19.8024.01000
Sixty-sixth
Legislative Assembly HOUSE BILL NO. 1116
of North Dakota
Introduced by
Industry, Business and Labor Committee
(At the request of the Insurance Commissioner)
1 A BILL for an Act to amend and reenact sections 26.1-38.1-01, 26.1-38.1-02, 26.1-38.1-03,
2 26.1-38.1-04, 26.1-38.1-05, 26.1-38.1-06, 26.1-38.1-08, 26.1-38.1-09, 26.1-38.1-10,
3 26.1-38.1-11, 26.1-38.1-13, 26.1-38.1-14, and 26.1-38.1-16 of the North Dakota Century Code,
4 relating to the North Dakota life and health insurance guaranty association; to repeal section
5 26.1-38.1-17 of the North Dakota Century Code, relating to application of laws to an insolvent
6 insurer; and to provide for application.
7 BE IT ENACTED BY THE LEGISLATIVE ASSEMBLY OF NORTH DAKOTA:
8 SECTION 1. AMENDMENT. Section 26.1-38.1-01 of the North Dakota Century Code is
9 amended and reenacted as follows:
10 26.1-38.1-01. ScopeCoverage and limitations.
11 1. This section provides coverage for the policies and contracts specified in subsection 2:
12 a. To persons, except for nonresident certificate holders under group policies or
13 contracts, who, regardless of where they reside, are the beneficiaries, assignees,
14 or payees, including health care providers rendering services covered under
15 health insurance policies or certificates, of the persons covered under
16 subdivision b.
17 b. To persons who are owners of or certificate holders or enrollees under such
18 policies or contracts other than unallocated annuity contracts and structured
19 settlement annuities, and in each case who:
20 (1) Are residents; or
21 (2) Are not residents, but only under all of the following conditions:
22 (a) The member insurer that issued such policies or contracts is
23 domiciled in this state;
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1 (b) The states in which the persons reside have associations similar to
2 the association created under this chapter; and
3 (c) The persons are not eligible for coverage by an association in any
4 other state due to the fact thatbecause the insurer or the health
5 maintenance organization was not licensed in the state at the time
6 specified in the state's guaranty association law.
7 c. For any unallocated annuity contract specified in subsection 2, subdivisions a
8 and b do not apply, and this chapter, except as provided in subdivisions e and f,
9 provides coverage to:
10 (1) Persons who are the owners of the unallocated annuity contracts if the
11 contracts are issued to or in connection with a specific benefit plan, the
12 sponsor of which has its principal place of business in this state; and
13 (2) Persons who are owners of unallocated annuity contracts issued to or in
14 connection with government lotteries if the owners are residents.
15 d. For structured settlement annuities specified in subsection 2, subdivisions a and
16 b do not apply, and this chapter, except as provided in subdivisions e and f,
17 provides coverage to a person who is a payee under a structured settlement
18 annuity or beneficiary of a payee if the payee is deceased, if the payee:
19 (1) Is a resident, regardless of where the contract owner resides; or
20 (2) Is not a resident, and:
21 (a) The contract owner of the structured settlement annuity is a resident,
22 or the contract owner of the structured settlement annuity is not a
23 resident but the insurer that issued the structured settlement annuity
24 is domiciled in this state and the state in which the contract owner
25 resides has an association similar to the association created under
26 this chapter; and
27 (b) Neither the payee or beneficiary nor the contract owner is eligible for
28 coverage by the association of the state in which the payee or
29 contract owner resides.
30 e. This chapter does not provide coverage to:
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1 (1) A person who is a payee or beneficiary of a contract owner resident of this
2 state, if the payee or beneficiary is afforded any coverage by the association
3 of another state; or
4 (2) A person covered under subdivision bc, if any coverage is provided by the
5 association of another state to the person; or
6 (3) A person who acquires rights to receive payments through a structured
7 settlement factoring transaction as defined in section 589(c)(3)(A) of title 26
8 of the United States Code, regardless of whether the transaction occurred
9 before or after this federal law became effective.
10 f. This chapter provides coverage to a person who is a resident of this state and, in
11 special circumstances, to a nonresident. In order to avoid duplicate coverage, if a
12 person who would otherwise receive coverage under this chapter is provided
13 coverage under the laws of any other state, the person may not be provided
14 coverage under this chapter. In determining the application of the provisions of
15 this subdivision in situations in which a person could be covered by the
16 association of more than one state, whether as an owner, payee, enrollee,
17 beneficiary, or assignee, this chapter must be construed in conjunction with other
18 state laws to result in coverage by only one association.
19 2. This chapter provides coverage to the persons specified in subsection 1 for policies or
20 contracts of direct, nongroup life insurance, health insurance, which for the purposes
21 of this chapter includes health maintenance organization subscriber contracts and
22 certificates, or annuity policies or contractsannuities, and supplemental contracts to
23 any of these, for certificates under direct group policies and contracts, and
24 supplemental contracts to any of these and for unallocated annuity contracts issued by
25 member insurers, except as limited by this chapter. Annuity contracts and certificates
26 under group annuity contracts include guaranteed investment contracts, deposit
27 administration contracts, unallocated funding agreements, allocated funding
28 agreements, structured settlement annuities, annuities issued to or in connection with
29 government lotteries, and any immediate or deferred annuity contracts.
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1 3. ThisExcept for the portion of a policy or contract, including a rider, which provides
2 long-term care or any other health insurance benefits, this chapter does not provide
3 coverage for:
4 a. Any portion of a policy or contract not guaranteed by the member insurer, or
5 under which the risk is borne by the policy owner or contract owner;
6 b. Any policy or contract of reinsurance, unless assumption certificates have been
7 issued pursuant to the reinsurance policy or contract;
8 c. Any portion of a policy or contract to the extent that the rate of interest on which
9 the portion of the policy or contract is based or to the extent that the rate of
10 interest, crediting of a rate of interest, or similar factor determined by using an
11 index or other external reference stated in the policy or contract which is
12 employed in calculating returns or changes in value:
13 (1) Averaged over the period of four years prior to the date on which the
14 member insurer becomes an impaired or insolvent insurer under this
15 chapter, whichever is earlier, exceeds a rate of interest determined by
16 subtracting two percentage points from Moody's corporate bond yield
17 average averaged for that same four-year period or for such lesser period if
18 the policy or contract was issued less than four years prior to the date on
19 which the member insurer becomes an impaired or insolvent insurer under
20 this chapter, whichever is earlier; and
21 (2) On and after the date on which the member insurer becomes an impaired or
22 insolvent insurer under this chapter, whichever is earlier, exceeds the rate of
23 interest determined by subtracting three percentage points from Moody's
24 corporate bond yield average as most recently available;
25 d. A portion of a policy or contract issued to a plan or program of an employer,
26 association, or other person to provide life, health, or annuity benefits to its
27 employees, members, or others, to the extent that such plan or program is
28 self-funded or uninsured, including benefits payable by an employer, association,
29 or other person under:
30 (1) A multiple employer welfare arrangement as defined in 29 U.S.C.
31 1144section 1144 of title 29 of the United States Code;
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1 (2) A minimum premium group insurance plan;
2 (3) A stop-loss group insurance plan; or
3 (4) An administrative services only contract;
4 e. Any portion of a policy or contract to the extent that it provides for dividends or
5 experience rating credits, voting rights, or payment of any fees or allowances to
6 any person, including the policy owner or contract owner, in connection with the
7 service to or administration of suchthe policy or contract;
8 f. Any policy or contract issued in this state by a member insurer at a time when it
9 was not licensed or did not have a certificate of authority to issue suchthe policy
10 or contract in this state;
11 g. Any unallocated annuity contract issued to or in connection with a benefit plan
12 protected under the federal pension benefit guaranty corporation regardless of
13 whether the federal pension benefit guaranty corporation has yet become liable
14 to make any payments with respect to the benefit plan;
15 h. Any portion of any unallocated annuity contract which is not issued to, or in
16 connection with, a specific employee, union, or association of natural persons
17 benefit plan or a government lottery;
18 i. A portion of a policy or contract to the extent that the assessments required by
19 section 26.1-38.1-06 with respect to the policy or contract are preempted or
20 otherwise not permitted by federal or state law;
21 j. An obligation that does not arise under the express written terms of the policy or
22 contract issued by the member insurer to the enrollee, certificate holder, contract
23 owner or policy owner, including:
24 (1) Claims based on marketing materials;
25 (2) Claims based on side letters, riders, or other documents that were issued by
26 the member insurer without meeting applicable policy or contract form filing
27 or approval requirements;
28 (3) Misrepresentations of or regarding policy or contract benefits;
29 (4) Extracontractual claims; or
30 (5) A claim for penalties or consequential or incidental damages;
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1 k. A contractual agreement that establishes the member insurer's obligations to
2 provide a book value accounting guaranty for defined contribution benefit plan
3 participants by reference to a portfolio of assets that is owned by the benefit plan
4 or its trustee, which in each case is not an affiliate of the member insurer;
5 l. A portion of a policy or contract to the extent it provides for interest or other
6 changes in value to be determined by the use of an index or other external
7 reference stated in the policy or contract, but which has not been credited to the
8 policy or contract, or as to which the policy owner's or contract owner's rights are
9 subject to forfeiture, as of the date the member insurer becomes an impaired or
10 insolvent insurer under this chapter, whichever is earlier. If a policy's or contract's
11 interest or changes in value are credited less frequently than annually, then for
12 purposes of determining the values that have been credited and are not subject
13 to forfeiture under this subdivision, the interest or changes in value determined by
14 using the procedures defined in the policy or contract will be credited as if the
15 contractual date of crediting interest or changing values was the date of
16 impairment or insolvency, whichever is earlier, and is not subject to forfeiture; and
17 m. A policy or contract providing any hospital, medical, prescription drug, or other
18 health care benefits pursuant to part C or part D of subchapter XVIII, of chapter 7
19 of title 42 of the United States Code (, commonly known as Medicare part C and
20 part D), or subchapter XIX of chapter 7 of title 42 of the United States Code;
21 commonly known as Medicaid, or any regulations issued pursuant thereto; and
22 n. Structured settlement annuity benefits to which a payee or beneficiary has
23 transferred the payee's or beneficiary's rights in a structured settlement factoring
24 transactions, as defined in section 5891(c)(3)(A) of title 26 of the United States
25 Code, regardless of whether the transaction occurred before or after this federal
26 law became effective.
27 4. The benefits that the association may become obligated to cover may in no event
28 exceed the lesser of:
29 a. The contractual obligations for which the member insurer is liable or would have
30 been liable if it were not an impaired or insolvent insurer; or
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1 b. (1) With any respect to one life, regardless of the number of policies, or
2 contracts:
3 (a) Three hundred thousand dollars in life insurance death benefits, but
4 not more than one hundred thousand dollars in net cash surrender
5 and net cash withdrawal values for life insurance;
6 (b) InFor health insurance benefits:
7 [1] One hundred thousand dollars for coverages not defined as
8 disability income insurance or basic hospital, medical, and
9 surgical insurance or major medical insurancehealth benefit
10 plans or long-term care insurance, including any net cash
11 surrender and net cash withdrawal values.
12 [2] Three hundred thousand dollars for disability income insurance,
13 and three hundred thousand dollars for long-term care
14 insurance.
15 [3] Five hundred thousand dollars for basic hospital, medical, and
16 surgical insurance or major medical insurancehealth benefit
17 plans.
18 (c) Two hundred fifty thousand dollars in the present value of annuity
19 benefits, including net cash surrender and net cash withdrawal values;
20 (2) With respect to each individual participating in a government retirement
21 benefit plan established under section 401(k), 403(b), or 457 of the United
22 States Internal Revenue Code covered by an unallocated annuity contract
23 or the beneficiaries of each such individual if deceased, in the aggregate,
24 two hundred fifty thousand dollars in present value annuity benefits,
25 including