Bill Text: IA HF667 | 2019-2020 | 88th General Assembly | Introduced

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Bill Title: A bill for an act relating to the membership of the life and health insurance guaranty association, assessments to member insurers for insurance written by impaired or insolvent member insurers, and including applicability provisions. (Formerly HSB 219.)

Spectrum: Committee Bill

Status: (Introduced - Dead) 2019-03-26 - Withdrawn. H.J. 647. [HF667 Detail]

Download: Iowa-2019-HF667-Introduced.html

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House File 667 - Introduced
HOUSE FILE 667
BY COMMITTEE ON COMMERCE
(SUCCESSOR TO HSB 219)
A BILL FOR
An Act relating to the membership of the life and health
insurance guaranty association, assessments to member
insurers for insurance written by impaired or insolvent
member insurers, and including applicability provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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Section 1. Section 507C.3, Code 2019, is amended by adding
the following new subsection:
NEW SUBSECTION . 7. Health maintenance organizations formed
under chapter 514B other than limited service organizations
formed under section 514B.33.
Sec. 2. Section 508C.2, Code 2019, is amended to read as
follows:
508C.2 Purpose.
1. The purpose of this chapter is to protect, subject to
certain limitations, the persons specified in section 508C.3,
subsection 1 , against failure in the performance of contractual
obligations under life , and health , insurance policies and
annuity policies, plans, or contracts specified in section
508C.3, subsection 2 , because of the impairment or insolvency
of the member insurer which issued the policies , plans, or
contracts.
2. To provide this protection, an association of member
insurers is created to enable the guaranty of payments of
benefits and of continuation of coverages as limited in by this
chapter . Members of the association are subject to assessment
to provide funds to carry out the purpose of this chapter .
Sec. 3. Section 508C.3, subsection 1, paragraphs a, b, and
e, Code 2019, are amended to read as follows:
a. Except Persons, regardless of where they reside, except
for nonresident certificate holders under group policies or
contracts, persons who are the beneficiaries, assignees, or
payees , including health care providers rendering services
covered under health insurance policies, contracts, or
certificates, of the persons covered under paragraph “b” .
b. Persons who are owners of or certificate holders
or enrollees under the policies or contracts specified in
subsection 2 , other than unallocated annuity contracts and
structured settlement annuities, or are enrollees, insureds , or
annuitants under the policies or contracts, and who are either
of the following:
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(1) Residents of this state.
(2) Nonresidents of this state if all of the following
conditions are met:
(a) The state in which the person resides has an association
similar to the association created in this chapter .
(b) The person is not eligible for coverage by an
association described in subparagraph division (a) in any
other state due to the fact that the insurer or the health
maintenance organization was not licensed in the state at the
time specified in that state’s guaranty association law.
(c) The member insurer that issued the policy or contract is
domiciled in this state.
e. A person who is a resident of this state and, only in
special circumstances, to a nonresident. In order to avoid
duplicate coverage, if a person who would otherwise receive
coverage under this chapter is provided coverage under the
laws of any other state, that person shall not be provided
coverage under this chapter . In determining the application
of the provisions of this paragraph in situations a situation
where a person could be provided coverage by the association
of more than one state, whether as an owner, payee, enrollee,
beneficiary, or assignee, this chapter shall be construed in
conjunction with other state laws to result in coverage by the
association of only one state.
Sec. 4. Section 508C.3, subsections 2, 3, and 4, Code 2019,
are amended to read as follows:
2. This chapter shall provide coverage to the persons
specified in subsection 1 under policies or contracts of direct
life insurance policies , health insurance policies including
long-term care insurance and disability insurance policies ,
annuity contracts or annuities , supplemental contracts,
certificates under group policies or contracts, and unallocated
annuity contracts issued by member insurers. For purposes
of this chapter, health insurance shall include without
limitation health maintenance organization subscriber contracts
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and certificates, long-term care insurance, and disability
insurance policies.
3. Coverage under this chapter shall not be provided to any
of the following:
a. A person who is a payee, or the a beneficiary of a payee
if the payee is deceased, of a contract owner who is a resident
of this state, if the payee or the beneficiary of the payee is
provided any coverage by the association of another state.
b. A person who is covered pursuant to subsection 1 ,
paragraph “c” , if that person is provided any coverage by the
association of another state.
c. A person who acquires rights to receive payments through
a structured settlement factoring transaction as defined in
26 U.S.C. §5891(c)(3)(A), regardless of when the transaction
occurred.
4. This chapter does not apply to any of the following :
a. Any Except for a portion of a policy or contract,
including a rider, that provides coverage for long-term care
or any health insurance benefits, any portion of a policy or
contract to the extent that the rate of interest on which
it is based or the interest rate, crediting rate, or similar
factor determined by use of an index or other external
reference stated in the policy or contract and employed in
calculating returns or changes in value, averaged over the
period of four years prior to the date on which the association
becomes obligated with respect to the policy or contract,
exceeds a rate of interest determined by subtracting two
percentage points from Moody’s corporate bond yield average
for the same four-year period or over such lesser period if
the policy or contract was issued less than four years before
the association became obligated; and on or after the date on
which the association becomes obligated with respect to the
policy or contract, exceeds the rate of interest determined by
subtracting three percentage points from Moody’s corporate bond
yield average as most recently available.
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b. That portion or part of a policy or contract not
guaranteed by the member insurer, or under which the risk is
borne by the policyholder policy or contract holder .
c. A policy or contract or part of a policy or contract
assumed by the impaired or insolvent insurer under a contract
of reinsurance, other than reinsurance for which assumption
certificates have been issued.
d. An unallocated annuity contract issued to or in
connection with an employee benefit plan protected under the
federal pension benefit guaranty corporation , regardless of
whether the federal pension benefit guaranty corporation has
yet become liable to make any payments with respect to the
benefit plan , or a .
e. A portion of an unallocated annuity contract which is not
issued to or in connection with a specific employee, union, or
association of natural persons, or any portion of a financial
guarantee.
e. f. A policy or contract issued by a company which is
licensed under chapter 509A , 512A , 512B , 514 , 514B , 518 , 518A ,
or 520 , or under section 514B.33 .
f. g. Except for a policy issued pursuant to section
515.48, subsection 5 , paragraph “a” , a policy or contract issued
by a company which is licensed under chapter 515 .
g. h. A charitable gift annuity under chapter 508F .
h. i. An annuity contract issued to a government lottery.
i. j. A funding agreement under section 508.31A .
j. k. An obligation that does not arise under the express
written terms of a covered policy or contract issued by the
member insurer to the enrollee, certificate holder, policy
owner, or contract owner including without limitation all of
the following:
(1) Claims A claim based on marketing materials.
(2) Claims A claim based on side letters, riders, or other
documents that were issued by the member insurer without
meeting applicable policy or contract form filing or approval
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requirements.
(3) Misrepresentation A claim based on misrepresentation of
or misrepresentation regarding policy or contract benefits.
(4) Extra-contractual claims An extra-contractual claim .
(5) Claims A claim for penalties, consequential, or
incidental damages.
k. l. A contractual agreement that establishes a member
insurer’s obligations to provide a book value accounting
guaranty for defined contribution benefit plan participants by
reference to a portfolio of assets that is owned by the benefit
plan or its trustee, which in each case is not an affiliate of
the member insurer.
l. m. A portion of a covered policy to the extent it
provides for interest or other change changes in value to be
determined by the use of an index or other external reference
stated in the covered policy, but which has have not been
credited to the covered policy, or as to which the covered
policy owner’s rights are subject to forfeiture, as of the
date the member insurer becomes an impaired or insolvent
insurer under this chapter , whichever is earlier. If a covered
policy’s interest or change changes in value is are credited
less frequently than annually, then for purposes of determining
the values that have been credited and are not subject to
forfeiture under the covered policy, the interest or change in
value determined by using the procedures defined in the covered
policy will be credited as if the contractual date of crediting
interest or changing values was the date of impairment or
insolvency, whichever is earlier, and will the crediting
interest or changing value shall not be subject to forfeiture.
m. n. A policy or contract issued in this state by a member
insurer at a time the insurer was not licensed or did not have
a certificate of authority to issue the policy or contract in
this state.
n. o. A portion of a policy or contract issued to a plan or
program of an employer, association, or other person to provide
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life, health, or annuity benefits to employees, members, or
others, to the extent that the plan or program is self-funded
or uninsured, including but not limited to benefits payable
by an employer, association, or other person under any of the
following:
(1) A multiple employer welfare arrangement as defined in
section 3 of the federal Employee Retirement Income Security
Act of 1974, 29 U.S.C. §1002, paragraph 40.
(2) A minimum premium group insurance plan.
(3) A stop-loss group insurance plan.
(4) An administrative services-only contract.
o. p. A portion of a policy or contract to the extent that
it provides for any of the following:
(1) Dividends or experience rating credits.
(2) Voting rights.
(3) Payment of any fees or allowances to any person,
including the policy or contract owner, in connection with
service to or administration of the policy or contract.
p. q. A portion of a policy or contract to the extent that
the assessments authorized by section 508C.9 with respect to
the policy or contract are preempted by federal or state law.
q. r. A policy or contract providing any hospital, medical,
prescription drug, or other health care benefits pursuant to
any of the following:
(1) 42 U.S.C. ch. 7, subch. XVIII, Part C or Part D,
commonly known as Medicare Part C and D pursuant to Tit. XVIII
of the federal Social Security Act , or any regulations issued
pursuant thereto.
(2) 42 U.S.C. ch. 7, subch. XIX, commonly known as Medicaid,
or any regulations issued pursuant thereto.
s. Structured settlement annuity benefits to which a payee
or beneficiary has transferred the payee’s or beneficiary’s
rights in a structured settlement factoring transaction as
defined in 26 U.S.C. §5891(c)(3)(A).
Sec. 5. Section 508C.3, Code 2019, is amended by adding the
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following new subsection:
NEW SUBSECTION . 4A. a. The benefits that the association
may become obligated to cover shall in no event exceed the
lesser of either of the following:
(1) The contractual obligations for which the member
insurer is liable or would have been liable if the member
insurer were not an impaired or insolvent insurer.
(2) Any of the following:
(a) With respect to one life, regardless of the number of
policies or contracts:
(i) Three hundred thousand dollars in life insurance death
benefits, but not more than one hundred thousand dollars in
net cash surrender and net cash withdrawal values for life
insurance.
(ii) Five hundred thousand dollars for health benefit
plans; three hundred thousand dollars for health insurance
benefits which are disability income protection coverage as
defined by the commissioner by rule pursuant to section 514D.4;
three hundred thousand dollars for long-term care insurance as
defined in section 514G.103; or one hundred thousand dollars
for other health insurance benefits including any net cash
surrender and net cash withdrawal values.
(iii) Two hundred fifty thousand dollars in the present
value of annuity benefits, including net cash surrender and net
cash withdrawal values.
(iv) With respect to each payee of a structured settlement
annuity, or the beneficiary or beneficiaries of the payee if
the payee is deceased, two hundred fifty thousand dollars in
present value annuity benefits, in the aggregate, including net
cash surrender and net cash withdrawal values.
(b) (i) With respect to each individual participating
in a retirement benefit plan established under section 401,
403(b), or 457 of the United States Internal Revenue Code, or
each unallocated annuity contract account, excluding a plan
established under section 401, 403(b), or 457 of the United
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States Internal Revenue Code, not more than two hundred fifty
thousand dollars in the aggregate, in present value annuity
benefits, including net cash surrender and net cash withdrawal
values for the beneficiaries of the deceased individual.
(ii) However, the association shall not in any event be
obligated to cover more than an aggregate of three hundred
fifty thousand dollars in benefits with respect to any one life
under subparagraph division (a) and this subparagraph division
(b), except with respect to benefits for health benefit plans
under subparagraph division (a), subparagraph subdivision
(ii), in which case the aggregate liability of the association
shall not exceed five hundred thousand dollars with respect
to any one individual, or more than five million dollars in
benefits to one owner of multiple nongroup policies of life
insurance regardless of whether the policy or contract owner is
an individual, firm, corporation, or other person, and whether
the persons insured are officers, managers, employees, or other
persons, and regardless of the number of policies and contracts
held by the owner.
(c) With respect to a plan sponsor whose plan owns, directly
or in trust, one or more unallocated annuity contracts not
included under subparagraph division (b), not more than five
million dollars in benefits, regardless of the number of
contracts held by the plan sponsor. However, where one or more
such unallocated annuity contracts are covered contracts under
this chapter and are owned by a trust or other entity for the
benefit of two or more plan sponsors, the association shall
provide coverage if the largest interest in the trust or entity
owning the contract is held by a plan sponsor whose principal
place of business is in the state but in no event shall the
association be obligated to cover more than five million
dollars in benefits in the aggregate with respect to all such
unallocated contracts.
b. The limitations on the association’s obligation to
cover benefits that are set forth under this subsection
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do not take into account the association’s subrogation and
assignment rights or the extent to which such benefits could
be provided out of the assets of the impaired or insolvent
insurer attributable to covered policies. The cost of the
association’s obligations under this chapter may be met by the
use of assets attributable to covered policies or reimbursed
to the association pursuant to the association’s subrogation
and assignment rights.
c. For purposes of this chapter, benefits provided by a
long-term care rider to a life insurance policy or annuity
contract shall be considered the same type of benefits as the
base life insurance policy or annuity contract to which the
long-term rider relates.
Sec. 6. Section 508C.3, subsection 5, Code 2019, is amended
to read as follows:
5. In performing its obligations to provide coverage
under this chapter , the association shall not be required to
guarantee, assume, reinsure, reissue, or perform, or cause to
be guaranteed, assumed, reinsured, reissued, or performed, the
contractual obligations of an insolvent or impaired insurer
under a covered policy or contract that do not materially
affect the economic values or economic benefits of the covered
policy or contract.
Sec. 7. Section 508C.5, subsections 8, 10, 11, 12, 14, 17,
19, and 20, Code 2019, are amended to read as follows:
8. “Covered policy” or “covered contract” means a policy
or contract , or a portion of a policy or contract , for which
coverage is provided under section 508C.3 .
10. “Impaired insurer” means a member insurer which , after
July 1, 1987, is not an insolvent insurer but and is placed
under an order of rehabilitation or conservation by a court of
competent jurisdiction.
11. “Insolvent insurer” means a member insurer which , after
July 1, 1987, is placed under an order of liquidation with a
finding of insolvency by a court of competent jurisdiction.
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12. “Member insurer” means a person an insurer or health
maintenance organization which is licensed or who which holds
a certificate of authority to transact in this state any kind
of insurance or health maintenance business for which coverage
is provided under section 508C.3 , and including a person an
insurer or health maintenance organization whose license or
certificate of authority in this state has been suspended,
revoked, not renewed, or voluntarily withdrawn but does not
including include any of the following:
a. An entity which is a licensed company specified in
section 508C.3, subsection 4 , paragraph “e” “f” or “f” “g” .
b. A mandatory state pooling plan.
c. A mutual assessment company or other person which
operates on an assessment basis.
d. An insurance exchange.
e. An entity which issues a charitable gift annuity under
chapter 508F .
f. An entity whose only business in this state is operating
as a managed care organization. For purposes of this
paragraph, “managed care organization” means an entity that is
under contract with the Iowa department of human services to
provide services to Medicaid recipients and that also meets
the definition of “health maintenance organization” in section
514B.1.
f. g. An entity similar to any of the entities enumerated
in this subsection .
14. “Owner” of a policy of contract, “policy holder” ,
“policy owner” , or “contract owner” means the person who is
identified as the legal owner of a policy or contract under
the terms of the policy or contract or who is otherwise vested
with legal title to the policy or contract through a valid
assignment completed in accordance with the terms of the policy
or contract and properly recorded as the owner on the books of
the member insurer. “Owner” , “policy holder” , “policy owner” ,
or “contract owner” does not include a person with a mere
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beneficial interest in a policy or contract.
17. “Premium” means amounts or consideration, by whatever
name called, received on covered policies or contracts less
returned premiums, considerations, and deposits and less
dividends and experience credits. “Premium” does not include
amounts for consideration received for policies or contracts or
for the portions of policies or contracts for which coverage
is not provided under section 508C.3, subsection 4 , except
that assessable premium shall not be reduced on account of the
provisions of section 508C.3, subsection 4 , paragraph “a” ,
relating to interest limitations and section 508C.8 508C.3 ,
subsection 8 4A , paragraph “a” , subparagraph (2), subparagraph
division (a), relating to limitations with respect to one
individual, one participant, and one policy or contract owner.
“Premium” also does shall not include any of the following:
a. Premiums in excess of five million dollars on an
unallocated annuity contract not issued under a governmental
retirement plan, or its trustee, established under section 401,
403(b), or 457 of the United States Internal Revenue Code.
b. With respect to multiple nongroup policies of life
insurance owned by one owner, whether the policy or contract
owner is an individual, firm, corporation, or other person, and
whether the persons insured are officers, managers, employees,
or other persons, premiums in excess of five million dollars
with respect to those polices or contracts, regardless of the
number of policies or contracts held by the owner.
19. “Receivership court” means a court in an insolvent
or impaired insurer’s state having jurisdiction over the
conservation, rehabilitation, or liquidation of the insolvent
or impaired insurer.
20. “Resident” means a person to whom a contractual
obligation is owed and who resides in a state on the date of
entry of a court order that determines a member insurer is an
impaired insurer or a court order that determines a member
insurer is an insolvent insurer. A person may be a resident
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of only one state, which in the case of a person other than a
natural person shall be the state of that person’s principal
place of business. A citizen of the United States who is a
resident of a foreign country, or is a resident of a United
States possession, territory, or protectorate that does not
have an association similar to the association created by this
chapter , shall be deemed a resident of the state or domicile of
the member insurer that issued the policy or contract.
Sec. 8. Section 508C.5, Code 2019, is amended by adding the
following new subsection:
NEW SUBSECTION . 9A. “Health benefit plan” means any
hospital or medical expense policy or certificate, or health
maintenance organization subscriber contract or any other
similar health contract. “Health benefit plan” does not include
any of the following:
a. Accident-only insurance.
b. Credit insurance.
c. Dental-only insurance.
d. Vision-only insurance.
e. Medicare supplement insurance.
f. Benefits for long-term care, home health care,
community-based care, or any combination thereof.
g. Disability income insurance.
h. Coverage for an onsite medical clinic.
i. Specified disease, hospital confinement indemnity,
or limited benefit health insurance if the specific type of
coverage does not provide coordination of benefits and is
provided under a separate policy or certificate.
Sec. 9. Section 508C.6, subsection 1, Code 2019, is amended
to read as follows:
1. A nonprofit legal entity is created to be known as the
Iowa life and health insurance guaranty association. All
member insurers shall be and shall remain members of the
association as a condition of their authority to transact
insurance or health maintenance organization business in this
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state. The association shall perform its functions under
the plan of operation established and approved under section
508C.10 and shall exercise its powers through the board of
directors established in section 508C.7 . For purposes of
administration and assessment, the association shall maintain
all of the following accounts:
a. A health insurance account.
b. A life insurance account.
c. An annuity account . A , which shall include annuity
contracts owned by a governmental retirement plan , or the
plan’s trustee, established under section 401, 403(b), or 457
of the United States Internal Revenue Code shall be covered by
the annuity account , but shall otherwise exclude unallocated
annuities .
d. An unallocated annuity contract account, excluding
plans which shall exclude contracts owned by a governmental
retirement benefit plan, or the plan’s trustee, established
under section 401, 403(b), or 457 of the United States Internal
Revenue Code.
Sec. 10. Section 508C.7, subsections 1 and 2, Code 2019, are
amended to read as follows:
1. The board of directors of the association shall consist
of not less than five seven nor more than nine eleven member
insurers serving terms as established in the plan of operation.
The members of the board shall be selected by member insurers,
subject to the approval of the commissioner. Vacancies on the
board shall be filled for the remaining period of the term
by a majority vote of the remaining board members, subject
to the approval of the commissioner. To select the initial
board of directors, and initially organize the association, the
commissioner shall give notice to all member insurers of the
time and place of the organizational meeting. In determining
voting rights at the organizational meeting , each member
insurer is shall be entitled to one vote in person or by proxy.
If the board of directors is not selected within sixty days
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after notice of the organizational meeting, the commissioner
may appoint the initial members.
2. In approving selections or in appointing members to the
board, the commissioner shall consider, among other factors,
whether all member insurers , including member insurers that
primarily write life insurance, annuity contracts, or health
benefit plans, are fairly represented.
Sec. 11. Section 508C.8, subsections 1 and 2, Code 2019, are
amended to read as follows:
1. If a domestic, foreign, or alien member insurer is
an impaired insurer, the association, subject to conditions
imposed by the association and approved by the impaired insurer
and the commissioner, may take any of the following actions :
a. Guarantee, assume, reissue, reinsure, or cause to be
guaranteed, assumed, reissued, or reinsured, any or all of the
covered policies of the impaired insurer.
b. Provide moneys, pledges, notes, guarantees, or other
means as proper to effectuate paragraph “a” and assure payment
of the contractual obligations of the impaired insurer pending
action under paragraph “a” .
c. Loan money to the impaired insurer and guarantee
borrowings by the impaired insurer, provided the association
has concluded, based on reasonable assumptions, that there is
a likelihood of repayment of the loan and a probability that
unless a loan is made the association would incur substantial
liabilities under subsection 2 .
2. If a member insurer is an insolvent insurer, the
association may in its discretion do any of the following:
a. The association may do either of the following:
(1) Guarantee, assume, reissue, or reinsure, or cause to
be guaranteed, assumed, reissued, or reinsured the covered
policies or contracts of an insolvent insurer.
(2) Assure payment of the contractual obligations of the
insolvent insurer.
b. Provide moneys, pledges, notes, guarantees, or other
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means as reasonably necessary to discharge the association’s
duties described in this subsection .
c. Provide benefits and coverages in accordance with all of
the following provisions:
(1) With respect to life and health insurance policies or
contracts and annuity contracts, assure payment of benefits
for premiums identical to the premiums and benefits, except
for conversion and renewability, that would have been payable
under the policies or contracts of the insolvent insurer for
the following claims incurred as follows:
(a) With respect to group policies or and contracts, not
later than the earlier of the next renewal date under those
policies or contracts or forty-five days, but in no event less
than thirty days, after the date on which the association
becomes obligated with respect to those the policies or
contracts.
(b) With respect to nongroup policies or contracts not later
than the earlier of the next renewal date, if any, under those
policies or contracts or one year, but in no event less than
thirty days, from the date on which the association becomes
obligated with respect to the policies or contracts.
(2) Make diligent efforts to provide all known insureds ,
enrollees, or annuitants, for nongroup policies or contracts,
or group policy or contract owners, with respect to group
policies or contracts, thirty days’ notice of the termination ,
pursuant to subparagraph (1), of the benefits provided pursuant
to subparagraph (1) .
(3) With respect to nongroup life and health insurance
policies or and contracts covered by the association, make
available to each known insured , enrollee, or annuitant, or
owner if other than the insured or annuitant, and with respect
to an individual formerly an insured , enrollee, or formerly
an annuitant under a group policy or contract who is not
eligible for replacement group coverage, substitute coverage
on an individual basis in accordance with the provisions of
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subparagraph (4), if the insureds , enrollees, or annuitants had
a right under law or under the terminated policy , or contract ,
or annuity to convert coverage to individual coverage or to
continue an individual policy , or contract , or annuity in force
until a specified age or for a specified time, during which the
member insurer had no right to unilaterally make changes in any
provision of the policy , or contract , or annuity or had a right
only to make changes in premium by class.
(4) In providing the substitute coverage required under
subparagraph (3), the association may offer either to reissue
the terminated coverage or to issue an alternative policy or
contract at actuarially justified rates .
(a) Reissued or alternative policies or contracts shall be
offered without requiring evidence of insurability, and shall
not provide for any waiting period or exclusion that would not
have applied under the terminated policy or contract.
(b) The association may reinsure any reissued or
alternative policy or contract.
(5) Alternative policies or contracts adopted by the
association shall be subject to the approval of the domiciliary
insurance commissioner and the receivership court . The
association may adopt alternative policies or contracts
of various types for future issuance without regard to any
particular impairment or insolvency of an insurer .
(a) Alternative policies or contracts shall contain
at least the minimum statutory provisions required in this
state and shall provide benefits that are not unreasonable
in relation to the premium charged. The association shall
set the premium in accordance with a table of rates that the
association shall adopt. The premium shall reflect the amount
of insurance to be provided and the age and class of risk of
each insured, but shall not reflect any changes in the health
of the insured after the original policy or contract was last
underwritten.
(b) Any alternative policy or contract issued by the
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association shall provide coverage of a type similar to that
of the policy or contract issued by the impaired or insolvent
insurer, as determined by the association.
(6) If the association elects to reissue terminated
coverage at a premium rate different from that charged under
the terminated policy or contract , the premium shall be
actuarially justified and set by the association in accordance
with the amount of insurance or coverage provided and the age
and class of risk, subject to approval of the domiciliary
insurance commissioner and the receivership court .
(7) The association’s obligations with respect to coverage
under any policy or contract of an the impaired or insolvent
insurer or under any reissued or alternative policy or
contract, shall cease on the date the coverage, or policy , or
contract , is replaced by another similar policy or contract by
the policy or contract owner, the insured, the enrollee, or the
association.
(8) When proceeding under this paragraph “c” with respect
to a policy or contract carrying guaranteed minimum interest
rates, the association shall assure the payment or crediting of
a rate of interest consistent with section 508C.3, subsection
4 , paragraph “a” .
(9) Nonpayment of premiums within thirty-one days after
the date required under the terms of any guaranteed, assumed,
alternative, or reissued policy, contract, or substitute
coverage shall terminate the association’s obligations under
the policy, contract, or coverage under this chapter with
respect to the policy, contract, or coverage, except with
respect to any claims incurred or any net cash surrender value
which may be due under this chapter.
(10) Premiums due for coverage after entry of an order
of liquidation of an insolvent insurer shall belong to the
association and be payable at the direction of the association.
If the liquidator of an insolvent insurer requests, the
association shall provide a report to the liquidator regarding
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the premiums collected by the association. The association
shall be liable for unearned premiums due to policy or contract
owners arising after the entry of the order of liquidation.
(11) The protection provided by this chapter shall not apply
where any guaranty protection is provided to a resident of this
state by the laws of the domiciliary state or by jurisdiction
of the impaired or insolvent insurer by an entity other than
this state.
Sec. 12. Section 508C.8, subsection 6, Code 2019, is amended
to read as follows:
6. a. The association shall have standing to appear
or intervene before any court or agency in this state with
jurisdiction over an impaired or insolvent insurer concerning
which the association is or may become obligated under this
chapter or with jurisdiction over any person or property
against which the association may have rights through
subrogation or otherwise. Standing shall extend to all matters
germane to the powers and duties of the association including
but not limited to proposals for reinsuring, reissuing,
modifying, or guaranteeing the covered policies or contracts
of the impaired or insolvent insurer and the determination of
the covered policies or contracts , and contractual obligations.
The association shall also have the right to appear or
intervene before any court or agency in another state with
jurisdiction over an impaired or insolvent insurer for which
the association is or may become obligated or with jurisdiction
over any person or property against whom the association may
have rights through subrogation or otherwise.
b. As a creditor of an impaired or insolvent insurer as
provided under section 508C.13, subsection 3 , and consistent
with the provisions of section 507C.34 , the association and
other similar associations shall be entitled to receive a
disbursement of assets out of the marshaled assets, from
time to time as the assets become available to reimburse
the association or similar associations, as a credit
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against contractual obligations under this chapter . If the
liquidator has not, within one hundred twenty days of a final
determination of insolvency of an a member insurer by the
receivership court, made an application to the court for the
approval of a proposal to disburse assets out of marshaled
assets to guaranty associations having obligations because
of the insolvency, the association or similar associations
shall be entitled to make application to the receivership
court for approval of its own the association’s or the similar
association’s proposal to disburse these the assets.
Sec. 13. Section 508C.8, subsection 7, paragraphs a and c,
Code 2019, are amended to read as follows:
a. A person receiving benefits under this chapter is deemed
to have assigned the rights under , and any causes of action
against any person for losses arising under, resulting from ,
or otherwise relating to , the covered policy or contract to
the association to the extent of the benefits received under
this chapter , whether the benefits are payments of contractual
obligations or on account of contractual obligations, a
continuation of coverage, or the provision of substitute or
alternative policies, contracts, or coverages. The association
may require an assignment to the association of the rights
and causes of action by any enrollee, payee, policyholder
policy or contract owner, beneficiary, insured, or annuitant
as a condition precedent to the receipt of any rights right
or benefits conferred by this chapter upon the person. The
association shall be subrogated to these the rights of any
enrollee, payee, policy or contract holder, beneficiary,
insured, or annuitant against the assets of the impaired or
insolvent insurer.
c. In addition to the rights pursuant to subsection 3 ,
paragraphs “a” and “b” , the association shall have all common
law rights of subrogation and any other equitable or legal
remedy which would have been available to the impaired or
insurer, insolvent insurer , or owner, beneficiary, enrollee,
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or payee of a covered policy or covered contract with respect
to the covered policy or covered contract, including without
limitation, in the case of a structured settlement annuity,
any rights of the owner, beneficiary, or payee of the annuity,
to the extent of benefits received pursuant to this chapter ,
against the a person originally or by succession responsible
for the losses arising from the personal injury relating to
the annuity or payment for the annuity, excepting any such
person responsible solely by reason of serving as an assignee
in respect of a qualified assignment under section 130 of the
Internal Revenue Code.
Sec. 14. Section 508C.8, subsection 8, Code 2019, is amended
by striking the subsection.
Sec. 15. Section 508C.8, subsection 10, paragraph g, Code
2019, is amended to read as follows:
g. For the purposes of this chapter and to the extent
approved by the commissioner, exercise the powers of a
domestic life or insurer, health insurer . However , or health
maintenance organization , but the association shall not issue
insurance policies or annuity contracts other than those issued
to perform the contractual association’s obligations of the
impaired or insolvent insurer under this chapter .
Sec. 16. Section 508C.8, subsection 10, Code 2019, is
amended by adding the following new paragraphs:
NEW PARAGRAPH . i. Unless prohibited by law, in accordance
with the terms and conditions of the policy or contract, file
for actuarially justified rate or premium increases for any
policy or contract for which the association provides coverage
under this chapter.
NEW PARAGRAPH . j. Take other necessary or appropriate
action to discharge the association’s duties and obligations
under this chapter or to exercise the association’s powers
under this chapter.
Sec. 17. Section 508C.8, subsection 11, paragraph a,
subparagraph (3), subparagraph division (c), Code 2019, is
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amended to read as follows:
(c) Within thirty days following the date of election, the
association and each reinsurer under reinsurance contracts
assumed by the association shall calculate the net balance due
to or from the association under each reinsurance contract as
of the date of election with respect to policies or contracts
covered, in whole or in part, by the association, which
calculation shall give full credit to all items paid by either
the member insurer or its receiver or the reinsurer prior to
the date of election. The reinsurer shall pay the receiver any
amounts due for losses or events prior to the date of the order
of liquidation, subject to any setoff for premiums unpaid for
periods prior to the date of the order for liquidation , and the
association or reinsurer shall pay any remaining balance due
the other, in each case within five days of the completion of
the aforementioned calculation. Any disputes dispute over the
amounts due to either the association or the reinsurer shall be
resolved by arbitration pursuant to the terms of the affected
reinsurance contracts contract or, if the contract contains no
does not contain an arbitration clause, as otherwise provided
by law. If the receiver has received any amounts due the
association pursuant to subparagraph division (b), the receiver
shall remit the same amounts to the association as promptly as
practicable.
Sec. 18. Section 508C.8, subsection 11, paragraph f,
subparagraph (3), Code 2019, is amended to read as follows:
(3) Give a policyholder , contract holder, enrollee,
certificate holder, or beneficiary an independent cause of
action against a reinsurer that is not otherwise set forth in
the reinsurance contract.
Sec. 19. Section 508C.8, subsection 15, unnumbered
paragraph 1, Code 2019, is amended to read as follows:
In carrying out its duties in connection with guaranteeing,
assuming, reissuing, or reinsuring policies or contracts under
subsections 2 1 and 3 2 , the association may , subject to
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approval of the receivership court, issue substitute coverage
for a policy or contract that provides an interest rate,
crediting rate, or similar factor determined by the use of
an index or other external reference stated in the policy or
contract employed in calculating returns or changes in value by
issuing an alternative policy or contract in accordance with
the following provisions:
Sec. 20. Section 508C.9, subsection 3, Code 2019, is amended
to read as follows:
3. a. The amount of a class A assessment shall be
determined by the board and may be authorized and called on a
pro rata or non-pro rata basis. If pro rata, the board may
provide that the assessment be credited against future class B
assessments. The total of all non-pro rata assessments shall
not exceed three hundred dollars per member insurer in any one
calendar year. The amount of a class B assessment shall be
allocated for assessment purposes among the accounts pursuant
to an allocation formula which may be based on the premiums or
reserves of the impaired or insolvent insurer or on any other
standard deemed by the board in its sole discretion as being
fair and reasonable under the circumstances.
b. The amount of a class B assessment, except for
assessments related to long-term care insurance, shall be
allocated for assessment purposes among the accounts pursuant
to an allocation formula which may be based on the premiums or
the reserves of the impaired or insolvent insurer or any other
standard deemed by the board in its sole discretion as being
fair and reasonable under the circumstances.
c. The amount of the class B assessment for long-term care
insurance written by the impaired or insolvent insurer shall be
allocated according to a methodology included in the plan of
operation pursuant to section 508C.10, and as approved by the
commissioner. The methodology shall provide for fifty percent
of the assessment to be allocated to accident and health member
insurers and fifty percent to be allocated to life and annuity
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member insurers.
b. d. Class B assessments against member insurers for
each account shall be in the proportion that the average of
the aggregate premiums received on business in this state by
each assessed member insurer on policies or contracts covered
by each account for the three most recent calendar years for
which information is available, preceding the year in which
the member insurer became insolvent, or, in the case of an
assessment with respect to an impaired insurer, the three
most recent calendar years for which information is available
preceding the year in which the member insurer became impaired,
bears to the premiums received on business in this state for
those calendar years by all assessed member insurers.
c. e. Assessments for funds to meet the requirements of the
association with respect to an impaired or insolvent insurer
shall not be authorized or called until necessary to implement
the purposes of this chapter . Classification of assessments
under subsection 2 and computation of assessments under this
subsection shall be made with a reasonable degree of accuracy,
recognizing that exact determinations may not always be
possible. The association shall notify each member insurer of
its anticipated pro rata share of an authorized assessment not
yet called within one hundred eighty days after the assessment
is authorized.
Sec. 21. Section 508C.9, subsection 5, paragraph a,
subparagraphs (1) and (2), Code 2019, are amended to read as
follows:
(1) Subject to the provisions of subparagraph (2) of this
paragraph “a” , the total of all assessments authorized by the
association with respect to a member insurer for each of the
accounts established pursuant to section 508C.6 , and designated
as the health insurance account, the life insurance account,
the annuity account, and the unallocated annuity contract
account, shall not in any one calendar year exceed two percent
of that member insurer’s average annual premiums received in
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this state on the policies and contracts covered by the account
during the three calendar years preceding the year in which the
member insurer becomes impaired or insolvent.
(2) If two or more assessments are authorized in one
calendar year with respect to member insurers that become
impaired or insolvent in different calendar years, the average
annual premiums for purposes of the aggregate assessment
percentage limitation referred to in subparagraph (1) of this
paragraph “a” shall be equal and limited to the higher of the
three-year average annual premiums for the applicable account
as calculated pursuant to this section .
Sec. 22. Section 508C.9, subsections 6, 7, and 8, Code 2019,
are amended to read as follows:
6. By an equitable method as established in the plan
of operation, the board may refund to member insurers, in
proportion to the contribution of each member insurer to
that account, the amount by which the assets of the account,
including assets accruing from assignment, subrogation, net
realized gains, and income from investments, exceed the amount
the board finds is necessary to carry out during the coming
year the obligations of the association with regard to that
account. A reasonable amount may be retained in any account to
provide funds for the continuing expenses of the association
and for future losses claims.
7. In determining its premium rates and policyowner
policy owner dividends as to any kind of insurance or health
maintenance organization business within the scope of this
chapter , it is proper for a member insurer to consider the
amount reasonably necessary to meet its assessment obligations
under this chapter .
8. The association shall issue to each member insurer paying
a class B assessment under this chapter , a certificate of
contribution in a form prescribed by the commissioner for the
amount of the assessment so paid. All outstanding certificates
shall be of equal dignity and priority without reference to
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amounts or dates of issue. A certificate of contribution may
be shown by the member insurer in its financial statement as an
asset in the form, for the amount , and for a period of time as
the commissioner may approve.
Sec. 23. Section 508C.10, subsection 1, paragraph b, Code
2019, is amended to read as follows:
b. If the association fails to submit a suitable plan
of operation within one hundred eighty days following July
1, 1987, or if at any time the association fails to submit
suitable amendments to the plan, the commissioner shall, after
notice and hearing, adopt rules pursuant to chapter 17A as
necessary or advisable to effectuate this chapter . The rules
shall continue in force until modified by the commissioner or
superseded by a plan submitted by the association and approved
by the commissioner.
Sec. 24. Section 508C.11, subsections 1 and 2, Code 2019,
are amended to read as follows:
1. The commissioner shall:
a. Upon request of the board of directors, provide the
association with a statement of the premiums for each member
insurer.
b. When an impairment is declared and the amount of the
impairment is determined, serve a demand upon the impaired
insurer to make good the impairment within a reasonable time.
Notice to the impaired insurer constitutes notice to its
shareholders, if any. The failure of the impaired insurer
to promptly comply with the demand shall not excuse the
association from the performance of its powers and duties under
this chapter .
2. After notice and hearing, the commissioner may suspend
or revoke the certificate of authority to transact insurance
business in this state of a member insurer which fails to pay
an assessment when due , or fails to comply with the plan of
operation. As an alternative, the commissioner may levy an
administrative penalty on any member insurer which fails to
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pay an assessment when due. The administrative penalty shall
not exceed five percent of the unpaid assessment per month.
However, an administrative penalty shall not be less than one
hundred dollars per month.
Sec. 25. Section 508C.12, subsection 1, unnumbered
paragraph 1, Code 2019, is amended to read as follows:
To aid in the detection and prevention of member insurer
insolvencies or impairments the commissioner shall:
Sec. 26. Section 508C.12, subsection 1, paragraph a,
subparagraph (1), subparagraph division (c), Code 2019, is
amended to read as follows:
(c) A formal order is made that a company member insurer
restrict its premium writing, obtain additional contributions
to surplus, withdraw from the state, reinsure all or any part
of its business, or increase capital, surplus, or any other
account for the security of policyholders , contract owners,
certificate holders, or creditors.
Sec. 27. Section 508C.12, subsections 2, 3, and 6, Code
2019, are amended to read as follows:
2. The commissioner may seek the advice and recommendations
of the board of directors concerning any matter affecting
the commissioner’s duties and responsibilities regarding the
financial condition of member insurers , and companies insurers
or health maintenance organizations seeking admission to
transact insurance business in this state.
3. The board of directors may upon majority vote make
reports and recommendations to the commissioner upon any matter
germane to the solvency, liquidation, rehabilitation , or
conservation of a member insurer or germane to the solvency of
a company an insurer or health maintenance organization seeking
to transact insurance business in this state. These reports
and recommendations are not public records pursuant to chapter
22 .
6. Upon majority vote, the board of directors may make
recommendations to the commissioner for the detection and
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prevention of member insurer insolvencies.
Sec. 28. Section 508C.13, subsections 3 and 4, Code 2019,
are amended to read as follows:
3. For the purpose of carrying out its obligations under
this chapter , the association shall be deemed to be a creditor
of the impaired or insolvent insurer to the extent of assets
attributable to covered policies reduced by any amounts to
which the association is entitled pursuant to its subrogation
rights under section 508C.8, subsection 7 . Assets of the
impaired or insolvent insurer attributable to covered policies
or contracts shall be used to continue all covered policies or
contracts and pay all contractual obligations of the impaired
or insolvent insurer as required by this chapter . As used
in this subsection , “assets attributable to covered policies”
policies or contracts” means that proportion of the assets which
the reserves that should have been established for the policies
or contracts bear to the reserves that should have been
established for all policies of insurance or health benefit
plans written by the impaired or insolvent insurer.
4. a. Prior to the termination of a liquidation,
rehabilitation, or conservation proceeding, the court may
take into consideration the contributions of the respective
parties, including the association, similar associations of
other states, the shareholders , contract owners, certificate
holders, enrollees, and policyowners policy owners of the
insolvent insurer, and any other party with a bona fide
interest, in making an equitable distribution of the ownership
rights of the insolvent insurer. When considering the
contributions, consideration shall be given to the welfare
of the policyholders contract owners, certificate holders,
enrollees, and policy owners of the continuing or successor
member insurer.
b. A distribution to stockholders, if any, of an impaired or
insolvent insurer shall not be made until the total amount of
valid claims of the association and of similar associations of
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other states for funds expended in carrying out its powers and
duties under section 508C.8 with respect to the member insurer
have been fully recovered by the association and the similar
associations.
Sec. 29. Section 508C.13, subsection 5, paragraphs a, b, and
c, Code 2019, are amended to read as follows:
a. Subject to the limitations of paragraphs “b” , “c” , and
“d” , if an order for liquidation or rehabilitation of an a
member insurer domiciled in this state has been entered, the
receiver appointed under the order may recover, on behalf of
the member insurer, from any affiliate that controlled it,
the amount of distributions other than stock dividends paid
by the member insurer on its capital stock , made at any time
during the five years preceding the petition for liquidation
or rehabilitation.
b. Distributions are not recoverable if the member
insurer shows that when paid the distributions were lawful
and reasonable and that the member insurer did not know and
could not reasonably have known that the distributions might
adversely affect the ability of the member insurer to fulfill
its contractual obligations.
c. A person who was an affiliate that controlled the member
insurer at the time the distributions were paid is shall be
liable up to the amount of distributions received. A person
who was an affiliate that controlled the member insurer at the
time the distributions were declared is shall be liable up to
the amount of distributions that would have been received if
they the distributions had been paid immediately. If two or
more persons are liable with respect to the same distributions,
they the persons are jointly and severally liable.
Sec. 30. Section 508C.18, Code 2019, is amended to read as
follows:
508C.18 Prohibited advertisements.
A person, including an a member insurer, agent , or affiliate
of an a member insurer, shall not make, publish, disseminate,
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circulate, or place before the public, or cause directly or
indirectly, to be made, published, disseminated, circulated,
or placed before the public in a newspaper, magazine, or other
publication, or in the form of a notice, circular, pamphlet,
letter, or poster, or over a radio station or television
station, or in any other way, an advertisement, announcement,
or statement, written or oral, which uses the existence of the
insurance guaranty association of this state for the purpose
of sales, solicitation, or inducement to purchase any form of
insurance or other coverage covered by this chapter . However,
this section does not apply to the association or any other
entity which does not sell or solicit insurance or coverage by
a health maintenance organization .
Sec. 31. Section 508C.18A, subsection 1, Code 2019, is
amended to read as follows:
1. a. On or after March 1, 2012, an A member insurer shall
not deliver an insurance a policy or contract in Iowa to the
owner of the policy or owner, contract owner, certificate
holder, or enrollee unless a summary document describing the
general purposes and current provisions of this chapter and
containing a disclosure in compliance with subsection 2 is
delivered to the policy or owner, contract owner , certificate
holder, or enrollee at the same time.
b. The summary document shall also be available upon request
by an insurance a policy or owner, contract owner , certificate
holder, or enrollee .
c. The distribution, delivery, contents, or interpretation
of this the summary document does not guarantee that either
the insurance policy or contract , or the policy owner , of the
policy or contract owner, certificate holder, or enrollee,
is covered in the event of the impairment or insolvency of a
member insurer.
d. The summary document shall be revised by the association
and approved by the commissioner as amendments to this chapter
may require. Failure to receive a summary document does not
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give the insurance policy or contract owner, certificate
holder, enrollee, or insured any greater rights than those
stated in this chapter .
Sec. 32. Section 508C.18A, subsection 2, paragraphs b, d, e,
and g, Code 2019, are amended to read as follows:
b. Prominently warn the insurance policy or contract owner ,
certificate holder, or enrollee that the association may not
cover the policy or contract or, if coverage is available, it
will be subject to substantial limitations and exclusions and
conditioned on continued residence in this state.
d. State that the member insurer and its the member
insurer’s agents are prohibited by law from using the existence
of the association for the purpose of sales, solicitation,
or inducement to purchase any form of insurance or health
maintenance organization coverage .
e. State that the insurance policy or owner, contract owner ,
certificate holder, or enrollee should not rely on coverage
from the association when selecting an insurer or health
maintenance organization .
g. Provide other information as directed by the
commissioner, including but not limited to sources for
information about the financial condition of an a member
insurer provided that the information is not proprietary and is
subject to disclosure under chapter 22 .
Sec. 33. Section 508C.18A, subsection 3, Code 2019, is
amended to read as follows:
3. A member insurer shall retain evidence of compliance with
the provisions of this section for as long as the insurance
policy or contract for which the notice is given remains in
effect.
Sec. 34. Section 514B.25A, Code 2019, is amended by striking
the section and inserting in lieu thereof the following:
514B.25A Impairment and insolvency protection.
The provisions of chapter 508C shall apply to health
maintenance organizations.
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Sec. 35. APPLICABILITY. This Act applies to any member
insurer that becomes insolvent or unable to fulfill the member
insurer’s contractual obligations on or after the effective
date of this Act.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
This bill relates to the membership of the life and health
insurance guaranty association and assessments to member
insurers for insurance written by impaired or insolvent member
insurers, and including applicability provisions.
The bill amends Code chapter 508C (Iowa life and health
insurance guaranty association) to conform more closely to
the national association of insurance commissioners’ life and
health guaranty association model act and to adopt several of
the changes to the model act recently adopted by the national
association of insurance commissioners.
The bill provides that assessments to member insurers of the
life and health insurance guaranty association (association)
for long-term care insurance written by an impaired or
insolvent insurer shall be allocated by the methodology
included in the association’s plan of operation and must
provide for 50 percent of the assessment to be allocated to
accident and health member insurers and 50 percent to be
allocated to life and annuity member insurers. Current law
does not provide for life and annuity members to be included
in the assessment for long-term care insurance written by an
impaired or insolvent insurer.
The bill also provides for the inclusion of health
maintenance organizations, other than limited service
organizations, as member insurers of the association. Current
law does not include health maintenance organizations as
members of the association. The bill specifically provides
that an entity whose only business in this state is operating
as a managed care organization is excluded as a member insurer
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of the organization. “Managed care organization” is defined
in the bill as an entity that is under contract with the Iowa
department of human services to provide services to Medicaid
recipients and that also meets the definition of “health
maintenance organization” in Code section 514B.1.
The bill strikes Code section 514B.25A, assessments for
insolvency protection for health maintenance organizations.
The bill applies to any member insurer that becomes
insolvent or unable to fulfill the member insurer’s contractual
obligations on or after the date the bill becomes effective.
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