AB688: Bill Text

2007 Assembly BILL 688

January 11, 2008 - Introduced by Representative F. Lasee, cosponsored by Senator Erpenbach. Referred to Committee on Insurance.

AB688,2,5 An Act to repeal 646.35 (6) (c) 1. a. and 646.35 (6) (c) 2. a.; to renumber 646.33 (3), 646.35 (4) (a) and 646.35 (4) (b); to renumber and amend 601.465, 605.02, 631.61 (1) (c), 646.12 (1) (a) and 646.31 (11); to consolidate, renumber and amend 646.35 (6) (c) 1. (intro.) and b. and 646.35 (6) (c) 2. (intro.) and b.; to amend 25.17 (3) (a), 76.68 (2), 76.68 (4), 601.41 (8) (b), 605.21 (4), 611.26 (3) (a), 611.26 (4) (a), 611.26 (4) (b), 611.72 (2), 632.745 (18) (b), 646.01 (1) (b) 14., 646.11 (4), 646.11 (5), 646.12 (1) (b), 646.12 (2) (a), 646.51 (3) (am) (intro.) and 646.51 (4) (a); to create 25.14 (1) (a) 19., 600.03 (25) (a) 4., 601.465 (1m) (title), 601.465 (2m), 605.02 (2), 631.61 (1) (c) 1., 631.61 (1) (c) 2., 631.61 (1) (c) 3., 632.07, 646.12 (1) (a) 2., 646.12 (1) (a) 3., 646.13 (3) (d), 646.31 (11) (a), 646.31 (11) (c) and 646.51 (3) (b) of the statutes; and to affect 2003 Wisconsin Act 261, section 162 (1); relating to: the definition of a late enrollee; making group insurance certificates available electronically; prohibiting a lender from requiring property insurance in an amount that exceeds the replacement value of improvements; premium tax statute of limitations; miscellaneous changes to the insurance security fund; investments of the local government property insurance fund by the State of Wisconsin Investment Board, other miscellaneous insurance-related modifications; and granting rule-making authority.

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 Section 1. 25.14 (1) (a) 19. of the statutes is created to read:

AB688,4,2 25.14 (1) (a) 19. The local government property insurance fund.

AB688, s. 2 Section 2. 25.17 (3) (a) of the statutes is amended to read:

AB688,5,2 25.17 (3) (a) Invest the core retirement investment trust, state life fund, local government property insurance fund, veterans trust fund, and injured patients and families compensation fund in loans, securities, and any other investments authorized by s. 620.22, and in bonds or other evidences of indebtedness or preferred stock of companies engaged in the finance business whether as direct lenders or as holding companies owning subsidiaries engaged in the finance business. Investments permitted by sub. (4) are permitted investments under this subsection.

AB688, s. 3 Section 3. 76.68 (2) of the statutes is amended to read:

AB688,5,13 76.68 (2) No suit may be brought to restrain or enjoin the collection of any license fee or tax imposed or provided for by this subchapter, and the fees required by s. 601.31. Any insurer aggrieved by the payment of any such license or other fee or tax may maintain a suit against the state for the recovery thereof action to recover any license fee or tax imposed or provided for by this subchapter or any fee required under s. 601.31, shall be brought in the circuit court for Dane County within 6 months from the time of the payment. The state may be served in the suit as provided in s. 801.11 (3). This subsection is the exclusive remedy by which to recover any license fee or tax imposed or provided for by this subchapter or any fee required under s. 601.31.

AB688, s. 4 Section 4. 76.68 (4) of the statutes is amended to read:

AB688,5,18 76.68 (4) The attorney general shall institute suit in the circuit court for Dane County to recover any license fees or tax not paid within the time prescribed by this subchapter, and the fees required by s. 601.31. Nothing in this subsection shall be construed as amending or modifying in any respect ch. 775.

AB688, s. 5 Section 5. 600.03 (25) (a) 4. of the statutes is created to read:

AB688,5,22 600.03 (25) (a) 4. Coverage, including stop-loss coverage, of an employer or plan sponsor relating to claims incurred under the employer's or plan sponsor's self-funded employee welfare benefit plan, as defined in 29 USC 1002 (1).

AB688, s. 6 Section 6. 601.41 (8) (b) of the statutes is amended to read:

AB688,6,4 601.41 (8) (b) In consultation with the life and disability advisory council established appropriate advisory council or committee designated by the commissioner, the commissioner shall by rule develop a uniform employee application form that a small employer insurer must use when a small employer applies for coverage under a group health benefit plan offered by the small employer insurer. The commissioner shall revise the form at least every 2 years.

AB688, s. 7 Section 7. 601.465 of the statutes is renumbered 601.465 (1m), and 601.465 (1m) (c) (intro.) and 6., as renumbered, are amended to read:

AB688,6,11 601.465 (1m) (c) (intro.) Testimony, reports, records, communications, and information that are obtained by the office from, or provided by the office to, any of the following, under a pledge of confidentiality or for the purpose of assisting or participating in monitoring activities or in the conduct of an inquiry, investigation, or examination:

AB688,6,12 6. An agent or employee of an agency described in par. (e) subd. 5.

AB688, s. 8 Section 8. 601.465 (1m) (title) of the statutes is created to read:

AB688,6,14 601.465 (1m) (title) Types of information.

AB688, s. 9 Section 9. 601.465 (2m) of the statutes is created to read:

AB688,6,17 601.465 (2m) Waiver and applicability of the privilege. All of the following apply to the privilege under this section:

AB688,6,19 (a) The privilege may be waived only by the affirmative written and specific consent of the commissioner.

AB688,6,20 (b) The privilege may not be constructively waived.

AB688,6,25 (c) The privilege applies to testimony, reports, records, communications, and information obtained, created, or provided by any official, employee, or agent of the office for the purpose of assisting or participating in monitoring activities or in the conduct of an inquiry, investigation, or examination by, or coordinated through, the National Association of Insurance Commissioners.

AB688,7,3 (d) The privilege applies to testimony, reports, records, communications, and information in existence on or after the effective date of this paragraph .... [revisor inserts date].

AB688, s. 10 Section 10. 605.02 of the statutes is renumbered 605.02 (1) and amended to read:

AB688,7,13 605.02 (1) Property of local governmental units. Any local governmental unit may insure in the property fund its property or, subject to sub. (2), property for which it may be liable in the event of damage or destruction. Property insured under this section by a local governmental unit may not also be insured in any other manner unless the manager certifies that additional insurance is necessary, or unless the local governmental unit by resolution, a certified copy of which is filed with the manager, decides to insure specified personal property with insurers authorized to do business in this state.

AB688, s. 11 Section 11. 605.02 (2) of the statutes is created to read:

AB688,7,17 605.02 (2) Requirements for nonowned property. The property fund may cover a building or structure specified in sub. (1) that is not owned by a local governmental unit only if all of the following conditions are met:

AB688,7,19 (a) The building or structure is listed and described as a nonowned building or structure in the local governmental unit's statement of values.

AB688,7,21 (b) The local governmental unit is contractually liable in the event that the building or structure is damaged or destroyed.

AB688,7,23 (c) The building or structure is in the local governmental unit's care, custody, or control.

AB688,7,24 (d) The building or structure is used for a legitimate governmental purpose.

AB688, s. 12 Section 12. 605.21 (4) of the statutes is amended to read:

AB688,8,3 605.21 (4) Insurance of personal property. All personal property of the local governing unit is insured and premiums therefor must be paid under this section except to the extent that coverage is excluded by resolution under s. 605.02 (1).

AB688, s. 13 Section 13. 611.26 (3) (a) of the statutes is amended to read:

AB688,8,8 611.26 (3) (a) Authorization. An insurance corporation may form or acquire subsidiaries to perform functions or provide services that are ancillary to its insurance operations. It may have up to 10% of its assets invested in such subsidiaries, unless the commissioner by order or rule provides otherwise.

AB688, s. 14 Section 14. 611.26 (4) (a) of the statutes is amended to read:

AB688,8,11 611.26 (4) (a) Invest in a subsidiary one or more subsidiaries more than 10 percent of its assets or 50 percent of its capital and surplus, whichever is less.

AB688, s. 15 Section 15. 611.26 (4) (b) of the statutes is amended to read:

AB688,8,16 611.26 (4) (b) Invest in a subsidiary one or more subsidiaries to the extent that the insurer's capital and surplus with regard to policyholders will not be reasonable in relation to the insurer's outstanding liabilities or adequate to meet the insurer's financial needs.

AB688, s. 16 Section 16. 611.72 (2) of the statutes is amended to read:

AB688,8,22 611.72 (2) Approval required. No proposed plan of merger under s. 180.1101 or 180.1104 or other plan for acquisition of control may be submitted to the shareholders of any domestic stock insurance corporation or its parent insurance holding corporation participating in the transaction or may be executed unless it has been approved by the commissioner.

AB688, s. 17 Section 17. 631.61 (1) (c) of the statutes is renumbered 631.61 (1) (c) (intro.) and amended to read:

AB688,9,11 631.61 (1) (c) Method of providing certificates. (intro.) The certificate shall be provided in a manner reasonably calculated to bring it to the attention of the certificate holder. The insurer may deliver or mail it directly to the certificate holder or may deliver or mail the certificates in bulk to the policyholder to transmit to certificate holders, unless the insurer has reason to believe that the policyholder will not promptly transmit the certificates. An affidavit by the insurer that it has mailed the certificates in the usual course of business creates a rebuttable presumption that it has done so. As an alternative to delivering or mailing the certificate, the insurer may make the certificate available electronically through an online internet or policyholder network Web site. If the insurer makes the certificate available electronically, the insurer shall do all of the following:

AB688, s. 18 Section 18. 631.61 (1) (c) 1. of the statutes is created to read:

AB688,9,17 631.61 (1) (c) 1. Request the policyholder to post the information, as well as instructions on how to access the certificate, in the policyholder's place of business or to publish the information and access instructions in a house organ that is reasonably calculated to bring the information to the attention of the certificate holders.

AB688, s. 19 Section 19. 631.61 (1) (c) 2. of the statutes is created to read:

AB688,9,21 631.61 (1) (c) 2. Provide notice to the policyholder of any subsequent change in the certificate and request the policyholder to notify the certificate holders of the change in the manner specified in subd. 1.

AB688, s. 20 Section 20. 631.61 (1) (c) 3. of the statutes is created to read:

AB688,9,24 631.61 (1) (c) 3. Provide a paper copy of the certificate to any certificate holder upon request.

AB688, s. 21 Section 21. 632.07 of the statutes is created to read:

AB688,10,5 632.07 Prohibiting requiring property insurance in excess of replacement value. A lender may not require a borrower, as a condition of receiving or maintaining a loan secured by real property, to insure the property against risks to improvements on the real property in an amount that exceeds the replacement value or market value of the improvements, whichever is less.

AB688, s. 22 Section 22. 632.745 (18) (b) of the statutes is amended to read:

AB688,10,7 632.745 (18) (b) A special enrollment period under s. 632.746 (6) or (7).

AB688, s. 23 Section 23. 646.01 (1) (b) 14. of the statutes is amended to read:

AB688,10,13 646.01 (1) (b) 14. A policy issued by an insurer to , or a contract entered into by an insurer with, a care management organization, as defined in s. 46.2805 (1), or the department of health and family services or any other governmental entity under s. 49.45 (2) (b) 2. any state law to provide prepaid health care to medical assistance recipients.

AB688, s. 24 Section 24. 646.11 (4) of the statutes is amended to read:

AB688,10,18 646.11 (4) Liability. No contributor to the fund or, person acting on its the fund's behalf, insurer representative on the board, or alternate representative designated under s. 646.12 (1) (a) 3. is personally liable for any obligations of the fund. The rights of creditors are solely against the assets of the fund.

AB688, s. 25 Section 25. 646.11 (5) of the statutes is amended to read: