remarked that this causes “the department to issue the assessment seven months after the close of the business year for the company. Many companies have stopped doing business and collections can become problematic.” The department stated that it is in the process of reviewing several options for changes in the way it times the assessments.
Question: a. Please provide the total Banking Licensing Assessment charged and revenue collected for FY 2010, FY 2011, and estimated for FY 2012. Please provide the total Banking Depositor Assessment charged and revenue collected for FY 2010, FY 2011, and estimated for FY 2012. Please provide the number of payers of each of these assessments.
Response: Banking Licensing Assessment
Estimated FY 2010 FY 2011 FY 2012 Charged $6,035,706 $6,879,716 $6,035,706 Collected $5,803,755 $6,538,968 N/A Payers 3,389 3,077 2,815
20 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Banking Depositor Assessment Estimated FY 2010 FY 2011 FY 2012 Charged $4,211,831 $4,581,539 $4,400,000 Collected $4,211,831 $4,581,539 N/A Payers 109 107 108
b. Please discuss in more detail the problem of collecting the assessment from companies that have closed prior to the issuance of assessments by the department. How many companies closed in 2011 and 2010 that the State was not able to assess? How does the department recoup the assessments made to these companies if the companies can not be located? Has the department made any changes to the way assessments are handled as a result of identifying this as an issue?
Response: Since 2009 the economy has been very difficult for the consumer finance businesses that the Department licenses. That has resulted in more effort in collecting those assessments.
Companies cease being licensees for several reasons. They can surrender their license, non- renew, or simply go out of business. Below is a chart that reflects the decrease in licensees for FY 2010 and FY2011. FY 2010 FY 2011
Non Mortgage Related Companies 407 58 Mortgage Related Companies 281 42
Any assessments that are uncollectible are written off in accordance with Circular Letter 11-20. Those amounts are added to assessments in subsequent years. The Department is currently evaluating changes to the assessment process to make it more efficient. Legislation will be required to implement the changes.
The Department is able to recoup the assessments by loading the Treasury approved write off amounts into the assessment for the following year. No changes have been made to the way assessments are handled.
9b. P.L.1995, c.156 (C.17:1C-19 et seq.) established a special purpose apportionment for funding expenses incurred by the Division of Insurance. The apportionment is charged to all insurers writing most classes of insurance in the State (including, but not limited to: property; fire; flood; motor vehicle; life and health; accident; title; credit; personal liability; malpractice; homeowners; and any other specified kinds of insurance) and those health maintenance
21 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
organizations (HMOs) granted a certificate of authority to operate in New Jersey pursuant to P.L.1973, c.337 (C.26:2J-1 et seq.). This assessment is used for funding the activities of the division in regulating, monitoring and supervising these carriers. The apportionment of each carrier is based on the proportion that its net written premiums for the preceding calendar year bear to the combined net written premiums of all carriers in the preceding year, except that no carrier is required to pay an apportionment that exceeds 0.10 percent of its net written premiums.
Question: a. Please provide the amount of the total apportionment for FY 2010, FY 2011, and estimated for FY 2012.
Response: Special Purpose Assessment
Estimated FY 2010 FY 2011 FY 2012 $9,572,834 $33,921,374 $34,000,000
b. How many companies reached the individual maximum apportionment in FY 2009, FY 2010, or FY 2011?
Response: No companies reached the individual maximum apportionment in FY 2009, 2010 or 2011.
c. Does the department encounter the same difficulty with collecting the special purpose apportionment from insurance companies that no longer operate as it encounters with the banking assessment, referenced in discussion point 9a?
Response: The Department does not encounter difficulty collecting the special purpose apportionment from insurance companies because they are generally large entities that continue to remain in business.
9c. In addition to the special purpose apportionment noted in Question #4b, several different statutes subject insurance carriers to additional assessments to reimburse the department for operating expenses, including the following:
1) An assessment on insurers for all services related to the department’s fraud prevention expenditures, pursuant to P.L.1983, c.320 (C.17:33A-1 et seq.). This assessment is billed and collected by the department, but is used to reimburse the Department of Law and Public Safety for the operations of its Office of the Insurance Fraud Prosecutor (OIFP).
2) An assessment on all Small Employer Health Insurance Benefits (SEH) carriers for the reasonable and necessary organizational and operating expenses of the SEH board of directors pursuant to section 16 of P.L.1992, c.162 (C.17B:27A-32).
3) An assessment on all Individual Health Coverage (IHC) Program carriers for the reasonable and necessary organizational and operating expenses of the IHC Program board of directors pursuant to section 10 of P.L.1992, c.162 (C.17B:27A-11).
22 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
4) An assessment for the Motor Vehicle Security Responsibility Fund pursuant to section 1 of P.L.1952, c.176 (C.39:6-58). The assessment is billed and collected by the department but used to reimburse the New Jersey Motor Vehicle Commission.
Question: Please provide an accounting of all assessments collected by the department for FY 2009, FY 2010, FY 2011, FY 2012 and estimated for FY 2013. Please detail this information by source, as numbered above.
Response:
1) Fraud Assessment Estimated Estimated FY 2009 FY 2010 FY 2011 F Y2012 FY 2013 Charged $33,542,871 $28,135,680 $25,055,381 $25,000,000 $25,000,000 Collected $33,477,977 $28,135,680 $24,768,862 N/A N/A
2) Small Employer Health Insurance Estimated Estimated FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 $254,518 $262,900 $259,400 $261,550 $260,000
3) Individual Health Insurance Coverage Estimated Estimated FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 $310,242 $329,300 $1,061,000 $649,280 $0
Note: The IHC program assessments occur on a 2-year cycle.
4) Motor Vehicle Assessment Estimated Estimated FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Charged $17,344,005 $17,800,000 $16,772,703 $18,455,000 $19,201,000 Collected $17,344,002 $17,800,000 $16,772,673 N/A N/A
5) Premium Tax Estimated Estimated FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 $430,886,000 $481,214,000 $458,234,000 $502,000,000 $ $515,000,000
9d. The New Jersey Real Estate Commission (REC), in the Department of Banking and Insurance was created to administer and enforce New Jersey's real estate licensing law, N.J.S.A. 45:15-1 et seq. The REC issues licenses to real estate brokers and salespersons, real estate schools, and course instructors, as well as establishes standards of practice for the real estate brokerage profession. The REC collects revenue from the issuance of licenses on a biennial basis as well as various other fees.
23 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Question: Please provide the amount of revenue collected by the REC for FY 2009, FY 2010, FY 2011, FY 2012 and estimated for FY 2013. Please detail the source of this revenue by type of transaction; for example, license renewal or other regulatory fees.
Response: Estimated Estimated FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 Fees $11,671,519 $3,837,738 $11,327,213 $3,500,000 $10,800,000 Fines $ 235,685 $ 367,499 $ 165,285 $ 200,000 $ 200,000
10. Section 13 of P.L.1995, c.156 (C.17:1C-31) provides that each insurer is liable for a maximum total assessment as follows: “the total amount assessable to companies in any fiscal year for all special purpose assessments made pursuant to applicable law as of the effective date of this act, including the special purpose apportionment established by this act, shall not exceed 0.20 percent of the combined net written premiums received, as defined in subsection b. of section 2 of this act, by all companies for the previous year.” P.L.2010, c.21 increased the allowable percentage from 0.20 percent to 0.25 percent. In response to OLS discussion points during the FY 2012 budget process, the department indicated that total net written premiums for FY 2010 were $41.4 billion.
Question: a. What are the combined net written premiums for all insurers for FY 2011 and estimated for FY 2012?
Response: Net written premiums in FY 2011 upon which the Special Purpose Apportionment Assessment is based were approximately $41.5 billion. Premiums appear to have increased slightly from the past year, so the Department expects the FY 2012 net written premiums to be over $42 billion. b. What was the total amount assessed to, and total amount collected from, companies in FY 2011? Is there any concern by the department that this number might exceed the “cap” in the near future?
Response: The total amount assessed to companies in FY 2011 is $58.9 million. This includes the Fraud Assessment ($25 million) and the Special Purpose Assessment ($33.9 million). There is no concern that this number might exceed the cap in the near future.
11. The department is responsible for investigating, in coordination with the Office of the Insurance Fraud Prosecutor (OIFP) in the Department of Law and Public Safety, fraud committed by licensees. In certain instances these investigations result in consumer recoveries and fines imposed on the industries the department regulates. In response to FY 2012 OLS Discussion Points, the department replied that it had made the following recoveries on behalf of consumers: $8.3 million in FY 2011 (as of 3/2011); $11.35 million in FY 2010; approximately $52.4 million in FY 2009; and, $22.2 million in FY 2008.
24 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
In its response, the department also provided a broad summary of the types of fines it collects from the different industries. Insurance companies are typically fined for improper claim denials or underpayments, use of unapproved policy forms and/or rates, transacting business without a license and failing to file required reports. Insurance producers are generally fined for misappropriation of premiums, failure to secure coverage, and forgery. Licensed financial entities and State chartered credit unions are usually fined as a result of examinations, consumer complaint handling and enforcement actions. The department stated that it had collected the following fines from the Banking, Insurance and Real Estate industries: $2.6 million in FY 2011 (as of 3/2011); $1.1 million in FY 2010; $17.7 million in FY 2009; and, $1.5 million in FY 2008.
Question: a. Please provide an inventory of all recoveries for consumers collected by the department for FY 2009, FY 2010, FY 2011 and thus far in FY 2012. Please detail this information by division.
Response: Consumer Recoveries FY 2009 FY 2010 FY 2011 FY 2012 (as of 2/29/12) Banking $ 2,755,567 $1,880,709 $ 2,202,234 $ 681,160 Insurance $49,619,125 $9,360,457 $15,274,287 $28,756,145 Real Estate $ 40,650 $ 104,906 $ 28,859 $ 0
b. Please provide a detailed inventory of the fines levied and fines collected by the department for FY 2009, FY 2010, FY 2011 and thus far in FY 2012. Please detail this information by division and by cause by industry. Please provide the collection rate for fines levied. Based on this information, does the department conclude that there are any significant increases in industry behavior punishable by fines that warrant attention by the Legislature.
Response: The Department typically fines insurance companies for improper claim denials or underpayments, use of unapproved policy forms and/or rates, transacting business without a license and failing to file required reports. The Department generally fines insurance producers for misappropriation of premium, failure to secure coverage and forgery. The Department fines state licensed financial entities and state chartered credit unions as a result of: 1) examinations, 2) consumer complaint handling, and 3) enforcement actions.
Fines Levied* FY 2009 FY 2010 FY 2011 FY 2012 (as of 2/29/12) Banking $ 711,657 $494,901 $ 178,867 $ 580,682 Insurance $17,314,850 $402,650 $3,003,807 $2,033,138 Real Estate $ 206,052 $350,144 $ 189,709 $ 158,059
*The Department is required to report fines as they are collected. As a result, fines collected within one fiscal year regularly reflect fines levied in prior fiscal years. A comparison between 25 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
the total amount of fines levied in each division from FY09 until FY12 (2/29/12) and the total amount of fines collected in each division for the same period will more accurately represent the rate of collection.
Fines Collected FY 2009 FY 2010 FY 2011 FY 2012 (as of 2/29/12) Banking $ 341,254 $442,112 $ 477,001 $759,180 Insurance** $17,343,771 $372,014 $3,210,662 $544,690 Real Estate $ 233,340 $282,909 $ 165,235 $142,583
**Gross collection includes up to $1 million reimbursed for administrative costs of the Health Information Technology program.
Total Fines FY 2009 to FY 2012 (as of 2/29/12) Total Fines Total Fines Rate of Levied Collected Collection Banking $ 1,966,107 $ 1,989,547 101% Insurance $22,754,445 $ 21,471,137 94% Real Estate $ 903,964 $ 824,067 91%
12. The New Jersey Surplus Lines Insurance Guaranty Fund, P.L.1984, c.101(C.17:22-6.70 et seq.) (the fund), administers the claims of insolvent surplus lines insurers that provided medical malpractice and homeowners coverage as eligible non-admitted insurers in New Jersey. All surplus lines companies in New Jersey are required to be members of the fund and to contribute funds for its operation.
Since 1984, a surcharge, in an amount determined by the commissioner, is collected on any surplus lines coverage policy issued in New Jersey. The surcharge is collected by the surplus lines agent and forwarded to the fund on a quarterly basis. The amount may be adjusted annually to meet projected expenses of the fund, but it may not exceed 4 percent of the policy premium pursuant to P.L.1984, c.101(C.17:22-6.75).
In response to FY 2012 OLS Discussion Points, the department provided a schedule of balances and disbursements for the fund for fiscal years 2000 through 2010 (estimated). Excluding the two years in which transfers were made from the fund to the General Fund as State revenue, FY 2010 had substantially more disbursements than any previous year recorded, $6.2 million.
Question: a. Please provide an update on the status of the New Jersey Surplus Lines Insurance Guaranty Fund, including: balances and disbursements made from the fund in the past 10 years; and estimates for FY 2012 and FY 2013.
26 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Response: The balances and disbursements for the past 10 years and estimates for calendar years 2012 and 2013 are listed below:
New Jersey Surplus Lines Insurance Guaranty Fund Schedule of Balances and Disbursements For Years End 2002 thru 2013
Total Year End Year Disbursements Fund Balance
2002 $47,682,595 $38,339,118 2003 $ 4,298,165 $35,614,234 2004 $ 3,117,750 $37,783,977 2005 $ 916,429 $40,514,728 2006 $ 768,630 $42,673,743 2007 $ 125,549 $45,630,566 2008 $ 113,852 $48,849,080 2009 $60,094,052 $13,317,585 2010 $ 5,588,444 $10,484,881 2011 $ 496,275 $10,107,767 2012 (est.) $ 245,000 $ 9,942,200
2013 (est.) $ 235,000 $ 9,779,200
b. Please explain why there was a substantial increase in disbursements in FY 2010.
Response: There was a large increase in 2010 disbursements due to a liquidator requested reclassification of claims paid by the New Jersey Property-Liability Insurance Guaranty Association to the Surplus Lines Insurance Guaranty Fund.
c. Please provide the surcharge assessed in 2010 and 2011, as a percentage of the premium.
Response: No surcharge was assessed in 2010 or 2011.
13. P.L.2011, c. 119 revised the method for the regulation and collection of surplus lines insurance premium taxes. These revisions brought “the surplus lines law,” P.L.1960, c.32 (C.17:22-6.40 et seq.), into compliance with the federal “Nonadmitted and Reinsurance Reform Act of 2010” (NRRA), which was passed by Congress as part of the “Dodd-Frank Wall Street Reform and Consumer Protection Act.” Prior to the enactment of NRRA, states shared surplus lines premium tax revenue based on the location of the insured’s various risks. Under NRRA, this ability to share surplus lines premium tax revenue was suspended in July 2011 until such time as New Jersey enters into a multi-state compact or agreement with one or more other states.
27 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
NRRA provides that if a State does not join such an agreement, it may collect 100 percent of the taxes due from insureds located in its state, otherwise known as “home-state” insureds. This includes the continued ability to collect all premium taxes owed by “home-state” insureds for their risks located in other states. However, as established under NRRA, a state that does not participate in a compact or agreement is precluded from collecting surplus lines premium taxes it currently receives attributable to risks situated in its state that belong to the home-state insureds of other jurisdictions.
P.L. 2011, c. 119 authorized the Commissioner of Banking and Insurance to enter into compacts or agreements with other states with respect to the collection of surplus lines premium taxes in order to maximize the tax revenue rightfully due and owing the State. As of July 2011, in the absence of an interstate compact regarding future surplus lines tax collections, all insurers for whom New Jersey qualifies as their “home state” are assessed the 5 percent surplus lines premium tax on all surplus lines insurance premiums, even if the premiums are on risks located out of the State.
At the time of enactment, it was unclear as to what effect this law would have on revenue collected by the State from surplus lines insurance premiums. According to the Department of Banking and Insurance, the State collected $42 million in revenue from the surplus lines premium tax in 2010 and approximately 80 percent of this revenue was from “home state” insureds. The remaining 20 percent of revenue was collected from insureds for whom there was uncertainty as to their “home state.” The department estimated that there may be increased revenue due to capturing current out of State risks from “home state” insureds and due to increased clarity of the standardized procedures for the market participants.
Question: a. What is the current status of the State’s participation in an agreement or compact with other states to collect surplus lines tax? Which states are part of any negotiations with the department? What is the anticipated timeline for the State’s future participation in an agreement or compact with other states to collect surplus lines tax?
Response: The Department is currently examining the effect of participating in an agreement or compact. Currently, the Department is not in direct negotiations with other states. The Department has been an interested party in monitoring the development of SLIMPACT and NIMA which are multi-state agreements or compacts. The Department is currently studying the proposal to determine which will provide the most revenue and marketplace efficiency for New Jersey.
b. Please provide the rate of surplus lines tax assessed in the states immediately surrounding New Jersey, including: Pennsylvania, Maryland, Delaware, New York and Connecticut.
28 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Response: The surplus lines tax rates for the surrounding states are:
State Percent Pennsylvania 3 Maryland 3 Delaware 2 New York 3.6 Connecticut 4
c. Please report the revenue collected from the surplus lines tax in 2011. What percentage of that revenue was from policies located in State and what percentage was from policies located out of state but whose parent company identifies New Jersey as its “home state”?
Response: The Department estimates that in FY 2011 the surplus lines tax generated $48 million. The Department estimates that 90 percent ($43.2 million) of the revenue was collected from insureds who’s “home state” is New Jersey; and the remaining 10 percent ($4.8 million) of the revenue was collected from insureds who’s “home state” is not New Jersey.
14. A 2007 Supreme Court decision and federal legislation enacted in 2008 have affected the ability of the department to regulate certain financial entities and have impacted the licensing and regulation of mortgage lenders, brokers and loan originators (ie: loan officers) in the State and the nation.
In the decision of Watters v. Wachovia Bank, N.A. the United States Supreme Court held that states are preempted from using their inspection and regulatory powers with respect to national banks and their operating subsidiaries. This decision, and prior opinion letters issued by federal regulatory agencies, reinforced and expanded the notion that any financial institution that is chartered on the federal level is exempt from state regulation. The department, in its response to the OLS questions during the review of the FY 2010 budget, indicated that the decision in Watters v. Wachovia Bank, N.A has resulted in a decrease in the number of State regulated businesses and individuals involved in mortgage lending.
Additionally, the federal “Housing and Economic Recovery Act of 2008” (Pub.L.110-289) was signed into law in July, 2008. Among other initiatives, this act included the “Secure and Fair Enforcement for Mortgage Licensing Act of 2008” (S.A.F.E. Act). The S.A.F.E. Act defines a loan originator as an individual who takes a residential mortgage loan application and offers or negotiates terms of a residential mortgage loan for compensation or gain. The act requires the states to participate in the Nationwide Mortgage Licensing System (NMLS), established by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. Each state’s system must include, at a minimum, requirements that meet the established national standards for licensing loan originators. These requirements include, among other things, minimum education requirements, ethics training, background checks, proof of financial responsibility, bonding requirements and the successful completion of a written exam. The State complied with these new federal standards by enacting the “New Jersey Residential Mortgage Lending Act,” (NJRMLA), sections 1 through 39 of P.L.2009, c.53 (C.17:11C-51 et seq.) 29 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
which updated the current regulatory scheme to conform to the requirements of the federal S.A.F.E. Act, and replaced the “New Jersey Licensed Lenders Act” (N.J.S.A.17:11C-1 et seq.) as the statutory framework for mortgage lenders.
New licenses pursuant to the NJRMLA began to be issued on July 31, 2010 in accordance with that act. As part of the transition to the new licensing regime, as of January 4, 2010, all current licensed and registered businesses and individuals were required to register with the federal NMLS. Additionally, all mortgage licenses and registrations previously issued under the New Jersey Licensed Lenders Act expired on July 31, 2010. Applicants may still choose to register with the State and pay an application fee to the State for a new license or license renewal to be issued under the NJRMLA. However, certain individuals and businesses that are licensed in the nationwide system are not also required to be licensed by the State. It is believed that this change may have negatively impacted the number of licenses issued by the State, resulting in a corresponding decrease in fees collected from these licensees.
The department, in its response to the OLS questions during the review of the FY 2012 budget, revealed that there are 1,453 financial institutions participating in the mortgage lending business licensed in the State in FY 2011 (as of April, 2011), pursuant to the NJRMLA as compared to 1,599 financial institutions licensed in the State in FY 2009, pursuant to the New Jersey Licensed Lenders Act (NJLLA). Furthermore, the department reported total revenue collected in FY 2010, under the NJLLA, NJRMLA and the NMLS was $3.84 million as compared to $1.8 million in FY 2009, collected pursuant to the NJLLA. There appears to be an inconsistency between the decrease in the number of institutions and an increase in the revenue collected.
Question: a. Please provide the number of individuals who have been regulated, registered, and licensed by the State for each year from FY 2006 through FY 2010 as participating in the mortgage lending business under the former “New Jersey Licensed Lenders Act.”
Response:
As of 12/31 of the Fiscal Year FY 2006 FY 2007 FY 2008 FY 2009 FY 2010
Licensed Lender Individual Secondary Mortgage Loan 571 674 632 557 380 Mortgage Banker 549 593 532 499 380 Correspondent Mortgage Banker 333 387 363 315 230 Mortgage Broker 302 335 373 370 240 Mortgage Solicitor 29,092 40,037 29,926 33,102 16,593
b. Please provide the number of individuals who have been regulated, registered, and licensed by the State for FY 2011 and thus far in FY 2012 as participating in the mortgage lending business pursuant to the “New Jersey Residential Mortgage Lending Act.”
30 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Response:
As of 6/30/2011 FY 2011
Qualified Individual Residential Mortgage Lenders 317 Qualified Individual Correspondent Residential Mortgage Lenders 168 Qualified Individual Residential Mortgage Brokers 201 Mortgage Loan Originators 6,085
As of 3/27/2012 FY 2012
Qualified Individual Residential Mortgage Lenders 325 Qualified Individual Correspondent Residential Mortgage Lenders 161 Qualified Individual Residential Mortgage Brokers 204 Mortgage Loan Originators 6,488
c. Please detail the number of financial institutions, participating in the mortgage lending business, that were licensed by the State for each year from FY 2007 through FY 2010 under the former “New Jersey Licensed Lenders Act.”
Response:
As of 12/31 of the Fiscal Year FY 2007 FY 2008 FY 2009 FY 2010 Corporations Secondary Mortgage Loan 628 603 511 364 Mortgage Banker 469 420 370 282 Correspondent Mortgage Banker 331 312 268 200 Mortgage Broker 323 356 353 258
Sole Proprietorships Secondary Mortgage Loan 21 21 18 15 Mortgage Banker 36 33 27 20 Correspondent Mortgage Banker 18 18 17 14 Mortgage Broker 28 27 19 11
Partnerships Secondary Mortgage Loan 7 6 5 5 Mortgage Banker 9 7 6 6 Correspondent Mortgage Banker 1 0 0 0 Mortgage Broker 6 6 5 5
d. Please detail the number of financial institutions, participating in the mortgage lending business, that are licensed by the State for FY 2010, FY 2011 and thus far in FY 2012 pursuant to the “New Jersey Residential Mortgage Lending Act.”
31 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Response: FY 2012 FY 2010 FY 2011 as of 3/27/2012 Companies (includes Corps, LLCs, Part, & Sole Props) Residential Mortgage Lenders 30 252 293 Correspondent Residential Mortgage Lenders 22 125 144 Residential Mortgage Brokers 18 158 187
Branches Residential Mortgage Lenders 14 599 611 Correspondent Residential Mortgage Lenders 0 120 105 Residential Mortgage Brokers 23 93 90
e. Please indicate how much the department collected from fees established under the "New Jersey Licensed Lenders Act," since its inception, reported by fiscal year.
Response: Revenue collected since inception of the Licensed Act is as follows:
1997 $3,295,889 1998 $4,177,503 1999 $4,755,653 2000 $3,988,448 2001 $10,879,833 2002 $4,815,811 2003 $5,920,063 2004 $11,357,175 2005 $11,430,747 2006 $10,111,044 2007 $3,999,765 2008 $2,246,429 2009 $1,861,785 2010 $2,622,300 2011 $1,503,173
f. Please indicate how much revenue the department has collected from each type of fee authorized under the “New Jersey Residential Mortgage Lending Act” in FY 2010, FY 2011 and anticipates collecting in FY 2012.
Response: FY 2010 FY 2011 FY 2012 as of 2/29/12 Licensed Lender Add Authority $ 33,900 $ 600 $ 2,100 Licensed Lender Branch $ 87,500 $27,200 $11,200 Licensed Lender Company $ 45,500 $ 7,700 $ 4,200 Licensed Individual $ 60,200 $ 9,100 $ 8,400 Mortgage Solicitor $ 70,000 $ 0 $ 0 Electronic Debits (All License types) $133,900 $ 0 $ 0
32 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
In FY 2007 the annual assessment was instituted and replaced most of the fees that Licensed Lenders paid.
g. Please indicate how much revenue has been collected from New Jersey licensees by the Nationwide Mortgage Licensing System (NMLS) in FY 2010, FY 2011 and how much is anticipated in FY 2012.
Response: FY 2012 FY 2010 FY 2011 (as of 2/29/12) National Mortgage Licensing System $1,839,950 $1,400,000 $638,985
The National Mortgage Licensing System (NMLS) will collect the revenue.
h. Please comment on the total revenue collected under the NJRMLA, including that revenue from the NMLS as compared to total revenue collected under the New Jersey Licensed Lenders Act.
Response: Total revenue collected under the New Jersey Residential Mortgage Lending Act (NJMLA), including that revenue from the National Mortgage Licensing System (NMLS) is as follows: FY 2010 FY 2011 FY 2012 (as of 2/29/12) $2,067,050 $1,444,600 $667,985
Beginning on January 4, 2010, New Jersey began its transition to mortgage licensure under the New Jersey Residential Mortgage Lending Act and licensure through the Nationwide Mortgage Licensing System (NMLS). All New Jersey mortgage licensees needed to complete that transition process and all new applicants for mortgage licensure needed to file through the NMLS. Increased revenue in FY 2010 can be attributed to fees charged to transitioning companies of $600 each, branches of $500 each and new fees for licensure of qualified individuals of $500 and for Mortgage Loan Originators of $150. New license applicants for company licensure paid $1,200 each while new branch applicants paid $1,000 each. As a result, although overall numbers of mortgage licensees were reduced, the one-time transition fees coupled with higher fees for new applicants created higher fee volume.
i. Please comment on the inconsistency between the decrease in the number of institutions and an increase in the revenue collected.
Response: See response to question 14h.
33 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
15. In addition to licensing and regulating individuals employed in the mortgage industry, as referenced in the above question, the department also licenses and regulates several other professional groups, including: debt adjusters (P.L.1979, c.16 (C.17:16G-1 et seq.)); home repair contractors (P.L.1968, c.224 (C.17:16C-95 et seq.)); insurance producers (P.L.2001, c. 210 (C.17:22A-26 et seq.)); pawnbrokers (R.S.45:22-1 et seq.); and public adjusters (P.L.1993, c.66 (C.17:22B-1 et seq.). Each of these individuals pays a fee to be licensed, and in some cases, to renew that license. These fees are intended to fund the administrative costs of providing oversight to these professions.
Question: a. Please provide the current initial fee and the renewal fee for each of these professions.
Response:
License Type Initial Application Fee Renewal Fee
Motor Vehicle Installment Seller $300 $0 Home Repair Contractor $300 $0 Home Financing Agency $400 $0 Pawnbroker $500 $0 Check Casher $700 $0 Insurance Premium Finance Company 500 $0 Debt Adjuster $300 $0 Foreign Money Transmitter $700 $0 Money Transmitter $700 $0 Sales Finance Company $700 $0 Consumer Lender $700 $0 Home Repair Salesperson (Individuals) $60 $0 High Cost Home Loan Credit Counseling $100 $0 Agency (Registration not license) Residential Mortgage Lender $1,200 $0 Correspondent Residential Mortgage Lender $1,200 $0 Residential Mortgage Broker $1,200 $0 Branches of each mortgage type $1,000 $0 Qualified Individual of each mortgage type $500 $0 Mortgage Loan Originator (Individuals) $150 $0
Insurance Producer $150* $150 Limited Lines Insurance Producer $ 75* $ 75 Public Adjuster $ 75** $ 75
*additional $20 for electronic filing or $40 for paper filing **additional $40 filing (paper only)
NOTE: Application fees for licensed lenders with mortgage banker or correspondent mortgage banker or mortgage broker and/or secondary mortgage lender under the former New Jersey Licensed Lenders Act had been reduced following the initiation of dedicated funding in FY 2007 34 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
to $700 for one authority and $1,000 for two authorities for companies, branch offices, and licensed individuals. Prior to dedicated funding, a license fee for a company, branch or individual with one authority was $1,400 and $2,800 for two authorities. Application fees for registration of mortgage solicitors were $100 each; the re-registration of a mortgage solicitor with a different employing mortgage entity required a new fee of $100. These registration fees did not decrease with dedicated funding.
Under the New Jersey Residential Mortgage Lending Act’s regulations, the application fee for companies was established at $1,200, branches at $1,000, qualified individuals at $500 and mortgage loan originators at $150.
Beginning on January 4, 2010, New Jersey began its transition to mortgage licensure under the New Jersey Residential Mortgage Lending Act and licensure through the NMLS. All of New Jersey mortgage licensees needed to complete that transition process and all new applicants for mortgage licensure needed to file through the NMLS. Increased revenue in FY 2010 can be attributed to fees charged to transitioning companies of $600 each, branches of $500 each and new fees for licensure of qualified individuals of $500 and for mortgage loan originators of $150. New license applicants for company licensure paid $1,200 each while new branch applicants paid $1,000 each. As a result, although overall numbers of mortgage licensees were reduced, the one-time transition fees coupled with higher fees for new applicants created higher fee volume.
b. Please provide the annual revenue collected from each of these fees for the previous five fiscal years.
Response: In addition to fees paid by individual insurance producers there are also termination and appointment fees paid by the company through NIPR (National Insurance Producers Registry) which are included with Insurance Producers.
FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Debt Adjusters $ 900 $ 600 $ 3,300 $ 3,300 $ 1,800 Home Repair Contractors $ 6,360 $ 10,200 $ 8,100 $ 11,400 $ 10,800 Insurance Producers $30,704,291 $35,011,985 $37,877,338 $37,656,645 $38,512,649 Pawnbrokers $ 1,000 $ 2,500 $ 2,500 $ 4,500 $ 1,500 Public Adjusters $ 118,360 $ 72,640 $ 88,560 $ 96,860 $ 152,340
35 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
c. Please provide the annual cost to administer these programs for the previous five fiscal years and the number of full time equivalent staff assigned to licensing and regulatory activities per year, per profession.
Response: FY 2007 FY 2008 FY 2009 FY 2010 FY 2011 Insurance Licensing $568,403 $598,319 $629,810 $718,247 $640,459 Full time Staff 10 10 10 11 9
All Insurance Licensing staff handle a variety of activities involved in the review and processing of initial and renewal paper and electronic filings for licensure, the maintenance of licensing records, and the handling of telephone calls, e-mail inquiries, and written correspondence that relate to the licensure of insurance producers and public adjusters.
All Banking Licensing staff handle a variety of activities involved in the review and processing of initial and renewal paper and electronic filings for licensure, the maintenance of licensing records, and the handling of telephone calls, e-mail inquiries, and written correspondence that relate to the licensure of debt adjusters, home repair contractors, pawnbrokers as well as motor vehicle installment sellers, check cashers, insurance premium finance companies, debt adjusters, money transmitters, foreign money transmitters, sales finance companies, consumer lenders, home repair salespersons, high cost home loan credit counseling agencies, residential mortgage lenders, correspondent residential mortgage lenders, residential mortgage brokers, qualified individuals for the three mortgage business categories, and mortgage loan originators.
16 a. In August 2011, Hurricane Irene made landfall in New Jersey as a Tropical Storm. Unprecedented flooding occurred in parts of New Jersey that had not traditionally experienced severe loss in storms. Hurricane Irene is the latest in a long list of extreme weather events in the United States over the past 20 years; for example, Hurricane Andrew in Florida, Hurricane Iniki in Hawaii, and Hurricane Katrina along the Gulf Coast. Industry experts, using catastrophic modeling, predict that the Northeast part of the country is statistically likely to endure a catastrophic weather event in the relatively near future. The combination of these weather events and the experts’ warnings, have led insurance companies to exercise increased caution in writing new policies in coastal areas and to apply stricter standards to the type and condition of homes they would insure. Some insurers define “coastal” as those 112 zip codes outlined in N.J.A.C. 11:2-42.9 and 11:2-42.10, also known as the “Windmap regulations,” while others consider the entire state of New Jersey to be “coastal.” This has reportedly resulted in reduced availability of affordable homeowners insurance in many areas of the State. In response to FY 2012 OLS Discussion Points, the department stated that there are approximately 100 companies writing homeowners insurance throughout the State. This represents a gradual increase in companies writing homeowners insurance in New Jersey over previous years. However, the department can not be certain as to which companies continue to write new policies because there is no “take all 36 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
comers” requirement in the line of homeowners insurance. Thus, while the number of insurers writing homeowners insurance has slightly increased over the past few years, there is no way for the department to be certain these companies are offering coverage in all areas of New Jersey.
Question: a. Please provide for the State as a whole, for the years 1998 through the latest year available, the total number of insurers offering homeowners insurance policies in the State. Please indicate, to the best of your ability, the number of these insurers who may write current policies but are not accepting new homeowners policies.
Response: See Attachment 2013 Budget Homeowners Market Share Information.
b. Please provide the latest “Windmap” reports available.
Response: The Windmap reports by individual companies are not public information and therefore we can not release this information.
16 b. In addition to a concern regarding the availability of homeowners insurance throughout the State, there is also a concern for more transparency in the composition of standard homeowners insurance policies. As discussed in last year’s Senate Budget and Appropriations hearing on the Department of Banking and Insurance’s budget, there is concern that consumers do not have access to fair, impartial, and complete information when purchasing homeowners insurance. Previously, the department published the Homeowners Insurance Price Comparison Guide (Guide) annually to meet the goal of educating the consumer. However, Bulletin No. 10-83, issued on December 21, 2010 by the department, eliminated the requirement for insurers to submit the premium survey on personal homeowners coverage for compilation by the department into the Guide.
Question: What were the department’s reasons for issuing Bulletin No. 10-83? Please update the Legislature on the department’s activities to educate consumers on homeowner insurance coverage. Has there been any observed increases in consumer complaints about homeowner’s insurance since Bulletin 10-83 took effect?
Response: On November 15, 2010 a Notice of Proposal to repeal N.J.A.C.11:4-29 in its entirety was published in the New Jersey Register. The comment period on this proposal expired on January 14, 2011. Since the repeal of N.J.A.C. 11:4-29 could not be adopted by January 31, 2011, the purpose of Bulletin 10-38 was to advise insurers that based upon the proposed repeal, they were not required to file the Homeowners Comparison Survey data for the year 2010 which would have been due January 31, 2011.
The Department is currently updating “Insuring Your Home” which is a consumer guide for homeowners, renters and condominium insurance. Additionally, the Department website provides consumers with insurer contact information in order to find a homeowners company that
37 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
will provide insurance for their home. The website also has basic information for consumers concerning “What to do if you have a loss” and information on “Can your policy be canceled?”
The Department does not track complaints that are a result of the issuance of a Bulletin. While there has been an increase in complaints, these are most likely the result of the wind, water or loss of power claims that resulted from the severe weather related storms in 2011. Based on information provided from the Consumer Protection section in 2009 the Department received 714 homeowner complaints, in 2010 there were 854 and in 2011 there were 1,103 complaints.
17. The Office for the Development, Implementation, and Deployment of Electronic Health Information Technology in New Jersey (Office for e-HIT) was established in the department pursuant to P.L.2007, c.330 (C.17:1D-1 et al). The Office for e-HIT, in collaboration with the New Jersey Health Information Technology Commission (HIT Commission), established in the Department of Health and Senior Services pursuant to Section 5 of P.L.2007, c.330 (C.26:1A-136), is responsible for developing, implementing and overseeing the operation of a Statewide health information technology plan.
There have also been press reports that the Governor’s proposed realigning of the Health Department will include a transfer of the Office for E-Hit to the Department of Health in FY 2013.
The Office for E-HIT and the HIT Commission received a federal grant award of $11.4 million in FY 2011 to fund four Health Information Exchanges located throughout the State. The exchanges will electronically link area providers with regional hospitals and ultimately be joined into a Statewide health information exchange that will provide electronic health records for all State residents. The federal funding began to be released in May, 2011 to the local partners.
Question: a. Please provide an update on the status of the Office for e-HIT’s activities and its collaboration with the e-HIT Commission. Please provide a timeline for the movement of the Office for e-HIT from DOBI to the Department of Health.
Response: The Director of the Office for e-HIT Development represents the Commissioner and/or the Department on the following committees and boards:
- HIT Alignment Team, a weekly meeting of all New Jersey state departments and entities concerned with the development and implementation of HIT in the State, in order to align and coordinate all governmental HIT pursuits; - Ex officio member of the Board of Trustees of NJ-HITEC, New Jersey’s Regional Extension Center, which is responsible for educating New Jersey’s physicians and helping them select and implement electronic health records (EHRs) in their practices;
38 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
- Ex officio member of the NJ HIT Commission, a monthly meeting of a wide range of public and private stakeholders with interests in HIT development and implementation. The Director of the Office for e-HIT collaborated with the Chair of the HIT Commission and the New Jersey HIT Coordinator in the drafting and editing of the 2011 Joint Interim Report, which was submitted to the Governor and Legislature in August 2011; - NJ HIT Steering Committee, a meeting of high-level representatives of the three funded regional Health Information Organizations (HIOs), the New Jersey HIT Coordinator, and representatives of the relevant state departments and agencies, working to establish common policies and procedures to ensure that the activities of the Federally-funded HIOs result in interoperable health data exchanges. In April 2012, the HIT Steering Committee will formally adopt a number of documents embodying the detailed specifications, policies, and procedures standardizing the exchange of data through secure, authorized, and interoperable networks; - Co-chair of the ICD-10/5010 Implementation Task Force; - Personal Injury Protection Medical Benefits e-Billing Working Group, working with representatives of the PIP and Workers’ Compensation lines of business to facilitate the transition from paper claims and billing procedures to electronic claims and billing; - Steering Committee Member of NJ SHARE, a meeting of New Jersey state departments and entities seeking to build a State Government Health Information Organization node. The purpose of the State HIO is to facilitate the exchange of diverse state data sources and databases through an efficient, standardized infrastructure that minimizes redundant and costly capabilities; - Working in close collaboration, the staff of the Office of Legislative & Regulatory Affairs and the Director of the Office for e-HIT draft regulations tying payments to medical testing laboratories to their use of electronic claims and the reporting of test results electronically. These new laboratory regulations will be published in the New Jersey Register on April 16, 2012, opening a public comment period that will close on June 15, 2012.
There are two entities being confused in the second part of this question – DOBI’s Office for e- HIT, and the New Jersey HIT Coordinator’s Office. The New Jersey HIT Coordinator, it is that office that has been proposed to be folded into the Department of Health. DOBI’s Office for e- HIT is not being relocated.
39 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
b. Does the department foresee any challenges with moving the Office for e-HIT from DOBI to the Department of Health. Please comment on these challenges.
Response: As noted above, there is no proposal to move the Office for e-HIT from DOBI.
c. Please provide the budget for the Office for e-HIT for FY 2012 and anticipated for FY 2013 and the funding sources for that budget.
Response: The Office for e-HIT drew down $1 million of the Department’s fines and assessments levied on the industry in FY 2012. This money was transferred to the Office of Management and Budget (OMB) from the New Jersey Department of Human Services, which acted as administrator of all funding overseen by the New Jersey Health Information Technology Coordinator. OMB then transferred that $1 million to the New Jersey Department of Health and Senior Services to fund the activities of the New Jersey HIT Commission. Aside from this transaction, the Office for e-HIT does not oversee a budget. For FY 2013 the same mechanism will be used to provide another $1 million to fund the activities of the New Jersey HIT Commission for the next fiscal year, provided the fines and assessments collected by the Department permit it.
The Department received no funds from the Federal grant program in FY 2012. The Department will also receive no funds from this Federal program in FY 2013.
d. Please provide an update on the federal grant award and the implementation of the Health Information Exchanges and the Statewide health information technology plan.
Response: In FY 2012, New Jersey received unconditional approval of its Statewide HIT Plan, releasing the full $11.4 million to support the development of the regional HIOs. On May 4, 2011 the first disbursement of grant awards was announced. Since then, Federal funds have been disbursed to three of the four HIOs, with Health-e-cITI receiving roughly 57 percent of its total budgeted amount, Jersey Health Connect receiving approximately 27 percent of its budgeted amount, and the Camden HIO receiving about 8 percent of its budgeted funding. These disbursements have been used for a number of implementation steps, including the hiring of dedicated HIT staff and the procurement of hardware. An additional $500,000 of the Federal award was used to support the activities of the New Jersey HIT Coordinator’s office.
40 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
The coalition of hospitals that formed the HIO in South Jersey did not materialize in FY 2012, so none of those funds have been used to build an HIO in South Jersey. The New Jersey HIT Coordinator will issue an RFP for a new HIO in South Jersey using the funding that was allocated for the original HIO in that region.
The New Jersey Health Information Network (NJHIN) has made significant strides from conceptualization toward implementation in FY 2012. On April 2, 2012, the HIT Steering Committee formally endorsed the policies, procedures, and specifications that will govern the exchange of data between the regional HIOs, the New Jersey State HIO (as described in the NJ SHARE section above), and the NJHIN. Implementation of the NJHIN financial sustainability plan is also moving forward, with meetings between the New Jersey HIT Coordinator, senior DOBI officials, and the healthcare payers being scheduled.
18. The FY 2010 Appropriations Act included two language provisions authorizing the transfer of funds from the Workers Compensation Security Fund (WCSF). A general language provision authorized the transfer of $20 million from the WCSF to the General Fund as State revenue in FY 2010 (FY 2010 Appropriations Handbook page E-7). Additionally, a language provision in Interdepartmental Accounts authorized an appropriation of $7 million from the WCSF to the State Workers’ Compensation Self Insurance Fund to offset the cost of the State’s workers’ compensation costs (FY 2010 Appropriations Handbook page B-213).
The WCSF (R.S.34:15-105) is a depository for monies received from assessments levied against mutual and stock insurance carriers writing workers’ compensation insurance in the State. The revenue in the fund is disbursed to persons entitled to receive workers’ compensation from a carrier when that mutual or stock carrier is determined to be insolvent.
In January 2010, P.L.2009, c. 327 (C.34:15-105.1 et al.) was enacted, transferring responsibility for the management, administration and claims activities of the WCSF from the Department of Banking and Insurance to the New Jersey Property-Liability Insurance Guaranty Association (PLIGA).
PLIGA is a “private, nonprofit, unincorporated, legal entity” given certain statutory obligations to act as a safety net for policyholders and claimants in the property and casualty insurance marketplace pursuant to N.J.S.A.30A-1 et seq. As an independent entity, PLIGA is not included in the State budget, and the WCSF is no longer a State-administered fund.
In response to FY 2012 OLS Discussion Points, the department estimated that the WCSF would receive $15.4 million in assessments and would have total expenditures of $17.4 million in FY 2012, with an ending balance in the WCSF of $52.5 million. Additionally, a dividend of $21.03 million was reported in FY 2011, but there was no information on a dividend anticipated for FY 2012.
41 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Question: Please provide an accounting of all resources and expenditures for the WCSF for FY 2011, FY 2012 and estimated for FY 2013, including, with respect to revenues: services and assessments and investment earnings; and with respect to expenditures: economic planning, development and security expenses and transfers to other funds (both State and PLIGA held). Please include the balance of the fund, both at the beginning of each fiscal year and projected for the end of each fiscal year. Please provide details for the dividend in FY 2011, FY 2012 and FY 2013.
Response: New Jersey Workers' Compensation Security Fund Schedule of Balances, Receipts and Disbursements For Fiscal Years 2011, 2012 and 2013 estimated
FY 2011 FY 2012 (est.)
Beginning Balance $33,088,400 $70,864,000
Receipts Assessments $16,999,100 $15,343,700 Liquidation Dividend $35,810,400 $12,851,500 Interest/Other Income $ 2,408,600 $ 525,100
Disbursements $17,442,500 $17,340,500
Ending Balance $70,864,000 $82,243,800
Outstanding Loss Reserves as of 3/31/11 = $105,509,859 Outstanding Loss Reserves as of 3/26/12 = $129,697,406
19a. Pursuant to P.L.2010, c.32 the former Division of Insurance Fraud Prevention (DIFP), was renamed and reconstituted as the Bureau of Fraud Deterrence. The former division was originally established under the Department of Banking and Insurance, but its functions were transferred to the Department of Law and Public Safety pursuant to Reorganization Plan No. 007-1998. The Bureau is now located in DOBI and consists of all civil investigators formerly assigned to the Office of the Insurance Fraud Prosecutor (OIFP) in the Department of Law and Public Safety, (other than those assigned to the Case Screening, Litigation and Analytical Support Unit), and those additional administrative and clerical support personnel transferred from the OIFP to the Bureau within DOBI. The OIFP was established in the Department of Law and Public Safety, pursuant to section 32 of the “Automobile Insurance Cost Reduction Act“ (AICRA), P.L.1998, c.21 (C.17:33A- 16). P.L.2010, c.32 provided that the OIFP retain responsibility for all criminal prosecutions and investigations of fraud, including the County Prosecutors’ Reimbursement Program.
The functions of the Bureau and the OIFP are funded through the Insurance Fraud Prevention assessment (page C-4, FY 2013 Budget Recommendation). The Insurance Fraud
42 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Prevention assessment is an assessment on certain insurers for reimbursement of all costs related to the activities and responsibilities of the OIFP and the Bureau. Pursuant to section 8 of P.L.1983 c. 320 (C.17:33A-8), as amended by P.L.2010, c.32, the assessment is paid by the insurance companies to the Department of Banking and Insurance prior to December 31 of each calendar year for expenses accrued in the previous fiscal year. The funds are then paid into the General Fund to reimburse the State for these expenses.
According to the department, “[t]his separation of civil and criminal represents a common- sense reorganization that will strengthen the State’s ability to deter fraud.” The new Bureau is “viewed as a key part of the department’s planned approach to rein in auto insurance PIP costs. The Bureau will make a special effort to investigate suspicious and phony personal injury protection claims as well as questionable claims of medical services not actually provided.”
Multiple sources reported in November 2011 that the Bureau had seen an increase in: consent orders issued (seven percent); civil penalties (13 percent); and executed consent orders (five percent) from November 1, 2010 through October 31, 2011 as compared to the previous year’s statistics from the OIFP.
Question: Please update the Legislature on the activities of the Bureau of Fraud Deterrence, including the number of cases being investigated and the types of fraud discovered. Please analyze the Bureau’s work in this regard compared to the previous work conducted by the OIFP.
Response: The Bureau of Fraud Deterrence has been fully operational since November 1, 2010. A comparison of the Bureau's first 15 months (November 1, 2010 - January 31, 2012) operational results to that of the Office of Insurance Fraud Prosecutors, Civil Division, final operational 15 months (July 1, 2009 - September 30, 2010), is as follows:
OIFP (7/1/09 - 9/30/10) BFD (11/1/10 - 1/31/12) Referrals Received: 5,487 Referrals Received: 4,304 Civil Fines Imposed: 514 Civil Fines Imposed: 580 for a total of $5,336,600 for a total of $7,184,000
The Bureau has actively conducted an array of insurance fraud investigations for all types of personal and commercial insurance written in New Jersey. Following a consistent trend, the most significant number of referrals received in the Bureau’s first full year of operation involved fraud in applications for auto insurance, PIP fraud by health care providers, fraud by health care providers in connection with health insurance claims, fraud alleged in life insurance applications and disability fraud. As can be seen by the above statistics, while the number of referrals reporting insurance fraud decreased, the Bureau was able to increase the number of civil fines imposed.
The re-establishment of the anti-fraud civil investigative function in the Department of Banking 43 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
and Insurance has placed Bureau investigators within the same organization that regulates the insurance industry. Bureau personnel have direct access to investigators in insurance licensing as well as regulatory officers. This has enhanced joint investigations involving licensees as well as access to subject matter experts.
Since becoming operational, Bureau leadership met with eighteen of the twenty-one county prosecutors. As a result of this initiative, Bureau investigators have worked cooperatively with prosecutor’s offices throughout the state, adding their expertise to complex insurance fraud investigations. These joint efforts have resulted in the issuance of civil consent orders in a significant number of cases.
Further, during this time, Bureau investigators have established close working relationships with insurance company Special Investigations Units. This level of cooperation has resulted in a greater exchange of time sensitive and critical information on cases of mutual interest. In October 2011, Bureau leadership was presented with an award from the New Jersey Special Investigator’s Association for its contribution in the fight against insurance fraud.
The Bureau of Fraud Deterrence has increased the role of the Department of Law and Public Safety, Division of Law in bringing civil prosecutions in cases where a settlement cannot be reached. Additionally, the Bureau, along with the Division of Law has been more aggressive in monitoring, pursuing consent orders and intervening in carrier litigation where allegations of fraud are brought under the Insurance Fraud Prevention Act.
The Bureau and the Office of Insurance Fraud Prosecutor (OIFP) in the Department of Law and Public Safety have worked jointly in a variety of areas since the transition. The Bureau and OIFP have collaborated on the receipt and investigation of referrals. Certain Bureau personnel have been sworn in as special state investigators and have worked side by side with OIFP criminal. The two agencies have been working on a state of the art case management system designed to streamline the referral process and allow communication between investigators where same is permitted by law.
The Bureau has been specifically charged by the Commissioner with taking actions to detect and deter PIP fraud. To that end, the Bureau created the proactive PIP Fraud Investigations Unit in August of 2011. The Unit is staffed with 89 experienced investigators. The Unit concentrates on 44 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
all aspects of PIP fraud including organized rings and repeat offenders. It collects information and intelligence data to identify involved parties including attorneys, providers and patients/claimants and proactively shares relevant information with OIFP, county prosecutors, local, state and federal law enforcement agencies as well as insurance company special investigations units. In addition, Bureau leadership has given multiple presentations to interested parties and other stakeholders on the problem of PIP fraud and methods of detection and prevention.
19b. The County Prosecutors’ Reimbursement Program is administered by the OIFP, but funded through the Insurance Fraud Prevention assessment collected by DOBI. The program was established pursuant to section 44 of P.L.1998, c.21 (C.17:33A-28) to provide reimbursement to the County Prosecutors’ offices for their activities undertaken in connection with investigating and prosecuting insurance fraud.
During the FY 2011 budget process, changes were proposed to the administration of insurance fraud prosecution services, including the establishment of the Bureau of Fraud Deterrence and a proposal eliminating grants currently made to counties for fraud prevention that go beyond the purpose of OIFP. Funding was reduced to the counties in FY 2010 and FY 2011, only to be reinstated in FY 2012. In response to discussion point questions in the FY 2012 budget process, the department stated that the funding to the counties was shifted from a calendar year basis to a fiscal year basis to provide “a half-year one-time FY 2011 savings” of approximately $1.7 million.
Question: a. Please provide the budget for the County Prosecutors’ Reimbursement Program for each fiscal year since its inception and its estimated cost for FY 2013.
Response: (Question answered by the Department of Law and Public Safety) A budget summary from the inception of the program (funding cycle 1 (June 16, 1999-June 15, 2001) through funding cycle 12 (January 1, 2012-December 31, 2012) is provided in Attachment 19b - A. The estimated cost for FY 2013 is $3.49 million.
b. Is the County Prosecutors’ Reimbursement Program now a retroactively funded reimbursement program or does it continue to be an advanced funded program? Please detail the process for the funding for each of the County Prosecutors’ offices.
Response: (Question answered by the Department of Law and Public Safety) The County Prosecutor Insurance Fraud Reimbursement Program operates as a reimbursement program. This program was established pursuant to section 44 of P.L.1998, c.21 (C. 17:33A-28) to provide reimbursement to the County Prosecutors’ Offices for their activities undertaken in connection with investigating and prosecuting of insurance fraud. 45 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Since its inception, this program has always been a retroactively funded reimbursement program. That is, the County Prosecutors’ Offices expend their resources investigating and prosecuting insurance fraud cases. They then submit requests to the Office of Insurance Fraud Prosecutor (“OIFP”) for reimbursement of those expenses. Provided the requests are approved, the counties receive reimbursement after the fact. This program does not and has never reimbursed funds for non-insurance fraud related activities.
Operation of the Reimbursement Program
Funding cycles operate on a calendar year and County Prosecutors may apply to OIFP for up to $250,000 per annum to cover some of the costs incurred in the investigation and prosecution of insurance fraud. OIFP provides the counties with written guidelines as to expense categories and types of cases that are reimbursable under the program. Each year, counties submit applications to the program, which detail the types of cases the office intends to pursue, and the anticipated expenses. The program does not cover all costs associated with the operation of a county insurance fraud program; in Cycle 12, funding was limited to salaries/wages and fringe benefits. OIFP allocates funds to a county based upon the justification for expenditures provided in each application. Counties expend their resources conducting these activities and are reimbursed on a quarterly basis after receipt of all required programmatic and financial reports for that quarter. Dedicated county staff submits signed bi-weekly time and attendance certifications indicating the amount of time spent on insurance fraud matters. Counties receiving full-time equivalent (FTE or hourly) reimbursement, submit signed certifications indicating the employee’s name, position, case information, amount of time spent on each case, and the hourly salary and fringe benefits rate. OIFP verifies the quarterly expenses by reconciling the county quarterly expense report with the approved program budget and then processes the county’s request for reimbursement.
Recent Growth of Program
The funding and verification processes are identical for each county. Recent changes to the program include the standardization of all reporting requirements and increased participation from 15 to 18 counties for Cycle 12. The successful recruitment of Middlesex, Monmouth and Sussex Counties broadens the scope of New Jersey’s fight against fraud. County Prosecutor insurance fraud units are an integral part of New Jersey’s comprehensive war on insurance fraud.
46 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Through their cultivation of local informants, their ability to tap local law enforcement resources, and their unique familiarity with local crime demographics, County Prosecutors are often able to identify and develop promising leads which culminate in successful criminal prosecutions.
20. The Foreclosure Rescue Fraud Prevention Act, P.L.2011, c.146 (the Act), requires foreclosure consultants and distressed property purchasers who contract with owners of residential properties in financial distress, to adhere to certain practices in providing foreclosure prevention services to owners. Specifically, the consultants must not collect any fees in excess of 3.5 percent of the purchase price and may not collect any fee prior to the completion of all agreed upon services. Additionally, the law provides that any contract between the homeowner and the consultant or purchaser must contain certain disclosure and notice requirements and the owner must retain the right to cancel the foreclosure consulting contract at any time until after the consultant or purchaser has fully performed every service and secured the relief stated in the contract. Furthermore, any distressed property conveyance or “conditional conveyance” involving the participation of a foreclosure consultant must be for at least 82% of fair market value.
The Act becomes effective in June, 2012; however the Commissioner of Banking and Insurance was instructed to promulgate rules and regulations in advance of the effective date to enforce the provisions of the Act and establish a licensing procedure for foreclosure consultants.
Question: Please update the Legislature on the department’s progress in adopting rules and regulations regarding the enforcement of this Act and the licensing procedure for foreclosure consultants. Please estimate the number of consultants the department anticipates seeking licensure. Please provide the Legislature with any comments on the effect of the passage of the Act on the actions of foreclosure consultants and distressed property purchasers. Has the department noticed any changes in the practices of these individuals in anticipation of the new rules?
Response: As of March 26, 2012, Department staff members have completed the basic framework for the implementing rules. Upon proposal in the New Jersey Register, a 60 day public comment period will follow.
The Department possesses no experience or relevant data from outside sources from which to project reliable numbers.
21. Over the past several years, the overall staffing level in the Executive branch has been reduced through restrictions on hiring and an early retirement initiative (ERI) offered in FY 2009. The following chart provides a comparison of full-time employees recorded for the department as of January in each respective year:
47 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
PAYROLL CHART Funding source 2009 2010 2011 2012 State 2 0 0 0 Dedicated 417 415 408 478 Non-State 4 4 92* 6 Federal 0 0 0 3 TOTAL 423 419 500 487 Difference from previous year -4 +81* -13 Difference from total in 2009 -4 +77 +64* * Information provided by the Department indicates that approximately 88 people were transferred from the Division of Fraud Prosecution in the Department of Law and Public Safety to the department’s newly established Bureau of Fraud Deterrence in 2011.
The department, as opposed to the majority of departments in the State, has seen an increase in employees dedicated to its mission. The majority of these employees can most likely be attributed to the reorganization of the Bureau of Insurance Fraud, effective July 1, 2010. However, if the 88 employees that were transferred from the Bureau of Insurance Fraud were excluded from the employee count, the department would have 22 fewer employees in 2012 than in 2009. This downward trend is interesting in light of the emphasis the department appeared to be making to boost their staff in the previous three years. In response to FY 2011 OLS Discussion Points, the department noted that it had hired twelve new employees in FY 2009 and FY 2010 to protect its accreditation. In fact, Governor Christie asserted in the FY 2011 Budget in Brief (page 37) that the hiring of additional staff was required to maintain the department’s accreditation with banking and insurance regulators and the department confirmed that approximately $1.2 million in salary and benefits would be added to the assessment for new hires in FY 2011.
Question: Please provide the number of employees on payroll, by funding source and by division, as of the latest date possible. Please explain the decrease in employees in 2012 as compared to 2011 and how this decrease may affect accreditation.
Response: Below is an updated chart reflecting the number of employees on payroll by funding source as of the end of pay period 7, March 23, 2012. The decrease is due to attrition. During the last fifteen months the Department has lost seventy-one employees mostly due to retirement. We are working as quickly as possible to hire replacements and expect to complete most of this hiring in the near future. Both the Banking and Insurance Divisions were reaccredited in 2010 for five years. Given the hiring that is already underway, we do not expect any effect on our accreditation.
48 Department of Banking and Insurance FY 2012-2013
Discussion Points (Cont’d)
Fiscal Year 2009 2010 2011 2012 2012 3/23/2012 Funding Source State 2 0 0 0 0 Dedicated 417 415 408 478 483 Non-State 4 4 92 6 4 Federal 0 0 0 3 3 Total 423 419 500 487 490 Attrition 43 28
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