Mutual Benefit Societies

Requires mutual benefit societies selling long-term care policies
to pay premium taxes and guaranty association assessments.

HOUSE OF REPRESENTATIVES                H.B. NO.352        
TWENTIETH LEGISLATURE, 1999                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  The legislature finds that current insurance and
 2 insurance related laws place life and disability insurance
 3 companies at a competitive disadvantage as against mutual benefit
 4 societies in the market for long-term care coverage.  Insurance
 5 companies must pay premium taxes and guaranty association
 6 assessments for the policies they sell.  However, mutual benefit
 7 societies selling similar products do not.
 8      The purpose of this bill is to require mutual benefit
 9 societies that sell long-term care coverage to pay insurance
10 premium taxes and life and disability insurance guaranty
11 association assessments.
12      SECTION 2.  Section 431:16-205, Hawaii Revised Statutes, is
13 amended by amending the definition of "member insurer" to read as
14 follows:
15      "431:16-205  Definitions.  As used in this part:
16      (a)  Account means any of the three accounts created under
17           section 431:16-206(a).
18      (b)  Association means the Hawaii Life and Disability
19           Insurance Guaranty Association created under section

Page 2                                                     
                                     H.B. NO.           

 1           431:16-206.
 2      (c)  Contractual obligation means any obligation under a
 3           policy or contract or certificate under a group policy
 4           or contract, or portion thereof for which coverage is
 5           provided under section 431:16-203.
 6      (d)  Covered policy means any policy or contract within the
 7           scope of this part under section 431:16-203.
 8      (e)  Impaired insurer means a member insurer which, after
 9           July 1, 1988, is not an insolvent insurer, and
10           (1)  Is deemed by the commissioner to be potentially
11                unable to fulfill its contractual obligations, or
12           (2)  Is placed under an order of rehabilitation or
13                conservation by a court of competent jurisdiction.
14      (f)  Insolvent insurer means a member insurer which after
15           July 1, 1988, is placed under an order of liquidation
16           by a court of competent jurisdiction with a finding of
17           insolvency.
18      (g)  Member insurer means any insurer licensed or who holds
19           a certificate of authority to transact in this State
20           any kind of insurance for which coverage is provided
21           under section 431:16-203, and includes any insurer
22           whose license or certificate of authority in this State
23           may have been suspended, revoked, not renewed, or

Page 3                                                     
                                     H.B. NO.           

 1           voluntarily withdrawn, but does not include:
 2           (1)  A nonprofit hospital or medical service
 3                organization[;] unless the organization offers
 4                long-term care insurance;
 5           (2)  A health maintenance organization;
 6           (3)  A fraternal benefit society;
 7           (4)  A mandatory state pooling plan;
 8           (5)  A mutual assessment company or any entity that
 9                operates on an assessment basis;
10           (6)  An insurance exchange; or
11           (7)  Any entity similar to any of the above.
12      (h)  Moody's Corporate Bond Yield Average means the Monthly
13           Average Corporates as published by Moody's Investors
14           Service, Inc., or any successor thereto.
15      (i)  Person means any individual, corporation, partnership,
16           association, or voluntary organization.
17      (j)  Premiums means amounts received on covered policies or
18           contracts less premiums, considerations and deposits
19           returned thereon, and less dividends and experience
20           credits thereon.  Premiums does not include any amounts
21           received for any policies or contracts or for the
22           portions of any policies or contracts for which
23           coverage is not provided under section 431:16-203(b)

Page 4                                                     
                                     H.B. NO.           

 1           except that assessable premium shall not be reduced on
 2           accounts under section 431:16-203(b)(2)(C) relating to
 3           interest limitations and section 431:16-203(c)(2)
 4           relating to limitations with respect to any one life
 5           and any one contract holder.
 6      (k)  Resident means any person who resides in this State at
 7           the time a member insurer is determined to be an
 8           impaired or insolvent insurer and to whom a contractual
 9           obligation is owed.  A person may be a resident of only
10           one state, which in the case of a person other than a
11           natural person shall be its principal place of
12           business.
13      (l)  Supplemental contract means any agreement entered into
14           for the distribution of policy or contract proceeds.
15      (m)  Unallocated annuity contract means any annuity contract
16           or group annuity certificate which is not issued to and
17           owned by an individual, except to the extent of any
18           annuity benefits guaranteed to an individual by an
19           insurer under such contract or certificate."
20      SECTION 3.  Section 432:1-102, Hawaii Revised Statutes, is
21 amended to read as follows:
22      "432:1-102  Applicability of other laws.(a)  Part III of
23 article 10A of chapter 431 shall apply to nonprofit medical

Page 5                                                     
                                     H.B. NO.           

 1 indemnity or hospital service associations.  Such associations
 2 shall be exempt from the provisions of part I of article 10A;
 3 provided that such exemption is in compliance with applicable
 4 federal statutes and regulations.
 5      (b)  Article 2 and article 13 of chapter 431, and the powers
 6 there granted to the commissioner, shall apply to managed care
 7 plans, health maintenance organizations, or medical indemnity or
 8 hospital service associations, which are owned or controlled by
 9 mutual benefit societies, so long as such application in any
10 particular case is in compliance with and is not preempted by
11 applicable federal statutes and regulations.
12      (c)  Part II of article 7 and part II of article 16 of
13 chapter 431 shall apply to that portion of the operations of a
14 nonprofit medical indemnity association or hospital service
15 association that offers long-term care coverage, if any."
16      SECTION 4.  Statutory material to be repealed is bracketed.
17 New statutory material is underscored.
18      SECTION 5.  This Act shall take effect upon its approval.
20                           INTRODUCED BY:  _______________________