Braille Monitor                                                                                April 1986



The Fair Insurance Coverage Act: Action in the 99th Congress

As Monitor readers know, the National Association of Insurance Commissioners (NAIC) has issued a revised model regulation to prohibit discrimination on grounds of blindness or partial blindness. The revision resulted from legislation which was considered in the Second Session of the 98th Congress. NAIC is opposed to federal legislation on insurance discrimination against anyone but acknowledges that some companies still discriminate against the blind. So NAIC has an expressed interest in showing Congress that the state insurance commissioners are committed to act on behalf of the blind.

The model revised regulation on discrimination against the blind is much better than the old one. In 1978, at the urging of the National Federation of the Blind, NAIC adopted what is now the outdated model regulation. It was a compromise with the insurance industry, which would have preferred no regulation at all. Still it was a foot in the door. The weakness of the old model was an escape clause allowing companies to discriminate against the blind if the decision to do so was based on "sound actuarial principles or actual or reasonably anticipated experience." We knew that was a potential loophole you could drive a truck through, and some of the companies did.

The revision to the model regulation closed the loophole. Regardless of "actuarial principles," "actual experience," or "reasonable anticipation," even regardless of iron clad evidence, NAIC's current model regulation on blindness or partial blindness prohibits any form of discrimination. A condition which causes blindness may be taken into account if the condition, but not the blindness, constitutes a greater risk.

With a model regulation like this, you would think that the problem of insurance discrimination should be over. Ah, yes, but any model regulation of the NAIC has no enforcement value of its own. Only the governmental agencies of each state, having the power to regulate insurance, can establish binding rules that are legally enforceable. So can the legislatures of each state. This is why we have circulated the revised NAIC model regulation on blindness or partial blindness and called for its adoption in every state. And for the same reason we have also gone back to Congress with a renewed effort aimed at passing a national law.

The bill now under consideration in both Houses of Congress is called the "Fair Insurance Coverage Act." It was introduced in the House of Representatives as H.R. 2741 with Congressman Jim Bates of California as the principal sponsor. At this writing there are 165 co-sponsors in the House. In the United States Senate the Fair Insurance Coverage Act has been introduced by Senator Charles Mathias of Maryland as S. 1290. There are three co-sponsors at this writing.

Here are the remarks which Senator Mathias delivered on the floor of the United States Senate as he introduced S. 1290. His statement gives evidence of the progress we are making in our battle toward full equality. It also shows that the National Federation of the Blind is the leading force in this battle. Truly the public perception, as well as the official perception, of blindness and the problems of the blind is changing. We are responsible for that. Here is the evidence. In the Senate of the United States:

Mr. Mathias: Mr. President, I am pleased to introduce today, along with Mr. Levin, Mr. Moynihan, and Mr. Biden, the Fair Insurance Coverage Act to prohibit discrimination on the basis of blindness or any degree of blindness. It is distressing that this legislation is necessary. However, the sad truth is that for many years blind people have encountered numerous difficulties in their efforts to secure various types of insurance coverage on an equal basis with those who can see.

The need for legislation to end this discrimination has been well documented by the National Association of Insurance Commissioners (NAIC). The NAIC found no factual basis for the belief that blindness represents an increased risk to insurers. Both the NAIC and the National Federation of the Blind affirm that no solid actuarial evidence exists for discrimination against the blind in insurance coverage. Accordingly, treating blind persons differently from those who can see was determined to be discriminatory and thus an unfair trade practice.

In 1978, the NAIC, after finding that the blind were victims of widespread discrimination by some insurance companies, adopted a model insurance regulation condemning such practices when based solely on the grounds of blindness. It was assumed that the model regulation would be placed on the statute books or promulgated as an administrative rule in most or all states.

Unfortunately, this assumption proved to be false. To date, fewer than half the States have followed the NAIC's lead in taking positive steps to end discriminatory practices against the blind. I am persuaded of the need for federal policy in this area as a last resort after the appropriate state remedies have been exhausted and in the absence of corrective state action.

This measure I introduce today is similar to one I submitted in the second session of the 98th Congress with broad support. Again this year I am proud to present this bill as a companion to the House measure, introduced by Representative Jim Bates, and I urge its careful review and consideration by my colleagues.

On September 11, 1985, the House of Representatives Subcommittee on Commerce, Transportation, and Tourism held a hearing on H.R. 2741. Jim Gashel was the lead-off witness followed by a panel of NFB leaders selected from several states. These representatives were Peggy Pinder of Iowa, Judy Sanders of Minnesota, Scott Lewis of Washington State, Vickie Ashley of Nebraska, and Cathy McManus of Pennsylvania. Their testimony was followed by presentations from a representative of the NAIC and a representative of the insurance industry.

The record of the proceedings shows clearly the need for federal legislation. Even where states have existing regulations or laws aimed at prohibiting discrimination against the blind, enforcement may often be weak or nonexistent. We proved that point in the hearing. The Fair Insurance Coverage Act would provide a backup remedy for blind individuals unable to obtain assistance through the state insurance departments.

Mr. Gashel's testimony, which is reprinted in summary form here, lays out the argument:

SEPTEMBER 11, 1985

Mr. Chairman, my name is James Gashel. I am representing the National Federation of the Blind, where I serve as Director of Governmental Affairs. My entire written statement is submitted, and I ask that it appear in full in the record.

In my written statement, I discuss the real problem of blindness in the social and attitudinal aspects. The myths and misconceptions about blindness are more of a limitation than the loss of eyesight itself. This is certainly true in insurance dealings, where subjective judgements have economic consequences. The last forty years have seen the emergence of blind people from armchairs of isolation to the mainstream of competition in our society. As a result, many of the traditional ways of dealing with the blind are changing and being challenged. So it is today with the long-established practices of the insurance industry.

Mr. Chairman, I believe the record will show that we have been extremely patient in trying to obtain fair treatment from the insurance industry. As far back as 1965, we made appeals to the National Association of Insurance Commissioners, asking for a ban on discrimination based on blindness. But the insurance commissioners were not convinced. I guess they thought the industry would be fair or perhaps they didn't care. Whatever, nothing was done.

That was twenty years ago, and here we are today still talking about the issue of insurance discrimination. We'll stop talking about it when the practices end or substantially abate. In testifying about this matter before your subcommittee last year, other witnesses and I described the most typical insurance practices that we regard as unfair treatment. These include: refusing to insure people who have been blind less than five years, or charging such individuals extra rates; refusing to include the waiver of premium rider on life insurance policies sold to people who are blind; refusing to sell blind persons accidental death benefits, or requiring extra premiums to obtain the rider; charging extra rates for all blind persons on personal health insurance policies, or denying the coverage altogether; and refusing to sell life insurance protection in the case of totally blind persons who are under age fifteen. These are the most common.

At the close of last year's hearing, you asked representatives of the National Association of Insurance Commissioners to find out whether in fact these and similarly unfair insurance practices were occuring. In short, you asked NAIC to determine if the companies were actually complying with NAIC's then model regulation on blindness. Well, NAIC did check up on the companies, and the results showed that there is discrimination based on blindness. There is, and it continues. On December 14, 1984, NAIC acknowledged this is an official resolution of its executive committee stating that: "Certain members of the insurance industry are engaging in activities which were intended to be prohibited by the model regulation on unfair discrimination on basis of blindness or partial blindness." Then the resolution proceeds to describe these "activities" as constituting "unfair discrimination against blind persons in the sale of insurance." So there you have an official finding of the executive committee of the National Association of Insurance Commissioners. Discrimination against the blind still continues.

Now, where are we? Has there been any improvement? And if so, why? In the first place, NAIC has changed its model regulation on blindness. That was a positive step. The model now prohibits any form of discrimination on grounds of blindness and includes no exclusionary language, as it used to. So no deviation from the straight nondiscrimination standard is permitted according to the new model. But now comes the hard part, the new model is only a model. It doesn't have the force of law anywhere. But each state is encouraged to follow it by changing the current laws or regulations. Only a handful have done so--Iowa, Oregon, Alaska, and North Carolina for sure. Some others are working on it, so a few more may be added to the list. But forty or more states are currently out of compliance with the revised NAIC model.

Some states have refused to adopt it. Scott Lewis will testify later that his (Washington) has refused and will likely continue to refuse. Meanwhile, in South Dakota the insurance commissioner has just recently proposed a state regulation covering health insurance. But he proposes to use the old, not the revised, NAIC model. So at least two states we know of appear unwilling even to consider NAIC's revised model. Meanwhile in Ohio adoption of NAIC's revised model on blindness has also been resisted. The opposition came from the insurance industry when the state insurance department asked the legislature to change an existing law. So the legislature gave up and the matter is at a standstill. That's three states.

By our count fourteen states and the District of Columbia currently have no law or regulation pertaining to insurance discrimination based on blindness But even where there is such a law or regulation (whether it is the new NAIC model or a derivative of the old one), the regulators have still been unable to eradicate blindness-based insurance discrimination. This is because the processes they apparently have for investigation, complaint handling, and monitoring of the industry are woefully inadequate. For example, despite th« fact that many states purport to prohibit insurance companies from refusing to sell blind persons accidental death coverage or waiver of premium riders, we still find that the underwriting manuals of the companies advise as one does that "requests for accidental death and waiver of premium riders should be declined when the applicant is totally or partially blind or when the applicant has disease of the eye." That manual is widely used in the industry, and the states allow it to continue.

Last fall in a memorandum from its underwriting committee, the Lincoln National Insurance Company admitted straight out that the underwriting guides they use were not changed several years ago when NAIC adopted its original model regulation on blindness; but the underwriters were now proposing a change. Why? Well, the memorandum says it straightforwardly. The reason was the bill in Congress--H.R. 4642--the same bill ordered reported by this Subcommittee on September 12 last year. So you succeeded where the states had failed. The Lincoln National Insurance Company has now changed all of its formerly discriminatory underwriting practices, and we expect that move to have some ripple effect throughout the industry.

It is a known fact that the insurance industry and the state regulators are almost beside themselves with worry about what you in Congress might do with legislation such as this designed to protect the consumer. At a meeting with NAIC last December, I was publicly asked the pivotal question: "Would adoption of the revised model regulation on blindness be sufficient to persuade the National Federation of the Blind to abandon this effort to get Congress to act?" For the record, this was put to me by the President of NAIC publicly before a roomful of onlookers. I said no. Let's face it. What Congress might do or say or might threaten to do or say is the real reason why we are making the progress that you will undoubtedly hear reported today.

This bill is not hostile to the state system, nor a rejection of it. Quite the opposite. In fact, H.R. 2741 is designed to support the state system--not to take it over. If enacted, this bill would merely provide individual supplemental protection in the event that an insurance department fails to do its job, and those failures do happen. Beyond that, the bill would establish a national standard of nondiscrimination concerning blindness which the industry could follow and everyone could understand. This bill is fully consistent with NAIC's revised model regulation on blindness or partial blindness. Let us underscore that point. We are not asking for anything that NAIC has not already agreed to and attested to the need for.

If Congress finds that the state system of regulation and enforcement cannot adequately control discrimination by the insurance industry, The Fair Insurance Coverage Act is certainly the appropriate vehicle to give individual relief to blind persons who are unable to obtain it from their states. Persons in the insurance department who really care about this issue should welcome the assistance. And those who oppose it will no doubt cling to their bureaucratic reasons for doing so. All we expect is fari treatment and a fair opportunity to contest any treatment that is not fair. But under existing law we get neither fair treatment nor a fair opportunity to do anything about it. If there are those in the insurance industry who say they want to eradicate discrimination based on blindness, let them do it. So far they have not succeeded.

If there are insurance regulators who are similarly committed, let them act. So far they have not succeeded either. And if they cannot succeed despite their best and noblest efforts, let the industry and the regulators not fight us further when we ask for help from Congress, especially with a modest proposal such as this.

Following this testimony there was a dialogue involving representative Norman Lent of Wyoming (ranking Republican on the Subcommittee), Mr. Florio (a Democrat, Chairman of the Subcommittee, and a co-sponsor of the bill), and Mr. Gashel:

Mr. Lent: Mr. Gashel, as I understand it, as a result of your meetings with the Lincoln National Reinsurance Company, that company has adopted underwriting standards to insure that discrimination against the blind is eliminated. Is this true, and isn't this a step forward to eliminating such discrimination?

Mr. Gashel: Mr. Lent, I believe that it is a result of this Subcommitte's work and the fact that you reported out a bill last September and that there is a bill pending in Congress now and they expected there to be one. I don't think it has a thing to do with me. Mr. Lent: Well, regardless of why or the motivation, my question was isn't this a fact and isn't this a step forward in eliminating this sort of discrimination?

Mr. Gashel: Absolutely. Mr. Lent: And on page 3 of the testimony you submitted to the subcommittee, you list 14 states which have not enacted any prohibition on this specific subject. However, according to information provided to us by the NAIC, ten of the states listed have a prohibition against discrimination in insuring the blind, and two states have legislation pending. How do you explain this inconsistency ?

Mr. Gashel: My data came from NAIC, so--

Mr. Lent: Well, we have from the NAIC Alabama, Georgia, New Mexico, Texas, West Virginia adopting the '84 model code, and pending in Idaho and New Hampshire.

Mr. Gashel: See, I don't know how to explain that because I am not privy to any information that says that the list of states you just read have adopted the '84 model. In the latest information I have from NAIC, it didn't indicate that.

Mr. Lent: Well, for example, Alabama, one of the states, adopted a regulation effective August 1, 1985. Alaska a regulation

Mr. Gashel: Oh, Alaska, we know.

Mr. Lent: Adopted June 28. Arkansas effective August 1, 1985, a regulation. Georgia, effective July 1, 1985, a statute. Iowa, effective May 31, 1985, a regulation. Maine, effective September 19, 1985, a statute. Minnesota, effective 1985, a regulation. Missouri. effective 1985, a regulation. And so on. So it would appear that some of these adoptions have been rather recent.

Mr. Gashel: Right. That's true. It's my belief that Minnesota has not adopted yet, although it's pending. Mr. Lent: According to the NAIC, Minnesota has adopted a regulation effective now.

Mr. Gashel: According to the Minnesota Department as of yesterday, they had not. Georgia, I, in fact, checked on yesterday and couldn't find anybody in the insurance department to tell me whether they had or they hadn't. Same is true of Alabama. Maine, I believe, is probably correct. They were certainly working on it. You know, it is hard to find out whether the states have or haven't, but mostly we take our compilations from NAIC.

Mr. Lent: Well, I can't understand what the controversy is because the NAIC, if we have any--we have to have faith in somebody--they have certified in this document dated September 5, 1585, these states as having adopted the xodel 1984 version code either by regulation or by statute. Let me just skip to another subject.

Mr. Florio: Will the gentleman yield or. that point?

Mr. Lent: Sure.

Mr. Florio: Just to keep this in proportion, what the gentleman from New York is saying is that the information that he has, that we have, is that ten ftates have adopted by regulation the § 4 code which you have acknowledged you think is good --

Mr. Gashel: Absolutely.

Vfr. Florio: --and two have done it by rtatute. That means thirty-eight have ict- Isn't that the crux of the point Saat you have been trying to make?

Mr. Gashel: I think so. It is very rjear the NAIC model isn't sweeping the nation vet.

Mr. Florio: Okay. I think that is helpful to bring out, and I thank the gentleman for yielding.

Mr. Lent: Well, we will have the NAIC testify in a little while, but I think what the NAIC is saying is that all these states, twelve or whatever it is, have adopted, and there are another twelve or thirteen that have this model code pending. So hopefully there will be some favorable action.

Mr. Gashel: I guess I would wonder why all fifty don't have it pending. I mean the remaining--

Mr. Lent: Well, maybe they do and maybe they don't, but I really wonder whether it is our province to tell a state, in view of the McCarron Act, whether it is our province to tell a state, for whatever reason they do or don't want to have it, that they have to have it. That is the problem. And whether we ought to give a federal court action to an organization, a group of people who don't want to be discriminated against but do want to be discriminated in favor of by having a special jurisdictional law passed that would give them access to the federal courts that someone with a heart murmur who can't get life insurance doesn't enjoy. That is the issue.

Mr. Gashel: I think that what you have got to do is consider this. You know, there is absolutely no evidence that blindness as a condition justifies the kind of things that are going on, denial of waiver of premium and all the other things that we talked about. There is undoubtedly, although I haven't ever studied the issue of heart murmurs, evidence that shows that people with heart murmurs are going to have heart conditions, heart attacks of problems or whatever.

So in the case if blindness we are just talking about a condition that is irrelevant to risk, but in the case of heart murmurs we have got a case that is relevant to risk. So we are not asking to be singled out; we are asking to be treated equally. We are asking to be given the right to have insurance on the same terms and conditions as anybody else could get with the same degree of risk. If the state insurance departments and state codes can't deliver that, which they have so far not been able to do, then we are asking for some avenue of being able to redress that problem in another forum without trying to burden the federal government with it.

Mr. Lent: In a state, Mr. Gashel, where they have adopted the model code, the '84 version, and a blind person runs into a refusal to sell or a refusal to make available waiver of premium or attempts to impose excess fees and so forth, that would be a violation of that state law, would it not?

Mr. Gashel: Yes, sir.

Mr. Lent: And the remedy for that would be in the state administrative and judicial arena, would it not?

Mr. Gashel: Yes, sir.

Mr. Lent: Well, it just seems to me if you are not getting what you want, if there is a violation, direct and unequivocal, of a state law where the model code is the law and an insurance company endeavors to refuse waiver of premium or extract a higher premium rate, that the remedy of the aggrieved party would be in the state rather than to come to Washington and ask us to pass a super-law that would give blind people access to federal courts.

Mr. Gashel: I don't really see this as a super-law. It is--

Mr. Lent: Well, if you have a withered arm or you have a heart murmur or you are in a wheel chair and you have trouble, you don't go into federal court. You go into the state court. Not everybody is--only a special set of circumstances where people have access to the federal court. There has to be diversity of citizenship or there has to be a constitutional issue, or it has to be a suit by a state against the federal government or a state against a state.

The federal courts are crowded. There are only certain situations where someone can go into the federal court. It seems that we are carving out, or attempting to through this legislation, a particular sort of situation where if you happen to be blind rather than deaf, or you happen to be blind rather than have a heart murmur, or happen to be blind rather than have a crippled arm or leg, you can go into federal court, but your next door neighbor who fits into one of those other categories is relegated to the state court system or the state insurance administrative system. By adding this kind of provision to the bill, you are going to trigger jurisdiction by the Judiciary Committee, and believe me, they are not going to look kindly on the extension of federal court jurisdiction for this one particular sort of situation.

Mr. Gashel: I think you have to look at these issues on an individual caseby-case basis, and you have got to see whether or not there has been a real effort by these different groups that you have listed, Mr. Lent, to try to get the state system to work for them and we have really made that effort. We have made a strong and consistant effort, and that is clearly documented. And if we cannot then get relief by trying to use the state system, or if that relief is very inconsistently delivered, then it seems to me from the standpoint of the consumer what option do we have but to ask for?--there is just no way.

Remember you are dealing with an administrative agency in a state, and that agency builds a record based on its analysis of the complaint, and then the person has to go and appeal on the basis of that record into the state courts, and that, too, is a disadvantage, depending on how consistently or good or carefully the state insurance department investigates the claim. And as we have said, they don't do it very well in a lot of cases. That is what we are saddled with and discrimination is continuing. We can't think of any other option to make the system work.

Mr. Lent: Well, It would seem to me--you know, you have a 1984 model code. This is only 1985. You have got that model code either adopted or pending adoption in 25 or 50 percent of the states in the union. That's not a bad track record. If I were in your position, I would be patting myself on the back and asking for new people to join my organization because that's an excellent and outstanding record.

Mr. Gashel: What I would like is for the State of New York to join the ranks. (Laughter).

Mr. Lent: My understanding, because I happen to be very friendly with Senator Dunn, who used to be the head of the Insurance Committee up in Albany in the State Legislature is that they feel that they have covered this through their unfair trade practices statute. I don't know if that's an adequate answer or not.

Mr. Gashel: Well, I don't think so because every state has that act. The same argument was also made by the NAIC that it doesn't really matter if we even have these different states that have enacted this model because we all have the Fair Trade Practices Act. Well, then, why does NAIC go off and adopt this new model? I mean, they clearly feel the need for something to be done. I think New York should too. It's a big state.

Mr. Gashel: Good.

Mr. Lent: I think that's the way to handle it, to do the lobbying on the state level.

Mr. Gashel: Good.

Mr. Lent: I have no further questions.