The December memorandum approved the use of SERFF in implementing and running the exchanges.

But the Dec. 6 memo raised additional concerns by stating, “Furthermore, some state-insurance regulators have requested that SERFF be used for other non-rate and form filing purposes.”

The memo adds, “In fact, a handful of states have implemented SERFF for alternative purposes. We understand that on an Oct. 5, 2011 conference call, the SERFF board expressed support for allowing the use of SERFF for alternative purposes.”

Such additional uses include annual reports (advisory organizations, financial, etc.) and utilization review filings. “The NAIC executive committee hereby states their full support for alternative uses of SERFF, recognizing that the use of SERFF for filing submission, review and approval should not be compromised in the process, and directs the [SERFF] board to continue to support these purposes on a going-forward basis, keeping in mind that the board's responsibilities are limited to rate and form filing.”

That goes to the heart of the industry concern that, “what the NAIC's current position means is that if the SERFF board voted to oppose a fee increase with a supermajority vote, such action would be sent to the NAIC Executive Committee, which could overturn it,” one source says.

“With so many states now mandating the use of SERFF, the SERFF board being limited to an advisory function is a significant change,” the source adds.

The source says that a primary concern is that the “NAIC could greatly expand its revenues through increases in SERFF fees and could expand SERFF into a tool to collect additional data, as has been suggested in the past.”

In their letter, the trade group officials state, “ Both the tone and substance of the Memorandum suggest an NAIC Executive Committee view regarding the role of the SERFF board and industry in future SERFF governance to which the insurance associations must respectfully, yet strongly, object.”

The letter adds, “The NAIC Executive Committee states in its 12/6/11 Memorandum that the SERFF Board is an advisory committee and repeatedly directs the SERFF Board to support certain uses of SERFF or to take certain actions that conflict with the express language of the SERFF bylaws.

“These statements also appear dismissive of the past partnership between the industry and the regulators which has led to SERFF's success,” the letter says.

The issue was discussed this morning at one of the opening sessions of the NAIC's spring meeting, being held inNew Orleans.

The topic has been simmering for more than two years. According to industry officials. The NAIC wants to amend the bylaws of its SERFF system so that the joint industry-regulatory board that now governs SERFF would become an advisory function to the NAIC Executive Committee, according to several industry officials who asked not to be named.

The NAIC sees this as an issue of corporate governance, according to these sources.

According to these officials, the industry's perspective is that regulators and the industry originally had considered a number of ways to structure SERFF when it was organized, and agreed to house it at the NAIC so long as there were safeguards to prevent public disclosure of SERFF filings and prevent the use of SERFF for other purposes and as well as assuring that SERFF fees were reasonable and used only for SERFF purposes rather than to subsidize other NAIC activities.

The source says that those safeguards were institutionalized in the SERFF bylaws through super-majority voting requirements (10 of 13) on any fee increases or major changes in SERFF operations.