Senate File 556 - Introduced SENATE FILE 556 BY COMMITTEE ON COMMERCE (SUCCESSOR TO SSB 1222) (COMPANION TO HF 667 BY COMMITTEE ON COMMERCE) A BILL FOR An Act relating to the membership of the life and health 1 insurance guaranty association, assessments to member 2 insurers for insurance written by impaired or insolvent 3 member insurers, and including applicability provisions. 4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 5 TLSB 2605SV (3) 88 ko/lh

S.F. 556 Section 1. Section 507C.3, Code 2019, is amended by adding 1 the following new subsection: 2 NEW SUBSECTION . 7. Health maintenance organizations formed 3 under chapter 514B other than limited service organizations 4 formed under section 514B.33. 5 Sec. 2. Section 508C.2, Code 2019, is amended to read as 6 follows: 7 508C.2 Purpose. 8 1. The purpose of this chapter is to protect, subject to 9 certain limitations, the persons specified in section 508C.3, 10 subsection 1 , against failure in the performance of contractual 11 obligations under life , and health , insurance policies and 12 annuity policies, plans, or contracts specified in section 13 508C.3, subsection 2 , because of the impairment or insolvency 14 of the member insurer which issued the policies , plans, or 15 contracts. 16 2. To provide this protection, an association of member 17 insurers is created to enable the guaranty of payments of 18 benefits and of continuation of coverages as limited in by this 19 chapter . Members of the association are subject to assessment 20 to provide funds to carry out the purpose of this chapter . 21 Sec. 3. Section 508C.3, subsection 1, paragraphs a, b, and 22 e, Code 2019, are amended to read as follows: 23 a. Except Persons, regardless of where they reside, except 24 for nonresident certificate holders under group policies or 25 contracts, persons who are the beneficiaries, assignees, or 26 payees , including health care providers rendering services 27 covered under health insurance policies, contracts, or 28 certificates, of the persons covered under paragraph “b” . 29 b. Persons who are owners of or certificate holders 30 or enrollees under the policies or contracts specified in 31 subsection 2 , other than unallocated annuity contracts and 32 structured settlement annuities, or are enrollees, insureds , or 33 annuitants under the policies or contracts, and who are either 34 of the following: 35 -1- LSB 2605SV (3) 88 ko/lh 1/ 32

S.F. 556 (1) Residents of this state. 1 (2) Nonresidents of this state if all of the following 2 conditions are met: 3 (a) The state in which the person resides has an association 4 similar to the association created in this chapter . 5 (b) The person is not eligible for coverage by an 6 association described in subparagraph division (a) in any 7 other state due to the fact that the insurer or the health 8 maintenance organization was not licensed in the state at the 9 time specified in that state’s guaranty association law. 10 (c) The member insurer that issued the policy or contract is 11 domiciled in this state. 12 e. A person who is a resident of this state and, only in 13 special circumstances, to a nonresident. In order to avoid 14 duplicate coverage, if a person who would otherwise receive 15 coverage under this chapter is provided coverage under the 16 laws of any other state, that person shall not be provided 17 coverage under this chapter . In determining the application 18 of the provisions of this paragraph in situations a situation 19 where a person could be provided coverage by the association 20 of more than one state, whether as an owner, payee, enrollee, 21 beneficiary, or assignee, this chapter shall be construed in 22 conjunction with other state laws to result in coverage by the 23 association of only one state. 24 Sec. 4. Section 508C.3, subsections 2, 3, and 4, Code 2019, 25 are amended to read as follows: 26 2. This chapter shall provide coverage to the persons 27 specified in subsection 1 under policies or contracts of direct 28 life insurance policies , health insurance policies including 29 long-term care insurance and disability insurance policies , 30 annuity contracts or annuities , supplemental contracts, 31 certificates under group policies or contracts, and unallocated 32 annuity contracts issued by member insurers. For purposes 33 of this chapter, health insurance shall include without 34 limitation health maintenance organization subscriber contracts 35 -2- LSB 2605SV (3) 88 ko/lh 2/ 32

S.F. 556 and certificates, long-term care insurance, and disability 1 insurance policies. 2 3. Coverage under this chapter shall not be provided to any 3 of the following: 4 a. A person who is a payee, or the a beneficiary of a payee 5 if the payee is deceased, of a contract owner who is a resident 6 of this state, if the payee or the beneficiary of the payee is 7 provided any coverage by the association of another state. 8 b. A person who is covered pursuant to subsection 1 , 9 paragraph “c” , if that person is provided any coverage by the 10 association of another state. 11 c. A person who acquires rights to receive payments through 12 a structured settlement factoring transaction as defined in 13 26 U.S.C. §5891(c)(3)(A), regardless of when the transaction 14 occurred. 15 4. This chapter does not apply to any of the following : 16 a. Any Except for a portion of a policy or contract, 17 including a rider, that provides coverage for long-term care 18 or any health insurance benefits, any portion of a policy or 19 contract to the extent that the rate of interest on which 20 it is based or the interest rate, crediting rate, or similar 21 factor determined by use of an index or other external 22 reference stated in the policy or contract and employed in 23 calculating returns or changes in value, averaged over the 24 period of four years prior to the date on which the association 25 becomes obligated with respect to the policy or contract, 26 exceeds a rate of interest determined by subtracting two 27 percentage points from Moody’s corporate bond yield average 28 for the same four-year period or over such lesser period if 29 the policy or contract was issued less than four years before 30 the association became obligated; and on or after the date on 31 which the association becomes obligated with respect to the 32 policy or contract, exceeds the rate of interest determined by 33 subtracting three percentage points from Moody’s corporate bond 34 yield average as most recently available. 35 -3- LSB 2605SV (3) 88 ko/lh 3/ 32

S.F. 556 b. That portion or part of a policy or contract not 1 guaranteed by the member insurer, or under which the risk is 2 borne by the policyholder policy or contract holder . 3 c. A policy or contract or part of a policy or contract 4 assumed by the impaired or insolvent insurer under a contract 5 of reinsurance, other than reinsurance for which assumption 6 certificates have been issued. 7 d. An unallocated annuity contract issued to or in 8 connection with an employee benefit plan protected under the 9 federal pension benefit guaranty corporation , regardless of 10 whether the federal pension benefit guaranty corporation has 11 yet become liable to make any payments with respect to the 12 benefit plan , or a . 13 e. A portion of an unallocated annuity contract which is not 14 issued to or in connection with a specific employee, union, or 15 association of natural persons, or any portion of a financial 16 guarantee. 17 e. f. A policy or contract issued by a company which is 18 licensed under chapter 509A , 512A , 512B , 514 , 514B , 518 , 518A , 19 or 520 , or under section 514B.33 . 20 f. g. Except for a policy issued pursuant to section 21 515.48, subsection 5 , paragraph “a” , a policy or contract issued 22 by a company which is licensed under chapter 515 . 23 g. h. A charitable gift annuity under chapter 508F . 24 h. i. An annuity contract issued to a government lottery. 25 i. j. A funding agreement under section 508.31A . 26 j. k. An obligation that does not arise under the express 27 written terms of a covered policy or contract issued by the 28 member insurer to the enrollee, certificate holder, policy 29 owner, or contract owner including without limitation all of 30 the following: 31 (1) Claims A claim based on marketing materials. 32 (2) Claims A claim based on side letters, riders, or other 33 documents that were issued by the member insurer without 34 meeting applicable policy or contract form filing or approval 35 -4- LSB 2605SV (3) 88 ko/lh 4/ 32

S.F. 556 requirements. 1 (3) Misrepresentation A claim based on misrepresentation of 2 or misrepresentation regarding policy or contract benefits. 3 (4) Extra-contractual claims An extra-contractual claim . 4 (5) Claims A claim for penalties, consequential, or 5 incidental damages. 6 k. l. A contractual agreement that establishes a member 7 insurer’s obligations to provide a book value accounting 8 guaranty for defined contribution benefit plan participants by 9 reference to a portfolio of assets that is owned by the benefit 10 plan or its trustee, which in each case is not an affiliate of 11 the member insurer. 12 l. m. A portion of a covered policy to the extent it 13 provides for interest or other change changes in value to be 14 determined by the use of an index or other external reference 15 stated in the covered policy, but which has have not been 16 credited to the covered policy, or as to which the covered 17 policy owner’s rights are subject to forfeiture, as of the 18 date the member insurer becomes an impaired or insolvent 19 insurer under this chapter , whichever is earlier. If a covered 20 policy’s interest or change changes in value is are credited 21 less frequently than annually, then for purposes of determining 22 the values that have been credited and are not subject to 23 forfeiture under the covered policy, the interest or change in 24 value determined by using the procedures defined in the covered 25 policy will be credited as if the contractual date of crediting 26 interest or changing values was the date of impairment or 27 insolvency, whichever is earlier, and will the crediting 28 interest or changing value shall not be subject to forfeiture. 29 m. n. A policy or contract issued in this state by a member 30 insurer at a time the insurer was not licensed or did not have 31 a certificate of authority to issue the policy or contract in 32 this state. 33 n. o. A portion of a policy or contract issued to a plan or 34 program of an employer, association, or other person to provide 35 -5- LSB 2605SV (3) 88 ko/lh 5/ 32

S.F. 556 life, health, or annuity benefits to employees, members, or 1 others, to the extent that the plan or program is self-funded 2 or uninsured, including but not limited to benefits payable 3 by an employer, association, or other person under any of the 4 following: 5 (1) A multiple employer welfare arrangement as defined in 6 section 3 of the federal Employee Retirement Income Security 7 Act of 1974, 29 U.S.C. §1002, paragraph 40. 8 (2) A minimum premium group insurance plan. 9 (3) A stop-loss group insurance plan. 10 (4) An administrative services-only contract. 11 o. p. A portion of a policy or contract to the extent that 12 it provides for any of the following: 13 (1) Dividends or experience rating credits. 14 (2) Voting rights. 15 (3) Payment of any fees or allowances to any person, 16 including the policy or contract owner, in connection with 17 service to or administration of the policy or contract. 18 p. q. A portion of a policy or contract to the extent that 19 the assessments authorized by section 508C.9 with respect to 20 the policy or contract are preempted by federal or state law. 21 q. r. A policy or contract providing any hospital, medical, 22 prescription drug, or other health care benefits pursuant to 23 any of the following: 24 (1) 42 U.S.C. ch. 7, subch. XVIII, Part C or Part D, 25 commonly known as Medicare Part C and D pursuant to Tit. XVIII 26 of the federal Social Security Act , or any regulations issued 27 pursuant thereto. 28 (2) 42 U.S.C. ch. 7, subch. XIX, commonly known as Medicaid, 29 or any regulations issued pursuant thereto. 30 s. Structured settlement annuity benefits to which a payee 31 or beneficiary has transferred the payee’s or beneficiary’s 32 rights in a structured settlement factoring transaction as 33 defined in 26 U.S.C. §5891(c)(3)(A). 34 Sec. 5. Section 508C.3, Code 2019, is amended by adding the 35 -6- LSB 2605SV (3) 88 ko/lh 6/ 32

S.F. 556 following new subsection: 1 NEW SUBSECTION . 4A. a. The benefits that the association 2 may become obligated to cover shall in no event exceed the 3 lesser of either of the following: 4 (1) The contractual obligations for which the member 5 insurer is liable or would have been liable if the member 6 insurer were not an impaired or insolvent insurer. 7 (2) Any of the following: 8 (a) With respect to one life, regardless of the number of 9 policies or contracts: 10 (i) Three hundred thousand dollars in life insurance death 11 benefits, but not more than one hundred thousand dollars in 12 net cash surrender and net cash withdrawal values for life 13 insurance. 14 (ii) Five hundred thousand dollars for health benefit 15 plans; three hundred thousand dollars for health insurance 16 benefits which are disability income protection coverage as 17 defined by the commissioner by rule pursuant to section 514D.4; 18 three hundred thousand dollars for long-term care insurance as 19 defined in section 514G.103; or one hundred thousand dollars 20 for other health insurance benefits including any net cash 21 surrender and net cash withdrawal values. 22 (iii) Two hundred fifty thousand dollars in the present 23 value of annuity benefits, including net cash surrender and net 24 cash withdrawal values. 25 (iv) With respect to each payee of a structured settlement 26 annuity, or the beneficiary or beneficiaries of the payee if 27 the payee is deceased, two hundred fifty thousand dollars in 28 present value annuity benefits, in the aggregate, including net 29 cash surrender and net cash withdrawal values. 30 (b) (i) With respect to each individual participating 31 in a retirement benefit plan established under section 401, 32 403(b), or 457 of the United States Internal Revenue Code, or 33 each unallocated annuity contract account, excluding a plan 34 established under section 401, 403(b), or 457 of the United 35 -7- LSB 2605SV (3) 88 ko/lh 7/ 32

S.F. 556 States Internal Revenue Code, not more than two hundred fifty 1 thousand dollars in the aggregate, in present value annuity 2 benefits, including net cash surrender and net cash withdrawal 3 values for the beneficiaries of the deceased individual. 4 (ii) However, the association shall not in any event be 5 obligated to cover more than an aggregate of three hundred 6 fifty thousand dollars in benefits with respect to any one life 7 under subparagraph division (a) and this subparagraph division 8 (b), except with respect to benefits for health benefit plans 9 under subparagraph division (a), subparagraph subdivision 10 (ii), in which case the aggregate liability of the association 11 shall not exceed five hundred thousand dollars with respect 12 to any one individual, or more than five million dollars in 13 benefits to one owner of multiple nongroup policies of life 14 insurance regardless of whether the policy or contract owner is 15 an individual, firm, corporation, or other person, and whether 16 the persons insured are officers, managers, employees, or other 17 persons, and regardless of the number of policies and contracts 18 held by the owner. 19 (c) With respect to a plan sponsor whose plan owns, directly 20 or in trust, one or more unallocated annuity contracts not 21 included under subparagraph division (b), not more than five 22 million dollars in benefits, regardless of the number of 23 contracts held by the plan sponsor. However, where one or more 24 such unallocated annuity contracts are covered contracts under 25 this chapter and are owned by a trust or other entity for the 26 benefit of two or more plan sponsors, the association shall 27 provide coverage if the largest interest in the trust or entity 28 owning the contract is held by a plan sponsor whose principal 29 place of business is in the state but in no event shall the 30 association be obligated to cover more than five million 31 dollars in benefits in the aggregate with respect to all such 32 unallocated contracts. 33 b. The limitations on the association’s obligation to 34 cover benefits that are set forth under this subsection 35 -8- LSB 2605SV (3) 88 ko/lh 8/ 32

S.F. 556 do not take into account the association’s subrogation and 1 assignment rights or the extent to which such benefits could 2 be provided out of the assets of the impaired or insolvent 3 insurer attributable to covered policies. The cost of the 4 association’s obligations under this chapter may be met by the 5 use of assets attributable to covered policies or reimbursed 6 to the association pursuant to the association’s subrogation 7 and assignment rights. 8 c. For purposes of this chapter, benefits provided by a 9 long-term care rider to a life insurance policy or annuity 10 contract shall be considered the same type of benefits as the 11 base life insurance policy or annuity contract to which the 12 long-term rider relates. 13 Sec. 6. Section 508C.3, subsection 5, Code 2019, is amended 14 to read as follows: 15 5. In performing its obligations to provide coverage 16 under this chapter , the association shall not be required to 17 guarantee, assume, reinsure, reissue, or perform, or cause to 18 be guaranteed, assumed, reinsured, reissued, or performed, the 19 contractual obligations of an insolvent or impaired insurer 20 under a covered policy or contract that do not materially 21 affect the economic values or economic benefits of the covered 22 policy or contract. 23 Sec. 7. Section 508C.5, subsections 8, 10, 11, 12, 14, 17, 24 19, and 20, Code 2019, are amended to read as follows: 25 8. “Covered policy” or “covered contract” means a policy 26 or contract , or a portion of a policy or contract , for which 27 coverage is provided under section 508C.3 . 28 10. “Impaired insurer” means a member insurer which , after 29 July 1, 1987, is not an insolvent insurer but and is placed 30 under an order of rehabilitation or conservation by a court of 31 competent jurisdiction. 32 11. “Insolvent insurer” means a member insurer which , after 33 July 1, 1987, is placed under an order of liquidation with a 34 finding of insolvency by a court of competent jurisdiction. 35 -9- LSB 2605SV (3) 88 ko/lh 9/ 32

S.F. 556 12. “Member insurer” means a person an insurer or health 1 maintenance organization which is licensed or who which holds 2 a certificate of authority to transact in this state any kind 3 of insurance or health maintenance business for which coverage 4 is provided under section 508C.3 , and including a person an 5 insurer or health maintenance organization whose license or 6 certificate of authority in this state has been suspended, 7 revoked, not renewed, or voluntarily withdrawn but does not 8 including include any of the following: 9 a. An entity which is a licensed company specified in 10 section 508C.3, subsection 4 , paragraph “e” “f” or “f” “g” . 11 b. A mandatory state pooling plan. 12 c. A mutual assessment company or other person which 13 operates on an assessment basis. 14 d. An insurance exchange. 15 e. An entity which issues a charitable gift annuity under 16 chapter 508F . 17 f. An entity whose only business in this state is operating 18 as a managed care organization. For purposes of this 19 paragraph, “managed care organization” means an entity that is 20 under contract with the Iowa department of human services to 21 provide services to Medicaid recipients and that also meets 22 the definition of “health maintenance organization” in section 23 514B.1. 24 f. g. An entity similar to any of the entities enumerated 25 in this subsection . 26 14. “Owner” of a policy of contract, “policy holder” , 27 “policy owner” , or “contract owner” means the person who is 28 identified as the legal owner of a policy or contract under 29 the terms of the policy or contract or who is otherwise vested 30 with legal title to the policy or contract through a valid 31 assignment completed in accordance with the terms of the policy 32 or contract and properly recorded as the owner on the books of 33 the member insurer. “Owner” , “policy holder” , “policy owner” , 34 or “contract owner” does not include a person with a mere 35 -10- LSB 2605SV (3) 88 ko/lh 10/ 32

S.F. 556 beneficial interest in a policy or contract. 1 17. “Premium” means amounts or consideration, by whatever 2 name called, received on covered policies or contracts less 3 returned premiums, considerations, and deposits and less 4 dividends and experience credits. “Premium” does not include 5 amounts for consideration received for policies or contracts or 6 for the portions of policies or contracts for which coverage 7 is not provided under section 508C.3, subsection 4 , except 8 that assessable premium shall not be reduced on account of the 9 provisions of section 508C.3, subsection 4 , paragraph “a” , 10 relating to interest limitations and section 508C.8 508C.3 , 11 subsection 8 4A , paragraph “a” , subparagraph (2), subparagraph 12 division (a), relating to limitations with respect to one 13 individual, one participant, and one policy or contract owner. 14 “Premium” also does shall not include any of the following: 15 a. Premiums in excess of five million dollars on an 16 unallocated annuity contract not issued under a governmental 17 retirement plan, or its trustee, established under section 401, 18 403(b), or 457 of the United States Internal Revenue Code. 19 b. With respect to multiple nongroup policies of life 20 insurance owned by one owner, whether the policy or contract 21 owner is an individual, firm, corporation, or other person, and 22 whether the persons insured are officers, managers, employees, 23 or other persons, premiums in excess of five million dollars 24 with respect to those polices or contracts, regardless of the 25 number of policies or contracts held by the owner. 26 19. “Receivership court” means a court in an insolvent 27 or impaired insurer’s state having jurisdiction over the 28 conservation, rehabilitation, or liquidation of the insolvent 29 or impaired insurer. 30 20. “Resident” means a person to whom a contractual 31 obligation is owed and who resides in a state on the date of 32 entry of a court order that determines a member insurer is an 33 impaired insurer or a court order that determines a member 34 insurer is an insolvent insurer. A person may be a resident 35 -11- LSB 2605SV (3) 88 ko/lh 11/ 32

S.F. 556 of only one state, which in the case of a person other than a 1 natural person shall be the state of that person’s principal 2 place of business. A citizen of the United States who is a 3 resident of a foreign country, or is a resident of a United 4 States possession, territory, or protectorate that does not 5 have an association similar to the association created by this 6 chapter , shall be deemed a resident of the state or domicile of 7 the member insurer that issued the policy or contract. 8 Sec. 8. Section 508C.5, Code 2019, is amended by adding the 9 following new subsection: 10 NEW SUBSECTION . 9A. “Health benefit plan” means any 11 hospital or medical expense policy or certificate, or health 12 maintenance organization subscriber contract or any other 13 similar health contract. “Health benefit plan” does not include 14 any of the following: 15 a. Accident-only insurance. 16 b. Credit insurance. 17 c. Dental-only insurance. 18 d. Vision-only insurance. 19 e. Medicare supplement insurance. 20 f. Benefits for long-term care, home health care, 21 community-based care, or any combination thereof. 22 g. Disability income insurance. 23 h. Coverage for an onsite medical clinic. 24 i. Specified disease, hospital confinement indemnity, 25 or limited benefit health insurance if the specific type of 26 coverage does not provide coordination of benefits and is 27 provided under a separate policy or certificate. 28 Sec. 9. Section 508C.6, subsection 1, Code 2019, is amended 29 to read as follows: 30 1. A nonprofit legal entity is created to be known as the 31 Iowa life and health insurance guaranty association. All 32 member insurers shall be and shall remain members of the 33 association as a condition of their authority to transact 34 insurance or health maintenance organization business in this 35 -12- LSB 2605SV (3) 88 ko/lh 12/ 32

S.F. 556 state. The association shall perform its functions under 1 the plan of operation established and approved under section 2 508C.10 and shall exercise its powers through the board of 3 directors established in section 508C.7 . For purposes of 4 administration and assessment, the association shall maintain 5 all of the following accounts: 6 a. A health insurance account. 7 b. A life insurance account. 8 c. An annuity account . A , which shall include annuity 9 contracts owned by a governmental retirement plan , or the 10 plan’s trustee, established under section 401, 403(b), or 457 11 of the United States Internal Revenue Code shall be covered by 12 the annuity account , but shall otherwise exclude unallocated 13 annuities . 14 d. An unallocated annuity contract account, excluding 15 plans which shall exclude contracts owned by a governmental 16 retirement benefit plan, or the plan’s trustee, established 17 under section 401, 403(b), or 457 of the United States Internal 18 Revenue Code. 19 Sec. 10. Section 508C.7, subsections 1 and 2, Code 2019, are 20 amended to read as follows: 21 1. The board of directors of the association shall consist 22 of not less than five seven nor more than nine eleven member 23 insurers serving terms as established in the plan of operation. 24 The members of the board shall be selected by member insurers, 25 subject to the approval of the commissioner. Vacancies on the 26 board shall be filled for the remaining period of the term 27 by a majority vote of the remaining board members, subject 28 to the approval of the commissioner. To select the initial 29 board of directors, and initially organize the association, the 30 commissioner shall give notice to all member insurers of the 31 time and place of the organizational meeting. In determining 32 voting rights at the organizational meeting , each member 33 insurer is shall be entitled to one vote in person or by proxy. 34 If the board of directors is not selected within sixty days 35 -13- LSB 2605SV (3) 88 ko/lh 13/ 32

S.F. 556 after notice of the organizational meeting, the commissioner 1 may appoint the initial members. 2 2. In approving selections or in appointing members to the 3 board, the commissioner shall consider, among other factors, 4 whether all member insurers , including member insurers that 5 primarily write life insurance, annuity contracts, or health 6 benefit plans, are fairly represented. 7 Sec. 11. Section 508C.8, subsections 1 and 2, Code 2019, are 8 amended to read as follows: 9 1. If a domestic, foreign, or alien member insurer is 10 an impaired insurer, the association, subject to conditions 11 imposed by the association and approved by the impaired insurer 12 and the commissioner, may take any of the following actions : 13 a. Guarantee, assume, reissue, reinsure, or cause to be 14 guaranteed, assumed, reissued, or reinsured, any or all of the 15 covered policies of the impaired insurer. 16 b. Provide moneys, pledges, notes, guarantees, or other 17 means as proper to effectuate paragraph “a” and assure payment 18 of the contractual obligations of the impaired insurer pending 19 action under paragraph “a” . 20 c. Loan money to the impaired insurer and guarantee 21 borrowings by the impaired insurer, provided the association 22 has concluded, based on reasonable assumptions, that there is 23 a likelihood of repayment of the loan and a probability that 24 unless a loan is made the association would incur substantial 25 liabilities under subsection 2 . 26 2. If a member insurer is an insolvent insurer, the 27 association may in its discretion do any of the following: 28 a. The association may do either of the following: 29 (1) Guarantee, assume, reissue, or reinsure, or cause to 30 be guaranteed, assumed, reissued, or reinsured the covered 31 policies or contracts of an insolvent insurer. 32 (2) Assure payment of the contractual obligations of the 33 insolvent insurer. 34 b. Provide moneys, pledges, notes, guarantees, or other 35 -14- LSB 2605SV (3) 88 ko/lh 14/ 32

S.F. 556 means as reasonably necessary to discharge the association’s 1 duties described in this subsection . 2 c. Provide benefits and coverages in accordance with all of 3 the following provisions: 4 (1) With respect to life and health insurance policies or 5 contracts and annuity contracts, assure payment of benefits 6 for premiums identical to the premiums and benefits, except 7 for conversion and renewability, that would have been payable 8 under the policies or contracts of the insolvent insurer for 9 the following claims incurred as follows: 10 (a) With respect to group policies or and contracts, not 11 later than the earlier of the next renewal date under those 12 policies or contracts or forty-five days, but in no event less 13 than thirty days, after the date on which the association 14 becomes obligated with respect to those the policies or 15 contracts. 16 (b) With respect to nongroup policies or contracts not later 17 than the earlier of the next renewal date, if any, under those 18 policies or contracts or one year, but in no event less than 19 thirty days, from the date on which the association becomes 20 obligated with respect to the policies or contracts. 21 (2) Make diligent efforts to provide all known insureds , 22 enrollees, or annuitants, for nongroup policies or contracts, 23 or group policy or contract owners, with respect to group 24 policies or contracts, thirty days’ notice of the termination , 25 pursuant to subparagraph (1), of the benefits provided pursuant 26 to subparagraph (1) . 27 (3) With respect to nongroup life and health insurance 28 policies or and contracts covered by the association, make 29 available to each known insured , enrollee, or annuitant, or 30 owner if other than the insured or annuitant, and with respect 31 to an individual formerly an insured , enrollee, or formerly 32 an annuitant under a group policy or contract who is not 33 eligible for replacement group coverage, substitute coverage 34 on an individual basis in accordance with the provisions of 35 -15- LSB 2605SV (3) 88 ko/lh 15/ 32

S.F. 556 subparagraph (4), if the insureds , enrollees, or annuitants had 1 a right under law or under the terminated policy , or contract , 2 or annuity to convert coverage to individual coverage or to 3 continue an individual policy , or contract , or annuity in force 4 until a specified age or for a specified time, during which the 5 member insurer had no right to unilaterally make changes in any 6 provision of the policy , or contract , or annuity or had a right 7 only to make changes in premium by class. 8 (4) In providing the substitute coverage required under 9 subparagraph (3), the association may offer either to reissue 10 the terminated coverage or to issue an alternative policy or 11 contract at actuarially justified rates . 12 (a) Reissued or alternative policies or contracts shall be 13 offered without requiring evidence of insurability, and shall 14 not provide for any waiting period or exclusion that would not 15 have applied under the terminated policy or contract. 16 (b) The association may reinsure any reissued or 17 alternative policy or contract. 18 (5) Alternative policies or contracts adopted by the 19 association shall be subject to the approval of the domiciliary 20 insurance commissioner and the receivership court . The 21 association may adopt alternative policies or contracts 22 of various types for future issuance without regard to any 23 particular impairment or insolvency of an insurer . 24 (a) Alternative policies or contracts shall contain 25 at least the minimum statutory provisions required in this 26 state and shall provide benefits that are not unreasonable 27 in relation to the premium charged. The association shall 28 set the premium in accordance with a table of rates that the 29 association shall adopt. The premium shall reflect the amount 30 of insurance to be provided and the age and class of risk of 31 each insured, but shall not reflect any changes in the health 32 of the insured after the original policy or contract was last 33 underwritten. 34 (b) Any alternative policy or contract issued by the 35 -16- LSB 2605SV (3) 88 ko/lh 16/ 32

S.F. 556 association shall provide coverage of a type similar to that 1 of the policy or contract issued by the impaired or insolvent 2 insurer, as determined by the association. 3 (6) If the association elects to reissue terminated 4 coverage at a premium rate different from that charged under 5 the terminated policy or contract , the premium shall be 6 actuarially justified and set by the association in accordance 7 with the amount of insurance or coverage provided and the age 8 and class of risk, subject to approval of the domiciliary 9 insurance commissioner and the receivership court . 10 (7) The association’s obligations with respect to coverage 11 under any policy or contract of an the impaired or insolvent 12 insurer or under any reissued or alternative policy or 13 contract, shall cease on the date the coverage, or policy , or 14 contract , is replaced by another similar policy or contract by 15 the policy or contract owner, the insured, the enrollee, or the 16 association. 17 (8) When proceeding under this paragraph “c” with respect 18 to a policy or contract carrying guaranteed minimum interest 19 rates, the association shall assure the payment or crediting of 20 a rate of interest consistent with section 508C.3, subsection 21 4 , paragraph “a” . 22 (9) Nonpayment of premiums within thirty-one days after 23 the date required under the terms of any guaranteed, assumed, 24 alternative, or reissued policy, contract, or substitute 25 coverage shall terminate the association’s obligations under 26 the policy, contract, or coverage under this chapter with 27 respect to the policy, contract, or coverage, except with 28 respect to any claims incurred or any net cash surrender value 29 which may be due under this chapter. 30 (10) Premiums due for coverage after entry of an order 31 of liquidation of an insolvent insurer shall belong to the 32 association and be payable at the direction of the association. 33 If the liquidator of an insolvent insurer requests, the 34 association shall provide a report to the liquidator regarding 35 -17- LSB 2605SV (3) 88 ko/lh 17/ 32

S.F. 556 the premiums collected by the association. The association 1 shall be liable for unearned premiums due to policy or contract 2 owners arising after the entry of the order of liquidation. 3 (11) The protection provided by this chapter shall not apply 4 where any guaranty protection is provided to a resident of this 5 state by the laws of the domiciliary state or by jurisdiction 6 of the impaired or insolvent insurer by an entity other than 7 this state. 8 Sec. 12. Section 508C.8, subsection 6, Code 2019, is amended 9 to read as follows: 10 6. a. The association shall have standing to appear 11 or intervene before any court or agency in this state with 12 jurisdiction over an impaired or insolvent insurer concerning 13 which the association is or may become obligated under this 14 chapter or with jurisdiction over any person or property 15 against which the association may have rights through 16 subrogation or otherwise. Standing shall extend to all matters 17 germane to the powers and duties of the association including 18 but not limited to proposals for reinsuring, reissuing, 19 modifying, or guaranteeing the covered policies or contracts 20 of the impaired or insolvent insurer and the determination of 21 the covered policies or contracts , and contractual obligations. 22 The association shall also have the right to appear or 23 intervene before any court or agency in another state with 24 jurisdiction over an impaired or insolvent insurer for which 25 the association is or may become obligated or with jurisdiction 26 over any person or property against whom the association may 27 have rights through subrogation or otherwise. 28 b. As a creditor of an impaired or insolvent insurer as 29 provided under section 508C.13, subsection 3 , and consistent 30 with the provisions of section 507C.34 , the association and 31 other similar associations shall be entitled to receive a 32 disbursement of assets out of the marshaled assets, from 33 time to time as the assets become available to reimburse 34 the association or similar associations, as a credit 35 -18- LSB 2605SV (3) 88 ko/lh 18/ 32