Office of the Director Arizona Department of Insurance 2910 North

Office of the Director

Arizona Department of Insurance

2910 North 44

Street, Suite 210, Phoenix, Arizona 85018-7269

Phone: (602) 364-3471 | Web: https://insurance.az.gov

Douglas A. Ducey, Governor

Leslie R. Hess, Interim Director

REGULATORY BULLETIN 2017-02

To: Insurance Producers, Surplus Lines Brokers, Insurance Industry Representatives,

Insurance Trade Associations, Life & Disability Insurers, Property & Casualty Insurers,

and Other Interested Parties.

From: Leslie Hess

Interim Director of Insurance

Date: August 8, 2017

Re: 2017 Arizona Insurance Laws

This Regulatory Bulletin summarizes the major, newly enacted legislation affecting the

Department, its licensees and insurance consumers. This summary is not meant as an

exhaustive list or a detailed analysis of all insurance-related bills. It generally describes the

substantive content but does not capture all details or necessarily cover all bills that may be of

interest to a particular reader. The Department may follow this bulletin with more detailed

bulletins related to the implementation of specific legislation. All interested persons are

encouraged to obtain copies of the enacted bills by contacting the Arizona Secretary of State’s

office at (602) 542-4086, or from the Arizona legislative web site at http://www.azleg.gov.

Please, direct any questions regarding this bulletin to Stephen Briggs, Legislative Liaison at (602)

364-3761.

Arizona’s Fifty-third Legislature, First Regular Session, adjourned sine die on May 10, 2017 at

7:00 p.m. Except as otherwise noted, all insurance-related legislation has a general effective

date of August 9, 2017.

This Substantive Policy Statement is advisory only. A Substantive Policy Statement does not include internal procedural

documents that only affect the internal procedures of the Agency, and does not impose additional requirements or penalties on

regulated parties or include confidential information or rules made in accordance with the Arizona Administrative Procedure

Act. If you believe that this Substantive Policy Statement does impose additional requirements or penalties on regulated parties

you may petition the agency under Arizona Revised Statutes Section 41-1033 for a review of the Statement.

Regulatory Bulletin 2017-02 – Page 2

INSURANCE-RELATED BILLS ENACTED IN 2017

Laws 2017, Chapter 88 (HB 2052): Limited Line Crop Insurance

Amends ARS § 20-281:

• Adds limited line crop insurance to the definition of limited line insurance.

Amends ARS § 20-286:

• Adds crop insurance as a limited line of insurance.

Amends ARS § 20-288:

• Requires the applicant to take an examination to offer limited line crop insurance.

Laws 2017, Chapter 153 (HB2069): Insurance Taxes; Installments; Electronic Filing

Amends ARS § 20-224, 36-2905, and 36-2944.01:

• Increases the amount of tax liability an insurer must have before being required to

pay tax installments from $2,000 to $50,000.

• Allows the Director to require insurers and AHCCCS Medicaid contractors to report

and pay insurance premium taxes electronically if the director posts to the

Department’s web site a list of one or more acceptable third-party services through

which an insurer must submit reports and payments.

Amends ARS § 20-225:

• Makes a penalty inapplicable for a payment of tax or interest that was late due to

delays caused by the third-party service.

Becomes effective on January 1, 2018.

Laws 2017, Chapter 150 (HB2070): Life Settlement Contracts; Broker Licenses

Amends ARS § 20-3202:

• Provides that expiration date of broker authority shall coincide with expiration of life

line of authority.

Laws 2017, Chapter 226 (HB 2160): Annuity Transaction; Training Requirements

Creates ARS § 20-1243.07:

• Adds producer education requirements for annuities.

• Prohibits a producer from soliciting the sale of an annuity product unless he or she

has adequate knowledge of the product to recommend the annuity and is in

compliance with the insurer’s standards for product training.

• Requires a producer to complete a one-time four credit hour training course that

meets the continuing education (CE) requirements outlined under Title 20 before

selling, soliciting or negotiating an annuity.

• Requires the length of the training course to be sufficient to qualify for at least four

CE credit hours.

• Requires the CE training course to include information on the following topics:

o Types of annuities and various classifications of annuities;

o Identification of the parties to an annuity;

o How product-specific annuity contract features affect consumers;

Regulatory Bulletin 2017-02 – Page 3

o The application of income taxation of qualified and nonqualified annuities;

o The primary use of annuities; and

o Appropriate sales practices, replacement requirements and disclosure

requirements.

• Allows the completion of substantially similar training course requirements of

another state to satisfy the CE training requirements of this state.

• Requires a CE training course provider to register as a CE provider and comply with

statutory requirements regarding reporting and certification issuance.

• Requires an insurer to verify that a producer has completed the CE training course

before allowing the producer to sell an annuity product.

• Allows an insurer to verify completion of the CE training course by obtaining

certificates of completion or reports from the following:

o Arizona Department of Insurance-sponsored database systems or vendors; or

o A reliable commercial database vendor that has a reporting arrangement

with approved insurance education providers

Becomes effective on January 1, 2018.

Laws 2017, Chapter 31 (HB 2189): Disability Insurance; Service Coverage

Amends ARS §§ 20-1376.09 and 20-1406.09:

• Excludes “disability income” from the requirement that a disability insurance policy

provide coverage for provider services regardless of the provider’s familial

relationship to the insured.

Laws 2017, Chapter 195 (HB 2232):

Commercial Insurance; Notice of Cancellation and Refund

of Unearned Premium.

Amends ARS § 20-1674:

• Allows the refund of premium, as a result of cancellation, to be mailed separately

but within ten days.

• If premium has been financed, a refund shall be returned in accordance with ARS §

20-1416.

Laws 2017, Chapter 281 (HB 2267)

: Captive Insurance; Fund

Amends ARS § 20-1098.18:

• Increases the threshold amount above which unencumbered monies in the Fund

revert to the State General Fund at the close of the fiscal year from $100,000 to

$200,000.

Laws 2017, Chapter 251 (HB 2279): Insurance; Fees; Insurance Producers

Amends ARS § 20-265:

• Requires the Department’s compilation and publication of information comparing

automobile insurance premiums to include fees charged at policy inception.

Amends ARS § 20-381:

Regulatory Bulletin 2017-02 – Page 4

• Modifies the definition of “supplementary rate information” to include a schedule of

fees, including membership fees charged by a reciprocal or mutual insurer.

Amends ARS § 20-465:

• Eliminates some restrictions on insurers being able to charge fees to an insured.

• Except as to life insurance, annuities, long-term care insurance or Medicare

supplement insurance, allows insurance producers to charge a fee or service charge

in addition to premium when the fee or service charge does not duplicate or

increase any fee or service charge in the insurer’s rate filing disclosed and the

insured agrees in writing to the fee or service charge.

• Preserves an insurance producer’s ability to charging and collecting fees the insurer

included in its rate filing.

• Modifies the definition of “commercial insurance” (to which ARS § 20-465 does not

apply) to exclude insurance maintained by a transportation network company driver

under a private passenger automobile insurance policy.

• Excludes from the restrictions of ARS § 20-465 surplus lines brokers transacting

surplus lines insurance.

Laws 2017, Chapter 323 (HB 2372): Public Benefits; Fee Waivers; Requirements

Creates ARS § 41-1080.01:

• Requires an agency to waive any fee charged for an initial license for any individual

applicant whose family income does not exceed 200 percent of the Federal Poverty

Line guidelines if the individual is applying for that specific license in this state for

the first time.

Laws 2017, Chapter 152 (HB 2386): Insurance; Advertising; Filing Requirements

Amends ARS § 20-1110:

• With respect to Sections 20-826, 20-1018, 20-1057 and 20-1110, exempts the

following from classification as advertising matter and sales material that is subject

to filing with the Director:

o Materials designed solely to increase public awareness of an insurer’s name,

trademarks, service marks, slogan or brand and not referencing specific

products or benefits offered by the insurer;

o Materials designed for and distributed only to large group benefit

administrators and their brokers and that are not intended for distribution to

group members;

o Webpages and other materials published exclusively to guide current

members about use of already purchased products;

o Social media sites and content that do not reference products or benefits

offered by the insurer or include a call to action;

o Web-banner advertisements, paid social media posts and online search

engine advertisements not linked to advertising matter and sales material or,

if linked to such content, linked only to content that meets one of the

following criteria:

Regulatory Bulletin 2017-02 – Page 5

 Not referencing specific products offered by the insurer; or

 Being less than 100 characters;

o Educational materials designed to increase consumer health insurance

literacy and not including a call to action or reference to a specific insure,

other that as the source or author of the materials; and

o Other materials and advertisements specified by the Department in rule or

by exemption order.

• Defines “insurer” as a disability insurer, group disability insurer, blanket disability

insurer, fraternal benefit society, prepaid dental plan organization, hospital service

corporation, medical service corporation, dental service corporation, optometric

service corporation and health care service organization.

• Defines “call to action” as a statement or other content that invites a consumer to

respond by contacting the insurer by phone, letter, email or other electronic

communication or attending an event so that the insurer can attempt to sell the

individual a product or service.

Laws 2017, Chapter 326 (HB 2498): Prepaid Legal Insurance; Capital Requirements

Amends ARS §20-1097.10:

• Reduces the unimpaired surplus requirement from $600,000 to $50,000 for

applicants seeking authorization to sell prepaid legal insurance contracts that only

provide legal service plans related to the lawful use of firearms.

Laws 2017, Chapter 299 (HB 2528): Index Exemptions; Unused Tax Credits

Amends ARS § 20-167:

• Eliminates the domestic stock life or disability insurer premium tax credit.

Repeals ARS 20-224.04

Becomes effective January 1, 2018.

Laws 2017, Chapter 9 (SB 1081): Mutual Holding Company Reorganization

Amends Title 20, Chapter 2, Arizona Revised Statutes, by adding Article 8.1; Creates ARS § 20-

713.01:

• Adds Article 8.1 and Section 20-731.01 to provide requirements for mutual holding

company reorganizations (See Sections 20-482 through 20-482.07, and 20-731.01)

Laws 2017, Chapter 70 (SB 1215): Insurance; Definition; Fire Protection Services

Amends ARS § 20-398:

• Adds an exclusion for the wildfire protection services portion of a property insurance

policy from being filed and approved by the Director.

• Requires a property insurance policy containing wildfire protection services,

including wildfire mitigation and wildfire suppression services, conducted by a

private entity, to contain a conspicuously stamped or written notice that states the

wildlife fire protection services are not subject to review by the Department.

Regulatory Bulletin 2017-02 – Page 6

Laws 2017, Chapter 267 (SB 1331): Workers’ Compensation; Rates; Deviations

Amends ARS § 20-359:

• Expands the exception for an insurer filing a deviation with the Director from one

deviation to up to six uniform percentage deviations that decrease or increase the

statewide portion of the rating organization’s rate filing.

o Requires that if more than one deviation is filed by an insurer, each deviation

must be established consistent with underwriting rules that are based on

criteria that would lead to a logical distinction of potential risk.

Laws 2017, Chapter 287 (SB 1332): Workers’ Compensation; Unemployment Insurance

Amends ARS § 23-722.04; Repeals ARS § 23-941.01; Creates ARS § 23-941.01; Amends ARS § 23-

1062:

• Allows DES or Office of Economic Opportunity to disclose unemployment insurance

information to the ICA, Department of Insurance or Attorney General for use by the

agency, their agents or their contractors in the investigation and prosecution of

workers’ compensation fraud.

• Repeals existing requirements of a final settlement agreement in a workers’

compensation case.

• Provides new requirements for the final settlement of a workers’ compensation

claim.

• Effective November 1, 2017, allows, in compliance with the requirements of the

Section, an interested party in a workers’ compensation claim to:

o Settle and release all or part of an accepted claim for compensation,

benefits, penalties or interest.

o If the period of disability is terminated by a carrier, negotiate a full and final

settlement agreement.

Laws 2017, Chapter 163 (SB 1341): Foster Children; Motor Vehicle Insurance

Amends ARS § 20-1106:

• Allows a foster child who is at least 16 years old and who has completed a driver

training program to contract, notwithstanding the minor’s minority status, for motor

vehicle liability insurance that satisfies the requirements of Section 28-4009 and that

covers the minor.

Laws 2017, Chapter 190 (SB 1441): Health Insurers; Surprise Billings; Arbitration

Amends ARS § 20-3101 and 20-3102; Amends ARS Title 20, Chapter 20 by adding Article 2:

• Lists general exceptions to qualification under this section. Lists requirements for a

bill to qualify as a surprise out-of-network bill for purposes of this section. Allows an

enrollee who has received a bill that meets the criteria of this section and who

disputes the amount of the bill to seek dispute resolution in accordance with this

section, if all of the following apply:

Regulatory Bulletin 2017-02 – Page 7

o The enrollee has resolved any health care appeal that the enrollee may have

had against the insurer following the insurer’s initial adjudication of the

claim;

o The amount of the bill for which the enrollee is responsible after deduction

of the enrollee’s cost sharing requirements and the insurer’s allowable

reimbursement is at least $1,000; and

o The enrollee received the bill.

• Sets forth the framework for a dispute resolution procedure for surprise bills which

includes the following:

o Requires the enrollee to participate in the teleconference and allows the

enrollee the option of participating in the arbitration.

o Requires the insurer and provider (or their representative) to participate in

both the teleconference and the arbitration.

o Prohibits an enrollee from seeking arbitration of a bill if the enrollee signed

certain disclosures set forth in the section and the surprise bill is less or equal

to the amount presented in the disclosure.

• Requires the Arizona Department of Insurance to develop a simple, fair, efficient and

cost-effective arbitration procedure for bill disputes and specify time frames,

standards and other details of the arbitration proceeding.

• Allows the Department to contract with one of more entities to provide qualified

arbitrators for the purpose of the arbitration process. Department staff may not

serve as arbitrators.

• Allows the enrollee to request arbitration of a bill by submitting a request for

arbitration to the Department on a Department-prescribed form (form).

• Requires the Department to notify the insurer and provider of arbitration requests.

• Requires the Department to arrange an informal settlement teleconference within

30 days of receiving request for arbitration. Department is not a participant in

teleconference.

• Requires the insurer to provide the other parties with the enrollee’s cost sharing

requirements under the enrollee’s health plan based on the adjudicated claim.

• Requires the parties involved to notify the Department of the results of the

teleconference.

• Specifies that if either the insurer or provider or their representative fails to

participate in the teleconference, then the other party may notify the Department

to immediately initiate arbitration with the nonparticipating party being required to

pay the total cost of the arbitration.

• Requires the Department, upon receipt of notice that the dispute has not been

settled or that a party has failed to participate in the teleconference, to appoint an

arbitrator and to notify the parties of the arbitration and the appointed arbitrator.

Regulatory Bulletin 2017-02 – Page 8

• Specifies that the insurer and provider agree to the arbitrator and provides

appointment procedure if objection to appointed arbitrator.

• Requires the following to occur before arbitration:

o The enrollee pays or makes arrangements in writing to pay to the provider

the total amount of the enrollee’s cost sharing due for the services contained

in the bill;

o The enrollee pays any amount received from the enrollee’s insurer as

payment for the out-of-network services that were rendered by the provider;

and

o If the insurer pays for out-of-network services directly to a provider, then the

insurer that has not remitted its payment for such services remits the

amount due to the provider.

• Requires arbitration of any bill to be conducted in the county in which the health

care services giving rise to the bill were rendered and allows the arbitration to be

conducted telephonically on the agreement of all of the participants.

• Requires the arbitration of the bill to take place with or without the enrollee’s

participation.

• Requires the arbitrator to determine the amount the provider is entitled to receive

as payment for the health care services, laboratory services or durable medical

equipment.

• Requires the arbitrator to allow each party to provide information the arbitrator

reasonably determines to be relevant in evaluating the bill, including the following:

o The average contracted amount that the insurer pays for the health care

services at issue in the county where the services were performed;

o The average amount that the provider has contracted to accept for the

health care services at issue in the county where the service were

performed;

o The amount that Medicare and Medicaid pay for the health care services at

issue;

o The provider’s direct pay rate, if any;

o Any information that would be evaluated in determining whether a fee is

reasonable and not excessive for the health care services at issue, including

the usual and customary charges for health care services at issue that were:

 Performed by a provider in the same or similar specialty; and

 Provided in the same geographical area; and

o Any other reliable databases or sources of information on the amount paid

for the health care services at issue in the county where the services were

performed.

• Requires the arbitration to be conducted within 120 days after the Department’s

notice of arbitration, except on the agreement of the parties participating in the

arbitration.

Regulatory Bulletin 2017-02 – Page 9

• Prohibits the arbitration from lasting more than four hours, except on the

agreement of the parties participating in the arbitration.

• Requires the arbitrator to issue a final written decision within 10 business days

following the arbitration hearing.

• Requires the arbitrator to provide a copy of the decision to the enrollee, the insurer

and the provider or its billing company or authorized representative.

• Specifies that all pricing information provided by insurers and providers in

connection with the arbitration of a bill is confidential and may not be disclosed by

the arbitrator or any other party participating in the arbitration.

• Exempts a claim that is the subject of an arbitration request from being subject to

A.R.S. Title 20, Chapter 20, Article 1, pertaining to the timely payment of health care

provider claims, while the arbitration is pending.

• Requires an insurer to remit its portion of the payment resulting from the

teleconference or the amount awarded by the arbitrator within 30 days of

resolution of the claim.

• Stipulates that the enrollee, notwithstanding any informal settlement of the

arbitrator’s decision with respect to the bill, is responsible for only the amount of

the enrollee’s cost sharing requirements and any amount received by the enrollee

from the enrollee’s insurer as payment for out-of-network services that were

rendered by the provider.

• Prohibits a provider from issuing, either directly or through its billing company, any

additional balance bill to the enrollee related to the health care service, laboratory

service or durable medical equipment that was the subject of the teleconference or

arbitration.

• Requires the insurer and provider to share the costs of the arbitration equally,

unless all parties otherwise agree.

• Specifies that the enrollee is not responsible for any portion of the cost of the

arbitration.

• Requires a person to do the following in order to qualify as an arbitrator:

o Have at least three years of experience in health care services claims; and

o Comply with any other qualifications established by the Department.

• Requires the Department, in conjunction with the appropriate health care boards, to

prescribe a notice that outlines an enrollee’s rights to dispute a bill.

• Requires insurers to include the above notice in each explanation of benefits or

other similar claim adjudication notice that is:

o Issued to enrollees; and

o Involves covered services rendered by a non-contracted provider.

• Requires a provider, their representative or billing company, upon being contacted

by the enrollee, to provide written notice as prescribed by the Department to the

enrollee, informing them of the dispute resolution process.

• Requires the Department to post information on its website for health care

consumers regarding:

o What constitutes a bill;

Regulatory Bulletin 2017-02 – Page 10

o How to try to avoid a bill; and

o How the dispute resolution process may be used to resolve a bill.

o Requires the Department, beginning on or before December 31, 2019 and by

each December 31 thereafter, to report on the resolution of disputed bills to

the Governor, President of the Senate and Speaker of the House of

Representatives, with a copy to the Secretary of State. Specifies the

information required in the report.