Alaska Life & Health Insurance Guaranty Association

Covered Contracts

§21.79.020(b). This chapter applies to a person specified in (a) of this section for a policy or contract of direct, nongroup life insurance, health insurance, annuity, and supplemental policy or contract, to a certificate under a direct group life, health, annuity, or supplemental policy or contract, to a subscriber’s contract issued by a hospital or medical service corporation under AS 21.87, to a subscriber’s contract issued by a health maintenance organization under AS 21.86, and to an unallocated annuity contract issued by a member insurer, except as otherwise limited by this chapter. (Amended effective 07/01/18)

Non-Covered Contracts

§21.79.020(c). This chapter does not apply to (1) that part of a policy or contract that is not guaranteed by the member insurer; (2) that part of the risk borne by the policy or contract owner; (3) a policy or contract of reinsurance, unless an assumption certificate has been issued; (4) that part of a policy or contract, except for part of a policy or contract, including a rider, that provides long-term care or other health insurance benefits, 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 years before the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever occurs first, exceeds the rate of interest determined by subtracting two percentage points from the published monthly average for that same four-year period or for a lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under this chapter, whichever occurs first; and (B) on and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever occurs first, exceeds the rate of interest determined by subtracting three percentage points from the most recent published monthly average; (5) a portion of a policy or contract issued to a plan or program of an employer, association, or similar entity to provide life, health, or an annuity benefit to an employee, member, or other person, to the extent that the plan or program is self-funded or uninsured, including a benefit payable by the employer, association, or similar entity under (A) a multiple employer welfare arrangement as defined in 29 U.S.C. 1002 (Employee Retirement Income Security Act of 1974); (B) a minimum premium group insurance plan; (C) a stop-loss group insurance plan; or (D) an administrative services only contract; (6) that part of a policy or contract that provides a dividend or experience rating credit or voting rights, or provides that a fee or allowance be paid to a person, including the policy or contract owner, in connection with the service to or administration of the policy or contract; (7) a 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 the policy or contract in this state; (8) a person who is a payee or beneficiary of a contract owner who is a resident of this state if the payee or beneficiary is provided coverage by the association of another state; (9) a person covered under (d) of this section if any coverage is provided by the association of another state to that person; (10) an unallocated annuity contract issued to or in connection with a benefit plan protected under the United States Pension Benefit Guaranty Corporation, regardless of whether the United States Pension Benefit Guaranty Corporation has become liable to make any payments with respect to the benefit plan; (11) that part of an unallocated annuity contract that is not issued to or in connection with a specific employee, union, or association of natural persons benefit plan or a government lottery; (12) that part of a policy or contract to the extent that assessments required by AS 21.79.070 with respect to the policy or contract are preempted by law; (13) an obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner, or policy owner, including, without limitation, (A) a claim based on marketing materials; (B) a claim based on a side letter or other document that was issued by the member insurer without meeting applicable policy or contract form filing or approval requirements; (C) a misrepresentation of or regarding policy or contract benefits; (D) an extra contractual claim; or (E) a claim for penalties or consequential or incidental damages; (14) 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; (15) that part of a policy or contract to the extent the part of the policy or contract 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 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 is earlier; if a policy’s 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 will not be subject to forfeiture; (16) a policy or contract providing a hospital, medical, prescription drug, or other health care benefit in accordance with 42 U.S.C. 1395w-21 — 1395w-154 or federal regulations adopted under those sections; (17) a person who acquires rights to receive payments through a structured settlement factoring transaction as defined in 26 U.S.C. 5891(c)(3)(A), regardless of whether the transaction occurred before, on, or after 26 U.S.C. 5891(c)(3)(A) became effective; or (18) 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 as defined in 26 U.S.C. 5891(c)(3)(A), regardless of whether the transaction occurred before, on, or after 26 U.S.C. 5891(c)(3)(A) became effective. (Amended effective 07/01/18)

Non-Resident Coverage

§21.79.020(a) The Act covers nonresidents under the following conditions: (i) the member insurer that issued the policy or contract is domiciled in this state; (ii) the state in which the person resides has an association similar to the association created by this chapter; and (iii) the person is not eligible for coverage by an association in any other state due to the fact that the insurer, hospital or medical service corporation, or health maintenance organization was not licensed at the time specified in the guaranty association law of that state. (Amended effective 07/01/18)

§21.79.025. (a) The benefits for which the association may become liable may not exceed the lesser of (1) the contractual obligations for which the member insurer is liable or would have been liable if it were not an impaired or insolvent insurer; (2) with respect to any one life, regardless of the number of policies or contracts, (A) $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance; (B) for health insurance benefits, (i) $100,000 for coverage not defined as disability income insurance, health benefit plans, or long-term care insurance, including any net cash surrender and net cash withdrawal values; (ii) $300,000 for disability income insurance as defined in AS 21.12.052 and $300,000 for long-term care insurance as defined in AS 21.53.200; (iii) $500,000 for health benefit plans; (C) $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; (3) with respect to either one contract owner provided coverage under AS 21.79.020(d)(2) or one plan sponsor whose plan owns directly or in trust one or more unallocated annuity contracts not included in (4) of this subsection, $5,000,000 in unallocated annuity contract benefits, irrespective of the number of contracts held by that contract owner or plan sponsor except that, in the case of one or more unallocated annuity contracts that are covered under this chapter and that are owned by a trust or other entity for the benefit of two or more plan sponsors, coverage shall be provided by the association if the largest interest in the trust or entity owning the contract is held by a plan sponsor whose principal place of business is in this state; however, the association is not liable to cover more than $5,000,000 in benefits, regardless of the number of policies and contracts held by the owner; (4) with respect to an individual participating in a governmental retirement benefit plan established under 26 U.S.C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457 and covered by an unallocated annuity contract, or to a beneficiary of the individual if the individual is deceased, in the aggregate, $250,000 in present-value annuity benefits, including net cash surrender and net cash withdrawal values; or (5) with respect to each payee of a structured settlement annuity, or beneficiary of the payee if the payee is deceased, $250,000 in present-value annuity benefits in the aggregate, including net cash surrender and net cash withdrawal values, if any. (b) The limitations imposed under this section 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 an impaired or insolvent insurer attributable to covered policies. The costs of the association’s obligations under this chapter may be met by the use of assets attributable to covered policies or reimbursed to the association under its subrogation and assignment rights. (c) In providing coverage required under AS 21.79.060, the association may not be required to guarantee, assume, reissue, reinsure, or perform, or cause to be guaranteed, assumed, reissued, reinsured, or performed, the contractual obligations of an insolvent or impaired insurer under a covered policy or contract when the obligations do not materially affect the economic values or economic benefits of the covered policy or contract. (d) The association may not be required to cover more than (1) an aggregate of $300,000 in benefits with respect to any one life under (a)(2), (4), and (5) of this section, except that, with respect to benefits for health benefit plans under (a)(2)(B) of this section, the aggregate liability of the association may not exceed $500,000 for any one individual; or (2) $5,000,000 in benefits 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, regardless of the number of policies and contracts held by the owner. (Amended effective 07/01/18)

Discretionary Triggers

§21.79.060(a) If a member insurer is an impaired insurer. (Amended effective 07/01/18)

Mandatory Triggers

§21.79.060(b) If a member insurer is an insolvent insurer. (Amended effective 07/01/18)

Foreign Triggers

No separate provision. (Amended effective 07/01/18)

"Impaired Insurer"

§21.79.900(12). A member insurer that is not an insolvent insurer and that is placed under an order of rehabilitation or conservation by a court of competent jurisdiction. (Amended effective 07/01/18)

"Insolvent Insurer"

§21.79.900 (13). A member insurer that is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency. (Amended effective 07/01/18)

"Member Insurer"

§21.79.900(14). An insurer licensed to transact insurance in the state, a hospital or medical service corporation licensed under AS 21.87, or a health maintenance organization licensed under AS 21.86, for which coverage is provided in AS 21.79.020 and includes an insurer, a hospital or medical service corporation licensed under AS 21.87, or a health maintenance organization licensed under AS 21.86, whose license or certificate of authority in this state may have been suspended, revoked, not renewed, or voluntarily withdrawn; “member insurer” does not include (A) a fraternal benefit society licensed under AS 21.84; (B) a mandatory state pooling plan; (C) a mutual assessment company or an entity that operates on an assessment basis; (D) an insurance exchange licensed under AS 21.75; (E) an organization that has a license or certificate limited to the issuance of charitable gift annuities; or (F) an entity similar to one described under (A) — (E) of this paragraph (Amended effective 07/01/18)

§21.79.040(a) Two accounts: For purposes of administration and assessment, the association shall maintain the following accounts: (1) the health insurance account; and (2) the life insurance and annuity account, including the following subaccounts: (A) life insurance account; (B) annuity account that must include annuity contracts owned by a governmental retirement benefit plan, or its trustee, qualified under 26 U.S. C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457 (Internal Revenue Code), but that otherwise excludes unallocated annuities; and (C) unallocated annuity account that must exclude contracts owned by a governmental retirement benefit plan, or its trustee, qualified under 26 U.S. C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457 (Internal Revenue Code). (Amended effective 9/9/96; 9/4/00)

Assessment Limits

§21.79.070(f). Except as provided in this subsection, the total of all assessments on a member insurer for each subaccount of the life and annuity account and for the health account may not in any one calendar year exceed two percent of the member insurer’s average annual premiums received in this state on policies or contracts covered by the account or subaccount during the three calendar years preceding the year in which the member insurer became an impaired or insolvent insurer. If two or more assessments are authorized in one calendar year with respect to member insurers that become impaired or insolvent in different calendar years, the average annual premiums for purposes of the aggregate assessment percentage limitation imposed under this subsection shall be limited to the highest of the average annual premiums during the preceding three calendar years for the applicable subaccount or account as calculated under this section. If the maximum assessment, together with the other assets of the association in an account, does not provide in any one year in either account an amount sufficient to carry out the responsibilities of the association, the necessary additional funds shall be assessed as soon as permitted by this chapter. (Amended effective 07/01/18)

Assessment Classes

§21.79.070(b). Two classes of assessments: (1) Class A for administrative and legal costs, other expenses and examinations; (2) Class B to carry out the powers and duties of the association with regard to an impaired or insolvent insurer.

§21.79.020(c)(4). Guaranty Association excludes from coverage: that part 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 years before the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever occurs first, exceeds the rate of interest determined by subtracting two percentage points from the published monthly average for that same four-year period or for a lesser period if the policy or contract was issued less than four years before the member insurer becomes an impaired or insolvent insurer under this chapter, whichever occurs first; and (B) on and after the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever occurs first, exceeds the rate of interest determined by subtracting three percentage points from the most recent published monthly average.

No provision.

§ 21.79.900(18) “premium” means the amounts or considerations, by whichever name called, received on a covered policy or contract less a premium, consideration, and deposit returned, and less a dividend and experience credit; “premium” does not include (A) amounts or considerations charged for an assessment or an amount received for a policy or contract or for the portions of a policy or contract for which coverage is not provided under AS 21.79.020(b) and (c), except that assessable premium may not be reduced on account of AS 21.79.020(c)(4) relating to interest limitations and AS 21.79.025(a)(2) — (5), (b), and (d) relating to limitations with respect to one individual, one participant, and one policy or contract owner; (B) premiums in excess of $5,000,000 on an unallocated annuity contract not issued under a governmental retirement benefit plan or its trustee established under 26 U.S.C. 401, 26 U.S.C. 403(b), or 26 U.S.C. 457; or (C) 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 $5,000,000 with respect to those policies or contracts, regardless of the number of policies or contracts held by the owner; (Amended effective 07/01/18)

§ 21.79.160 “Prohibited advertisement of insurance sales; required notice” (a) A person, including a member insurer, agent, or affiliate of a member insurer, may not 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, an advertisement, announcement, or statement, written or oral, that 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 the association. However, this section does not apply to the association or any other entity that does not sell or solicit insurance, coverage by a hospital or medical service corporation, or coverage by a health maintenance organization. (Amended effective 07/01/18)