New Jersey Life & Health Insurance Guaranty Association

Covered Contracts

§17B:32A-3.b. Direct, non-group life insurance, health insurance (which includes health service corporation contracts, hospital service corporation contracts, medical service corporation contracts, and health maintenance organization subscriber contracts and certificates), or annuities and supplemental policies or contracts, for certificates under direct group life insurance, health insurance, annuities and supplemental policies and contracts, for individual and group long-term care insurance policies and contracts, and for unallocated annuity contracts, issued by member insurers, except as limited by 17B:32A-1 et seq.; and policies or contracts issued by medical service corporations declared to be insolvent or impaired by a court of competent jurisdiction on or after September 1, 1987, but prior to the effective date of the act.

Non-Covered Contracts

§17B:32A-3.c. (1) any portion of a policy or contract not guaranteed by the member insurer, or under which the risk is borne by the policy or contract owner; (2) any policy or contract of reinsurance, unless assumption certificates have been issued; (3) any portion of a policy or contract to the extent that the rate of interest on which it is based: (a) averaged over the four-year period prior to the date on which the association becomes obligated with respect to that policy or contract, exceeds the lesser of: (i) the rate of interest determined by subtracting three percentage points from Moody’s Corporate Bond Yield Average averaged for that same four-year period, or for such lesser period if the policy or contract was issued less than four years before the association became obligated, or (ii) the rate of interest specified in the standard valuation law, or the rules of this State for determining the minimum standard for the valuation of policies or contracts issued during the year of insolvency; and (b) on and after the date on which the association becomes obligated with respect to that policy or contract, exceeds the rate of interest determined by subtracting four percentage points from Moody’s Corporate Bond Yield Average as most recently available; except that the limitation of this paragraph shall not preclude the association from providing more extensive coverage if it is proceeding under the authority of section 7 of P.L.1991, c.208 (C.17B:32A-7); (4) any plan or program of an employer, association or similar entity to provide life, health, or annuity benefits to its employees or members to the extent that such plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association or similar entity under: (a) a Multiple Employer Welfare Arrangement as defined in the Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1002); (b) a minimum premium group insurance plan; (c) a stop-loss group insurance plan; or (d) an administrative services only contract; (5) any portion of a policy or contract to the extent that it provides dividends or experience rating credits, or provides that any fees or allowances be paid to any person, including the owner of the policy or contract, in connection with the service to or administration of that policy or contract; (6) any policy or contract issued in this State by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue that policy or contract in this State; (7) any unallocated annuity contract issued to an employee benefit plan covered by the Pension Benefit Guaranty Corporation and whose benefits will be paid under such system; (8) any portion of any unallocated annuity contract which is not issued to or in connection with a specific plan providing benefits to employees or an association of natural persons; (9) a portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which has 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 P.L.1991, c.208 (C.17B:32A-1 et seq.), whichever is earlier. If a policy or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this paragraph, the interest or change in value determined by using the procedures defined in the policy or contract shall be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and shall not be subject to forfeiture; (10) a policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Medicare Parts C or D or the Medicaid program, 42 U.S.C. ss.1396 et seq., including the Children’s Health Insurance Program (CHIP) which provides health coverage to eligible children, either through Medicaid or separate CHIP programs, or any regulations issued pursuant thereto, or the “Family Health Care Coverage Act,” P.L.2005, c.156 (C.30:4J-8 et seq.), or (11) structured settlement annuity benefits to which a payee (or beneficiary) has transferred rights in a structured settlement factoring transaction as defined pursuant to section 5891 of the federal Internal Revenue Code, 26 U.S.C. § 5891(c)(3)(A), regardless of whether the transaction occurred before or after that section became effective.

Non-Resident Coverage

§17B:32A-3.a(2)(b). Yes. Covers nonresidents, but only if: (i) the insurers which issued the policies or contracts are domiciled in New Jersey; (ii) those insurers never held a license or certificate of authority in the states in which those persons reside; (iii) those states have associations and coverage provisions with respect to residency similar to the association created by this act; and (iv) those persons are not eligible for coverage by those associations.

§17B:32A-3.e. (2) with respect to any one insured individual, regardless of the number of policies or contracts: (a) $500,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance; (b) $500,000 in present value annuity benefits, including net cash surrender and net cash withdrawal values, but not more than $100,000 in net cash surrender and net cash withdrawal values for annuity benefits; provided, however, that in no event shall the association be liable to expend more than $500,000 in the aggregate with respect to any one individual under this paragraph (2); or (3) with respect to any one unallocated annuity contract, $2,000,000 in benefits; or (4) with respect to any one group, blanket, or individual accident or health insurance or group, blanket or individual accident or health insurance policy, unlimited benefits. (5) with respect to each individual participating in a governmental retirement benefit plan established under sections 401, 403(b), or 457 of the U.S. Internal Revenue Code, 26 U.S.C. ss.401, 403(b), and 457, covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, $500,000 in present value annuity benefits, including net cash surrender and net cash withdrawal values; and (6) with respect to each payee of a structured settlement annuity (or beneficiary or beneficiaries of the payee if deceased), $500,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any. (7) The limitations set forth in this subsection are limitations on the benefits for which the association is obligated before taking into account either its subrogation and assignment rights or the extent to which those benefits could be provided out of the assets of the impaired or insolvent insurer attributable to covered policies. The costs of the obligation of the association under P.L.1991, c.208 (C.17B:32A-1 et seq.) may be met by the use of assets attributable to covered policies or reimbursed to the association pursuant to its subrogation and assignment rights. f. A provider of health care services, in order to receive payment directly from the association upon a claim of the provider against an insured or enrollee, shall agree to forgive the insured of 20% of the obligation which would otherwise be paid by the member insurer had it not been insolvent. The obligations of solvent member insurers to pay all or part of the covered claim are not diminished by the forgiveness provided in this subsection. The association is not bound by an assignment of benefits executed with respect to the coverage provided by the insolvent insurer. The association may aggregate all claims owed health care providers when negotiating direct payment of claims of all covered individuals.

Discretionary Triggers

§17B:32A-7.a. When a domestic insurer is impaired.

Mandatory Triggers

§17B:32A-7.c. If a member insurer is insolvent.

Foreign Triggers

See Mandatory Triggers.

"Impaired Insurer"

§17B:32A-4. A member insurer which is (1) determined by the commissioner to be potentially unable to fulfill its contractual obligations; or (2) placed under an order of receivership, rehabilitation or conservation by a court of competent jurisdiction.

"Insolvent Insurer"

§17B:32A-4. A member insurer which, after the effective date of the act, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

§17B:32A-4. “Member insurer” means any insurer, health service corporation, hospital service corporation, medical service corporation, or health maintenance organization licensed in this State or which holds a certificate of authority to transact any kind of insurance, health service corporation business, hospital service corporation business, medical service corporation business, or health maintenance organization business in this State for which coverage is provided under section 3 of P.L.1991, c.208 (C.17B:32A-3), and includes any insurer, health service corporation, hospital service corporation, medical service corporation, or health maintenance organization whose license or certificate of authority in this State may have been suspended, revoked, not renewed or voluntarily withdrawn, but does not include: (1) A dental service corporation established pursuant to the provisions of P.L.1968, c.305 (C.17:48C-1 et seq.); (2) A dental plan organization established pursuant to the provisions of P.L.1979, c.478 (C.17:48D-1 et seq.); (3) (Deleted by amendment, P.L.2022, c.98); (4) A fraternal benefit society established pursuant to the provisions of P.L.1959, c.167 (C.17:44A-1 et seq.); (5) A mandatory state pooling plan; (6) A mutual assessment company or any entity that operates on an assessment basis to the extent of the assessment liability of its members; (7) An insurance exchange; (8) A licensed organized delivery system licensed pursuant to P.L.1999, c.409 (C.17:48H-1 et seq.); (9) A captive insurer, established pursuant to P.L.2011, c.25 (C.17:47B-1 et seq.); or (10) An entity similar to any of the above.

§17B:32A-5.b. Two accounts: (1) life insurance and annuity account, includes sub accounts: (a) life insurance,( b) annuity, (c) unallocated annuity; and (2) health account.

Assessment Limits

§17B:32A-8.e. Two percent (2%) of the insurers average premiums received in the state during the three calendar years preceding the year of impairment or insolvency.

Assessment Classes

§17B:32A-8.b. Two classes of assessments: Class A for the purpose of meeting administrative and legal costs of the association along with other expenses and examinations conducted under this act. Class A assessments shall also be made, upon the request of the commissioner, for the purpose of meeting costs incurred by or on behalf of the department in the administration of an insolvent insurer to the extent those costs exceed assets of the insolvent insurer available for that purpose; and Class B to carry out the powers and duties of the association with respect to an impaired or an insolvent insurer. The amount of Class B assessments for long-term care insurance written by the impaired or insolvent insurer shall be allocated according to a methodology included in the plan of operation and approved by the commissioner. The methodology shall provide for 50 percent of the assessment to be allocated to accident and health member insurers and 50 percent to be allocated to life and annuity member insurers.

§17B:32A-3.c(3). Guaranty Association excludes from coverage: any portion of a policy or contract to the extent that the rate of interest on which it is based: (a) averaged over the four-year period prior to the date on which the association becomes obligated with respect to that policy or contract, exceeds the lesser of: (i) the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period, or for such lesser period if the policy or contract was issued less than four years before the association became obligated, or (ii) the rate of interest specified in the standard valuation law, or the rules of this State for determining the minimum standard for the valuation of policies or contracts issued during the year of insolvency; and (b) on and after the date on which the association becomes obligated with respect to that policy or contract, exceeds the rate of interest determined by subtracting four percentage points from Moody's Corporate Bond Yield Average as most recently available; except that the limitation of this paragraph shall not preclude the association from providing more extensive coverage if it is proceeding under the authority of section 7 of this act.

§17B:32A-18.a. Yes, a member insurer may offset against its premium tax liability, attributable to premiums written in that year, any assessments for which a certificate of contribution has been issued, to the extent of 10% of the amount of those assessments for each of the five calendar years following the second year after the year in which those assessments were paid, except that no member insurer may offset its premium tax liability by more than 20% of its premium tax liability in any one year. If a member insurer should cease doing business in the state, any uncredited assessments may be offset against its premium tax liability for the year in which it ceases to do business. b. A member insurer that is exempt from taxes referenced in subsection a. of this section may recoup its assessments by a surcharge on its premiums or by a surcharge on its membership fees (as applicable) in a sum reasonably calculated to recoup the assessments over a reasonable period of time, as approved by the commissioner. Amounts recouped shall not be considered premiums for any other purpose, including the computation of gross premium tax, the medical loss ratio, or insurance producer commission. If a member insurer collects excess surcharges, the member insurer shall remit the excess amount to the association, and the excess amount shall be applied to reduce future assessments in the appropriate account. c. Any sums which are acquired by member insurers as the result of a refund from the association pursuant to subsection f. of section 8 of P.L.1991, c.208 (C.17B:32A-8), and which have theretofore been offset against premium taxes as provided in subsection a. of this section, shall be paid by those member insurers to the State as the Director of the Division of Taxation may require. The association shall notify the commissioner and the Director of the Division of Taxation of any refunds made. d. This section shall not apply in any way to the imposition or collection of, and no offset shall be permitted against, the surtax on premiums authorized pursuant to section 76 of P.L.1990, c.8 (C.17:33B-49).

§ 17B:32A-4 “Premiums” means amounts or considerations received in any calendar year on covered policies or contracts less premiums, considerations and deposits returned thereon, and less dividends and experience credits thereon. “Premiums” shall not include any amounts or considerations received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subsection b. of section 3 of this act except that assessable premium shall not be reduced as the result of the application of: paragraph (3) of subsection c. of section 3 relating to interest limitations; or paragraph (2) of subsection d. of section 3 relating to limitations with respect to any one insured individual. “Premiums” shall not include any premiums in excess of $2,000,000 per contract on any unallocated annuity contract.

§17B:32A-17 No person, including a member insurer, agent or affiliate of a member insurer or insurance producer shall make, publish, disseminate, circulate or place before the public or cause directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in any newspaper, magazine or other publication or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the association for the purpose of sales, solicitation, or inducement to purchase any form of insurance or other coverage covered by P.L.1991, c.208 (C.17B:32A-1 et seq.). This subsection shall not apply to the department or the association or to any other entity which does not sell or solicit insurance or coverage by a health service corporation, hospital service corporation, medical service corporation, or health maintenance organization.