The Idaho House of Representatives has approved legislation that would expand the authority of the Idaho Department of Insurance (DOI) by enabling the department to impose regulatory controls over the sale of products that, according to some of the bill’s critics, don’t even qualify as insurance.
“Since 1996 our Idaho Department of Insurance has used RBC, or risk-based capital, as a reporting mechanism to verify an insurance company’s actual capital levels,” explained Rep. Rick Youngblood, R-Nampa, in presenting the legislation to House colleagues. Stating that the measurement of RBC is a “tool to prevent insolvency,” Youngblood added that “our bill today will broaden the scope of RBC oversight by the Department of Insurance.”
At issue is the idea of requiring the DOI to begin regulating what are known as “fraternal benefits societies (FBS).” Tom Donovan, deputy director of DOI, describes FBS as “collective organizations, often of a religious nature, that provide some types of benefits to their members.” Last month Donovan cited the Knights of Columbus and various Lutheran social care groups as examples of fraternal benefits societies.
The wording of House Bill 358 makes no specific reference to fraternal benefits societies, but rather, it calls for the expansion of capital regulations to be imposed upon “other entities.” The bill passed in the House by a vote of 48 to 20 and will now be undertaken in the Senate.
According to Donovan, current law requires an insurance company operating in Idaho to maintain $2 million in capital. In December he told the Legislature’s health care task force that the DOI sought to impose the $2 million requirement on FBS groups.
Several members of the House who opposed the bill suggested that while an FBS often provide medical or dental services to their members, they are nonetheless not insurance companies and should not be subject to the same capital requirements that are imposed upon insurance companies.
The American Fraternal Alliance, a professional consortium, says on its website that FBS “have their roots as mutual aid organizations—founded to serve the needs of immigrants and other underserved groups before the days of government and employer-based health care and retirement programs. Today’s fraternals are focused on serving the needs of others in the communities where their members live and work.”
“These organizations have traditionally been excluded (from insurance company regulations) for a reason,” Rep. Lynn Luker, R-Boise, said. “I am not sure why the Department of Insurance is seeking to oversee medical service providers.”
Also debating against the bill was Rep. Vito Barbieri, R-Dalton Gardens. “This expands the authority of DOI where it was previously deemed to be not necessary,” he said.
Along with Youngblood, House Minority Leader John Rusche, D-Lewiston, debated in favor of the bill, suggesting that the services provided to members of an FBS are similar to insurance. “If it walks like a duck and quacks like a duck, perhaps it ought to be regulated like a duck,” he stated.