Senate OKs measure for state to oversee fraternal benefits societies

Senate OKs measure for state to oversee fraternal benefits societies

by
Idaho Freedom Foundation staff
March 18, 2014
Idaho Freedom Foundation staff
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March 18, 2014
[post_thumbnail] Sen. John Goedde, R-Coeur d'Alene, presented a bill to his Senate colleagues requiring the financial health of fraternal benefits societies to be regulated by the Department of Insurance.

The Idaho State Senate 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, don’t qualify as insurance.

House Bill 358, which passed in the House in late January, was approved by the Senate on a vote of 25 to 10.

“Idaho has long monitored the risk-based capital assets of insurance companies in the prevention of insolvency of companies,” said Sen. John Goedde, R- Coeur d’Alene, as he presented the bill before the full Senate. “This bill requires fraternal benefits societies (FBS) and other health organizations to submit risk-based capital information.”

Empowering the DOI to regulate the FBS market is an expansion of the agency’s control. According to Tom Donovan, deputy director of the DOI, an FBS is described as “collective organizations, often of a religious nature, that provide some types of benefits to their members.” Last December Donovan spoke on the matter before a legislative interim committee and cited the Knights of Columbus and various Lutheran social care groups as examples of FBS’s that operate in Idaho.

Donovan told IdahoReporter.com that insurance companies operating in Idaho currently have to maintain $2 million in capital reserves. House Bill 358 will expand that requirement to FBS’s, requiring that FBS operators report their assets to the DOI. “The intention of this bill is to protect the solvency of Idaho insurance companies,” Goedde stated during Senate debate.

However, according to a professional organization of FBS operators, the services of an FBS are not the same as the services provided under an insurance policy.

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.”

In January several members of the House argued that House Bill 358 would expand the DOI’s authority in ways in which it was never intended to be expanded.

“These organizations (FBS 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.

Goedde noted Monday during the debate that House Bill 358 “will expand the scrutiny of companies that operate an FBS.” There was no subsequent debate in the Senate.

The bill now goes to Gov. Butch Otter for his consideration.

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