86R8958 SMT-F
By: Smithee H.B. No. 1864
A BILL TO BE ENTITLED
AN ACT
relating to the Texas Life and Health Insurance Guaranty
Association.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
SECTION 1. Section 463.002, Insurance Code, is amended to
read as follows:
Sec. 463.002. PURPOSE. The purpose of this chapter is to
protect, subject to certain limitations, a person specified by
Section 463.201 against failure in the performance of a contractual
obligation under a life, accident, [or] health, [insurance policy]
or annuity policy, plan, or contract with respect to which this
chapter provides coverage as determined under Subchapter E, because
of the impairment or insolvency of the member insurer that issued
the policy, plan, or contract.
SECTION 2. Section 463.003, Insurance Code, is amended by
amending Subdivisions (4), (7-a), and (9) and adding Subdivisions
(4-a), (4-b), (5-a), and (6-a) to read as follows:
(4) "Covered policy" or "covered contract" means a
policy or contract, or portion of a policy or contract, including a
health maintenance organization contract, with respect to which
this chapter provides coverage as determined under Subchapter E.
(4-a) "Enrollee" means an individual who is enrolled in
a health maintenance organization contract with respect to which
this chapter provides coverage as determined under Subchapter E.
For purposes of this chapter, an enrollee is considered to be an
insured.
(4-b) "Health benefit plan" means a hospital and
medical expense incurred policy or certificate, health maintenance
organization enrollee contract, or any other similar health
contract. The term does not include:
(A) accident-only insurance;
(B) credit insurance;
(C) dental-only insurance;
(D) vision-only insurance;
(E) Medicare supplement insurance;
(F) long-term care coverage or benefits, home
health care coverage or benefits, community-based care coverage or
benefits, or any combination of those coverages or benefits;
(G) disability income insurance;
(H) coverage for on-site medical clinics; or
(I) specified disease, hospital confinement
indemnity, or limited benefit health insurance coverage if the
types of coverage do not provide coordination of benefits and are
provided under separate policies or certificates.
(5-a) "Insurance" includes health benefit plan
coverage.
(6-a) "Insurer" includes a health maintenance
organization.
(7-a) "Owner" means the owner of a policy or contract
and "policyholder," "policy owner," and "contract owner" mean the
person who is identified as the legal owner under the terms of the
policy or contract or who is otherwise vested with legal title to
the policy or contract through a valid assignment completed in
accordance with the terms of the policy or contract and is properly
recorded as the owner on the books of the member insurer. The terms
"owner," "contract owner," "policyholder," and "policy owner" do
not include persons with a mere beneficial interest in a policy or
contract.
(9) "Premium" means an amount received on a covered
policy, less any premium, consideration, or deposit returned on the
policy, and any dividend or experience credit on the policy. The
term does not include:
(A) an amount received for a policy or contract
or part of a policy or contract for which coverage is not provided
under Section 463.202, except that assessable premiums may not be
reduced because of:
(i) an interest limitation provided by
Section 463.203(b)(3); or
(ii) a limitation provided by Section
463.204 with respect to a single individual, participant,
annuitant, or policy or contract owner;
(B) premiums in excess of $5 million on an
unallocated annuity contract not issued under a governmental
benefit plan established under Section 401, 403(b), or 457,
Internal Revenue Code of 1986;
(C) premiums received from the state treasury or
the United States treasury for insurance for which this state or the
United States contracts to:
(i) provide welfare benefits to designated
welfare recipients; or
(ii) implement:
(a) Title 2, Health and Safety Code;
(b) Title 2, Human Resources Code; [,]
or
(c) the Social Security Act (42 U.S.C.
Section 301 et seq.); or
(D) premiums in excess of $5 million with respect
to multiple nongroup policies of life insurance owned by one owner,
regardless of whether the policy owner is an individual, firm,
corporation, or other person and regardless of whether the persons
insured are officers, managers, employees, or other persons,
regardless of the number of policies or contracts held by the owner.
SECTION 3. Subchapter A, Chapter 463, Insurance Code, is
amended by adding Sections 463.0032 and 463.007 to read as follows:
Sec. 463.0032. USE OF TERMS POLICY AND CONTRACT. For
purposes of this chapter, "policy" and "contract" have the same
meaning.
Sec. 463.007. CONSTRUCTION OF LONG-TERM CARE RIDER. For
purposes of this chapter, benefits provided by a long-term care
rider to a life insurance policy or annuity contract are considered
to be the same type of benefits as the base life insurance policy or
annuity contract.
SECTION 4. Section 463.052, Insurance Code, is amended to
read as follows:
Sec. 463.052. REQUIRED PARTICIPATION IN ASSOCIATION. (a)
As a condition of engaging in the business of insurance in this
state, an insurer, including a mutual assessment company, a local
mutual aid association, a statewide mutual assessment company,
[and] a stipulated premium company, and a health maintenance
organization authorized to engage in business in this state, shall
participate as a member of the association if the insurer holds a
certificate of authority to engage in a kind of insurance business
in this state with respect to which this chapter provides coverage
as determined under Subchapter E. The requirement to participate
applies regardless of whether the insurer's certificate of
authority in this state is suspended, revoked, not renewed, or
voluntarily withdrawn.
(b) The following do not participate as member insurers:
(1) [a health maintenance organization;
[(2)] a fraternal benefit society;
(2) [(3)] a mandatory state pooling plan;
(3) [(4)] a reciprocal or interinsurance exchange;
(4) [(5)] an organization which has a certificate of
authority or license limited to the issuance of charitable gift
annuities, as defined by this code or rules adopted by the
commissioner; and
(5) [(6)] an entity similar to an entity described by
Subdivision (1), (2), (3), or (4)[, or (5)].
SECTION 5. Section 463.053, Insurance Code, is amended by
adding Subsection (c-1) to read as follows:
(c-1) The commissioner shall consider, among other things,
whether the directors appointed under Subsections (b) and (c)
fairly represent the member insurers that are health maintenance
organizations and life, health, and annuity insurers.
SECTION 6. Sections 463.059(a), (c), and (f), Insurance
Code, are amended to read as follows:
(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]. The board may use telephone conference call,
videoconference, or other similar telecommunication method for
establishing a quorum, voting, or any other meeting purpose in
accordance with this section regardless of the subject matter
discussed or considered by the board at the meeting.
(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].
(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
posted on the association's Internet website [made available to the
public].
SECTION 7. Section 463.101(a), Insurance Code, is amended
to read as follows:
(a) The association may:
(1) enter into contracts as necessary or proper to
carry out this chapter and the purposes of this chapter;
(2) sue or be sued, including taking:
(A) necessary or proper legal action to:
(i) recover an unpaid assessment under
Subchapter D; or
(ii) settle a claim or potential claim
against the association; or
(B) necessary legal action to avoid payment of an
improper claim;
(3) borrow money to effect the purposes of this
chapter;
(4) exercise, for the purposes of this chapter and to
the extent approved by the commissioner, the powers of a domestic
life, accident, or health insurance company, a health maintenance
organization, or a group hospital service corporation, except that
the association may not issue an insurance policy or annuity
contract other than to perform the association's obligations under
this chapter;
(5) unless prohibited by other law, implement or file
for an actuarially justified rate or premium increase in accordance
with the terms and conditions of a covered policy or contract;
(6) to further the association's purposes, exercise
the association's powers, and perform the association's duties,
join an organization of one or more state associations that have
similar purposes;
(7) [(6)] request information from a person seeking
coverage from the association in determining its obligations under
this chapter with respect to the person, and the person shall
promptly comply with the request; and
(8) [(7)] take any other necessary or appropriate
action to discharge the association's duties and obligations under
this chapter or to exercise the association's powers under this
chapter.
SECTION 8. Section 463.102(b), Insurance Code, is amended
to read as follows:
(b) The association may amend the plan of operation. An
amendment must be approved by the commissioner and takes effect on:
(1) the date the commissioner approves the amendment;
or
(2) the 60th [30th] day after the date the amendment is
submitted to the commissioner for approval, if the commissioner
does not approve or disapprove the amendment before the 60th [30th]
day.
SECTION 9. Section 463.109, Insurance Code, is amended to
read as follows:
Sec. 463.109. ASSOCIATION APPEARANCE BEFORE COURT;
INTERVENTION. (a) The association may appear before a court in
this state with jurisdiction over an impaired or insolvent insurer
concerning which the association is or may become obligated under
this chapter. The association's right to appear applies to:
(1) a proposal for reinsuring, reissuing, modifying,
or guaranteeing the insurer's policies or contracts;
(2) the determination of the insurer's policies or
contracts and contractual obligations; and
(3) any other matter germane to the association's
powers and duties.
(b) The association may appear or intervene before a court
in another state with jurisdiction over:
(1) an impaired or insolvent insurer concerning which
the association is or may become obligated; or
(2) a third party against whom the association may
have rights through subrogation of the insurer's policyholders or
enrollees.
SECTION 10. Sections 463.114(c), (d), and (e), Insurance
Code, are amended to read as follows:
(c) At the expiration of the 60th day after approval of the
document, a member [an] insurer may not deliver a policy or contract
with respect to which this chapter provides coverage as determined
under Subchapter E to a policy, [or] contract, or certificate
holder or enrollee before a copy of the summary document is
delivered to the policy, [or] contract, or certificate holder or
enrollee. The document must also be available on request of a
policy, contract, or certificate holder or enrollee
[policyholder].
(d) The distribution, delivery, content, or interpretation
of a summary document does not guarantee that a policy or contract
or a policy, [or] contract, or certificate holder or enrollee is
provided coverage by this chapter if a member insurer becomes
impaired or insolvent. Failure to receive the document does not
give an insured or policy, contract, or certificate holder or
enrollee any rights greater than those provided by this chapter.
(e) An insurer or agent may not deliver a policy or contract
described by Section 463.202 that is excluded from the coverage
provided by this chapter by Section 463.203 unless the insurer or
agent, either before or in conjunction with delivery, gives the
policy, [or] contract, or certificate holder or enrollee a separate
written notice clearly and conspicuously disclosing that the policy
or contract is not covered by the association.
SECTION 11. Section 463.153, Insurance Code, is amended by
amending Subsections (b) and (c) and adding Subsection (b-1) to
read as follows:
(b) Class B assessments on [against] a member insurer for
each account under Section 463.105 shall be authorized and called
in the proportion that the premiums received on business in this
state by the member insurer on policies or contracts covered by each
account for the three most recent calendar years for which
information is available preceding the year in which the impaired
or insolvent member insurer became impaired or insolvent bear to
premiums received on business in this state for those calendar
years by all assessed member insurers. Except for assessments
related to long-term care insurance as described by Subsection
(b-1), the [The] amount of a Class B assessment shall be allocated
among the separate accounts in accordance with an allocation
formula that may be based on:
(1) the premiums or reserves of the impaired or
insolvent insurer; or
(2) any other standard deemed by the board in the
board's sole discretion as being fair and reasonable under the
circumstances.
(b-1) The amount of a Class B assessment for long-term care
insurance written by an impaired or insolvent member insurer shall
be allocated according to a methodology included in the plan of
operation and approved by the commissioner. The methodology must
provide for 50 percent of the assessment to be allocated to accident
and health member insurers and 50 percent to be allocated to life
and annuity member insurers. This subsection does not apply to a
rider to a member insurer's life insurance policy or annuity
contract that provides long-term care benefits.
(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 impaired or insolvent member
insurer became an impaired or insolvent insurer. If two or more
assessments are authorized in a calendar year with respect to
member insurers that become impaired or insolvent in different
calendar years, the average annual premiums for purposes of the
aggregate assessment percentage limitation 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 12. Sections 463.154 and 463.201, Insurance Code,
are amended to read as follows:
Sec. 463.154. DEFERMENT. The association may wholly or
partly defer an assessment on [of] a member insurer if the
association believes payment of the assessment would endanger the
ability of the insurer to fulfill the insurer's contractual
obligations. The amount of the assessment that is deferred may be
assessed against the other member insurers in a manner consistent
with this subchapter.
Sec. 463.201. PERSONS [INSUREDS] COVERED. (a) Subject to
Subsections (b) and (c), this chapter provides coverage for a
policy or contract described by Section 463.202 to a person who is:
(1) a person, other than a certificate holder under a
group policy or contract who is not a resident, who is a
beneficiary, assignee, or payee, including a health care provider
who renders services covered under a health insurance policy or
certificate, of a person described by Subdivision (2);
(2) a person who is an owner of or certificate holder
or enrollee under a policy or contract specified by Section
463.202, other than an unallocated annuity contract or structured
settlement annuity, and who is:
(A) a resident; or
(B) not a resident, but only under all of the
following conditions:
(i) the member insurers that issued the
policies or contracts are domiciled in this state;
(ii) the state in which the person resides
has an association similar to the association; and
(iii) the person is not eligible for
coverage by an association in any other state because the insurer or
health maintenance organization was not licensed in the state at
the time specified in that state's guaranty association law;
(3) a person who is the owner of an unallocated annuity
contract issued to or in connection with:
(A) a benefit plan whose plan sponsor has the
sponsor's principal place of business in this state; or
(B) a government lottery, if the owner is a
resident; or
(4) a person who is the payee under a structured
settlement annuity, or beneficiary of the payee if the payee is
deceased, if:
(A) the payee is a resident, regardless of where
the contract owner resides;
(B) the payee is not a resident, the contract
owner of the structured settlement annuity is a resident, and the
payee is not eligible for coverage by the association in the state
in which the payee resides; or
(C) the payee and the contract owner are not
residents, the insurer that issued the structured settlement
annuity is domiciled in this state, the state in which the contract
owner resides has an association similar to the association, and
neither the payee or, if applicable, the payee's beneficiary, nor
the contract owner is eligible for coverage by the association in
the state in which the payee or contract owner resides.
(b) This chapter does not provide coverage to:
(1) a person who is a payee or the beneficiary of a
payee with respect to a contract the owner of which is a resident of
this state, if the payee or the payee's beneficiary is afforded any
coverage by the association of another state; [or]
(2) a person otherwise described by Subsection (a)(3),
if any coverage is provided by the association of another state to
that person; or
(3) a person who acquires rights to receive payments
through a structured settlement factoring transaction as defined by
Section 5891(c)(3)(A), Internal Revenue Code of 1986 (26 U.S.C.
Section 5891(c)(3)(A)), regardless of whether the transaction
occurred before, on, or after the date that section became
effective.
(c) This chapter is intended to provide coverage to persons
who are residents of this state, and in those limited circumstances
as described in this chapter, to nonresidents. In order to avoid
duplicate coverage, if a person who would otherwise receive
coverage under this chapter is provided coverage under the laws of
any other state, the person may not be provided coverage under this
chapter. In determining the application of the provisions of this
subsection in situations in which a person could be covered by the
association of more than one state, whether as an owner, payee,
enrollee, beneficiary, or assignee, this chapter shall be construed
in conjunction with other state laws to result in coverage by only
one association.
SECTION 13. Section 463.202(a), Insurance Code, is amended
to read as follows:
(a) Except as limited by this chapter, the coverage provided
by this chapter to a person specified by Section 463.201, subject to
Sections 463.201(b) and (c), applies with respect to the following
policies and contracts issued by a member insurer:
(1) a direct, nongroup life, health, accident,
annuity, or supplemental policy or contract, including a health
maintenance organization contract or certificate;
(2) a certificate under a direct group policy or
contract;
(3) a group hospital service contract; and
(4) an unallocated annuity contract.
SECTION 14. Section 463.203, Insurance Code, is amended by
amending Subsection (b) and adding Subsection (b-1) 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;
(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), 42 U.S.C. Sections 1396-1396w-5 (Medicaid), or 42
U.S.C. Sections 1397aa-1397mm (State Children's Health Insurance
Program) or a regulation adopted under those federal statutes; or
(14) structured settlement annuity benefits to which a
payee or beneficiary has transferred the payee's or beneficiary's
rights in a structured settlement factoring transaction as defined
by Section 5891(c)(3)(A), Internal Revenue Code of 1986 (26 U.S.C.
Section 5891(c)(3)(A)), regardless of whether the factoring
transaction occurred before, on, or after the date that section
became effective.
(b-1) The exclusion from coverage described by Subsection
(b)(3) does not apply to any portion of a policy or contract,
including a rider, that provides long-term care benefits or any
other health insurance benefit.
SECTION 15. 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 life insurance policies on a
single life;
(2) an amount in excess of:
(A) $250,000 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 health benefit plans [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 income 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 health benefit plans [basic hospital, medical-surgical, major
medical], disability income, or long-term care insurance;
(4) an amount in excess of $250,000 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 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 health benefit plans
[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 covered person; or
(B) imposed by a court.
SECTION 16. Section 463.251(b), Insurance Code, is amended
to read as follows:
(b) With the commissioner's approval, the association may:
(1) guarantee, assume, reissue, or reinsure, or cause
to be guaranteed, assumed, reissued, or reinsured, one or more of
the insurer's policies or contracts;
(2) provide money, pledges, notes, guarantees, or
other means proper to:
(A) implement Subdivision (1); and
(B) ensure payment of the insurer's contractual
obligations until action is taken under Subdivision (1); or
(3) loan money to the insurer.
SECTION 17. Section 463.252(c), Insurance Code, is amended
to read as follows:
(c) A policy or contract owner, certificate holder, or
enrollee who claims emergency or hardship may petition for
substitute benefits under standards the association proposes and
the commissioner approves. Substitute benefits are available only
for a health claim, periodic annuity benefit payment, death
benefit, supplemental benefit, or cash withdrawal.
SECTION 18. Section 463.253(b), Insurance Code, is amended
to read as follows:
(b) The association shall provide money, pledges,
guarantees, or other means reasonably necessary to discharge the
insurer's duties and to:
(1) guarantee, assume, reissue, or reinsure, or cause
to be guaranteed, assumed, reissued, or reinsured, the insurer's
policies or contracts; or
(2) ensure payment of the insurer's contractual
obligations.
SECTION 19. Sections 463.254(b), (e), (f), (g), (h), and
(i), Insurance Code, are amended to read as follows:
(b) The association, in accordance with Subsections (c) and
(d), as applicable, shall ensure payment of benefits identical to
the benefits that would have been payable under the policy or
contract of the insurer[, at premiums identical to the premiums
that would have been applicable under that policy or contract,
except for terms of conversion and renewability].
(e) The association shall diligently attempt to provide
each known insured, enrollee, or group policy or contract holder
[policyholder] with notice before the 30th day before the date the
benefits are terminated.
(f) As provided by Subsections (g)-(i), the association
shall make substitute coverage available on an individual basis to:
(1) each known insured or enrollee under an individual
policy, or the owner if other than the insured or enrollee; and
(2) each individual who:
(A) was formerly insured or enrolled under a
group policy or contract; and
(B) is not eligible for replacement group
coverage.
(g) Substitute coverage is available for an individual
policy under Subsection (f) only if the insured, enrollee, or owner
was entitled under law or the terminated policy to continue an
individual policy in force until a specified age or for a specified
period during which the insurer:
(1) was not entitled to unilaterally change a
provision of the policy; or
(2) was entitled only to change a premium by class.
(h) Substitute coverage is available for a group policy or
contract under Subsection (f) only if the formerly insured or
enrolled individual was entitled under law or the terminated policy
or contract to convert group coverage to individual coverage.
(i) To provide substitute coverage under Subsection (f),
the association may offer to reissue the terminated coverage or
issue an alternative policy. The association shall offer the
reissued or alternative policy without requiring evidence of
insurability, at actuarially justified rates. The reissued or
alternative policy may not provide for a waiting period or
exclusion that would not have applied under the terminated
policy. The association may reinsure a reissued or alternative
policy.
SECTION 20. Section 463.256(b), Insurance Code, is amended
to read as follows:
(b) The association shall set the premium according to a
table of rates the association adopts. The premium:
(1) must reflect:
(A) the amount of insurance provided; and
(B) each insured's or enrollee's age and class of
risk; and
(2) may not reflect any change in an insured's or
enrollee's health occurring after the original policy was most
recently underwritten.
SECTION 21. Section 463.258, Insurance Code, is amended to
read as follows:
Sec. 463.258. PREMIUM FOR REISSUANCE OF TERMINATED
COVERAGE. If the association reissues terminated coverage at a
premium different from the terminated policy's premium, the premium
must:
(1) reflect the amount of insurance provided and the
insured's or enrollee's age and class of risk; and
(2) be approved by the commissioner or a court.
SECTION 22. Section 463.260(b), Insurance Code, is amended
to read as follows:
(b) The association's obligations with respect to coverage
under a policy of an impaired or insolvent insurer or under a
reissued or alternative policy terminate on the date the coverage
or policy is replaced by another similar policy by the
policyholder, the contract owner, the insured, the enrollee, or the
association.
SECTION 23. Sections 463.261(a) and (c), Insurance Code,
are amended to read as follows:
(a) A person receiving a benefit under this chapter,
including a payment of or on account of a contractual obligation,
continuation of coverage, or provision of substitute or alternative
coverage, is considered to have assigned to the association the
rights under, and any cause of action relating to, the covered
policy to the extent of the benefit received. The association may
require a payee, policy or contract owner, beneficiary, insured,
enrollee, or annuitant to assign the person's rights and cause of
action to the association as a condition of receiving a right or
benefit under this chapter.
(c) The association has all common law rights of subrogation
and any other equitable or legal remedy that would have been
available to the impaired or insolvent insurer or holder,
beneficiary, enrollee, or payee of a policy or contract with
respect to the policy or contract.
SECTION 24. Section 463.304, Insurance Code, is amended to
read as follows:
Sec. 463.304. DISTRIBUTION OF OWNERSHIP RIGHTS OF IMPAIRED
OR INSOLVENT INSURER. In making an equitable distribution of the
ownership rights of an impaired or insolvent insurer before the
termination of a receivership, the court:
(1) shall consider the welfare of the policyholders,
contract owners, certificate holders, and enrollees of the
continuing or successor insurer; and
(2) may consider the contributions of the respective
parties, including the association, the shareholders, [and]
policyholders, contract owners, certificate holders, and enrollees
of the impaired or insolvent insurer, and any other party with a
bona fide interest.
SECTION 25. Section 463.351(a), Insurance Code, is amended
to read as follows:
(a) The commissioner shall:
(1) notify the insurance officials of all the other
states, territories of the United States, and the District of
Columbia by mail not later than the 30th day after the date the
commissioner:
(A) revokes or suspends a member insurer's
certificate of authority; or
(B) issues a formal order requiring a member
insurer to:
(i) restrict the insurer's premium writing;
(ii) withdraw from this state;
(iii) reinsure all or part of the insurer's
business;
(iv) obtain additional contributions to
surplus; or
(v) increase capital, surplus, or another
account for the security of policyholders, contract owners, or
creditors;
(2) report to the board when the commissioner:
(A) takes an action described by Subdivision (1)
or receives from another insurance official a report indicating
that a similar action has been taken in another state; or
(B) has reasonable cause to believe from a
completed or continuing examination that a member insurer may be
impaired or insolvent; and
(3) provide to the board the National Association of
Insurance Commissioners Insurance Regulatory Information System
ratios and listings of insurers not included in those ratios.
SECTION 26. The changes in law made by this Act apply only
to an insurer that first becomes impaired or insolvent on or after
the effective date of this Act.
SECTION 27. This Act takes effect September 1, 2019.