Texas 2011 - 82nd Regular

Texas House Bill HB1157 Compare Versions

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1	1	82R7003 PMO-F
2	2	By: Hancock, Torres H.B. No. 1157
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the Texas Life, Accident, Health, and Hospital Service
8	8	Insurance Guaranty Association.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. The heading to Chapter 463, Insurance Code, is
11	11	amended to read as follows:
12	12	CHAPTER 463. TEXAS LIFE AND[, ACCIDENT,] HEALTH[, AND HOSPITAL
13	13	SERVICE] INSURANCE GUARANTY ASSOCIATION
14	14	SECTION 2. Section 463.001, Insurance Code, is amended to
15	15	read as follows:
16	16	Sec. 463.001. SHORT TITLE. This chapter may be cited as the
17	17	Texas Life and [, Accident,] Health[, and Hospital Service]
18	18	Insurance Guaranty Association Act.
19	19	SECTION 3. Section 463.003(1), Insurance Code, is amended
20	20	to read as follows:
21	21	(1) "Association" means the Texas Life and [,
22	22	Accident,] Health[, and Hospital Service] Insurance Guaranty
23	23	Association.
24	24	SECTION 4. Section 463.051(a), Insurance Code, is amended
25	25	to read as follows:
26	26	(a) The Texas Life and [, Accident,] Health[, and Hospital
27	27	Service] Insurance Guaranty Association is a nonprofit legal entity
28	28	existing to pay benefits and continue coverage as provided by this
29	29	chapter.
30	30	SECTION 5. Subchapter B, Chapter 463, Insurance Code, is
31	31	amended by adding Section 463.059 to read as follows:
32	32	Sec. 463.059. MEETINGS BY TELEPHONE AND VIDEOCONFERENCE.
33	33	(a) Notwithstanding Chapter 551, Government Code, or any other
34	34	law, the board or a committee of the board may meet by telephone
35	35	conference call, videoconference, or other similar
36	36	telecommunication method if immediate action is required and
37	37	convening a quorum of the board or committee of the board at a
38	38	single location is not reasonable or practical. A board or
39	39	committee member who is unable to attend a meeting in person and who
40	40	is participating in a board or committee meeting by telephone
41	41	conference call, videoconference, or other similar
42	42	telecommunication method may be counted to establish a quorum and
43	43	may vote.
44	44	(b) A meeting authorized by this section is subject to the
45	45	notice requirements that apply to other meetings.
46	46	(c) The notice of a meeting authorized by this section must
47	47	specify that the location of the meeting is the location at which
48	48	meetings of the board and committees of the board are usually held.
49	49	(d) Each part of a meeting authorized by this section that
50	50	must be open to the public must be audible to the public at the
51	51	location specified by Subsection (c).
52	52	(e) Two-way audio communication must be available during
53	53	the entire meeting between all members of the board or committee
54	54	attending a meeting authorized by this section and if the two-way
55	55	audio communication is disrupted so that a quorum of the board or
56	56	committee is no longer participating in the meeting, the meeting
57	57	may not continue until the two-way audio communication is
58	58	reestablished.
59	59	(f) An audio or digital recording of a meeting authorized by
60	60	this section must be made in accordance with the association's
61	61	bylaws. The recording of the open portion of the meeting must be
62	62	made available to the public.
63	63	(g) A vote during a meeting authorized by this section must
64	64	be taken in such a manner that the vote of each member is audible and
65	65	may be verified as the vote of the member.
66	66	SECTION 6. Section 463.153(c), Insurance Code, is amended
67	67	to read as follows:
68	68	(c) The total amount of assessments on a member insurer for
69	69	each account under Section 463.105 may not in one calendar year
70	70	exceed two percent of the insurer's average annual premiums on the
71	71	policies covered by the account during the three calendar years
72	72	preceding the year in which the insurer became an impaired or
73	73	insolvent insurer. If two or more assessments are authorized in a
74	74	calendar year with respect to insurers that become impaired or
75	75	insolvent in different calendar years, the average annual premiums
76	76	for purposes of the aggregate assessment percentage limitation
77	77	described by this subsection shall be equal to the higher of the
78	78	three-year average annual premiums for the applicable subaccount or
79	79	account as computed in accordance with this section. If the
80	80	maximum assessment and the other assets of the association do not
81	81	provide in a year an amount sufficient to carry out the
82	82	association's responsibilities, the association shall make
83	83	necessary additional assessments as soon as this chapter permits.
84	84	SECTION 7. Section 463.203(b), Insurance Code, is amended
85	85	to read as follows:
86	86	(b) This chapter does not provide coverage for:
87	87	(1) any part of a policy or contract not guaranteed by
88	88	the insurer or under which the risk is borne by the policy or
89	89	contract owner;
90	90	(2) a policy or contract of reinsurance, unless an
91	91	assumption certificate has been issued;
92	92	(3) any part of a policy or contract to the extent that
93	93	the rate of interest on which that part is based:
94	94	(A) as averaged over the period of four years
95	95	before the date the member insurer becomes impaired or insolvent
96	96	under this chapter, whichever is earlier, exceeds a rate of
97	97	interest determined by subtracting two percentage points from
98	98	Moody's Corporate Bond Yield Average averaged for the same
99	99	four-year period or for a lesser period if the policy or contract
100	100	was issued less than four years before the date the member insurer
101	101	becomes impaired or insolvent under this chapter, whichever is
102	102	earlier; and
103	103	(B) on and after the date the member insurer
104	104	becomes impaired or insolvent under this chapter, whichever is
105	105	earlier, exceeds the rate of interest determined by subtracting
106	106	three percentage points from Moody's Corporate Bond Yield Average
107	107	as most recently available;
108	108	(4) a portion of a policy or contract issued to a plan
109	109	or program of an employer, association, similar entity, or other
110	110	person to provide life, health, or annuity benefits to the entity's
111	111	employees, members, or others, to the extent that the plan or
112	112	program is self-funded or uninsured, including benefits payable by
113	113	an employer, association, or similar entity under:
114	114	(A) a multiple employer welfare arrangement as
115	115	defined by Section 3, Employee Retirement Income Security Act of
116	116	1974 (29 U.S.C. Section 1002);
117	117	(B) a minimum premium group insurance plan;
118	118	(C) a stop-loss group insurance plan; or
119	119	(D) an administrative services-only contract;
120	120	(5) any part of a policy or contract to the extent that
121	121	the part provides dividends, experience rating credits, or voting
122	122	rights, or provides that fees or allowances be paid to any person,
123	123	including the policy or contract owner, in connection with the
124	124	service to or administration of the policy or contract;
125	125	(6) a policy or contract issued in this state by a
126	126	member insurer at a time the insurer was not authorized to issue the
127	127	policy or contract in this state;
128	128	(7) an unallocated annuity contract issued to or in
129	129	connection with a benefit plan protected under the federal Pension
130	130	Benefit Guaranty Corporation, regardless of whether the Pension
131	131	Benefit Guaranty Corporation has not yet become liable to make any
132	132	payments with respect to the benefit plan;
133	133	(8) any part of an unallocated annuity contract that
134	134	is not issued to or in connection with a specific employee, a
135	135	benefit plan for a union or association of individuals, or a
136	136	governmental lottery;
137	137	(9) any part of a financial guarantee, funding
138	138	agreement, or guaranteed investment contract that:
139	139	(A) does not contain a mortality guarantee; and
140	140	(B) is not issued to or in connection with a
141	141	specific employee, a benefit plan, or a governmental lottery;
142	142	(10) a part of a policy or contract to the extent that
143	143	the assessments required by Subchapter D with respect to the policy
144	144	or contract are preempted by federal or state law;
145	145	(11) a contractual agreement that established the
146	146	member insurer's obligations to provide a book value accounting
147	147	guaranty for defined contribution benefit plan participants by
148	148	reference to a portfolio of assets that is owned by the benefit plan
149	149	or the plan's trustee in a case in which neither the benefit plan
150	150	sponsor nor its trustee is an affiliate of the member insurer; [or]
151	151	(12) a part of a policy or contract to the extent the
152	152	policy or contract provides for interest or other changes in value
153	153	that are to be determined by the use of an index or external
154	154	reference stated in the policy or contract, but that have not been
155	155	credited to the policy or contract, or as to which the policy or
156	156	contract owner's rights are subject to forfeiture, as of the date
157	157	the member insurer becomes an impaired or insolvent insurer under
158	158	this chapter, whichever date is earlier, subject to Subsection (c);
159	159	or
160	160	(13) a policy or contract providing a hospital,
161	161	medical, prescription drug, or other health care benefit under 42
162	162	U.S.C. Sections 1395w-21 et seq. and 1395w-101 et seq. (Medicare
163	163	Parts C and D) or a regulation adopted under those federal statutes.
164	164	SECTION 8. Section 463.204, Insurance Code, is amended to
165	165	read as follows:
166	166	Sec. 463.204. OBLIGATIONS EXCLUDED. A contractual
167	167	obligation does not include:
168	168	(1) death benefits in an amount in excess of $300,000
169	169	or a net cash surrender or net cash withdrawal value in an amount in
170	170	excess of $100,000 under one or more policies on a single life;
171	171	(2) an amount in excess of:
172	172	(A) $250,000 [$100,000] in the present value
173	173	under one or more annuity contracts issued with respect to a single
174	174	life under individual annuity policies or group annuity policies;
175	175	or
176	176	(B) $5 million in unallocated annuity contract
177	177	benefits with respect to a single contract owner regardless of the
178	178	number of those contracts;
179	179	(3) an amount in excess of the following amounts,
180	180	including any net cash surrender or cash withdrawal values, under
181	181	one or more accident, health, accident and health, or long-term
182	182	care insurance policies on a single life:
183	183	(A) $500,000 for basic hospital,
184	184	medical-surgical, or major medical insurance, as those terms are
185	185	defined by this code or rules adopted by the commissioner;
186	186	(B) $300,000 for disability and long-term care
187	187	insurance, as those terms are defined by this code or rules adopted
188	188	by the commissioner; or
189	189	(C) $200,000 for coverages that are not defined
190	190	as basic hospital, medical-surgical, major medical, disability, or
191	191	long-term care insurance;
192	192	(4) an amount in excess of $250,000 [$100,000] in
193	193	present value annuity benefits, in the aggregate, including any net
194	194	cash surrender and net cash withdrawal values, with respect to each
195	195	individual participating in a governmental retirement benefit plan
196	196	established under Section 401, 403(b), or 457, Internal Revenue
197	197	Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by
198	198	an unallocated annuity contract or the beneficiary or beneficiaries
199	199	of the individual if the individual is deceased;
200	200	(5) an amount in excess of $250,000 [$100,000] in
201	201	present value annuity benefits, in the aggregate, including any net
202	202	cash surrender and net cash withdrawal values, with respect to each
203	203	payee of a structured settlement annuity or the beneficiary or
204	204	beneficiaries of the payee if the payee is deceased;
205	205	(6) aggregate benefits in an amount in excess of
206	206	$300,000 with respect to a single life, except with respect to:
207	207	(A) benefits paid under basic hospital,
208	208	medical-surgical, or major medical insurance policies, described
209	209	by Subdivision (3)(A), in which case the aggregate benefits are
210	210	$500,000; and
211	211	(B) benefits paid to one owner of multiple
212	212	nongroup policies of life insurance, whether the policy owner is an
213	213	individual, firm, corporation, or other person, and whether the
214	214	persons insured are officers, managers, employees, or other
215	215	persons, in which case the maximum benefits are $5 million
216	216	regardless of the number of policies and contracts held by the
217	217	owner;
218	218	(7) an amount in excess of $5 million in benefits, with
219	219	respect to either one plan sponsor whose plans own directly or in
220	220	trust one or more unallocated annuity contracts not included in
221	221	Subdivision (4) irrespective of the number of contracts with
222	222	respect to the contract owner or plan sponsor or one contract owner
223	223	provided coverage under Section 463.201(a)(3)(B), except that, if
224	224	one or more unallocated annuity contracts are covered contracts
225	225	under this chapter and are owned by a trust or other entity for the
226	226	benefit of two or more plan sponsors, coverage shall be afforded by
227	227	the association if the largest interest in the trust or entity
228	228	owning the contract or contracts is held by a plan sponsor whose
229	229	principal place of business is in this state, and in no event shall
230	230	the association be obligated to cover more than $5 million in
231	231	benefits with respect to all these unallocated contracts;
232	232	(8) any contractual obligations of the insolvent or
233	233	impaired insurer under a covered policy or contract that do not
234	234	materially affect the economic value of economic benefits of the
235	235	covered policy or contract; or
236	236	(9) punitive, exemplary, extracontractual, or bad
237	237	faith damages, regardless of whether the damages are:
238	238	(A) agreed to or assumed by an insurer or
239	239	insured; or
240	240	(B) imposed by a court.
241	241	SECTION 9. Section 463.263(b), Insurance Code, is amended
242	242	to read as follows:
243	243	(b) The association is entitled to retain a portion of any
244	244	amount paid to the association under this section equal to the
245	245	percentage determined by dividing the aggregate amount of policy
246	246	owners' claims related to that insolvency for which the association
247	247	has provided statutory benefits by the aggregate amount of all
248	248	policy owners' claims in this state related to that insolvency and
249	249	shall remit to the domiciliary receiver the amount paid to the
250	250	association less the amount [and] retained under this section.
251	251	SECTION 10. Subchapter F, Chapter 463, Insurance Code, is
252	252	amended by adding Section 463.264 to read as follows:
253	253	Sec. 463.264. REINSURANCE. (a) The association may elect
254	254	to succeed to the rights of an insolvent insurer under a contract of
255	255	reinsurance to which the insolvent insurer is a party to the extent:
256	256	(1) of the contractual obligations of the covered
257	257	policies for which the association may become obligated; and
258	258	(2) that the reinsurance contract provides coverage
259	259	for losses occurring after the association is obligated to provide
260	260	coverage.
261	261	(b) As a condition to making an election under Subsection
262	262	(a), the association shall pay all unpaid premiums due under the
263	263	reinsurance contract to which Subsection (a) refers for coverage
264	264	relating to a period before and after the date the association is
265	265	obligated to provide coverage.
266	266	SECTION 11. Section 154.359(c), Finance Code, is amended to
267	267	read as follows:
268	268	(c) A claim may not be approved for a loss to the extent the
269	269	claim is insured, bonded, or otherwise covered, protected, or
270	270	reimbursed from other sources, including coverage provided by the
271	271	Texas Life and [, Accident,] Health[, and Hospital Service]
272	272	Insurance Guaranty Association under Chapter 463, Insurance Code.
273	273	SECTION 12. Section 609.113(b), Government Code, is amended
274	274	to read as follows:
275	275	(b) A plan administrator may not approve a vendor's
276	276	application if the vendor is:
277	277	(1) a state or national bank or savings and loan
278	278	association, the deposits of which are not insured by the Federal
279	279	Deposit Insurance Corporation;
280	280	(2) a credit union, the deposits of which are not
281	281	insured by the National Credit Union Administration Board or the
282	282	Texas Share Guaranty Credit Union; or
283	283	(3) an insurance company that:
284	284	(A) is not a member of the Texas Life and [,
285	285	Accident,] Health[, and Hospital Service] Insurance Guaranty
286	286	Association; or
287	287	(B) is an impaired or insolvent insurer under
288	288	Chapter 463 [Article 21.28-D], Insurance Code.
289	289	SECTION 13. Section 609.712(b), Government Code, is amended
290	290	to read as follows:
291	291	(b) A plan administrator may not approve a vendor's
292	292	application if the vendor is:
293	293	(1) a state or national bank or savings and loan
294	294	association, the deposits of which are not insured by the Federal
295	295	Deposit Insurance Corporation;
296	296	(2) a credit union, the deposits of which are not
297	297	insured by the National Credit Union Administration Board; or
298	298	(3) an insurance company that:
299	299	(A) is not a member of the Texas Life and [,
300	300	Accident,] Health[, and Hospital Service] Insurance Guaranty
301	301	Association; or
302	302	(B) is an impaired or insolvent insurer under
303	303	Chapter 463 [Article 21.28-D], Insurance Code.
304	304	SECTION 14. (a) Effective September 1, 2011:
305	305	(1) the name of the Texas Life, Accident, Health, and
306	306	Hospital Service Insurance Guaranty Association is changed to the
307	307	Texas Life and Health Insurance Guaranty Association, and all
308	308	powers, duties, rights, and obligations of the Texas Life,
309	309	Accident, Health, and Hospital Service Insurance Guaranty
310	310	Association are the powers, duties, rights, and obligations of the
311	311	Texas Life and Health Insurance Guaranty Association;
312	312	(2) a member of the board of directors of the Texas
313	313	Life, Accident, Health, and Hospital Service Insurance Guaranty
314	314	Association is a member of the board of directors of the Texas Life
315	315	and Health Insurance Guaranty Association; and
316	316	(3) a reference in law to the Texas Life, Accident,
317	317	Health, and Hospital Service Insurance Guaranty Association is a
318	318	reference to the Texas Life and Health Insurance Guaranty
319	319	Association.
320	320	(b) The Texas Life and Health Insurance Guaranty
321	321	Association is the successor to the Texas Life, Accident, Health,
322	322	and Hospital Service Insurance Guaranty Association in all
323	323	respects. All personnel, equipment, data, documents, facilities,
324	324	contracts, items, other property, rules, decisions, and
325	325	proceedings of or involving the Texas Life, Accident, Health, and
326	326	Hospital Service Insurance Guaranty Association are unaffected by
327	327	the change in the name of the association.
328	328	SECTION 15. (a) The change in law made by this Act to
329	329	Section 463.153(c), Insurance Code, applies to assessments
330	330	authorized on or after October 1, 2008, with respect to an insurer
331	331	that first became impaired or insolvent after September 1, 2005;
332	332	all other changes in law made by this Act apply only to an insurer
333	333	that first becomes an impaired or insolvent insurer on or after the
334	334	effective date of this Act.
335	335	(b) Except as provided by Subsection (a) of this section, an
336	336	insurer that becomes an impaired or insolvent insurer before the
337	337	effective date of this Act is governed by the law as it existed
338	338	immediately before that date, and that law is continued in effect
339	339	for that purpose.
340	340	SECTION 16. This Act takes effect September 1, 2011.