HB5349 94TH GENERAL ASSEMBLY

LRB094 19325 LJB 54976 b

94TH GENERAL ASSEMBLY
State of Illinois
2005 and 2006
HB5349

Introduced 01/26/06, by Rep. Frank J. Mautino

SYNOPSIS AS INTRODUCED:

5 ILCS 80/4.17
5 ILCS 80/4.27 new
215 ILCS 5/229.4	from Ch. 73, par. 841.4
215 ILCS 5/368f new

Amends the Regulatory Sunset Act to extend the repeal date of certain Articles of the Illinois Insurance Code until January 1, 2017. Amends the Illinois Insurance Code. Extends the repeal date for a Section concerning the Standard Non-forfeiture Law for Individual Deferred Annuities until July 1, 2016. Provides that no Illinois resident activated for military service and no spouse or dependent of that resident who becomes eligible for a government-sponsored health insurance program as a result of the service may be denied reinstatement to the health insurance coverage that lapsed as a result of the military service. Provides that the insurer must receive the request for reinstatement within a certain time period. Requires insurers to provide written notice to policyholders of the right to reinstatement. Provides that the requirement of reinstatement does not apply to certain types of policies. Authorizes the Secretary of Financial and Professional Regulation to adopt rules. Effective immediately.

FISCAL NOTE ACT MAY APPLY

A BILL FOR

AN ACT concerning insurance.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 5. The Regulatory Sunset Act is amended by changing Section 4.17 and by adding Section 4.27 as follows:

(5 ILCS 80/4.17)

Sec. 4.17. Acts repealed on January 1, 2007. The following are repealed on January 1, 2007:

The Boiler and Pressure Vessel Repairer Regulation Act.

The Structural Pest Control Act.

Articles II, III, IV, V, V 1/2, VI, VIIA, VIIB, VIIC, XVII, XXXI, XXXI 1/4, and XXXI 3/4 of the Illinois Insurance Code.

The Clinical Psychologist Licensing Act.

The Illinois Optometric Practice Act of 1987.

The Medical Practice Act of 1987.

The Environmental Health Practitioner Licensing Act.

(Source: P.A. 92-837, eff. 8-22-02.)

(5 ILCS 80/4.27 new)

Sec. 4.27. Act repealed on January 1, 2017. The following are repealed on January 1, 2017:

Articles II, III, IV, V, V 1/2, VI, VIIA, VIIB, VIIC, XVII, XXXI, XXXI 1/4, and XXXI 3/4 of the Illinois Insurance Code.

Section 10. The Illinois Insurance Code is amended by changing Section 229.4 and by adding Section 368f as follows:

(215 ILCS 5/229.4) (from Ch. 73, par. 841.4)

(Section scheduled to be repealed on July 1, 2006)

Sec. 229.4. Standard Non-forfeiture Law for Individual Deferred Annuities.

(1) No contract of annuity issued on or after the operative date of this Section except as stated in subsection (11) shall be delivered or issued for delivery in this State unless it contains in substance the following provisions or corresponding provisions which in the opinion of the Director are at least as favorable to the contract holder upon cessation of payment of considerations under the contract:

(a) That upon cessation of payment of considerations under a contract, the company will grant a paid-up annuity benefit on a plan stipulated in the contract of such value as is specified in subsections (3), (4), (5), (6) and (8).

(b) If a contract provides for a lump sum settlement at maturity, or at any other time, that upon surrender of the contract at or prior to the commencement of any annuity payments, the company will pay in lieu of any paid-up annuity benefit a cash surrender benefit of such amount as is specified in subsections (3), (4), (6) and (8). The company shall reserve the right to defer the payment of such cash surrender benefit for a period of 6 months after demand therefor with surrender of the contract.

(c) A statement of the mortality table, if any, and interest rates used in calculating any minimum paid-up annuity, cash surrender or death benefits that are guaranteed under the contract, together with sufficient information to determine the amount of such benefits.

(d) A statement that any paid-up annuity, cash surrender or death benefits that may be available under the contract are not less than the minimum benefits required by any statute of the state in which the contract is delivered and an explanation of the manner in which such benefits are altered by the existence of any additional amounts credited by the company to the contract, any indebtedness to the company on the contract or any prior withdrawals from or partial surrenders of the contract.

Notwithstanding the requirements of this subsection, any deferred annuity contract may provide that if no considerations have been received under a contract for a period of 2 full years and the portion of the paid-up annuity benefit at maturity on the plan stipulated in the contract arising from considerations paid prior to such period would be less than $20.00 monthly, the company may at its option terminate such contract by payment in cash of the present value of such portion of the paid-up annuity benefit, calculated on the basis of the mortality table, if any, and interest rate specified in the contract for determining the paid-up annuity benefit, and by such payment shall be relieved of any further obligation under such contract.

(2) The minimum values as specified in subsections (3), (4), (5), (6) and (8) of any paid-up annuity, cash surrender or death benefits available under an annuity contract shall be based upon minimum nonforfeiture amounts as defined in this subsection.

(a) With respect to contracts providing for flexible considerations, the minimum nonforfeiture amount at any time at or prior to the commencement of any annuity payments shall be equal to an accumulation up to such time at a rate of interest of 3% per annum of percentages of the net considerations, as hereinafter defined, paid prior to such time, decreased by the sum of (i) any prior withdrawals from or partial surrenders of the contract accumulated at a rate of interest of 3% per annum and (ii) the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract.

The net considerations for a given contract year used to define the minimum nonforfeiture amount shall be an amount not less than zero and shall be equal to the corresponding gross considerations credited to the contract during that contract year less an annual contract charge of $30.00 and less a collection charge of $1.25 per consideration credited to the contract during that contract year. The percentages of net considerations shall be 65% of the net consideration for the first contract year and 87 1/2% of the net considerations for the second and later contract years. Notwithstanding the provisions of the preceding sentence, the percentage shall be 65% of the portion of the total net consideration for any renewal contract year which exceeds by not more than two times the sum of those portions of the net considerations in all prior contract years for which the percentage was 65%.

(a-5) Notwithstanding the provisions of paragraph (a) of this subsection, the minimum nonforfeiture amount for any contract issued on or after July 1, 2002 and before July 1, 2005 shall be based on a rate of interest of 1.5% per annum.

(b) With respect to contracts providing for fixed scheduled considerations, minimum nonforfeiture amounts shall be calculated on the assumption that considerations are paid annually in advance and shall be defined as for contracts with flexible considerations which are paid annually, with two exceptions:

(i) The portion of the net consideration for the first contract year to be accumulated shall be the sum of 65% of the net consideration for the first contract year plus 22 1/2% of the excess of the net consideration for the first contract year over the lesser of the net considerations for the second and third contract years.

(ii) The annual contract charge shall be the lesser of (A) $30.00 or (B) 10% of the gross annual consideration.

(c) With respect to contracts providing for a single consideration, minimum nonforfeiture amounts shall be defined as for contracts with flexible considerations except that the percentage of net consideration used to determine the minimum nonforfeiture amount shall be equal to 90% and the net consideration shall be the gross consideration less a contract charge of $75.00.

(3) Any paid-up annuity benefit available under a contract shall be such that its present value on the date annuity payments are to commence is at least equal to the minimum nonforfeiture amount on that date. Such present value shall be computed using the mortality table, if any, and the interest rate specified in the contract for determining the minimum paid-up annuity benefits guaranteed in the contract.

(4) For contracts which provide cash surrender benefits, such cash surrender benefits available prior to maturity shall not be less than the present value as of the date of surrender of that portion of the maturity value of the paid-up annuity benefit which would be provided under the contract at maturity arising from considerations paid prior to the time of cash surrender reduced by the amount appropriate to reflect any prior withdrawals from or partial surrenders of the contract, such present value being calculated on the basis of an interest rate not more than 1% higher than the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, decreased by the amount of any indebtedness to the company on the contract, including interest due and accrued, and increased by any existing additional amounts credited by the company to the contract. In no event shall any cash surrender benefit be less than the minimum nonforfeiture amount at that time. The death benefit under such contracts shall be at least equal to the cash surrender benefit.

(5) For contracts which do not provide cash surrender benefits, the present value of any paid-up annuity benefit available as a nonforfeiture option at any time prior to maturity shall not be less than the present value of that portion of the maturity value of the paid-up benefit provided under the contract arising from considerations paid prior to the time of the contract is surrendered in exchange for, or changed to, a deferred paid-up annuity, such present value being calculated for the period prior to the maturity date on the basis of the interest rate specified in the contract for accumulating the net considerations to determine such maturity value, and increased by any existing additional amounts credited by the company to the contract. For contracts which do not provide any death benefits prior to the commencement of any annuity payments, such present values shall be calculated on the basis of such interest rate and the mortality table specified in the contract for determining the maturity value of the paid-up annuity benefit. However, in no event shall the present value of a paid-up annuity benefit be less than the minimum nonforfeiture amount at that time.

(6) For the purpose of determining the benefits calculated under subsections (4) and (5), in the case of annuity contracts under which an election may be made to have annuity payments commence at optional maturity dates, the maturity date shall be deemed to be the latest date for which election shall be permitted by the contract, but shall not be deemed to be later than the anniversary of the contract next following the annuitant's seventieth birthday or the tenth anniversary of the contract, whichever is later.

(7) Any contract which does not provide cash surrender benefits or does not provide death benefits at least equal to the minimum nonforfeiture amount prior to the commencement of any annuity payments shall include a statement in a prominent place in the contract that such benefits are not provided.

(8) Any paid-up annuity, cash surrender or death benefits available at any time, other than on the contract anniversary under any contract with fixed scheduled considerations, shall be calculated with allowance for the lapse of time and the payment of any scheduled considerations beyond the beginning of the contract year in which cessation of payment of considerations under the contract occurs.

(9) For any contract which provides, within the same contract by rider or supplemental contract provision, both annuity benefits and life insurance benefits that are in excess of the greater of cash surrender benefits or a return of the gross considerations with interest, the minimum nonforfeiture benefits shall be equal to the sum of the minimum nonforfeiture benefits for the annuity portion and the minimum nonforfeiture benefits, if any, for the life insurance portion computed as if each portion were a separate contract. Notwithstanding the provisions of subsections (3), (4), (5), (6) and (8), additional benefits payable (a) in the event of total and permanent disability, (b) as reversionary annuity or deferred reversionary annuity benefits, or (c) as other policy benefits additional to life insurance, endowment, and annuity benefits, and considerations for all such additional benefits, shall be disregarded in ascertaining the minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits that may be required by this section. The inclusion of such additional benefits shall not be required in any paid-up benefits, unless such additional benefits separately would require minimum nonforfeiture amounts, paid-up annuity, cash surrender and death benefits.

(10) After the effective date of this Section, any company may file with the Director a written notice of its election to comply with the provisions of this Section after a specified date before the second anniversary of the effective date of this Section. After the filing of such notice, then upon such specified date, which shall be the operative date of this section for such company, this Section shall become operative with respect to annuity contracts thereafter issued by such company. If a company makes no such election, the operative date of this section for such company shall be the second anniversary of the effective date of this Section.

(11) This Section shall not apply to any reinsurance, group annuity purchased under a retirement plan or plan of deferred compensation established or maintained by an employer (including a partnership or sole proprietorship) or by an employee organization, or by both, other than a plan providing individual retirement accounts or individual retirement annuities under Section 408 of the Internal Revenue Code, as now or hereafter amended, premium deposit fund, variable annuity, investment annuity, immediate annuity, any deferred annuity contract after annuity payments have commenced, or reversionary annuity, nor to any contract which shall be delivered outside this State through an agent or other representative of the company issuing the contract.

(12) This Section is repealed on July 1, 2016 2006.

(Source: P.A. 92-541, eff. 7-1-02; 93-873, eff. 8-6-04.)

(215 ILCS 5/368f new)

Sec. 368f. Military service member insurance reinstatement.

(a) No Illinois resident activated for military service and no spouse or dependent of the resident who becomes eligible for a federal government-sponsored health insurance program, including the TriCare program providing coverage for civilian dependents of military personnel, as a result of the activation shall be denied reinstatement into the same individual health insurance coverage with the health insurer that the resident lapsed as a result of activation or becoming covered by the federal government-sponsored health insurance program. The resident shall have the right to reinstatement in the same individual health insurance coverage without medical underwriting, subject to payment of the current premium charged to other persons of the same age and gender that are covered under the same individual health coverage. Except in the case of birth or adoption that occurs during the period of activation, reinstatement must be into the same coverage type as the resident held prior to lapsing the individual health insurance coverage and at the same or, at the option of the resident, higher deductible level. The reinstatement rights provided under this subsection (a) are not available to a resident or dependents if the activated person is discharged from the military under other than honorable conditions.

(b) The health insurer with which the reinstatement is being requested must receive a request for reinstatement no later than 63 days following the later of (i) deactivation or (ii) loss of coverage under the federal government-sponsored health insurance program. The health insurer may request proof of loss of coverage and the timing of the loss of coverage of the government-sponsored coverage in order to determine eligibility for reinstatement into the individual coverage. The effective date of the reinstatement of individual health coverage shall be the first of the month following receipt of the notice requesting reinstatement.

(c) All insurers must provide written notice to the policyholder of individual health coverage of the rights described in subsection (a) of this Section. In lieu of the inclusion of the notice in the individual health insurance policy, an insurance company may satisfy the notification requirement by providing a single written notice:

(1) in conjunction with the enrollment process for a policyholder initially enrolling in the individual coverage on or after the effective date of this amendatory Act of the 94th General Assembly; or

(2) by mailing written notice to policyholders whose coverage was effective prior to the effective date of this amendatory Act of the 94th General Assembly no later than 90 days following the effective date of this amendatory Act of the 94th General Assembly.

(d) The provisions of subsection (a) of this Section do not apply to any policy or certificate providing coverage for any specified disease, specified accident or accident-only coverage, credit, dental, disability income, hospital indemnity, long-term care, Medicare supplement, vision care, or short-term nonrenewable health policy or other limited-benefit supplemental insurance, or any coverage issued as a supplement to any liability insurance, workers' compensation or similar insurance, or any insurance under which benefits are payable with or without regard to fault, whether written on a group, blanket, or individual basis.

(e) Nothing in this Section shall require an insurer to reinstate the resident if the insurer requires residency in an enrollment area and those residency requirements are not met after deactivation or loss of coverage under the government-sponsored health insurance program.

(f) All terms, conditions, and limitations of the individual coverage into which reinstatement is made apply equally to all insureds enrolled in the coverage.

(g) The Secretary may adopt rules as may be necessary to carry out the provisions of this Section.

Section 99. Effective date. This Act takes effect upon becoming law.