FR Doc 02-31069

[Federal Register: December 10, 2002 (Volume 67, Number 237)]
[Notices]
[Page 75849-75851]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10de02-31]

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DEPARTMENT OF COMMERCE

National Telecommunications and Information Administration

Docket No. 010222048-2293-06

The Health and Life Insurance Cancellation Notices Exception of
the Electronic Signatures in Global and National Commerce Act

AGENCY: National Telecommunications and Information Administration
(NTIA), U.S. Department of Commerce

ACTION: Notice, Request for Comments

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SUMMARY: Section 101 of the Electronic Signatures in Global and
National Commerce Act, Pub. L. No. 106-229, codified at 15 U.S.C. 7001
et seq. (``ESIGN'' or ``the Act''), preserves the legal effect,
validity, and enforceability of signatures and contracts relating to
electronic transactions and electronic signatures used in the formation
of electronic contracts. 15 U.S.C. 7001(a). Section 103 (a) and (b) of
the Act, however, provides that the provisions of section 101 do not
apply to contracts and records governed by statutes and regulations
regarding court documents; probate and domestic law matters; state
commercial law; consumer law covering utility services, residential
property foreclosures and defaults, and insurance benefits; product
recall notices; and hazardous materials documents. Section 103 of the
Act also requires the Secretary of Commerce, through the Assistant
Secretary for Communications, to review the operation of these
exceptions to evaluate whether they continue to be necessary for
consumer protection, and to make recommendations to Congress based on
this evaluation. 15 U.S.C. 7003(c)(1). This Notice is intended to
solicit comments from interested parties for purposes of this
evaluation, specifically on the health and life insurance cancellation
notices exception to the ESIGN Act. See 15 U.S.C. 7003(b)(2)(C). NTIA
will publish separate notices requesting comment on the other
exceptions listed in section 103 of the ESIGN Act.\1\
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\1\ Comments submmitted in response to Federal Register notices
requesting comment on the other exceptions to ESIGN will be
considered as part of the same section 103 evaluation and not as
part of a separate review of the Act.

DATES: Written comments and papers are requested to be submitted on or
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before February 10, 2003.

ADDRESSES: Written comments should be submitted to Josephine Scarlett,
National Telecommunications and Information Administration, 14th Street
and Constitution Ave., NW., Washington, DC 20230. Paper submissions
should include a three and one-half inch computer diskette in HTML,
ASCII, Word, or WordPerfect format (please specify version). Diskettes
should be labeled with the name and organizational affiliation of the
filer, and the name of the word processing program used to create the
document. In the alternative, comments may be submitted electronically
to the following electronic mail address: esignstudy--
insnot@ntia.doc.gov. Comments submitted via electronic mail also should
be submitted in one or more of the formats specified above.

FOR FURTHER INFORMATION CONTACT: For questions about this request for
comment, contact: Josephine Scarlett, Attorney, Office of the Chief
Counsel, NTIA, 14th Street and Constitution Ave., NW., Washington, DC
20230, telephone (202) 482-1816 or electronic mail:
jscarlett@ntia.doc.gov. Media inquiries should be directed to the
Office of Public Affairs, National Telecommunications and Information
Administration, at (202) 482-7002.

SUPPLEMENTARY INFORMATION:

Background: Electronic Signatures in Global and National Commerce Act

Congress enacted the Electronic Signatures in Global and National
Commerce Act, Pub. L. No. 106-229, 114 Stat. 464 (2000), to facilitate
the use of electronic records and signatures in interstate and foreign
commerce and to remove uncertainty about the validity of contracts
entered into electronically. Section 101 requires, among other things,
that electronic signatures, contracts, and records be given legal
effect, validity, and enforceability. Sections 103(a) and (b) of the
Act provides that the requirements of section 101 will not apply to
contracts and records governed by statutes and regulations regarding:
probate and domestic law matters; state commercial law; consumer law
covering utility services, residential default and foreclosure notices;
insurance benefits cancellation notices; product recall notices; and
hazardous materials documents.
The statutory language providing for an exception to section 101 of
ESIGN for health and life insurance cancellation notices is found in
section 103(b)(2)(C) of the Act:

Sec. 103. [15 U.S.C. 7003] Specific Exceptions.

(b) Additional Exceptions.-- The provisions of section 101 shall
not apply to--
* * * *
(2) any notice of--
* * * *
(C) the cancellation or termination of health insurance or benefits
or life insurance benefits (excluding annuities)--
* * * *
The statutory language requiring the Assistant Secretary for
Communications and Information to submit a report to Congress on the
results of the evaluation of the section 103 exceptions to the ESIGN
Act is found in section 103(c)(1) of the Act as set forth below.

(1) Evaluation required.-- The Secretary of Commerce, acting
through the Assistant Secretary for Communications and Information,
shall review the operation of the exceptions in subsections (a) and (b)
to evaluate, over a period of 3 years, whether such exceptions continue
to be necessary for the protection of consumers. Within 3 years after
the date of enactment of this Act, the Assistant Secretary shall submit
a report to Congress on the results of such evaluation.

Health and Life Insurance Cancellation Notices

Information regarding life and health insurance rates and benefits
is widely distributed through electronic means, including Internet
websites and facsimiles. The ESIGN Act exception for life and health
insurance cancellation notices excludes insurance cancellation notices
sent to consumers by an

[[Page 75850]]

electronic method from the operation of the statute. The rules and
regulations governing termination and cancellation notices for life and
health insurance benefits are governed, in part by Federal law, but
primarily by state law.
The Department of Labor, Pension Welfare Benefits Administration
(PWBA), and the Department of Health and Human Services, Centers for
Medicaid and Medicare Services (CMS), have Federal regulatory authority
for the distribution of information regarding life and health insurance
to Federal employees and to Medicare and Medicaid recipients. As early
as 1997, before the passage of ESIGN, these agencies proposed rules to
allow the release of information regarding health and life insurance
benefits in electronic format. See, e.g., 62 FR 16979 (April 8, 1997).
Since that time, both agencies have conducted rulemaking proceedings to
incorporate standards for the electronic transmission of certain health
insurance information. The CMS adopted standards for electronic
transactions regarding health plans, health care clearinghouses, and
certain health care providers in August 2000. See 65 FR 50312 (August
17, 2000). CMS recently proposed an amendment to its rules to improve
Medicare and Medicaid programs, and the efficiency and effectiveness of
the health care system in general by encouraging the development of a
health information system through the establishment of standards and
requirements for the electronic transmission of certain health
insurance information. See 67 FR 38050 (May 31, 2002). The CMS's
regulations require health providers and organizations to provide:
written notice to Medicare enrollees of the termination of a risk
contract; notice by mail to Medicare enrollees of a health maintenance
organization (HMO) or covered medical provider's (CMP) intention not to
renew a contract; and 60 days' notice of a contract termination
initiated by the HMO or CMP. See 42 CFR 417.488(a), 417.492(a)(ii), and
417.494(b)(iv)(4).
The Labor Department's PWBA also recently issued regulations
governing the disclosure of pension and health plan information through
electronic media. See 67 FR 17264 (April 9, 2002). Under new rules that
became effective on October 9, 2002, the administrator of a group
health plan may furnish certain documents to plan enrollees,
beneficiaries, and other persons entitled to the information using
electronic media. See 29 CFR 2520.104b-1(c).
With respect to state laws, some states' regulations require health
and life insurance companies to provide written notice to policyholders
before the effective date of a policy cancellation or nonrenewal. For
example, the Florida statute provides that a health insurance provider
must provide the insured written notice at least 45 days prior to
cancellation or nonrenewal. Fla.Stat. Sec. 408.909(7) (2002). The
South Carolina Code provides that an insurer must give an insured at
least 31 days' written notice of nonrenewal of a health insurance
policy. S.C. Code Ann. Sec. 38-71-335.
The use of electronic means to transmit health and life insurance
cancellation notices, therefore, would represent a departure from
Federal and state rules that require companies to transmit information
in writing through postal delivery. Approximately forty-three states
have used section 102(a)(1) of ESIGN to adopt electronic transactions
laws that incorporate or exclude state-exclusive areas from the
application of the state's electronic transactions law. See National
Conference of Commissioners on Uniform State Laws at http://www.nccusl.org/nccusl/LegislativeByState.pdf.
Of the states that have
passed these laws, several have expressly excluded health and life
insurance cancellation notices from the operation of the state
electronic transactions laws.\2\ For example, North Carolina's
electronic transaction law provides that the law does not apply to
``any notice of the cancellation or termination of health insurance or
benefits, or life insurance or benefits, excluding annuities.'' See
N.C. Gen. Stat. Sec. 66-313(e)(3) (2000). A large number of the
remaining states have passed state uniform electronic transactions laws
that do not contain language that expressly excludes health and life
insurance cancellation notices. These states' statutes may contain
general provisions, however, that makes the substantive insurance law
controlling, which requires an examination of the insurance codes in
these states to determine whether electronic health and life insurance
cancellation notices are legally valid. Information regarding changes
in state or Federal law to allow electronic transmission of
cancellation notices for life and health insurance would assist in the
evaluation of whether consumers would be adequately protected if the
life and health insurance cancellation notices exception is eliminated
from the ESIGN Act.
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\2\ The following states have enacted electronic transactions
laws that include an exception for health and life insurance
cancellation notices: Alabama, California, Colorado, Connecticut,
Hawaii, Illinois, Louisiana, Maryland, Minnesota, Mississippi, New
Jersey, New Mexico, and North Carolina. See e.g., Md Code Ann., Com.
Law Sec. 21-201(B)(4)(III); N.C. Gen. Stat. Sec. 66-313(E)(3)
(2001); and National Conference of Commissioners on Uniform State
Laws, available at http://www.nccusl/legislativebystate.pdf.
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The ESIGN Section 103 Evaluation

The ESIGN Act directs the Assistant Secretary of Communications and
Information to conduct an evaluation of whether the exceptions set out
in section 103 of the Act continue to be necessary for the protection
of consumers, and to submit a report to Congress on the results of the
evaluation no later than June 30, 2003. The Assistant Secretary for
Communications and Information is the chief administrator of NTIA. As
the President's principal advisor on telecommunications policies
pertaining to the Nation's economic and technological advancement, NTIA
is the executive branch agency responsible for developing and
articulating domestic and international telecommunications policy.
The ESIGN section 103 evaluation is intended to examine the current
status of Federal and state regulations that govern, and practices of
companies that issue life and health insurance cancellation notices, in
preparation for a report to Congress on whether this exception remains
necessary to protect consumers. This evaluation is not a review or
analysis of Federal and state regulations and rules relating to life
and health insurance cancellation notices for the purpose of
recommending changes to those regulations, but to advise Congress of
the current state of law, practice, and procedure regarding this issue.
Comments filed in response to this Notice should not be considered to
have a connection with or impact on ongoing specific Federal and state
procedures or rulemaking proceedings concerning life and health
insurance cancellation notices.

Invitation to Comment

NTIA requests that interested parties, including members of the
bar, courts and consumer representatives, submit written comment on any
issue of fact, law, or policy that may assist in the evaluation
required by section 103(c). We invite comment from all parties that may
be affected by the removal of the life and health insurance
cancellation notices exception from the ESIGN Act including, but not
limited to, state agencies and organizations, national and state bar
associations, consumer advocates, and insurance or benefits law
practitioners. The comments will assist NTIA in evaluating the
potential impact of the removal of this exception from

[[Page 75851]]

ESIGN on consumers, insurers, practitioners, and state electronic
transactions laws. The following questions are intended to provide
guidance as to the specific subject areas to be examined as a part of
the evaluation. Commenters are invited to discuss any relevant issue,
regardless of whether it is identified below.
1. What methods, if any, are available to protect health and life
insurance consumers if the exception for life and health insurance
cancellation notices is eliminated from the ESIGN Act? Discuss.
2. Discuss state and municipal health and life insurance
regulations, laws, and ordinances that require written notice to
consumers for cancellation or termination of insurance benefits.
3. Discuss any state regulations that allow companies to transmit
health and life insurance cancellation notices by electronic methods.
4. How would the removal of the insurance cancellation notices
exception to ESIGN affect health and life insurance consumers? How
would the removal of the exception affect the provision of notice by
health and life insurance companies to their customers? Please discuss.
5. What effect would the removal of the exception have on current
state and Federal policies concerning cancellations of life and health
insurance? Discuss.
6. If the ESIGN Act is amended to eliminate the health and life
insurance cancellation notice exception, what other changes, if any,
should be made to the Act to maintain consumer protection laws? What
changes would be necessary, if any, to maintain current state and
Federal policies concerning the content and timing of health and life
insurance termination and cancellation notices?
7. What are the benefits for health and life insurance customers,
and insurance companies that may result from electronic notice of
cancellation of insurance benefits?
8. List any issues regarding delivery, timing, authentication, and
privacy for health and life insurance benefits cancellation notices
that can and should be resolved prior to removal of the exception from
the Act?
9. Discuss current electronic methods that are used to provide life
and health insurance information to customers(e.g., executed contracts,
quotes provided, benefits statements).
10. Describe any consumer protection mechanisms employed by
companies that use electronic methods to transmit health and life
insurance information to consumers.
11. Have states and companies developed electronic notification
procedures for the transmission of health and life insurance
information? If so, discuss:
a. the receipt verification procedures that have been implemented;
b. regulations that have been updated to reflect electronic
signature technologies; and
c. current state regulations that require the retention of a
separate paper copy.
12. Discuss any other issues (such as privacy and state consumer
protection laws) that may be affected if insurance cancellation notices
are included under the requirements of section 101 of the ESIGN Act.
Please provide copies of studies, reports, opinions, research or
other empirical data referenced in the responses.

Dated: December 4, 2002.
Kathy D. Smith,
Chief Counsel, National Telecommunications and Information
Administration.
[FR Doc. 02-31069 Filed 12-9-02; 8:45 am]

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