South Dakota Life & Health Insurance Guaranty Association

Covered Contracts

§ 58-29C-46B(1). This chapter shall provide coverage to the persons specified in subpart A for the policies or contracts of direct, nongroup life insurance, health insurance, or annuities, and for certificates under direct group policies and contracts, and for supplemental contracts to any of these, in each case except as limited by this chapter. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts.(Amended effective 7/1/13) [Please note that during its 2005 session the South Dakota legislature enacted statutes which authorize the creation of a self-funded multiple employer trust to provide health benefits (see SDCL 58-18-88 through 94). The new statutes concerning MEWAs provide that a proposed MEWA must first obtain authorization from the director of the South Dakota Division of Insurance before it may provide health benefits. The statutes provide that any MEWA authorized by the director shall be a member of the South Dakota Life and Health Insurance Guaranty Association. Presumably, these statutes concerning MEWAs by implication amend the section of South Dakota's guaranty association law that provides that MEWAs are not covered].

Non-Covered Contracts

§ 58-29C-46B(2) (a) A 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; (b) A policy or contract of reinsurance, unless assumption certificates have been issued pursuant to the reinsurance policy or contract; (c) A 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: (i) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting two 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 member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and (ii) On and after the date on which the member insurer becomes an impaired or insolvent insurer 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; (d) A portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, health, or annuity benefits to its 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 other person under: (i) A multiple employer welfare arrangement as defined in section 3(40) of the Employee Retirement Income Security Act of 1974 (29 U.S.C. § 1002(40)); (ii) A minimum premium group insurance plan; (iii) A stop-loss group insurance plan; or (iv) An administrative services only contract; (e) A portion of a policy or contract to the extent that it provides for: (i) Dividends or experience rating credits; (ii) Voting rights; or (iii) Payment of any fees or allowances to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract; (f) 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; (g) A portion of a policy or contract to the extent that the assessments required by 58-29C-52 with respect to the policy or contract are preempted by federal or state law; (h) An obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the certificate holder, contract owner or policy owner, including without limitation: (i) Claims based on marketing materials; (ii) Claims based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements; (iii) Misrepresentations of or regarding policy or contract benefits; (iv) Extra-contractual claims; or (v) A claim for penalties or consequential or incidental damages; (i) 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; (j) An unallocated annuity contract; (k) 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, 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, for purposes of determining the values that have been credited and are not subject to forfeiture under this subsection, 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; and (l) A policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Part C or Part D of Subchapter XVIII Chapter 7 of Title 42 of the United States Code (commonly known as Medicare Part C & D), or Subchapter XIX, Chapter 7 Title 42 of the United States Code (commonly known as Medicaid), or any regulations issued pursuant thereto. (3) The exclusion from coverage under subsection (2)(c) of this subdivision does not apply to any portion of a policy or contract, including a rider, that provides long-term care or any other health insurance benefits.

Non-Resident Coverage

§ 58-29C-46A(2)(b). Yes. Covers nonresidents, but only under all of the following conditions: (i) The member insurer that issued the policies or contracts is domiciled in South Dakota; (ii) The states in which the persons reside have associations similar to the association created by this chapter; and (iii) The persons are not eligible for coverage by an association in any other state due to the fact that the insurer was not licensed in the state at the time specified in the state's guaranty association law;

§ 58-29C-46 § C(2)(a) With respect to one life, regardless of the number of policies or contracts: (i) Three hundred thousand dollars in life insurance death benefits, but not more than one hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance; (ii) For health insurance benefits: (I) One hundred thousand dollars for coverages not described in clauses (II) and (III) below, including any net cash surrender and net cash withdrawal values; (II) Three hundred thousand dollars for disability income insurance as defined in § 58–17–108, and three hundred thousand dollars for long-term care insurance as defined in subdivision 58–17B–2(6); (III) Five hundred thousand dollars for health benefit plans; or (iii) Two hundred fifty thousand dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or (b) With respect to each payee of a structured settlement annuity (or beneficiary or beneficiaries of the payee if deceased), two hundred fifty thousand dollars in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values , if any; (c) However, in no event may the association be obligated to cover more than (i) an aggregate of three hundred thousand dollars in benefits with respect to any one life under subsections 2(a) and 2(b) of subpart C of this section except with respect to benefits for health benefit plans under subparagraph 2(a)(ii) of this section, in which case the aggregate liability of the association may not exceed five hundred thousand dollars with respect to any one individual, or (ii) 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 dollars in benefits, regardless of the number of policies and contracts held by the owner; (d) The limitations set forth in 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 the 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 pursuant to its subrogation and assignment rights; and (e) For the purposes of this chapter, benefits provided by a long-term care rider to a life insurance policy or annuity contract are considered the same type of benefits as the base life insurance policy or annuity contract to which it relates.

Discretionary Triggers

§58-29C-51A. When a member insurer is an impaired insurer. Effective July 1, 2003 (prior statute repealed).

Mandatory Triggers

§58-29C-51B. When a member insurer is insolvent. Effective July 1, 2003 (prior statute repealed).

Foreign Triggers

No separate provision.

"Impaired Insurer"

§58-29C-48(10). A member insurer which, after July 1, 2003, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction. Effective July 1, 2003 (prior statute repealed).

"Insolvent Insurer"

§58-29C-48(11). A member insurer which after July 1, 2003, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency. Effective July 1, 2003 (prior statute repealed).

"Member Insurer"

§58-29C-48(12) “Member insurer,” an insurer licensed or that holds a certificate of authority to transact in this state any kind of insurance for which coverage is provided under § 58–29C–46, and includes an insurer whose license or certificate of authority in this state may have been suspended, revoked, not renewed, or voluntarily withdrawn, but does not include: (a) A hospital or medical service organization, whether for profit or nonprofit; (b) A health maintenance organization; (c) A fraternal benefit society; (d) A mandatory state pooling plan; (e) A mutual assessment company or other person that operates on an assessment basis; (f) An insurance exchange; (g) An organization engaged in the issuance of charitable gift annuities, which is described in § 58–1–16; or (h) An entity similar to any of the above; (Amended effective 7/1/13)

§58-29C-49A. Two accounts: (1) The life insurance and annuity account which includes the following subaccounts: (a) Life insurance account; and (b) Annuity account; and (2) The health insurance account. (Amended effective 7/1/13)

Assessment Limits

§58-29C-52E(1)(a). Two percent (2%) of the average premiums in state for policies covered by the account during the three calendar years preceding the impairment or insolvency. Effective July 1, 2003 (prior statute repealed).

Assessment Classes

§58-29C-52B. Two classes of assessments: Class A assessments for the purpose of meeting administrative and legal costs and other expenses; and Class B assessments to carry out the powers and duties of the association under § 58-29C-51 with regard to an impaired or an insolvent insurer. Effective July 1, 2003 (prior statute repealed).

§58-29C-46B(2)(c). Guaranty Association excludes from coverage: A 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: (i) Averaged over the period of four years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier, exceeds the rate of interest determined by subtracting two 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 member insurer becomes an impaired or insolvent insurer under this chapter, whichever is earlier; and (ii) On and after the date on which the member insurer becomes an impaired or insolvent insurer 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. (Amended effective 7/1/2013)

§58-29C-56A. Yes. A member insurer may offset against its premium tax liability to this state an assessment described in subpart 58-29C-52 H to the extent of twenty percent of the amount of the assessment for each of the five calendar years following the year in which the assessment was paid. If the assessment is five hundred dollars or less, the member insurer shall take the total offset in the first year following the year in which the assessment was paid. However, total assessments offset against premium taxes may not exceed two million dollars in any year. If offsets exceed the annual limitation in this section, the excess may be carried forward to a subsequent year in which the annual limitation has not been exceeded. Any excess shall be apportioned among the contributing insurers in relation to their assessment that caused the limit to be exceeded. In the event a member insurer should cease doing business, all uncredited assessments may be credited against its premium tax liability for the year it ceases doing business. Effective July 1, 2003 (prior statute repealed).

§ 58-29C-48 (16) “Premiums,” amounts or considerations (by whatever name called) received on covered policies or contracts less returned premiums, considerations, and deposits and less dividends and experience credits. The term, premiums, does not include amounts or considerations received for policies or contracts or for the portions of policies or contracts for which coverage is not provided under subpart B of § 58-29C-46 except that assessable premium may not be reduced on account of subsection 58-29C-46B(2)(c) relating to interest limitations and subdivision 58-29C-46C(2) relating to limitations with respect to one individual, one participant, and one policy or contract owner. Premiums do not include: (a) Premiums on an unallocated annuity contract; or (b) 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 dollars with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner;

§58-29C-62 A. No person, including a member insurer, agent, or affiliate of a member insurer may 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 Life and Health Insurance Guaranty Association of this state for the purpose of sales, solicitation, or inducement to purchase any form of insurance covered by the South Dakota Life and Health Insurance Guaranty Association chapter. However, this section does not apply to the South Dakota Life and Health Insurance Guaranty Association or any other entity which does not sell or solicit insurance. Effective July 1, 2013.