Title of Rule: Chapter 284-90 WAC, Rules pertaining to AIDS.

Purpose: This rule making is part of the commissioner's regulatory improvement process. The rules were enacted in 1986, since then changes in medicine and industry practices have created a need to update this regulation.

Other Identifying Information: Insurance Commissioner Matter No. R 2000-07.

Statutory Authority for Adoption: RCW 48.02.060, 48.30.010, 48.44.050, 48.46.200.

Statute Being Implemented: RCW 48.01.030, 48.05.250, 48.18.110, 48.18.480.

Summary: This rule making seeks to update the existing regulation and clarify the responsibilities of carriers under chapter 284-90 WAC. The chapter is entitled "Rules pertaining to AIDS."

Reasons Supporting Proposal: The final rules should be clearer and easier to understand, administer, and to comply with without sacrificing any consumer protections. Industry has asked for clarification of this regulation.

Name of Agency Personnel Responsible for Drafting and Implementation: Janis LaFlash, Olympia, Washington, (360) 753-4214; and Enforcement: Jeffrey Coopersmith, Lacey, Washington, (360) 407-0734.

Name of Proponent: Deborah Senn, Insurance Commissioner, governmental.

Rule is not necessitated by federal law, federal or state court decision.

Explanation of Rule, its Purpose, and Anticipated Effects: The regulation was initially adopted in 1986 as a response to the AIDS crisis. It has not been updated since despite the increasing knowledge of the disease and inherent risks and changes in the testing for and treatment of AIDS. The rule making is intended to clarify the existing rule and bring it up to date.

     Proposed WAC 284-90-010 and 284-90-020 are changed to reflect changes in terminology and conditions and to increase clarity.

     Proposed WAC 284-90-030 will be repealed. The commissioner had asked that the actuarial statement filed with an annual report take into account impact of AIDS and related conditions upon the adequacy of the reserves of the life insurer. When the original rule was adopted, several commentators noted that actuaries should already be accounting for this in their opinion. However, as other commentators pointed out the AIDS risk was not quantifiable at the time so this was not a redundant exercise but a true concern for ensuring financial solvency. Today, the risk is more easily defined and quantified. Also, actuaries have fourteen years of experience in factoring the risk. Thus, the requirement is no longer unnecessary and should be repealed.

     Industry has asked for clarification of this regulation. The proposal was developed with industry involvement and was shared with interested parties including consumer interest groups, insurers, and other agencies.

Proposal Changes the Following Existing Rules: WAC 284-90-010 and 284-90-020 are updated. Language is clarified. WAC 284-90-030 is repealed. This section is no longer necessary.

August 1, 2000

D. J. Patin

Deputy Insurance Commissioner

OTS-3875.1

AMENDATORY SECTION(Amending Order R 86-5, filed 10/15/86)

WAC 284-90-010
Purpose.

(1) The purpose of this chapter is to assure nondiscriminatory treatment of insureds and prospective insureds by establishing minimum standards insurers must meet with respect to acquired immune deficiency syndrome (AIDS) and its related conditions.      ((Such)) Related conditions include a positive testing for the Human ((T-Cell Lymphotropic Virus Type III (HTLV-III) antibodies and a diagnosis of AIDS related complex)) Immunodeficiency Virus (HIV).

     (2) The insurance code prohibits unfair discrimination between insureds having like risk and exposure factors.      The practical effect of the law is to require grouping of insureds into classes of like risk and exposure and charging a premium commensurate with the risk and exposure.      This assures the equitable treatment of each class of insureds in the sense that the premium charge is reasonably related to the risk assumed by the insurer and that no class of insureds supports (or is supported by) another class of insureds.      For example: Insureds with a heart condition should not subsidize (or be subsidized by) insureds with AIDS or diabetes; policies issued on a standard basis should not be surcharged to support those issued to insureds suffering from an ailment.      To properly classify such prospective insureds, insurers must ask appropriate questions on application forms and may require reasonable testing of prospective insureds, when health underwriting is not prohibited by rule or statute.

[Statutory Authority: RCW 48.02.060, 48.44.050 and 48.46.200.      86-21-065 (Order R 86-5), § 284-90-010, filed 10/15/86.]

(1) AIDS and its related conditions are diseases and must be considered as such under the insurance laws of this state.      Underwriting considerations must be consistent with the underwriting considerations applied to other diseases.      Prospective insureds must be accepted or rejected or rated standard or substandard on the basis of bona fide and substantiated statistical differences in risk or exposure.

     (2) Questions about AIDS and related health conditions on applications for insurance must be in clear and understandable language and must lend themselves to the placement of applicants in the proper class of insureds.      Questions which are ambiguous or misleading are prohibited.

     (3) ((When used, the blood)) Testing of insurance applicants must be administered on a nondiscriminatory basis.      If a prospective insured is to be declined or rated substandard because of ((HTLV-III antibodies in the blood)) HIV infection, such action must be based on a Western Blot Test or ((another)) any United States Food and Drug Administration approved confirmatory test of equal or greater accuracy.      Testing procedures of lesser accuracy may be used on a nondiscriminatory basis for underwriting purposes, but a prospective insured may not be declined or rated substandard solely on the basis of results from such test(s).

     (4) There are several aspects of the disease AIDS which may create unforeseen claim settlement problems under life insurance, loss of time, and medical coverages.      The likelihood of the claimant incurring medical expenses from several different symptoms of AIDS or one of its related conditions may make it difficult to determine when the disease first manifested itself.      The long incubation period along with the concurrent and aggravating ailments may create problems with the application of the preexisting conditions clause and the incontestable provision, as well as the rules which determine a new spell of illness.      The benefit provision, including any extended benefit provision, will determine the extent of claim payments if the disease manifested itself while the policy was in force but continued after expiration of coverage or termination of the contract.      Such matters, and others unique to the disease of AIDS and its related conditions, must be resolved in a manner consistent with the settlement of claims resulting from other diseases.

[Statutory Authority: RCW 48.02.060, 48.44.050 and 48.46.200.      86-21-065 (Order R 86-5), § 284-90-020, filed 10/15/86.]

     The following section of the Washington Administrative Code is repealed:

WAC 284-90-030

Policy reserves -- Annual financial statements.

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