Many states have adopted laws based on the National Association of Insurance Commissioners (NAIC) model Unfair Trade Practices Act, which prohibits “unfair discrimination” but allows “risk classification based on sound actuarial principles and actual or reasonably anticipated experience.” 1 Other NAIC model laws and regulations are consistent with this approach. Similar language is found in state laws and regulations relating to rate filing. 2 The North Carolina Administrative Code, for example, requires a statement by an actuarial expert that health maintenance organization premiums “are established in accordance with actuarial principles for various categories of enrollees and are not excessive, inadequate or unfairly discriminatory.” Regarding the inclusion of risks with demonstrably different risk probabilities in the same risk class, a 1973 opinion of the Attorney General of Washington 3 , states “equality of treatment may be denied as much by requiring apparently identical benefits be provided to persons unequally situated as by requiring different benefits to be provided to persons equally situated.” (Emphasis in original). There are situations, however, in which laws and regulations have been adopted that constrain or put limits on risk classification in certain circumstances. These actions often are taken in reaction to specific individual circumstances and to public concern that these circumstances engender. The Manhart 4 decision by the Supreme Court, as well as subsequent employment law, for example, prohibits requiring different employee contributions for similar pension benefits for male and female employees. A small number of states prohibit gender-distinct rates for annuities and, less frequently, life insurance. Numerous limitations on risk classification apply to health insurance. The restriction on the recognition of pre-existing conditions in the “Patient Protection and Affordable Care Act” (PPACA) 5 passed by the U.S. Congress in 2010 is a notable example. Restrictions on the use of the pre-existing conditions as risk characteristics are instructive in two ways. First, when the criteria necessary for the success of complex financial or personal security systems are subordinated to other public policy concerns, the issues that 1
Unfair Trade Practices Act, NAIC MODEL LAWS, REGULATIONS AND GUIDELINES 880-1, §4 (2007). Model laws, regulations and guidelines adopted by the NAIC are adopted, sometimes with revisions, by the various states at their discretion. 2 See, e.g., 11 N.C. Admin. Code 12.0321 (2011); Va. Code. Ann. § 38.2-1909 (2011). See also Guidelines for Filing of Rates for Individual Health Insurance Forms, NAIC MODEL LAWS, REGULATIONS AND GUIDELINES 134-1, §§ 1-2 (2010); Property & Casualty Rating Law (prior approval version), NAIC MODEL LAWS, REGULATIONS AND GUIDELINES 1780-4, § 4 (2009). 3 1973 Wash. Att’y Gen. Op. No. 21, (Oct. 11, 1973), available at www.atg.wa.gov/AGOOpinions/opinion.aspx?section=archive&id=6930. 4 Los Angeles Dep’t Water and Power v. Manhart, 435 U.S. 702 (1978). 5 Patient Protection and Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119 § 1201 (2010).