Enhancing WA Child Support Insurance Intercept Law

The Division of Child Support (DCS), within the Department of Social and Health Services, is the designated child support agency in Washington. According to the U.S. Child Support Services 2023 report, DCS provided child support services to more than 240,000 Washington families. Its employees help families establish and modify child support orders, and they enforce those orders by collecting child support on behalf of custodial parents.

Past-due child support totaled more than $1.7 billion as of the end of 2023. Child support debt in Washington persists until 10 years or more after a family’s youngest child turns 18. As a result, the accumulated debt can include decades of past-due payments.

The Office of the Insurance Commissioner (OIC) oversees Washington state’s insurance industry to protect consumers and make sure that companies, agents and brokers doing business in the state follow the rules. It monitors 2,707 insurers, each of which must submit annual reports to the OIC. The OIC notifies insurers of their responsibilities regarding consumer complaints and conducts investigations to make sure companies deliver the services and coverage customers have paid for. Depending on the infraction, the OIC can revoke or suspend an insurer’s license to do business in the state and/or impose a fine.

In September 2020, we published a performance audit that recommended a change to a state law that allowed child-support liens on insurance claims. At that time, insurance companies doing business in Washington could voluntarily submit claims data to match against child-support debt, but they were not required to do so. We recommended the state require insurance companies to participate in an insurance intercept match program to increase collections for past due child support.

The Legislature enacted RCW 26.23.037, which took effect on January 1, 2022. Insurers must now report certain claims for bodily injury or wrongful death, worker’s compensation or life insurance within 10 days of opening the claim. The amount of the claim must be for more than $500 beyond any claim-related attorneys’ fees, property damage or medical costs.

Learn about the earlier report.

State law does not require the OIC to take any action for the child support insurance intercept match program. Additionally, insurance regulators in other states with match programs rarely play a role in their implementation. But not all eligible insurance claims have been reported as required for DCS to act upon. DCS staff sometimes learn about unreported claims through other means.

Despite DCS outreach efforts, some insurers may be unaware of mandatory reporting requirements. DCS tries to educate insurers who fail to report eligible claims, but has difficulty reaching the right person. Although not obligated by law to communicate with insurers specifically about this law, OIC has information that could help DCS.

A dedicated section on the OIC’s website gives insurers access to information on laws and rules under the Washington Insurance Code. Insurers can also sign up to receive email or text alerts to subscribers about rule changes, legislation, industry information and consumer news.

State law currently does not allow for enforcement if an insurer decides not to report a claim. If the law were to change, there are pros and cons to which agency – OIC or DSHS – is best positioned for monitoring and enforcement authority. For example:

• In favor of assigning authority to DSHS, we noted that doing so would consolidate all aspects of the program under a single agency and chapter within the law. In addition, Division of Child Support already has subpoena authority. It can impose fines, suspend licenses, and take actions through Superior Court in response to noncompliance with a child support order.
   
• In favor of assigning authority to OIC, we noted the agency's deep understanding of the insurance business, so it would be better able to understand the causes behind a noncompliance issue. Furthermore, OIC already has an existing process for reviewing the activities of insurers.

However, each agency lacks knowledge of the other's processes and constituencies. If the law were changed to assign shared responsibility, both would have to work closely together to combine their individual expertise.

Other states provide examples for how monitoring and enforcement could be addressed and guide legislative changes. Phrasing from their laws could help legislators decide how to modify Washington law to close existing gaps and make our state’s program more effective. 

For example, seven states implemented provisions for taking action if an insurance company fails to comply with the law. Five states specify penalties for noncompliance with reporting requirements, either in law or in rules. Additionally, Washington might want to consider allowing penalties to be applied when the failure to report by an insurer is “willful.”  

Other states have considered how to assess insurers for compliance with state law. In Massachusetts, the Division of Insurance checks for compliance with the state’s child support insurance intercept match program during “market conduct” exams. 

We made a recommendation to the Legislature to assign responsibility for monitoring and enforcement of the reporting requirement under the child support insurance intercept law to either the Division of Child Support within the Department of Social and Health Services, the Office of the Insurance Commissioner, or both. We made a recommendation to the Office of the Insurance Commissioner to help inform insurers doing business in Washington and others about their requirements under the child support insurance intercept law.