August 6, 1999
The Honorable John D. Hawke, Jr. Dear Mr. Hawke: Making sure that claims are paid when loss occurs is a fundamental concern of every consumer who buys insurance. In 1997 (the most recent year for which figures are available), payment of claims and other problems led consumers to file 391,547 complaints with state insurance departments. Yet, the National Association of Insurance Commissioners (NAIC) says that H.R. 10, the Financial Services Act of 1999, as passed by the House, would prevent state insurance departments from intervening on behalf of insurance consumers in the future if a bank, rather than a non-bank, were to handle the evaluation and payment of claims for an insurance company. An insurance consumer, who is denied medical treatment or payment of legitimate claims, should not also be denied recourse to an insurance regulator just because a bank is processing the claim. I can only hope that this is not the intent of proponents of this legislation. I am interested in hearing your views on the appropriate regulation of banks that may handle the payment of insurance claims. More than 35,000 complaints involving health maintenance organizations (HMO’s) and other health care insurers were expected to be made to state insurance departments last year, according to the NAIC. Altogether, state insurance departments have 10,000 employees who spend all or most of their time helping consumers. What public policy interest could possibly be served by preventing state insurance commissioners from providing assistance to consumers at life’s most vulnerable moments, such as when someone is battling cancer, loses a loved one, or suffers the loss of a home, automobile, or other catastrophic loss? Without the help of state insurance departments, the NAIC says that consumers in these situations would suffer devastating financial losses and would be denied important medical services. I am enclosing a recent NAIC Insurance Consumer Alert entitled "Resolving Health Care Insurance Disputes." In the cases cited by the NAIC, state insurance departments secured benefits and important medical services for consumers that HMO’s and other health insurance companies had rejected. It is my strong belief that consumers should be free in the future to seek help like this from state insurance departments, regardless of whether their claims are processed by a bank or someone else. I would appreciate having the benefit of your views on this matter as well as your response to the following questions: (1) Should state insurance departments be able to intervene on behalf of consumers in disputes that arise when banks process insurance claims? Please explain. (2) Section 104(b)(3) of H.R. 10 as passed by the House says that state statutes, regulations, interpretations, orders, and other actions shall not be preempted to the extent that they do not apply to an insured depository institution or a wholesale financial institution and that they do not relate to sales or marketing. The NAIC interprets this language as preempting the application of state laws, regulations, etc. to bank insurance activities, other than sales and underwriting. These other insurance activities could include the evaluation and payment of insurance claims, investment management, and the handling of consumer grievances and complaints. Do you agree that section 104(b)(3) would preempt states from regulating insurance activities performed by banks directly, other than sales and underwriting? Please explain. Would you support changes to the legislation clarifying that state insurance departments may not be preempted from intervening on behalf of consumers in such cases? Please explain. (3) The processing of health insurance claims inevitably involves questions of the type and quality of medical care to be provided, as well as the level of payment for services. What is it that makes you think a bank is, or is not well-suited to make the kind of medical judgements involved in the payment of health insurance claims? Please explain. If a bank does perform this claims payment function, do you believe its activities in this regard should be subject to all the requirements state insurance laws and regulations impose on other non-bank entities that perform similar functions? Please explain. (4) If H.R. 10 were to be enacted into law in its present form and state insurance departments were unable to intervene on behalf of consumers whose health and other insurance claims were processed by a bank, (a) is there any other official or entity to whom such insurance consumers could turn for help in resolving disputes over the provision and payment for medical services, (b) what federal government resources are necessary to resolve consumer grievances involving insurance claims processed by banks, and (c) is the OCC able and willing to provide those resources? Please explain. (5) What is the system for handling consumer complaints about banks that exists at the Office of the Comptroller of the Currency (OCC)? How many full and part-time employees are involved in the taking and resolution of consumer complaints? Is the system centralized, nationally, or are there separate consumer grievance systems in different areas of the country? If there is no central system, how is coordination and the sharing of information among the area systems accomplished? (6) The OCC and the state insurance commissioners have been working to coordinate their handling of insurance consumer complaints. Clearly, the state insurance commissioners have significant experience handling insurance complaints (391,547 in 1997) and have devoted substantial resources to this task (10,000 employees nationwide). How is cooperation between the OCC and the state insurance commissioners affected if H.R. 10 prevents states from exercising their authority under state law to intervene in insurance claims disputes on behalf of consumers whose claims are processed by banks? Please explain. Thank you for your cooperation, and I look forward to hearing from you. I would like to request that you provide answers to my questions no later than close of business Wednesday, September 1, 1999. If you have any questions, please feel free to call me or have your staff call Bruce Gwinn of the Committee staff at 226-3400. Sincerely,
JOHN D. DINGELL
cc: The Honorable Thomas J. Bliley, Chairman The Honorable Michael G. Oxley, Chairman The Honorable Edolphus Towns, Ranking Member
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