00 HOUSE BILL NO. 303 01 "An Act relating to the method of payment of fees and adoption of regulations 02 under AS 21; relating to orders under AS 21 regarding risk based capital 03 instructions; relating to accounting standards for insurance companies; amending 04 the definitions of 'creditable coverage' and 'late enrollees' in AS 21.54; relating 05 to requirements for small employer insurers; relating to requirements for issuance 06 of new voting securities by an insurance company; requiring health care insurance 07 coverage for reconstructive surgery following mastectomy; requiring guaranteed 08 renewability of and certification of coverage regarding certain individual health 09 insurance policies; and providing for an effective date." 10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 11 * Section 1. AS 21.06.250 is amended to read: 12 Sec. 21.06.250. Fees and licenses. The director shall collect in advance a fee 13 for each license and for services performed by the division of insurance. Fees may be 14 collected for but are not limited to applications, licenses and license renewals, 01 certificates of authority, service of process, printed or photocopied material, and 02 postage. The director shall adopt regulations setting the fees in an amount the director 03 determines to be sufficient to reimburse the state for the actual expense incurred in 04 providing a service. The director may require by regulation that an insurer or 05 other licensee pay a fee by electronic means. 06 * Sec. 2. AS 21.14.010(e) is amended to read: 07 (e) The director shall establish risk based capital instructions by order after 08 an open meeting as provided under AS 44.62.310 [REGULATION]. 09 * Sec. 3. AS 21.14.200(18) is amended to read: 10 (18) "risk based capital instructions" means risk based capital 11 instructions for a life and health insurer or for a property and casualty insurer 12 [ADOPTED BY ORDER OF THE DIRECTOR AFTER AN OPEN MEETING AS 13 PROVIDED UNDER AS 44.62.310]; 14 * Sec. 4. AS 21.18.010 is repealed and reenacted to read: 15 Sec. 21.18.010. Allowable assets. In a determination of the financial condition 16 of an insurer, the following assets are allowed: 17 (1) assets that are wholly and exclusively owned by the insurer and that 18 are registered, recorded, or held under the insurer's name; 19 (2) premiums, not more than three months past due, excluding 20 commissions payable on them, due from a controlling or controlled person, to the 21 extent that 22 (A) the premiums collected by the controlling or controlled 23 person and not remitted to the insurer are held in a trust account with a bank 24 or other depository approved by the division and may not be commingled with 25 other money of the controlling or controlled person; a disbursement from the 26 trust account may be made only to the insurer, the insured, or, for the purpose 27 of returning a premium, an entity that is entitled to returned premiums on 28 behalf of the insured; however, the investment income derived from the trust 29 may be allocated as the parties consider proper; a controlling or controlled 30 person shall deposit premiums collected into the trust account within five 31 working days after collection; the director shall disapprove a trust agreement 01 that, in the director's judgment, does not assure the safety of the premiums 02 collected; 03 (B) the controlling or controlled person has provided to the 04 insurer, and the insurer has maintained in its possession, an unexpired, clean, 05 irrevocable, and unconditional letter of credit, payable to the insurer, for a term 06 of not less than one year with automatic extension for one year, unless the 07 beneficiary has received in writing notification of intention not to renew 30 08 days before the original expiration date; the letter of credit must be issued in 09 conformity with the requirements set out in this subparagraph, and the amount 10 of the letter of credit must equal or exceed the liability of the controlling or 11 controlled person to the insurer, at all times during the period that the letter of 12 credit is in effect, for premiums collected by the controlling or controlled 13 person; a letter of credit must be issued under arrangements satisfactory to the 14 division and the letter must be issued by a banking institution that is a member 15 of the Federal Reserve System and that has a financial standing satisfactory to 16 the department; the director shall disapprove a letter of credit that, in the 17 director's judgment, does not assure the safety of the premiums; 18 (C) the controlling or controlled person has provided to the 19 insurer, and the insurer has maintained in its possession, evidence that the 20 controlling or controlled person has purchased and has currently in effect a 21 financial guaranty bond, payable to the insurer, issued for a continuous term, 22 cancelable only on 30-day written notice to the beneficiary of intention to 23 terminate with the bond continuing in effect for acts committed before the date 24 of termination, and that is in conformity with the requirements set out in (B) 25 of this paragraph; the amount of the bond must equal or exceed the liability of 26 the controlling or controlled person to the insurer, at all times during which the 27 financial guaranty bond is in effect, for the premium collected by the 28 controlling or controlled person; a financial guaranty bond must be issued 29 under an arrangement satisfactory to the division, by an insurer that is 30 authorized to transact business in the state, that has financial standing 31 satisfactory to the division, and that is neither controlled nor controlling in 01 relation to either the insurer or the person for whom the bond is purchased; and 02 (D) a financial examination indicates that the controlling or 03 controlled person is solvent and has the ability to pay the premiums as they 04 become due; the financial examination, as scheduled by the director, shall be 05 based on a review of the books and records of the controlling or controlled 06 person; 07 (3) other assets considered by the director to be available for the 08 payment of losses and claims, at values to be determined by the director, with any 09 excess valuation reported as nonadmitted; and 10 (4) other assets that do not exceed limitations as given in AS 21.21; 11 any excess shall be reported as nonadmitted assets. 12 * Sec. 5. AS 21.18.030 is repealed and reenacted to read: 13 Sec. 21.18.030. Assets not allowed. In addition to assets excluded by the 14 application of AS 21.18.010, all nonadmitted assets and all other assets of doubtful 15 value or character included as ledger or nonledger assets in a statement by an insurer 16 to the director, or in an examiner's report to the director, shall also be reported, to the 17 extent of the value disallowed, as deductions from the gross assets of the insurer, 18 unless the director permits a reserve to be carried among the liabilities of the insurer 19 in place of a deduction. 20 * Sec. 6. AS 21.18.050 is amended to read: 21 Sec. 21.18.050. Reserves and liabilities, in general. In a determination of the 22 financial condition of an insurer, [CAPITAL STOCK AND] liabilities to be charged 23 against its assets shall include 24 (1) [THE AMOUNT OF ITS CAPITAL STOCK OUTSTANDING, IF 25 ANY; 26 (2)] the amount, estimated consistent with the provisions of this title, 27 necessary to pay all of its unpaid losses and claims incurred on or before the date of 28 statement, whether reported or unreported, together with the expenses of adjustment 29 or settlement; 30 (2) [(3)] with reference to life and health insurance and annuity 31 contracts, 01 (A) the amount of reserves on life insurance policies and 02 annuity contracts in force, valued according to the tables of mortality, rates of 03 interest, and methods adopted under this title that are applicable; 04 (B) reserves for disability benefits, for both active and disabled 05 lives; 06 (C) reserves for accidental death benefits; 07 (D) additional reserves that may be required by the director, 08 consistent with practice formulated or approved by the National Association of 09 Insurance Commissioners, on account of the insurance; 10 (3) [(4)] with reference to health insurance, the amount of reserves 11 required under AS 21.18.080 - 21.18.086; 12 (4) [(5)] with reference to insurance other than specified in (2) [(3)] and 13 (3) [(4)] of this section, and other than title insurance, the amount of reserves equal 14 to the unearned portions of the gross premiums charged on policies in force, computed 15 in accordance with this chapter; 16 (5) [(6) TAXES, ] expenses [,] and other obligations due or accrued at 17 the date of the statement. 18 * Sec. 7. AS 21.18.073 is repealed and reenacted to read: 19 Sec. 21.18.073. Unearned premium reserve for title insurance. In addition 20 to an adequate reserve as to outstanding losses as required under AS 21.18.050, a title 21 insurer shall establish, segregate, and maintain an unearned premium reserve as 22 required by the director. 23 * Sec. 8. AS 21.18 is amended by adding a new section to read: 24 Sec. 21.18.160. Regulations. The director may adopt regulations to implement 25 and interpret this chapter. 26 * Sec. 9. AS 21.21.050 is amended to read: 27 Sec. 21.21.050. Diversification of investments. An insurer shall invest in or 28 hold as admitted assets categories of investments only within applicable limits as 29 follows: 30 (1) an insurer may not, except with the consent of the director, have 31 a combination of investments in or loans upon the security of the obligations, property, 01 or securities of any one person, or insurer, aggregating an amount exceeding five 02 percent of the insurer's assets; this restriction does not apply to 03 (A) general obligations of the United States; or 04 (B) general obligations of a state of the United States that is not 05 insolvent and whose securities are not then in default; or 06 (C) policy loans made under AS 21.21.210; 07 (2) an insurer may not invest in or hold at any one time more than 10 08 percent of the outstanding voting stock of a corporation, except with the consent of the 09 director given with respect to voting rights of preference stock during default of 10 dividends; this paragraph does not apply to stock of a wholly-owned subsidiary of the 11 insurer or to controlling stock of an insurer acquired under AS 21.21.170; 12 (3) an insurer, other than title insurer, shall invest and maintain invested 13 funds in an amount not less than the higher of the minimum basic capital for stock 14 insurers or basic guarantee surplus for mutual insurers and additional surplus for both 15 stock and mutual insurers required under AS 21.09.070, or 50 percent of the total 16 capital and surplus shown on the most recent statement of the insurer's financial 17 condition as filed with the director under AS 21.09.200, but the insurer may not invest 18 or maintain funds except in 19 (A) cash; 20 (B) the fully insured portion of bank deposits when the 21 insurance is provided by a solvent agency of the United States government or 22 by collateral in the form of the securities provided for under AS 21.21.060 and 23 21.21.080; 24 (C) the securities provided for under AS 21.21.060 and 25 21.21.080; or 26 (D) the securities provided for under AS 21.21.090 issued by 27 this state or a political subdivision of this state, but only if rated Class 1 by the 28 securities valuation office for the period during which the securities are held 29 for the purposes of this section, and only if the insurer invests and maintains 30 not more than 15 percent of its total capital and surplus in the securities as 31 shown on the most recent statement of the insurer's financial condition filed 01 with the director under AS 21.09.200; 02 (4) a life insurer shall invest and keep invested its funds in an amount 03 not less than the reserves under its life insurance policies and annuity contracts, other 04 than variable annuities, in force, in cash or the securities or investments provided for 05 under this chapter; 06 (5) except with the director's written consent, an insurer may not have 07 invested at any one time more than 20 percent of its assets in the class of securities 08 described in AS 21.21.140, exclusive of obligations of public utilities; 09 (6) an insurer may invest and have invested at any one time in 10 aggregate amount not more than 10 percent of its assets in all stocks under 11 AS 21.21.160, 21.21.170, and 21.21.200, except with the director's written consent; 12 determination of the amount that an insurer has invested in common stocks for the 13 purposes of this paragraph is based on the cost of the stocks to the insurer; this 14 paragraph does not apply to stock of a controlled or subsidiary insurance corporation 15 or other corporation held under AS 21.21.170 and 21.21.180; 16 (7) except with the director's written consent, an insurer may not have 17 invested at any one time more than 10 percent of its assets in any one of the class of 18 securities described in AS 21.21.100, 21.21.150, 21.21.190, 21.21.250(c), [OR] 19 21.21.260 , or 21.21.360 . 20 * Sec. 10. AS 21.42 is amended by adding a new section to read: 21 Sec. 21.42.400. Coverage for reconstructive surgery following mastectomy. 22 A health care insurer that offers, issues for delivery, delivers, or renews in this state 23 a health care insurance plan providing medical and surgical benefits for mastectomies 24 shall comply with 42 U.S.C. 300gg-6 and 42 U.S.C. 300gg-52 regarding coverage for 25 reconstructive surgery following mastectomies. 26 * Sec. 11. AS 21.51 is amended by adding new sections to read: 27 Sec. 21.51.400. Renewability and certification. A health care insurer that 28 offers a health care insurance plan in the individual market shall comply with the 29 guaranteed renewability requirements established under 42 U.S.C. 300gg-42 and shall 30 comply with the certification of coverage requirements established under 42 U.S.C. 31 300gg-43. 01 Sec. 21.51.500. Definitions. In this chapter, 02 (1) "health care insurance plan" has the meaning given in 03 AS 21.54.500; 04 (2) "health care insurer" has the meaning given in AS 21.54.500; 05 (3) "individual market" means the market for health care insurance 06 offered to individuals other than in connection with a health benefit plan as defined 07 in AS 21.54.500. 08 * Sec. 12. AS 21.54.500(7) is amended to read: 09 (7) "creditable coverage" means, with respect to an individual, 10 coverage, excluding excepted benefits, calculated as required under AS 21.54.120 and 11 applicable under 12 (A) a health care insurance plan [OFFERED IN THE GROUP 13 MARKET]; 14 (B) a health benefit plan; 15 (C) 42 U.S.C. 1395c or 1395j (Part A or Part B of Title XVIII 16 of the Social Security Act) ; [:] 17 (D) 42 U.S.C. 1396 (Title XIX of the Social Security Act), 18 other than coverage consisting solely of benefits under 42 U.S.C. 1396s; 19 (E) 10 U.S.C. 1071 - 1090; 20 (F) a medical care program of the Indian Health Service or of 21 a tribal organization; 22 (G) AS 21.55 or other state high risk pool ; 23 (H) 5 U.S.C. 8901 - 8914; 24 (I) a public health plan as defined under federal law; or 25 (J) a health benefit plan under 22 U.S.C. 2504(e) (Peace Corps 26 Act); 27 * Sec. 13. AS 21.54.500(20) is amended to read: 28 (20) "late enrollee" means a participant or beneficiary who requests 29 enrollment in an employer's health care insurance plan following the initial enrollment 30 period for which the participant or beneficiary was eligible to enroll under the terms 31 of a health care insurance plan, except that a participant or beneficiary may not be 01 considered a late enrollee if 02 (A) the individual requests enrollment within 30 days after the 03 termination of the creditable coverage or the exhaustion of coverage , was 04 covered under creditable coverage at the time of the initial enrollment, and 05 (i) [WAS COVERED UNDER CREDITABLE 06 COVERAGE AT THE TIME OF THE INITIAL ENROLLMENT; 07 (ii)] has lost creditable coverage as a result of the 08 termination of employer contributions toward coverage or the 09 termination of eligibility, including death, divorce, dissolution of 10 marriage, legal separation, or a reduction in number of hours of 11 employment; or 12 (ii) [(iii)] had coverage under a federal continuation 13 provision and the coverage under that provision was exhausted; 14 (B) the individual is employed by an employer who offers 15 multiple health care insurance plans and the individual elects a different health 16 care insurance plan during an open enrollment period; or 17 (C) a court has ordered coverage to be provided for a spouse 18 or minor child under a covered employee's plan and request for enrollment is 19 made within 30 days after issuance of the court order; 20 * Sec. 14. AS 21.56.110 is amended by adding a new subsection to read: 21 (e) The requirements of this chapter continue to apply with respect to coverage 22 offered to a small employer until the plan anniversary following the date the employer 23 no longer meets the definition of a "small employer" in AS 21.54.500. 24 * Sec. 15. AS 21.56.140(b) is amended to read: 25 (b) A small employer insurer shall issue a health care insurance plan to a small 26 employer that applies for a plan and shall accept for enrollment under the health care 27 insurance [INSURER] coverage all eligible employees and their dependents who apply 28 for enrollment during the period in which the employee first becomes eligible to enroll 29 under the terms of the plan. A small employer insurer may not place a restriction on 30 an eligible employee or dependent with respect to being a participant or beneficiary 31 that is inconsistent with AS 21.54.100. 01 * Sec. 16. AS 21.56.140(c) is amended to read: 02 (c) A small employer insurer may not increase a requirement for minimum 03 employee participation or for minimum employer contribution applicable to a small 04 employer at any time after the small employer has been accepted for coverage, except 05 that a small employer insurer may vary application of minimum participation and 06 employer contribution requirements by the size of the small employer group. In 07 applying minimum employee participation requirements, a small employer insurer 08 may not consider employees or dependents who have similar existing coverage in 09 determining whether the minimum employee participation level is met. 10 * Sec. 17. AS 21.56.140(d) is amended to read: 11 (d) If a small employer insurer offers coverage to a small employer, the small 12 employer insurer shall offer coverage to all of the eligible employees of the small 13 employer and their dependents. A small employer insurer may not offer coverage to 14 only certain individuals in a small employer group or to only part of the group, except 15 in the case of late enrollees as provided in AS 21.54.110(d). For purposes of 16 complying with this subsection, 17 (1) a small employer insurer may issue a health care insurance plan 18 that covers only those employees that the small employer selects to be covered 19 under its plan, except that the small employer insurer shall initially offer a plan 20 to the small employer that covers all eligible employees as defined in AS 21.56.250 21 and their dependents; 22 (2) a small employer insurer, producer, or any other representative 23 of the small employer insurer may not directly or indirectly influence a small 24 employer in selecting which employees will be covered under the small employer's 25 health care insurance plan based on the factors concerning unfair discrimination 26 listed in AS 21.54.100; and 27 (3) a small employer insurer shall apply the minimum employee 28 participation and minimum employer contribution requirements to those 29 employees that the small employer selects to be covered under the small 30 employer's health care insurance plan. 31 * Sec. 18. AS 21.56.140(f) is amended to read: 01 (f) A small employer insurer may not, directly or indirectly, encourage or 02 direct small employers to refrain from filing an application for coverage with a small 03 employer insurer or to seek coverage from another insurer because of a health status 04 factor, the claims experience, the industry, the occupation, the size, or the geographic 05 location of the small employer. 06 * Sec. 19. AS 21.56.180(a) is amended to read: 07 (a) A small employer insurer may not, directly or indirectly, enter into a 08 contract, agreement, or arrangement with an insurance producer, a managing general 09 agent, or a third-party administrator that provides for or results in the compensation 10 paid to an insurance producer for the sale of a health care insurance plan to vary based 11 on the health status, claims experience, industry, occupation, size, or geographic 12 location of the small employer. This subsection does not apply to a compensation 13 arrangement that provides compensation to an insurance producer, a managing general 14 agent, or a third-party administrator on the basis of a percentage of premium that does 15 not vary based on the health status, claims experience, industry, occupation, size, or 16 geographic location [AREA] of the small employer. 17 * Sec. 20. AS 21.18.900(4); AS 21.21.360(b), 21.21.360(c), 21.21.360(d), 21.21.360(e), and 18 21.21.360(f) are repealed. 19 * Sec. 21. AS 21.22.010(g)(1) is repealed. 20 * Sec. 22. The uncodified law of the State of Alaska is amended by adding a new section 21 to read: 22 TRANSITION: REGULATIONS. Notwithstanding sec. 24 of this Act, the director of 23 the division of insurance in the Department of Community and Economic Development may 24 proceed to adopt regulations necessary to implement secs. 4 - 9 and 20 of this Act. The 25 regulations take effect under AS 44.62 (Administrative Procedure Act), but not before the 26 effective date of secs. 4 - 9 and 20 of this Act. 27 * Sec. 23. Except as provided in sec. 24 of this Act, this Act takes effect immediately 28 under AS 01.10.070(c). 29 * Sec. 24. Sections 4 - 9 and 20 of this Act take effect January 1, 2001.