Insights

The State of Louisiana recently joined a growing list of states whose executive leaders and state agency heads have issued emergency orders and proclamations addressing the effects of COVID-19. In yet another effort to assist Louisianans as they navigate the epidemic, Louisiana Insurance Commissioner Jim Donelon issued Emergency Rule 40 on Friday, March 27, 2020, that, among other things, suspends insurers from being able to cancel, non-renew, or non-reinstate policies issued to Louisiana insureds. The benefits, entitlements, and protections of the Rule apply to any insured, policyholder, member, subscriber, enrollee, or certificate holder who, as of March 12, 2020, has an insurance policy, insurance contract, or certificate of coverage for any of the kinds of insurance enumerated in the Rule. Additionally, this rule clarifies that no policy can be canceled or non-renewed because of a claim filed during this emergency.

This Rule only applies to insurance policies in effect as of March 12, 2020, and does not apply to any new insurance policies issued after March 12, 2020. The Rule’s entitlements and protections are retroactive to March 12, 2020, and shall continue until expiration on the earlier of May 12, 2020, or on the date, the Louisiana Governor lifts the State of Emergency presently in effect until April 13, inclusive of any renewal of that emergency. Because of the retroactive nature of the Rule, any notices of cancellation or non-renewal sent between March 12, 2020, and March 27, 2020, are null and void and will need to be re-evaluated after the Rule expires.

The Rule applies to all types of insurance issued in Louisiana but breaks that insurance down into two main categories: (1) “health and accident insurance,” such as health maintenance organizations (HMOs), managed care organizations (MCOs), preferred provider organizations (PPOs), pharmacy benefit managers (PBMs), and third-party administrators (TPAs) acting on behalf of an HMO, MCO, PPO or PBMs; and (2) all other types of insurance, such a property and casualty insurance, vehicle, marine and transportation, homeowners insurance, life insurance, and all other insurance-related entities licensed by the Commissioner or doing business in Louisiana.  A complete list of all the types of insurance that fall into the second category can be found in Louisiana Revised Statute § 22:47. Recognizing what category an insurer’s particular policy of insurance falls within is important because the effects of the Rule are different depending on the category of insurance.

ER-40 endeavors to minimize negative economic impacts from the stay-at-home Order issued by the Governor and imposed by the State. It also ensures that policyholders have access to adequate coverage as this is "uniquely important" during the "mass disruptions to the normalcy previously enjoyed by Louisianans." When asked about the stay-at-home order and its impact on Louisiana's policy holders, Commissioner Donelon responded, "The ongoing impact of the stay at home order has touched households and businesses throughout Louisiana and this order provides Louisiana policyholders a moratorium on policy cancellations and non-renewal by their insurers." Donelon added, "I do want to stress that nothing in this Order absolves consumers or businesses of their ultimate responsibility for payment of premiums."

In light of COVID-19’s substantial impact on the medical system, the majority of the specific effects of Rule 40 apply to policies of “health and accident insurance.” The suspension of the twenty-day written notice requirement for individuals bringing claims under policies of health and accident insurance is one of the Rule’s most important effect. An insurer who denies a health or accident claim as being untimely while Rule 40 is in effect could potentially open themselves up to additional statutory penalties. Because Rule 40 merely “suspends” but does not “interrupt” the notice requirement, the time period for providing the twenty-day written notice requirement will not re-set after the expiration of the Rule. For example, if someone was injured on March 10, after the expiration of Rule 40, that individual will only have 18 days remaining to provide written notice of the claim to their health or accident insurance provider.

The remedies available to insurers for individuals who make claims during this time period but who have failed to pay their premiums is also different depending on the type of insurance at issue. For all of the general types of insurance identified in the broad, second category of Rule 40, the insurer is simply allowed to offset the premium owed by the insured from any claim payment made to the insured under the policy. But health and accident insurers are specifically excluded from this remedy by Rule 40 and are given their own process for payment of health claims when the insured has failed to pay the premium.

As it pertains to health and accident insurance, under the Rule, if an insured fails to make a premium payment and the insurer who be entitled to terminate the policy but for the suspension imposed by the Rule, the insurer may pend all claims until either: (1) the insurer receives the delinquent premium payment; or (2) the Rule expires and the insurer is allowed to cancel or terminate the policy. If the insurer receives the delinquent payment, the insurer must immediately adjudicate and pay all pending claims. And even  if the insurer is entitled to cancel or terminate the policy, the insurer still must pay the claim to the health care provider or health care professional, albeit at a severely discounted rate.

Under the Rule, all insureds are required to continue paying the full amount of their premiums, unless the  insured expressly requests in writing that their policy be cancelled or they express written consent to the cancellation of their policy by the insurer. Additionally, Rule 40 still allows insurers to cancel or terminate an insurance policy because of fraud or material misrepresentations on the part of the insured.

Rule 40 gives the Commissioner broad authority to enforce any violations of the Rule through regulatory action and/or statutory penalties for failing to act in good faith. The Commissioner may also exempt any insurer from compliance with the Rule upon written request by the insurer that explains the reasons for the exemption and then only if the Commissioner determines that compliance with the Rule may be reasonably expected to result in the insurer being subject to undue hardship, impairment, or insolvency.

Should you have any questions about the impact of Emergency Rule 40, please contact the firm.