Texas 2019 - 86th Regular

Texas House Bill HB1864 Compare Versions

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1	1	86R8958 SMT-F
2	2	By: Smithee H.B. No. 1864
3	3
4	4
5	5	A BILL TO BE ENTITLED
6	6	AN ACT
7	7	relating to the Texas Life and Health Insurance Guaranty
8	8	Association.
9	9	BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
10	10	SECTION 1. Section 463.002, Insurance Code, is amended to
11	11	read as follows:
12	12	Sec. 463.002. PURPOSE. The purpose of this chapter is to
13	13	protect, subject to certain limitations, a person specified by
14	14	Section 463.201 against failure in the performance of a contractual
15	15	obligation under a life, accident, [or] health, [insurance policy]
16	16	or annuity policy, plan, or contract with respect to which this
17	17	chapter provides coverage as determined under Subchapter E, because
18	18	of the impairment or insolvency of the member insurer that issued
19	19	the policy, plan, or contract.
20	20	SECTION 2. Section 463.003, Insurance Code, is amended by
21	21	amending Subdivisions (4), (7-a), and (9) and adding Subdivisions
22	22	(4-a), (4-b), (5-a), and (6-a) to read as follows:
23	23	(4) "Covered policy" or "covered contract" means a
24	24	policy or contract, or portion of a policy or contract, including a
25	25	health maintenance organization contract, with respect to which
26	26	this chapter provides coverage as determined under Subchapter E.
27	27	(4-a) "Enrollee" means an individual who is enrolled in
28	28	a health maintenance organization contract with respect to which
29	29	this chapter provides coverage as determined under Subchapter E.
30	30	For purposes of this chapter, an enrollee is considered to be an
31	31	insured.
32	32	(4-b) "Health benefit plan" means a hospital and
33	33	medical expense incurred policy or certificate, health maintenance
34	34	organization enrollee contract, or any other similar health
35	35	contract. The term does not include:
36	36	(A) accident-only insurance;
37	37	(B) credit insurance;
38	38	(C) dental-only insurance;
39	39	(D) vision-only insurance;
40	40	(E) Medicare supplement insurance;
41	41	(F) long-term care coverage or benefits, home
42	42	health care coverage or benefits, community-based care coverage or
43	43	benefits, or any combination of those coverages or benefits;
44	44	(G) disability income insurance;
45	45	(H) coverage for on-site medical clinics; or
46	46	(I) specified disease, hospital confinement
47	47	indemnity, or limited benefit health insurance coverage if the
48	48	types of coverage do not provide coordination of benefits and are
49	49	provided under separate policies or certificates.
50	50	(5-a) "Insurance" includes health benefit plan
51	51	coverage.
52	52	(6-a) "Insurer" includes a health maintenance
53	53	organization.
54	54	(7-a) "Owner" means the owner of a policy or contract
55	55	and "policyholder," "policy owner," and "contract owner" mean the
56	56	person who is identified as the legal owner under the terms of the
57	57	policy or contract or who is otherwise vested with legal title to
58	58	the policy or contract through a valid assignment completed in
59	59	accordance with the terms of the policy or contract and is properly
60	60	recorded as the owner on the books of the member insurer. The terms
61	61	"owner," "contract owner," "policyholder," and "policy owner" do
62	62	not include persons with a mere beneficial interest in a policy or
63	63	contract.
64	64	(9) "Premium" means an amount received on a covered
65	65	policy, less any premium, consideration, or deposit returned on the
66	66	policy, and any dividend or experience credit on the policy. The
67	67	term does not include:
68	68	(A) an amount received for a policy or contract
69	69	or part of a policy or contract for which coverage is not provided
70	70	under Section 463.202, except that assessable premiums may not be
71	71	reduced because of:
72	72	(i) an interest limitation provided by
73	73	Section 463.203(b)(3); or
74	74	(ii) a limitation provided by Section
75	75	463.204 with respect to a single individual, participant,
76	76	annuitant, or policy or contract owner;
77	77	(B) premiums in excess of $5 million on an
78	78	unallocated annuity contract not issued under a governmental
79	79	benefit plan established under Section 401, 403(b), or 457,
80	80	Internal Revenue Code of 1986;
81	81	(C) premiums received from the state treasury or
82	82	the United States treasury for insurance for which this state or the
83	83	United States contracts to:
84	84	(i) provide welfare benefits to designated
85	85	welfare recipients; or
86	86	(ii) implement:
87	87	(a) Title 2, Health and Safety Code;
88	88	(b) Title 2, Human Resources Code; [,]
89	89	or
90	90	(c) the Social Security Act (42 U.S.C.
91	91	Section 301 et seq.); or
92	92	(D) premiums in excess of $5 million with respect
93	93	to multiple nongroup policies of life insurance owned by one owner,
94	94	regardless of whether the policy owner is an individual, firm,
95	95	corporation, or other person and regardless of whether the persons
96	96	insured are officers, managers, employees, or other persons,
97	97	regardless of the number of policies or contracts held by the owner.
98	98	SECTION 3. Subchapter A, Chapter 463, Insurance Code, is
99	99	amended by adding Sections 463.0032 and 463.007 to read as follows:
100	100	Sec. 463.0032. USE OF TERMS POLICY AND CONTRACT. For
101	101	purposes of this chapter, "policy" and "contract" have the same
102	102	meaning.
103	103	Sec. 463.007. CONSTRUCTION OF LONG-TERM CARE RIDER. For
104	104	purposes of this chapter, benefits provided by a long-term care
105	105	rider to a life insurance policy or annuity contract are considered
106	106	to be the same type of benefits as the base life insurance policy or
107	107	annuity contract.
108	108	SECTION 4. Section 463.052, Insurance Code, is amended to
109	109	read as follows:
110	110	Sec. 463.052. REQUIRED PARTICIPATION IN ASSOCIATION. (a)
111	111	As a condition of engaging in the business of insurance in this
112	112	state, an insurer, including a mutual assessment company, a local
113	113	mutual aid association, a statewide mutual assessment company,
114	114	[and] a stipulated premium company, and a health maintenance
115	115	organization authorized to engage in business in this state, shall
116	116	participate as a member of the association if the insurer holds a
117	117	certificate of authority to engage in a kind of insurance business
118	118	in this state with respect to which this chapter provides coverage
119	119	as determined under Subchapter E. The requirement to participate
120	120	applies regardless of whether the insurer's certificate of
121	121	authority in this state is suspended, revoked, not renewed, or
122	122	voluntarily withdrawn.
123	123	(b) The following do not participate as member insurers:
124	124	(1) [a health maintenance organization;
125	125	[(2)] a fraternal benefit society;
126	126	(2) [(3)] a mandatory state pooling plan;
127	127	(3) [(4)] a reciprocal or interinsurance exchange;
128	128	(4) [(5)] an organization which has a certificate of
129	129	authority or license limited to the issuance of charitable gift
130	130	annuities, as defined by this code or rules adopted by the
131	131	commissioner; and
132	132	(5) [(6)] an entity similar to an entity described by
133	133	Subdivision (1), (2), (3), or (4)[, or (5)].
134	134	SECTION 5. Section 463.053, Insurance Code, is amended by
135	135	adding Subsection (c-1) to read as follows:
136	136	(c-1) The commissioner shall consider, among other things,
137	137	whether the directors appointed under Subsections (b) and (c)
138	138	fairly represent the member insurers that are health maintenance
139	139	organizations and life, health, and annuity insurers.
140	140	SECTION 6. Sections 463.059(a), (c), and (f), Insurance
141	141	Code, are amended to read as follows:
142	142	(a) Notwithstanding Chapter 551, Government Code, or any
143	143	other law, the board or a committee of the board may meet by
144	144	telephone conference call, videoconference, or other similar
145	145	telecommunication method [if immediate action is required and
146	146	convening a quorum of the board or committee of the board at a
147	147	single location is not reasonable or practical. A board or
148	148	committee member who is unable to attend a meeting in person and who
149	149	is participating in a board or committee meeting by telephone
150	150	conference call, videoconference, or other similar
151	151	telecommunication method may be counted to establish a quorum and
152	152	may vote]. The board may use telephone conference call,
153	153	videoconference, or other similar telecommunication method for
154	154	establishing a quorum, voting, or any other meeting purpose in
155	155	accordance with this section regardless of the subject matter
156	156	discussed or considered by the board at the meeting.
157	157	(c) The notice of a meeting authorized by this section must
158	158	specify [that] the location of the meeting [is the location at which
159	159	meetings of the board and committees of the board are usually held].
160	160	(f) An audio or digital recording of a meeting authorized by
161	161	this section must be made in accordance with the association's
162	162	bylaws. The recording of the open portion of the meeting must be
163	163	posted on the association's Internet website [made available to the
164	164	public].
165	165	SECTION 7. Section 463.101(a), Insurance Code, is amended
166	166	to read as follows:
167	167	(a) The association may:
168	168	(1) enter into contracts as necessary or proper to
169	169	carry out this chapter and the purposes of this chapter;
170	170	(2) sue or be sued, including taking:
171	171	(A) necessary or proper legal action to:
172	172	(i) recover an unpaid assessment under
173	173	Subchapter D; or
174	174	(ii) settle a claim or potential claim
175	175	against the association; or
176	176	(B) necessary legal action to avoid payment of an
177	177	improper claim;
178	178	(3) borrow money to effect the purposes of this
179	179	chapter;
180	180	(4) exercise, for the purposes of this chapter and to
181	181	the extent approved by the commissioner, the powers of a domestic
182	182	life, accident, or health insurance company, a health maintenance
183	183	organization, or a group hospital service corporation, except that
184	184	the association may not issue an insurance policy or annuity
185	185	contract other than to perform the association's obligations under
186	186	this chapter;
187	187	(5) unless prohibited by other law, implement or file
188	188	for an actuarially justified rate or premium increase in accordance
189	189	with the terms and conditions of a covered policy or contract;
190	190	(6) to further the association's purposes, exercise
191	191	the association's powers, and perform the association's duties,
192	192	join an organization of one or more state associations that have
193	193	similar purposes;
194	194	(7) [(6)] request information from a person seeking
195	195	coverage from the association in determining its obligations under
196	196	this chapter with respect to the person, and the person shall
197	197	promptly comply with the request; and
198	198	(8) [(7)] take any other necessary or appropriate
199	199	action to discharge the association's duties and obligations under
200	200	this chapter or to exercise the association's powers under this
201	201	chapter.
202	202	SECTION 8. Section 463.102(b), Insurance Code, is amended
203	203	to read as follows:
204	204	(b) The association may amend the plan of operation. An
205	205	amendment must be approved by the commissioner and takes effect on:
206	206	(1) the date the commissioner approves the amendment;
207	207	or
208	208	(2) the 60th [30th] day after the date the amendment is
209	209	submitted to the commissioner for approval, if the commissioner
210	210	does not approve or disapprove the amendment before the 60th [30th]
211	211	day.
212	212	SECTION 9. Section 463.109, Insurance Code, is amended to
213	213	read as follows:
214	214	Sec. 463.109. ASSOCIATION APPEARANCE BEFORE COURT;
215	215	INTERVENTION. (a) The association may appear before a court in
216	216	this state with jurisdiction over an impaired or insolvent insurer
217	217	concerning which the association is or may become obligated under
218	218	this chapter. The association's right to appear applies to:
219	219	(1) a proposal for reinsuring, reissuing, modifying,
220	220	or guaranteeing the insurer's policies or contracts;
221	221	(2) the determination of the insurer's policies or
222	222	contracts and contractual obligations; and
223	223	(3) any other matter germane to the association's
224	224	powers and duties.
225	225	(b) The association may appear or intervene before a court
226	226	in another state with jurisdiction over:
227	227	(1) an impaired or insolvent insurer concerning which
228	228	the association is or may become obligated; or
229	229	(2) a third party against whom the association may
230	230	have rights through subrogation of the insurer's policyholders or
231	231	enrollees.
232	232	SECTION 10. Sections 463.114(c), (d), and (e), Insurance
233	233	Code, are amended to read as follows:
234	234	(c) At the expiration of the 60th day after approval of the
235	235	document, a member [an] insurer may not deliver a policy or contract
236	236	with respect to which this chapter provides coverage as determined
237	237	under Subchapter E to a policy, [or] contract, or certificate
238	238	holder or enrollee before a copy of the summary document is
239	239	delivered to the policy, [or] contract, or certificate holder or
240	240	enrollee. The document must also be available on request of a
241	241	policy, contract, or certificate holder or enrollee
242	242	[policyholder].
243	243	(d) The distribution, delivery, content, or interpretation
244	244	of a summary document does not guarantee that a policy or contract
245	245	or a policy, [or] contract, or certificate holder or enrollee is
246	246	provided coverage by this chapter if a member insurer becomes
247	247	impaired or insolvent. Failure to receive the document does not
248	248	give an insured or policy, contract, or certificate holder or
249	249	enrollee any rights greater than those provided by this chapter.
250	250	(e) An insurer or agent may not deliver a policy or contract
251	251	described by Section 463.202 that is excluded from the coverage
252	252	provided by this chapter by Section 463.203 unless the insurer or
253	253	agent, either before or in conjunction with delivery, gives the
254	254	policy, [or] contract, or certificate holder or enrollee a separate
255	255	written notice clearly and conspicuously disclosing that the policy
256	256	or contract is not covered by the association.
257	257	SECTION 11. Section 463.153, Insurance Code, is amended by
258	258	amending Subsections (b) and (c) and adding Subsection (b-1) to
259	259	read as follows:
260	260	(b) Class B assessments on [against] a member insurer for
261	261	each account under Section 463.105 shall be authorized and called
262	262	in the proportion that the premiums received on business in this
263	263	state by the member insurer on policies or contracts covered by each
264	264	account for the three most recent calendar years for which
265	265	information is available preceding the year in which the impaired
266	266	or insolvent member insurer became impaired or insolvent bear to
267	267	premiums received on business in this state for those calendar
268	268	years by all assessed member insurers. Except for assessments
269	269	related to long-term care insurance as described by Subsection
270	270	(b-1), the [The] amount of a Class B assessment shall be allocated
271	271	among the separate accounts in accordance with an allocation
272	272	formula that may be based on:
273	273	(1) the premiums or reserves of the impaired or
274	274	insolvent insurer; or
275	275	(2) any other standard deemed by the board in the
276	276	board's sole discretion as being fair and reasonable under the
277	277	circumstances.
278	278	(b-1) The amount of a Class B assessment for long-term care
279	279	insurance written by an impaired or insolvent member insurer shall
280	280	be allocated according to a methodology included in the plan of
281	281	operation and approved by the commissioner. The methodology must
282	282	provide for 50 percent of the assessment to be allocated to accident
283	283	and health member insurers and 50 percent to be allocated to life
284	284	and annuity member insurers. This subsection does not apply to a
285	285	rider to a member insurer's life insurance policy or annuity
286	286	contract that provides long-term care benefits.
287	287	(c) The total amount of assessments on a member insurer for
288	288	each account under Section 463.105 may not in one calendar year
289	289	exceed two percent of the insurer's average annual premiums on the
290	290	policies covered by the account during the three calendar years
291	291	preceding the year in which the impaired or insolvent member
292	292	insurer became an impaired or insolvent insurer. If two or more
293	293	assessments are authorized in a calendar year with respect to
294	294	member insurers that become impaired or insolvent in different
295	295	calendar years, the average annual premiums for purposes of the
296	296	aggregate assessment percentage limitation described by this
297	297	subsection shall be equal to the higher of the three-year average
298	298	annual premiums for the applicable subaccount or account as
299	299	computed in accordance with this section. If the maximum
300	300	assessment and the other assets of the association do not provide in
301	301	a year an amount sufficient to carry out the association's
302	302	responsibilities, the association shall make necessary additional
303	303	assessments as soon as this chapter permits.
304	304	SECTION 12. Sections 463.154 and 463.201, Insurance Code,
305	305	are amended to read as follows:
306	306	Sec. 463.154. DEFERMENT. The association may wholly or
307	307	partly defer an assessment on [of] a member insurer if the
308	308	association believes payment of the assessment would endanger the
309	309	ability of the insurer to fulfill the insurer's contractual
310	310	obligations. The amount of the assessment that is deferred may be
311	311	assessed against the other member insurers in a manner consistent
312	312	with this subchapter.
313	313	Sec. 463.201. PERSONS [INSUREDS] COVERED. (a) Subject to
314	314	Subsections (b) and (c), this chapter provides coverage for a
315	315	policy or contract described by Section 463.202 to a person who is:
316	316	(1) a person, other than a certificate holder under a
317	317	group policy or contract who is not a resident, who is a
318	318	beneficiary, assignee, or payee, including a health care provider
319	319	who renders services covered under a health insurance policy or
320	320	certificate, of a person described by Subdivision (2);
321	321	(2) a person who is an owner of or certificate holder
322	322	or enrollee under a policy or contract specified by Section
323	323	463.202, other than an unallocated annuity contract or structured
324	324	settlement annuity, and who is:
325	325	(A) a resident; or
326	326	(B) not a resident, but only under all of the
327	327	following conditions:
328	328	(i) the member insurers that issued the
329	329	policies or contracts are domiciled in this state;
330	330	(ii) the state in which the person resides
331	331	has an association similar to the association; and
332	332	(iii) the person is not eligible for
333	333	coverage by an association in any other state because the insurer or
334	334	health maintenance organization was not licensed in the state at
335	335	the time specified in that state's guaranty association law;
336	336	(3) a person who is the owner of an unallocated annuity
337	337	contract issued to or in connection with:
338	338	(A) a benefit plan whose plan sponsor has the
339	339	sponsor's principal place of business in this state; or
340	340	(B) a government lottery, if the owner is a
341	341	resident; or
342	342	(4) a person who is the payee under a structured
343	343	settlement annuity, or beneficiary of the payee if the payee is
344	344	deceased, if:
345	345	(A) the payee is a resident, regardless of where
346	346	the contract owner resides;
347	347	(B) the payee is not a resident, the contract
348	348	owner of the structured settlement annuity is a resident, and the
349	349	payee is not eligible for coverage by the association in the state
350	350	in which the payee resides; or
351	351	(C) the payee and the contract owner are not
352	352	residents, the insurer that issued the structured settlement
353	353	annuity is domiciled in this state, the state in which the contract
354	354	owner resides has an association similar to the association, and
355	355	neither the payee or, if applicable, the payee's beneficiary, nor
356	356	the contract owner is eligible for coverage by the association in
357	357	the state in which the payee or contract owner resides.
358	358	(b) This chapter does not provide coverage to:
359	359	(1) a person who is a payee or the beneficiary of a
360	360	payee with respect to a contract the owner of which is a resident of
361	361	this state, if the payee or the payee's beneficiary is afforded any
362	362	coverage by the association of another state; [or]
363	363	(2) a person otherwise described by Subsection (a)(3),
364	364	if any coverage is provided by the association of another state to
365	365	that person; or
366	366	(3) a person who acquires rights to receive payments
367	367	through a structured settlement factoring transaction as defined by
368	368	Section 5891(c)(3)(A), Internal Revenue Code of 1986 (26 U.S.C.
369	369	Section 5891(c)(3)(A)), regardless of whether the transaction
370	370	occurred before, on, or after the date that section became
371	371	effective.
372	372	(c) This chapter is intended to provide coverage to persons
373	373	who are residents of this state, and in those limited circumstances
374	374	as described in this chapter, to nonresidents. In order to avoid
375	375	duplicate coverage, if a person who would otherwise receive
376	376	coverage under this chapter is provided coverage under the laws of
377	377	any other state, the person may not be provided coverage under this
378	378	chapter. In determining the application of the provisions of this
379	379	subsection in situations in which a person could be covered by the
380	380	association of more than one state, whether as an owner, payee,
381	381	enrollee, beneficiary, or assignee, this chapter shall be construed
382	382	in conjunction with other state laws to result in coverage by only
383	383	one association.
384	384	SECTION 13. Section 463.202(a), Insurance Code, is amended
385	385	to read as follows:
386	386	(a) Except as limited by this chapter, the coverage provided
387	387	by this chapter to a person specified by Section 463.201, subject to
388	388	Sections 463.201(b) and (c), applies with respect to the following
389	389	policies and contracts issued by a member insurer:
390	390	(1) a direct, nongroup life, health, accident,
391	391	annuity, or supplemental policy or contract, including a health
392	392	maintenance organization contract or certificate;
393	393	(2) a certificate under a direct group policy or
394	394	contract;
395	395	(3) a group hospital service contract; and
396	396	(4) an unallocated annuity contract.
397	397	SECTION 14. Section 463.203, Insurance Code, is amended by
398	398	amending Subsection (b) and adding Subsection (b-1) to read as
399	399	follows:
400	400	(b) This chapter does not provide coverage for:
401	401	(1) any part of a policy or contract not guaranteed by
402	402	the insurer or under which the risk is borne by the policy or
403	403	contract owner;
404	404	(2) a policy or contract of reinsurance, unless an
405	405	assumption certificate has been issued;
406	406	(3) any part of a policy or contract to the extent that
407	407	the rate of interest on which that part is based:
408	408	(A) as averaged over the period of four years
409	409	before the date the member insurer becomes impaired or insolvent
410	410	under this chapter, whichever is earlier, exceeds a rate of
411	411	interest determined by subtracting two percentage points from
412	412	Moody's Corporate Bond Yield Average averaged for the same
413	413	four-year period or for a lesser period if the policy or contract
414	414	was issued less than four years before the date the member insurer
415	415	becomes impaired or insolvent under this chapter, whichever is
416	416	earlier; and
417	417	(B) on and after the date the member insurer
418	418	becomes impaired or insolvent under this chapter, whichever is
419	419	earlier, exceeds the rate of interest determined by subtracting
420	420	three percentage points from Moody's Corporate Bond Yield Average
421	421	as most recently available;
422	422	(4) a portion of a policy or contract issued to a plan
423	423	or program of an employer, association, similar entity, or other
424	424	person to provide life, health, or annuity benefits to the entity's
425	425	employees, members, or others, to the extent that the plan or
426	426	program is self-funded or uninsured, including benefits payable by
427	427	an employer, association, or similar entity under:
428	428	(A) a multiple employer welfare arrangement as
429	429	defined by Section 3, Employee Retirement Income Security Act of
430	430	1974 (29 U.S.C. Section 1002);
431	431	(B) a minimum premium group insurance plan;
432	432	(C) a stop-loss group insurance plan; or
433	433	(D) an administrative services-only contract;
434	434	(5) any part of a policy or contract to the extent that
435	435	the part provides dividends, experience rating credits, or voting
436	436	rights, or provides that fees or allowances be paid to any person,
437	437	including the policy or contract owner, in connection with the
438	438	service to or administration of the policy or contract;
439	439	(6) a policy or contract issued in this state by a
440	440	member insurer at a time the insurer was not authorized to issue the
441	441	policy or contract in this state;
442	442	(7) an unallocated annuity contract issued to or in
443	443	connection with a benefit plan protected under the federal Pension
444	444	Benefit Guaranty Corporation, regardless of whether the Pension
445	445	Benefit Guaranty Corporation has not yet become liable to make any
446	446	payments with respect to the benefit plan;
447	447	(8) any part of an unallocated annuity contract that
448	448	is not issued to or in connection with a specific employee, a
449	449	benefit plan for a union or association of individuals, or a
450	450	governmental lottery;
451	451	(9) any part of a financial guarantee, funding
452	452	agreement, or guaranteed investment contract that:
453	453	(A) does not contain a mortality guarantee; and
454	454	(B) is not issued to or in connection with a
455	455	specific employee, a benefit plan, or a governmental lottery;
456	456	(10) a part of a policy or contract to the extent that
457	457	the assessments required by Subchapter D with respect to the policy
458	458	or contract are preempted by federal or state law;
459	459	(11) a contractual agreement that established the
460	460	member insurer's obligations to provide a book value accounting
461	461	guaranty for defined contribution benefit plan participants by
462	462	reference to a portfolio of assets that is owned by the benefit plan
463	463	or the plan's trustee in a case in which neither the benefit plan
464	464	sponsor nor its trustee is an affiliate of the member insurer;
465	465	(12) a part of a policy or contract to the extent the
466	466	policy or contract provides for interest or other changes in value
467	467	that are to be determined by the use of an index or external
468	468	reference stated in the policy or contract, but that have not been
469	469	credited to the policy or contract, or as to which the policy or
470	470	contract owner's rights are subject to forfeiture, as of the date
471	471	the member insurer becomes an impaired or insolvent insurer under
472	472	this chapter, whichever date is earlier, subject to Subsection (c);
473	473	[or]
474	474	(13) a policy or contract providing a hospital,
475	475	medical, prescription drug, or other health care benefit under 42
476	476	U.S.C. Sections 1395w-21 et seq. and 1395w-101 et seq. (Medicare
477	477	Parts C and D), 42 U.S.C. Sections 1396-1396w-5 (Medicaid), or 42
478	478	U.S.C. Sections 1397aa-1397mm (State Children's Health Insurance
479	479	Program) or a regulation adopted under those federal statutes; or
480	480	(14) structured settlement annuity benefits to which a
481	481	payee or beneficiary has transferred the payee's or beneficiary's
482	482	rights in a structured settlement factoring transaction as defined
483	483	by Section 5891(c)(3)(A), Internal Revenue Code of 1986 (26 U.S.C.
484	484	Section 5891(c)(3)(A)), regardless of whether the factoring
485	485	transaction occurred before, on, or after the date that section
486	486	became effective.
487	487	(b-1) The exclusion from coverage described by Subsection
488	488	(b)(3) does not apply to any portion of a policy or contract,
489	489	including a rider, that provides long-term care benefits or any
490	490	other health insurance benefit.
491	491	SECTION 15. Section 463.204, Insurance Code, is amended to
492	492	read as follows:
493	493	Sec. 463.204. OBLIGATIONS EXCLUDED. A contractual
494	494	obligation does not include:
495	495	(1) death benefits in an amount in excess of $300,000
496	496	or a net cash surrender or net cash withdrawal value in an amount in
497	497	excess of $100,000 under one or more life insurance policies on a
498	498	single life;
499	499	(2) an amount in excess of:
500	500	(A) $250,000 in the present value under one or
501	501	more annuity contracts issued with respect to a single life under
502	502	individual annuity policies or group annuity policies; or
503	503	(B) $5 million in unallocated annuity contract
504	504	benefits with respect to a single contract owner regardless of the
505	505	number of those contracts;
506	506	(3) an amount in excess of the following amounts,
507	507	including any net cash surrender or cash withdrawal values, under
508	508	one or more accident, health, accident and health, or long-term
509	509	care insurance policies on a single life:
510	510	(A) $500,000 for health benefit plans [basic
511	511	hospital, medical-surgical, or major medical insurance, as those
512	512	terms are defined by this code or rules adopted by the
513	513	commissioner];
514	514	(B) $300,000 for disability income and long-term
515	515	care insurance, as those terms are defined by this code or rules
516	516	adopted by the commissioner; or
517	517	(C) $200,000 for coverages that are not defined
518	518	as health benefit plans [basic hospital, medical-surgical, major
519	519	medical], disability income, or long-term care insurance;
520	520	(4) an amount in excess of $250,000 in present value
521	521	annuity benefits, in the aggregate, including any net cash
522	522	surrender and net cash withdrawal values, with respect to each
523	523	individual participating in a governmental retirement benefit plan
524	524	established under Section 401, 403(b), or 457, Internal Revenue
525	525	Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by
526	526	an unallocated annuity contract or the beneficiary or beneficiaries
527	527	of the individual if the individual is deceased;
528	528	(5) an amount in excess of $250,000 in present value
529	529	annuity benefits, in the aggregate, including any net cash
530	530	surrender and net cash withdrawal values, with respect to each
531	531	payee of a structured settlement annuity or the beneficiary or
532	532	beneficiaries of the payee if the payee is deceased;
533	533	(6) aggregate benefits in an amount in excess of
534	534	$300,000 with respect to a single life, except with respect to:
535	535	(A) benefits paid under health benefit plans
536	536	[basic hospital, medical-surgical, or major medical insurance
537	537	policies], described by Subdivision (3)(A), in which case the
538	538	aggregate benefits are $500,000; and
539	539	(B) benefits paid to one owner of multiple
540	540	nongroup policies of life insurance, whether the policy owner is an
541	541	individual, firm, corporation, or other person, and whether the
542	542	persons insured are officers, managers, employees, or other
543	543	persons, in which case the maximum benefits are $5 million
544	544	regardless of the number of policies and contracts held by the
545	545	owner;
546	546	(7) an amount in excess of $5 million in benefits, with
547	547	respect to either one plan sponsor whose plans own directly or in
548	548	trust one or more unallocated annuity contracts not included in
549	549	Subdivision (4) irrespective of the number of contracts with
550	550	respect to the contract owner or plan sponsor or one contract owner
551	551	provided coverage under Section 463.201(a)(3)(B), except that, if
552	552	one or more unallocated annuity contracts are covered contracts
553	553	under this chapter and are owned by a trust or other entity for the
554	554	benefit of two or more plan sponsors, coverage shall be afforded by
555	555	the association if the largest interest in the trust or entity
556	556	owning the contract or contracts is held by a plan sponsor whose
557	557	principal place of business is in this state, and in no event shall
558	558	the association be obligated to cover more than $5 million in
559	559	benefits with respect to all these unallocated contracts;
560	560	(8) any contractual obligations of the insolvent or
561	561	impaired insurer under a covered policy or contract that do not
562	562	materially affect the economic value of economic benefits of the
563	563	covered policy or contract; or
564	564	(9) punitive, exemplary, extracontractual, or bad
565	565	faith damages, regardless of whether the damages are:
566	566	(A) agreed to or assumed by an insurer, [or]
567	567	insured, or covered person; or
568	568	(B) imposed by a court.
569	569	SECTION 16. Section 463.251(b), Insurance Code, is amended
570	570	to read as follows:
571	571	(b) With the commissioner's approval, the association may:
572	572	(1) guarantee, assume, reissue, or reinsure, or cause
573	573	to be guaranteed, assumed, reissued, or reinsured, one or more of
574	574	the insurer's policies or contracts;
575	575	(2) provide money, pledges, notes, guarantees, or
576	576	other means proper to:
577	577	(A) implement Subdivision (1); and
578	578	(B) ensure payment of the insurer's contractual
579	579	obligations until action is taken under Subdivision (1); or
580	580	(3) loan money to the insurer.
581	581	SECTION 17. Section 463.252(c), Insurance Code, is amended
582	582	to read as follows:
583	583	(c) A policy or contract owner, certificate holder, or
584	584	enrollee who claims emergency or hardship may petition for
585	585	substitute benefits under standards the association proposes and
586	586	the commissioner approves. Substitute benefits are available only
587	587	for a health claim, periodic annuity benefit payment, death
588	588	benefit, supplemental benefit, or cash withdrawal.
589	589	SECTION 18. Section 463.253(b), Insurance Code, is amended
590	590	to read as follows:
591	591	(b) The association shall provide money, pledges,
592	592	guarantees, or other means reasonably necessary to discharge the
593	593	insurer's duties and to:
594	594	(1) guarantee, assume, reissue, or reinsure, or cause
595	595	to be guaranteed, assumed, reissued, or reinsured, the insurer's
596	596	policies or contracts; or
597	597	(2) ensure payment of the insurer's contractual
598	598	obligations.
599	599	SECTION 19. Sections 463.254(b), (e), (f), (g), (h), and
600	600	(i), Insurance Code, are amended to read as follows:
601	601	(b) The association, in accordance with Subsections (c) and
602	602	(d), as applicable, shall ensure payment of benefits identical to
603	603	the benefits that would have been payable under the policy or
604	604	contract of the insurer[, at premiums identical to the premiums
605	605	that would have been applicable under that policy or contract,
606	606	except for terms of conversion and renewability].
607	607	(e) The association shall diligently attempt to provide
608	608	each known insured, enrollee, or group policy or contract holder
609	609	[policyholder] with notice before the 30th day before the date the
610	610	benefits are terminated.
611	611	(f) As provided by Subsections (g)-(i), the association
612	612	shall make substitute coverage available on an individual basis to:
613	613	(1) each known insured or enrollee under an individual
614	614	policy, or the owner if other than the insured or enrollee; and
615	615	(2) each individual who:
616	616	(A) was formerly insured or enrolled under a
617	617	group policy or contract; and
618	618	(B) is not eligible for replacement group
619	619	coverage.
620	620	(g) Substitute coverage is available for an individual
621	621	policy under Subsection (f) only if the insured, enrollee, or owner
622	622	was entitled under law or the terminated policy to continue an
623	623	individual policy in force until a specified age or for a specified
624	624	period during which the insurer:
625	625	(1) was not entitled to unilaterally change a
626	626	provision of the policy; or
627	627	(2) was entitled only to change a premium by class.
628	628	(h) Substitute coverage is available for a group policy or
629	629	contract under Subsection (f) only if the formerly insured or
630	630	enrolled individual was entitled under law or the terminated policy
631	631	or contract to convert group coverage to individual coverage.
632	632	(i) To provide substitute coverage under Subsection (f),
633	633	the association may offer to reissue the terminated coverage or
634	634	issue an alternative policy. The association shall offer the
635	635	reissued or alternative policy without requiring evidence of
636	636	insurability, at actuarially justified rates. The reissued or
637	637	alternative policy may not provide for a waiting period or
638	638	exclusion that would not have applied under the terminated
639	639	policy. The association may reinsure a reissued or alternative
640	640	policy.
641	641	SECTION 20. Section 463.256(b), Insurance Code, is amended
642	642	to read as follows:
643	643	(b) The association shall set the premium according to a
644	644	table of rates the association adopts. The premium:
645	645	(1) must reflect:
646	646	(A) the amount of insurance provided; and
647	647	(B) each insured's or enrollee's age and class of
648	648	risk; and
649	649	(2) may not reflect any change in an insured's or
650	650	enrollee's health occurring after the original policy was most
651	651	recently underwritten.
652	652	SECTION 21. Section 463.258, Insurance Code, is amended to
653	653	read as follows:
654	654	Sec. 463.258. PREMIUM FOR REISSUANCE OF TERMINATED
655	655	COVERAGE. If the association reissues terminated coverage at a
656	656	premium different from the terminated policy's premium, the premium
657	657	must:
658	658	(1) reflect the amount of insurance provided and the
659	659	insured's or enrollee's age and class of risk; and
660	660	(2) be approved by the commissioner or a court.
661	661	SECTION 22. Section 463.260(b), Insurance Code, is amended
662	662	to read as follows:
663	663	(b) The association's obligations with respect to coverage
664	664	under a policy of an impaired or insolvent insurer or under a
665	665	reissued or alternative policy terminate on the date the coverage
666	666	or policy is replaced by another similar policy by the
667	667	policyholder, the contract owner, the insured, the enrollee, or the
668	668	association.
669	669	SECTION 23. Sections 463.261(a) and (c), Insurance Code,
670	670	are amended to read as follows:
671	671	(a) A person receiving a benefit under this chapter,
672	672	including a payment of or on account of a contractual obligation,
673	673	continuation of coverage, or provision of substitute or alternative
674	674	coverage, is considered to have assigned to the association the
675	675	rights under, and any cause of action relating to, the covered
676	676	policy to the extent of the benefit received. The association may
677	677	require a payee, policy or contract owner, beneficiary, insured,
678	678	enrollee, or annuitant to assign the person's rights and cause of
679	679	action to the association as a condition of receiving a right or
680	680	benefit under this chapter.
681	681	(c) The association has all common law rights of subrogation
682	682	and any other equitable or legal remedy that would have been
683	683	available to the impaired or insolvent insurer or holder,
684	684	beneficiary, enrollee, or payee of a policy or contract with
685	685	respect to the policy or contract.
686	686	SECTION 24. Section 463.304, Insurance Code, is amended to
687	687	read as follows:
688	688	Sec. 463.304. DISTRIBUTION OF OWNERSHIP RIGHTS OF IMPAIRED
689	689	OR INSOLVENT INSURER. In making an equitable distribution of the
690	690	ownership rights of an impaired or insolvent insurer before the
691	691	termination of a receivership, the court:
692	692	(1) shall consider the welfare of the policyholders,
693	693	contract owners, certificate holders, and enrollees of the
694	694	continuing or successor insurer; and
695	695	(2) may consider the contributions of the respective
696	696	parties, including the association, the shareholders, [and]
697	697	policyholders, contract owners, certificate holders, and enrollees
698	698	of the impaired or insolvent insurer, and any other party with a
699	699	bona fide interest.
700	700	SECTION 25. Section 463.351(a), Insurance Code, is amended
701	701	to read as follows:
702	702	(a) The commissioner shall:
703	703	(1) notify the insurance officials of all the other
704	704	states, territories of the United States, and the District of
705	705	Columbia by mail not later than the 30th day after the date the
706	706	commissioner:
707	707	(A) revokes or suspends a member insurer's
708	708	certificate of authority; or
709	709	(B) issues a formal order requiring a member
710	710	insurer to:
711	711	(i) restrict the insurer's premium writing;
712	712	(ii) withdraw from this state;
713	713	(iii) reinsure all or part of the insurer's
714	714	business;
715	715	(iv) obtain additional contributions to
716	716	surplus; or
717	717	(v) increase capital, surplus, or another
718	718	account for the security of policyholders, contract owners, or
719	719	creditors;
720	720	(2) report to the board when the commissioner:
721	721	(A) takes an action described by Subdivision (1)
722	722	or receives from another insurance official a report indicating
723	723	that a similar action has been taken in another state; or
724	724	(B) has reasonable cause to believe from a
725	725	completed or continuing examination that a member insurer may be
726	726	impaired or insolvent; and
727	727	(3) provide to the board the National Association of
728	728	Insurance Commissioners Insurance Regulatory Information System
729	729	ratios and listings of insurers not included in those ratios.
730	730	SECTION 26. The changes in law made by this Act apply only
731	731	to an insurer that first becomes impaired or insolvent on or after
732	732	the effective date of this Act.
733	733	SECTION 27. This Act takes effect September 1, 2019.