Bill Text: IL SB3244 | 2017-2018 | 100th General Assembly | Introduced

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Bill Title: Amends the of the Illinois Insurance Code. Merges the Health Maintenance Organization Guaranty Association Article of the Health Maintenance Organization Act into the Illinois Life and Health Insurance Guaranty Association Law. Makes conforming changes. Provides that the rights, powers, privileges, assets, property, duties, debts, obligations, and liabilities of each association prior to merger shall remain with the members of the respective association. Provides the rights, powers, privileges, assets, property, debts, obligations, and liabilities of each association after the merger. Repeals the Health Maintenance Organization Guaranty Association Article of the Health Maintenance Organization Act. Makes other changes. Effective immediately.

Spectrum: Slight Partisan Bill (Democrat 3-1)

Status: (Failed) 2019-01-09 - Session Sine Die [SB3244 Detail]

Download: Illinois-2017-SB3244-Introduced.html

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100TH GENERAL ASSEMBLY State of Illinois 2017 and 2018 SB3244 Introduced 2/15/2018, by Sen. John G. Mulroe SYNOPSIS AS INTRODUCED:
215 ILCS 5/531.02 from Ch. 73, par. 1065.80-2
215 ILCS 5/531.03 from Ch. 73, par. 1065.80-3
215 ILCS 5/531.05 from Ch. 73, par. 1065.80-5
215 ILCS 5/531.06 from Ch. 73, par. 1065.80-6
215 ILCS 5/531.07 from Ch. 73, par. 1065.80-7
215 ILCS 5/531.08 from Ch. 73, par. 1065.80-8
215 ILCS 5/531.09 from Ch. 73, par. 1065.80-9
215 ILCS 5/531.11 from Ch. 73, par. 1065.80-11
215 ILCS 5/531.12 from Ch. 73, par. 1065.80-12
215 ILCS 5/531.13 from Ch. 73, par. 1065.80-13
215 ILCS 5/531.14 from Ch. 73, par. 1065.80-14
215 ILCS 5/531.19 from Ch. 73, par. 1065.80-19
215 ILCS 5/531.20 new
215 ILCS 125/Art. VI rep.
Amends the of the Illinois Insurance Code. Merges the Health Maintenance Organization Guaranty Association Article of the Health Maintenance Organization Act into the Illinois Life and Health Insurance Guaranty Association Law. Makes conforming changes. Provides that the rights, powers, privileges, assets, property, duties, debts, obligations, and liabilities of each association prior to merger shall remain with the members of the respective association. Provides the rights, powers, privileges, assets, property, debts, obligations, and liabilities of each association after the merger. Repeals the Health Maintenance Organization Guaranty Association Article of the Health Maintenance Organization Act. Makes other changes. Effective immediately.
LRB100 18858 SMS 34100 b
FISCAL NOTE ACT MAY APPLY
A BILL FOR
SB3244 LRB100 18858 SMS 34100 b
AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Insurance Code is amended by
changing Sections 531.02, 531.03, 531.05, 531.06, 531.07,
531.08, 531.09, 531.11, 531.12, 531.13, 531.14, and 531.19 and
by adding Section 531.20 as follows:
(215 ILCS 5/531.02) (from Ch. 73, par. 1065.80-2)
Sec. 531.02. Purpose. The purpose of this Article is to
protect, subject to certain limitations, the persons specified
in paragraph (1) of Section 531.03 against failure in the
performance of contractual obligations, under life, or health
insurance policies, and annuity policies, plans, or contracts
and health or medical care service contracts specified in
paragraph (2) of Section 531.03, due to the impairment or
insolvency of the member insurer issuing such policies, plans,
or contracts. To provide this protection, (1) an association of
member insurers is created to enable the guaranty of payment of
benefits and of continuation of coverages, (2) members of the
Association are subject to assessment to provide funds to carry
out the purpose of this Article, and (3) the Association is
authorized to assist the Director, in the prescribed manner, in
the detection and prevention of member insurer impairments or

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insolvencies.
(Source: P.A. 86-753.)
(215 ILCS 5/531.03) (from Ch. 73, par. 1065.80-3)
Sec. 531.03. Coverage and limitations.
(1) This Article shall provide coverage for the policies
and contracts specified in subsection paragraph (2) of this
Section:
(a) to persons who, regardless of where they reside
(except for non-resident certificate holders under group
policies or contracts), are the beneficiaries, assignees
or payees, including health care providers rendering
services covered under a health insurance policy or
certificate, of the persons covered under paragraph (b) of
this subsection subparagraph (1)(b), and
(b) to persons who are owners of or certificate holders
or enrollees under the policies or contracts (other than
unallocated annuity contracts and structured settlement
annuities) and in each case who:
(i) are residents; or
(ii) are not residents, but only under all of the
following conditions:
(A) the member insurer that issued the
policies or contracts is domiciled in this State;
(B) the states in which the persons reside have
associations similar to the Association created by

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this Article;
(C) the persons are not eligible for coverage
by an association in any other state due to the
fact that the insurer or health maintenance
organization was not licensed in that state at the
time specified in that state's guaranty
association law.
(c) For unallocated annuity contracts specified in
subsection (2), paragraphs (a) and (b) of this subsection
(1) shall not apply and this Article shall (except as
provided in paragraphs (e) and (f) of this subsection)
provide coverage to:
(i) persons who are the owners of the unallocated
annuity contracts if the contracts are issued to or in
connection with a specific benefit plan whose plan
sponsor has its principal place of business in this
State; and
(ii) persons who are owners of unallocated annuity
contracts issued to or in connection with government
lotteries if the owners are residents.
(d) For structured settlement annuities specified in
subsection (2), paragraphs (a) and (b) of this subsection
(1) shall not apply and this Article shall (except as
provided in paragraphs (e) and (f) of this subsection)
provide coverage to a person who is a payee under a
structured settlement annuity (or beneficiary of a payee if

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the payee is deceased), if the payee:
(i) is a resident, regardless of where the contract
owner resides; or
(ii) is not a resident, but only under both of the
following conditions:
(A) with regard to residency:
(I) the contract owner of the structured
settlement annuity is a resident; or
(II) the contract owner of the structured
settlement annuity is not a resident but the
insurer that issued the structured settlement
annuity is domiciled in this State and the
state in which the contract owner resides has
an association similar to the Association
created by this Article; and
(B) neither the payee or beneficiary nor the
contract owner is eligible for coverage by the
association of the state in which the payee or
contract owner resides.
(e) This Article shall not provide coverage to:
(i) a person who is a payee or beneficiary of a
contract owner resident of this State if the payee or
beneficiary is afforded any coverage by the
association of another state; or
(ii) a person covered under paragraph (c) of this
subsection (1), if any coverage is provided by the

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association of another state to that person.
(f) This Article is intended to provide coverage to a
person who is a resident of this State and, in special
circumstances, to a nonresident. In order to avoid
duplicate coverage, if a person who would otherwise receive
coverage under this Article is provided coverage under the
laws of any other state, then the person shall not be
provided coverage under this Article. In determining the
application of the provisions of this paragraph in
situations where a person could be covered by the
association of more than one state, whether as an owner,
payee, enrollee, beneficiary, or assignee, this Article
shall be construed in conjunction with other state laws to
result in coverage by only one association.
(2)(a) This Article shall provide coverage to the persons
specified in subsection paragraph (1) of this Section for
policies or contracts of direct, (i) nongroup life insurance,
health insurance (that, for the purposes of this Article,
includes health maintenance organization subscriber contracts
and certificates), annuities annuity and supplemental
policies, or contracts to any of these, (ii) for certificates
under direct group policies or contracts, (iii) for unallocated
annuity contracts and (iv) for contracts to furnish health care
services and subscription certificates for medical or health
care services issued by persons licensed to transact insurance
business in this State under this the Illinois Insurance Code.

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Annuity contracts and certificates under group annuity
contracts include but are not limited to guaranteed investment
contracts, deposit administration contracts, unallocated
funding agreements, allocated funding agreements, structured
settlement agreements, lottery contracts and any immediate or
deferred annuity contracts.
(b) Except as otherwise provided in paragraph (c) of this
subsection, this This Article shall not provide coverage for:
(i) that portion of a policy or contract not guaranteed
by the member insurer, or under which the risk is borne by
the policy or contract owner;
(ii) any such policy or contract or part thereof
assumed by the impaired or insolvent insurer under a
contract of reinsurance, other than reinsurance for which
assumption certificates have been issued;
(iii) 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 is
determined by use of an index or other external reference
stated in the policy or contract employed in calculating
returns or changes in value:
(A) averaged over the period of 4 years prior to
the date on which the member insurer becomes an
impaired or insolvent insurer under this Article,
whichever is earlier, exceeds the rate of interest
determined by subtracting 2 percentage points from

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Moody's Corporate Bond Yield Average averaged for that
same 4-year period or for such lesser period if the
policy or contract was issued less than 4 years before
the member insurer becomes an impaired or insolvent
insurer under this Article, whichever is earlier; and
(B) on and after the date on which the member
insurer becomes an impaired or insolvent insurer under
this Article, whichever is earlier, exceeds the rate of
interest determined by subtracting 3 percentage points
from Moody's Corporate Bond Yield Average as most
recently available;
(iv) any unallocated annuity contract issued to or in
connection with a 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;
(v) any portion of any unallocated annuity contract
which is not issued to or in connection with a specific
employee, union or association of natural persons benefit
plan or a government lottery;
(vi) an obligation that does not arise under the
express written terms of the policy or contract issued by
the member insurer to the enrollee, certificate holder,
contract owner, or policy owner, including without
limitation:

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(A) a claim based on marketing materials;
(B) 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 requirements;
(C) a misrepresentation of or regarding policy or
contract benefits;
(D) an extra-contractual claim; or
(E) a claim for penalties or consequential or
incidental damages;
(vii) any stop-loss insurance, as defined in clause (b)
of Class 1 or clause (a) of Class 2 of Section 4, and
further defined in subsection (d) of Section 352;
(viii) any policy or contract providing any hospital,
medical, prescription drug, or other health care benefits
pursuant to Part C or Part D of Subchapter XVIII, Chapter 7
of Title 42 of the United States Code (commonly known as
Medicare Part C & D), Subchapter XIX, Chapter 7 of Title 42
of the United States Code (commonly known as Medicaid), or
any regulations issued pursuant thereto;
(ix) any portion of a policy or contract to the extent
that the assessments required by Section 531.09 of this
Code with respect to the policy or contract are preempted
or otherwise not permitted by federal or State law;
(x) any portion of a policy or contract issued to a
plan or program of an employer, association, or other

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person to provide life, health, or annuity benefits to its
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:
(A) a multiple employer welfare arrangement as
defined in 29 U.S.C. Section 1002 1144;
(B) a minimum premium group insurance plan;
(C) a stop-loss group insurance plan; or
(D) an administrative services only contract;
(xi) any portion of a policy or contract to the extent
that it provides for:
(A) dividends or experience rating credits;
(B) voting rights; or
(C) payment of any fees or allowances to any
person, including the policy or contract owner, in
connection with the service to or administration of the
policy or contract;
(xii) any policy or contract issued in this State by a
member insurer at a time when it was not licensed or did
not have a certificate of authority to issue the policy or
contract in this State;
(xiii) any contractual agreement that establishes the
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

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owned by the benefit plan or its trustee, which in each
case is not an affiliate of the member insurer;
(xiv) any portion of a policy or contract to the extent
that it provides for interest or other changes in value to
be determined by the use of an index or other external
reference stated in the policy or contract, but which have
not been credited to the policy or contract, or as to which
the policy or contract owner's rights are subject to
forfeiture, as of the date the member insurer becomes an
impaired or insolvent insurer under this Code, whichever is
earlier. If a policy's or contract's interest or changes in
value are credited less frequently than annually, then for
purposes of determining the values that have been credited
and are not subject to forfeiture under this Section, the
interest or change in value determined by using the
procedures defined in the policy or contract 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 not be subject
to forfeiture; or
(xv) that portion or part of a variable life insurance
or variable annuity contract not guaranteed by a member an
insurer.
(c) The exclusion from coverage referenced in subdivision
(iii) of paragraph (b) of this subsection shall not apply to
any portion of a policy or contract, including a rider, that

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provides long-term care or other health insurance benefits.
(3) The benefits for which the Association may become
liable shall in no event exceed the lesser of:
(a) the contractual obligations for which the member
insurer is liable or would have been liable if it were not
an impaired or insolvent insurer, or
(b)(i) with respect to any one life, regardless of the
number of policies or contracts:
(A) $300,000 in life insurance death benefits, but
not more than $100,000 in net cash surrender and net
cash withdrawal values for life insurance;
(B) for in health insurance benefits:
(I) $100,000 for coverages not defined as
disability income insurance or health benefit
plans basic hospital, medical, and surgical
insurance or major medical insurance or long-term
care insurance, including any net cash surrender
and net cash withdrawal values;
(II) $300,000 for disability income insurance
and $300,000 for long-term care insurance as
defined in Section 351A-1 of this Code; and
(III) $500,000 for health benefit plans basic
hospital medical and surgical insurance or major
medical insurance;
(C) $250,000 in the present value of annuity
benefits, including net cash surrender and net cash

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withdrawal values;
(ii) with respect to each individual participating in a
governmental retirement benefit plan established under
Section Sections 401, 403(b), or 457 of the U.S. Internal
Revenue Code covered by an unallocated annuity contract or
the beneficiaries of each such individual if deceased, in
the aggregate, $250,000 in present value annuity benefits,
including net cash surrender and net cash withdrawal
values;
(iii) with respect to each payee of a structured
settlement annuity or beneficiary or beneficiaries of the
payee if deceased, $250,000 in present value annuity
benefits, in the aggregate, including net cash surrender
and net cash withdrawal values, if any; or
(iv) with respect to either (1) one contract owner
provided coverage under subparagraph (ii) of paragraph (c)
of subsection (1) of this Section or (2) one plan sponsor
whose plans own directly or in trust one or more
unallocated annuity contracts not included in subparagraph
(ii) of paragraph (b) of this subsection, $5,000,000 in
benefits, irrespective of the number of contracts with
respect to the contract owner or plan sponsor. However, in
the case where one or more unallocated annuity contracts
are covered contracts under this Article and are owned by a
trust or other entity for the benefit of 2 or more plan
sponsors, coverage shall be afforded by the Association if

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the largest interest in the trust or entity owning the
contract or contracts is held by a plan sponsor whose
principal place of business is in this State. In no event
shall the Association be obligated to cover more than
$5,000,000 in benefits with respect to all these
unallocated contracts.
In no event shall the Association be obligated to cover
more than (1) an aggregate of $300,000 in benefits with respect
to any one life under subparagraphs (i), (ii), and (iii) of
this paragraph (b) except with respect to benefits for health
benefit plans basic hospital, medical, and surgical insurance
and major medical insurance under item (B) of subparagraph (i)
of this paragraph (b), in which case the aggregate liability of
the Association shall not exceed $500,000 with respect to any
one individual or (2) with respect to one owner of multiple
nongroup policies of life insurance, 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, $5,000,000 in benefits,
regardless of the number of policies and contracts held by the
owner.
The limitations set forth in this subsection are
limitations on the benefits for which the Association is
obligated before taking into account either its subrogation and
assignment rights or the extent to which those benefits could
be provided out of the assets of the impaired or insolvent

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insurer attributable to covered policies. The costs of the
Association's obligations under this Article may be met by the
use of assets attributable to covered policies or reimbursed to
the Association pursuant to its subrogation and assignment
rights.
For purposes of this Article, 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 it
relates.
(4) In performing its obligations to provide coverage under
Section 531.08 of this Code, 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 the 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.
(Source: P.A. 96-1450, eff. 8-20-10; revised 10-5-17.)
(215 ILCS 5/531.05) (from Ch. 73, par. 1065.80-5)
Sec. 531.05. Definitions. As used in this Act:
"Account" means either of the 2 3 accounts created under
Section 531.06.
"Association" means the Illinois Life and Health Insurance
Guaranty Association created under Section 531.06.

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"Authorized assessment" or the term "authorized" when used
in the context of assessments means a resolution by the Board
of Directors has been passed whereby an assessment shall be
called immediately or in the future from member insurers for a
specified amount. An assessment is authorized when the
resolution is passed.
"Benefit plan" means a specific employee, union, or
association of natural persons benefit plan.
"Called assessment" or the term "called" when used in the
context of assessments means that a notice has been issued by
the Association to member insurers requiring that an authorized
assessment be paid within the time frame set forth within the
notice. An authorized assessment becomes a called assessment
when notice is mailed by the Association to member insurers.
"Director" means the Director of Insurance of this State.
"Contractual obligation" means any obligation under a
policy or contract or certificate under a group policy or
contract, or portion thereof for which coverage is provided
under Section 531.03.
"Covered person" means any person who is entitled to the
protection of the Association as described in Section 531.02.
"Covered contract" or "covered policy" means any policy or
contract within the scope of this Article under Section 531.03.
"Extra-contractual claims" shall include, but are not
limited to, claims relating to bad faith in the payment of
claims, punitive or exemplary damages, or attorneys' fees and

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costs.
"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:
(1) accident only insurance;
(2) credit insurance;
(3) dental only insurance;
(4) vision only insurance;
(5) Medicare supplement insurance;
(6) benefits for long-term care, home health care,
community-based care, or any combination thereof;
(7) disability income insurance;
(8) coverage for on-site medical clinics; or
(9) specified disease, hospital confinement indemnity,
or limited benefit health insurance if the types of
coverage do not provide coordination of benefits and are
provided under separate policies or certificates.
"Impaired insurer" means (A) a member insurer which, after
the effective date of this amendatory Act of the 96th General
Assembly, is not an insolvent insurer, and is placed under an
order of rehabilitation or conservation by a court of competent
jurisdiction or (B) a member insurer deemed by the Director
after the effective date of this amendatory Act of the 96th
General Assembly to be potentially unable to fulfill its
contractual obligations and not an insolvent insurer.

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"Insolvent insurer" means a member insurer that, after the
effective date of this amendatory Act of the 96th General
Assembly, is placed under a final order of liquidation by a
court of competent jurisdiction with a finding of insolvency.
"Member insurer" means an insurer or health maintenance
organization licensed or holding a certificate of authority to
transact in this State any kind of insurance or health
maintenance organization business for which coverage is
provided under Section 531.03 of this Code and includes an
insurer or health maintenance organization whose license or
certificate of authority in this State may have been suspended,
revoked, not renewed, or voluntarily withdrawn or whose
certificate of authority may have been suspended pursuant to
Section 119 of this Code, but does not include:
(1) a hospital or medical service organization,
whether profit or nonprofit;
(2) (blank); a health maintenance organization;
(3) any burial society organized under Article XIX of
this Code, any fraternal benefit society organized under
Article XVII of this Code, any mutual benefit association
organized under Article XVIII of this Code, and any foreign
fraternal benefit society licensed under Article VI of this
Code or a fraternal benefit society;
(4) a mandatory State pooling plan;
(5) a mutual assessment company or other person that
operates on an assessment basis;

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(6) an insurance exchange;
(7) an organization that is permitted to issue
charitable gift annuities pursuant to Section 121-2.10 of
this Code;
(8) any health services plan corporation established
pursuant to the Voluntary Health Services Plans Act;
(9) any dental service plan corporation established
pursuant to the Dental Service Plan Act; or
(10) an entity similar to any of the above.
"Moody's Corporate Bond Yield Average" means the Monthly
Average Corporates as published by Moody's Investors Service,
Inc., or any successor thereto.
"Owner" of a policy or contract and "policyholder", "policy
owner", and "contract owner" mean the person who is identified
as the legal owner 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. The terms
owner, contract owner, policyholder, and policy owner do not
include persons with a mere beneficial interest in a policy or
contract.
"Person" means an individual, corporation, limited
liability company, partnership, association, governmental body
or entity, or voluntary organization.
"Plan sponsor" means:

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(1) the employer in the case of a benefit plan
established or maintained by a single employer;
(2) the employee organization in the case of a benefit
plan established or maintained by an employee
organization; or
(3) in a case of a benefit plan established or
maintained by 2 or more employers or jointly by one or more
employers and one or more employee organizations, the
association, committee, joint board of trustees, or other
similar group of representatives of the parties who
establish or maintain the benefit plan.
"Premiums" mean amounts or considerations, by whatever
name called, received on covered policies or contracts less
returned premiums, considerations, and deposits and less
dividends and experience credits.
"Premiums" does not include:
(A) amounts or considerations received for policies or
contracts or for the portions of policies or contracts for
which coverage is not provided under Section 531.03 of this
Code except that assessable premium shall not be reduced on
account of the provisions of subparagraph (iii) of
paragraph (b) of subsection (2) (a) of Section 531.03 of
this Code relating to interest limitations and the
provisions of paragraph (b) of subsection (3) of Section
531.03 relating to limitations with respect to one
individual, one participant, and one policy owner or

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contract owner;
(B) premiums in excess of $5,000,000 on an unallocated
annuity contract not issued under a governmental
retirement benefit plan (or its trustee) established under
Section 401, 403(b) or 457 of the United States Internal
Revenue Code; or
(C) with respect to multiple nongroup policies of life
insurance owned by one owner, whether the policy owner 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 $5,000,000 with respect to these policies or contracts,
regardless of the number of policies or contracts held by
the owner.
"Principal place of business" of a plan sponsor or a person
other than a natural person means the single state in which the
natural persons who establish policy for the direction,
control, and coordination of the operations of the entity as a
whole primarily exercise that function, determined by the
Association in its reasonable judgment by considering the
following factors:
(A) the state in which the primary executive and
administrative headquarters of the entity is located;
(B) the state in which the principal office of the
chief executive officer of the entity is located;
(C) the state in which the board of directors (or

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similar governing person or persons) of the entity conducts
the majority of its meetings;
(D) the state in which the executive or management
committee of the board of directors (or similar governing
person or persons) of the entity conducts the majority of
its meetings;
(E) the state from which the management of the overall
operations of the entity is directed; and
(F) in the case of a benefit plan sponsored by
affiliated companies comprising a consolidated
corporation, the state in which the holding company or
controlling affiliate has its principal place of business
as determined using the above factors. However, in the case
of a plan sponsor, if more than 50% of the participants in
the benefit plan are employed in a single state, that state
shall be deemed to be the principal place of business of
the plan sponsor.
The principal place of business of a plan sponsor of a
benefit plan described in paragraph (3) of the definition of
"plan sponsor" this Section shall be deemed to be the principal
place of business of the association, committee, joint board of
trustees, or other similar group of representatives of the
parties who establish or maintain the benefit plan that, in
lieu of a specific or clear designation of a principal place of
business, shall be deemed to be the principal place of business
of the employer or employee organization that has the largest

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investment in the benefit plan in question.
"Receivership court" means the court in the insolvent or
impaired insurer's state having jurisdiction over the
conservation, rehabilitation, or liquidation of the member
insurer.
"Resident" means a person to whom a contractual obligation
is owed and who resides in this State on the date of entry of a
court order that determines a member insurer to be an impaired
insurer or a court order that determines a member insurer to be
an insolvent insurer. A person may be a resident of only one
state, which in the case of a person other than a natural
person shall be its principal place of business. Citizens of
the United States that are either (i) residents of foreign
countries or (ii) residents of United States possessions,
territories, or protectorates that do not have an association
similar to the Association created by this Article, shall be
deemed residents of the state of domicile of the member insurer
that issued the policies or contracts.
"Structured settlement annuity" means an annuity purchased
in order to fund periodic payments for a plaintiff or other
claimant in payment for or with respect to personal injury
suffered by the plaintiff or other claimant.
"State" means a state, the District of Columbia, Puerto
Rico, and a United States possession, territory, or
protectorate.
"Supplemental contract" means a written agreement entered

SB3244 - 23 - LRB100 18858 SMS 34100 b
into for the distribution of proceeds under a life, health, or
annuity policy or a life, health, or annuity contract.
"Unallocated annuity contract" means any annuity contract
or group annuity certificate which is not issued to and owned
by an individual, except to the extent of any annuity benefits
guaranteed to an individual by an insurer under such contract
or certificate.
(Source: P.A. 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.06) (from Ch. 73, par. 1065.80-6)
Sec. 531.06. Creation of the Association. There is created
a non-profit legal entity to be known as the Illinois Life and
Health Insurance Guaranty Association. All member insurers are
and must remain members of the Association as a condition of
their authority to transact insurance or a health maintenance
organization business in this State. The Association must
perform its functions under the plan of operation established
and approved under Section 531.10 and must exercise its powers
through a board of directors established under Section 531.07.
For purposes of administration and assessment, the Association
must maintain 2 accounts:
(1) The life insurance and annuity account, which
includes the following subaccounts:
(a) Life Insurance Account;
(b) Annuity account, which shall include annuity
contracts owned by a governmental retirement plan (or

SB3244 - 24 - LRB100 18858 SMS 34100 b
its trustee) established under Section 401, 403(b), or
457 of the United States Internal Revenue Code, but
shall otherwise exclude unallocated annuities; and
(c) Unallocated annuity account, which shall
exclude contracts owned by a governmental retirement
benefit plan (or its trustee) established under
Section 401, 403(b), or 457 of the United States
Internal Revenue Code.
(2) The health insurance account.
The Association shall be supervised by the Director and is
subject to the applicable provisions of the Illinois Insurance
Code. Meetings or records of the Association may be opened to
the public upon majority vote of the board of directors of the
Association.
(Source: P.A. 95-331, eff. 8-21-07; 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.07) (from Ch. 73, par. 1065.80-7)
Sec. 531.07. Board of Directors.) The board of directors
of the Association consists of not less than 7 nor more than 11
members serving terms as established in the plan of operation.
The insurer members insurers of the board are to be selected by
member insurers subject to the approval of the Director. In
addition, 2 persons who must be public representatives may be
appointed by the Director to the board of directors. A public
representative may not be an officer, director, or employee of
an insurance company or a health maintenance organization or

SB3244 - 25 - LRB100 18858 SMS 34100 b
any person engaged in the business of insurance. Vacancies on
the board must be filled for the remaining period of the term
in the manner described in the plan of operation.
In approving selections or in appointing members to the
board, the Director must consider, whether all member insurers
are fairly represented.
Members of the board may be reimbursed from the assets of
the Association for expenses incurred by them as members of the
board of directors but members of the board may not otherwise
be compensated by the Association for their services.
(Source: P.A. 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.08) (from Ch. 73, par. 1065.80-8)
Sec. 531.08. Powers and duties of the Association.
(a) In addition to the powers and duties enumerated in
other Sections of this Article:
(1) If a member insurer is an impaired insurer, then
the Association may, in its discretion and subject to any
conditions imposed by the Association that do not impair
the contractual obligations of the impaired insurer and
that are approved by the Director:
(A) guarantee, assume, reissue, or reinsure or
cause to be guaranteed, assumed, reissued, or
reinsured, any or all of the policies or contracts of
the impaired insurer; or
(B) provide such money, pledges, loans, notes,

SB3244 - 26 - LRB100 18858 SMS 34100 b
guarantees, or other means as are proper to effectuate
paragraph (A) and assure payment of the contractual
obligations of the impaired insurer pending action
under paragraph (A).
(2) If a member insurer is an insolvent insurer, then
the Association shall, in its discretion, either:
(A) guaranty, assume, reissue, or reinsure or
cause to be guaranteed, assumed, reissued, or
reinsured the policies or contracts of the insolvent
insurer or assure payment of the contractual
obligations of the insolvent insurer and provide
money, pledges, loans, notes, guarantees, or other
means reasonably necessary to discharge the
Association's duties; or
(B) provide benefits and coverages in accordance
with the following provisions:
(i) with respect to policies and contracts
life and health insurance policies and annuities,
ensure payment of benefits for premiums identical
to the premiums and benefits (except for terms of
conversion and renewability) that would have been
payable under the policies or contracts of the
insolvent insurer for claims incurred:
(a) with respect to group policies and
contracts, not later than the earlier of the
next renewal date under those policies or

SB3244 - 27 - LRB100 18858 SMS 34100 b
contracts or 45 days, but in no event less than
30 days, after the date on which the
Association becomes obligated with respect to
the policies and contracts;
(b) with respect to nongroup policies,
contracts, and annuities not later than the
earlier of the next renewal date (if any) under
the policies or contracts or one year, but in
no event less than 30 days, from the date on
which the Association becomes obligated with
respect to the policies or contracts;
(ii) make diligent efforts to provide all
known insureds, enrollees, or annuitants (for
nongroup policies and contracts), or group policy
owners or contract owners with respect to group
policies and contracts, 30 days notice of the
termination (pursuant to subparagraph (i) of this
paragraph (B)) of the benefits provided;
(iii) with respect to nongroup policies and
contracts life and health insurance policies and
annuities covered by the Association, make
available to each known insured, enrollee, or
annuitant, or owner if other than the insured,
enrollee, or annuitant, and with respect to an
individual formerly an insured, enrollee, or
formerly an annuitant under a group policy or

SB3244 - 28 - LRB100 18858 SMS 34100 b
contract who is not eligible for replacement group
coverage, make available substitute coverage on an
individual basis in accordance with the provisions
of paragraph (3), if the insureds, enrollees, or
annuitants had a right under law or the terminated
policy, contract, or annuity to convert coverage
to individual coverage or to continue an
individual policy, contract, or annuity in force
until a specified age or for a specified time,
during which the insurer or health maintenance
organization had no right unilaterally to make
changes in any provision of the policy, contract,
or annuity or had a right only to make changes in
premium by class.
(b) In providing the substitute coverage required under
subparagraph (iii) of paragraph (B) of item (2) of subsection
(a) of this Section, the Association may offer either to
reissue the terminated coverage or to issue an alternative
policy or contract at actuarially justified rates, subject to
the prior approval of the Director.
Alternative or reissued 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.
The Association may reinsure any alternative or reissued
policy or contract.

SB3244 - 29 - LRB100 18858 SMS 34100 b
Alternative policies or contracts adopted by the
Association shall be subject to the approval of the Director.
The Association may adopt alternative policies or contracts of
various types for future issuance insurance without regard to
any particular impairment or insolvency.
Alternative policies or contracts shall contain at least
the minimum statutory provisions required in this State and
provide benefits that shall not be unreasonable in relation to
the premium charged. The Association shall set the premium in
accordance with a table of rates which it 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.
Any alternative policy or contract issued by the
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.
(c) 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 Director or by a
court of competent jurisdiction.
(d) The Association's obligations with respect to coverage

SB3244 - 30 - LRB100 18858 SMS 34100 b
under any policy or contract of the impaired or insolvent
insurer or under any reissued or alternative policy or contract
shall cease on the date such coverage or policy or contract is
replaced by another similar policy or contract by the
policyholder, the insured, the enrollee, or the Association.
(e) When proceeding under this Section with respect to any
policy or contract carrying guaranteed minimum interest rates,
the Association shall assure the payment or crediting of a rate
of interest consistent with subparagraph (2)(b)(iii)(B) of
Section 531.03.
(f) Nonpayment of premiums thirty-one days after the date
required under the terms of any guaranteed, assumed,
alternative or reissued policy or contract or substitute
coverage shall terminate the Association's obligations under
such policy, contract, or coverage under this Act with respect
to such policy, contract, or coverage, except with respect to
any claims incurred or any net cash surrender value which may
be due in accordance with the provisions of this Act.
(g) Premiums due for coverage after entry of an order of
liquidation of an insolvent insurer shall belong to and be
payable at the direction of the Association, and the
Association shall be liable for unearned premiums due to policy
or contract owners arising after the entry of such order.
(h) In carrying out its duties under paragraph (2) of
subsection (a) of this Section, the Association may:
(1) subject to approval by a court in this State,

SB3244 - 31 - LRB100 18858 SMS 34100 b
impose permanent policy or contract liens in connection
with a guarantee, assumption, or reinsurance agreement if
the Association finds that the amounts which can be
assessed under this Article are less than the amounts
needed to assure full and prompt performance of the
Association's duties under this Article or that the
economic or financial conditions as they affect member
insurers are sufficiently adverse to render the imposition
of such permanent policy or contract liens to be in the
public interest; or
(2) subject to approval by a court in this State,
impose temporary moratoriums or liens on payments of cash
values and policy loans or any other right to withdraw
funds held in conjunction with policies or contracts in
addition to any contractual provisions for deferral of cash
or policy loan value. In addition, in the event of a
temporary moratorium or moratorium charge imposed by the
receivership court on payment of cash values or policy
loans or on any other right to withdraw funds held in
conjunction with policies or contracts, out of the assets
of the impaired or insolvent insurer, the Association may
defer the payment of cash values, policy loans, or other
rights by the Association for the period of the moratorium
or moratorium charge imposed by the receivership court,
except for claims covered by the Association to be paid in
accordance with a hardship procedure established by the

SB3244 - 32 - LRB100 18858 SMS 34100 b
liquidator or rehabilitator and approved by the
receivership court.
(i) There shall be no liability on the part of and no cause
of action shall arise against the Association or against any
transferee from the Association in connection with the transfer
by reinsurance or otherwise of all or any part of an impaired
or insolvent insurer's business by reason of any action taken
or any failure to take any action by the impaired or insolvent
insurer at any time.
(j) If the Association fails to act within a reasonable
period of time as provided in subsection (2) of this Section
with respect to an insolvent insurer, the Director shall have
the powers and duties of the Association under this Act with
regard to such insolvent insurers.
(k) The Association or its designated representatives may
render assistance and advice to the Director, upon his request,
concerning rehabilitation, payment of claims, continuations of
coverage, or the performance of other contractual obligations
of any impaired or insolvent insurer.
(l) The Association shall have standing to appear or
intervene before a 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
Article 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

SB3244 - 33 - LRB100 18858 SMS 34100 b
germane to the powers and duties of the Association, including,
but not limited to, proposals for reinsuring, reissuing,
modifying, or guaranteeing the policies or contracts of the
impaired or insolvent insurer and the determination of the
policies or contracts and contractual obligations. The
Association shall also have the right to appear or intervene
before a 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.
(m)(1) A person receiving benefits under this Article shall
be 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
because of this Article, whether the benefits are payments of
or on account of contractual obligations, continuation of
coverage, or provision of substitute or alternative policies,
contracts, or coverages. The Association may require an
assignment to it of such rights and cause of action by any
enrollee, payee, policy, or contract owner, beneficiary,
insured, or annuitant as a condition precedent to the receipt
of any right or benefits conferred by this Article upon the
person.
(2) The subrogation rights of the Association under this

SB3244 - 34 - LRB100 18858 SMS 34100 b
subsection have the same priority against the assets of the
impaired or insolvent insurer as that possessed by the person
entitled to receive benefits under this Article.
(3) In addition to paragraphs (1) and (2), the Association
shall have all common law rights of subrogation and any other
equitable or legal remedy that would have been available to the
impaired or insolvent insurer or owner, beneficiary, enrollee,
or payee of a policy or contract with respect to the policy or
contracts, including without limitation, in the case of a
structured settlement annuity, any rights of the owner,
beneficiary, enrollee, or payee of the annuity to the extent of
benefits received pursuant to this Article, against a person
originally or by succession responsible for the losses arising
from the personal injury relating to the annuity or payment
therefor, excepting any such person responsible solely by
reason of serving as an assignee in respect of a qualified
assignment under Internal Revenue Code Section 130.
(4) If the preceding provisions of this subsection (l) are
invalid or ineffective with respect to any person or claim for
any reason, then the amount payable by the Association with
respect to the related covered obligations shall be reduced by
the amount realized by any other person with respect to the
person or claim that is attributable to the policies or
contracts, or portion thereof, covered by the Association.
(5) If the Association has provided benefits with respect
to a covered obligation and a person recovers amounts as to

SB3244 - 35 - LRB100 18858 SMS 34100 b
which the Association has rights as described in the preceding
paragraphs of this subsection (10), then the person shall pay
to the Association the portion of the recovery attributable to
the policies or contracts, or portion thereof, covered by the
Association.
(n) The Association may:
(1) Enter into such contracts as are necessary or
proper to carry out the provisions and purposes of this
Article.
(2) Sue or be sued, including taking any legal actions
necessary or proper for recovery of any unpaid assessments
under Section 531.09. The Association shall not be liable
for punitive or exemplary damages.
(3) Borrow money to effect the purposes of this
Article. Any notes or other evidence of indebtedness of the
Association not in default are legal investments for
domestic member insurers and may be carried as admitted
assets.
(4) Employ or retain such persons as are necessary to
handle the financial transactions of the Association, and
to perform such other functions as become necessary or
proper under this Article.
(5) Negotiate and contract with any liquidator,
rehabilitator, conservator, or ancillary receiver to carry
out the powers and duties of the Association.
(6) Take such legal action as may be necessary to

SB3244 - 36 - LRB100 18858 SMS 34100 b
avoid payment of improper claims.
(7) Exercise, for the purposes of this Article and to
the extent approved by the Director, the powers of a
domestic life insurer, or health insurer, or health
maintenance organization, but in no case may the
Association issue insurance policies or annuity contracts
other than those issued to perform the contractual
obligations of the impaired or insolvent insurer.
(8) Exercise all the rights of the Director under
Section 193(4) of this Code with respect to covered
policies after the association becomes obligated by
statute.
(9) Request information from a person seeking coverage
from the Association in order to aid the Association in
determining its obligations under this Article with
respect to the person, and the person shall promptly comply
with the request.
(9.5) 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 it provides coverage under
this Article.
(10) Take other necessary or appropriate action to
discharge its duties and obligations under this Article or
to exercise its powers under this Article.
(o) With respect to covered policies for which the

SB3244 - 37 - LRB100 18858 SMS 34100 b
Association becomes obligated after an entry of an order of
liquidation or rehabilitation, the Association may elect to
succeed to the rights of the insolvent insurer arising after
the date of the order of liquidation or rehabilitation under
any contract of reinsurance to which the insolvent insurer was
a party, to the extent that such contract provides coverage for
losses occurring after the date of the order of liquidation or
rehabilitation. As a condition to making this election, the
Association must pay all unpaid premiums due under the contract
for coverage relating to periods before and after the date of
the order of liquidation or rehabilitation.
(p) A deposit in this State, held pursuant to law or
required by the Director for the benefit of creditors,
including policy owners or contract owners, not turned over to
the domiciliary liquidator upon the entry of a final order of
liquidation or order approving a rehabilitation plan of a
member an insurer domiciled in this State or in a reciprocal
state, pursuant to Article XIII 1/2 of this Code, shall be
promptly paid to the Association. The Association shall be
entitled to retain a portion of any amount so paid to it equal
to the percentage determined by dividing the aggregate amount
of policy owners' or contract owners' claims related to that
insolvency for which the Association has provided statutory
benefits by the aggregate amount of all policy owners' or
contract owners' claims in this State related to that
insolvency and shall remit to the domiciliary receiver the

SB3244 - 38 - LRB100 18858 SMS 34100 b
amount so paid to the Association less the amount retained
pursuant to this subsection (13). Any amount so paid to the
Association and retained by it shall be treated as a
distribution of estate assets pursuant to applicable State
receivership law dealing with early access disbursements.
(q) The Board of Directors of the Association shall have
discretion and may exercise reasonable business judgment to
determine the means by which the Association is to provide the
benefits of this Article in an economical and efficient manner.
(r) Where the Association has arranged or offered to
provide the benefits of this Article to a covered person under
a plan or arrangement that fulfills the Association's
obligations under this Article, the person shall not be
entitled to benefits from the Association in addition to or
other than those provided under the plan or arrangement.
(s) Venue in a suit against the Association arising under
the Article shall be in Cook County. The Association shall not
be required to give any appeal bond in an appeal that relates
to a cause of action arising under this Article.
(t) The Association may join an organization of one or more
other State associations of similar purposes to further the
purposes and administer the powers and duties of the
Association.
(u) In carrying out its duties in connection with
guaranteeing, assuming, reissuing, or reinsuring policies or
contracts under subsections (1) or (2), the Association may,

SB3244 - 39 - LRB100 18858 SMS 34100 b
subject to 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 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:
(1) in lieu of the index or other external reference
provided for in the original policy or contract, the
alternative policy or contract provides for (i) a fixed
interest rate, or (ii) payment of dividends with minimum
guarantees, or (iii) a different method for calculating
interest or changes in value;
(2) there is no requirement for evidence of
insurability, waiting period, or other exclusion that
would not have applied under the replaced policy or
contract; and
(3) the alternative policy or contract is
substantially similar to the replaced policy or contract in
all other material terms.
(Source: P.A. 96-1450, eff. 8-20-10; 97-333, eff. 8-12-11.)
(215 ILCS 5/531.09) (from Ch. 73, par. 1065.80-9)
Sec. 531.09. Assessments.
(1) For the purpose of providing the funds necessary to
carry out the powers and duties of the Association, the board

SB3244 - 40 - LRB100 18858 SMS 34100 b
of directors shall assess the member insurers, separately for
each account, at such times and for such amounts as the board
finds necessary. Assessments shall be due not less than 30 days
after written notice to the member insurers and shall accrue
interest from the due date at such adjusted rate as is
established under Section 6621 of Chapter 26 of the United
States Code and such interest shall be compounded daily.
(2) There shall be 2 classes of assessments, as follows:
(a) Class A assessments shall be made for the purpose
of meeting administrative costs and other general expenses
and examinations conducted under the authority of the
Director under subsection (5) of Section 531.12.
(b) Class B assessments shall be made to the extent
necessary to carry out the powers and duties of the
Association under Section 531.08 with regard to an impaired
or insolvent domestic insurer or insolvent foreign or alien
insurers.
(3)(a) The amount of any Class A assessment shall be
determined at the discretion of the board of directors and such
assessments shall be authorized and called on a non-pro rata
basis. The amount of any Class B assessment, except for
assessments related to long-term care insurance, shall be
allocated for assessment purposes among the accounts and
subaccounts pursuant to an allocation formula which may be
based on the premiums or reserves of the impaired or insolvent
insurer or any other standard deemed by the board in its sole

SB3244 - 41 - LRB100 18858 SMS 34100 b
discretion as being fair and reasonable under the
circumstances.
(b) Class B assessments against member insurers for each
account and subaccount shall be in the proportion that the
premiums received on business in this State by each assessed
member insurer on policies or contracts covered by each account
or subaccount for the three most recent calendar years for
which information is available preceding the year in which the
member insurer became impaired or insolvent, as the case may
be, bears to such premiums received on business in this State
for such calendar years by all assessed member insurers.
(b-5) 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 and approved by the Director. The methodology
shall provide for 50% of the assessment to be allocated to
accident and health member insurers and 50% to be allocated to
life and annuity member insurers.
(c) Assessments for funds to meet the requirements of the
Association with respect to an impaired or insolvent insurer
shall not be made until necessary to implement the purposes of
this Article. Classification of assessments under subsection
(2) and computations of assessments under this subsection shall
be made with a reasonable degree of accuracy, recognizing that
exact determinations may not always be possible.
(4) The Association may abate or defer, in whole or in

SB3244 - 42 - LRB100 18858 SMS 34100 b
part, the assessment of a member insurer if, in the opinion of
the board, payment of the assessment would endanger the ability
of the member insurer to fulfill its contractual obligations.
In the event an assessment against a member insurer is abated
or deferred in whole or in part the amount by which the
assessment is abated or deferred may be assessed against the
other member insurers in a manner consistent with the basis for
assessments set forth in this Section. Once the conditions that
caused a deferral have been removed or rectified, the member
insurer shall pay all assessments that were deferred pursuant
to a repayment plan approved by the Association.
(5) (a) Subject to the provisions of subparagraph (ii) of
this paragraph, the total of all assessments authorized by the
Association with respect to a member insurer for each
subaccount of the life insurance and annuity account and for
the health account shall not in one calendar year exceed 2% of
that member insurer's average annual premiums received in this
State on the policies and contracts covered by the subaccount
or account during the 3 calendar years preceding the year in
which the member insurer became an impaired or insolvent
insurer.
If 2 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 referenced in subparagraph (a) of this paragraph

SB3244 - 43 - LRB100 18858 SMS 34100 b
shall be equal and limited to the higher of the 3-year average
annual premiums for the applicable subaccount or account as
calculated pursuant to this Section.
If the maximum assessment, together with the other assets
of the Association in an account, does not provide in one year
in either account an amount sufficient to carry out the
responsibilities of the Association, the necessary additional
funds shall be assessed as soon thereafter as permitted by this
Article.
(b) The board may provide in the plan of operation a method
of allocating funds among claims, whether relating to one or
more impaired or insolvent insurers, when the maximum
assessment will be insufficient to cover anticipated claims.
(c) If the maximum assessment for a subaccount of the life
insurance and annuity account in one year does not provide an
amount sufficient to carry out the responsibilities of the
Association, then pursuant to paragraph (b) of subsection (3),
the board shall assess the other subaccounts of the life
insurance and annuity account for the necessary additional
amount, subject to the maximum stated in paragraph (a) of this
subsection.
(6) The board may, by an equitable method as established in
the plan of operation, 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 exceed the amount the
board finds is necessary to carry out during the coming year

SB3244 - 44 - LRB100 18858 SMS 34100 b
the obligations of the Association with regard to that account,
including assets accruing from net realized gains and income
from investments. A reasonable amount may be retained in any
account to provide funds for the continuing expenses of the
Association and for future losses.
(7) An assessment is deemed to occur on the date upon which
the board votes such assessment. The board may defer calling
the payment of the assessment or may call for payment in one or
more installments.
(8) It is proper for any member insurer, in determining its
premium rates and policy owner policyowner dividends as to any
kind of insurance or health maintenance organization business
within the scope of this Article, to consider the amount
reasonably necessary to meet its assessment obligations under
this Article.
(9) The Association must issue to each member insurer
paying a Class B assessment under this Article a certificate of
contribution, in a form acceptable to the Director, for the
amount of the assessment so paid. All outstanding certificates
are of equal dignity and priority without reference to amounts
or dates of issue. A certificate of contribution may be shown
by the member insurer in its financial statement as an asset in
such form and for such amount, if any, and period of time as
the Director may approve, provided the member insurer shall in
any event at its option have the right to show a certificate of
contribution as an admitted asset at percentages of the

SB3244 - 45 - LRB100 18858 SMS 34100 b
original face amount for calendar years as follows:
100% for the calendar year after the year of issuance;
80% for the second calendar year after the year of
issuance;
60% for the third calendar year after the year of issuance;
40% for the fourth calendar year after the year of
issuance;
20% for the fifth calendar year after the year of issuance.
(10) The Association may request information of member
insurers in order to aid in the exercise of its power under
this Section and member insurers shall promptly comply with a
request.
(Source: P.A. 95-86, eff. 9-25-07 (changed from 1-1-08 by P.A.
95-632); 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.11) (from Ch. 73, par. 1065.80-11)
Sec. 531.11. Duties and powers of the Director. In addition
to the duties and powers enumerated elsewhere in this Article:
(1) The Director must do all of the following:
(a) Upon request of the board of directors, provide the
Association with a statement of the premiums in the
appropriate accounts for each member insurer.
(b) Notify the board of directors of the existence of
an impaired or insolvent insurer not later than 3 days
after a determination of impairment or insolvency is made
or when the Director receives notice of impairment or

SB3244 - 46 - LRB100 18858 SMS 34100 b
insolvency.
(c) Give notice to an impaired insurer as required by
Sections 34 or 60. Notice to the impaired insurer shall
constitute notice to its shareholders, if any.
(d) In any liquidation or rehabilitation proceeding
involving a domestic member insurer, be appointed as the
liquidator or rehabilitator. If a foreign or alien member
insurer is subject to a liquidation proceeding in its
domiciliary jurisdiction or state of entry, the Director
shall be appointed conservator.
(2) The Director may suspend or revoke, after notice and
hearing, the certificate of authority to transact business
insurance in this State of any member insurer which fails to
pay an assessment when due or fails to comply with the plan of
operation. As an alternative the Director may levy a forfeiture
on any member insurer which fails to pay an assessment when
due. Such forfeiture may not exceed 5% of the unpaid assessment
per month, but no forfeiture may be less than $100 per month.
(3) Any action of the board of directors or the Association
may be appealed to the Director by any member insurer or any
other person adversely affected by such action if such appeal
is taken within 30 days of the action being appealed. Any final
action or order of the Director is subject to judicial review
in a court of competent jurisdiction.
(4) The liquidator, rehabilitator, or conservator of any
impaired insurer may notify all interested persons of the

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effect of this Article.
(Source: P.A. 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.12) (from Ch. 73, par. 1065.80-12)
Sec. 531.12. Prevention of Insolvencies. To aid in the
detection and prevention of member insurer insolvencies or
impairments:
(1) It shall be the duty of the Director:
(a) To notify the Commissioners of all other states,
territories of the United States, and the District of
Columbia when he takes any of the following actions against
a member insurer:
(i) revocation of license;
(ii) suspension of license;
(iii) makes any formal order except for an order
issued pursuant to Article XII 1/2 of this Code that
such member insurer company 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 policy owners, contract
owners, certificate holders, policyholders or
creditors.
Such notice shall be transmitted to all commissioners
within 30 days following the action taken or the date on
which the action occurs.

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(b) To report to the board of directors when he has
taken any of the actions set forth in subparagraph (a) of
this paragraph or has received a report from any other
commissioner indicating that any such action has been taken
in another state. Such report to the board of directors
shall contain all significant details of the action taken
or the report received from another commissioner.
(c) To report to the board of directors when the
Director has reasonable cause to believe from an
examination, whether completed or in process, of any member
insurer that the member insurer may be an impaired or
insolvent insurer.
(d) To furnish to the board of directors the National
Association of Insurance Commissioners Insurance
Regulatory Information System ratios and listings of
companies not included in the ratios developed by the
National Association of Insurance Commissioners. The board
may use the information contained therein in carrying out
its duties and responsibilities under this Section. The
report and the information contained therein shall be kept
confidential by the board of directors until such time as
made public by the Director or other lawful authority.
(2) The Director may seek the advice and recommendations of
the board of directors concerning any matter affecting his or
her duties and responsibilities regarding the financial
condition of member insurers companies and insurers or health

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maintenance organizations companies seeking admission to
transact insurance business in this State.
(3) The board of directors may, upon majority vote, make
reports and recommendations to the Director upon any matter
germane to the liquidation, rehabilitation or conservation of
any member insurer and insurers or health maintenance
organizations seeking admission to transact business in this
State. Such reports and recommendations shall not be considered
public documents.
(4) The board of directors may, upon majority vote, make
recommendations to the Director for the detection and
prevention of member insurer insolvencies.
(5) The board of directors shall, at the conclusion of any
member insurer insolvency in which the Association was
obligated to pay covered claims prepare a report to the
Director containing such information as it may have in its
possession bearing on the history and causes of such
insolvency. The board shall cooperate with the boards of
directors of guaranty associations in other states in preparing
a report on the history and causes for insolvency of a
particular member insurer, and may adopt by reference any
report prepared by such other associations.
(Source: P.A. 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.13) (from Ch. 73, par. 1065.80-13)
Sec. 531.13. Tax offset. In the event the aggregate Class

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A, B and C assessments for all member insurers do not exceed
$3,000,000 in any one calendar year, no member insurer shall
receive a tax offset. However, for any one calendar year before
1998 in which the total of such assessments exceeds $3,000,000,
the amount in excess of $3,000,000 shall be subject to a tax
offset to the extent of 20% of the amount of such assessment
for each of the 5 calendar years following the year in which
such assessment was paid, and ending prior to January 1, 2003,
and each member insurer may offset the proportionate amount of
such excess paid by the member insurer against its liabilities
for the tax imposed by subsections (a) and (b) of Section 201
of the Illinois Income Tax Act. The provisions of this Section
shall expire and be given no effect for any tax period
commencing on and after January 1, 2003.
(Source: P.A. 93-29, eff. 6-20-03.)
(215 ILCS 5/531.14) (from Ch. 73, par. 1065.80-14)
Sec. 531.14. Miscellaneous Provisions.
(1) Nothing in this Article may be construed to reduce the
liability for unpaid assessments of the insured of an impaired
or insolvent insurer operating under a plan with assessment
liability.
(2) Records must be kept of all negotiations and meetings
in which the Association or its representatives are involved to
discuss the activities of the Association in carrying out its
powers and duties under Section 531.08. Records of such

SB3244 - 51 - LRB100 18858 SMS 34100 b
negotiations or meetings may be made public only upon the
termination of a liquidation, rehabilitation, or conservation
proceeding involving the impaired or insolvent insurer, upon
the termination of the impairment or insolvency of the insurer,
or upon the order of a court of competent jurisdiction. Nothing
in this paragraph (2) limits the duty of the Association to
render a report of its activities under Section 531.15.
(3) For the purpose of carrying out its obligations under
this Article, the Association is deemed to be a creditor of the
impaired or insolvent insurer to the extent of assets
attributable to covered policies or contracts reduced by any
amounts to which the Association is entitled as subrogee (under
paragraph (8) of Section 531.08). All assets of the impaired or
insolvent insurer attributable to covered policies or
contracts must be used to continue all covered policies and pay
all contractual obligations of the impaired insurer as required
by this Article. "Assets attributable to covered policies or
contracts", as used in this paragraph (3), is that proportion
of the assets which the reserves that should have been
established for such policies or contracts bear to the reserve
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 any liquidation,
rehabilitation, or conservation proceeding, the court may take
into consideration the contributions of the respective

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parties, including the Association, the shareholders, contract
owners, certificate holders, enrollees, and policy owners
policyowners of the impaired or insolvent insurer, and any
other party with a bona fide interest, in making an equitable
distribution of the ownership rights of such impaired or
insolvent insurer. In such a determination, consideration must
be given to the welfare of the policy owners, contract owners,
certificate holders, and enrollees policyholders of the
continuing or successor insurer.
(b) No distribution to stockholders, if any, of an impaired
or insolvent insurer may be made until and unless the total
amount of valid claims of the Association for funds expended
with interest in carrying out its powers and duties under
Section 531.08, with respect to such member insurer have been
fully recovered by the Association.
(5) (a) If an order for liquidation or rehabilitation of a
member an insurer domiciled in this State has been entered, the
receiver appointed under such order has a right to 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 5 years preceding the petition for
liquidation or rehabilitation subject to the limitations of
paragraphs (b) to (d).
(b) No such dividend is recoverable if the member insurer
shows that when paid the distribution was lawful and

SB3244 - 53 - LRB100 18858 SMS 34100 b
reasonable, and that the member insurer did not know and could
not reasonably have known that the distribution might adversely
affect the ability of the member insurer to fulfill its
contractual obligations.
(c) Any person who as an affiliate that controlled the
member insurer at the time the distributions were paid is
liable up to the amount of distributions he received. Any
person who was an affiliate that controlled the member insurer
at the time the distributions were declared, is liable up to
the amount of distributions he would have received if they had
been paid immediately. If 2 persons are liable with respect to
the same distributions, they are jointly and severally liable.
(d) The maximum amount recoverable under subsection (5) of
this Section is the amount needed in excess of all other
available assets of the insolvent insurer to pay the
contractual obligations of the insolvent insurer.
(e) If any person liable under paragraph (c) of subsection
(5) of this Section is insolvent, all its affiliates that
controlled it at the time the dividend was paid are jointly and
severally liable for any resulting deficiency in the amount
recovered from the insolvent affiliate.
(6) As a creditor of the impaired or insolvent insurer as
established in subsection (3) of this Section and consistent
with subsection (2) of Section 205 of this Code, the
Association and other similar associations shall be entitled to
receive a disbursement of assets out of the marshaled assets,

SB3244 - 54 - LRB100 18858 SMS 34100 b
from time to time as the assets become available to reimburse
it, as a credit against contractual obligations under this
Article. If the liquidator has not, within 120 days after a
final determination of insolvency of a member an 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, then the Association shall be entitled to make
application to the receivership court for approval of its own
proposal to disburse these assets.
(Source: P.A. 96-1450, eff. 8-20-10.)
(215 ILCS 5/531.19) (from Ch. 73, par. 1065.80-19)
Sec. 531.19. Prohibited advertisement of action of the
Insurance Guaranty Association in sale of insurance.
(a) No person, including a member an insurer, agent or
affiliate of a member an insurer shall make, publish,
disseminate, circulate, or place before the public, or cause
directly or indirectly, to be made, published, disseminated,
circulated or placed before the public, in any newspaper,
magazine or other publication, or in the form of a notice,
circular, pamphlet, letter or poster, or over any radio station
or television station, or in any other way, any 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

SB3244 - 55 - LRB100 18858 SMS 34100 b
purchase any form of insurance or other coverage covered by
this Article; provided, however, that this Section shall not
apply to the Illinois Life and Health Guaranty Association or
any other entity which does not sell or solicit insurance or
coverage by a health maintenance organization.
(b) Within 180 days of August 16, 1993, the Association
shall prepare a summary document describing the general
purposes and current limitations of this Article and complying
with subsection (c). This document shall be submitted to the
Director for approval. Sixty days after receiving approval, no
member insurer may deliver a policy or contract described in
subparagraph (a) of paragraph (2) of Section 531.03 and not
excluded under subparagraph (b) of that Section to a policy
owner, or contract owner, certificate holder, or enrollee
unless the document is delivered to the policy owner, or
contract owner, certificate holder, or enrollee prior to or at
the time of delivery of the policy or contract. The document
should also be available upon request by a policy owner,
contract owner, certificate holder, or enrollee policyholder.
The distribution, delivery, or contents or interpretation of
this document shall not mean that either the policy or the
contract or the policy owner, contract owner, certificate
holder, or enrollee thereof would be covered in the event of
the impairment or insolvency of a member insurer. The
description document shall be revised by the Association as
amendments to this Article may require. Failure to receive this

SB3244 - 56 - LRB100 18858 SMS 34100 b
document does not give the policy owner policyholder, contract
owner holder, certificate holder, enrollee, or insured any
greater rights than those stated in this Article.
(c) The document prepared under subsection (b) shall
contain a clear and conspicuous disclaimer on its face. The
Director shall promulgate a rule establishing the form and
content of the disclaimer. The disclaimer shall:
(1) State the name and address of the Life and Health
Insurance Guaranty Association and of the Department.
(2) Prominently warn the policy owner, or contract
owner, certificate holder, or enrollee that the Life and
Health Insurance Guaranty 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 the State.
(3) State that the member insurer and its agents are
prohibited by law from using the existence of the Life and
Health Insurance Guaranty Association for the purpose of
sales, solicitation, or inducement to purchase any form of
insurance or health maintenance organization coverage.
(4) Emphasize that the policy owner, or contract owner,
certificate holder, or enrollee should not rely on coverage
under the Life and Health Insurance Guaranty Association
when selecting an insurer or health maintenance
organization.
(5) Provide other information as directed by the

SB3244 - 57 - LRB100 18858 SMS 34100 b
Director.
(d) (Blank).
(Source: P.A. 88-364; 88-627, eff. 9-9-94; 89-97, eff. 7-7-95.)
(215 ILCS 5/531.20 new)
Sec. 531.20. Merger of Illinois Health Maintenance
Organization Guaranty Association with and into the Illinois
Life and Health Insurance Guaranty Association. In order to
provide for the merger of the Illinois Health Maintenance
Organization Guaranty Association with and into the Illinois
Life and Health Insurance Guaranty Association, the following
shall apply:
(1) The Illinois Health Maintenance Organization
Guaranty Association is merged with and into the Illinois
Life and Health Insurance Guaranty Association, which
shall then continue to be known as the Illinois Life and
Health Insurance Guaranty Association.
(2) All premerger rights, powers, privileges, assets,
property, duties, debts, obligations, and liabilities of
each association related to a liquidated member shall
remain with the members of the respective association prior
to merger and subject to the laws in effect at the time the
order of liquidation was entered with respect to the
liquidated member, but shall be administered by the
Illinois Life and Health Insurance Guaranty Association.
The Illinois Life and Health Insurance Guaranty

SB3244 - 58 - LRB100 18858 SMS 34100 b
Association shall adopt changes to its plan of operation
which reasonably accomplish this.
(3) Subject to paragraph (2), the Illinois Life and
Health Insurance Guaranty Association shall succeed,
without other transfer, to all the rights, powers,
privileges, assets, and property of the Illinois Health
Maintenance Organization Guaranty Association and shall be
subject to all duties, debts, obligations, and liabilities
of the Illinois Health Maintenance Organization that exist
as of the date of the merger of the Illinois Health
Maintenance Organization Guaranty Association into the
Illinois Life and Health Insurance Guaranty Association.
Without limiting the generality of the foregoing, the
Illinois Life and Health Insurance Guaranty Association
shall succeed to (A) all collected, uncollected, or
unbilled assessments of the Illinois Health Maintenance
Organization Guaranty Association, (B) all cash, bank
accounts, accrued interest, and tangible property of the
Illinois Health Maintenance Organization Guaranty
Association, (C) all rights, powers, privileges, duties,
and obligations of the Illinois Health Maintenance
Organization Guaranty Association under any of its
contracts or commitments, and (D) all subrogations,
assignments, and creditor rights and interests of the
Illinois Health Maintenance Organization Guaranty
Association.

SB3244 - 59 - LRB100 18858 SMS 34100 b
(4) All rights of creditors and all liens upon the
property of the Illinois Health Maintenance Organization
Guaranty Association shall be preserved unimpaired,
provided that the liens upon property of the Illinois
Health Maintenance Organization Guaranty Association shall
be limited to the property affected thereby immediately
prior to the effective date of this amendatory Act of the
100th General Assembly.
(5) Any action or proceeding pending by or against the
Illinois Health Maintenance Organization Guaranty
Association may be prosecuted to judgment.
(6) Notwithstanding any other provision to the
contrary in this Article:
(A) It is the intent of this Section to preserve
only the rights, powers, privileges, assets, property,
debts, obligations, and liabilities of the Illinois
Health Maintenance Organization Guaranty Association
as they existed on the date of its merger into the
Illinois Life and Health Insurance Guaranty
Association, and not to provide contract owners,
certificate holders, enrollees and policy owners, or
their respective payees, beneficiaries, or assignees,
with duplicative or new rights, powers, privileges,
assets, or property.
(B) Accordingly, no contract owner, certificate
holder, enrollee and policy owner, and no contract

SB3244 - 60 - LRB100 18858 SMS 34100 b
owner's, certificate holder's, enrollee's or policy
owner's payee, beneficiary, or assignee, shall be
entitled to (i) a recovery from the Illinois Life and
Health Insurance Guaranty Association that is
duplicative of a previous recovery from the Illinois
Health Maintenance Organization Guaranty Association
or (ii) a recovery from the Illinois Life and Health
Insurance Guaranty Association on account of a claim
against the Illinois Health Maintenance Organization
Guaranty Association where the Illinois Life and
Health Insurance Guaranty Association is liable with
respect to a claim under the same policy or contract
under this Article.
(215 ILCS 125/Art. VI rep.)
Section 10. The Health Maintenance Organization Act is
amended by repealing Article VI.
Section 99. Effective date. This Act takes effect upon
becoming law.