SB436/HB554 – Insurance – Surplus Lines – Short-Term Medical Insurance

This legislation continued our effort last year to expand the availability of certain insurance products (temporary medical insurance this year – disability insurance last year) from surplus lines insurers.

Life and health insurance producers are largely unfamiliar with the surplus lines insurance market.  Surplus lines are typically found in property and casualty insurance, and exist to serve the hard-to-place risk.  Surplus lines insurers do not obtain state licenses in the same manner as “admitted” insurers do.  While they are permitted to offer certain products on a state by state basis, they are lightly regulated.  Consequently, they have the flexibility to enter and leave insurance markets more easily.

Certain surplus lines insurers, such as Lloyd’s, have disability insurance products that can be written on individuals who do not medically qualify for standard disability coverage, or at higher limits than those available in standard disability markets.  We supported legislation in 2015 to allow such products to be sold in Maryland.

This year’s legislation followed the same path for temporary (short-term) medical insurance.  Often written in conjunction with overseas travel, the availability of short-term medical insurance has been dramatically reduced in recent years, especially following the passage of the Affordable Care Act.  A very small number of admitted insurers now write this coverage, and surplus lines insurers have products to fill the gap.

The Insurance Commissioner initially opposed this effort to expand the role of surplus lines.  JLC Co-Chair Willie Franklin testified in support of the bill, reasoning that more products would now be available to serve Maryland insurance consumers.  The legislative committees were persuaded by this argument, and the bill was reduced in scope to apply only to travel-related risks, with a further restriction to insure that they would not compete with either student health plans or ACA-compliant plans.  In this form, the legislation was passed.