When Lt. Gov. John Garamendi was the state of California's chief insurance regulator he drafted a set of regulations intended to protect policyholders of disability insurance. These protections were implemented after he left office in January 2007 and was succeeded by Steve Poizner (R). Now the two are butting heads as Poizner tries to make regulation changes. According to Garamendi, these changes will weaken consumer protections and be a tragedy for policyholders.
The regulations that Garamendi created covered group disability policies and protect policyholders from experiencing a cut in benefits because of estimated pension payments, potential temporary benefits from worker's compensation, permanent disability benefits from the worker's compensation system, and estimated earnings received, unless there was a reasonable basis for the estimated calculation.
Now Poizner is attempting to roll back the regulations so that insurers can reduce group disability insurance benefits due to wages the policyholder may receive, workers' compensation, and pensions. Poizner says the regulations are not necessary because state and federal laws already ban insurers from reducing benefits in disability clauses due to offset clauses.
While this may make sense, Garamendi has expressed that they will not be able to protect policyholders without the regulations, and stands firm that he drafted the regulations due to severe problems within the system, including scandals, denial of claims, using offsets, and denial of coverage. Garamendi has also expressed worry that this only benefits the insurance companies so they can continue controlling the benefits. Incidentally, the American Council of Life Insurers and the Association of California Life and Health Insurance Companies support getting rid of the regulations. These associations write most disability insurance policies in the United States.
There is currently an ongoing debate over the disability regulations. Hearings have been held by the Department of Insurance and they are still considering amendments to the regulations, which would have to find approval from the Office of Administrative Law.
There are currently more than 4.5 million Californians with disability insurance purchased either through an individual plan or a group policy. Most employers offer this insurance, which usually replaces at least half of a worker's income, should they become injured, ill, or disabled.
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