Discussion - New Jersey Legislature · Department of Banking and Insurance FY 2017-2018 Discussion Points (Cont’d) 3 Question: How do Horizon Blue Cross Blue Shield of New Jersey’s

Department of Banking and Insurance FY 2017-2018

Discussion Points

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1. In his budget address on February 28, 2017, the Governor urged the Legislature to partner with him and the insurance industry to support the “underserved … our most vulnerable population who access Charity Care and Medicaid,” referencing Horizon Blue Cross Blue Shield of New Jersey and their “abundant surplus” and proposing a permanent fund that Horizon would fund every year through its surplus to “help this population gain even greater access to in-patient and out-patient drug rehabilitation treatment.” Pursuant to P.L.1985, c.236 (N.J.S.A.17:48E-1 et seq.), a non-profit health service corporation, such as Horizon, is required to establish two separate special contingent surplus accounts, one for individual contracts and one for other activities. The health service corporation must maintain in each account during each calendar year a surplus over and above its reserves and liabilities equal to a minimum of $1.25 million or 2.5 percent of that year’s net premium income, whichever is more. The department may increase the 2.5 percent minimum; however it cannot exceed five percent of the net premium income during the preceding year (N.J.S.A.17:48E-17.1). In addition, pursuant to "The Dynamic Capital and Surplus Act of 1993,” P.L.1993, c.235 (N.J.S.A.17B:18-67 et seq.) and its subsequent regulations (N.J.A.C.11:2-39 et seq.), health insurers must meet a risk based capital (RBC) requirement for doing business in New Jersey. RBC was created by the National Association of Insurance Commissioners as a method of measuring the minimum amount of capital appropriate to support an insurance company’s business operation in consideration of its size and risk profile. RBC event levels are defined at N.J.A.C.11:2-39 in terms of a company's Total Adjusted Capital (TAC) compared to its Authorized Control Level Risk Based Capital.

Furthermore, the department is authorized pursuant to N.J.S.A.17B:19-5 to promulgate regulations establishing all aspects of the minimum reserve standards for health insurance companies.

Question: Please identify the health service corporations that are currently authorized to transact business in New Jersey. For each corporation, please indicate the following annual information from CY 2010 to CY 2016: net premium income, the rate of premium income deposited into the required special contingent surplus accounts, the amounts in those accounts at the end of the year, and the minimum

amount required in each account.

Response: Presently, there is one health service corporation in New Jersey: Horizon Healthcare

Services, Inc. d/b/a Horizon Blue Cross Blue Shield of New Jersey. The following will provide financial data with regard to Horizon’s surplus position and statutory minimum requirements. The information provided below is based on regulatory filings from Horizon.

CY Net Premium Income Surplus Statutory Min. Req.

2016 $6,722,127,972 $2,385,936,594 $624,261,018

2015 $6,172,302,659 $2,305,909,361 $625,426,676

2014 $5,816,204,026 $2,230,234,344 $590,676,381

2013 $5,228,439,361 $2,212,037,895 $564,983,913


Discussion Points (Cont’d)

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2012 $4.941,623,873 $2,106,940,035 $565,117,498

2011 $4,831,136,532 $1,973,204,361 $483,861,048

2010 $5,006,640,647 $1,771,102,162 $484,896,661

CY Surplus Individual Business

Surplus

Group Business Surplus

2016 $2,385,936,000 $467,016,000 $1,918,920,000

2015 $2,305,909,000 $469,053,000 $1,836,856,000

2014 $2,230,234,000 $482,381,000 $1,747,853,000

2013 $2,212,038,000 $419,405,000 $1,792,633,000

2012 $2,106,940,000 $331,190,000 $1,775,750,000

2011 $1,973,204,000 $284,795,000 $1,688,409,000

2010 $1,771,102,000 $263,150,000 $1,507,952,000

CY Individual Business Surplus Individual Business Surplus Min. Req.

2016 $467,016,000 $122,190,991

2015 $469,053,000 $127,220,224

2014 $482,381,000 $119,511,844

2013 $419,405,000 $107,121,613

2012 $331,190,000 $88,830,847

2011 $284,795,000 $69,836,270

2010 $263,150,000 $72,045,854

CY Group Business Surplus Group Business Surplus Min. Req.

2016 $1,918,920,000 $502,070,027

2015 $1,836,856,000 $498,206,452

2014 $1,747,853,000 $471,164,537

2013 $1,792,633,000 $457,862,300

2012 $1,775,750,000 $476,286,651

2011 $1,688,409,000 $414,024,778

2010 $1,507,952,000 $412,850,807

Question: Please explain the RBC requirement for health service corporations. For each corporation, please indicate the following annual information from CY 2010 to

CY 2016: TAC, RBC, RBC level, and the minimum RBC requirement.

Response: RBC ratios use a detailed, risk-based calculation that evaluates the risks of an insurer

and its needed capital, reserves and surplus to determine an insurer’s authorized control level (“ACL”) RBC, which is the minimum amount pursuant to prescribed calculations needed to cover an insurer’s obligations. Because they are specifically designed to be just one regulatory tool, and not a sole metric of financial health, RBC Reports and RBC Plans are confidential and privileged pursuant to N.J.A.C. 11:2-39A.10, and therefore the Department cannot share company-specific RBC information.



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Question: How do Horizon Blue Cross Blue Shield of New Jersey’s reserves, expressed as a percentage of RBC, compare to the percentage of RBC of all Blue Cross Blue Shield companies nationwide?

Response:

RBC is not a regulatory comparison tool. The optimal and/or target RBC level will vary based upon the insurer’s business, its goals, its asset mix, etc. N.J.A.C. 11:2-39A.10 expressly states that “the comparison of a health organization’s total adjusted capital to any of its RBC levels is a regulatory tool that may indicate the need for corrective action . . . [it] is not intended as a means to rank health organizations generally.”

Insurers are prohibited from using RBC ratios in advertising or to opine on the RBC of

their competitors. Likewise, the Department does not opine on the appropriate level of RBC for a given insurer.

Question: In addition to special contingent surplus accounts and RBC requirements, are there any other statutory or regulatory requirements regarding the minimum standards for health insurance reserves that impact health service corporations? Please explain.

Response:

The Department’s hazardous financial condition rules at N.J.A.C. 11:2-27.3 provide a list of twenty-nine factors under which the Department can take formal regulatory action such as confidential administrative supervision pursuant to N.J.S.A. 17:51A-1 et seq.

Question: How does the department monitor a health service corporation’s compliance with the various reserve and capital requirements? Please explain the department’s actions and penalties imposed in the event that a health service corporation does not comply with these requirements. At what level of a drop in reserves, expressed as a percentage of RBC, would the department begin an examination of a health service corporation’s financial structure?

Response: The Department engages in a continuous and detailed risk-focused surveillance process of

all domiciled insurers’ financial conditions, including Horizon’s. Thus, the “examination of a health service corporation’s financial structure” occurs continuously and at all levels of RBC. Our risk-focused surveillance has the following aims:

To detect as early as possible those insurers with potential financial trouble;

To timely identify non-compliance with state statutes and regulations;

To compile information needed for timely and appropriate regulatory action;

To provide a clearer methodology for assessing residual risk in each activity under review and to explain how that assessment translates into establishing examination procedures; and

To allow for the assessment of risk management processes beyond those associated with the verification of financial statement line items (for example, the effectiveness of corporate governance activities or the Enterprise Risk Management (“ERM”) process).



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Included within the risk-focused surveillance process is the financial analysis process.

One of the main purposes of the financial analysis function is to identify as early as possible actual or potential solvency issues. The early identification of such issues is a vital component of effective financial solvency regulation. The Financial Analyst uses a number of tools and processes to complete in-house audits of the Annual Statement, Quarterly Statements, and other supplemental filings. Financial analysts complete a detailed review of domestic insurance company’s statutorily required Annual (due March 1) and Quarterly (due May 15, August 15, and November 15) financial statements within time frames prescribed by the NAIC Accreditation standards and guidelines.

In addition to this continuous financial analysis, all domestic insurers must undergo a

financial examination at least once every five years pursuant to N.J.S.A. 17:27A-5.

If the results of all of the above-discussed financial monitoring and reporting demonstrate that an insurance company’s financial condition has deteriorated enough for the company to be considered “troubled” then the Department heightens its monitoring.

If the continued monitoring or a limited scope exam demonstrates that a company’s

financial condition has worsened to a point that it is operating in a “hazardous financial condition,” then NJDOBI has the power to proceed to the next level of regulatory action and formally place the company into Administrative Supervision.

If administrative supervision is unsuccessful in ameliorating a company’s hazardous

financial condition, the Department then can proceed to place the insurer into rehabilitation or liquidation pursuant to N.J.S.A. 17B:32-31 et seq.

Question: Does the department define what is an excessive surplus in relation to health insurers? Does Horizon’s surplus, as of the close of its last completed fiscal year, fall within this definition? Does State or federal law require Horizon or any other insurer to take any specific action when in a financial condition constituting an excessive surplus? Is the department obligated to take any action with regard to Horizon or an insurer deemed to be in that financial condition?

Response: Under NAIC model laws and regulations and pursuant to State law, there is no

definition of “excessive surplus.” Minimum surplus requirements are established by law, but an appropriate level of surplus for each company will vary based upon the legal and operational structure of the company, its lines of business and risks, its goals and business plans, market conditions, etc.

Question: Does any other state define what is an excessive surplus in relation to health insurers in that state? Does any other state impose a statutory mandate to direct an insurer, deemed to have an excessive surplus or otherwise be in a financial condition substantially similar to that of Horizon, on the use of such a surplus, as proposed by the Governor?



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Response: Although the Department regularly monitors national best practices and trends, it is not

an appropriate source for a nationwide survey.

Question: In what ways does Horizon’s unique status as a health service corporation, as compared to other health insurers in the State, affect: the amount of taxes Horizon pays; Horizon’s responsibilities to New Jersey citizens; and Horizon’s relationship to a permanent fund such as the one the Governor has proposed? Should other insurers doing business in New Jersey be evaluated in the same manner as Horizon Blue Cross Blue Shield to determine the presence of an abundant surplus that would contribute to the permanent fund proposed by the Governor? Which other insurers would be found to be in that financial condition?

Response:

The Department regulates Horizon as a health service corporation, and in doing so, the Department is responsible for calculating the amount of Horizon’s Premium Tax responsibility. The Premium tax is calculated by taking the respective Premium Tax Rate and applying that rate to the Calendar Year Total Direct Written Premiums. Total Direct Written Premiums during Calendar Year 2016 for Horizon Healthcare Services Inc. were $1.1 billion for Individual Accident & Health, plus $3.8 billion for Group Accident & Health, for a total Direct Written Premium during Calendar Year 2016 of $4.9 billion. The Premium Taxes due for Individual Accident & Health (@ 2.1%) were $23.0 million and the Premium Taxes due for Group Accident & Health (@1.05%) were $39.7 million, for a total Premium Tax obligation for Calendar Year 2016 of $62.7 million.

The question of which other insurers should be evaluated in the same manner as Horizon is ultimately a public policy decision for the Legislature and Governor; the Department will implement and enforce any new insurance legislation that is enacted. The question also refers to “an abundant surplus.” As noted in a previous response, the definition of abundance or excess in surplus does not appear in current insurance law. There is no definition of such a condition that the Department could use to determine where a certain amount of surplus would become abundant or excessive.

2a. The “Patient Protection and Affordable Care Act,” Pub.L.111-148, and the “Health Care and Education Reconciliation Act of 2010,” Pub.L.111-152, collectively more commonly known as the “Affordable Care Act” (ACA), were comprehensive pieces of federal legislation enacted in March 2010 to facilitate the availability and affordability of health insurance nationally. Since the passage of the ACA, the department has received $6.3 million in federal funding for consumer outreach, health insurance rate review, and investigating the possibility of establishing a State-based health care exchange, or marketplace. More details on the funding received and spent thus far can be accessed in the department’s responses to FY 2011 through FY 2017 OLS Discussion Point questions.



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The ACA requires that any proposed rate increase by individual or small group market insurers at or above 10 percent must be evaluated through a state’s rate review process to ensure it is justified. Since August 2010, the Department of Banking and Insurance (DOBI) has received federal grants under ACA for implementing and improving the State’s rate review process. On September 19, 2014, the department was awarded its fourth federal rate review, or Rate Review Cycle IV, grant worth $1.18 million. As of March 23, 2017, approximately $260,000 of the $1.18 million grant had been expended. The department anticipated using unspent federal rate review grant money to fund five positions within the department in FY 2017 to maintain the rate review database and to provide enhanced rate review capacity, including the development of consumer information, such as rate calculators and the management of complaint processing. In addition, unspent federal rate review grant money was anticipated to procure actuarial services from the Hay Group. The consultant was to be used on a limited basis for the analysis of complex filings or filings where compliance with federal standards is in question. The department also anticipated using unexpended balances for a study by the Center for State Health Policy at Rutgers, The State University of New Jersey, concerning policy migration and consumer choices due to the ACA. According to the Centers for Medicare and Medicaid Services’ website, the federal rate review funding is intended to improve the efficiency of the submission and tracking of rates; track the number of consumer inquiries and complaints, which will be posted on the department’s website; and study “specific rate review related elements that arise from the Affordable Care Act, including the Unified Rate Review Template, single risk pool, actuarial value, meaningful difference and the impact of risk mitigation programs such as risk adjustment, transitional reinsurance, and risk corridors.”

Question: Please provide a full accounting of federal ACA grants received, grant amounts expended, remaining grant balances, and unspent grant funds that reverted back to the federal government. Please include this information for grants received for consumer outreach, health insurance rate review, and investigating the possibility of establishing a State-based health care exchange.

Response:

Summary of Rate Review Grant Funding

Grant Time Period Amount

Budgeted Amount

Spent Net Difference

Cycle I 08/09/2010 – 09/30/2011 $1,000,000 $861,068 $138,932 Cycle II 10/01/2011 – 09/30/2015 $4,146,261 $2,512,982 $1,633,279 Cycle IV 09/19/2014 – 09/18/2017* $1,179,000 $580,000 $600,000

Totals $6,325,261 $3,453,742 $2,871,519 * CMS permitted States the opportunity to file for a No Cost Extension (NCE) with respect to the Cycle IV Grant. NJ was awarded a NCE, which extended the time to expend Cycle IV Grant funds through September 18, 2017. Since the final year for



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Cycle II and the initial year for Cycle IV overlapped, expenditures for 10/01/2014 – 09/30/2015 were debited to the Cycle II Grant.

Consumer Assistance Grant The Department was also awarded a grant of $982,000 for Federal FY 2011 for the

Consumer Assistance Program (CAP), which was a federally funded program that enhances and expands many of the services currently provided by the Department’s Office of Consumer Protection Services.

Investigation of State-Based Exchange New Jersey applied for and was awarded two grants. The first was a $1 million

planning grant from Federal FY 2011 to enable the state to explore interest in a state-based exchange. The second was a $7.67 million grant from Federal FY 2012 to be used to plan and explore the possibility of establishing a State Health Insurance Exchange to be operational in 2014. However, due to the State’s decision not to proceed with a State-based Exchange, all activity exploring the establishment of an Exchange was halted with the majority of the second grant never being used.

Question: What are the department’s plans for using any remaining grant balances? By what date must the funds be used?

Response:

Approximately $600,000 of the Cycle IV funding remains available as of December 31, 2016. Primary uses of the grant include funding for the grant-related activities of certain Department employees, grant-funded positions (and all associated costs) as well as the actuarial consultants through September 18, 2017, with the No Cost Extension (NCE). These positions maintain the database, provide enhanced rate review capacity (especially in tracking, completeness, and Federal requirements), enhanced ability to develop and maintain consumer information (including rate calculators), and enhanced, streamlined response to rate complaints.

Question: Please identify by title the positions the department anticipates to have filled through ACA grant money in FY 2018. How long does the department anticipate these positions being funded through ACA grant money?

Response:

The Department anticipates funding three positions through September 18, 2017 with the remaining Cycle IV NCE Grant funds. Those positions are identified as: Rate Information & Oversight (RIO) Actuary; RIO Unit Manager; and RIO Analyst.

Question: Please describe the work performed by the Hay Group and the Center for

State Health Policy at Rutgers, The State University of New Jersey. How much Rate Review Cycle IV grant money was utilized for these purposes?



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Response:

Korn Ferry/Hay Group (actuarial consultants) will continue to assist with filings for which compliance with Federal standards is in question, provide a better understanding of the application of the 3Rs (Transitional Reinsurance, Risk Adjustment and Risk Corridors), and respond to ad hoc research questions which may inform and enhance both the rate filing and rate review processes. As of December 31, 2016, approximately $165,000 of the budgeted $227,000 has been expended for consultant / contractual assignments.

2b. The ACA established a minimum level of health care benefits, referred to as the Essential Health Benefits (EHB) package, that all qualified health plans (QHPs) offered nationwide must include. States are required to select a “benchmark plan” that offers all of these benefits as the standard for plans offered in the state. New Jersey’s benchmark plan is the Horizon HMO Access HAS Compatible. Furthermore, the ACA authorizes states to require a QHP to cover additional mandated benefits beyond those in the EHB, provided that the state defrays the costs of such mandated benefits. However, the regulations (45 CFR Parts 147, 155 and 156) provide that states may include, as part of their “benchmark plan,” state benefit mandates that were enacted before December 31, 2011 without triggering cost defrayment obligations. In the last year, New Jersey enacted one law which mandates certain health care benefits: P.L.2017, c.28 requiring health insurance carriers to adhere to certain coverage requirements for treatment of substance use disorders. The department indicated in FY 2017 OLS Discussion Point responses that the other State laws which mandate certain health care benefits enacted since December 31, 2011 did not require the State to defray any costs as each law contained certain provisions that precluded the ACA requirement. Recent amendments by the Centers for Medicare and Medicaid Services to 45 C.F.R. 155.170 adopted in late February 2016 have changed the manner in which post-2011 benefit mandates that are in addition to the ACA’s EHBs are identified and reported. Previously, state-based health care exchanges had to identify such non-EHB benefit mandates; now, states must identify the benefits that are in addition to the EHBs for which defrayment is required and carriers must calculate the costs of such benefits and report the information to the state. In response to FY 2017 OLS Discussion Point questions, the department indicated that discussions were pending regarding this change to the federal rules.

Question: What is the department’s estimate for the costs for QHPs to provide substance use disorder services pursuant to P.L.2017, c.28? What department is responsible for providing the mandated benefits defrayment payments, if any?

Response:

It is too early to gauge the cost impact of P.L.2017, c.28. In respect to defrayment, please see the response to the next question.



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Question: Please indicate how the State plans to implement the amendments to 45 C.F.R. 155.170 regarding the identification and reporting of post-2011 benefit mandates.

Response:

Although prior Federal rules obligated the Federal Exchange to identify any mandates that would trigger defrayment, the Exchange relied on information reported by the State. The Exchange required the State to provide a list of mandates with the effective dates. The amended Federal rules transfer the responsibility to take action to implement a defrayment process to the State. To date, the State has not enacted any mandate that would trigger defrayment. The Department carefully reviews proposed legislation and highlights whether a mandate would increase benefits beyond those set forth in the benchmark plan triggering defrayment. If such a mandate were to be enacted, the Department in conjunction with the health carriers would work to determine any amounts to be defrayed by the State.

2c. The department is responsible for reviewing all health insurance rate increases pursuant to the ACA. Furthermore, under the federal law, individuals are supposed to be able to access information regarding rate increase requests that meet the threshold of 10 percent or more on federal, state or insurer websites. (Please see the OLS background paper, “Health Insurance Rate Review; Federal Health Care Reform Law Requirements” in the FY 2013 OLS budget analysis of the department for more information.)

Under State law, pursuant to P.L.2008, c.38, the department also has the authority to disapprove rates in the individual or small group markets when the filing is incomplete, contrary to law, or the rates are inadequate or unfairly discriminatory. In New Jersey, the individual market is administered through the Individual Health Care Program (IHCP), while the small group market is administered through the Small Employer Health Benefits Program (SEH).

Question: Please describe the rate review process the department employs and any changes that have been made to this process in the last year. Please describe any instance in CY 2016 or thus far in CY 2017 in which the department has disapproved of a rate. Please indicate the reason for the disapproval and any resolution, if applicable, that was achieved.

Response: Please see: http://www.nj.gov/dobi/lifehealthactuarial/rateinfo/index.html#process

Under NJ State law, DOBI has the authority to review and disapprove rate fillings that

are found to be incomplete or nor in compliance with the law. DOBI’s rate review process determines if the rate increase is unreasonable if, for example:

http://www.nj.gov/dobi/lifehealthactuarial/rateinfo/index.html#process



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- It is based on faulty assumptions or unsubstantiated medical trends. - It charges different prices to people who pose similar risks. - It does not meet Minimum Loss Ratio (MLR) standards. - It does not comply with permissible rating factors.

The federal government has determined that NJ’s rate review process is effective.

Question: Please provide the filed rate increase or decrease requests for health care plans available in the IHCP and SEH in CY 2016 and thus far in CY 2017. Please identify the websites on which the public can access information regarding these rate changes.

Response: - 2017 Changes in Rates – IHC Below is a table showing the range in the IHCP rate increases for 2017 when compared

to the 2016 IHCP rates by carrier.

Carrier % Change in 2017 rates

Aetna Life Insurance Company 18.8% to 19.9%

AmeriHealth HMO, Inc. 0.0% to 54.3%

AmeriHealth Insurance Company of New Jersey -6.1% to 54.3%

Cigna HealthCare of New Jersey, Inc. 13.0%

Horizon Healthcare of New Jersey, Inc. -0.1%

Horizon Healthcare Services, Inc. 4.5% to 24.2%

Oxford Health Insurance, Inc. 30.7% to 44.2% Freelancers Consumer Operated and Oriented Program of New Jersey, Inc.

d/b/a Health Republic Insurance of New Jersey, submitted rates for the plan year 2017. The range for these rate changes were from 35.2% to 71.2%, if they had remained in the market.

Consumers can access current rate information for the individual market through the

following web site: http://www.state.nj.us/dobi/division_insurance/ihcseh/ihcrates.htm. - 2017 Changes in Rates – SEH In 2017, the majority of the carriers introduced a significant number of new SEH health

plans while at the same time discontinuing a significant number of SEH health plans offered in 2016. The table below shows the range of the 2017 rate changes for those health plans that were offered in both 2016 and 2017 by carrier.

Carrier % Change in 2017 rates

Aetna Health Inc. and Aetna Life Insurance Co. 7.61% to 22.09%

AmeriHealth Insurance Co. and AmeriHealth HMO 2.77% to 30.97%

Cigna Health and Life and Cigna Healthcare of NJ 0.14% to 1.41%

Horizon Healthcare Services and Horizon Healthcare of NJ 3.70% to 7.47%

http://www.state.nj.us/dobi/division_insurance/ihcseh/ihcrates.htm



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Oxford Health Insurance -0.36% to 25.41%

Current rate information for the small employer market can be accessed through the following web site: http://www.state.nj.us/dobi/division_insurance/ihcseh/sehrates.htm.

Question: Has the department identified any trends in consumer choice since the implementation of the ACA’s publication requirements regarding rate changes in the

individual and small group markets? Response:

New Jersey has a long history of publishing rate information. Even before website distribution of rate information was possible, monthly individual rates were published and mailed to hundreds of consumers each month. Thus, the Department thinks the publication requirements under the ACA have had little influence on purchase decisions in New Jersey.

3. Pursuant to P.L.1992, c.161 (N.J.S.A.17B:27A-2 et seq.), a law included in a larger package commonly known as the “Health Care Reform Act of 1992,” New Jersey established the Individual Health Care Program (IHCP), which restructured the individual health insurance market. The IHCP seeks to ensure that people without access to employer- or government-sponsored health care programs can purchase health care coverage for themselves and their families from a variety of private carriers. Among other provisions, this law established incentives for carriers to participate in the individual market and allowed consumers to comparison shop based on premiums. Since the enactment of the ACA, the IHCP provides consumers information on health benefits plans that can be purchased directly from a carrier as well as through the New Jersey ACA marketplace. In plan year 2017, only two carriers are offering plans on the New Jersey ACA marketplace: AmeriHealth New Jersey and Horizon Healthcare Services. Consumers can also directly purchase plans from both of these carriers; however, only plans purchased on the ACA marketplace may qualify for certain income-based federal subsidies. Additionally, the Small Employer Health Benefits Program (SEH), enacted pursuant to P.L.1992, c.162 (N.J.S.A.17B:27A-17 et seq.), was established to provide small employers (those with 2 to 50 employees) with the option to purchase standardized health benefits plans. The plans can be modified based on the age, gender and family status of the employees and location of the business.

In 2014, the department enacted regulations to amend the IHCP and the SEH to ensure compliance with federal law. These regulations included the establishment of a minimum level of benefits, or EHB, pursuant to section 1302 of the ACA.

Question: Please provide sample policy costs for individuals purchasing policies through the IHCP, as well as the number of carriers and number of plans available in the IHCP market, for the three most recent years available. Please explain the difference in the cost of policies over the previous years.

http://www.state.nj.us/dobi/division_insurance/ihcseh/sehrates.htm



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Response:

Sample Monthly Premiums (for age 50) for 2015-to 2017 IHC

Plan Type 2015 2016 2017*

HMO (Gold)

$800.09 $842.56 $841.17

EPO (Silver)

$532.14 $564.55 $599.00

Changes in plan costs: For purposes of comparison, we used the same plan types and the same age (50). The sample HMO (Gold) monthly premium in 2017 ($841.17) is approximately 0.2 percent below the monthly premium in 2016 ($842.56) and approximately 4.9 percent above the monthly premium in 2015 ($800.09). The sample EPO (Silver) monthly premium in 2017 ($599.00) is approximately 5.8 percent above the monthly premium in 2016 ($564.55) and approximately 11.2 percent above the monthly premium in 2015 ($532.14).

There is no one explanation for the premium differences year-to-year. There have been multi-faceted changes to the IHC market between 2015 and 2017. Some of the factors that continue to have an impact on premiums are: medical costs; ACA taxes and fees; plan designs; competition; buyers. The number of carriers (double counting AmeriHealth and Horizon) in the IHC market has decreased from 10 in 2015 to 7 in 2017. The number of plans available for sale among the carriers has decreased 50 percent from 2015 (86) to 2017 (43). However, it is important to note that prospective pricing to an 80 percent loss ratio has been consistent over the years for New Jersey’s markets and carriers continue to make refunds if actual experience produces better results. As of 2014, all plans must include the ACA-required 10 essential health benefits. Since most carriers elected to carve the pediatric dental benefits out of the medical plan, the plans include only nine of the essential health benefits and the tenth, pediatric dental, is provided in a stand-alone pediatric dental plan. The premiums shown above do not include the premiums for a stand-alone pediatric dental plan.

Question: In the IHCP, how many individuals are covered through plans purchased directly from the carrier and how many are covered through plans purchased on the ACA marketplace? Please provide these data for the three most recent years

available.

Response:

Below is a table that shows the number of IHCP enrollees that purchased plan on and off the ACA marketplace as of the last quarter of years 2014 to 2016.

Year On ACA Marketplace Off ACA Marketplace Total

2016 214,566 94,255 308,821

2015 187,287 103,186 290,913



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2014 139,844 110,542 250,386

Question: What percentage of individuals covered through the ACA marketplace receives a federal subsidy? What is the average federal subsidy?

Response:

As of March 2016, approximately 82% of IHCP enrollees who purchased a health plan on the ACA marketplace received a federal subsidy in the form of an advanced premium tax credit. The average advanced premium tax credit was $322 per month.

Question: Please provide sample policy costs for businesses purchasing insurance through the SEH, as well as the number of carriers and number of plans available in the SEH market, for the three most recent years available. Please explain the difference in the cost of policies over the previous years.

Response:

Below is a summary of monthly premiums for a hypothetical small employer. Premium comparisons are provided for the most recent years. Direct comparison between years is not possible because of subtle changes in product offerings. However, we believe the table makes a fair comparison by carriers and by years.

The Department now posts SEH rate charts as well as a rate calculator on the SEH

website. Employers have the option to look at the rate charts for the base (age 21) premium for each plan or they can use the calculator to enter the specifics for their employee group for an estimate of total premium for the group. This carrier-specific data is now available on the web site rather than the Premium Comparison Survey which listed only generic premiums for a sample group.

2015-to 2017 SEH Monthly Premium (for hypothetical group)

Carrier Name Plan Name

2015

2016 2017*

Aetna Life Insurance

NJ Silver QPOS 2000 70/50

$5,523

$5,575

$6,328

Aetna Life Insurance

NJ Silver OAEPO 2000 70 %

$5,311

$5,629

$6,389

AmeriHealth Ins. Co.

Gold EPO Regional Preferred $30/$50

$6,062

$7,059

$7,800

AmeriHealth Ins. Co.

Silver EPO HSA Local Value 100 percent/100 percent

$4,747

$4,293

$4,744

Health Republic Ins. Co.

Solid Silver $

5,109 $

6,141 NA

Health Republic Ins. Co.

Core Silver $

4,990 $

5,998 NA

Horizon BCBS

Advantage EPO HSA Bronze 100 Compatible

$4,803

$5,337

$5,650



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Horizon BCBS

Advantage EPO HSA Silver 100 Compatible $750 Contrib

$4,899

$5,444

$5,763

Oxford Health Ins.

EPO 30/50 $1000 L Gated OHI w/ $25/$50/$75 (Gold)

$6,161

$7,366

$7,602

Oxford Health Ins.

PPO Flex 25/40 L Non-Gated OHI w/ $15/$35/$75 (Gold)

$7,037

$8,355

$8,622

AVERAGES

$5,464

$6,120

$6,612

Changes in plan costs: Note that for purposes of comparison, we used a

hypothetical small group comprised of six employees some of whom have dependents. The results show the average monthly premium in 2017 ($6,612) is about 7.4 percent above the average monthly premium in 2016 ($6,120). Also, the results show the average monthly premium in 2016 ($6,120) was approximately 10.7 percent above the average monthly premium in 2015 ($5,464).

There is no one explanation for the premium differences year-to-year. There

have been multi-faceted changes to the marketplace between 2014 and 2017. Some of the factors that continue to have an impact on premiums are: medical costs; ACA taxes and fees; plan designs; competition; buyers. The number of plans available for sale among the carriers has decreased 21 percent from 2015 (248) to 2017 (205). However, it is important to note that prospective pricing to an 80 percent loss ratio has been consistent over the years for New Jersey’s markets and carriers continue to make refunds if actual experience produces better results.

Small Employer coverage is employment based. Employment was reduced

during the recession, and despite the more robust economy and recovery of jobs in the small employer market, a concomitant increase in enrollment has not occurred. Reports suggest that employers are continuing to require greater contributions from employees (under the New Jersey small employer law employers must contribute at least 10 percent of the overall group premium), reducing the take-up rate of employer-offered coverage. In addition, as of 2014, Federal law required an amendment to the definition of small employer such that businesses that are husband-wife businesses with no full-time employees in addition to the husband-wife or that are sole proprietorships or partnerships cannot purchase coverage in the small employer market unless the business has at least one other, unrelated common law employee. Thus, since 2014 many of the smallest small employers are ineligible to buy coverage in the small employer market.

As would be expected, enrollment decreases when premiums increase because

of cost/affordability issues. Premiums increase for a number of reasons:

The workforce is aging, and the take-up rate of employer-offered coverage is greater among older employees, as coverage options for younger employees have changed and



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increased in recent years. For example, dependents may remain on a parent’s coverage up to age 26 with the potential to remain until age 31. Individuals under age 30 may purchase individual catastrophic coverage. Some employees may qualify for an exemption from the requirement to maintain coverage if the employer-offered coverage is too costly. An older risk pool for rating purposes results in increased rates even when medical costs are stable, because there is increased utilization of medical services associated with age.

Employers and employees may determine that it is more advantageous for employees to purchase coverage in the Federally Facilitated Marketplace because of subsidies and the possibility of cost-share reductions that are available with individual plans. This may be particularly true if the group tends to have employees that are younger or receive lower wages/salaries. As already noted, movement of younger workers out of the group risk pool tends to have an adverse impact on group rates, making group premiums less attractive in general.

Several insurance companies developed and are aggressively marketing “self-funding”

options to small employers. Because self-funded arrangements do not have to comply with the same State and Federal requirements and protections as the insured small employer plans they can offer plan designs and use underwriting and rating requirements that encourage participation by groups with more favorable risks. These arrangements tend to take the youngest and healthiest groups out of the SEH program, reducing enrollment and increasing premiums for those that remain. Because small employer plans have been and continue to be subject to the guaranteed issue requirement, businesses that elect to move to self-funded programs can later return to the small employer market when they find the claims costs make self-funding too great of a financial risk or when they find their employees and dependents require coverage of services that may not be covered under the self-funded arrangement. The fully-insured small employer market thus experiences further adverse selection which drives up premiums.

Question: How many small businesses and covered individuals participated in the SEH in each of the three most recent years.

Response:

Below is a table showing the enrollment in the small employer health market for years 2014 to 2016 by quarter.

Year 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter

2016 456,163 449,570 437,017 430,861

2015 491,205 482,066 474,681 463,762

2014 599,037 562,398 521,146 503,018

4. New Jersey's “Health Maintenance Organizations (HMO) Act” (N.J.S.A.26:2J-1 et seq.) and “Health Care Quality Act (HCQA)” (N.J.S.A.26:2S-1 et seq.) provide protections to patients covered under health benefits plans by requiring carriers' health plans and HMOs to meet minimum standards, including network access and adequacy standards. Network access and



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adequacy standards ensure that a health plan can provide health care services to all of its subscribers. For example, N.J.A.C.11:24A-4.10 provides that health carriers under the HCQA must provide at least two eligible primary care physicians within 10 miles or 30 minutes driving or public transit time of 90 percent of the carrier’s covered persons. The department has adopted similar provisions for HMOs pursuant to N.J.A.C.11:24-6.2. In addition, the United States Department of Health and Human Services issued final rules (45 CFR 156.230 and 156.235) in March 2012 elaborating on the ACA requirement that all qualified health plan provider networks are sufficient in number and types of providers. The department reviews network access and adequacy, pursuant to these regulatory standards, at the time of filing of the network plan by the carrier, annually thereafter, and on an ongoing basis as conditions change and concerns arise. In order to perform annual reviews, the department utilizes updates of multiple tables of data on a county service area basis on primary care physicians, specialty care physicians, acute care hospitals and ancillary and specialty providers, as well as information on provider turnover throughout the year. Additionally, the department continually monitors other sources of information, such as consumer complaints and the decisions of the Independent Health Care Appeals Program (IHCAP) to identify potential issues with network adequacy by provider type and carrier. According to responses to FY 2017 Discussion Point questions, network access and adequacy review is performed by two department staff – Manager, Office of Managed Care and Supervising Health Care Facilities Evaluator -- and that work is checked and supervised by a third staff member, the Assistant Commissioner for Consumer Protection. The department indicated that it was in the process of hiring two insurance analyst trainees and augmenting its computer capabilities to reduce the time needed to perform network access and adequacy review.

Question: Please describe the current network access and adequacy standards in regard to: a) inpatient and outpatient facilities that provide treatment for substance use disorders and b) behavioral health care.

Response:

The regulations require access to Inpatient psychiatric services and residential substance abuse treatment for adults, adolescents and children within 45 miles or 60 minutes driving time, whichever is less, of 90 percent of members within each county or sub-area.

In regard to health care professionals, the access standard for psychiatrists is 45 miles or

60 minutes and the access standard for non-physician behavioral health and substance abuse treatment providers is 20 miles or 30 minutes driving time, whichever is less, of 90 percent of members within each county or sub-area.

Question: How many new health benefits plans were reviewed and approved for network access and adequacy by the department in FY 2016? How many active health benefits plans received an annual review for network access and adequacy in FY 2016? What is the total number of health benefits plans, both new and active, approved by the department to be offered in the State in FY 2016?



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Response:

The Department reviews the medical/hospital networks that carriers offer in the fully insured market and to Medicaid beneficiaries (the Department of Human Services also reviews Medicaid networks under its own standards, and approval is required from both agencies). An increasing number of carriers are offering multiple network options. In 2016, carriers filed each of their networks electronically. The Department reviewed a total of 19 networks from these carriers.

The Department approved two new networks in 2017, both offered by Aetna Life

Insurance Company. The Aetna Whole Health Meridian Network is a tiered network limited to Monmouth and Ocean counties. The Aetna Whole Health Virtua Network is a tiered network limited to Burlington and Camden Counties.

Question: Were any proposed or active health benefits plan networks deemed inadequate and carriers required to revise their network either at the time of filing or during an annual review in FY 2016? Please explain.

Response:

Yes. During the course of reviews of carriers’ networks to determine whether they meet the Department’s standards, the Department routinely requires carriers to augment the network to achieve adequacy. The Department also requires carriers to report significant changes to a network when they occur, requires quarterly updates to previously approved networks, and monitors consumer complaints and IURO decisions so as to ensure that the network remains adequate. Due to limited providers practicing in a particular specialty or within a certain geographic area, there are occasions when an in-network provider may be unavailable; however, the Department’s rules require the carriers to grant in-plan exceptions for their members to obtain treatment from an out-of-network provider with the member’s cost-sharing limited to in-network cost-sharing.

Question: Please provide an update of the department’s efforts to hire additional staff and to augment computer capabilities to support network access and adequacy review. What are the costs of these efforts, and the source of funds for those expenses?

Response:

In 2016, the Department took several measures to increase the efficiency of its evaluation and monitoring of the adequacy of provider networks. It entered into a contract with Quest Analytics (“Quest”) in order to review networks more quickly and frequently and to more efficiently compare networks across plans. Quest is nationally recognized for its software tools designed to measure and analyze provider networks based on geo-access criteria. All carriers in New Jersey are now required to submit their provider networks electronically to Quest so that Quest can apply an algorithm based on the Department’s geo-access regulations. The Department is provided with a breakdown of every carrier’s network by county and specialty. This process speeds the identification of potential areas in which the carrier is meeting less than 90% compliance with an access standard.



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The Department also hired two additional staff to coincide with the implementation of the Quest contract. These individuals are dedicated to evaluating and monitoring provider networks. Whereas the Department previously reviewed networks on an annual basis with more frequent monitoring as necessary, the Department, through use of the Quest Software, is now requiring carriers to submit their networks electronically on a quarterly basis. The Department is also reviewing more closely limited services networks, such as dental and vision.

The contract with Quest Analytics was paid through dedicated funding at a cost of $108,808. 5. The “Health Care Quality Act (HCQA)” authorizes health insurance carriers to make decisions to deny, reduce, or terminate coverage of a health care service proposed to be delivered to a covered person based on the carrier’s physician’s clinical judgment as to whether the service is medically necessary. The HCQA also provides certain protections to covered persons in the event that there are no providers in the carrier’s network that can provide medically necessary care, allowing a covered person to request what is commonly known as an “in-plan exception.” Under the HCQA, medical necessity is determined through Utilization Management (UM) review, a system for reviewing the appropriate and efficient allocation of health care services under a health benefits plan according to specified guidelines. The purpose of UM review is to determine whether, or to what extent, a health care service given or proposed to be given to a covered person should or will be reimbursed, covered, paid for, or otherwise provided under the health benefits plan. A carrier’s UM program is required to be administered under the direction of a physician licensed to practice in this State under the clinical direction of the carrier’s medical director. UM decisions must be based on written clinical criteria and protocols developed with involvement from practicing physicians and other licensed health care providers within the carrier’s network and must be based on generally accepted medical standards. Any decision to deny payment for a requested service must be made according to these statutory guidelines.

Further, a carrier with an UM program is required to provide notice and allow insureds and their health care providers to appeal the carrier’s decisions through the Independent Health Care Appeals Program (IHCAP) established under N.J.S.A.26:2S-11 and administered by the department. The department contracts through the State procurement process with multiple Independent Utilization Review Organizations, to perform both the preliminary and full reviews of the cases presented to the IHCAP. Carriers bear the costs of both the preliminary and full review.

Question: Please describe how the department monitors a carrier’s UM review process for compliance with the HCQA.

Response: Each year, the Department requires carriers to submit a description of their utilization

management appeal process in order to ensure it is compliant with regulations. The



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Department finds, however, that complaint investigators in the Office of Managed Care are better positioned to monitor compliance through investigation of member complaints. A substantial number of complaints involve appeals of denied services.

In investigating these cases, staff can determine whether the carrier rendered timely

utilization management decisions, provided proper notice of denials, and followed the appeal process in accordance with the regulations. If staff determines that the carrier failed to comply in any of these areas, the member is permitted to immediately proceed to an external appeal. The carrier is also required to address those areas in which it is not demonstrating compliance with the utilization management process. Failure to do so may lead to enforcement action.

Question: Please provide an overview of the number and type of appeals the department has received through the IHCAP in FY 2016 and thus far in FY 2017, and how those appeals were resolved.

Response:

The chart below provides information of the number and type of appeals received through the IHCAP in FY 2016 and to date in FY 2017.

FY 2016 2017

Category Total Total

Covered medication 133 241

Inpatient admission 127 155

Outpatient medical treatment/diagnostic testing 58 61

Home Health Care 55 32

Reduction of acuity level 53 69

Inpatient hospital days 51 74

In-patient behavioral health treatment 50 48

Outpatient rehabilitation therapy 40 36

Dental 22 18

In-network exceptions 21 19

Surgical procedures 18 28

DME and/or supplies 18 26

Skilled nursing facility 17 20

Experimental/investigational 16 20



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Category Total Total

Other 15 13

Total 694 860

Question: Please indicate the number of appeals the department has received through the IHCAP in FY 2016 and thus far in FY 2017 that involve a covered person’s request for an in-plan exception, and how those appeals were resolved.

Response:

The chart below shows the FY 2016 IHCAP uphold and reversal rates by carrier. We do not have information specific to in-plan exception uphold and reversal rates.

INDEPENDENT HEALTH CARE APPEALS PROGRAM FISCAL YEAR 2016

IURO Determination

Carrier

Market Total Disagree % Disagree Agree With Plan

% Agree With Plan

Share* Appeals With Plan With Plan

Completed

Aetna Health 9.70% 24 13 54.2% 11 45.8%

AmeriChoice**

223 109 48.9% 114 51.1%

Amerigroup 6.50% 70 42 60.0% 28 40.0%

AmeriHealth 5.20% 35 5 14.3% 30 85.7%

Cigna 1.20% 21 12 57.1% 9 42.9%

Horizon 51.10% 262 125 47.7% 137 52.2%

Oxford**

36 17 47.2% 19 52.8%

United**

9 4 44.4% 5 55.6%

Health Republic 1.60% 8 6 75.0% 2 25.0%

Wellcare 1.80% 4 3 75.0% 1 25.0%

Total

692 336 48.6% 356 51.4%

** AmeriChoice (now d/b/a United Healthcare Community Plan), Oxford and United are all owned by UnitedHealth Group. The combined market share is 22.0%.

INDEPENDENT HEALTH CARE APPEALS PROGRAM FY 17 TO DATE: JULY 1, 2016 – APRIL 6, 2017



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IURO Determination

Carrier Total

Appeals Completed

Disagree With Plan

% Disagree With Plan

Agree With Plan

% Agree With Plan

Aetna Health 30 15 50% 15 50%

AmeriChoice** 191 114 60% 77 40%

Amerigroup 68 30 44% 38 56%

AmeriHealth 45 16 35% 29 65%

Cigna 9 2 22% 7 77%

Horizon 468 277 59% 191 41%

Health Republic 11 5 45% 6 55%

Nippon 1 1 100% 0 100%

Wellcare 4 4 100% 0 0%

Oxford** 33 19 57% 14 43%

United**

Total 860 483 56% 377 44%

Question: How many appeals through the IHCAP from FY 2010 to present have concerned the coverage of inpatient and outpatient treatment of substance use disorder? Please indicate the carrier associated with each appeal, and how those

appeals were resolved. Response:

INDEPENDENT HEALTH CARE APPEALS PROGRAM (SUBSTANCE ABUSE) FISCAL YEARS 2010 - 2017

IURO Determination

Carrier Total

Appeals Upheld % Upheld

Reversed/ Modified

% Reversed/ Modified

Aetna Health 14 6 42.9% 8 57.1%

Amerigroup 2 1 50% 1 50%

AmeriHealth 4 3 75% 1 25%

Cigna 15 8 53.3% 7 46.7%

Horizon 92 65 70.7% 27 29.3%

Nippon 2 0 0% 2 100%

Oxford 31 20 64.5% 11 35.5%

UHC 2 2 100% 0 0%

Total 148 99 67% 49 33%



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Question: What factors does the IHCAP use to resolve appeals regarding the coverage of inpatient and outpatient treatment of substance use disorder?

Response:

All appeals without regard to the nature of the treatment sought are reviewed by independent physicians who are board certified in the specialty area of the case and are in active practice. Many of the physician reviewers are members of professional organizations, on-staff at large university hospitals, have professorships and published peer reviewed articles.

The independent physician’s clinical assessment of the member is based on a review of

all medical documentation submitted by the carrier and the member. Determinations of the level of care needed by the member and the duration of treatment are based on nationally recognized and accepted practice guidelines. The independent physicians consult the most appropriate and current guidelines available. A review of the decisions rendered by independent physicians show that they often use both the American Society of Addiction Medicine (“ASAM”) criteria and Practice Guidelines developed by the American Psychiatric Association.

6a. Surplus lines insurance is insurance coverage that is not available from insurers licensed in the State and which must be purchased from a non-admitted carrier. Surplus lines insurers provide the marketplace with coverage for catastrophic-prone risks and risks that are declined by the standard underwriting and rating process of admitted insurance carriers. The methods for the regulation and collection of surplus lines insurance premium taxes were revised by P.L.2011, c.119 to comply with the federal “Nonadmitted and Reinsurance Reform Act of 2010” (NRRA), which was passed by Congress as part of the “Dodd-Frank Wall Street Reform and Consumer Protection Act.” Prior to the enactment of NRRA, states shared surplus lines premium tax revenue based on the location of the insured’s various risks. Currently, NRRA provides that states may enter into multi-state compacts or agreements with one or more other states. If a state does not join such an agreement, it may collect 100 percent of the taxes on surplus lines premiums in which the insured is located in its state, otherwise known as a “home-state” insured. This includes the continued ability to collect all premium taxes associated with “home-state” insureds for their risks located in other states. However, a state that does not participate in a compact or agreement is precluded from collecting surplus lines premium taxes attributable to risks situated in its state that belong to the home-state insureds of other jurisdictions. The Commissioner of Banking and Insurance was authorized pursuant to P.L.2011, c.119 to enter into compacts or agreements with other states with respect to the collection of surplus lines premium taxes in order to maximize State tax revenue. In response to FY 2016 OLS Discussion Points, the department stated that it was not in negotiations with any other states regarding participation in an agreement or compact to collect surplus lines premium taxes and that the department had determined it was not advantageous for both consumer protection and the State to contemplate negotiations to participate in such an agreement or compact. In the absence of an interstate compact regarding future surplus lines tax collections, all surplus lines



23

premiums for “home-state” insureds are assessed the five percent surplus lines premium tax, even if the premiums are on risks located out of the State. According to DOBI, the State collected $79.8 million in revenue from the surplus lines premium tax in 2015, of which approximately 10 percent was attributable to policies that include out-of-State exposures.

Question: Please provide the total surplus lines premium tax amount charged and collected for FY 2016 and estimated to be charged and collected for FY 2017 and FY 2018. Please provide the number of payers of the tax in FY 2016 and the estimated number of payers in FY 2017 and FY 2018. How is this revenue utilized?

Response: 2016: $74.4M (750 s/l producer and 16 IPC filers) 2017: $75.0M est. 2018: $75.0M est.

Question: How much of the revenue in FY 2016 is derived from policies that include out-of-State exposures? Please indicate the number of payers of the tax in FY 2016

that have policies that include out-of-State exposures. Response:

Ten percent of the surplus lines tax is attributable to policies that include out-of-State exposures, which includes both surplus lines producers and independently procured filers. The total number of payers is 149, which includes 138 surplus lines producers and 11 independently procured filers.

Question: Please indicate the amount of tax charged, but yet to be collected from FY 2012 to FY 2016. In each year, please identify the amount of tax yet to be collected that is attributable to policies that include out-of-State exposures.

Response:

The tax revenue due for 2012 – 2016 has been collected for all policies reported.

Question: Please provide the surplus lines tax rate assessed in the states that are in the vicinity of New Jersey, including: Pennsylvania, Maryland, Delaware, New York and Connecticut, if it has changed in the last two years.

Response:

The surplus lines tax for neighboring states is:

Pennsylvania 3 percent, plus a $25 stamping fee



24

Maryland 3 percent

Delaware 3 percent (changed from 2 percent)

Connecticut 4 percent

New York 3.6 percent, plus a 0.17 percent stamping fee (decreased stamping fee from .2 percent).

New Jersey’s present surplus lines tax rate is 5 percent.

Question: Does the department continue to consider it not to be advantageous for the State to participate in a multi-state compact? If so, please explain the basis for that determination.

Response:

The Department is not currently in negotiations with any other states regarding participation in an agreement or compact to collect surplus lines premium taxes. No plans are contemplated to open negotiations for this purpose. The Department determined it is advantageous for New Jersey to adopt the “home state” approach with respect to the revenue it would generate for the State. Further, the Department is not aware of any successfully implemented multi-state compacts in which it could participate.

6b. The New Jersey Surplus Lines Insurance Guaranty Fund, P.L.1984, c.101 (N.J.S.A.17:22-6.70 et seq.), administers the claims of insolvent surplus lines insurers that provided medical malpractice and homeowners coverage as eligible non-admitted insurers in New Jersey. All surplus lines companies in New Jersey are required to be members of the fund and to contribute funds for its operation. The fund is managed by the New Jersey Property-Liability Insurance Guaranty Association (PLIGA). PLIGA is a “private, nonprofit, unincorporated, legal entity” given certain statutory obligations to act as a safety net for policyholders and claimants in the property and casualty insurance marketplace pursuant to N.J.S.A.17:30A-1 et seq. As an independent entity, PLIGA’s budget is not included in the State budget. Each member insurer was responsible for making an initial one-time payment of $25,000 into the fund. Additionally, a surcharge, in an amount determined by DOBI, is collected on any surplus lines coverage policy issued in New Jersey. The surcharge is collected by the surplus lines agent and forwarded to the fund on a quarterly basis. The amount may be adjusted annually to meet projected expenses of the fund, but it may not exceed four percent of the policy premium pursuant to section 6 of P.L.1984, c.101 (N.J.S.A.17:22-6.75). However, the surcharge has not been collected since 1993 and, according to DOBI FY 2016 OLS Discussion Point responses, the Commissioner of Banking and Insurance has not found reinstatement of the surcharge to be necessary to meet the current and projected obligations and expenses of the fund. Furthermore, according to FY 2016 OLS Discussion Point responses, the department ceased to collect the initial $25,000 payment as of July 21, 2011 due to limits imposed by the federal “Dodd-Frank Wall Street Reform and Consumer Protection Act.”

On December 31, 2015, the fund carried a balance of $12.2 million, an increase of over $1.0 million from December 31, 2014, attributable for the most part to distributions collected in



25

connection with insolvency proceedings. According to the Office of Management and Budget in the Department of the Treasury, the FY 18 Budget Recommendation anticipates the transfer of $8.0 million from the fund to the General Fund (page C-3, included in Insurance – Licenses and Other Fees). Such a transfer is subject to legislative approval.

Question: Please provide an accounting of all resources and expenditures for the Surplus Lines Insurance Guaranty Fund for 2016 and estimates thereof for 2017 and 2018, including, with respect to revenues: assessments, investment earnings, and any other form of income; and with respect to expenditures: claim disbursements,

administrative expenses, any other type of expenses, and transfers to other funds (both State and PLIGA held). Please include the balance of the fund, both at the beginning of each year and projected for the end of each year.

Response:

New Jersey Surplus Lines Insurance Guaranty Fund Schedule of Balances, Receipts and Disbursements For Fiscal Years 2016, 2017 and 2018 estimated

FY2016

FY2017

FY2018 (est)

Beginning Balance $12,202,960

$12,226,838

$12,172,838

Receipts: Assessments 0

0

0

Liquidation Dividend 7,203

0

0

Interest/Other Income 91,944

56,200

50,000

Disbursements: Claims 27,473 70,700 64,000

Administrative 47,796

39,500

36,000

Ending Balance $12,226,838

$12,172,838

12,122,838

Question: Please provide the outstanding loss reserves for the most recent year available, and for the previous year.



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Response: Loss Reserves for 2016 = $1,044,204 Loss Reserves for 2015 = $1,311,730

Question: Does the department recommend any legislative action in regard to the fund?

Response:

Because the Department is prohibited by Federal law from collecting the one-time $25,000 assessment from surplus line companies pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, 15 U.S.C. 8201 et seq., prospective funding for the SLIGF is limited. Additionally, NJ is the only state with a guaranty fund for surplus lines insurance. Should legislation which seeks to transfer SLIGF funds to the State Budget be introduced, it might also seek to disband the SLIGF, as the consumer protections sought to be provided by the SLIGF could be considered illusory if the fund is depleted but not disbanded.

7a. The State Auditor issued a report on January 19, 2017 regarding unclaimed life insurance benefits. According to the report, insurance companies are currently the subject of several multi-state investigations for their use of the Social Security Administration’s Death Master File (DMF) or other similar databases to identify deceased policyholders to stop annuity payments but not to identify unclaimed life insurance benefits. Also under scrutiny are certain companies’ practices to terminate life insurance policies for non-payment once they stop receiving premiums from the deceased policyholder or once the accumulated cash value of the policy has been depleted without attempting to contact the beneficiary. These investigations have resulted in dozens of multi-state Regulatory Settlement Agreements (RSAs) with the industry. Under the agreements, insurance companies have committed themselves to altering some of their practices regarding unclaimed life insurance benefits and have paid out billions in previously unclaimed benefits to their lawful beneficiaries with hundreds of millions in additional unclaimed life insurance benefits escheating to the respective states’ Unclaimed Property Administrator (UPA). Under current New Jersey law and regulations, insurance companies are only obligated to pay life insurance death benefits after a claim has been submitted by a designated beneficiary along with the policyholder’s proof of death.

Question: Please describe the department’s involvement in the multi-state investigations into insurance company practices relating to unclaimed life insurance benefits. How many investigations has the department led or co-led?

Response:

The Department has been a signatory on every DMF RSA to date against companies that do business in New Jersey. The Department was a lead state on the Prudential DMF examination. See attached spreadsheet.



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Question: What is the department’s view of the industry’s practices relating to unclaimed life insurance benefits prior to the investigations? In the department’s view, were the practices fair to consumers?

Response:

The RSAs state that insurance regulators nationwide have concerns with insurance companies’ use of the DMF for the singular purpose of terminating annuity payments and not to search for life insurance policies covering the same deceased persons. They do not find and the companies do not admit to any statutory or regulatory violations. Following entry of the RSAs, 23 states enacted specific statutes to address DMF use. Many of these statutes mandate affirmative use of the DMF even when a company has not used the database previously. The question of whether state law should mandate and control how the DMF is used by insurance companies is a policy call for the Legislature and the Governor particularly since required use of the DMF may be costly for smaller insurance companies.

Question: For each insurance company with which the department has entered into a multi-state RSA concerning the treatment of unclaimed life insurance benefits, please provide: a) the name of the company; b) the date of the agreement; c) the lead investigative entity; d) the total dollar amount of previously unclaimed life insurance benefits that has been disbursed to New Jersey beneficiaries as a result of the agreement; and e) the total dollar amount of previously unclaimed life insurance benefits that has escheated to the State UPA for custodial safekeeping as a result of the agreement.

Response:

See the attached spreadsheet. The Department does not, at this time, have all of the company specific information on the amount of previously unclaimed life insurance benefits disbursed to New Jersey beneficiaries as a result of the RSAs. The most current aggregate information we have is that $194,184,125.82 was distributed to New Jersey beneficiaries as a result of the RSAs as of September 20, 2016. The Department has no information on the amount of funds that escheated to the State UPA as a result of the RSAs as this information is outside of the Department’s regulatory jurisdiction.

Question: Please list the insurance companies with which the department has a RSA pending concerning unclaimed life insurance benefit practices.

Response: Pending RSA Agreements are confidential, as they involve ongoing investigative matters.

Question: Please list the companies licensed to issue life insurance policies in New Jersey with which the department does not have a concluded or pending RSA concerning the treatment of unclaimed life insurance benefits. Does the department have the power to compel these companies to adopt unclaimed life insurance benefit practices that are stipulated in adopted RSAs?



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Response:

The only companies for whom the entry of a RSA is applicable are companies that: (1) issued individual life insurance, or group life insurance for which they performed record keeping, (2) issued annuities, and (3) used the DMF to terminate annuity payments but not to identify deceased persons insured by the company. The current and pending RSAs cover the vast majority of the market where insurers engaged in the sale of both products. For the reasons stated in B above, the Department cannot compel insurance companies to adopt the practices stipulated in the RSAs. 7b. In December of 2016, the department announced a collaborative effort with the National Association of Insurance Commissioners to provide electronic services to New Jersey consumers that will aid them in finding lost life insurance policies and annuities sold in New Jersey. The automated tool provides assistance to life insurance or annuity beneficiaries in cases where they believe available coverage exists, but cannot find the original policy and do not have policy information. Individuals who believe that they are beneficiaries, as well as executors and legal representatives of the deceased can submit a request to insurance companies licensed in New Jersey to search for a missing life insurance policy or annuity contract. The Life Insurance Policy Locator is found on the DOBI website: https://www20.state.nj.us/DOBI_UIC/LocatePolicy.

Question: To date, how many inquiries have been made using this electronic service? How many successful matches have been made between beneficiaries and unclaimed life insurance benefits? What is the total dollar amount of previously unclaimed life insurance benefits that has been disbursed to New Jersey beneficiaries as a result of this tool?

Response:

The Department has collaborated with the NAIC on development and operation of the service to enable consumers to locate lost and/or unknown life insurance policies and annuities. Since the beginning of the year, there have been a total of 189 requests through the New Jersey tool, and 326 through the NAIC search function for New Jersey. The New Jersey tool was implemented as a temporary measure pending completion of the NAIC nationwide tool, and as such it has not collected data on the number of matches or amounts distributed as a result of a search. According to data from the NAIC, for that search tool through February there have been 22 matches for New Jersey, and a total of $6,766 distributed as a result of searches.

Question: Please identify the initial and ongoing costs of this effort, as well as the funding source?

Response:

Development of the Department’s search tool was performed by staff at the Department. Based on the amount of staff time spent building the tool, the Department

https://www20.state.nj.us/DOBI_UIC/LocatePolicy



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estimates that the cost of development was approximately $17,755. NAIC’s development of its search tool did not result in any charges to the Department or expenditure of State funds.

8. On March 1, 2017, the Commonwealth Court of Pennsylvania placed Penn Treaty Network America Insurance Company and its subsidiary, American Network Insurance Company, in liquidation. The companies provided long-term care insurance to policyholders in all 50 states and the District of Columbia. As of March 1, 2017, the life and health insurance guaranty associations in the states where Penn Treaty and American Network were licensed to do business have assumed responsibility for their policies. This includes continuing coverage and paying eligible claims, subject to guaranty association coverage limits and the terms and conditions of coverage. Under the “New Jersey Life and Health Insurance Guaranty Association Act,” P.L.1991, c.208 (N.J.S.A.17B:32A-1 et seq.), the New Jersey Life and Health Insurance Guaranty Association acts as an insurance backstop, up to established statutory limits, whenever an insurer issuing certain life and health insurance policies or annuities becomes insolvent. There is no limit of protection provided by the guaranty association for health insurance claims. The guaranty association assesses member insurers to carry out its administrative functions and its duties to pay out on claims of insolvent member insurers. The guaranty association is a private entity; however, it may work in cooperation with the department in fulfilling its role of protecting New Jersey policyholders of insolvent life and health insurance companies.

Question: Is the department involved in the New Jersey Life and Health Insurance Guaranty Association’s assumption of responsibility for Penn Treaty and American Network policies held by State residents? Is the department taking any action on behalf of affected New Jersey policyholders?

Response:

Yes, the Department has been involved in the GA’s assumption of the policies held by NJ residents. The Department has had a series of meetings with the GA representatives to ensure that NJ policyholders (1) are treated fairly, (2) have all the information needed to make informed decisions about their policy, and (3) understand the valuable protection afforded by the NJ Guaranty Association.

Additionally, the Department has reviewed legal documents, reshaped many of the offers and proposals presented to us, reviewed and commented on preliminary rate increase requests, and reviewed and commented on draft notices to policyholders, including FAQs and options to mitigate the rate increases requested by the GA.

The Department is currently reviewing the official rate increase filing submitted by the

NJ Guaranty Association.

Question: How many New Jersey policyholders will be affected by the liquidation of Penn Treaty and American Network? Please provide information on the limits of coverage included in Penn Treaty and American Network long-term care insurance policies.



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Response:

Based on the latest count available, there are approximately 1,865 NJ residents as of the liquidation date. There are another 705 policies that were originally issued in NJ but the policyholders have moved to other states. These 705 policyholders are covered by the other state guaranty associations. The NJ GA provides unlimited protection on LTC coverage. Most other states cap the guaranty fund’s protection, typically at $300,000.

Question: Does the unlimited protection provided by the New Jersey Life and Health

Insurance Guaranty Association for health insurance claims extend to long-term care insurance claims?

Response:

Yes, all NJ residents (i.e., American Network Insurance Company policyholders that resided in New Jersey on the date of ANIC’s liquidation, March 1, 2017) have unlimited guaranty fund protection.

Question: Please provide an accounting of all resources and expenditures of the guaranty association for 2016 and estimates thereof for 2017 and 2018, including, with respect to revenues: assessments, investment earnings, and any other form of income; and with respect to expenditures: claims disbursements, administrative expenses, and any other type of expenses. Please provide the guaranty association’s fund balance at the beginning of 2017 and its projected fund balance for the end of 2017 and 2018.

Response:

New Jersey Life & Health Insurance Guaranty Association Schedule of Balances, Receipts and Disbursements

For Calendar Years 2016 & 2017 (Estimated)

(in thousands)

CY2016

CY2017 (Est)

Beginning Balance $16,745

$15,912

Receipts:

Interest/Other Income 268

250

Disbursements: Claims 0 0

Administrative 1,101 1,061

Ending Balance $15,912 $15,101



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*2018 estimates not available.

Question: Thus far, what amount of claims disbursements is attributable to the Penn Treaty and American Network liquidation? Please identify the estimated claims disbursement amount regarding the liquidation in 2017 and 2018.

Response:

To date, no claims disbursements attributable to either of Penn Treaty or American Network in Liquidation because the Orders of Liquidation were only entered on March 1, 2017, and these Orders were needed to trigger guaranty fund coverage. LHIGA’s estimated liability for NJ’s ANIC policyholders absent any premium increases and/or policyholder elected benefit reductions is approximately $211 million. There is no liability in NJ for Penn Treaty because it did not conduct business here. These amounts will be paid out over a long period of time as LTC claims are made and new claimants need coverage; however, LHIGA has assessed and/or issued a note to cover 90% of the current liability estimates.

Question: Are increases in either consumer premiums or insurer assessments, or both, expected as the result of this liquidation?

Response:

The NJ Guaranty Association is seeking a significant rate increase from ANIC policyholders (e.g., increases are in excess of 100% for the majority of policyholders). The Department is reviewing this proposed increase.

Question: Does the department recommend any legislative action regarding the guaranty association coverage limit for long-term care insurance?

Response:

The NAIC is considering various options to address LTC insurance issues when a receivership occurs. Options under discussion include limiting the Health insurance industry’s burden on potential future LTC assessments to some percentage – potentially 50% of the total costs. Today, for example, we understand that perhaps 70% of the burden for the Penn Treaty/ANIC collapse rests with the Health insurers. Our Department is participating in this work stream at NAIC as a national approach to this issue could be important to ensure uniformity and fairness for all LTC policyholders and life and health insurers.

9. In responding to prior OLS Discussion Point questions, the department has provided a broad summary of the types of fines it collects from the different industries it regulates. Insurance companies are typically fined for improper claim denials or underpayments, use of unapproved policy forms or rates, transacting business without a license and failing to file required reports. Insurance producers are generally fined for misappropriation of premiums, failure to secure coverage, and forgery. Licensed financial entities and State chartered credit unions are usually fined as a result of examinations, consumer complaint handling, and enforcement actions. All fine collections are designated for the General Fund.



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The total amount of funds recovered on behalf of insurance industry consumer complaintants is estimated to decrease from $8.5 million in FY 2015 to $4.6 million in FY 2018, according to evaluation data on page D-26 of the Governor’s FY 2018 Budget.

Question: Please provide an inventory of all recoveries for consumers collected by the department for FY 2016 and thus far in FY 2017. Please detail this information by division.

Response:

Consumer Recoveries FY 2016 FY 2017

to date

Insurance $8,187,659 $4,558,653

Banking $413,667 $136,157

Real Estate $142,157.81 $276,927.62

Question: Please provide a detailed inventory of the fines levied and fines collected by the department for FY 2016 and thus far in FY 2017. Please detail this information by division.

Response:

Fines Levied FY 2016 FY 2017

to date

Insurance $4,813,500 $1,975,750

Banking $206,624 $133,624

Real Estate $125,797 $129,004

Fraud 3,684,366 1,494,700

Response

Fines Collected FY 2016 FY 2017

to date

Insurance $2,732,157* $1,752,463

Banking $505,560 $141,184

Real Estate $76,460 $80,829

Fraud $1,528,500 $849,653

*Prior to transfer to HINT

Please provide the collection rate for fines levied.



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Response: Collection rates are difficult to calculate since revenue is recorded when it is paid,

which is sometimes in a different fiscal year.

Based on this information, does the department conclude that there are any significant increases in industry behavior punishable by fines that warrant attention by the Legislature?

Response: The Department is not aware of any such significant increases in industry behavior.

Question: Please explain why the total amount of funds recovered on behalf of insurance industry consumer complaintants is estimated to continue its gradual decrease from $8.5 million in FY 2015 to $4.6 million in FY 2018.

Response: Many of the larger recoveries in prior years related to Sandy damage and those claims

are now resolved.

Also, other large recoveries may have resulted from practices that have since been addressed by statute and regulation, e.g. annuity suitability.

Have resources been redirected to other department priorities?

Response: There has been no redirection of resources.

Please provide the number of employees assigned to insurance consumer complaint investigations in FY 2015, FY 2016, FY 2017 as well as the number of employees projected to be assigned to that function in FY 2018.

Response:

Staff Assigned to Insurance Consumer Investigations

FY 2015 56

FY 2016 53

FY 2017 56

FY 2018 56



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10. The FY 2018 Budget Recommendation anticipates that DOBI will collect a total of $141.2 million in State and dedicated revenue in FY 2017 and $142.0 million in FY 2018 (pages C-3 and C-9). DOBI does not anticipate any federal revenue in FY 2017 or FY 2018 (page C-16). The FY 2018 Budget Recommendation (page D-28) also recommends $64.5 million in State and dedicated funds be appropriated for the department’s operations in FY 2018, which is only a $3,000 increase from the current year’s adjusted appropriations, but an $11.8 million increase over FY 2016 expenditures.

Question: Please provide for FY 2016: (a) a summary of all revenue collected through the department;

Response: FY 2016 Total Revenue $324,210,668

(b) the total amount of revenue that is dedicated to the department;

Response: FY 2016 Revenue Dedicated to the Department $68,081,995 (c) the amounts transferred to other departments, by department and purpose; and

Response: FY 2016 Motor Vehicle Commission $20,019,234 Security Responsibility Fund Department of Health $185,290,004 Charity Care Total $205,309,238

(d) the total remaining in the General Fund for other State purposes unrelated to the department’s scope of activities.

Response: All funds collected are related to the Departments scope of Activities. FY 2016 Deposited in the General Fund $50,819,435 (Fees and Fines)

11. The Division of Banking imposes two assessments on financial entities on or around October 1 of each year: a Banking Licensing Assessment and a Banking Depositor Assessment (N.J.S.A.17:1C-33 et seq.). The assessments are based on calendar year business for each company and fiscal year expenditures incurred by or on behalf of the Division of Banking, as



35

certified by the Office of Management and Budget in the Department of the Treasury. These certified expenses include, in addition to the direct cost of personal services, the cost of maintenance and operation, the cost of employee benefits and workers' compensation, rentals for space occupied in State-owned or State-leased buildings and all other direct and indirect costs of the administration of those functions, as well as any amounts remaining uncollected from the assessment of the previous fiscal year (N.J.S.A.17:1C-35).

Question: Please provide the total Banking Licensing Assessment charged and collected for FY 2016 and estimated to be charged and collected for FY 2017 and FY 2018. Please provide the total Banking Depositor Assessment charged and collected for FY 2016 and estimated to be charged and collected for FY 2017 and FY 2018. Please provide the number of payers of each assessment in FY 2016 and the estimated number of payers in FY 2017 and FY 2018.

Response: Banking Licensing Assessment

FY 2016

FY 2017

Estimated FY 2018

Charged $6,599,313.38 $7,436,000 $7,436,000 Collected $6,406,452.99 N/A N/A Payers 3401 Banking Depository Assessment

FY 2016

FY 2017

Estimated FY 2018

Charged $4,560,914.20 $5,587,000 $5,587,000 Collected $4,560,190.55 N/A N/A Payers 92

Question: Please provide the expenses of the division detailed in N.J.S.A.17:1C-35 and approved by the Office of Management and Budget in the Department of the Treasury for each assessment, as well as the number of employees dedicated to the division for FY 2016.

Response: Depositories

FY 2016

Salaries and Wages $2,646,342.31

Materials and Supplies $9,376.26

Services other than Personnel

$418,998.17

Maintenance and Fixed Charges

$17,580.00

Equipment $16.75

Subtotal $3,092,313.49



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Other Expenses

Administration Adjustments – 0

Fringe Benefits $1,155,917.68

Indirect costs $18,263.65

Building Operations and Maintenance

$212,327.67 7

Debt Service – Roebling Building $36,810.00

Cancelled Obligations $(5,576..93) 3)

Warren Street Parking Costs $6,000.00

Bank Street Parking Costs $2,287.76

Rent Calculation $2,456.02

Subtotal $1,426,485.87

Banking – Depository Total Expenses

$4,520,799.36

Number of Employees FY 2016 88

Office of Consumer Finance FY 2016



Services other than Personnel $617,043.49

Subtotal

$4,937,557.40

Administration Adjustments – $0


Indirect costs $18,263.65

Building Operations and Maintenance

$212,327.67

Debt Service – Roebling Building 10,162.00

Cancelled Obligations ($7,258.47)




Write-Off $0

Subtotal $2,061,026.92



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Banking - Office of Consumer

Finance Total Expenses $6,998,584.32

12a. The department imposes a special purpose apportionment for funding expenses incurred by the Division of Insurance (N.J.S.A.17:1C-19 et seq.). The apportionment is charged to all insurers writing most classes of insurance in the State (including, but not limited to: property; fire; flood; motor vehicle; life and health; accident; title; credit; personal liability; malpractice; homeowners; and any other specified kinds of insurance) and those health maintenance organizations (HMOs) granted a certificate of authority to operate in New Jersey pursuant to P.L.1973, c.337 (N.J.S.A.26:2J-1 et seq.). This apportionment is used for funding the activities of the division in regulating, monitoring and supervising these carriers. The apportionment of each carrier is based on the proportion that its net written premiums for the preceding calendar year bear to the combined net written premiums of all carriers in the preceding year, except that no carrier is required to pay an apportionment that exceeds 0.10 percent of its net written premiums. Each year, the Office of Management and Budget in the Department of the Treasury certifies to the Commissioner of Banking and Insurance, by category, the total amount of expenses incurred by or on behalf of the division. These expenses include, in addition to the direct cost of personal services, the cost of maintenance and operation, the cost of employee benefits and workers' compensation, rentals for space occupied in State-owned or State-leased buildings and all other direct and indirect costs of the administration of those functions, as well as any amounts remaining uncollected from the special purpose apportionment of the previous fiscal year (N.J.S.A.17:1C-20).

Question: Please provide the amount of the total special purpose apportionment charged and collected for FY 2016 and estimated to be charged and collected for FY 2017 and FY 2018. Please provide the number of payers of the apportionment in FY 2016 and the estimated number of payers in FY 2017 and FY 2018.

Response: Special Purpose Assessment

FY 2016 FY 2017 FY 2018

Estimated Estimated

Charged $33,904,645.17 $38,894,000 $38,894,000

Collected $33,900,795 N/A N/A

Payers 1009 1007 1007

Question: How many companies paid the individual maximum apportionment of 0.10 percent of their net written premiums in FY 2016? For each of these companies, please identify the assessed amount and the company’s net written premiums.

Response: The limit for Individual maximum apportionment is 0.05 percent of total Fraud expense

assessment.



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Only one company exceeded the maximum.

The amount assessed $1,156,551.99.

Company’s Net Written Premium was $ 5,180,715,032.

Question: Please provide the expenses of the division detailed in N.J.S.A.17:1C-20 and approved by the Office of Management and Budget in the Department of the Treasury and provide the number of employees dedicated to the division for FY 2016.

Response:

Special Purpose Assessment FY 2016



Services other than Personal $2,719,792.25

Maintenance and Fixed Charges $47,693.04

Additions, Improvements , and Equipment $111,684.32

Subtotal $22,665,071.91


Indirect Costs $124,287.70

Building Operations and Maintenance $1,444,931.16

Debt Service- Roebling Building $457,464.61

Warren Street Parking Costs $46,500.00 Cancelled Obligations Fiscal 2013- Fiscal 2015 -$21,108.89

Lockbox $2100.00


Rent Calculation

Subtotal $11,494,932.26

Total Expenses $34,160,004.17

Revenue $255,359

Write-Offs $0.00

Net Revenue $255,359



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Fiscal 2016 Assessment

$33,904,645.17

Number of Employees FY 2016 289 12b. In addition to the special purpose apportionment, several different statutes subject insurance carriers to additional assessments to reimburse the department for operating expenses, including the following:

1) An assessment on insurers for fraud prevention services, pursuant to P.L.1983, c.320 (N.J.S.A.17:33A-1 et seq.). The insurance fraud prevention assessment is levied on certain insurers for reimbursement of all costs related to the activities of the Office of the Insurance Fraud Prosecutor within the Department of Law and Public Safety and the Bureau of Fraud Deterrence within DOBI. This assessment is billed and collected by DOBI.

2) An assessment on all Small Employer Health Benefits Plan (SEH) carriers for the reasonable and necessary organizational and operating expenses of the SEH board of directors, pursuant to section 16 of P.L.1992, c.162 (N.J.S.A.17B:27A-32).

3) A biennial assessment on all Individual Health Coverage Program (IHCP) carriers for the reasonable and necessary organizational and operating expenses of the IHCP board of directors, pursuant to section 10 of P.L.1992, c.162 (N.J.S.A.17B:27A-11).

4) An assessment on companies writing motor vehicle liability insurance or motor vehicle liability bonds for the Motor Vehicle Security Responsibility Fund, pursuant to section 1 of P.L.1952, c.176 (N.J.S.A.39:6-58). The assessment is billed and collected by the department but used to reimburse the New Jersey Motor Vehicle Commission for eligible expenses.

5) An assessment on lines of insurance subject to the jurisdiction of the Division of Rate Counsel, an in-but-not-of agency in the Department of Treasury, pursuant to subsection b. of section 48 of P.L.2005, c.155 (N.J.S.A.52:27EE-48). This assessment is billed and collected by the department, but is used to reimburse the Division of Rate Counsel for expenses in connection with the administration of insurance rate cases pursuant to section 53 of P.L.2005, c.155 (N.J.S.A.52:27EE-53).

Question: Please provide an accounting of all assessments charged and collected by the department for FY 2016 and estimated to be charged and collected for FY 2017 and FY 2018. Please provide the number of payers of each assessment in FY 2016 and the estimated number of payers in FY 2017 and FY 2018. Please detail this information by source, as numbered above.

Response:

1) Fraud Assessment

Estimated Estimated



40

FY 2016 FY 2017 FY 2018

Charged $23,131,039.81 $29,207,000 $29,207,000

Collected $23,130,869 N/A N/A

Payers 990 990 990

2) Small Employers Health Insurance

Estimated Estimated

FY 2016 FY 2017 FY 2018

Charged $305,308 $375,000 $385,000

Collected $301,225 N/A N/A

Payers 11 10 10

3) Individual Health Coverage

Estimated Estimated

FY 2016 FY 2017 FY 2018

Charged $627,024 N/A $660,000

Collected $626,301 N/A N/A

Payers 33 N/A 25

4) Motor Vehicle Assessment

Estimated Estimated

FY 2016 FY 2017 FY 2018

Charged $ 20,019,233.98 $20,900,000 $20,900,000

Collected $19,996,522.05 N/A N/A

Payers 305 305 305

5) Rate Counsel Estimated Estimated

FY 2016 FY 2017 FY 2018

Charged $35,460 $75,000 $75,000

Collected $35,554.25 N/A N/A

Payers 90 90 90

Question: Please provide the FY 2016 organizational and operating expenses of the SEH board of directors and the number of employees dedicated to administering the program.

Response: The audited expenses per the 2016 audit report are $242,069.

Question: Please provide the FY 2016 organizational and operating expenses of the IHCP board of directors and the number of employees dedicated to administering the program.



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Response: The audited expenses per the 2016 audit report are $239,839.

Three employees administer both the IHC and the SEH programs.

12c. P.L.2016, c.38 limits the premium volume for any single contract of life insurance at $100 million per year for the purpose of calculating the annual special purpose apportionment and the insurance fraud prevention assessment in the case of foreign life insurers. Foreign life insurers mean those insurers not domiciled in New Jersey. While this law changes the allocation of the annual special purpose apportionment and insurance fraud prevention assessment, it does not affect the total amount collected under either revenue stream as any apportionment or assessment amount on foreign life insurers premiums excluded as being above the cap will be distributed on a pro rata basis among the life insurance companies domiciled in New Jersey, known as domestic life insurance companies.

Question: How many foreign life insurers does the department estimate will reach

the maximum premium volume in regard to the annual special purpose apportionment and insurance fraud assessment in FY 2017 and FY 2018? What is the total amount of apportionment and assessment that the department estimates will be re-allocated to domestic life insurance companies as a result of P.L.2016, c.38? By what amount will the average apportionment and assessment amounts charged to domestic life insurance companies increase?

Response: The bill will be implemented for the FY 2017 assessments which will be calculated

during the Fall of 2017. At this point the information to answer the question is not available. 12d. N.J.S.A.17:1C-31 caps the combined amount of all DOBI insurance industry assessments in a given fiscal year at 0.25 percent of the combined net written premiums received by all companies for the previous year. In response to FY 2017 OLS Discussion Point questions, the department noted that combined net written premiums for FY 2015 were $50.4 billion, with companies being assessed a total amount of $61.7 million. As a reference, the maximum total amount the State was permitted to assess insurance companies in FY 2016 based on the FY 2015 net written premiums total was approximately $126.0 million. The department estimated that the combined net written premiums would rise to $52.5 billion in FY 2016.

Question: Please provide the CY 2016 and the estimated CY 2017 combined net

written premiums for all insurers, breaking down these data by line of insurance. Response:

The net written premiums for CY 2016 have not yet been calculated so the exact total for 2016 or the break down for line of insurance is not available.

CY 2016 Estimated $52,500,000,000 CY 2017 Estimated $55,000,000,000



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Question: Please provide the total amount assessed to, and collected from, companies in FY 2016 and the amount estimated to be collected and charged in FY 2017.

Response:

Insurance Assessments

FY 2016 FY 2017

Special Purpose $33,904,645 $38,894,000

Fraud $23,131,040 $29,207,000

Motor Vehicle $20,019,234 $20,900,000

Rate Counsel $35,460 $75,000

$77,090,379 $89,076,000

Collected

Special Purpose $33,899,036 Fraud $22,976,562 Motor Vehicle $19,996,522 Rate Counsel $35,460

$76,907,580

13a. The New Jersey Real Estate Commission (REC) was created to administer and enforce New Jersey's real estate licensing law (N.J.S.A.45:15-1 et seq.). The REC issues licenses to real estate brokers and salespersons, real estate schools, and course instructors, and also establishes standards of practice for the real estate brokerage profession. The REC collects revenue from the issuance of licenses on a biennial basis, with FY 2018 not being a renewal year in the commission’s two-year licensing schedule, as well as from the collection of certain fines.

Question: Please provide the amount of revenue collected by the REC for FY 2016 and estimated to be collected for FY 2017 and FY 2018. Please detail the source of this revenue by type of transaction; for example: fines; new licenses; license renewals; or other regulatory fees.

Response:

Real Estate Commission

Revenue FY 2016 FY 2017* FY 2018

As of 4/4/17

License Fees $3,834,584.00 $1,726,706.96 $3,900,000

Fines $76,460.00 $81,769.44

Total Revenue $3,911,044.00 $1,808,476.40 $3,900,000



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Please indicate the number of each transaction within each category.

Response:

Real Estate License FY 2017

Transactions to Date

Original applications 5828

Individual Hires 15282

Individual Terminations 13015

Company Reinstatements 169

Company Terminations 275

Miscellaneous Transactions 87

Total 34656

What factors account for the increase in licensed brokers and salespersons from 80,456 in FY 2015 to an estimated 95,000 in FY 2018 (page D-27 of Governor’s FY 2018 Budget Recommendation)?

Response:

The growth of the real estate market has been enjoying a steady increase over the past few years. Based on this growth and a current review of the industry statistics for the early part of this year, the upward trend in the number of real estate sales, both pending and closed, is on the rise. An active real estate market typically has a positive impact on the number of professionals seeking real estate licenses.

13b. The federal “Housing and Economic Recovery Act of 2008” (Pub.L.110-289) included the “Secure and Fair Enforcement for Mortgage Licensing Act of 2008” (SAFE Act). The SAFE Act is designed to enhance consumer protection and reduce fraud through the setting of minimum standards for the licensing and registration of state-licensed mortgage loan originators. These requirements include minimum education requirements, ethics training, background checks, proof of financial responsibility, bonding requirements and the successful completion of a written exam.

The SAFE Act also requires the states to participate in the Nationwide Mortgage Licensing System (NMLS), established by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators. The NMLS is a database for non-depository financial services licensing and registration. It is the official system for companies and individuals to apply for, amend, renew and surrender license authorities managed through NMLS by state or territorial governmental agencies. NMLS itself does not grant or deny licenses.



44

The State complied with these federal standards by enacting the “New Jersey Residential Mortgage Lending Act,” sections 1 through 39 of P.L.2009, c.53 (N.J.S.A.17:11C-51 et seq.) as the statutory framework for mortgage lenders.

Question: Please provide the number of licenses, separated into individual, branch, and company categories, that was newly granted in FY 2016 and thus far in FY 2017.

Response:

Newly Granted Licenses FY 2016 FY 2017

to date

Individuals 4029 2603

Companies 74 54

Branches 399 370 What was the total number of licensed individuals or entities in each of these categories in FY 2016 and thus far in FY 2017?

Response:

Total Licensees FY 2016 FY 2017

to date

Individuals 12236 12856

Companies 730 753

Branches 1277 1427

Question: Please indicate how much revenue was collected from license application fees, separated into individual, branch, and company categories, in FY 2016 and thus far in FY 2017.

Response:

Revenue FY 2016 FY 2017

to date

Individuals $708,950 $480,400

Companies $81,600 $81,600

Branches $413,000 $367,000

13c. The department also licenses and regulates debt adjusters (P.L.1979, c.16 (N.J.S.A.17:16G-1 et seq.)); home repair contractors (P.L.1968, c.224 (N.J.S.A.17:16C-95 et seq.)); insurance producers (P.L.2001, c. 210 (N.J.S.A.17:22A-26 et seq.)); pawnbrokers (N.J.S.A.45:22-1 et seq.); and public adjusters (P.L.1993, c.66 (N.J.S.A.17:22B-1 et seq.)). Each of these individuals pays a fee to be licensed, and in some cases, to renew that license. These fees are intended to fund the administrative costs of overseeing these professions.



45

Question: Please provide the current initial fee and the renewal fee, along with the required frequency of renewal, for each of these professions. Please indicate if any of these fees have changed in the last three years.

Response:

License Type Initial Fee Renewal Fee Renewal

Frequency

Debt Adjuster 300 None Biennial

Home Repair Contractor 300 None Biennial

Pawn Brokers 500 None Biennial

Insurance Producers 150 150 Biennial

Public Adjusters 75 75 Biennial

Question: Please provide the following information for FY 2016 and FY 2017 to date for each of these professions: the revenue collected from fees; the number of new licenses; and the costs associated with overseeing these professions.

Response:

Number of New Licensees

License Type FY 2016

FY 2017 to Date

Debt Adjuster 3 0 Home Repair Contractor 1 3 Pawn Brokers 4 0 Insurance Producers 32238 24802 Public Adjusters 170 124

Cost of Banking and Insurance Licensing

FY 2016

FY 2017 to Date

Insurance $775,045.84 $572,125.45 Banking $516,559.06 $358,947.29



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Licensing Revenue

FY 2016

FY 2017 to Date

Insurance $41,864,138 $18,629,605 Banking $1,532,200 $1,246,862

14. The Workers Compensation Security Fund (WCSF) (N.J.S.A.34:15-105) is a depository for moneys received from assessments levied against mutual and stock insurance carriers writing workers’ compensation insurance in the State. The revenue in the fund is disbursed to persons entitled to receive workers’ compensation from a carrier when that mutual or stock carrier is determined to be insolvent. P.L.2009, c.327 (N.J.S.A.34:15-105.1 et al.) transferred responsibility for the administration and claims activities of the WCSF from DOBI to the New Jersey Property-Liability Insurance Guaranty Association (PLIGA). As an independent entity, PLIGA’s budget is not included in the State budget. According to DOBI’s FY 2017 OLS Discussion Point responses, the department estimated that the WCSF would receive $49.5 million in income from assessments, liquidation dividends, interest, and other sources in FY 2016 and would have total expenditures of $21.8 million, with an ending balance of $161.6 million, an increase of approximately $45 million since FY 2014. As of March 28, 2016, the outstanding loss reserves for the fund were approximately $258 million.

Question: Please provide an accounting of all resources and expenditures for the WCSF for 2016 and estimates thereof for 2017 and 2018, including, with respect to revenues: assessments, liquidation dividends, investment earnings, and any other type of revenue; and with respect to expenditures: claim disbursements, administrative expenses, any other type of expenses, and transfers to other funds (both State and PLIGA held). Please include the balance of the fund, both at the beginning of each year and projected for the end of each year.

Response:

New Jersey Workers' Compensation Security Fund Schedule of Balances, Receipts and Disbursements For Fiscal Years 2016, 2017 and 2018 estimated

FY2016

FY2017

FY2018 (est)

Beginning Balance $133,895,302

$164,226,847

$170,713,200



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Receipts: Assessments 23,331,106

23,869,626

24,192,500

Liquidation Dividend 26,913,290

2,850,711

Unknown

Interest/Other Income 721,216

1,684,816

1,085,700

Disbursements: Claims 17,712,169 18,635,800 20,634,000

Administrative 2,921,898

3,283,000

3,323,400

Ending Balance $164,226,847

$170,713,200

$172,034,000

Question: Please provide details for the dividend in 2016 and 2017.

Response:

Please see attachment Liquidation Dividends January 2015 – March 2017.

Question: Please provide the outstanding loss reserves for the most recent year available, and for the previous year.

Response:

Outstanding Loss Reserves as of March 30, 2017 = $268,843,796

Outstanding Loss Reserves as of March 28, 2016 = $264,515,882

Outstanding Loss Reserves as of March 30, 2015 = $272,877,074 15. P.L.2011, c.25 (N.J.S.A.17:47B-1 et seq.), more commonly known as the “Captive Insurers Act,” regulates captive insurance companies. “Captive insurance companies are insurance companies established with the specific objective of financing risk emanating from their parent group or groups.” (DOBI PRN 2011-192) Among its provisions, the law permits a captive insurance company licensed by the department to do business in the State in certain lines of insurance, generally including contracts or policies of life insurance, health insurance, annuities, indemnity, property and casualty, fidelity, guaranty and title insurance, and reinsurance, so long as the captive insurance company meets certain requirements. Prior to enactment of P.L.2011, c.25, New Jersey companies that wished to form captive insurance companies had to do so in other states or countries. Today, New Jersey companies can use the law to insure their risks in New Jersey. Pursuant to the act, a premiums tax is collected from captive insurance companies, but the companies are exempt from the special purpose apportionment. The tax is collected at the following rates on direct premiums for all lines of insurance, except reinsurance premiums: 0.0038 percent on the first $20 million; 0.00285 percent on the next $20 million; 0.0019 percent on the next $20 million; and 0.00072 percent on each dollar thereafter. Companies are



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required to pay the following tax rates on reinsurance premiums: 0.00214 percent on the first $20 million; 0.00143 percent on the next $20 million; 0.00048 percent on the next $20 million; and 0.00024 percent on each dollar thereafter. Reinsurance is insurance that is purchased by an insurance company from one or more other insurance companies directly or through a broker as a means of risk management. The tax is due on March 1 each year on the premiums the company earned in the previous calendar year. The minimum aggregate premiums tax to be paid by a company is $7,500 and the maximum is $200,000. Section 13 of P.L.2011 c.25 (N.J.S.A.17:47B-13) established the Captive Insurance Regulation and Supervision Fund to provide the department with a funding source to administer the “Captive Insurers Act.” The Commissioner of Banking and Insurance is responsible for establishing the fees and assessments necessary for the administration of the act and all collections therefrom must be deposited into the fund. Regulations provide for a maximum $4,000 fee for the initial license application of a captive insurance company, and a $300 license renewal fee (N.J.A.C.11:28-1.1 to 1.23).

Question: Please provide the number of captive insurers, by name, type, by lines of insurance (health, life, annuities, indemnity, property and casualty, guaranty, and title), and by date of approval, that have been approved to be licensed in New Jersey in 2016 and thus far in 2017. How many applications has the department received and how many applications has the department rejected in 2016 and thus far in 2017? How many applications are currently pending?

Response:

Captive Insurers 2016 2017 Totals All Years

Applications submitted

P&C

Pure 6 1 20

Association 0 0 1

Industrial 0 0 1

Sponsored Cell 0 0 1

L&H

Pure 0 1 2


Total 27

Licensed

Pure 0 1 18

Industrial 0 0 1

Association 0 0 1


L&H

Pure 0 0 1



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Total 23

One application is being processed at present. We have declined 4 applications.

The identity and ownership of captive insurers are confidential pursuant to N.J.S.A. 17:47B-2c(3). It is important to understand that a captive insurer is fundamentally a self-insurance mechanism for the risk management purposes of the businesses owning the captive. Captives are not traditional insurance companies serving individual insurance consumers, and their policies are not for sale to others. This distinguishes captives from the rate, form, financial disclosure and other regulatory requirements common to traditional insurers.

Question: Please indicate how much revenue was collected from captive insurers in FY 2016 and thus far in FY 2017 from each of the following sources: premiums tax, initial license application fees, and license renewal fees. Are all of these revenues deposited into the Captive Insurance Regulation and Supervision Fund and dedicated to the administration of the “Captives Insurers Act”?

Response:

Registration and Premium Tax

FY 2016 FY 2017

Est.

Totals All Years

Registration fees $ 5,700 $ 6,600 $21,900

Premium taxes $1,017,413 $1,032,154 $3,613,394

All of the revenues are dedicated to the administration of the “Captives Insurers Act.”

Question: How many companies reached the $200,000 aggregate premiums tax maximum in FY 2016?

Response:

One company.

Question: Please detail DOBI’s expenditures for the administration of the “Captive Insurers Act” in FY 2016 and thus far in FY 2017. Please identify the source of these funds.

Response: The cost to administer the Captive Insurers Act primarily consists of salaries, fringe

benefits and overhead, and is included in the Department’s budget. FY 2012

$151,000



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FY 2013 $239,000 FY 2014 $278,000 FY 2015 $293,855 FY 2016 FY 2017

As of 3/31

$256,249 $159,560

Question: Please detail, by job title, how many staff are dedicated to the administration of the “Captive Insurers Act.” Does the department have an adequate number of employees to properly administer this Act? If not, how many additional staff would be needed, and at what additional cost?

Response:

The Department currently has two dedicated staff members (an Assistant Chief and an Administrative Assistant) for the administration of the “Captive Insurers Act.” The Department is currently in the process of analyzing the expansion of the captive marketplace. Depending upon the results of this analysis, additional staff may be required to administer any significant expansion.

Question: Please provide an accounting of the Captive Insurance Regulation and Supervision Fund, including opening and closing balances, revenues and disbursements, in each fiscal year since inception.

Response:

Listed below is an accounting of the Captive Insurance Regulation and Supervision fund since inception in FY 2012.

Beginning balance $ 0 Revenue Collected $3,440,589 Expenses Paid $ 27,489 Balance $3,413,100

Question: Please provide the number of professionals--i.e., accountants, actuaries, and managers--that have registered with the department to be service providers for the captive market in 2016 and thus far in 2017.

Response:

Service Providers 2016 2017 Totals All Years

Accountants 3 0 19

Actuaries 2 3 42

Captive Managers 2 2 24

Total 85



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Question: Please indicate how many captive insurance companies have re-domesticated to New Jersey, pursuant to N.J.A.C.11:28-1.4.

Response:

Four captive insurance companies have re-domesticated to New Jersey pursuant to N.J.A.C. 11:28-1.4.

16. The department’s Bureau of Fraud Deterrence is responsible for investigating the civil component of insurance fraud. In certain insurance fraud cases, the bureau conducts these investigations in coordination with the Office of the Insurance Fraud Prosecutor (OIFP) in the Department of Law and Public Safety, the entity that investigates the criminal component of insurance fraud. The functions of the Bureau of Fraud Deterrence and the OIFP are funded through the insurance fraud prevention assessment, which is estimated to yield $29.2 million in FY 2018 (page C-3, FY 2018 Budget Recommendation). The insurance fraud prevention assessment is levied on certain insurers for reimbursement of all costs related to the activities and responsibilities of the OIFP and the bureau. Pursuant to N.J.S.A.17:33A-8, the Office of Management and Budget in the Department of the Treasury shall, on or before September 1 in each year, certify the total amount of expenses incurred by the State in connection with the administration of insurance fraud prevention in the previous fiscal year. This amount is then apportioned among the insurance companies by the department and an assessment is paid by the insurance companies prior to December 31 of each calendar year for expenses accrued in the previous fiscal year. The County Prosecutors’ Reimbursement Program is administered by the OIFP and also funded through the insurance fraud prevention assessment. The program was established pursuant to section 44 of P.L.1998, c.21 (N.J.S.A.17:33A-28) to provide reimbursement to the County Prosecutors’ offices for their activities undertaken in connection with investigating and prosecuting insurance fraud.

According to DOBI responses to FY 2017 Discussion Point questions, bureau planned to improve efficiencies through the use of digital technologies in FY 2017, specifically by establishing the ability to receive electronic referrals from the insurance industry and maintain electronic investigative files. Additionally, in FY 2017, the bureau intended to establish a Complex Case Unit, which would concentrate solely on detecting, investigating and prosecuting large-scale, complex, multi-transactional insurance fraud cases particularly in the area of auto injury and personal injury protection coverage of automobile insurance policies. According to the department, 75 percent of the cases opened by the bureau in FY 2015 involved automobile insurance.

Question: Please report on the activities of the bureau, including the number of cases investigated and the types of fraud discovered in FY 2016 and thus far in FY 2017.

Response:



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On June 30, 2010, pursuant to P.L.2010, c.32 the former Division of Insurance Fraud Prevention (DIFP) was renamed and reconstituted as the Bureau of Fraud Deterrence within the Department of Banking and Insurance. The law transferred the civil component of insurance fraud back to the Department of Banking and Insurance, naming it the Bureau of Fraud Deterrence (the Bureau). The criminal component remained with the Office of the Insurance Fraud Prosecutor (OIFP) in the Department of Law and Public Safety. The law mandated collaboration between the criminal and civil components, citing specific requirements such as regular formal meetings, dual insurance industry fraud referrals, and coordination, related to administrative subpoenas, etc.

Six and one half years since the transfer, post-transition results reflect an increase of

civil penalties and restitution from those obtained prior to the creation of the Bureau in 2010. Additionally, since the transfer the Bureau has begun to place a greater emphasis on larger, complex, multi-transactional fraud schemes and has become more aggressive in joining insurers in lawsuits brought under N.J.S.A 17:33A-7 of the New Jersey Insurance Fraud Prevention Act (the Act). The Act allows any company damaged as a result of violations of the Act, to sue to recover compulsory damages which can include investigative costs, costs of the suit and attorney fees. Section 7d of the Act allows the Commissioner to join these suits and seek payment of civil penalties as authorized by the Act, which is being done on selective matters through the Office of the Attorney General Division of Law.

Also since the transfer, the Bureau and OIFP have successfully prosecuted a number of significant cases, through negotiated settlements. In these circumstances, the OIFP and the Bureau have independently, yet concurrently, exercised their authority, with defense counsel who have requested that the civil fraud prosecution and penalties be addressed in a global resolution with the criminal prosecution.

In FY 2016, the Bureau opened 5,917 investigations, levied $3,684,366 in fines and

secured $1,482,209 in restitution. In FY 2017 from July 1, 2016 – March 31, 2017, the Bureau opened 3,629 investigations, levied $1,494,700 in fines and secured $244,294 in restitution.

Of the 5,917 cases opened in FY 2016, 78% of the cases opened involved auto

insurance, 6% health insurance, 5% homeowners insurance, 4% commercial insurance, 4% workers compensation insurance, 1% disability insurance, 1% dental insurance, and the remaining 1% involved all others.

The Bureau has continued a close working relationship with insurance carrier Special

Investigative Units (SIUs). Bureau investigators personally discuss each carrier-referred case with their respective SIU counterpart. Bureau and SIU leadership maintain close professional relationships with one another and meet regularly. Overall, the SIU community has been very supportive and collaborative with the Bureau in their joint anti-fraud mission.

In the six and one half years since its creation, the Bureau, working in coordination

with the OIFP, County Prosecutors and New Jersey’s insurance industry, has established a solid foundation which positions itself to confront the ever changing world of insurance fraud going forward. The Bureau has improved efficiencies and adapted to the digital age by receiving electronic referrals from the insurance industry and the maintaining of electronic investigative files by our staff. Additionally, in FY17, the Bureau established a Complex Case Unit. This



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specialized Unit will concentrate solely on detecting, investigating and prosecuting large scale, complex, multi transactional insurance fraud cases particularly in the area of auto injury/PIP.

Question: Please provide a detailed breakdown of expenses as they were certified by the Department of the Treasury pursuant to N.J.S.A.17:33A-8 for FY 2016; including the cost of personal services, maintenance and operation, employee fringe benefits, rentals for space and all other indirect or direct costs of administration.

Response:

Fraud Assessment FY 2106



Services other than Personal $1,534,072.67

Maintenance and Fixed Charges $294,218.11

Additions Improvements and Equipment $28,912.29

Office of the Fraud Prosecutor $8,481,491.64

Sub Total $16,920,359.29


Indirect Costs $36,527.30

Building Operations and Maintenance $424,655.34

Debt Service Roebling Building $70,519.07

Debt Service Justice Complex $24,858.59


Cancelled Obligations FY 2103 - FY 2015 -$2,062.45

Lock Box $600.00



Sub Total $6,210,680.52

Total FY 2016 Fraud Assessment $23,131,039.81

Question: Please provide, by county, the CY 2016 awards under the County Prosecutors’ Reimbursement Program and the program’s estimated cost for CY 2017.

Response:

County Prosecutor Insurance Fraud Reimbursement Program - Annual Awards

Cycle 16 Cycle 17

January 1, 2016- December 31, 2016

January 1, 2017- December 31, 2017



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Atlantic $0 $0

Bergen $0 $0

Burlington $206,118 $222,743

Camden $250,000 $250,000

Cape May $100,644 $110,990

Cumberland $0 $0

Essex $250,000 $250,000

Gloucester $131,405 $142,743

Hudson $250,000 $250,000

Hunterdon $0 $0

Mercer $250,000 $250,000

Middlesex $261,250 $250,000

Monmouth $102,000 $250,000

Morris $250,000 $250,000

Ocean $250,000 $250,000

Passaic $261,250 $261,250

Salem $226,251 $226,551

Somerset $250,000 $250,000

Sussex $89,891 $ 93,626

Union $261,250 $250,000

Warren $140,110 $136,048

Total award $3,530,169 $3,693,951

Question: Please provide an update on the bureau’s digital modernization efforts. Please indicate the cost to implement these improvements as well as any data evidencing more efficient processing due to such improvements. What is the impact of these costs on the insurance fraud prevention assessment?

Response:

In FY 2016 and FY 2017, the Bureau continued to advance its digital modernization efforts. These efforts have resulted in a dramatic reduction in the time required for the Bureau to process a referral and respond back to an insurance company, as well as an increase in the overall number of fraud referrals received. Prior to the transition to digital referrals, insurance companies making referrals would complete paper referral forms and copy important documents, pictures and recordings, and mail them to the OIFP, who would review them for criminal activity and refer them to the Bureau. Upon receipt of those paper referrals, it would take an average of 90 days for the Bureau to review, populate the database, and process. Since transitioning to a digital referral form and the ability of insurance companies to electronically attach significant information and evidence of their insurance fraud allegations, including photographs, videos and recordings, the Bureau has reduced the processing time of new cases by two thirds (from ninety days to under thirty days). This significant reduction occurred at the same time the Bureau experienced a 25% increase in the overall number of referrals received.



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The Bureau’s cost to implement these changes includes an annual $22,500.00 fee for maintenance to the Bureau’s civil insurance fraud module of the InfoShare Data Base System, which is shared with the Division of Criminal Justice in the Department of Law and Public Safety. However, this additional expense is offset by eliminating the cost of materials and labor associated with creating, maintaining and archiving paper records, which will diminish any impact on the insurance fraud prevention assessment.

Question: Please provide an update on the bureau’s establishment of a Complex Case Unit. Please indicate the cost to establish the unit, and any additional staff hired to fulfill the unit’s goals. What is the impact of these costs on the insurance fraud prevention assessment?

Response:

The Bureau established a Major Fraud Unit which became fully operational on September 1, 2016. The Major Fraud Unit is currently staffed by nine investigators who transferred from other areas of the Bureau at no additional cost. Additionally, a Manager with extensive experience in investigating and directing complex insurance fraud investigations was hired in September 2016, back-filling a Manager position vacated by retirement. Also, the Bureau is currently looking to fill other FTE positions with additional investigators and support staff to further support this new unit, which will not impact the insurance fraud prevention assessment. The Department believes this strengthened emphasis on major fraud will enhance the effectiveness of Bureau in achieving its fraud deterrence mission.

17. The Federal Emergency Management Agency’s (FEMA) National Flood Insurance Program (NFIP) is responsible for reviewing claims filed by NFIP policyholders affected by Hurricane Sandy. In March of 2015, FEMA announced that it would reopen flood insurance claims amid accusations that Hurricane Sandy victims may have received flood insurance payments based upon false or altered reports. FEMA notified affected claimants, and stated that homeowners found to have received inadequate compensation would be entitled to additional funds, up to a maximum of $250,000 for their property and $100,000 for dwelling contents. In response to FY 2017 budget hearing follow-up questions, the department indicated that it had made numerous requests to FEMA regarding the status of those claims.

Question: Has the department been successful in gathering information from FEMA on the status of reopened NFIP flood claims in the State? If so, please explain. How many claims have been reopened and what is the status of those claims? How much additional money have Hurricane Sandy victims received?

Response:

According to FEMA, of the $359,986,811 paid via the Sandy Claims Review, $193,167,638 was paid to NJ policyholders to date. 18. Among its total capital assets, the State has considerable land holdings, valued by the FY 2016 Comprehensive Annual Financial Report at about $5.22 billion (Land and Easements, pg. 26). Land and easements may be held for future use, restricted as to future uses, or not needed for public purposes and available for sale, lease or other disposition. Knowledge about the



56

extent, location, condition and intended use of these properties and property rights does not appear to be readily available. There could be potentially beneficial uses of some properties, other than those intended by the state agency in control of the properties, depending on the size, location and condition of those properties.

Question: Please list each property under ownership or control of the department comprising unimproved or vacant land one acre or more in size, excluding land comprising all or part of a State park, recreation or wildlife management area, identifying each property by county and municipal location, street address, tax map

block and lot number and, if available, Global Positioning System coordinates. Please provide the size of the property, its current use, intended future use within the next five years, and any known or suspected environmental contamination that would impede its future use. Please also describe any deed restrictions affecting current and future use. What are the department’s policies and procedures for determining future uses of its land holdings that further the department’s mission, and for allowing beneficial uses of its land in ways that are outside the department’s traditional mission?

Response: The Department does not own or control any land.

Documents

Discussion - New Jersey Legislature · Department of Banking and Insurance FY 2017-2018 Discussion Points (Cont’d) 3 Question: How do Horizon Blue Cross Blue Shield of New Jersey’s