82R7003 PMO-F
By: Hancock, Torres H.B. No. 1157
A BILL TO BE ENTITLED
AN ACT
relating to the Texas Life, Accident, Health, and Hospital Service
Insurance Guaranty Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. The heading to Chapter 463, Insurance Code, is
amended to read as follows:
CHAPTER 463. TEXAS LIFE AND[, ACCIDENT,] HEALTH[, AND HOSPITAL
SERVICE] INSURANCE GUARANTY ASSOCIATION
SECTION 2. Section 463.001, Insurance Code, is amended to
read as follows:
Sec. 463.001. SHORT TITLE. This chapter may be cited as the
Texas Life and [, Accident,] Health[, and Hospital Service]
Insurance Guaranty Association Act.
SECTION 3. Section 463.003(1), Insurance Code, is amended
to read as follows:
(1) "Association" means the Texas Life and [,
Accident,] Health[, and Hospital Service] Insurance Guaranty
Association.
SECTION 4. Section 463.051(a), Insurance Code, is amended
to read as follows:
(a) The Texas Life and [, Accident,] Health[, and Hospital
Service] Insurance Guaranty Association is a nonprofit legal entity
existing to pay benefits and continue coverage as provided by this
chapter.
SECTION 5. Subchapter B, Chapter 463, Insurance Code, is
amended by adding Section 463.059 to read as follows:
Sec. 463.059. MEETINGS BY TELEPHONE AND VIDEOCONFERENCE.
(a) Notwithstanding Chapter 551, Government Code, or any other
law, the board or a committee of the board may meet by telephone
conference call, videoconference, or other similar
telecommunication method if immediate action is required and
convening a quorum of the board or committee of the board at a
single location is not reasonable or practical. A board or
committee member who is unable to attend a meeting in person and who
is participating in a board or committee meeting by telephone
conference call, videoconference, or other similar
telecommunication method may be counted to establish a quorum and
may vote.
(b) A meeting authorized by this section is subject to the
notice requirements that apply to other meetings.
(c) The notice of a meeting authorized by this section must
specify that the location of the meeting is the location at which
meetings of the board and committees of the board are usually held.
(d) Each part of a meeting authorized by this section that
must be open to the public must be audible to the public at the
location specified by Subsection (c).
(e) Two-way audio communication must be available during
the entire meeting between all members of the board or committee
attending a meeting authorized by this section and if the two-way
audio communication is disrupted so that a quorum of the board or
committee is no longer participating in the meeting, the meeting
may not continue until the two-way audio communication is
reestablished.
(f) An audio or digital recording of a meeting authorized by
this section must be made in accordance with the association's
bylaws. The recording of the open portion of the meeting must be
made available to the public.
(g) A vote during a meeting authorized by this section must
be taken in such a manner that the vote of each member is audible and
may be verified as the vote of the member.
SECTION 6. Section 463.153(c), Insurance Code, is amended
to read as follows:
(c) The total amount of assessments on a member insurer for
each account under Section 463.105 may not in one calendar year
exceed two percent of the insurer's average annual premiums on the
policies covered by the account during the three calendar years
preceding the year in which the insurer became an impaired or
insolvent insurer. If two or more assessments are authorized in a
calendar year with respect to insurers that become impaired or
insolvent in different calendar years, the average annual premiums
for purposes of the aggregate assessment percentage limitation
described by this subsection shall be equal to the higher of the
three-year average annual premiums for the applicable subaccount or
account as computed in accordance with this section. If the
maximum assessment and the other assets of the association do not
provide in a year an amount sufficient to carry out the
association's responsibilities, the association shall make
necessary additional assessments as soon as this chapter permits.
SECTION 7. Section 463.203(b), Insurance Code, is amended
to read as follows:
(b) This chapter does not provide coverage for:
(1) any part of a policy or contract not guaranteed by
the insurer or under which the risk is borne by the policy or
contract owner;
(2) a policy or contract of reinsurance, unless an
assumption certificate has been issued;
(3) any part of a policy or contract to the extent that
the rate of interest on which that part is based:
(A) as averaged over the period of four years
before the date the member insurer becomes impaired or insolvent
under this chapter, whichever is earlier, exceeds a rate of
interest determined by subtracting two percentage points from
Moody's Corporate Bond Yield Average averaged for the same
four-year period or for a lesser period if the policy or contract
was issued less than four years before the date the member insurer
becomes impaired or insolvent under this chapter, whichever is
earlier; and
(B) on and after the date the member insurer
becomes impaired or insolvent under this chapter, whichever is
earlier, exceeds the rate of interest determined by subtracting
three percentage points from Moody's Corporate Bond Yield Average
as most recently available;
(4) a portion of a policy or contract issued to a plan
or program of an employer, association, similar entity, or other
person to provide life, health, or annuity benefits to the entity's
employees, members, or others, to the extent that the plan or
program is self-funded or uninsured, including benefits payable by
an employer, association, or similar entity under:
(A) a multiple employer welfare arrangement as
defined by Section 3, Employee Retirement Income Security Act of
1974 (29 U.S.C. Section 1002);
(B) a minimum premium group insurance plan;
(C) a stop-loss group insurance plan; or
(D) an administrative services-only contract;
(5) any part of a policy or contract to the extent that
the part provides dividends, experience rating credits, or voting
rights, or provides that fees or allowances be paid to any person,
including the policy or contract owner, in connection with the
service to or administration of the policy or contract;
(6) a policy or contract issued in this state by a
member insurer at a time the insurer was not authorized to issue the
policy or contract in this state;
(7) an unallocated annuity contract issued to or in
connection with a benefit plan protected under the federal Pension
Benefit Guaranty Corporation, regardless of whether the Pension
Benefit Guaranty Corporation has not yet become liable to make any
payments with respect to the benefit plan;
(8) any part of an unallocated annuity contract that
is not issued to or in connection with a specific employee, a
benefit plan for a union or association of individuals, or a
governmental lottery;
(9) any part of a financial guarantee, funding
agreement, or guaranteed investment contract that:
(A) does not contain a mortality guarantee; and
(B) is not issued to or in connection with a
specific employee, a benefit plan, or a governmental lottery;
(10) a part of a policy or contract to the extent that
the assessments required by Subchapter D with respect to the policy
or contract are preempted by federal or state law;
(11) a contractual agreement that established 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 owned by the benefit plan
or the plan's trustee in a case in which neither the benefit plan
sponsor nor its trustee is an affiliate of the member insurer; [or]
(12) a part of a policy or contract to the extent the
policy or contract provides for interest or other changes in value
that are to be determined by the use of an index or external
reference stated in the policy or contract, but that 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 chapter, whichever date is earlier, subject to Subsection (c);
or
(13) a policy or contract providing a hospital,
medical, prescription drug, or other health care benefit under 42
U.S.C. Sections 1395w-21 et seq. and 1395w-101 et seq. (Medicare
Parts C and D) or a regulation adopted under those federal statutes.
SECTION 8. Section 463.204, Insurance Code, is amended to
read as follows:
Sec. 463.204. OBLIGATIONS EXCLUDED. A contractual
obligation does not include:
(1) death benefits in an amount in excess of $300,000
or a net cash surrender or net cash withdrawal value in an amount in
excess of $100,000 under one or more policies on a single life;
(2) an amount in excess of:
(A) $250,000 [$100,000] in the present value
under one or more annuity contracts issued with respect to a single
life under individual annuity policies or group annuity policies;
or
(B) $5 million in unallocated annuity contract
benefits with respect to a single contract owner regardless of the
number of those contracts;
(3) an amount in excess of the following amounts,
including any net cash surrender or cash withdrawal values, under
one or more accident, health, accident and health, or long-term
care insurance policies on a single life:
(A) $500,000 for basic hospital,
medical-surgical, or major medical insurance, as those terms are
defined by this code or rules adopted by the commissioner;
(B) $300,000 for disability and long-term care
insurance, as those terms are defined by this code or rules adopted
by the commissioner; or
(C) $200,000 for coverages that are not defined
as basic hospital, medical-surgical, major medical, disability, or
long-term care insurance;
(4) an amount in excess of $250,000 [$100,000] in
present value annuity benefits, in the aggregate, including any net
cash surrender and net cash withdrawal values, with respect to each
individual participating in a governmental retirement benefit plan
established under Section 401, 403(b), or 457, Internal Revenue
Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by
an unallocated annuity contract or the beneficiary or beneficiaries
of the individual if the individual is deceased;
(5) an amount in excess of $250,000 [$100,000] in
present value annuity benefits, in the aggregate, including any net
cash surrender and net cash withdrawal values, with respect to each
payee of a structured settlement annuity or the beneficiary or
beneficiaries of the payee if the payee is deceased;
(6) aggregate benefits in an amount in excess of
$300,000 with respect to a single life, except with respect to:
(A) benefits paid under basic hospital,
medical-surgical, or major medical insurance policies, described
by Subdivision (3)(A), in which case the aggregate benefits are
$500,000; and
(B) benefits paid to one owner of multiple
nongroup policies of life insurance, whether the policy owner is an
individual, firm, corporation, or other person, and whether the
persons insured are officers, managers, employees, or other
persons, in which case the maximum benefits are $5 million
regardless of the number of policies and contracts held by the
owner;
(7) an amount in excess of $5 million in benefits, with
respect to either one plan sponsor whose plans own directly or in
trust one or more unallocated annuity contracts not included in
Subdivision (4) irrespective of the number of contracts with
respect to the contract owner or plan sponsor or one contract owner
provided coverage under Section 463.201(a)(3)(B), except that, if
one or more unallocated annuity contracts are covered contracts
under this chapter and are owned by a trust or other entity for the
benefit of two or more plan sponsors, coverage shall be afforded by
the association if 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, and in no event shall
the association be obligated to cover more than $5 million in
benefits with respect to all these unallocated contracts;
(8) any contractual obligations of the insolvent or
impaired insurer under a covered policy or contract that do not
materially affect the economic value of economic benefits of the
covered policy or contract; or
(9) punitive, exemplary, extracontractual, or bad
faith damages, regardless of whether the damages are:
(A) agreed to or assumed by an insurer or
insured; or
(B) imposed by a court.
SECTION 9. Section 463.263(b), Insurance Code, is amended
to read as follows:
(b) The association is entitled to retain a portion of any
amount paid to the association under this section equal to the
percentage determined by dividing the aggregate amount of policy
owners' claims related to that insolvency for which the association
has provided statutory benefits by the aggregate amount of all
policy owners' claims in this state related to that insolvency and
shall remit to the domiciliary receiver the amount paid to the
association less the amount [and] retained under this section.
SECTION 10. Subchapter F, Chapter 463, Insurance Code, is
amended by adding Section 463.264 to read as follows:
Sec. 463.264. REINSURANCE. (a) The association may elect
to succeed to the rights of an insolvent insurer under a contract of
reinsurance to which the insolvent insurer is a party to the extent:
(1) of the contractual obligations of the covered
policies for which the association may become obligated; and
(2) that the reinsurance contract provides coverage
for losses occurring after the association is obligated to provide
coverage.
(b) As a condition to making an election under Subsection
(a), the association shall pay all unpaid premiums due under the
reinsurance contract to which Subsection (a) refers for coverage
relating to a period before and after the date the association is
obligated to provide coverage.
SECTION 11. Section 154.359(c), Finance Code, is amended to
read as follows:
(c) A claim may not be approved for a loss to the extent the
claim is insured, bonded, or otherwise covered, protected, or
reimbursed from other sources, including coverage provided by the
Texas Life and [, Accident,] Health[, and Hospital Service]
Insurance Guaranty Association under Chapter 463, Insurance Code.
SECTION 12. Section 609.113(b), Government Code, is amended
to read as follows:
(b) A plan administrator may not approve a vendor's
application if the vendor is:
(1) a state or national bank or savings and loan
association, the deposits of which are not insured by the Federal
Deposit Insurance Corporation;
(2) a credit union, the deposits of which are not
insured by the National Credit Union Administration Board or the
Texas Share Guaranty Credit Union; or
(3) an insurance company that:
(A) is not a member of the Texas Life and [,
Accident,] Health[, and Hospital Service] Insurance Guaranty
Association; or
(B) is an impaired or insolvent insurer under
Chapter 463 [Article 21.28-D], Insurance Code.
SECTION 13. Section 609.712(b), Government Code, is amended
to read as follows:
(b) A plan administrator may not approve a vendor's
application if the vendor is:
(1) a state or national bank or savings and loan
association, the deposits of which are not insured by the Federal
Deposit Insurance Corporation;
(2) a credit union, the deposits of which are not
insured by the National Credit Union Administration Board; or
(3) an insurance company that:
(A) is not a member of the Texas Life and [,
Accident,] Health[, and Hospital Service] Insurance Guaranty
Association; or
(B) is an impaired or insolvent insurer under
Chapter 463 [Article 21.28-D], Insurance Code.
SECTION 14. (a) Effective September 1, 2011:
(1) the name of the Texas Life, Accident, Health, and
Hospital Service Insurance Guaranty Association is changed to the
Texas Life and Health Insurance Guaranty Association, and all
powers, duties, rights, and obligations of the Texas Life,
Accident, Health, and Hospital Service Insurance Guaranty
Association are the powers, duties, rights, and obligations of the
Texas Life and Health Insurance Guaranty Association;
(2) a member of the board of directors of the Texas
Life, Accident, Health, and Hospital Service Insurance Guaranty
Association is a member of the board of directors of the Texas Life
and Health Insurance Guaranty Association; and
(3) a reference in law to the Texas Life, Accident,
Health, and Hospital Service Insurance Guaranty Association is a
reference to the Texas Life and Health Insurance Guaranty
Association.
(b) The Texas Life and Health Insurance Guaranty
Association is the successor to the Texas Life, Accident, Health,
and Hospital Service Insurance Guaranty Association in all
respects. All personnel, equipment, data, documents, facilities,
contracts, items, other property, rules, decisions, and
proceedings of or involving the Texas Life, Accident, Health, and
Hospital Service Insurance Guaranty Association are unaffected by
the change in the name of the association.
SECTION 15. (a) The change in law made by this Act to
Section 463.153(c), Insurance Code, applies to assessments
authorized on or after October 1, 2008, with respect to an insurer
that first became impaired or insolvent after September 1, 2005;
all other changes in law made by this Act apply only to an insurer
that first becomes an impaired or insolvent insurer on or after the
effective date of this Act.
(b) Except as provided by Subsection (a) of this section, an
insurer that becomes an impaired or insolvent insurer before the
effective date of this Act is governed by the law as it existed
immediately before that date, and that law is continued in effect
for that purpose.
SECTION 16. This Act takes effect September 1, 2011.