Researcher: JKL Page 1 5/1/24
OLR Bill Analysis
sHB 5503
AN ACT CONCERNING INSURANCE MARKET CONDUCT AND
INSURANCE LICENSING, THE INSURANCE DEPARTMENT'S
TECHNICAL CORRECTIONS AND OTHER REVISIONS TO THE
INSURANCE STATUTES AND CAPTIVE INSURANCE.
TABLE OF CONTENTS:
SUMMARY
§ 1 — INSURANCE COMM ISSIONER’S ENFORCEMENT AUTHORITY
Allows the insurance commissioner to impose restitution, with interest, when someone
violates the state’s insurance laws, regulations, or commissioner orders; allows the
commissioner to ask the attorney general to file a court action to enforce the laws,
regulations, or commissioner orders, impose a fine of up to $100,000 per violation, or
order restitution with interest
§ 2 — 30 DAYS TO TURN OVER DOCUMENTS
Requires anyone requested to provide the Insurance Department with documents related
to an investigation to comply within 30 days after the request
§§ 3 & 4 — EXPIRATION DATE FOR CERTAIN INITIAL LICENSES
Revises the expiration date for initial licenses issued to motor vehicle damage appraisers
and casualty claims adjusters from June 30 in an odd-numbered year to two years after
the licensee’s birthday that came before the license was issued
§ 5 — GENERAL INSURANCE ASSESSMENT PROCE SS
Removes the Office of the Healthcare Advocate from the Insurance Department’s annual
process of assessing carriers for the general insurance assessment
§§ 6, 7 & 12 — ELECTRONIC FILINGS IN LIEU OF PAPER FILINGS
Removes requirements that insurers file copies of annual financial statements and audited
financial reports with the insurance commissioner, allowing electronic filings to the NAIC
to suffice
§ 8 — NON-ENGLISH INSURANCE DOCUMENTS AN D
TRANSLATIONS
Requires insurers who file policies in a non-English language to certify that they comply
with readable language requirements and bear the risks associated with any translations;
allows the insurance commissioner to hire translation services at the insurer’s cost
§ 9 — PHARMACY BENEF IT MANAGER REPORT DU E DATE
Moves up the annual due date for PBMs to report rebate information to the insurance
commissioner by one month; requires the commissioner to give the PBMs a copy of his 2024HB-05503-R010644-BA.DOCX
Researcher: JKL Page 2 5/1/24
annual report to the Insurance and Real Estate Committee by 10 days before it is due to
the committee
§§ 10 & 16 — CONNECTICUT CLEARINGHOUSE REPEALED
Repeals a requirement that the Health Reinsurance Association develop the Connecticut
Clearinghouse on health insurance policies available in the state
§ 11 — SMALL EMPLOYER DEFINITION
Beginning January 1, 2025, updates the definition of “small employer” in the health
insurance statutes to mean having no more than 50 employees
§ 13 — INDEPENDENT REVIEW ORGANIZATION ACCREDITATION
PERIOD
Extends the accreditation approval or reapproval period for independent review
organizations from two to three years
§§ 14 & 15 — CAPTIVE INSURER CONVERSION OF PROTECTED
CELLS
Allows a captive insurer’s protected cell to convert into a new protected cell, incorporated
cell, or captive insurance company without any impact on the protected cell’s assets,
rights, benefits, obligations, and liabilities
BACKGROUND
SUMMARY
This bill makes numerous unrelated changes to insurance statutes, as
summarized in the section-by-section analysis below.
EFFECTIVE DATE: October 1, 2024, unless otherwise stated below.
§ 1 — INSURANCE COMM ISSIONER’S ENFORCEME NT
AUTHORITY
Allows the insurance commissioner to impose restitution, with interest, when someone
violates the state’s insurance laws, regulations, or commissioner orders; allows the
commissioner to ask the attorney general to file a court action to enforce the laws,
regulations, or commissioner orders, impose a fine of up to $100,000 per violation, or
order restitution with interest
By law, the insurance commissioner must administer and enforce the
laws regarding insurance companies and health care centers (i.e.,
HMOs). Relatedly, the law grants him the reasonable and necessary
powers to protect the public interest.
The bill explicitly allows the commissioner to order restitution of any
amount obtained in violation of the state’s insurance laws, regulations,
or commissioner orders, plus interest as allowed under another state 2024HB-05503-R010644-BA.DOCX
Researcher: JKL Page 3 5/1/24
law. This is generally 10% interest per year (CGS § 37-3a).
Additionally, whenever the commissioner finds and can show that a
person has violated, or is about to violate, the state’s insurance laws,
regulations, or commissioner orders, the bill allows him to ask the
attorney general to bring an action in Hartford Superior Court for an
injunction (permanent or temporary), restraining order, or other
appropriate order; a penalty of up to $100,000 per violation; or
restitution, with interest, for the amount the person obtained in
violation of the laws, regulations, or commissioner orders. The
commissioner is not required to post a bond in any court action brought.
And if the commissioner prevails in court, the court may also order the
state’s costs be paid as part of its order. (Under existing law, the
commissioner may already request the attorney general to apply to
Superior Court for a permanent or temporary order restraining a person
from violating the insurance laws (CGS § 38a-16(b)).)
§ 2 — 30 DAYS TO TURN OVER DO CUMENTS
Requires anyone requested to provide the Insurance Department with documents related
to an investigation to comply within 30 days after the request
By law, the insurance commissioner may conduct investigations and
hearings on any matter under the insurance laws. He may, among other
things, order the production of books, records, papers, or documents for
an investigation.
The bill requires that anyone who receives a request for the
production of books, records, papers, or documents comply with the
order within 30 days after the date of the order. By law, if a person
refuses to comply, the commissioner may ask the Superior Court to
order compliance.
§§ 3 & 4 — EXPIRATION DATE FOR CERTAIN INITIAL LICENSES
Revises the expiration date for initial licenses issued to motor vehicle damage appraisers
and casualty claims adjusters from June 30 in an odd-numbered year to two years after
the licensee’s birthday that came before the license was issued
Under current law, initial licenses for motor vehicle damage
appraisers and casualty claim adjusters expire on the June 30 in an odd-
numbered year following the license issuance, unless sooner revoked or 2024HB-05503-R010644-BA.DOCX
Researcher: JKL Page 4 5/1/24
suspended. The bill changes this expiration date to be two years after
the licensee’s birthday that came before the date the license was issued,
unless it was already revoked or suspended. By law, a licensee may
renew the license every two years at the insurance commissioner’s
discretion with payment of the required renewal fees.
§ 5 — GENERAL INSURANCE ASSESSMENT PROCE SS
Removes the Office of the Healthcare Advocate from the Insurance Department’s annual
process of assessing carriers for the general insurance assessment
By law, domestic insurers and HMOs pay an annual assessment to
the Insurance Department to cover the expenses of the Insurance
Department, Office of the Healthcare Advocate, and Office of Health
Strategy, among other things.
Under current law, the insurance commissioner and the Office of the
Healthcare Advocate assess the entities following a process set in state
law. The bill removes the Office of the Healthcare Advocate from this
process, leaving the insurance commissioner to manage the assessment
process.
It also makes technical and conforming changes.
§§ 6, 7 & 12 — ELECTRONIC FILINGS IN LIEU OF PAPER FILINGS
Removes requirements that insurers file copies of annual financial statements and audited
financial reports with the insurance commissioner, allowing electronic filings to the NAIC
to suffice
Current law requires domestic insurers, HMOs, and fraternal benefit
societies to file copies of annual financial statements and audited
financial reports with the insurance commissioner as well as
electronically with the National Association of Insurance
Commissioners (NAIC). The bill eliminates the requirement to submit
these to the commissioner. Instead, it deems the companies’ electronic
submissions to the NAIC, as required by law, to have been filed with
the commissioner.
§ 8 — NON-ENGLISH INSURANCE DOCUMENTS AN D
TRANSLATIONS 2024HB-05503-R010644-BA.DOCX
Researcher: JKL Page 5 5/1/24
Requires insurers who file policies in a non-English language to certify that they comply
with readable language requirements and bear the risks associated with any translations;
allows the insurance commissioner to hire translation services at the insurer’s cost
By law, insurance policies filed with the Insurance Department must
meet certain readability standards (e.g., Flesch reading ease scores and
print specifications). As under current law, the bill allows insurers to file
policies in any language. The insurer must certify that the policy
complies with the readability standards or is translated from a policy
that complies.
The bill allows the insurance commissioner to hire a translation
service to review a non-English-language policy filed by an insurer. The
insurer that filed the policy must pay the cost of the translation.
Alternatively, the commissioner may require the insurer to provide an
English translated copy of the policy and a certification as to the
accuracy of the translation. The bill requires the insurer to accept all risk
associated with a translation.
The bill also allows the commissioner to adopt implementing
regulations.
§ 9 — PHARMACY BENEF IT MANAGER REPORT DU E DATE
Moves up the annual due date for PBMs to report rebate information to the insurance
commissioner by one month; requires the commissioner to give the PBMs a copy of his
annual report to the Insurance and Real Estate Committee by 10 days before it is due to
the committee
By law, each pharmacy benefit manager (PBM) must file a report
annually with the insurance commissioner concerning prescription
drug rebates. Under current law, the report is due by March 1. The bill
moves up the due date to February 1, beginning in 2025.
The law also requires the commissioner to report to the Insurance and
Real Estate Committee, annually by March 1, an aggregation of the
PBMs’ rebate reports. Under current law, the commissioner must give
the PBMs an advanced copy of this report by February 1 annually. The
bill instead requires him to give them the advanced copy by 10 days
before he reports to the committee.
EFFECTIVE DATE: January 1, 2025 2024HB-05503-R010644-BA.DOCX
Researcher: JKL Page 6 5/1/24
§§ 10 & 16 — CONNECTICUT CLEARINGHOUSE R EPEALED
Repeals a requirement that the Health Reinsurance Association develop the Connecticut
Clearinghouse on health insurance policies available in the state
Current law requires the Health Reinsurance Association to develop
the Connecticut Clearinghouse as a resource for individuals and small
employers to get information on health insurance policies and plans
available in the state. The bill repeals this requirement. (The
clearinghouse has largely been replaced by the health insurance
exchange, Access Health CT.)
EFFECTIVE DATE: Upon passage
§ 11 — SMALL EMPLOYER DEFINITION
Beginning January 1, 2025, updates the definition of “small employer” in the health
insurance statutes to mean having no more than 50 employees
Beginning January 1, 2025, the bill defines “small employer” for
purposes of the health insurance laws to mean an employer with an
average of at least one and no more than 50 employees on business days
in the prior calendar year and at least one employee on the first day of
the group health insurance plan year.
Current law extends the definition to no more than 100 employees,
except that the insurance commissioner may postpone that definition to
be consistent with the federal Affordable Care Act. The commissioner
did that in Insurance Bulletin HC-106 (2015). So, in practice, the small
employer definition has been no more than 50 employees since before
2016.
The bill removes the commissioner’s authority to postpone the
change in definition. As a result, under the bill, from October 1, 2024, to
December 31, 2024, a small employer is one that has no more than 100
employees. This means plans covering between 50 and 100 employees
must comply with the laws affecting small employers for a three-month
period (e.g., rating requirements, mandatory benefits).
§ 13 — INDEPENDENT REVIEW ORGANIZATION A CCREDITATION
PERIOD
Extends the accreditation approval or reapproval period for independent review
organizations from two to three years 2024HB-05503-R010644-BA.DOCX
Researcher: JKL Page 7 5/1/24
By law, the insurance commissioner maintains a list of accredited
independent review organizations that are available to conduct regular
or expedited external reviews of health insurance grievances. Under
current law, an accreditation lasts two years. The bill extends this to
three years. As under existing law, if the commissioner determines that
an organization no longer meets the minimum requirements for
accreditation, he must end its approval and remove it from the list of
approved organizations.
§§ 14 & 15 — CAPTIVE INSURER CONVERSION OF PROTECTED
CELLS
Allows a captive insurer’s protected cell to convert into a new protected cell, incorporated
cell, or captive insurance company without any impact on the protected cell’s assets,
rights, benefits, obligations, and liabilities
Captive Insurer
Generally, a captive insurer is an insurance company formed to
insure or reinsure the risks of its owners, parent company, or affiliated
company. The law allows several different types of captive insurers to
be licensed and operate in the state, including a sponsored captive
insurer.
A sponsored captive insurer is an insurance company (1) for which
one or more sponsors provide the minimum paid-in capital and surplus,
(2) that insures its participants through separate participant contracts,
and (3) that funds its liability to each participant through protected cells
and separates each cell’s assets from that of other cells and the captive
insurer as a whole. PA 23-15 allowed these protected cells to establish,
with the insurance commissioner’s prior written approval, separate
accounts and allocate assets to them, subject to certain requirements.
Conversion of Protected Cell Allowed
The bill allows sponsored captive insurers to convert protected or
incorporated protected cells into one of the following other insurance
company structures or types of accounts:
1. a single protected or incorporated protected cell;
2. a new sponsored captive insurer (including those licensed as a 2024HB-05503-R010644-BA.DOCX
Researcher: JKL Page 8 5/1/24
special purpose financial captive insurer);
3. a new special purpose financial captive, pure captive, agency
captive, industrial insured captive, or association captive insurer;
or
4. a new risk retention group.
Any conversion is deemed to (1) be a continuation of the cell’s
existence, with all of its assets, rights, benefits, obligations, and
liabilities, and (2) occur without any transfer or assignment of these
assets, rights, benefits, obligations, and liabilities and without creating
any reversionary interest in or impairment of them. The bill specifies
that the conversion does not limit any rights or protections applicable to
the cell or the sponsored captive that existed prior to the conversion.
Conversion Process
Under the bill, a sponsored captive must apply to the insurance
commissioner and receive his prior written approval for the conversion.
Additionally, the bill subjects the conversion to the existing laws
regulating captives and the sponsored captive insurer’s plan of
operation approved by the commissioner, without affecting the
converted cell’s assets, rights, benefits, obligations, and liabilities.
For cells that convert into an incorporated protected cell or a new
captive insurer or risk retention group, the conversion must follow all
existing business corporation or limited liability company laws that are
applicable to the newly formed business or legal entity.
BACKGROUND
Legislative History
The House referred the bill (File 378) to the Insurance and Real Estate
Committee, which reported a substitute that replaced the underlying
bill’s study of workforce shortages and workforce development with
various insurance-related provisions.
Related Bill
SB 372 (File 570), favorably reported by the Appropriations 2024HB-05503-R010644-BA.DOCX
Researcher: JKL Page 9 5/1/24
Committee, among other things, limits the type of domestic insurance
entities required to pay the portion of the general insurance assessment
that supports the budgets of the Office of the Healthcare Advocate and
the Office of Health Strategy.
COMMITTEE ACTION
Commerce Committee
Joint Favorable
Yea 21 Nay 3 (03/21/2024)
Insurance and Real Estate Committee
Joint Favorable Substitute
Yea 12 Nay 0 (04/23/2024)