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  S.B. No. 567
 
 
 
 
AN ACT
  relating to the Texas Life, Accident, Health, and Hospital Service
  Insurance Guaranty Association.
         BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
         SECTION 1.  The heading to Chapter 463, Insurance Code, is
  amended to read as follows:
  CHAPTER 463.  TEXAS LIFE AND[, ACCIDENT,] HEALTH[, AND HOSPITAL
  SERVICE] INSURANCE GUARANTY ASSOCIATION
         SECTION 2.  Section 463.001, Insurance Code, is amended to
  read as follows:
         Sec. 463.001.  SHORT TITLE.  This chapter may be cited as
  the Texas Life and[, Accident,] Health[, and Hospital Service]
  Insurance Guaranty Association Act.
         SECTION 3.  Subdivision (1), Section 463.003, Insurance
  Code, is amended to read as follows:
               (1)  "Association" means the Texas Life and[,
  Accident,] Health[, and Hospital Service] Insurance Guaranty
  Association.
         SECTION 4.  Subsection (a), Section 463.051, Insurance Code,
  is amended to read as follows:
         (a)  The Texas Life and[, Accident,] Health[, and Hospital
  Service] Insurance Guaranty Association is a nonprofit legal entity
  existing to pay benefits and continue coverage as provided by this
  chapter.
         SECTION 5.  Subchapter B, Chapter 463, Insurance Code, is
  amended by adding Section 463.059 to read as follows:
         Sec. 463.059.  MEETINGS BY TELEPHONE AND VIDEOCONFERENCE.
  (a)  Notwithstanding Chapter 551, Government Code, or any other
  law, the board or a committee of the board may meet by telephone
  conference call, videoconference, or other similar
  telecommunication method if immediate action is required and
  convening a quorum of the board or committee of the board at a
  single location is not reasonable or practical.  A board or
  committee member who is unable to attend a meeting in person and who
  is participating in a board or committee meeting by telephone
  conference call, videoconference, or other similar
  telecommunication method may be counted to establish a quorum and
  may vote.
         (b)  A meeting authorized by this section is subject to the
  notice requirements that apply to other meetings.
         (c)  The notice of a meeting authorized by this section must
  specify that the location of the meeting is the location at which
  meetings of the board and committees of the board are usually held.
         (d)  Each part of a meeting authorized by this section that
  must be open to the public must be audible to the public at the
  location specified by Subsection (c).
         (e)  Two-way audio communication must be available during
  the entire meeting between all members of the board or committee
  attending a meeting authorized by this section, and if the two-way
  audio communication is disrupted so that a quorum of the board or
  committee is no longer participating in the meeting, the meeting
  may not continue until the two-way audio communication is
  reestablished.
         (f)  An audio or digital recording of a meeting authorized by
  this section must be made in accordance with the association's
  bylaws.  The recording of the open portion of the meeting must be
  made available to the public.
         (g)  A vote during a meeting authorized by this section must
  be taken in such a manner that the vote of each member is audible and
  may be verified as the vote of the member.
         SECTION 6.  Subsection (c), Section 463.153, Insurance Code,
  is amended to read as follows:
         (c)  The total amount of assessments on a member insurer for
  each account under Section 463.105 may not in one calendar year
  exceed two percent of the insurer's average annual premiums on the
  policies covered by the account during the three calendar years
  preceding the year in which the insurer became an impaired or
  insolvent insurer.  If two or more assessments are authorized in a
  calendar year with respect to insurers that become impaired or
  insolvent in different calendar years, the average annual premiums
  for purposes of the aggregate assessment percentage limitation
  described by this subsection shall be equal to the higher of the
  three-year average annual premiums for the applicable subaccount or
  account as computed in accordance with this section.  If the maximum
  assessment and the other assets of the association do not provide in
  a year an amount sufficient to carry out the association's
  responsibilities, the association shall make necessary additional
  assessments as soon as this chapter permits.
         SECTION 7.  Subsection (b), Section 463.203, Insurance Code,
  is amended to read as follows:
         (b)  This chapter does not provide coverage for:
               (1)  any part of a policy or contract not guaranteed by
  the insurer or under which the risk is borne by the policy or
  contract owner;
               (2)  a policy or contract of reinsurance, unless an
  assumption certificate has been issued;
               (3)  any part of a policy or contract to the extent that
  the rate of interest on which that part is based:
                     (A)  as averaged over the period of four years
  before the date the member insurer becomes impaired or insolvent
  under this chapter, whichever is earlier, exceeds a rate of
  interest determined by subtracting two percentage points from
  Moody's Corporate Bond Yield Average averaged for the same
  four-year period or for a lesser period if the policy or contract
  was issued less than four years before the date the member insurer
  becomes impaired or insolvent under this chapter, whichever is
  earlier; and
                     (B)  on and after the date the member insurer
  becomes impaired or insolvent under this chapter, whichever is
  earlier, exceeds the rate of interest determined by subtracting
  three percentage points from Moody's Corporate Bond Yield Average
  as most recently available;
               (4)  a portion of a policy or contract issued to a plan
  or program of an employer, association, similar entity, or other
  person to provide life, health, or annuity benefits to the entity's
  employees, members, or others, to the extent that the plan or
  program is self-funded or uninsured, including benefits payable by
  an employer, association, or similar entity under:
                     (A)  a multiple employer welfare arrangement as
  defined by Section 3, Employee Retirement Income Security Act of
  1974 (29 U.S.C. Section 1002);
                     (B)  a minimum premium group insurance plan;
                     (C)  a stop-loss group insurance plan; or
                     (D)  an administrative services-only contract;
               (5)  any part of a policy or contract to the extent that
  the part provides dividends, experience rating credits, or voting
  rights, or provides that fees or allowances be paid to any person,
  including the policy or contract owner, in connection with the
  service to or administration of the policy or contract;
               (6)  a policy or contract issued in this state by a
  member insurer at a time the insurer was not authorized to issue the
  policy or contract in this state;
               (7)  an unallocated annuity contract issued to or in
  connection with a benefit plan protected under the federal Pension
  Benefit Guaranty Corporation, regardless of whether the Pension
  Benefit Guaranty Corporation has not yet become liable to make any
  payments with respect to the benefit plan;
               (8)  any part of an unallocated annuity contract that
  is not issued to or in connection with a specific employee, a
  benefit plan for a union or association of individuals, or a
  governmental lottery;
               (9)  any part of a financial guarantee, funding
  agreement, or guaranteed investment contract that:
                     (A)  does not contain a mortality guarantee; and
                     (B)  is not issued to or in connection with a
  specific employee, a benefit plan, or a governmental lottery;
               (10)  a part of a policy or contract to the extent that
  the assessments required by Subchapter D with respect to the policy
  or contract are preempted by federal or state law;
               (11)  a contractual agreement that established the
  member insurer's obligations to provide a book value accounting
  guaranty for defined contribution benefit plan participants by
  reference to a portfolio of assets that is owned by the benefit plan
  or the plan's trustee in a case in which neither the benefit plan
  sponsor nor its trustee is an affiliate of the member insurer; [or]
               (12)  a part of a policy or contract to the extent the
  policy or contract provides for interest or other changes in value
  that are to be determined by the use of an index or external
  reference stated in the policy or contract, but that have not been
  credited to the policy or contract, or as to which the policy or
  contract owner's rights are subject to forfeiture, as of the date
  the member insurer becomes an impaired or insolvent insurer under
  this chapter, whichever date is earlier, subject to Subsection (c);
  or
               (13)  a policy or contract providing a hospital,
  medical, prescription drug, or other health care benefit under 42
  U.S.C. Sections 1395w-21 et seq. and 1395w-101 et seq. (Medicare
  Parts C and D) or a regulation adopted under those federal statutes.
         SECTION 8.  Section 463.204, Insurance Code, is amended to
  read as follows:
         Sec. 463.204.  OBLIGATIONS EXCLUDED.  A contractual
  obligation does not include:
               (1)  death benefits in an amount in excess of $300,000
  or a net cash surrender or net cash withdrawal value in an amount in
  excess of $100,000 under one or more policies on a single life;
               (2)  an amount in excess of:
                     (A)  $250,000 [$100,000] in the present value
  under one or more annuity contracts issued with respect to a single
  life under individual annuity policies or group annuity policies;
  or
                     (B)  $5 million in unallocated annuity contract
  benefits with respect to a single contract owner regardless of the
  number of those contracts;
               (3)  an amount in excess of the following amounts,
  including any net cash surrender or cash withdrawal values, under
  one or more accident, health, accident and health, or long-term
  care insurance policies on a single life:
                     (A)  $500,000 for basic hospital,
  medical-surgical, or major medical insurance, as those terms are
  defined by this code or rules adopted by the commissioner;
                     (B)  $300,000 for disability and long-term care
  insurance, as those terms are defined by this code or rules adopted
  by the commissioner; or
                     (C)  $200,000 for coverages that are not defined
  as basic hospital, medical-surgical, major medical, disability, or
  long-term care insurance;
               (4)  an amount in excess of $250,000 [$100,000] in
  present value annuity benefits, in the aggregate, including any net
  cash surrender and net cash withdrawal values, with respect to each
  individual participating in a governmental retirement benefit plan
  established under Section 401, 403(b), or 457, Internal Revenue
  Code of 1986 (26 U.S.C. Sections 401, 403(b), and 457), covered by
  an unallocated annuity contract or the beneficiary or beneficiaries
  of the individual if the individual is deceased;
               (5)  an amount in excess of $250,000 [$100,000] in
  present value annuity benefits, in the aggregate, including any net
  cash surrender and net cash withdrawal values, with respect to each
  payee of a structured settlement annuity or the beneficiary or
  beneficiaries of the payee if the payee is deceased;
               (6)  aggregate benefits in an amount in excess of
  $300,000 with respect to a single life, except with respect to:
                     (A)  benefits paid under basic hospital,
  medical-surgical, or major medical insurance policies, described
  by Subdivision (3)(A), in which case the aggregate benefits are
  $500,000; and
                     (B)  benefits paid to one owner of multiple
  nongroup policies of life insurance, whether the policy owner is an
  individual, firm, corporation, or other person, and whether the
  persons insured are officers, managers, employees, or other
  persons, in which case the maximum benefits are $5 million
  regardless of the number of policies and contracts held by the
  owner;
               (7)  an amount in excess of $5 million in benefits, with
  respect to either one plan sponsor whose plans own directly or in
  trust one or more unallocated annuity contracts not included in
  Subdivision (4) irrespective of the number of contracts with
  respect to the contract owner or plan sponsor or one contract owner
  provided coverage under Section 463.201(a)(3)(B), except that, if
  one or more unallocated annuity contracts are covered contracts
  under this chapter and are owned by a trust or other entity for the
  benefit of two or more plan sponsors, coverage shall be afforded by
  the association if the largest interest in the trust or entity
  owning the contract or contracts is held by a plan sponsor whose
  principal place of business is in this state, and in no event shall
  the association be obligated to cover more than $5 million in
  benefits with respect to all these unallocated contracts;
               (8)  any contractual obligations of the insolvent or
  impaired insurer under a covered policy or contract that do not
  materially affect the economic value of economic benefits of the
  covered policy or contract; or
               (9)  punitive, exemplary, extracontractual, or bad
  faith damages, regardless of whether the damages are:
                     (A)  agreed to or assumed by an insurer or
  insured; or
                     (B)  imposed by a court.
         SECTION 9.  Subsection (b), Section 463.263, Insurance Code,
  is amended to read as follows:
         (b)  The association is entitled to retain a portion of any
  amount paid to the association under this section equal to the
  percentage determined by dividing the aggregate amount of policy
  owners' claims related to that insolvency for which the association
  has provided statutory benefits by the aggregate amount of all
  policy owners' claims in this state related to that insolvency and
  shall remit to the domiciliary receiver the amount paid to the
  association less the amount [and] retained under this section.
         SECTION 10.  Subchapter F, Chapter 463, Insurance Code, is
  amended by adding Section 463.264 to read as follows:
         Sec. 463.264.  REINSURANCE. (a)  The association may elect
  to succeed to the rights of an insolvent insurer under a contract of
  reinsurance to which the insolvent insurer is a party to the extent:
               (1)  of the contractual obligations of the covered
  policies for which the association may become obligated; and
               (2)  that the reinsurance contract provides coverage
  for losses occurring after the association is obligated to provide
  coverage.
         (b)  As a condition to making an election under Subsection
  (a), the association shall pay all unpaid premiums due under the
  reinsurance contract to which Subsection (a) refers for coverage
  relating to a period before and after the date the association is
  obligated to provide coverage.
         SECTION 11.  Subsection (c), Section 154.359, Finance Code,
  is amended to read as follows:
         (c)  A claim may not be approved for a loss to the extent the
  claim is insured, bonded, or otherwise covered, protected, or
  reimbursed from other sources, including coverage provided by the
  Texas Life and[, Accident,] Health[, and Hospital Service]
  Insurance Guaranty Association under Chapter 463, Insurance Code.
         SECTION 12.  Subsection (b), Section 609.113, Government
  Code, is amended to read as follows:
         (b)  A plan administrator may not approve a vendor's
  application if the vendor is:
               (1)  a state or national bank or savings and loan
  association, the deposits of which are not insured by the Federal
  Deposit Insurance Corporation;
               (2)  a credit union, the deposits of which are not
  insured by the National Credit Union Administration Board or the
  Texas Share Guaranty Credit Union; or
               (3)  an insurance company that:
                     (A)  is not a member of the Texas Life and[,
  Accident,] Health[, and Hospital Service] Insurance Guaranty
  Association; or
                     (B)  is an impaired or insolvent insurer under
  Chapter 463 [Article 21.28-D], Insurance Code.
         SECTION 13.  Subsection (b), Section 609.712, Government
  Code, is amended to read as follows:
         (b)  A plan administrator may not approve a vendor's
  application if the vendor is:
               (1)  a state or national bank or savings and loan
  association, the deposits of which are not insured by the Federal
  Deposit Insurance Corporation;
               (2)  a credit union, the deposits of which are not
  insured by the National Credit Union Administration Board; or
               (3)  an insurance company that:
                     (A)  is not a member of the Texas Life and[,
  Accident,] Health[, and Hospital Service] Insurance Guaranty
  Association; or
                     (B)  is an impaired or insolvent insurer under
  Chapter 463 [Article 21.28-D], Insurance Code.
         SECTION 14.  (a)  Effective September 1, 2011:
               (1)  the name of the Texas Life, Accident, Health, and
  Hospital Service Insurance Guaranty Association is changed to the
  Texas Life and Health Insurance Guaranty Association, and all
  powers, duties, rights, and obligations of the Texas Life,
  Accident, Health, and Hospital Service Insurance Guaranty
  Association are the powers, duties, rights, and obligations of the
  Texas Life and Health Insurance Guaranty Association;
               (2)  a member of the board of directors of the Texas
  Life, Accident, Health, and Hospital Service Insurance Guaranty
  Association is a member of the board of directors of the Texas Life
  and Health Insurance Guaranty Association; and
               (3)  a reference in law to the Texas Life, Accident,
  Health, and Hospital Service Insurance Guaranty Association is a
  reference to the Texas Life and Health Insurance Guaranty
  Association.
         (b)  The Texas Life and Health Insurance Guaranty
  Association is the successor to the Texas Life, Accident, Health,
  and Hospital Service Insurance Guaranty Association in all
  respects. All personnel, equipment, data, documents, facilities,
  contracts, items, other property, rules, decisions, and
  proceedings of or involving the Texas Life, Accident, Health, and
  Hospital Service Insurance Guaranty Association are unaffected by
  the change in the name of the association.
         SECTION 15.  (a)  The change in law made by this Act to
  Subsection (c), Section 463.153, Insurance Code, applies to
  assessments authorized on or after October 1, 2008, with respect to
  an insurer that first became impaired or insolvent after September
  1, 2005; all other changes in law made by this Act apply only to an
  insurer that first becomes an impaired or insolvent insurer on or
  after the effective date of this Act.
         (b)  Except as provided by Subsection (a) of this section, an
  insurer that becomes an impaired or insolvent insurer before the
  effective date of this Act is governed by the law as it existed
  immediately before that date, and that law is continued in effect
  for that purpose.
         SECTION 16.  This Act takes effect September 1, 2011.
 
 
 
 
 
  ______________________________ ______________________________
     President of the Senate Speaker of the House     
 
         I hereby certify that S.B. No. 567 passed the Senate on
  March 24, 2011, by the following vote:  Yeas 31, Nays 0.
 
 
  ______________________________
  Secretary of the Senate    
 
         I hereby certify that S.B. No. 567 passed the House on
  April 14, 2011, by the following vote:  Yeas 142, Nays 0, one
  present not voting.
 
 
  ______________________________
  Chief Clerk of the House   
 
 
 
  Approved:
 
  ______________________________ 
              Date
 
 
  ______________________________ 
            Governor