Pennsylvania Life & Health Insurance Guaranty Association

Covered Contracts

40 PS §991.1703(b)(1). Direct non group life insurance, health insurance, annuity and supplemental policies or contracts, for certificates under direct group policies and contracts, and unallocated annuity contracts issued by member insurers. Health insurance includes RANLI PPO, hospital plan corporation, professional health services plan corporation and health maintenance organization subscriber policies, contracts, and certificates. Annuity contracts and certificates under group annuity contracts include, but are not limited to, guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement annuities, annuities issued to or in connection with government lotteries and any immediate or deferred annuity contracts.

Non-Covered Contracts

40 PS §991.1703(b)(2). Any portion of a policy or contract not guaranteed by the member insurer; part of any policy or contract under which the risk is borne by the policyholder; any policy or contract of reinsurance, unless assumption certificates have been issued; any portion of a policy or contract that provides interest in excess of a specified rate; any employer programs to the extent that they are self-funded; dividends; any policy or contract issued in this Commonwealth by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue such policy or contract in this Commonwealth; any unallocated annuity contract issued to an employee benefit plan protected under the federal PBGC; any unallocated annuity contract which is not issued to or in connection with a specific employee, union or association of natural persons benefit plan or a government lottery; a portion of a policy or contract to the extent it is preempted by Federal or State law; an obligation that does not arise under the express written terms of the policy or contract issued by the member insurer; a contractual agreement that establishes 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 its trustee, which in each case is not an affiliate of the member insurer; 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 have not been credited to the policy or contract as of the date the member insurer becomes an impaired or insolvent; a policy or contract providing any hospital, medical, prescription drug or other health care benefits under Part C of D of Medicare, Medicaid, or any regulations issue pursuant thereto; structured settlement annuity benefits to which a payee or beneficiary has transferred the payee's or beneficiary's rights in a structured settlement factoring transaction.

Non-Resident Coverage

40 PS §991.1703(a)(2)(ii). Yes. Covers nonresidents under the following conditions: (1) the member insurer that issued such policies or contracts is domiciled in the commonwealth;(2) the states in which the persons reside have associations similar to the association created by this article; and (3) (C) the persons are not eligible for coverage by associations in any other state due to the fact that such insurers, RANLI PPOs, hospital plan corporations, professional health services plan corporations or health maintenance organizations were not licensed or did not hold a certificate of authority in the states in which the persons reside at the time specified in the state's guaranty association law.

40 PS §991.1703(c). (ii) (A) With respect to any one life, regardless of the number of policies or contracts, the following shall apply: (I) Three hundred thousand ($300,000) dollars for life insurance death benefits, but not more than one hundred thousand ($100,000) dollars in net cash surrender and net cash withdrawal values for life insurance. (II) For health insurance benefits: (1) One hundred thousand ($100,000) dollars for coverages or benefits not defined as disability income insurance, health benefit plans, or long-term care insurance, including any net cash surrender and net cash withdrawal values. (2) Three hundred thousand ($300,000) dollars for disability income insurance, and long-term care insurance benefits, including any cash surrender and net cash withdrawal values. (3) Five hundred thousand ($500,000) dollars for health benefit plans. (III) Two hundred fifty thousand ($250,000) dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values. (B) With respect to each individual participating in a governmental retirement plan established under section 401, 403(b) or 457 of the Internal Revenue Code of 1986 covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, two hundred and fifty thousand ($250,000) dollars in present value annuity benefits, including net cash surrender and net cash withdrawal values. (C) With respect to each payee of a structured settlement annuity, or beneficiary or beneficiaries of the payee if deceased, two hundred fifty thousand ($250,000) dollars in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any. (D) With respect to either one contract owner provided coverage under subsection (a)(3)(ii) or one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in clause (B), five million ($5,000,000) dollars in benefits, irrespective of the number of such contracts held by that contract owner or plan sponsor. In the case where one or more unallocated annuity contracts are covered contracts under this article and are owned by a trust or other entity for the benefit of two (2) 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 Commonwealth and in no event shall the association be obligated to cover more than five million ($5,000,000) dollars in benefits with respect to all these unallocated contracts. (E) The association shall not, however, be liable to expend more than three hundred thousand ($300,000) dollars in the aggregate with respect to any one individual under subparagraph(ii)(A), (B) or (C) of paragraph (1) except with respect to benefits for health benefit plans under subclause (II)(3) of clause (A), in which case the aggregate liability of the association shall not exceed five hundred thousand ($500,000 ) dollars with respect to any one individual, or with respect to one owner of multiple nongroup policies of life insurance, whether the policy or contract owner is an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or other persons, more than five million ($5,000,000) dollars in benefits, regardless of the number of policies and contracts held by the owner.

Discretionary Triggers

40 PS §991.1706(a). When a member insurer is impaired.

Mandatory Triggers

40 PS §991.1706(b). If a member insurer is insolvent.

Foreign Triggers

No separate provision.

"Impaired Insurer"

40 PS §991.1702. A member insurer which, after the effective date of this article, is not an insolvent insurer and: (1) is deemed by the Insurance Commissioner to be potentially unable to fulfill its contractual obligations; or (2) is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

"Insolvent Insurer"

40 PS §991.1702. A member insurer, which after the effective date of this article, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

40 PS §991.1702. Any insurer, RANLI PPO, hospital plan corporation, professional health services plan corporation or health maintenance organization licensed or which holds a certificate of authority to transact in this Commonwealth any kind of insurance, RANLI PPO business, hospital plan corporation business, professional health services plan corporation business or health maintenance organization business for which coverage is provided under section 1703 and includes any insurer, RANLI PPO, hospital plan corporation, professional health services plan corporation or health maintenance organization whose license or certificate of authority in this Commonwealth may have been suspended, revoked, not renewed or voluntarily withdrawn. The term does not include any of the following: (1) A fraternal benefit society. (2) A mandatory State pooling plan. (3) A mutual assessment company or any entity that operates on an assessment basis. (4) An insurance exchange. (5) An organization that is a qualified charity issuing only qualified charitable gift annuities exempt from regulation under the act of October 16, 1996 (P.L. 712), known as the Charitable Gift Annuity Exemption Act. (6) Any entity similar to any of the above.

40 PS §991.1704(1). Two accounts: For purposes of administration and assessment the association shall maintain two accounts: (1) The life insurance and annuity account which includes the following subaccounts: (i) Life insurance account. (ii) Annuity account, which shall include annuity contracts owned by a governmental retirement plan or its trustee established under section 401, 403(b) or 457 of the Internal Revenue Code of 1986, but shall otherwise exclude unallocated annuities. (iii) Unallocated annuity account which shall exclude contracts owned by a governmental retirement benefit plan or its trustee under section 401, 403(b) or 457 of the Internal Revenue Code of 1986. (2) The health insurance account.

Assessment Limits

40 PS §991.1707(e)(1). Two percent (2%) of premiums in state for policies covered by each account.

Assessment Classes

40 PS §991.1707(b). Two classes of assessments: Class A for administrative costs, legal costs, general expenses and examinations; these assessments can be authorized and called whether or not related to a particular impaired or insolvent insurer, and Class B to carry out the powers and duties of the association with regard to an impaired or insolvent domestic insurer.

40 PS §991.1703(b)(2)(iii). 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, or the interest rate, crediting rate or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (A) averaged over the period of four (4) years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this article, whichever is earlier, exceeds a rate of interest determined by subtracting two (2) percentage points from Moody's Corporate Bond Yield Average averaged for the same four- year period or for such lesser period if the policy or contract was issued less than four (4) years before the member insurer becomes an impaired or insolvent insurer under this article, whichever is earlier;; and (B) on and after the date on which the member insurer becomes an impaired or insolvent insurer under this article, whichever is earlier, exceeds the rate of interest determined by subtracting three (3) percentage points from Moody's Corporate Bond Yield Average as most recently available.

40 PS § 991.1711 (a) A member insurer may offset against its premium or income tax liability to this Commonwealth a proportionate part of the assessments described in section 1707 to the extent of twenty per centum (20%) of the amount of such assessment for each of the five (5) calendar years following the year in which such assessment was paid. In the event a member insurer should cease doing business, all uncredited assessments may be credited against its premium or income tax liability for the year it ceases doing business. (b) The proportionate part of an assessment which may be offset against a member insurer’s premium or income tax liability to the Commonwealth shall be determined according to a fraction of which the denominator is the total premiums (in the category assessed) received by the member insurer during the calendar year immediately preceding the year in which the assessment is paid and the numerator is that portion of the premiums received during such year on account of policies or contracts of life insurance (including or limited to annuities and unallocated annuities per account or subaccount, as applicable per the assessment), or health and accident insurance (including RANLI PPP, hospital plan corporation, professional health services plan corporation and health maintenance organization subscriber policies, contracts and certificates), in which the premium rates are guaranteed during the continuance of the respective policies or contracts without a right exercisable by the member insurer to increase said premium rates. (c) A member insurer that is exempt from taxes referenced in subsection (a) may recoup its assessments by assigning available offsets (as calculated under subsection (b)) to a taxable member or members of its controlled group, as the term is defined under section 1563(a) of the Internal Revenue Code of 1986. Such assigned offsets may be utilized by the taxable member or members in the manner provided under subsection (a). (d) A member insurer that is exempt from taxes referenced in subsection (a) and has no taxable members of a controlled group as referenced in subsection (c) may recoup its assessments by a surcharge on its premiums 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 agent 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. (e) Any sums which are acquired by refund, pursuant to section 1707(f), from the association by member insurers, and which have theretofore been offset against premium or income taxes as provided in this section and are not then needed for the purposes of this article, shall be paid by such member insurers to this Commonwealth in such manner as the tax authorities may require. The association shall notify the commissioner that such refunds have been made. (f) No offset against premium or income tax liability shall be permitted to the extent that a member insurer’s rates or policyholder dividends have been adjusted as permitted in section 1707.

§ 991.1702 “Premiums.” The amounts received on covered policies or contracts less premiums, considerations and deposits returned thereon and less dividends and experience credits thereon. The term does not include any amounts received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under section 1703(b) except that assessable premium shall not be reduced on account of sections 1703(b)(2)(iii) relating to interest limitations and 1703(c)(1)(ii) relating to limitations with respect to any one individual, any one participant and any one policy or contract holder. The term does not include any premiums in excess of five million ($5,000,000) dollars on any unallocated annuity contract not issued under a governmental retirement plan established under section 401, 403(b) or 457 of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. § 1 et seq.). The term does not include, with respect to multiple nongroup policies of life insurance owned by one owner, whether the policy or contract owner is an individual, firm, corporation or other person, and whether the persons insured are officers, managers, employees or other persons, premiums in excess of five million ($5,000,000) dollars with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.

40 PS § 991.1717 “Prohibited advertisement of Insurance Guaranty Association Article in Insurance and Other Coverage Sales” (a) No person, including a member insurer, agent or affiliate of a member insurer 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 this article, provided, however, that this section shall not apply to the association or any other entity which does not sell or solicit insurance, or coverage by a RANLI PPO, hospital plan corporation, professional health services plan corporation or health maintenance organization.