Public Act 094-1076
 
SB2917 Enrolled LRB094 19125 LJB 54646 b

    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 Acts repealed on January 1, 2007.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are repealed on January 1, 2007: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 Act repealed on January 1, 2017.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are repealed on January 1, 2017: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 229.4a and by adding Section 356z.8 as
follows:
 
    (215 ILCS 5/229.4a)
    (Section scheduled to be repealed on July 1, 2007)
    Sec. 229.4a. Standard Non-forfeiture Law for Individual
Deferred Annuities.
    (1) Title. This Section shall be known as the Standard
Nonforfeiture Law for Individual Deferred Annuities.
    (2) Applicability. 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.
    (3) Nonforfeiture Requirements.
        (A) In the case of contracts issued on or after the
    operative date of this Section as defined in subsection
    (13), no contract of annuity, except as stated in
    subsection (2), 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 of Insurance are at least as
    favorable to the contract holder, upon cessation of payment
    of considerations under the contract:
            (i) That upon cessation of payment of
        considerations under a contract, or upon the written
        request of the contract owner, the company shall grant
        a paid-up annuity benefit on a plan stipulated in the
        contract of such value as is specified in subsections
        (5), (6), (7), (8) and (10);
            (ii) 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
        shall pay in lieu of a paid-up annuity benefit a cash
        surrender benefit of such amount as is specified in
        subsections (5), (6), (8) and (10). The company may
        reserve the right to defer the payment of the cash
        surrender benefit for a period not to exceed 6 months
        after demand therefor with surrender of the contract
        after making written request and receiving written
        approval of the Director. The request shall address the
        necessity and equitability to all policyholders of the
        deferral;
            (iii) A statement of the mortality table, if any,
        and interest rates used calculating any minimum
        paid-up annuity, cash surrender, or death benefits
        that are guaranteed under the contract, together with
        sufficient information to determine the amounts of the
        benefits; and
            (iv) 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 the 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.
        (B) Notwithstanding the requirements of this Section,
    a 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 prior considerations paid would be
    less than $20 monthly, the company may at its option
    terminate the contract by payment in cash of the then
    present value of the portion of the paid-up annuity
    benefit, calculated on the basis on the mortality table, if
    any, and interest rate specified in the contract for
    determining the paid-up annuity benefit, and by this
    payment shall be relieved of any further obligation under
    the contract.
    (4) Minimum values. The minimum values as specified in
subsections (5), (6), (7), (8) and (10) 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)(i) 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 rates of
    interest as indicated in subdivision (4)(B) of the net
    considerations (as hereinafter defined) paid prior to such
    time, decreased by the sum of paragraphs (a) through (d)
    below:
                (a) Any prior withdrawals from or partial
        surrenders of the contract accumulated at rates of
        interest as indicated in subdivision (4)(B);
                (b) An annual contract charge of $50,
        accumulated at rates of interest as indicated in
        subdivision (4)(B);
                (c) Any premium tax paid by the company for the
        contract, accumulated at rates of interest as
        indicated in subdivision (4)(B); and
                (d) The amount of any indebtedness to the
        company on the contract, including interest due and
        accrued.
        (ii) The net considerations for a given contract year
    used to define the minimum nonforfeiture amount shall be an
    amount equal to 87.5% of the gross considerations, credited
    to the contract during that contract year.
        (B) The interest rate used in determining minimum
    nonforfeiture amounts shall be an annual rate of interest
    determined as the lesser of 3% per annum and the following,
    which shall be specified in the contract if the interest
    rate will be reset:
            (i) The five-year Constant Maturity Treasury Rate
        reported by the Federal Reserve as of a date, or
        average over a period, rounded to the nearest 1/20th of
        one percent, specified in the contract no longer than
        15 months prior to the contract issue date or
        redetermination date under subdivision (4)(B)(iv);
            (ii) Reduced by 125 basis points;
            (iii) Where the resulting interest rate is not less
        than l%; and
            (iv) The interest rate shall apply for an initial
        period and may be redetermined for additional periods.
        The redetermination date, basis and period, if any,
        shall be stated in the contract. The basis is the date
        or average over a specified period that produces the
        value of the 5-year Constant Maturity Treasury Rate to
        be used at each redetermination date.
        (C) During the period or term that a contract provides
    substantive participation in an equity indexed benefit, it
    may increase the reduction described in subdivision
    (4)(B)(ii) above by up to an additional 100 basis points to
    reflect the value of the equity index benefit. The present
    value at the contract issue date, and at each
    redetermination date thereafter, of the additional
    reduction shall not exceed market value of the benefit. The
    Director may require a demonstration that the present value
    of the additional reduction does not exceed the market
    value of the benefit. Lacking such a demonstration that is
    acceptable to the Director, the Director may disallow or
    limit the additional reduction.
        (D) The Director may adopt rules to implement the
    provisions of subdivision (4)(C) and to provide for further
    adjustments to the calculation of minimum nonforfeiture
    amounts for contracts that provide substantive
    participation in an equity index benefit and for other
    contracts that the Director determines adjustments are
    justified.
    (5) Computation of Present Value. 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. Present value shall be computed using the mortality
table, if any, and the interest rates specified in the contract
for determining the minimum paid-up annuity benefits
guaranteed in the contract.
    (6) Calculation of Cash Surrender Value. For contracts that
provide cash surrender benefits, the 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 that 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 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.
    (7) Calculation of Paid-up Annuity Benefits. For contracts
that 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 annuity benefit provided under the contract arising
from considerations paid prior to the time 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 maturity value, and increased by
any additional amounts credited by the company to the contract.
For contracts that do not provide any death benefits prior to
the commencement of any annuity payments, 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.
    (8) Maturity Date. For the purpose of determining the
benefits calculated under subsections (6) and (7), 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.
    (9) Disclosure of Limited Death Benefits. A contract that
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.
    (10) Inclusion of Lapse of Time Considerations. 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.
    (11) Proration of Values; Additional Benefits. For a
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 (5), (6), (7), (8) and (10), additional benefits
payable in the event of total and permanent disability, as
reversionary annuity or deferred reversionary annuity
benefits, or 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
under this Section. The inclusion of such benefits shall not be
required in any paid-up benefits, unless the additional
benefits separately would require minimum nonforfeiture
amounts, paid-up annuity, cash surrender and death benefits.
    (12) Rules. The Director may adopt rules to implement the
provisions of this Section.
    (13) Effective Date. After the effective date of this
amendatory Act of the 93rd General Assembly, a company may
elect to apply its provisions to annuity contracts on a
contract form-by-contract form basis before July 1, 2006. In
all other instances, this Section shall become operative with
respect to annuity contracts issued by the company on or after
July 1, 2006.
    (14) (Blank) This Section is repealed on July 1, 2007.
(Source: P.A. 93-873, eff. 8-6-04.)
 
    (215 ILCS 5/356z.8 new)
    Sec. 356z.8. Multiple sclerosis preventative physical
therapy. A group or individual policy of accident and health
insurance or managed care plan amended, delivered, issued, or
renewed after the effective date of this amendatory Act of the
94th General Assembly must provide coverage for medically
necessary preventative physical therapy for insureds diagnosed
with multiple sclerosis. For the purposes of this Section,
"preventative physical therapy" means physical therapy that is
prescribed by a physician licensed to practice medicine in all
of its branches for the purpose of treating parts of the body
affected by multiple sclerosis, but only where the physical
therapy includes reasonably defined goals, including, but not
limited to, sustaining the level of function the person has
achieved, with periodic evaluation of the efficacy of the
physical therapy against those goals. The coverage required
under this Section shall be subject to the same deductible,
coinsurance, waiting period, cost sharing limitation,
treatment limitation, calendar year maximum, or other
limitations as provided for other physical or rehabilitative
therapy benefits covered by the policy.
 
    Section 15. The Health Maintenance Organization Act is
amended by changing Section 5-3 as follows:
 
    (215 ILCS 125/5-3)  (from Ch. 111 1/2, par. 1411.2)
    Sec. 5-3. Insurance Code provisions.
    (a) Health Maintenance Organizations shall be subject to
the provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
141.3, 143, 143c, 147, 148, 149, 151, 152, 153, 154, 154.5,
154.6, 154.7, 154.8, 155.04, 355.2, 356m, 356v, 356w, 356x,
356y, 356z.2, 356z.4, 356z.5, 356z.6, 356z.8, 364.01, 367.2,
367.2-5, 367i, 368a, 368b, 368c, 368d, 368e, 401, 401.1, 402,
403, 403A, 408, 408.2, 409, 412, 444, and 444.1, paragraph (c)
of subsection (2) of Section 367, and Articles IIA, VIII 1/2,
XII, XII 1/2, XIII, XIII 1/2, XXV, and XXVI of the Illinois
Insurance Code.
    (b) For purposes of the Illinois Insurance Code, except for
Sections 444 and 444.1 and Articles XIII and XIII 1/2, Health
Maintenance Organizations in the following categories are
deemed to be "domestic companies":
        (1) a corporation authorized under the Dental Service
    Plan Act or the Voluntary Health Services Plans Act;
        (2) a corporation organized under the laws of this
    State; or
        (3) a corporation organized under the laws of another
    state, 30% or more of the enrollees of which are residents
    of this State, except a corporation subject to
    substantially the same requirements in its state of
    organization as is a "domestic company" under Article VIII
    1/2 of the Illinois Insurance Code.
    (c) In considering the merger, consolidation, or other
acquisition of control of a Health Maintenance Organization
pursuant to Article VIII 1/2 of the Illinois Insurance Code,
        (1) the Director shall give primary consideration to
    the continuation of benefits to enrollees and the financial
    conditions of the acquired Health Maintenance Organization
    after the merger, consolidation, or other acquisition of
    control takes effect;
        (2)(i) the criteria specified in subsection (1)(b) of
    Section 131.8 of the Illinois Insurance Code shall not
    apply and (ii) the Director, in making his determination
    with respect to the merger, consolidation, or other
    acquisition of control, need not take into account the
    effect on competition of the merger, consolidation, or
    other acquisition of control;
        (3) the Director shall have the power to require the
    following information:
            (A) certification by an independent actuary of the
        adequacy of the reserves of the Health Maintenance
        Organization sought to be acquired;
            (B) pro forma financial statements reflecting the
        combined balance sheets of the acquiring company and
        the Health Maintenance Organization sought to be
        acquired as of the end of the preceding year and as of
        a date 90 days prior to the acquisition, as well as pro
        forma financial statements reflecting projected
        combined operation for a period of 2 years;
            (C) a pro forma business plan detailing an
        acquiring party's plans with respect to the operation
        of the Health Maintenance Organization sought to be
        acquired for a period of not less than 3 years; and
            (D) such other information as the Director shall
        require.
    (d) The provisions of Article VIII 1/2 of the Illinois
Insurance Code and this Section 5-3 shall apply to the sale by
any health maintenance organization of greater than 10% of its
enrollee population (including without limitation the health
maintenance organization's right, title, and interest in and to
its health care certificates).
    (e) In considering any management contract or service
agreement subject to Section 141.1 of the Illinois Insurance
Code, the Director (i) shall, in addition to the criteria
specified in Section 141.2 of the Illinois Insurance Code, take
into account the effect of the management contract or service
agreement on the continuation of benefits to enrollees and the
financial condition of the health maintenance organization to
be managed or serviced, and (ii) need not take into account the
effect of the management contract or service agreement on
competition.
    (f) Except for small employer groups as defined in the
Small Employer Rating, Renewability and Portability Health
Insurance Act and except for medicare supplement policies as
defined in Section 363 of the Illinois Insurance Code, a Health
Maintenance Organization may by contract agree with a group or
other enrollment unit to effect refunds or charge additional
premiums under the following terms and conditions:
        (i) the amount of, and other terms and conditions with
    respect to, the refund or additional premium are set forth
    in the group or enrollment unit contract agreed in advance
    of the period for which a refund is to be paid or
    additional premium is to be charged (which period shall not
    be less than one year); and
        (ii) the amount of the refund or additional premium
    shall not exceed 20% of the Health Maintenance
    Organization's profitable or unprofitable experience with
    respect to the group or other enrollment unit for the
    period (and, for purposes of a refund or additional
    premium, the profitable or unprofitable experience shall
    be calculated taking into account a pro rata share of the
    Health Maintenance Organization's administrative and
    marketing expenses, but shall not include any refund to be
    made or additional premium to be paid pursuant to this
    subsection (f)). The Health Maintenance Organization and
    the group or enrollment unit may agree that the profitable
    or unprofitable experience may be calculated taking into
    account the refund period and the immediately preceding 2
    plan years.
    The Health Maintenance Organization shall include a
statement in the evidence of coverage issued to each enrollee
describing the possibility of a refund or additional premium,
and upon request of any group or enrollment unit, provide to
the group or enrollment unit a description of the method used
to calculate (1) the Health Maintenance Organization's
profitable experience with respect to the group or enrollment
unit and the resulting refund to the group or enrollment unit
or (2) the Health Maintenance Organization's unprofitable
experience with respect to the group or enrollment unit and the
resulting additional premium to be paid by the group or
enrollment unit.
    In no event shall the Illinois Health Maintenance
Organization Guaranty Association be liable to pay any
contractual obligation of an insolvent organization to pay any
refund authorized under this Section.
(Source: P.A. 92-764, eff. 1-1-03; 93-102, eff. 1-1-04; 93-261,
eff. 1-1-04; 93-477, eff. 8-8-03; 93-529, eff. 8-14-03; 93-853,
eff. 1-1-05; 93-1000, eff. 1-1-05; revised 10-14-04.)
 
    Section 20. The Voluntary Health Services Plans Act is
amended by changing Section 10 as follows:
 
    (215 ILCS 165/10)  (from Ch. 32, par. 604)
    Sec. 10. Application of Insurance Code provisions. Health
services plan corporations and all persons interested therein
or dealing therewith shall be subject to the provisions of
Articles IIA and XII 1/2 and Sections 3.1, 133, 140, 143, 143c,
149, 155.37, 354, 355.2, 356r, 356t, 356u, 356v, 356w, 356x,
356y, 356z.1, 356z.2, 356z.4, 356z.5, 356z.6, 356z.8, 364.01,
367.2, 368a, 401, 401.1, 402, 403, 403A, 408, 408.2, and 412,
and paragraphs (7) and (15) of Section 367 of the Illinois
Insurance Code.
(Source: P.A. 92-130, eff. 7-20-01; 92-440, eff. 8-17-01;
92-651, eff. 7-11-02; 92-764, eff. 1-1-03; 93-102, eff. 1-1-04;
93-529, eff. 8-14-03; 93-853, eff. 1-1-05; 93-1000, eff.
1-1-05; revised 10-14-04.)
 
    Section 99. Effective date. This Act takes effect upon
becoming law.