LRB-3785/1
PJK/JK/ARG:lmk&jld:jf
2007 - 2008 LEGISLATURE
January 11, 2008 - Introduced by Representative F. Lasee, cosponsored by Senator
Erpenbach. Referred to Committee on Insurance.
AB688,2,5
1An Act to repeal 646.35 (6) (c) 1. a. and 646.35 (6) (c) 2. a.;
to renumber 646.33
2(3), 646.35 (4) (a) and 646.35 (4) (b);
to renumber and amend 601.465, 605.02,
3631.61 (1) (c), 646.12 (1) (a) and 646.31 (11);
to consolidate, renumber and
4amend 646.35 (6) (c) 1. (intro.) and b. and 646.35 (6) (c) 2. (intro.) and b.;
to
5amend 25.17 (3) (a), 76.68 (2), 76.68 (4), 601.41 (8) (b), 605.21 (4), 611.26 (3) (a),
6611.26 (4) (a), 611.26 (4) (b), 611.72 (2), 632.745 (18) (b), 646.01 (1) (b) 14., 646.11
7(4), 646.11 (5), 646.12 (1) (b), 646.12 (2) (a), 646.51 (3) (am) (intro.) and 646.51
8(4) (a);
to create 25.14 (1) (a) 19., 600.03 (25) (a) 4., 601.465 (1m) (title), 601.465
9(2m), 605.02 (2), 631.61 (1) (c) 1., 631.61 (1) (c) 2., 631.61 (1) (c) 3., 632.07, 646.12
10(1) (a) 2., 646.12 (1) (a) 3., 646.13 (3) (d), 646.31 (11) (a), 646.31 (11) (c) and
11646.51 (3) (b) of the statutes; and
to affect 2003 Wisconsin Act 261, section
162 12(1);
relating to: the definition of a late enrollee; making group insurance
13certificates available electronically; prohibiting a lender from requiring
14property insurance in an amount that exceeds the replacement value of
1improvements; premium tax statute of limitations; miscellaneous changes to
2the insurance security fund; investments of the local government property
3insurance fund by the State of Wisconsin Investment Board, other
4miscellaneous insurance-related modifications; and granting rule-making
5authority.
Analysis by the Legislative Reference Bureau
Insurance security fund
The bill makes various changes to the insurance security fund provisions of the
statutes. In general, the insurance security fund (fund), which is created as a
nonprofit organization and funded through assessments paid by insurers covered
under the fund, pays claims made against insolvent insurers.
Under current law, the board of directors of the fund (board) includes between
7 and 14 members, consisting of the state attorney general, the state treasurer, the
commissioner, and representatives of insurers who are chosen under procedures
specified by the commissioner by administrative rule. The chairperson of the board
is elected by members of the board under a rule promulgated by the commissioner.
Under the bill, the board consists of the state attorney general, the state treasurer,
the commissioner, and between nine and 11 representatives of insurers who are
appointed by the commissioner for three-year terms; a member who is an insurer
representative may designate an alternate representative, who has all of the powers
and responsibilities of the designating representative, to represent the insurer at
any meeting of the board; and the chairperson of the board is elected annually by the
members at the first meeting after June 1.
Under current law, generally, the fund has no liability for payment of a claim
that is not filed by the date set by the liquidator or court. The bill provides that the
fund is not liable for any claim that is filed after 18 months after the order of
liquidation is entered if no date for filing is set by the liquidator or court. The bill
also specifies the circumstances under which an insurer, reinsurer, insurance pool,
or underwriting association that has paid a claim for health care costs and is
subrogated to an insurer in liquidation may assert a claim for reimbursement
against the fund.
Under current law, the fund is not responsible for paying benefits under a life
or disability insurance policy or an annuity contract to the extent that the rate of
interest on which the benefits are based, or the interest rate, crediting rate, or similar
factor determined by use of an index, exceeds the smaller of the minimum
guaranteed rate specified in the contract or a rate of interest determined in relation
to Moody's corporate bond yield average. The bill changes this so that the fund's
responsibility for payment is based only on whether the interest rate on which the
benefits are based exceeds the applicable Moody's corporate bond yield average.
Under current law, assessments paid by insurers to support the fund are based
on premium written in this state for the year preceding either the year the
liquidation order was entered or the year in which the assessment is authorized by
the board, depending on when the assessment is authorized. This bill retains that
provision for all types of insurance except life or disability insurance policies and
annuity contracts. For those types of insurance, assessments are based on average
annual premium received in this state for the three most recent years preceding the
year the liquidation order was entered. In addition, the bill changes the maximum
amount that an insurer may be assessed in any calendar year. Under current law,
the maximum assessment amount is 2 percent of average annual premium received
in this state during the three calendar years preceding the year in which the
liquidation order is entered. The bill changes the maximum assessment amount to
2 percent of the insurer's assessable premiums on which an insurer's assessment is
based.
Current law provides a number of types of insurance or insurance-like
products or arrangements that are not covered by the fund, including a policy issued
by an insurer to the Department of Health and Family Services (DHFS) under a
specific state statute to provide prepaid health care to medical assistance recipients.
The bill expands that to include not only policies but also contracts between an
insurer and DHFS or other entities under any state statute to provide prepaid health
care to medical assistance recipients.
Investments of the State of Wisconsin Investment Board
Under current law, the State of Wisconsin Investment Board (SWIB) has
authority to invest and manage certain assets, including moneys of the local
government property insurance fund (LGPIF). As with most of the funds under
SWIB's investment control, LGPIF is invested as part of the state investment fund,
which is comprised of fixed income investments with a short-term investment
objective. In contrast, SWIB has broader investment authority over assets of the
state life fund, the veterans trust fund, the injured patients and families
compensation fund, and the core retirement investment trust (containing most
Wisconsin Retirement System contributions), which may be invested with a
longer-term investment objective in specific classes of investments enumerated by
statute (authorized list).
This bill removes LGPIF from the state investment fund and allows SWIB to
invest LGPIF in an authorized list of investments that includes both fixed income
and equity securities.
Miscellaneous insurance provisions
The bill makes various other insurance-related changes. The bill:
1. Prohibits a lender with a security interest in real property from requiring
the borrower to insure the real property against risks to improvements in an amount
that exceeds the lesser of the replacement value or market value of the
improvements.
2. Authorizes an insurer that provides group or blanket insurance to make the
certificates available to certificate holders electronically as an alternative to
delivering or mailing the certificates to the policyholder. However, any certificate
holder may receive a paper copy of the certificate upon request.
3. Makes the definition of a late enrollee, for purposes of group health benefit
plan requirements, consistent with the federal Health Insurance Portability and
Accountability Act of 1996. The definition of a late enrollee affects the length of time
that may be required for an affiliation period and for a preexisting condition
exclusion.
4. Clarifies that the level of investment allowed in an insurance corporation
subsidiary applies to all subsidiaries of the insurance corporation in the aggregate,
not to each separate subsidiary.
5. Provides that the only remedy for recovering a license fee or assessment paid
by an insurer is to commence an action in the circuit court for Dane County.
6. Specifies requirements for property that may be covered under the local
government property insurance fund that is not actually owned by a local
governmental unit.
7. Provides that the commissioner of insurance (commissioner) must consult
with the appropriate advisory council or committee designated by the commissioner,
rather than the Life and Disability Advisory Council, when developing a uniform
employee application form for use by small employer insurers.
8. Provides some clarifications with respect to investigation and examination
information that the Office of the Commissioner of Insurance has a privilege to
refuse to disclose.
9. Specifies that coverage that is provided to an employer or plan sponsor
relating to claims incurred under the employer's or plan sponsor's self-funded
employee welfare benefit plan (self-funded, or self-insured, health care plan) is
"insurance" for purposes of the insurance statutes.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB688, s. 1
1Section
1. 25.14 (1) (a) 19. of the statutes is created to read:
AB688,4,22
25.14
(1) (a) 19. The local government property insurance fund.
AB688, s. 2
3Section
2. 25.17 (3) (a) of the statutes is amended to read:
AB688,5,24
25.17
(3) (a) Invest the core retirement investment trust, state life fund,
local
5government property insurance fund, veterans trust fund, and injured patients and
6families compensation fund in loans, securities, and any other investments
7authorized by s. 620.22, and in bonds or other evidences of indebtedness or preferred
8stock of companies engaged in the finance business whether as direct lenders or as
1holding companies owning subsidiaries engaged in the finance business.
2Investments permitted by sub. (4) are permitted investments under this subsection.
AB688, s. 3
3Section
3. 76.68 (2) of the statutes is amended to read:
AB688,5,134
76.68
(2) No suit may be brought to restrain or enjoin the collection of any
5license fee or tax imposed or provided for by this subchapter, and the fees required
6by s. 601.31. Any
insurer aggrieved by the payment of any such license or other fee
7or tax may maintain a suit against the state for the recovery thereof action to recover
8any license fee or tax imposed or provided for by this subchapter or any fee required
9under s. 601.31, shall be brought in the circuit court for Dane County within 6
10months from the time of the payment. The state may be served in the suit as provided
11in s. 801.11 (3).
This subsection is the exclusive remedy by which to recover any
12license fee or tax imposed or provided for by this subchapter or any fee required under
13s. 601.31.
AB688, s. 4
14Section
4. 76.68 (4) of the statutes is amended to read:
AB688,5,1815
76.68
(4) The attorney general shall institute suit in the circuit court for Dane
16County to recover any license fees or tax not paid within the time prescribed by this
17subchapter, and the fees required by s. 601.31.
Nothing in this subsection shall be
18construed as amending or modifying in any respect ch. 775.
AB688, s. 5
19Section
5. 600.03 (25) (a) 4. of the statutes is created to read:
AB688,5,2220
600.03
(25) (a) 4. Coverage, including stop-loss coverage, of an employer or
21plan sponsor relating to claims incurred under the employer's or plan sponsor's
22self-funded employee welfare benefit plan, as defined in
29 USC 1002 (1).
AB688, s. 6
23Section
6. 601.41 (8) (b) of the statutes is amended to read:
AB688,6,424
601.41
(8) (b) In consultation with the
life and disability advisory council
25established appropriate advisory council or committee designated by the
1commissioner, the commissioner shall by rule develop a uniform employee
2application form that a small employer insurer must use when a small employer
3applies for coverage under a group health benefit plan offered by the small employer
4insurer. The commissioner shall revise the form at least every 2 years.
AB688, s. 7
5Section
7. 601.465 of the statutes is renumbered 601.465 (1m), and 601.465
6(1m) (c) (intro.) and 6., as renumbered, are amended to read:
AB688,6,117
601.465
(1m) (c) (intro.) Testimony, reports, records, communications, and
8information that are obtained by the office from, or provided by the office to, any of
9the following, under a pledge of confidentiality or for the purpose of assisting
or
10participating in monitoring activities or in the conduct of an
inquiry, investigation
, 11or examination:
AB688,6,1212
6. An agent or employee of an agency described in
par. (e) subd. 5.
AB688, s. 8
13Section
8. 601.465 (1m) (title) of the statutes is created to read:
AB688,6,1414
601.465
(1m) (title)
Types of information.
AB688, s. 9
15Section
9. 601.465 (2m) of the statutes is created to read:
AB688,6,1716
601.465
(2m) Waiver and applicability of the privilege. All of the following
17apply to the privilege under this section:
AB688,6,1918
(a) The privilege may be waived only by the affirmative written and specific
19consent of the commissioner.
AB688,6,2020
(b) The privilege may not be constructively waived.
AB688,6,2521
(c) The privilege applies to testimony, reports, records, communications, and
22information obtained, created, or provided by any official, employee, or agent of the
23office for the purpose of assisting or participating in monitoring activities or in the
24conduct of an inquiry, investigation, or examination by, or coordinated through, the
25National Association of Insurance Commissioners.
AB688,7,3
1(d) The privilege applies to testimony, reports, records, communications, and
2information in existence on or after the effective date of this paragraph .... [revisor
3inserts date].
AB688, s. 10
4Section
10. 605.02 of the statutes is renumbered 605.02 (1) and amended to
5read:
AB688,7,136
605.02
(1) Property of local governmental units. Any local governmental
7unit may insure in the property fund its property or
, subject to sub. (2), property for
8which it may be liable in the event of damage or destruction. Property insured under
9this section by a local governmental unit may not also be insured in any other
10manner unless the manager certifies that additional insurance is necessary, or
11unless the local governmental unit by resolution, a certified copy of which is filed
12with the manager, decides to insure specified personal property with insurers
13authorized to do business in this state.
AB688, s. 11
14Section
11. 605.02 (2) of the statutes is created to read:
AB688,7,1715
605.02
(2) Requirements for nonowned property. The property fund may
16cover a building or structure specified in sub. (1) that is not owned by a local
17governmental unit only if all of the following conditions are met:
AB688,7,1918
(a) The building or structure is listed and described as a nonowned building or
19structure in the local governmental unit's statement of values.
AB688,7,2120
(b) The local governmental unit is contractually liable in the event that the
21building or structure is damaged or destroyed.
AB688,7,2322
(c) The building or structure is in the local governmental unit's care, custody,
23or control.
AB688,7,2424
(d) The building or structure is used for a legitimate governmental purpose.
AB688, s. 12
25Section
12. 605.21 (4) of the statutes is amended to read:
AB688,8,3
1605.21
(4) Insurance of personal property. All personal property of the local
2governing unit is insured and premiums therefor must be paid under this section
3except to the extent that coverage is excluded by resolution under s. 605.02
(1).
AB688, s. 13
4Section
13. 611.26 (3) (a) of the statutes is amended to read:
AB688,8,85
611.26
(3) (a)
Authorization. An insurance corporation may form or acquire
6subsidiaries to perform functions or provide services that are ancillary to its
7insurance operations. It may have up to 10% of its assets invested in such
8subsidiaries
, unless the commissioner by order or rule provides otherwise.
AB688, s. 14
9Section
14. 611.26 (4) (a) of the statutes is amended to read:
AB688,8,1110
611.26
(4) (a) Invest in
a subsidiary
one or more subsidiaries more than 10
11percent of its assets or 50 percent of its capital and surplus, whichever is less.
AB688, s. 15
12Section
15. 611.26 (4) (b) of the statutes is amended to read:
AB688,8,1613
611.26
(4) (b) Invest in
a subsidiary
one or more subsidiaries to the extent that
14the insurer's capital and surplus with regard to policyholders will not be reasonable
15in relation to the insurer's outstanding liabilities or adequate to meet the insurer's
16financial needs.
AB688, s. 16
17Section
16. 611.72 (2) of the statutes is amended to read:
AB688,8,2218
611.72
(2) Approval required. No proposed plan of merger under s. 180.1101
19or 180.1104 or other plan for acquisition of control
may be submitted to the
20shareholders of any domestic stock insurance corporation or its parent insurance
21holding corporation participating in the transaction
or may be executed unless it has
22been approved by the commissioner.
AB688, s. 17
23Section
17. 631.61 (1) (c) of the statutes is renumbered 631.61 (1) (c) (intro.)
24and amended to read:
AB688,9,11
1631.61
(1) (c)
Method of providing certificates. (intro.) The certificate shall be
2provided in a manner reasonably calculated to bring it to the attention of the
3certificate holder. The insurer may deliver or mail it directly to the certificate holder
4or may deliver or mail the certificates in bulk to the policyholder to transmit to
5certificate holders, unless the insurer has reason to believe that the policyholder will
6not promptly transmit the certificates. An affidavit by the insurer that it has mailed
7the certificates in the usual course of business creates a rebuttable presumption that
8it has done so.
As an alternative to delivering or mailing the certificate, the insurer
9may make the certificate available electronically through an online internet or
10policyholder network Web site. If the insurer makes the certificate available
11electronically, the insurer shall do all of the following: