HB 403: "An Act relating to the Alaska Life and Health Insurance Guaranty Association; and providing for an effective date."
00 HOUSE BILL NO. 403 01 "An Act relating to the Alaska Life and Health Insurance Guaranty Association; and 02 providing for an effective date." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 21.79.010 is amended to read: 05 Sec. 21.79.010. Purpose. The purpose of this chapter is to protect, subject to 06 certain limitations, the persons specified in AS 21.79.020(a) against failure in the 07 performance of contractual obligations under life, [INSURANCE AND] health, 08 [INSURANCE POLICIES] and annuity policies, plans, or contracts specified in 09 AS 21.79.020(b) because of the impairment or insolvency of the member insurer that 10 issued the policies, plans, or contracts. To provide this protection, an association of 11 insurers is created under AS 21.79.040 to pay benefits and continue coverages as 12 limited by this chapter, and members of the association are subject to assessment to 13 provide funds to carry out the purpose of this chapter. 14 * Sec. 2. AS 21.79.020(a) is amended to read:
01 (a) This chapter applies to a policy and contract specified in (b) of this section 02 and to a person who 03 (1) except for a nonresident certificate holder under a group policy or 04 contract, is the beneficiary, assignee, or payee, including health care providers 05 rendering services covered under health insurance policies or certificates, of a 06 person described in (2) of this subsection; and 07 (2) except in the case of an unallocated annuity contract or a structured 08 settlement annuity, is the owner of, or a certificate holder or enrollee under, the policy 09 or contract, and who 10 (A) is a resident; or 11 (B) is not a resident, if the following conditions are satisfied: 12 (i) the member insurer that issued the policy or contract 13 is domiciled in this state; 14 (ii) the state in which the person resides has an 15 association similar to the association created by this chapter; and 16 (iii) the person is not eligible for coverage by an 17 association in any other state due to the fact that the insurer, hospital 18 or medical service corporation, or health maintenance organization 19 was not licensed at the time specified in the guaranty association 20 [AS REQUIRED BY] law of [IN] that state. 21 * Sec. 3. AS 21.79.020(b) is amended to read: 22 (b) This chapter applies to a person specified in (a) of this section for a policy 23 or contract of [AND TO A] direct, nongroup life insurance, health insurance, 24 annuity, and supplemental policy or contract, to a certificate under a direct group life, 25 health, annuity, or supplemental policy or contract, to a subscriber's contract issued 26 by a hospital or medical service corporation under AS 21.87, to a subscriber's 27 contract issued by a health maintenance organization under AS 21.86, and to an 28 unallocated annuity contract issued by a member insurer, except as otherwise limited 29 by this chapter. In this subsection, "annuity policy or contract" or "certificate 30 under a direct group life, health, annuity, or supplemental policy or contract" 31 includes a guaranteed investment contract, a deposit administration contract, an
01 unallocated funding agreement, an allocated funding agreement, a structured 02 settlement annuity, an annuity issued to or in connection with a government 03 lottery, and an immediate or deferred annuity contract. 04 * Sec. 4. AS 21.79.020(c) is amended to read: 05 (c) This chapter does not apply to 06 (1) that part of a policy or contract that is not guaranteed by the 07 member insurer; 08 (2) that part of the risk borne by the policy or contract owner 09 [HOLDER]; 10 (3) a policy or contract of reinsurance, unless an assumption certificate 11 has been issued; 12 (4) that part of a policy or contract, except for part of a policy or 13 contract, including a rider, that provides long-term care or other health 14 insurance benefits, to the extent that the rate of interest on which it is based, or the 15 interest rate, crediting rate, or similar factor determined by use of an index or other 16 external reference stated in the policy or contract employed in calculating returns or 17 changes in value, 18 (A) averaged over the period of four years before the date on 19 which the member insurer becomes an impaired or insolvent insurer under this 20 chapter, whichever occurs first, exceeds the rate of interest determined by 21 subtracting two percentage points from the published monthly average for that 22 same four-year period or for a lesser period if the policy or contract was issued 23 less than four years before the member insurer becomes an impaired or 24 insolvent insurer under this chapter, whichever occurs first; and 25 (B) on and after the date on which the member insurer becomes 26 an impaired or insolvent insurer under this chapter, whichever occurs first, 27 exceeds the rate of interest determined by subtracting three percentage points 28 from the most recent published monthly average; 29 (5) a portion of a policy or contract issued to a plan or program of 30 an employer, association, or similar entity to provide life, health, or an annuity benefit 31 to an employee, [OR] member, or other person, to the extent that the plan or program
01 is self-funded or uninsured, including a benefit payable by the employer, association, 02 or similar entity under 03 (A) a multiple employer welfare arrangement as defined in 29 04 U.S.C. 1002 (Employee Retirement Income Security Act of 1974); 05 (B) a minimum premium group insurance plan; 06 (C) a stop-loss group insurance plan; or 07 (D) an administrative services only contract; 08 (6) that part of a policy or contract that provides a dividend or 09 experience rating credit or voting rights, or provides that a fee or allowance be paid to 10 a person, including the policy or contract owner [HOLDER], in connection with the 11 service to or administration of the policy or contract; 12 (7) a policy or contract issued in this state by a member insurer at a 13 time when it was not licensed or did not have a certificate of authority to issue the 14 policy or contract in this state; 15 (8) a person who is a payee or beneficiary of a contract owner 16 [HOLDER] who is a resident of this state if the payee or beneficiary is provided 17 coverage by the association of another state; 18 (9) a person covered under (d) [(e)] of this section if any coverage is 19 provided by the association of another state to that person; 20 (10) an unallocated annuity contract issued to or in connection with a 21 benefit plan protected under the United States Pension Benefit Guaranty Corporation, 22 regardless of whether the United States Pension Benefit Guaranty Corporation has 23 become liable to make any payments with respect to the benefit plan; 24 (11) that part of an unallocated annuity contract that is not issued to or 25 in connection with a specific employee, union, or association of natural persons 26 benefit plan or a government lottery; 27 (12) that part of a policy or contract to the extent that assessments 28 required by AS 21.79.070 with respect to the policy or contract are preempted by law; 29 (13) an obligation that does not arise under the express written terms of 30 the policy or contract issued by the member insurer to the enrollee, certificate 31 holder, contract owner, or policy owner, including, without limitation,
01 (A) a claim based on marketing materials; 02 (B) a claim based on a side letter or other document that was 03 issued by the member insurer without meeting applicable policy or contract 04 form filing or approval requirements; 05 (C) a misrepresentation of or regarding policy or contract 06 benefits; 07 (D) an extra contractual claim; or 08 (E) a claim for penalties or consequential or incidental 09 damages; 10 (14) a contractual agreement that establishes the member insurer's 11 obligations to provide a book value accounting guaranty for defined contribution 12 benefit plan participants by reference to a portfolio of assets that is owned by the 13 benefit plan or its trustee, which, in each case, is not an affiliate of the member 14 insurer; [OR] 15 (15) that part of a policy or contract to the extent the part of the policy 16 or contract provides for interest or other changes in value to be determined by the use 17 of an index or other external reference stated in the policy or contract, but that have 18 not been credited to the policy or contract, or as to which the policy or contract 19 owner's rights are subject to forfeiture, as of the date the member insurer becomes an 20 impaired or insolvent insurer under this chapter, whichever is earlier; if a policy's or 21 contract's interest or changes in value are credited less frequently than annually, then, 22 for purposes of determining the values that have been credited and are not subject to 23 forfeiture under this paragraph, the interest or change in value determined by using the 24 procedures defined in the policy or contract shall be credited as if the contractual date 25 of crediting interest or changing values was the date of impairment or insolvency, 26 whichever is earlier, and will not be subject to forfeiture; 27 (16) a policy or contract providing a hospital, medical, 28 prescription drug, or other health care benefit in accordance with 42 U.S.C. 29 1395w-21 - 1395w-154 or federal regulations adopted under those sections; 30 (17) a person who acquires rights to receive payments through a 31 structured settlement factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A),
01 regardless of whether the transaction occurred before, on, or after 26 U.S.C. 02 5891(c)(3)(A) became effective; or 03 (18) structured settlement annuity benefits to which a payee or 04 beneficiary has transferred the payee's or beneficiary's rights in a structured 05 settlement factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A), regardless 06 of whether the transaction occurred before, on, or after 26 U.S.C. 5891(c)(3)(A) 07 became effective. 08 * Sec. 5. AS 21.79.020(d) is amended to read: 09 (d) This chapter, except for (a) of this section, applies to an unallocated 10 annuity contract [SPECIFIED UNDER (b) OF THIS SECTION,] and shall provide 11 coverage to a person who is the owner of 12 (1) the unallocated annuity contract if the contract is issued to or in 13 connection with a specific benefit plan whose plan sponsor has its principal place of 14 business in this state; and 15 (2) an unallocated annuity contract issued to or in connection with a 16 government lottery if the owner is a resident. 17 * Sec. 6. AS 21.79.020(e) is amended to read: 18 (e) This chapter, except for (a) of this section, applies to a structured 19 settlement annuity [SPECIFIED UNDER (b) OF THIS SECTION,] and shall provide 20 coverage to a person who is a payee under a structured settlement annuity, or the 21 beneficiary of a payee if the payee is deceased, if the payee is 22 (1) a resident, regardless of where the contract owner resides; or 23 (2) not a resident, but only if both of the following conditions exist 24 [EXISTS]: 25 (A) the contract owner of the structured settlement annuity is 26 (i) a resident; or 27 (ii) not a resident, but the insurer that issued the 28 structured settlement annuity is domiciled in this state, and the state in 29 which the contract owner resides has an association similar to the 30 association created by this chapter; and 31 (B) the payee, or the payee's beneficiary, and the contract
01 owner are not eligible for coverage by the association of the state in which the 02 payee or contract owner resides. 03 * Sec. 7. AS 21.79.025(a) is amended to read: 04 (a) The benefits for which the association may become liable may not exceed 05 the lesser of 06 (1) the contractual obligations for which the member insurer is liable 07 or would have been liable if it were not an impaired or insolvent insurer; 08 (2) with respect to any one life, regardless of the number of policies or 09 contracts, 10 (A) $300,000 in life insurance death benefits, but not more than 11 $100,000 in net cash surrender and net cash withdrawal values for life 12 insurance; 13 (B) for [IN] health insurance benefits, 14 (i) $100,000 for coverage not defined as disability 15 income insurance, health benefit plans, or long-term care insurance, 16 [OR BASIC HOSPITAL, MEDICAL, AND SURGICAL 17 INSURANCE OR MAJOR MEDICAL INSURANCE,] including any 18 net cash surrender and net cash withdrawal values; 19 (ii) $300,000 for disability income insurance as defined 20 in AS 21.12.052 and $300,000 for long-term care insurance as defined 21 in AS 21.53.200; 22 (iii) $500,000 for health benefit plans [BASIC 23 HOSPITAL, MEDICAL, AND SURGICAL INSURANCE OR 24 MAJOR MEDICAL INSURANCE]; 25 (C) $250,000 in the present value of annuity benefits, including 26 net cash surrender and net cash withdrawal values; 27 (3) with respect to either [ANY] one contract owner provided 28 coverage under AS 21.79.020(d)(2) [HOLDER] or one plan sponsor whose plan 29 owns directly or in trust one or more unallocated annuity contracts not included in (4) 30 of this subsection, $5,000,000 in unallocated annuity contract benefits, irrespective of 31 the number of contracts held by that contract owner [HOLDER] or plan sponsor
01 except that, in the case of one or more unallocated annuity contracts that are covered 02 under this chapter and that are owned by a trust or other entity for the benefit of two or 03 more plan sponsors, coverage shall be provided by the association if the largest 04 interest in the trust or entity owning the contract is held by a plan sponsor whose 05 principal place of business is in this state; however, the association is not liable to 06 cover more than $5,000,000 in benefits, regardless of the number of policies and 07 contracts held by the owner [WITH RESPECT TO AN UNALLOCATED 08 ANNUITY CONTRACT NOT INCLUDED IN (4) OF THIS SUBSECTION]; 09 (4) with respect to an individual participating in a governmental 10 retirement benefit plan established under 26 U.S.C. 401, 26 U.S.C. 403(b), or 26 11 U.S.C. 457 and covered by an unallocated annuity contract, or to a beneficiary of the 12 individual if the individual is deceased, in the aggregate, $250,000 [$100,000] in 13 present-value annuity benefits, including net cash surrender and net cash withdrawal 14 values; or 15 (5) with respect to each payee of a structured settlement annuity, or 16 beneficiary of the payee if the payee is deceased, $250,000 [$100,000] in present- 17 value annuity benefits in the aggregate, including net cash surrender and net cash 18 withdrawal values, if any. 19 * Sec. 8. AS 21.79.025(c) is amended to read: 20 (c) In providing coverage required under AS 21.79.060, the association may 21 not be required to guarantee, assume, reissue, reinsure, or perform, or cause to be 22 guaranteed, assumed, reissued, reinsured, or performed, the contractual obligations of 23 an insolvent or impaired insurer under a covered policy or contract when the 24 obligations do not materially affect the economic values or economic benefits of the 25 covered policy or contract. 26 * Sec. 9. AS 21.79.025(d) is amended to read: 27 (d) The association may not be required to cover more than 28 (1) an aggregate of $300,000 in benefits with respect to any one life 29 under (a)(2), (4), and (5) of this section, except that, with respect to benefits for health 30 benefit plans [BASIC HOSPITAL, MEDICAL, AND SURGICAL INSURANCE OR 31 MAJOR MEDICAL INSURANCE] under (a)(2)(B) of this section, the aggregate
01 liability of the association may not exceed $500,000 for any one individual; or 02 (2) $5,000,000 in benefits with respect to one owner of [OR] multiple 03 nongroup policies of life insurance, whether the policy or contract owner is an 04 individual, firm, corporation, or other person, and whether the persons insured are 05 officers, managers, employees, or other persons, regardless of the number of policies 06 and contracts held by the owner. 07 * Sec. 10. AS 21.79.025 is amended by adding a new subsection to read: 08 (e) For purposes of this chapter, benefits provided by a long-term care rider to 09 a life insurance policy or annuity contract will be considered the same type of benefits 10 as the base life insurance policy or annuity contract to which the rider relates. 11 * Sec. 11. AS 21.79.040(a) is amended to read: 12 (a) There is established as a nonprofit legal entity the Alaska Life and Health 13 Insurance Guaranty Association. Each member insurer shall be a member of the 14 association as a condition of the insurer's authority to transact insurance, a hospital or 15 medical service corporation business, or a health maintenance organization 16 business in this state. The association shall perform its functions under a plan of 17 operation established and approved under AS 21.79.080 and shall exercise its powers 18 through the Board of Governors established under AS 21.79.050. For purposes of 19 administration and assessment, the association shall maintain the following accounts: 20 (1) the health [INSURANCE] account; and 21 (2) the life insurance and annuity account, including the following 22 subaccounts: 23 (A) life insurance account; 24 (B) annuity account that must include annuity contracts owned 25 by a governmental retirement benefit plan, or its trustee, qualified under 26 26 U.S.C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457 (Internal Revenue Code), but 27 that otherwise excludes unallocated annuities; and 28 (C) unallocated annuity account that must exclude contracts 29 owned by a governmental retirement benefit plan, or its trustee, qualified under 30 26 U.S.C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457 (Internal Revenue Code). 31 * Sec. 12. AS 21.79.050(a) is amended to read:
01 (a) The Board of Governors of the association consists of not less than seven 02 [FIVE] nor more than 11 [NINE] representatives of member insurers. The director 03 may appoint two individuals as members of the board to represent the public. Terms of 04 office for board members shall be established in the plan of operation submitted under 05 AS 21.79.080. Member insurers shall select the insurer board members, subject to the 06 approval of the director. A vacancy in a board membership held by an insurer member 07 shall be filled for the unexpired term by a majority vote of the remaining board 08 members, subject to the approval of the director. A vacancy in a board membership 09 held by a representative of the public shall be filled by the director. A board member 10 who represents the public may not be an officer, director, or employee of an insurer, 11 hospital or medical service corporation, or a health maintenance organization 12 and may not be engaged in the business of insurance. 13 * Sec. 13. AS 21.79.060(a) is amended to read: 14 (a) If a member insurer becomes impaired, the association may, with the 15 approval of the director and subject to any conditions imposed by the association that 16 do not impair the contractual obligations of the impaired insurer, 17 (1) guarantee, assume, reissue, reinsure, or provide for the guarantee, 18 assumption, reissuance, or reinsurance of the policies or contracts of the impaired 19 insurer; and [OR] 20 (2) provide money, pledges, loans, notes, guarantees, or other means 21 that are necessary to act under (1) of this subsection and to assure payment of the 22 contractual obligations of the impaired insurer until those obligations are guaranteed, 23 reinsured, or assumed. 24 * Sec. 14. AS 21.79.060(d) is amended to read: 25 (d) If a member insurer becomes insolvent, the association shall, in its 26 discretion and with the approval of the director, 27 (1) guarantee, assume, reissue, reinsure, or provide for the guarantee, 28 assumption, reissuance, or reinsurance of the covered policies or contracts of the 29 insolvent insurer, or otherwise assure payment of the contractual obligations of 30 the insolvent insurer; and provide money, pledges, loans, notes, guarantees, or 31 other means that are necessary to discharge the association's duties under this
01 section; or 02 (2) provide benefits and coverage in accordance with the following 03 provisions: 04 (A) with respect to policies and contracts, assure payment 05 of benefits that would have been payable under a policy or contract of the 06 insolvent insurer for claims incurred with respect to 07 (i) a group policy or contract, not later than the 08 earlier of the next renewal date under the policy or contract or 45 09 days, but in no event less than 30 days, after the date on which the 10 association becomes obligated with respect to the policy or 11 contract; 12 (ii) an individual policy, contract, or annuity, not 13 later than the earlier of the next renewal date, if any, under the 14 policy or contract or one year, but in no event less than 30 days, 15 after the date on which the association becomes obligated with 16 respect to the policy or contract; 17 (B) with respect to an individual or group policy or 18 contract, make a diligent effort to provide a known insured, an enrollee, 19 an annuitant, or a group policy owner or group contract owner 30 days' 20 notice of the termination of the benefits provided; 21 (C) with respect to an individual policy or contract, make 22 available to each known insured, enrollee, or annuitant, or owner if other 23 than an insured, enrollee, or annuitant, and with respect to an individual 24 who was formerly an insured, enrollee, or annuitant under a group policy 25 or contract who is not eligible for replacement group coverage, make 26 available substitute coverage on an individual basis under (D) of this 27 paragraph, if the insured, enrollee, or annuitant had a right under law or 28 under the terminated policy or contract to convert coverage to individual 29 coverage or to continue an individual policy or contract in force until a 30 specified age, or for a specific time during which the insurer, hospital or 31 medical service corporation, or health maintenance organization did not
01 have the unilateral right to make changes in any provision of the policy or 02 contract or had a right only to make changes in premium by class; 03 (D) in providing the substitute coverage under (C) of this 04 paragraph, the association 05 (i) shall offer either to reissue the terminated 06 coverage or to issue an alternate policy or contract at actuarially 07 justified rates; 08 (ii) shall offer an alternative or reissued policy or 09 contract without requiring evidence of insurability and may not 10 provide for a waiting period or exclusion that would not have 11 applied under the terminated policy or contract; and 12 (iii) may reinsure an alternative or reissued policy or 13 contract; 14 (E) an alternative policy or contract must 15 (i) if adopted by the association, be subject to the 16 approval of the director and the receivership court; the association 17 may adopt alternative policies or contracts of various types for 18 future issuance without regard to a particular impairment or 19 insolvency; 20 (ii) contain at least the minimum statutory 21 provisions required in the state and provide benefits that may not 22 be unreasonable in relation to the premium charged; the 23 association shall set the premium under a table of rates that it shall 24 adopt; the premium must reflect the amount of insurance to be 25 provided and the age and class of risk of each insured, but may not 26 reflect changes in the health of the insured after the original policy 27 or contract was last underwritten; 28 (iii) if issued by the association, provide coverage of 29 a type similar to that of the policy or contract issued by the 30 impaired or insolvent insurer, as determined by the association; 31 (F) if the association elects to reissue terminated coverage
01 at a premium rate different from that charged under the terminated 02 policy or contract, the premium shall be actuarially justified and set by 03 the association according to the amount of insurance or coverage provided 04 and the age and class of risk; 05 (G) the association's obligations with respect to coverage 06 under a policy or contract of an impaired or insolvent insurer or under a 07 reissued or alternative policy or contract stop on the date the coverage, 08 policy, or contract is replaced by another similar policy or contract by the 09 policy or contract owner, the insured, the enrollee, or the association; 10 (H) when proceeding under this subsection with respect to a 11 policy or contract carrying guaranteed minimum interest rates, the 12 association shall assure the payment or crediting of a rate of interest 13 consistent with AS 21.79.020(c)(4) [HELD BY RESIDENTS; 14 (2) ASSURE PAYMENT TO RESIDENTS OF THE 15 CONTRACTUAL OBLIGATIONS OF THE INSOLVENT INSURER; 16 (3) PROVIDE MONEY, PLEDGES, NOTES, GUARANTEES, OR 17 OTHER MEANS NECESSARY TO DISCHARGE THE ASSOCIATION'S DUTIES 18 UNDER THIS SUBSECTION; OR 19 (4) WITH RESPECT ONLY TO LIFE AND HEALTH INSURANCE 20 POLICIES AND ANNUITIES, PROVIDE BENEFITS AND COVERAGES 21 REQUIRED UNDER (e) OF THIS SECTION]. 22 * Sec. 15. AS 21.79.060(k) is amended to read: 23 (k) Nonpayment of a premium within 31 days after the date required under the 24 terms of a guaranteed, assumed, alternative or reissued policy or contract or substitute 25 coverage terminates the obligations of the association under the policy, contract, or 26 coverage except with respect to the claims incurred or the net cash surrender value that 27 may be due under the provisions of this chapter. 28 * Sec. 16. AS 21.79.060(l) is amended to read: 29 (l) A premium due for coverage after entry of an order of liquidation of an 30 insolvent insurer belongs to and is payable at the direction of the association. Upon 31 request of a liquidator of an insolvent insurer, the association shall provide a
01 report to the liquidator regarding the premium collected by the association. The 02 [, AND THE] association is liable for unearned premiums due to a policy or contract 03 owner arising after the entry of the order. 04 * Sec. 17. AS 21.79.060(n) is amended to read: 05 (n) In carrying out its duties under [(a), (c), AND] (d) of this section, the 06 association may impose a permanent policy or contract lien under a guarantee, 07 assumption, or reinsurance agreement if the policy or contract lien is approved by a 08 court and the association finds that 09 (1) the amount that may be assessed under this chapter is less than the 10 amount needed to assure full and prompt performance of the association's duties 11 under this chapter [INSOLVENT INSURER'S CONTRACTUAL OBLIGATIONS]; 12 or 13 (2) the economic or financial condition that affects member insurers is 14 sufficiently adverse that the imposition of a policy or contract lien is in the public 15 interest. 16 * Sec. 18. AS 21.79.060(o) is amended to read: 17 (o) In carrying out its duties [BEFORE TAKING ACTION] under (d) [(a) - 18 (e)] of this section, the association may request the superior court to impose an 19 injunction against the payment of a cash value and policy loan, or the exercise of 20 another right to withdraw funds held in connection with a policy or contract, in 21 addition to a contractual provision for deferral of a cash or policy loan value. In 22 addition, if the receivership court imposes an injunction on payment of cash values or 23 policy loans or on any other right to withdraw funds of an impaired or insolvent 24 insurer held in conjunction with a policy or contract, the association may defer 25 payment of cash values, policy loans, or other rights for the period of the injunction, 26 except for claims covered by the association to be paid as required by a hardship 27 procedure established by the liquidator or rehabilitator and approved by the 28 receivership court. 29 * Sec. 19. AS 21.79.060(p) is amended to read: 30 (p) If the association fails to take action under (d) [(a) - (e)] of this section 31 within a reasonable period of time after a member insurer becomes insolvent, the
01 director shall assume the powers of the association under (d) [(a) - (e)] of this section. 02 * Sec. 20. AS 21.79.060(s) is amended to read: 03 (s) A person who receives benefits under this chapter is considered to have 04 assigned the rights under, and any cause of action against a person for losses arising 05 under, resulting from, or otherwise relating to, the covered policy to the association to 06 the extent of the benefits received under this chapter, whether the benefits are payment 07 of or on account of contractual obligations, continuations of coverage, or provisions of 08 substitute or alternative policies, contracts, or coverages [COVERAGE]. The 09 association may require an assignment to the association of those rights by the 10 enrollee, payee [PAYEES], policy or contract owner, beneficiary, insured, or 11 annuitant before a person receives the rights or benefits conferred by this chapter. The 12 priority of the association's subrogation right to the assets of the insolvent insurer is 13 the same as the priority of the person entitled to benefits under this chapter. In addition 14 to the rights described in this subsection, the association has common law rights of 15 subrogation and any other equitable or legal remedy that would have been available to 16 the impaired or insolvent insurer or owner, beneficiary, enrollee, or payee of a policy 17 or contract with respect to the policy or contract. These rights include, in the case of 18 a structured settlement annuity, the rights of the enrollee, owner, beneficiary, or payee 19 of the annuity, to the extent of benefits received under this chapter, against a person 20 originally or by succession responsible for the losses arising from the personal injury 21 relating to the annuity or annuity payment, except for a person responsible solely by 22 reason of being an assignee in respect to a qualified assignment under 26 U.S.C. 130 23 (Internal Revenue Code). If the provisions of this subsection are invalid with respect 24 to a person or claim, the amount payable by the association with respect to the related 25 coverage obligation shall be reduced by the amount realized by another person from 26 the person or claim covered by the association. If the association has provided benefits 27 with respect to a covered obligation and a person recovers amounts to which the 28 association has rights as described in this subsection, the person recovering the 29 amounts shall pay to the association the portion of the recovery attributable to the 30 policies or contracts [POLICY] covered by the association. 31 * Sec. 21. AS 21.79.060(t) is amended to read:
01 (t) In addition to the rights and powers otherwise established in this chapter, 02 the association may 03 (1) enter into contracts that are necessary or proper to carry out the 04 provisions of this chapter; 05 (2) sue or be sued, and take legal action necessary or proper for 06 recovery of an unpaid assessment under AS 21.79.070 or settlement of a claim or 07 potential claim; 08 (3) borrow money to carry out the purposes of this chapter; notes or 09 other evidence of indebtedness of the association not in default are legal investments 10 for domestic member insurers and may be carried as admitted assets; 11 (4) employ or retain those persons necessary to handle the financial 12 transactions of the association and other functions under this chapter; 13 (5) negotiate and contract with a liquidator, rehabilitator, conservator, 14 or ancillary receiver to carry out the powers and duties of the association; 15 (6) exercise, for the purposes of this chapter and to the extent approved 16 by the director, the powers of a domestic life insurer, [OR] health insurer, hospital or 17 medical service corporation, or health maintenance organization; however, the 18 association may not issue [INSURANCE] policies or [ANNUITY] contracts other 19 than those issued to perform its obligations under this chapter [THE 20 CONTRACTUAL OBLIGATIONS OF AN IMPAIRED OR INSOLVENT 21 INSURER]; 22 (7) take legal action to prevent or recover the payment of improper 23 claims; 24 (8) join an organization of one or more other state associations with 25 similar purposes; 26 (9) determine, using reasonable business judgment, the means by 27 which the association is to provide the benefits of this chapter in an economical and 28 efficient manner; 29 (10) request information from a person seeking coverage from the 30 association in order to determine the obligations of the association under this chapter; 31 a person receiving a request under this paragraph shall promptly comply with the
01 request; 02 (11) request information from a member insurer in order to aid in the 03 exercise of a power under this section; a member insurer receiving a request under this 04 paragraph shall promptly comply with the request; [AND] 05 (12) unless prohibited by law, in accordance with the terms of the 06 policy or contract, file for actuarially justified rates or premium increases for a 07 policy or contract for which it provides coverage under this chapter; and 08 (13) perform all other acts necessary or proper to implement this 09 chapter. 10 * Sec. 22. AS 21.79.060 is amended by adding a new subsection to read: 11 (aa) The rights and obligations of the association, reinsurers of an insolvent 12 insurer, and the receiver of an insolvent insurer are governed by the following 13 provisions: 14 (1) not later than 180 days after the date of the order of liquidation, the 15 association may elect to succeed to the rights and obligations of the ceding member 16 insurer that relate to policies, contracts, or annuities covered, in whole or in part, by 17 the association, in each case under any one or more reinsurance contracts entered into 18 by the insolvent insurer and its reinsurers and selected by the association; an 19 assumption is effective as of the date of the order of liquidation; the election shall be 20 effected by the association or the National Organization of Life and Health Insurance 21 Guaranty Associations on the association's behalf by written notice, return receipt 22 requested, to the affected reinsurers; to facilitate the earliest practicable decision about 23 whether to assume any of the contracts of reinsurance and to protect the financial 24 position of the estate, as soon as possible after commencement of formal delinquency 25 proceedings, the receiver and each reinsurer of the ceding member insurer shall make 26 available, upon request, to the association or the National Organization of Life and 27 Health Insurance Guaranty Associations on the association's behalf 28 (A) copies of in-force contracts of reinsurance and all related 29 files and records relevant to the determination of whether those contracts 30 should be assumed; and 31 (B) notices of any defaults under the reinsurance contracts or
01 any known event or condition that, with the passage of time, could become a 02 default under the reinsurance contracts; 03 (2) as to reinsurance contracts assumed by the association under this 04 subsection, 05 (A) the association is responsible for all unpaid premiums due 06 under the reinsurance contracts for periods before, on, and after the date of the 07 order of liquidation and is responsible for the performance of all other 08 obligations to be performed on and after the date of the order of liquidation in 09 each case that relates to policies, contracts, or annuities covered, in whole or in 10 part, by the association; the association may charge policies, contracts, or 11 annuities covered in part by the association, through reasonable allocation 12 methods, the costs for reinsurance in excess of the obligations of the 13 association and shall provide notice and an accounting of those charges to the 14 liquidator; 15 (B) the association is entitled to any amounts payable by the 16 reinsurer under the reinsurance contracts with respect to losses or events that 17 occur in periods on and after the date of the order of liquidation and that relate 18 to policies, contracts, or annuities covered, in whole or in part, by the 19 association, if, upon receiving those amounts, the association is obliged to pay 20 to the beneficiary, under the policy, contract, or annuity for which the amounts 21 were paid, a portion of the amount equal to the lesser of the 22 (i) amount received by the association; and 23 (ii) amount by which the amount received by the 24 association exceeds the amount equal to the benefits paid by the 25 association under the policy, contract, or annuity, less the amount 26 retained by the insurer applicable to the loss or event; 27 (C) not later than 30 days after the association's election, the 28 association and each reinsurer under contracts assumed by the association shall 29 calculate the net balance due to or from the association under each reinsurance 30 contract as of the election date with respect to policies, contracts, or annuities 31 covered, in whole or in part, by the association; in making the calculation, the
01 association and reinsurer shall give full credit to all items paid by either the 02 member insurer or its receiver or the reinsurer before the election date; the 03 reinsurer shall pay the receiver any amounts due for losses or events before the 04 date of the order of liquidation, subject to any set-off for premiums unpaid for 05 periods before the date, and the association or reinsurer shall pay any 06 remaining balance due the other, in each case, not later than five days after the 07 completion of the calculation; a dispute over the amount due to the association 08 or reinsurer shall be resolved by arbitration under the terms of the affected 09 reinsurance contract or, if the contract does not contain an arbitration clause, as 10 otherwise provided by law; if the receiver has received an amount due to the 11 association under (B) of this paragraph, the receiver shall remit the amount to 12 the association as promptly as practicable; 13 (D) if the association or receiver on the association's behalf, not 14 later than 60 days after the election date, pays the unpaid premiums due for 15 periods both before and after the election date that relate to policies, contracts, 16 or annuities covered, in whole or in part, by the association, the reinsurer may 17 not terminate the reinsurance contracts for failure to pay premium insofar as 18 the reinsurance contracts relate to policies, contracts, or annuities covered, in 19 whole or in part, by the association, and may not set off an unpaid amount due 20 under another contract or an unpaid amount due from a party other than the 21 association against amounts due to the association; 22 (3) during the period from the date of the order of liquidation until the 23 election date, or, if the election date does not occur, until 180 days after the date of the 24 order of liquidation, 25 (A) neither the association nor the reinsurer shall have any 26 rights or obligations under reinsurance contracts that the association has the 27 right to assume, whether for periods before, on, or after the date of the order of 28 liquidation; and 29 (B) the reinsurer, the receiver, and the association shall, to the 30 extent practicable, provide to each other data and records reasonably requested, 31 if, once the association has elected to assume a reinsurance contract, the
01 parties' rights and obligations are governed by this subsection; 02 (4) if the association does not elect to assume a reinsurance contract by 03 the election date, the association does not have rights or obligations, in each case for 04 periods before, on, and after the date of the order of liquidation, with respect to the 05 reinsurance contract; 06 (5) when policies, contracts, annuities, or covered obligations with 07 respect to policies or annuities are transferred to an assuming insurer, the association 08 may also transfer reinsurance on the policies, contracts, or annuities, in the case of 09 contracts assumed by the association, subject to the following: 10 (A) unless the reinsurer and the assuming insurer agree 11 otherwise, the reinsurance contract transferred may not cover any new policies 12 or insurance, contracts, or annuities in addition to those transferred; 13 (B) the obligations described in (1) of this subsection do not 14 apply with respect to matters arising on and after the effective date of the 15 transfer; and 16 (C) notice shall be given in writing, return receipt requested, by 17 the transferring party to the affected reinsurer not less than 30 days before the 18 effective date of the transfer; 19 (6) the provisions of this subsection supersede the provisions of any 20 state law or of any affected reinsurance contract that provides for or requires any 21 payment of reinsurance proceeds, on account of losses or events that occur in periods 22 on and after the date of the order of liquidation, to the receiver of the insolvent insurer 23 or another person; the receiver shall remain entitled to any amounts payable by the 24 reinsurer under the reinsurance contracts with respect to losses or events that occur in 25 periods before the date of the liquidation, subject to applicable set-off provisions; 26 (7) except as otherwise provided in this section, nothing in this 27 subsection 28 (A) alters or modifies the terms and conditions of a reinsurance 29 contract; 30 (B) abrogates or limits the right of a reinsurer to claim that the 31 reinsurer is entitled to rescind a reinsurance contract;
01 (C) gives a policy or contract owner, enrollee, certificate 02 holder, or beneficiary an independent cause of action against a reinsurer that is 03 not otherwise set out in the reinsurance contract; 04 (D) limits or affects the association's rights as a creditor of the 05 estate against the assets of the estate; and 06 (E) applies to a reinsurance agreement covering property or 07 casualty risks. 08 * Sec. 23. AS 21.79.070(a) is amended to read: 09 (a) For the purpose of providing funds necessary to carry out the powers and 10 duties of the association, the Board of Governors shall by resolution assess the 11 member insurers, separately for each account, at a time and for an amount that the 12 board finds necessary. Assessments are authorized when a resolution is passed and 13 are due not less than 30 days after prior written notice to the member insurers and 14 accrue interest at 10 percent a year from the date payment is due. Authorized 15 assessments become called when notice is mailed by the association to member 16 insurers. 17 * Sec. 24. AS 21.79.070(c) is amended to read: 18 (c) The amount of a class A assessment shall be determined by the board and 19 may be made on a pro rata or non pro rata basis. If a pro rata assessment is made, the 20 board may provide that it be credited against future class B assessments. [A NON 21 PRO RATA ASSESSMENT MAY NOT EXCEED $250 PER MEMBER INSURER 22 IN A CALENDAR YEAR.] The amount of a class B assessment, except for 23 assessments related to long-term care insurance, shall be allocated for assessment 24 purposes between [AMONG] the accounts and among the subaccounts of the life 25 insurance and annuity account under an allocation formula that may be based on the 26 premiums or reserves of the impaired or insolvent insurer or by another standard 27 determined by the board in its sole discretion as being fair and reasonable under the 28 circumstances. The amount of the class B assessment for long-term care insurance 29 written by the impaired or insolvent insurer shall be allocated according to a 30 methodology included in the association's plan of operation approved by the 31 director. The methodology must provide for 50 percent of the assessment to be
01 allocated to accident and health member insurers and 50 percent allocated to life 02 and annuity member insurers. 03 * Sec. 25. AS 21.79.070(f) is amended to read: 04 (f) Except as provided in this subsection, the total of all assessments on a 05 member insurer for each subaccount of the life and annuity account and for the health 06 account may not in any one calendar year exceed two percent of the member insurer's 07 average annual premiums received in this state on policies or contracts covered by the 08 account or subaccount during the three calendar years preceding the year in which the 09 member insurer became an impaired or insolvent insurer. If two or more assessments 10 are authorized in one calendar year with respect to member insurers that become 11 impaired or insolvent in different calendar years, the average annual premiums for 12 purposes of the aggregate assessment percentage limitation imposed under this 13 subsection shall be limited to the highest of the average annual premiums during the 14 preceding three calendar years for the applicable subaccount or account as calculated 15 under this section. If the maximum assessment, together with the other assets of the 16 association in an account, does not provide in any one year in either account an 17 amount sufficient to carry out the responsibilities of the association, the necessary 18 additional funds shall be assessed as soon as permitted by this chapter. 19 * Sec. 26. AS 21.79.070(j) is amended to read: 20 (j) The board may, by an equitable method as established in the plan of 21 operation, refund to member insurers, in proportion to the contribution of each 22 member insurer to that account, the amount by which the assets of the account exceed 23 the amount the board finds is necessary to carry out during the coming year the 24 obligations of the association with regard to that account, including assets accruing 25 from assignment, subrogation, net realized gains, and income from investments. A 26 reasonable amount may be retained in any account to provide funds for the continuing 27 expenses of the association and for future losses claims. 28 * Sec. 27. AS 21.79.070(k) is amended to read: 29 (k) A member insurer may, in determining its premium rates and policy owner 30 dividends as to any kind of insurance, hospital or medical service corporation 31 business, or health maintenance organization business within the scope of this
01 chapter, consider the amount reasonably necessary to meet its assessment obligations 02 under this chapter. 03 * Sec. 28. AS 21.79.070(l) is amended to read: 04 (l) A member insurer that wishes to protest all or part of an assessment shall 05 pay when due the full amount of the assessment as set out in the notice provided by 06 the association. The payment shall be available to meet association obligations during 07 the pendency of the protest or any subsequent appeal. If a payment is made under 08 protest, payment must be accompanied by a statement in writing that the payment is 09 made under protest and setting out a brief statement of the grounds for the protest. 10 Within 60 days following the payment of an assessment under protest by a member 11 insurer, the association shall notify the member insurer in writing of its determination 12 with respect to the protest unless the association notifies the member insurer that 13 additional time is required to resolve the issues raised by the protest. Within 30 days 14 after a final decision has been made, the association shall notify the protesting member 15 insurer in writing of that final decision. Within 60 days after [OF] receipt of notice of 16 the final decision, the protesting member insurer may appeal that final action to the 17 director. In the alternative to rendering a final decision with respect to a protest based 18 on a question regarding the assessment base, the association may refer protests to the 19 director for a final decision with or without recommendation from the association. If a 20 protest or appeal on an assessment is upheld, the amount paid in error or excess shall 21 be returned to the member insurer [COMPANY]. Interest on a refund due a protesting 22 member insurer shall be paid at the rate actually earned by the association. 23 * Sec. 29. AS 21.79.080(c) is amended to read: 24 (c) A member insurer shall comply with the plan of operation. The plan of 25 operation must 26 (1) establish procedures for handling assets of the association; 27 (2) establish the amount and method of reimbursing members of the 28 board under AS 21.79.050(c); 29 (3) establish regular places and times for meetings of the board in the 30 state; the board may conduct meetings telephonically; 31 (4) establish procedures for keeping records of all financial
01 transactions of the association, its agents, and the board; 02 (5) establish terms of office for members of the board, and establish 03 procedures for the selection of the members of the board and for the director's 04 approval of the members selected; 05 (6) establish additional procedures for assessments under 06 AS 21.79.070; [AND] 07 (7) establish procedures for removing a member of the board for 08 cause, including procedures for removing a member of the board who becomes 09 an impaired or insolvent insurer; 10 (8) establish policy and procedures for addressing conflicts of 11 interest; and 12 (9) contain additional provisions necessary or proper for the 13 association to exercise its powers and duties. 14 * Sec. 30. AS 21.79.090(b) is amended to read: 15 (b) The director may 16 (1) after notice and hearing as provided in AS 21.06.180 - 21.06.230, 17 suspend or revoke the certificate of authority to transact business [INSURANCE] in 18 this state of a member insurer that fails to pay an assessment when due or fails to 19 comply with the plan of operation; 20 (2) levy a penalty on a member insurer that fails to comply with the 21 plan of operation; or 22 (3) levy a penalty on a member insurer that fails to pay an assessment 23 when due; if the unpaid assessment is more than $2,000, the penalty may not exceed 24 five percent of the unpaid assessment a [PER] month or be less than $100 a [PER] 25 month; if the unpaid assessment is $2,000 or less, the penalty is $100 a [PER] month. 26 * Sec. 31. AS 21.79.090(c) is amended to read: 27 (c) A final [AN] action of the board or the association may be appealed to the 28 director by a member insurer if the appeal is taken not later than 60 [WITHIN 30] 29 days after the date the notice of the action is mailed. Final action or order of the 30 director may be reviewed by the superior court. 31 * Sec. 32. AS 21.79.090(d) is amended to read:
01 (d) The liquidator, rehabilitator, or conservator of an impaired or insolvent 02 insurer may notify all interested persons of the effect of this chapter. 03 * Sec. 33. AS 21.79.100(a) is amended to read: 04 (a) The director shall notify, by mail, the commissioner, director, or 05 superintendent of insurance of the other states, territories of the United States, and the 06 District of Columbia within 30 days after the date on which the following actions are 07 taken against a member insurer: 08 (1) revocation of a license; 09 (2) suspension of a license; or 10 (3) a formal order that a member insurer restrict its premium writing, 11 obtain additional contributions to surplus, withdraw from the state, reinsure all or any 12 part of its business, or increase capital, surplus, or any other account for the security of 13 policyholders, contract owners, certificate holders, or creditors. 14 * Sec. 34. AS 21.79.100(e) is amended to read: 15 (e) The director may seek the board's advice and recommendations concerning 16 the financial condition of member insurers, [AND] insurers, hospital and medical 17 service corporations, and health maintenance organizations who apply for 18 admission to transact insurance business in the state. 19 * Sec. 35. AS 21.79.100(f) is amended to read: 20 (f) The board may 21 (1) make reports and recommendations to the director relating to the 22 solvency, liquidation, rehabilitation, or conservation of a member insurer or the 23 solvency of an insurer, hospital or medical service corporation, or health 24 maintenance organization that applies [INSURERS WHO APPLY] to transact 25 insurance business in the state; the director and the board shall keep the reports and 26 recommendations confidential; 27 (2) notify the director of any information that indicates that a member 28 insurer may be impaired or insolvent. 29 * Sec. 36. AS 21.79.100(h) is amended to read: 30 (h) The board may make recommendations to the director for detecting and 31 preventing member insurer insolvencies.
01 * Sec. 37. AS 21.79.110(c) is amended to read: 02 (c) The association is considered to be a creditor of the impaired or insolvent 03 insurer to the extent of assets attributable to covered policies that are reduced by an 04 amount to which the association is entitled under AS 21.79.060(s). Assets of the 05 impaired or insolvent insurer that are attributable to covered policies shall be used to 06 continue all covered policies and pay all contractual obligations of the impaired or 07 insolvent insurer as required by this chapter. Assets attributable to covered policies or 08 contracts include those assets that should have been established as reserves for the 09 covered policies or contracts. These assets are determined by multiplying the total 10 assets of the impaired or insolvent insurer by a fraction, the numerator of which is the 11 amount that should have been established as reserves for the covered policies or 12 contracts of the impaired or insolvent insurer, and the denominator of which is the 13 amount that should have been established as reserves for all policies or contracts of 14 insurance issued in all states by that insurer. As a creditor of the impaired or insolvent 15 insurer, the association and other similar entities in other states are entitled to receive a 16 disbursement of assets out of the marshaled assets as a credit against contractual 17 obligations under this chapter from time to time as the assets become available. If the 18 liquidator has not, within 120 days after [OF] the date of a final determination of 19 insolvency of a member [AN] insurer by the court, made an application to the court 20 for the approval of a proposal to disburse assets, the association may make application 21 to the court for the approval of the association's proposal to disburse assets. 22 * Sec. 38. AS 21.79.110(d) is amended to read: 23 (d) Before the termination of a liquidation, rehabilitation, or conservation 24 proceeding, the court may consider the contributions of the respective parties, 25 including the association, [THE] shareholders, contract owners, certificate holders, 26 enrollees, and policyholders of the impaired or insolvent insurer, and any other party 27 with a bona fide interest, in distributing the ownership rights of the impaired or 28 insolvent insurer. The court shall consider the welfare of policyholders, contract 29 owners, certificate holders, and enrollees of the continuing or successor member 30 insurer [INSURERS]. A distribution to stockholders of an impaired or insolvent 31 insurer may not be made until the total amount of valid claims of the association for
01 money spent in carrying out its powers and duties under AS 21.79.060, with respect to 02 the impaired or insolvent insurer, has been fully recovered by the association. 03 * Sec. 39. AS 21.79.110(e) is amended to read: 04 (e) The receiver appointed under an order for liquidation or rehabilitation of a 05 domestic member insurer may recover the amount distributed, other than stock 06 dividends paid by the member insurer on its capital stock, to a controlling affiliate, as 07 defined in AS 21.22.200, during the five years preceding the petition for liquidation or 08 rehabilitation. However, if the member insurer shows that, when paid, the distribution 09 was lawful and reasonable, and that the distribution might adversely affect the ability 10 of the member insurer to fulfill the member insurer's contractual obligations, the 11 receiver may not recover the amount distributed to the controlling affiliate. The 12 following provisions apply to recovery of amounts distributed: 13 (1) a controlling affiliate of the member insurer at the time the 14 distribution was paid is liable for a distribution received; a controlling affiliate at the 15 time the distribution was declared is liable for a distribution that would have been 16 received if the distribution had been paid at that time; if two or more persons are liable 17 with respect to the same distribution, they are jointly and severally liable; 18 (2) if an affiliate liable under (1) of this subsection is insolvent, all its 19 controlling affiliates at the time the dividend was paid are jointly and severally liable 20 for any amount that is not recovered from the insolvent affiliate; 21 (3) the amount needed to pay the contractual obligations of the 22 insolvent insurer that exceeds the available assets of the insolvent insurer is the 23 greatest amount that may be recovered under this subsection. 24 * Sec. 40. AS 21.79.110(f) is amended to read: 25 (f) A deposit in this state, held by law or required by the director for the 26 benefit of creditors, including policy or contract owners, not turned over to the 27 domiciliary liquidator upon the entry of a final order of liquidation or order approving 28 a rehabilitation plan of a member [AN] insurer domiciled in this state or in a 29 reciprocal state shall be promptly paid to the association. The association 30 (1) is entitled to retain a portion of any amount paid to it equal to the 31 percentage determined by dividing the aggregate amount of policy or contract
01 owners' claims related to that insolvency for which the association has provided 02 statutory benefits by the aggregate amount of all policy or contract owners' claims in 03 this state related to that insolvency; and 04 (2) shall remit to the domiciliary receiver the amount paid to the 05 association and retained under (1) of this subsection; any amount paid to the 06 association not retained by it under (1) of this subsection shall be treated as a 07 distribution of state assets under AS 21.78.294 or a similar provision of the state of 08 domicile of the impaired or insolvent insurer. 09 * Sec. 41. AS 21.79.140 is amended to read: 10 Sec. 21.79.140. Civil immunity. The association and its agents and 11 employees, members of the Board of Governors, member insurers, and agents and 12 employees of member insurers, and the director and the director's representatives are 13 not civilly liable, and a cause of action of any nature may not arise, for an action or 14 omission in performing duties under this chapter. The immunity extends to the 15 participation in an organization of one or more other state associations of similar 16 purposes and to that organization and its agents or employees [IN THIS 17 SECTION, "DUTIES" INCLUDES PARTICIPATION IN AN ORGANIZATION OF 18 ONE OR MORE STATE ASSOCIATIONS OF LIFE OR HEALTH INSURERS]. 19 * Sec. 42. AS 21.79.150 is amended to read: 20 Sec. 21.79.150. Stay of proceedings; default judgment. Proceedings 21 involving an insolvent insurer shall be stayed at least 180 [60] days after the date of a 22 final order of liquidation, rehabilitation, or conservation in order to allow the 23 association to exercise a power or duty authorized under this chapter. If a default 24 judgment is entered against an insolvent insurer, the association may apply to have the 25 judgment set aside or may defend against the action on its merits. 26 * Sec. 43. AS 21.79.160(a) is amended to read: 27 (a) A person, including a member [AN] insurer, agent, or affiliate of a 28 member [AN] insurer, may not make, publish, disseminate, circulate, or place before 29 the public, or cause, directly or indirectly, to be made, published, disseminated, 30 circulated, or placed before the public, in any newspaper, magazine, or other 31 publication, or in the form of a notice, circular, pamphlet, letter, or poster, or over any
01 radio station or television station, or in any other way, an advertisement, 02 announcement, or statement, written or oral, that uses the existence of the association 03 for the purpose of sales, solicitation, or inducement to purchase any form of insurance 04 or other coverage covered by the association. However, this section does not apply to 05 the association or any other entity that does not sell or solicit insurance, coverage by a 06 hospital or medical service corporation, or coverage by a health maintenance 07 organization. 08 * Sec. 44. AS 21.79.160(b) is amended to read: 09 (b) The association shall prepare a summary document describing the general 10 purposes and current limitations of this chapter and complying with (c) of this section. 11 This document shall be submitted to the director for approval. Beginning 60 days after 12 the date on which the director approves the document, a member [AN] insurer may 13 not deliver a policy or contract to a policy or contract owner, certificate holder, or 14 enrollee [POLICY OR CONTRACT OWNER] unless the summary document is 15 delivered to the policy or contract owner, certificate holder, or enrollee [POLICY 16 OR CONTRACT OWNER] at the time of delivery of the policy or contract. The 17 document shall also be available upon request by a policy or contract owner, 18 certificate holder, or enrollee [OWNER]. The distribution, delivery, contents, or 19 interpretation of this document does not guarantee that either the policy or the 20 contract, or the policy or contract owner, certificate holder, or enrollee [OWNER 21 OF THE POLICY OR CONTRACT,] is covered in the event of the impairment or 22 insolvency of a member insurer. The description document shall be revised by the 23 association as amendments to this chapter may require. Failure to receive this 24 document does not give the policy or [OWNER,] contract owner, certificate holder, 25 enrollee, or insured any greater rights than those stated in this chapter. 26 * Sec. 45. AS 21.79.160(c) is amended to read: 27 (c) The document prepared under (b) of this section must contain a clear and 28 conspicuous disclaimer on its face. The director shall establish the form and content of 29 the disclaimer. The disclaimer must 30 (1) state the name and address of the association and the division of 31 insurance;
01 (2) prominently warn the policy or contract owner, certificate holder, 02 or enrollee that the association may not cover the policy or, if coverage is available, 03 that the policy will be subject to substantial limitations and exclusions and conditioned 04 on continued residence in this state; 05 (3) state the types of policies or contracts for which guaranty funds 06 will provide coverage; 07 (4) state that the member insurer and its agents are prohibited by law 08 from using the existence of the association for the purpose of sales, solicitation, or 09 inducement to purchase any form of insurance, hospital or medical service 10 corporation coverage, or health maintenance organization coverage; 11 (5) state that the policy or contract owner, certificate holder, or 12 enrollee should not rely on coverage under the association when selecting and insurer; 13 (6) explain rights available and procedures for filing a complaint to 14 allege a violation of a provision of this chapter; and 15 (7) provide other information as required by the director, including 16 sources for information about the financial condition of insurers if the information is 17 not proprietary and is subject by law to disclosure. 18 * Sec. 46. AS 21.79.900(5) is amended to read: 19 (5) "called" means that a notice has been mailed [ISSUED] by the 20 association to member insurers requiring that an authorized assessment be paid within 21 the time set out in the notice; 22 * Sec. 47. AS 21.79.900(6) is amended to read: 23 (6) "contractual obligation" means an obligation under a policy, 24 contract, or certificate under a group policy or contract, or a portion of one for which 25 coverage is provided under AS 21.79.020(a), (b), (d), or (e); 26 * Sec. 48. AS 21.79.900(7) is amended to read: 27 (7) "covered contract" or "covered policy" means a policy or 28 contract or a portion of a policy or contract for which coverage is provided under 29 [DESCRIBED IN] AS 21.79.020(a), [AND] (b), (d), or (e); 30 * Sec. 49. AS 21.79.900(10) is amended to read: 31 (10) "member insurer" means an insurer licensed to transact insurance
01 in the state, a hospital or medical service corporation licensed under AS 21.87, or 02 a health maintenance organization licensed under AS 21.86, for which coverage is 03 provided in AS 21.79.020 [, OR A SUBSCRIBER CONTRACT PROVIDING 04 BENEFITS DESCRIBED IN AS 21.87.120(a)(2) - (4) OR 21.87.130(a)(2) AND (3),] 05 and includes an insurer, a hospital or medical service corporation licensed under 06 AS 21.87, or a health maintenance organization licensed under AS 21.86, whose 07 license or certificate of authority in this state may have been suspended, revoked, not 08 renewed, or voluntarily withdrawn; "member insurer" does not include 09 (A) [A HEALTH MAINTENANCE ORGANIZATION 10 LICENSED UNDER AS 21.86; 11 (B)] a fraternal benefit society licensed under AS 21.84; 12 (B) [(C)] a mandatory state pooling plan; 13 (C) [(D)] a mutual assessment company or an entity that 14 operates on an assessment basis; 15 (D) [(E)] an insurance exchange licensed under AS 21.75; 16 (E) [(F) A HOSPITAL OR MEDICAL SERVICE 17 ORGANIZATION LICENSED UNDER AS 21.87; 18 (G)] an organization that has a license or certificate limited to 19 the issuance of charitable gift annuities; or 20 (F) [(H)] an entity similar to one described under (A) - (E) [(A) 21 - (G)] of this paragraph; 22 * Sec. 50. AS 21.79.900(12) is amended to read: 23 (12) "owner," when used with respect to [IN RELATION TO] a 24 policy or contract, "policyholder," "policy owner," and "contract owner" 25 (A) mean [MEANS] the person who is identified as the legal 26 owner under the terms of the policy or contract, or who is otherwise vested 27 with legal title to the policy or contract through a valid assignment completed 28 under the terms of the policy or contract and who is properly recorded as the 29 owner on the records of the member insurer; 30 (B) do [DOES] not include a person with a mere beneficial 31 interest in a policy or contract;
01 * Sec. 51. AS 21.79.900(13) is amended to read: 02 (13) "plan sponsor" means, in the case of a benefit plan established or 03 maintained by 04 (A) a single employer, the employer; 05 (B) an employee organization, the employee organization; or 06 (C) two or more employers or jointly by one or more 07 employers and one or more employee organizations, the association, 08 committee, joint board of trustees, or other similar group of representatives of 09 the parties who establish or maintain the benefit plan; 10 * Sec. 52. AS 21.79.900(14) is amended to read: 11 (14) "premium" means the amounts or considerations, by whichever 12 name called, [AMOUNT] received on a covered policy or contract less a premium, 13 consideration, and deposit returned, and less a dividend and experience credit; 14 "premium" does not include amounts or considerations [AN AMOUNT] charged for 15 an assessment or an amount received for a policy or contract or for the portions of a 16 policy or contract for which coverage is not provided under AS 21.79.020(b) and (c), 17 except that assessable premium may not be reduced on account of 18 AS 21.79.020(c)(4) relating to interest limitations and AS 21.79.025(a)(2) - (5), (b), 19 and (d) relating to limitations with respect to one individual, one participant, and 20 one policy or contract owner; "premium" does not include 21 (A) premiums in excess of $5,000,000 on an unallocated 22 annuity contract not issued under a governmental retirement benefit plan 23 or its trustee established under 26 U.S.C. 401, 26 U.S.C. 403(b), or 26 24 U.S.C. 457; or 25 (B) with respect to multiple nongroup policies of life 26 insurance owned by one owner, whether the policy or contract owner is an 27 individual, firm, corporation, or other person, and whether the persons 28 insured are officers, managers, employees, or other persons, premiums in 29 excess of $5,000,000 with respect to those policies or contracts, regardless 30 of the number of policies or contracts held by the owner; 31 * Sec. 53. AS 21.79.900(15) is amended to read:
01 (15) "receivership court" means the court in the insolvent or impaired 02 insurer's state having jurisdiction over the conservation, rehabilitation, or liquidation 03 of the member insurer; 04 * Sec. 54. AS 21.79.900(16) is amended to read: 05 (16) "resident" means a person to whom a contractual obligation is 06 owed under this chapter and who resides in this state on the date of entry of a court 07 order that determines a member insurer to be an impaired or insolvent insurer [, 08 WHICHEVER OCCURS FIRST]; a person may be a resident of only one state, 09 which, in the case of a person other than a natural person, shall be the principal place 10 of business; 11 * Sec. 55. AS 21.79.900(19) is amended to read: 12 (19) "supplemental contract" means a written [AN] agreement entered 13 into for the distribution of proceeds under life, health, or annuity policy or contract 14 benefits; 15 * Sec. 56. AS 21.79.900 is amended by adding new paragraphs to read: 16 (21) "benefit plan" means a specific employee, union, or association of 17 natural persons benefit plan; 18 (22) "election date" means the date of the association's election under 19 AS 21.79.060(aa); 20 (23) "extra contractual claim" includes a claim related to bad faith in 21 payment of a claim, punitive or exemplary damages, and attorney fees and costs; 22 (24) "health benefit plan" means a hospital or medical expense policy 23 or certificate, or health maintenance organization subscriber contract or any other 24 similar health contract; "health benefit plan" does not include 25 (A) accident only insurance; 26 (B) credit insurance; 27 (C) dental only insurance; 28 (D) vision only insurance; 29 (E) Medicare supplement insurance; 30 (F) benefits for long-term care, home health care, community- 31 based care, or any combination thereof;
01 (G) disability income insurance; 02 (H) coverage for on-site medical clinics; or 03 (I) specified disease, hospital confinement indemnity, or limited 04 benefit health insurance if the types of coverage do not provide coordination of 05 benefits and are provided under separate policies or certificates; 06 (25) "published monthly average" means the monthly average of 07 corporate bond yields, as published by Moody's Investors Service, Inc., or its 08 successor or, if Moody's average of corporate bond yields is not published, a 09 substantially similar average established by regulation adopted by the director. 10 * Sec. 57. AS 21.86.260(a) is amended to read: 11 (a) Except as provided in AS 21.36, AS 21.42, AS 21.54, AS 21.56, AS 21.79, 12 and in this chapter, this title does not apply to a health maintenance organization that 13 obtains a certificate of authority under this chapter. This subsection does not apply to 14 an insurer licensed under AS 21.09 or a hospital or medical service corporation 15 licensed under AS 21.87 except with respect to its health maintenance organization 16 activities authorized by and regulated under this chapter. 17 * Sec. 58. AS 21.87.340 is amended to read: 18 Sec. 21.87.340. Other provisions applicable. In addition to the provisions 19 contained or referred to previously in this chapter, the following chapters and 20 provisions of this title also apply with respect to service corporations to the extent 21 applicable and not in conflict with the express provisions of this chapter and the 22 reasonable implications of the express provisions, and, for the purposes of the 23 application, the corporations shall be considered to be mutual "insurers": 24 (1) AS 21.03; 25 (2) AS 21.06; 26 (3) AS 21.07; 27 (4) AS 21.09, except AS 21.09.090; 28 (5) AS 21.18.010; 29 (6) AS 21.18.030; 30 (7) AS 21.18.040; 31 (8) AS 21.18.080 - 21.18.086;
01 (9) AS 21.36; 02 (10) AS 21.42.110, 21.42.345 - 21.42.395; 03 (11) AS 21.51.120 and 21.51.400; 04 (12) AS 21.51.405; 05 (13) AS 21.53; 06 (14) AS 21.54; 07 (15) AS 21.56; 08 (16) AS 21.69.400; 09 (17) AS 21.69.520; 10 (18) AS 21.69.600, 21.69.620, and 21.69.630; 11 (19) AS 21.78; 12 (20) AS 21.79; 13 (21) AS 21.96.060; 14 (22) [(21)] AS 21.97. 15 * Sec. 59. AS 21.79.020(f), 21.79.060(c), 21.79.060(e), 21.79.060(f), 21.79.060(g), 16 21.79.060(h), 21.79.060(i), 21.79.060(j), 21.79.060(u), 21.79.060(v), 21.79.060(w), 17 21.79.060(x), 21.79.110(b)(2), and 21.79.110(e) are repealed. 18 * Sec. 60. The uncodified law of the State of Alaska is amended by adding a new section to 19 read: 20 TRANSITION: REGULATIONS. The director of the division of insurance may adopt 21 regulations necessary to implement the changes made by this Act. The regulations take effect 22 under AS 44.62 (Administrative Procedure Act), but not before the effective date of the law 23 implemented by the regulation. 24 * Sec. 61. Section 60 of this Act takes effect immediately under AS 01.10.070(c). 25 * Sec. 62. Except as provided in sec. 61 of this Act, this Act takes effect July 1, 2018.