Bill Summary – FastDemocracy

OHIO LEGISLATIVE SERVICE COMMISSION
                                          Office of Research                            Legislative Budget
         www.lsc.ohio.gov                   and Drafting                                      Office
                           H.B. 339                            Bill Analysis
                  133rd   General Assembly
                                                               Click here for H.B. 339’s Fiscal Note
Version: As Reported by House Insurance
Primary Sponsor: Rep. Merrin
Effective Date:
Yosef Schiff, Attorney
                                                    SUMMARY
                    Corrects technical errors throughout the insurance laws.
                    Lengthens the amount of time a life insurance policy may be backdated from three to six
                      months.
                    Specifies that a regional council of governments does not engage in the business of
                      insurance if the council provides health care benefits to the council members’ officers
                      and employees and their dependents if certain criteria are met.
                                             DETAILED ANALYSIS
Technical corrections
        The bill corrects a number of technical errors in the insurance laws. For example,
R.C. 3903.724(A)(4) refers to a “contact” instead of a “contract.” Another example is R.C.
3902.08, which contains an incorrect cross-reference. That section exempts certain insurance
policies from the general requirement that policies must be filed with the Superintendent of
Insurance, so long as the exempted policies are accompanied by certificates that meet certain
requirements. One of those requirements is that the form must meet a minimum reading ease
score. That specific requirement is found in R.C. 3902.04(D). However, R.C. 3902.08 incorrectly
cross-references to a nonexistent division, R.C. 3902.05(D), instead.
        The bill also changes the wording of two sections. The first, R.C. 3919.14, appears to
have been defectively re-codified from General Code 9429-2 in H.B. 1 of the 100th General
Assembly in 1953. That bill re-codified all existing Ohio statutes into the Revised Code. This
particular section requires a mutual life and accident insurer to submit “separate annual
statements to the superintendent of insurance of the business transacted by it under the
assessment plan, as required by section 3919.01 to 3919.15, inclusive, of the Revised Code, or
for the purpose of under the level premium or legal reserve plan, as required by section
3907.19 of the Revised Code.” The bill corrects two issues with this section. First, the bill
                                                                                                       December 12, 2019
Office of Research and Drafting                    LSC                                Legislative Budget Office
changes “3919.01 to 3919.15” to “3919.16,” which is the correct cross-reference. And second, it
replaces the phrase “or for the purpose of” – which is inconsistent with the original wording in
the General Code and results in an incomplete sentence – with the phrase, “and of the business
transacted by it,” which was the original wording under the General Code. Thus, under the bill,
the insurer must make separate annual statements to the Superintendent of Insurance of the
business transacted by it under the assessment plan, as required by 3919.16 of the Revised
Code, and of the business transacted by it under the level premium or legal reserve plan, as
required by section 3907.19 of the Revised Code.
        The second provision reworded by the bill is R.C. 3964.19(E)(1). This division lists the
types of agreements into which a special purpose financial captive insurance company may
enter. The division was reworded and broken up into more divisions for ease of reading:
                   Current wording                                       H.B. 339 wording
(E)(1) A special purpose financial captive insurance   (E)(1)(a) A special purpose financial captive
company may enter into asset management                insurance company may enter into the following
agreements, including swap agreements,                 types of transactions for the purposes described in
guaranteed investment contracts, or other              division (E)(1)(b) of this section:
transactions with the objective of reducing timing
                                                       (i) Asset management agreements, including swap
differences in the funding of upfront, or ongoing,
                                                       agreements;
transaction expenses, or managing asset, credit,
prepayment, or interest rate risk of the               (ii) Guaranteed investment contracts;
investments of the special purpose financial           (iii) Other transactions with the objective of
captive insurance company to ensure that the           reducing timing differences in the funding of
investments are sufficient to assure payment or        upfront, or ongoing, transaction expenses, or
repayment of the securities, and related interest      managing asset, credit, prepayment, or interest
or principal payments, issued pursuant to a special    rate risk of the investments of the special purpose
purpose financial captive insurance company            financial captive insurance company.
insurance securitization transaction or the
obligations required under a special purpose           (b) The purpose of the transactions described in
financial captive insurance company contract or        division (E)(1)(a) of this section shall be any of the
for any other purpose approved by the                  following:
superintendent.                                        (i) To ensure that the investments are sufficient to
                                                       assure payment or repayment of the securities,
                                                       and related interest or principal payments, issued
                                                       pursuant to a special purpose financial captive
                                                       insurance company insurance securitization
                                                       transaction;
                                                       (ii) To ensure that the investments are sufficient to
                                                       assure payment or repayment of the obligations
                                                       required under a special purpose financial captive
                                                       insurance company contract;
                                                       (iii) Any other purpose approved by the
                                                       superintendent.
P a g e |2                                                                                           H.B. 339
                                                                                                As Introduced
Office of Research and Drafting                        LSC                   Legislative Budget Office
       The bill explicitly states that in enacting these changes, the intent of the General
Assembly is to correct nonsubstantive errors only and not to make substantive changes. Any
section affected by these changes must be construed as a restatement and correction of, and
substituted in a continuing way for, the corresponding statutory provision existing on its date of
enactment.1
Backdating life insurance policies
        A life insurer will often allow an applicant to backdate the applicant’s life insurance
policy if the applicant recently had a birthday, thereby “capturing” the applicant’s younger age
and lowering the premium. Current law allows a policy to be backdated up to three months.2 In
other words, if an applicant turned 56 on January 1 and applied for life insurance March 31, the
policy may be backdated to take effect as of December 31, when the applicant was 55 years
old. This could result in a lower premium. The applicant would still need to pay the premiums
for the additional months of January through March, but depending on the circumstances, the
total amount paid could be less than if the policy were not backdated.
      The bill extends the amount of time the policy may be backdated from three to six
months.
Regional Council of Governments – health care benefits
        Continuing law permits the governing bodies of Ohio political subdivisions to enter into
an agreement with each other, or with the governing bodies of political subdivisions of another
state, for establishment of a regional council. A regional council that is established to provide
health care benefits to the council members’ officers and employees and their dependents may
contract to administer and coordinate a self-funded health benefit program of a nonprofit
corporation.
       Under the bill, if a council operating such a program does not act as a third-party
administrator under the Third-party Administrator Law, the operation of the program does not
constitute engaging in the business of insurance and is not subject to Ohio Insurance Laws.3
                                                HISTORY
                              Action                                       Date
Introduced                                                   09-17-19
Reported, H. Insurance                                       12-11-19
H0339-RH-133/ks
1   R.C. 1.301 and Section 3 of the bill.
2   R.C. 3915.13.
3   R.C. 167.03(E) and R.C. 167.01, not in the bill.
P a g e |3                                                                                  H.B. 339
                                                                                       As Introduced
Statutes affected: 
As Introduced: 167.03, 1751.32, 1751.53, 1751.69, 1751.74, 1751.84, 1753.31, 3901.045, 3901.13, 3901.25, 3901.41, 3901.45, 3901.811, 3901.87, 3901.88, 3901.90, 3902.08, 3903.01, 3903.50, 3903.52, 3903.56, 3903.71, 3903.724, 3903.728, 3903.7211, 3903.74, 3904.01, 3904.02, 3904.16, 3905.051, 3905.062, 3905.063, 3905.14, 3905.84, 3905.85, 3906.11, 3907.03, 3907.07, 3909.04, 3911.09, 3911.20, 3911.24, 3913.11, 3913.22, 3913.40, 3915.05, 3915.053, 3915.073, 3915.13, 3916.01, 3916.171, 3916.18, 3919.14, 3921.13, 3921.191, 3922.11, 3922.14, 3922.17, 3923.01, 3923.021, 3923.04, 3923.19, 3923.38, 3923.39, 3923.53, 3923.55, 3923.56, 3923.60, 3923.65, 3923.82, 3923.85, 3925.09, 3927.08, 3929.011, 3929.04, 3930.10, 3931.02, 3931.03, 3931.99, 3933.01, 3933.02, 3935.06, 3935.10, 3935.12, 3935.13, 3935.14, 3935.99, 3937.10, 3937.182, 3941.46, 3951.04, 3951.06, 3951.10, 3951.99, 3953.01, 3953.07, 3953.14, 3953.29, 3956.01, 3956.09, 3956.10, 3959.01, 3960.07, 3964.19, 3999.16, 3999.41, 4509.41, 4509.67, 3941.47, 3941.48, 3941.49, 3941.52
As Reported By House Committee: 167.03, 1751.32, 1751.74, 1751.84, 1753.31, 3901.045, 3901.45, 3901.811, 3901.87, 3902.08, 3903.01, 3903.52, 3903.56, 3903.71, 3903.724, 3903.728, 3903.7211, 3903.74, 3904.01, 3904.16, 3905.051, 3905.14, 3905.84, 3909.04, 3911.24, 3913.11, 3913.40, 3915.05, 3915.053, 3915.073, 3915.13, 3916.171, 3919.14, 3922.11, 3922.14, 3923.021, 3923.04, 3923.53, 3925.09, 3927.08, 3929.04, 3930.10, 3931.03, 3931.99, 3941.46, 3951.04, 3951.10, 3953.14, 3956.01, 3959.01, 3960.07, 3964.19, 3999.16
As Passed By House: 167.03, 1751.32, 1751.74, 1751.84, 1753.31, 3901.045, 3901.45, 3901.811, 3901.87, 3902.08, 3903.01, 3903.52, 3903.56, 3903.71, 3903.724, 3903.728, 3903.7211, 3903.74, 3904.01, 3904.16, 3905.051, 3905.14, 3905.84, 3909.04, 3911.24, 3913.11, 3913.40, 3915.05, 3915.053, 3915.073, 3915.13, 3916.171, 3919.14, 3922.11, 3922.14, 3923.021, 3923.04, 3923.53, 3925.09, 3927.08, 3929.04, 3930.10, 3931.03, 3931.99, 3941.46, 3951.04, 3951.10, 3953.14, 3956.01, 3959.01, 3960.07, 3964.19, 3999.16