Colorado Life & Health Insurance Protection Association

Covered Contracts

§10-20-104(2)(a). This article 20 provides coverage to the persons specified in subsections (1) and (1.3) of this section for direct, nongroup life insurance, health insurance, health maintenance organization, annuity, and supplemental policies or contracts and for certificates under direct group life insurance, health insurance, health maintenance organization, or annuity policies or contracts, and for supplemental contracts to any of these, issued by member insurers pursuant to article 7 and parts 1, 2, and 4 of article 16 of this title 10, except as limited by this article 20. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, and any immediate or deferred annuity contracts.

Non-Covered Contracts

§10-20-104(2)(b). Except as otherwise provided in subsection (2)(c) of this section, this article 20 does not provide coverage for: (I) 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; (II) Any policy or contract of reinsurance, unless assumption certificates have been issued under the reinsurance policy or contract; (III) 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 other factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns and changes in value: (A) When averaged over the period of four years prior to the date on which the association became obligated with respect to the policy or contract, exceeds a 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 association became obligated; and (B) On and after the date on which the association became obligated with respect to the policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody’s corporate bond yield average as most recently available; (IV) Any portion of a policy, contract, 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 such plan or program is self-funded or uninsured, including but not limited to benefits payable by an employer, association, or other person under: (A) A multiple employer welfare arrangement, as defined in section 1002 of title 29 of the United States Code; (B) A minimum premium group insurance plan; (C) A stop-loss group insurance plan; or (D) An administrative services only contract; (V) Any portion of a policy or contract to the extent that it provides dividends or experience rating credits, voting rights, or that any fees or allowances be paid to any person, including the policy or contract holder, in connection with the service to or administration of such policy or contract; (VI) 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 such policy or contract in this state; (VII) Any unallocated annuity contract; (VIII) Any annuity contract or group annuity certificate which is used by a nonprofit insurance company exclusively for the benefit of nonprofit educational institutions and their employees for the purpose of providing retirement benefits; (IX) Any policy, contract, certificate, or subscriber agreement issued by a prepaid dental care plan as defined in parts 1 and 5 of article 16 of this title; (X) Services covered under a policy of sickness and accident insurance as defined in section 10-16-102 (50) when written by a property and casualty insurer as part of an automobile insurance contract; (XI) Repealed. (XII) Any member insurer that was insolvent or unable to fulfill its contractual obligations as of July 1, 1991; except that an annuity contract issued or assumed by such a member insurer shall be covered under this article 20 if the member insurer was ordered into liquidation between July 1, 1991, and August 31, 1991; (XIII) Repealed. (XIV) Any 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 such changes have not been credited to the policy or contract, or to the extent 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 article. 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 section, 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 insolvency, and such interest or changes shall not be subject to forfeiture. (XV) Repealed. (XVI) Any policy or contract providing hospital, medical, prescription drug, or other health-care benefits under: (A) Part C or part D of subchapter XVIII, chapter 7 of title 42, United States Code, or any regulation issued under those parts C or D; or (B) Subchapter XIX, chapter 7 of title 42, United States Code, or any regulation issued under Title XIX; (XVII) Any portion of a policy or contract to the extent that the assessment required by this article with respect to the policy or contract are preempted or otherwise not allowed by federal or state law; (XVIII) Any obligation that does not arise under the expressed written terms of the policy or contract issued by the member insurer to the owner, certificate holder, or enrollee, including: (A) Claims based on marketing materials, brochures, illustrations, advertisements, or oral statements by agents, brokers, or others used or made in connection with the sale of covered policies and contracts; (B) Claims based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy I form filing or approval requirements; (C) Misrepresentations of, or regarding, policy or contract benefits; (D) Extracontractual claims; and (E) Claims for penalties, interest, or consequential or incidental damages; (XIX) Any 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 a benefit plan or trustee that is not an affiliate of the member insurer. (XX) 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. sec. 5891 (c)(3)(A), regardless of whether the transaction occurred before, on, or after the effective date of 26 U.S.C. sec. 5891 (c)(3)(A).

Non-Resident Coverage

§10-20-104(1)(a). Yes. Covers nonresidents, but only under all of the following conditions: (A) The member insurer that issued the policies or contracts is domiciled in this state; (B) The member insurer never held a license or certificate of authority in the states in which such persons reside; (C) Such states have associations similar to the association created by this article; and (D) Such persons are not eligible for any amount of coverage by such associations;

§10-20-104(3). The contractual obligations for which the member insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or (b) (I) With respect to any one life, regardless of the number of policies or contracts with that member insurer: (A) Three hundred thousand dollars in net life insurance death benefits, and no more than one hundred thousand dollars in net cash surrender and net cash withdrawal values for life insurance; (B) For health insurance benefits or coverage received under health maintenance organization contracts: One hundred thousand dollars for coverages not defined as disability, coverage or services under health benefit plans, or long-term care insurance, including any net cash surrender and net cash withdrawal values; three hundred thousand dollars for disability insurance; three hundred thousand dollars for long-term care insurance; or five hundred thousand dollars for coverage or services under health benefit plans; (C) Two hundred fifty thousand dollars in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or (D) With respect to each payee of a structured settlement annuity, two hundred fifty thousand dollars in present-value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values. (E) (Deleted by amendment, L. 2013.) (II) The association is not obligated to cover: (A) More than three hundred thousand dollars in benefits, in the aggregate, with respect to any one life under subsection (3)(b)(I) of this section; except that, with respect to benefits for coverage or services under health benefit plans under subsection (3)(b)(I)(B) of this section, the aggregate liability of the association must not exceed five hundred thousand dollars with respect to any one life; or (B) More than five million dollars in benefits with respect to an owner of multiple nongroup policies of life insurance, regardless of whether the policy owner is an individual, firm, corporation, or other person; whether the persons insured are officers, managers, employees, or other persons; or the number of policies and contracts held by the owner.

Discretionary Triggers

§10-20-108(1). If a member insurer is an impaired insurer.

Mandatory Triggers

§10-20-108(2). If a member insurer is an insolvent insurer.

Foreign Triggers

No separate provision.

"Impaired Insurer"

§10-20-103(6.7) “Impaired insurer” means a member insurer that is not an insolvent insurer and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

"Insolvent Insurer"

§10-20-103(7). A member insurer which is placed under an order or liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

§10-20-103(8). Member insurer” means any insurer or health maintenance organization that is licensed or holds a certificate of authority in this state to write any kind of insurance or health maintenance organization business for which coverage is provided pursuant to section 10-20-104 and includes any insurer or health maintenance organization 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 nonprofit hospital or medical service organization; (b) Repealed. (c) A fraternal benefit society; (d) A mandatory state pooling plan; (e) Repealed. (f) A stipulated premium insurance company; (g) A local mutual burial association; (h) A mutual assessment company or any entity that operates on an assessment basis; (i) An interinsurance exchange; (i.5) A health-care coverage cooperative with a certificate of authority issued and operating under part 10 of article 16 of this title 10; or (j) Any entity similar to those specified subsections (8)(a) to (8)(i.5) of this section.

§10-20-106. Three accounts: (a) The life insurance account; (b) The health insurance account; and (c) The annuity account.

Assessment Limits

§10-20-109(5)(a). Two percent (2%)of the average premiums received by the insurer in this state on the policies and contracts covered by the account during the three calendar years preceding the year in which the insurer became impaired or insolvent.

Assessment Classes

§10-20-109. Two classes of assessments: Class A for meeting administrative and legal costs and other expenses and examinations; and Class B to carry out the powers and duties of the association with regard to an impaired or insolvent insurer.

§10-20-104(2)(b)(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 other factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns and changes in value: (A) When averaged over the period of four years prior to the date on which the association became obligated with respect to the policy or contract, exceeds a 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 association became obligated; and (B) On and after the date on which the association became obligated with respect to the policy or contract exceeds the rate of interest determined by subtracting three percentage points from Moody's corporate bond yield average as most recently available.

§10-20-113. Yes. 100% of Class B assessment amount made on life and annuity accounts may be offset for 5 years following payment at the rate of 20% per year. The total amount of all offsets for all member insurers cannot exceed $4 million per year. Offsets will be prorated if the total amount of offset would exceed $4 million in any year. Carry forward of offset is permitted when cap is exceeded. Colorado’s tax offset provision does not apply to health insurance assessments, however, member insurers writing health insurance may recoup the health insurance assessment through policyholder surcharge on premiums charged for health policies.

§ 10-20-103(12) (a) “Premiums” means the amount of money or other consideration, however designated, received on covered policies or contracts less returned premiums, returned consideration, and returned deposits, and less dividends and experience credits. (b) “Premiums” does not include: (I) Any amount of money or other consideration received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under section 10-20-104 (2); except that assessable premiums shall not be reduced on account of section 10-20-104 (2)(b)(III) relating to interest limitations and section 10-20-104 (3)(b) relating to limitations with respect to any one life; (II) Premiums on an unallocated annuity contract; or (III) Premiums in excess of five million dollars with respect to multiple nongroup policies of life insurance owned by one owner, regardless of: (A) Whether the policy owner is an individual, firm, corporation, or other person; (B) Whether the persons insured are officers, managers, employees, or other persons; or (C) The number of policies or contracts held by the owner.

§10-20-119 A person, including a member insurer and any agent or affiliate of a member insurer, shall 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, any advertisement, announcement, or statement, written or oral, that uses the existence of the life and health insurance protection association for the purpose of sales, solicitation, or inducement to purchase any form of insurance or other coverage covered by this article 20. However, this section does not apply to the association or any other entity that does not sell or solicit insurance or coverage by a health maintenance organization.