District of Columbia Life & Health Insurance Guaranty Association

Covered Contracts

Coverage shall be provided to the persons specified in subsection (a) of this section for policies or contracts of direct, non-group life insurance, health insurance (which for purposes of this chapter shall include health maintenance organization subscriber contracts and certificates) issued by a member insurer, annuities for certificates under direct group policies or contracts issued by a member insurer, and for supplemental contracts issued by a member insurer to any of the foregoing, except as limited by this chapter. Annuity contracts and certificates under group annuity contracts include allocated funding agreements, structured settlement annuities, lottery contracts, and any immediate or deferred annuity contracts.

Non-Covered Contracts

Coverage shall not be provided for: (A) Any portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the owner of the policy, contract, or certificate; (B) Any policy or contract of reinsurance, unless assumption certificates have been issued and delivered pursuant to the reinsurance policy or contract; (C) Any portion of a policy, contract, or certificate, to the extent of the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by the 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 4-year period prior to the date on which the Association becomes obligated with respect to the policy, contract, or certificate, exceeds a rate of interest determined by subtracting 2 percentage points from Moody’s Corporate Bond Yield Average averaged for that same 4-year period or for a lesser period if the policy, contract, or certificate was issued and delivered less than 4 years before the Association became obligated; and (ii) On and after the date on which the Association becomes obligated with respect to the policy, contract, or certificate, exceeds the rate of interest determined by subtracting 3 percentage points from the most recent Moody’s Corporate Bond Yield Average; (D) Any portion of a policy or contract issued to a 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 the plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association, or similar entity under: (i) A Multiple Employer Welfare Arrangement as defined in section 514 of the Employee Retirement Income Security Act of 1974 (29 U.S.C. §?1144), as amended; (ii) A minimum premium group insurance plan; (iii) A stop-loss group insurance plan; or (iv) An administrative services only contract; (E) Any portion of a policy or contract that provides for: (i) Dividends or experience rating credits; (ii) Voting rights; or (iii) Payment of fees or allowances to any person, including the policy or contract owner, in connection with the service or administration of the policy or contract; (F) Any policy, contract, or certificate issued and delivered in the District of Columbia by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue and deliver the policy, contract, or certificates in the District of Columbia; (G) Any unallocated annuity contract; (H) Any portion of a policy or contract to the extent the assessments required by § 31-5406 with respect to the policy or contract are preempted by federal or state law; (I) Any obligation that does not arise under the express written terms of the policy or contract issued by the insurer to the contract owner or policy owner, including: (i) Claims based on marketing materials; (ii) Claims based on side letters, riders, or other documents that were issued by the insurer without meeting applicable policy form filing or approval requirements; (iii) Misrepresentations of or regarding policy benefits; (iv) Extra-contractual claims; or (v) A claim for penalties or consequential or incidental damages; (J) 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 the benefit plan or its trustee, which in each case is not an affiliate of the member insurer; (K) Any portion of a policy or contract that 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 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 or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that has 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; (L) Any policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to the Balanced Budget Act of 1997, approved August 11, 1997 (111 Stat. 251; 42 U.S.C. §§ 1395w-21 et seq.), and the Medicare Prescription Drug, Improvement, and Modernization Act of 2003, approved December 8, 2003 (117 Stat. 2066; 42 U.S.C. §§ 1395w-101 et seq.) (commonly known as Medicare Parts C and D), or Title XIX of the Social Security Act, approved February 4, 2009 (123 Stat. 91; 42 U.S.C. § 1396 et seq.) (commonly known as Medicaid), or any regulations issued pursuant to those titles; or (M) Structured settlement annuity benefits to which a payee (or beneficiary) has transferred his or her rights in a structured settlement factoring transaction as defined in section 115(a) of the Victims of Terrorism Tax Relief Act of 2001, approved January 23, 2002 (115 Stat. 2436; 26 U.S.C. 5891(c)(3)), regardless of whether the transaction occurred before or after such section became effective. (3) The exclusion from coverage referenced in paragraph (2)(C) of this subsection shall 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

Yes. Are not residents, subject to the following conditions: (i) The insurers which issued and delivered the policies or contracts are domiciled in the District of Columbia; (ii) The state 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.

With respect to any 1 life, regardless of the number of policies, contracts, or certificates: (i) $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; (ii) In health insurance benefits: (I) $ 100,000 for coverage not defined as disability insurance or health benefit plan or long- term care insurance, including any net cash surrender and net cash withdrawal values; (II) $ 300,000 for disability insurance; (III) $ 300,000 for long-term care insurance; and (IV) $ 500,000 for health benefit plans; or (iii) $300,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values. (A-i) With respect to each payee of a structured settlement annuity (or beneficiary or beneficiaries of the payee if deceased), $ 300,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any. (A-ii) The Association shall not be obligated to cover: (i) More than an aggregate of $ 300,000 in benefits with respect to any one life under subparagraphs (A) and (A-i) of this paragraph except with respect to benefits for health benefit plans under subparagraph (A)(ii) of this paragraph, in which case the aggregate liability of the Association shall not exceed $ 500,000 with respect to any one individual; or (ii) With respect to one owner of multiple non-group policies of life insurance, whether the policy owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, more than $ 5,000,000 in benefits, regardless of the number of policies and contracts held by the owner; (A-iii) (i) 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. (ii) 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.

Discretionary Triggers

If a member insurer is an impaired domestic insurer, the Association may, in its discretion and subject to any conditions imposed by the Association that do not impair the contractual obligations of the impaired insurer that are approved by the Mayor, and that are, except in cases of court-ordered conservation or rehabilitation, also approved by the impaired insurer: (1) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all of the policies, contracts, or certificates of the impaired insurer; (2) Provide monies, pledges, notes, guarantees, or other proper means to effectuate paragraph (1) of this subsection and assure payment of the contractual obligations of the impaired insurer pending action under paragraph (1) of this subsection; or (3) Loan money to the impaired insurer.

Mandatory Triggers

If a member insurer is an impaired insurer, whether domestic, foreign, or alien, and the insurer is not paying claims timely, then subject to the preconditions specified in paragraph (2) of this subsection, the Association shall, in its discretion, either: (A) Take any of the actions specified in subsection (a) of this section, subject to the conditions therein; or (B) Provide substitute benefits in lieu of the contractual obligations of the impaired insurer solely for health claims, periodic annuity benefit payments, death benefits, supplemental benefits, and cash withdrawals for policy or contract owners who petition for them under claims of emergency or hardship in accordance with standards proposed by the Association and approved by the Mayor. (2) The Association shall be subject to the requirements of paragraph (1) of this subsection only: (A) If the laws of the member insurer’s state of domicile provide that until all payments of or on account of the impaired insurer’s contractual obligation by all guaranty associations, along with all expenses and interest on all payments and expenses, shall have been repaid to the guaranty associations or a plan of repayment by the impaired insurer shall have been approved by the guaranty associations: (i) The delinquency proceeding shall not be dismissed; (ii) Neither the impaired insurer nor its assets shall be returned to the control of its shareholders or private management; and (iii) It shall not be permitted to solicit or accept new business or have any suspended or revoked license restored; and (B) If the impaired insurer is a domestic insurer, it has been placed under an order of rehabilitation by a court of competent jurisdiction in the District of Columbia; or (C) If the impaired insurer is a foreign or alien insurer: (i) It has been prohibited from soliciting or accepting new business in the District of Columbia; (ii) Its certificate of authority has been suspended or revoked in the District of Columbia; and (iii) A petition for rehabilitation or liquidation has been filed in a court of competent jurisdiction in its state of domicile by the commissioner of insurance of the state. (c) If a member insurer is an insolvent insurer, the Association shall, in its discretion: (1) (A) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies, contracts, and certificates of the insolvent insurer; or (B) Assure payment of the contractual obligations of the insolvent insurer; and (C) Provide the monies, pledges, guarantees, or other means as are reasonably necessary to discharge the duties; or (2) With respect only to life and health insurance policies and certificates, provide benefits and coverages in accordance with subsection (d) of this section.

Foreign Triggers

See Mandatory Triggers.

"Impaired Insurer"

“Impaired insurer” means a member insurer which, after July 22, 1992, is not an insolvent insurer, and (A) is deemed by the Mayor to be potentially unable to fulfill its contractual obligations, or (B) is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.

"Insolvent Insurer"

“Insolvent insurer” means a member insurer which, after July 22, 1992, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.

"Member Insurer"

(A) “Member insurer” means: (i) An insurer or health maintenance organization licensed or holding a certificate of authority in the District of Columbia to sell any kind of insurance or health maintenance organization business for which coverage is provided under § 31-5402; (ii) An insurer or health maintenance organization whose license or certificate of authority in the District has been suspended, revoked, not renewed, or voluntarily withdrawn; and (iii) The Group Hospital and Medical Services, Inc. (B) The term “member insurer” does not include: (i) A fraternal benefit society; (ii) A mandatory state pooling plan; (iii) A mutual assessment company or any entity that operates on an assessment basis; (iv) A risk retention group; (v) An insurance exchange; (vi) An organization that has a certificate or license limited to the issuance of charitable gift annuities; or (vii) Any entity similar to any of the above.

For purposes of administration and assessment the Association shall maintain 2 accounts: (A) The life insurance and annuity account which shall include the following subaccounts: (i) Life insurance account; and (ii) Annuity account; and (B) The health insurance account.

Assessment Limits

§31-5406(e)(1). Two percent (2%) of the average premiums received on business in the state covered by each account during the three calendar years preceding the year in which the insurer is declared impaired or insolvent.

Assessment Classes

There shall be 2 assessments, as follows: (1) Class A assessments shall be made for the purposes of meeting administrative and legal costs and other expenses and examinations conducted under the authority of §?31-5409(e). Class A assessments may be made whether or not related to a particular impaired or insolvent insurer. (2) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the Association under §?31-5405 with regard to an impaired or insolvent insurer.

Any portion of a policy, contract, or certificate, to the extent of the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by the 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 4-year period prior to the date on which the Association becomes obligated with respect to the policy, contract, or certificate, exceeds a rate of interest determined by subtracting 2 percentage points from Moody’s Corporate Bond Yield Average averaged for that same 4-year period or for a lesser period if the policy, contract, or certificate was issued and delivered less than 4 years before the Association became obligated; and (ii) On and after the date on which the Association becomes obligated with respect to the policy, contract, or certificate, exceeds the rate of interest determined by subtracting 3 percentage points from the most recent Moody’s Corporate Bond Yield Average;

A member insurer may offset against its premium taxes an assessment described in §?31-5406(h) to the extent of 10% of the amount of the assessment for each of the 10 calendar years following the year in which the assessment was paid. In the event a member insurer should cease doing business, all uncredited assessments may be credited against the premium taxes for the year it ceases doing business.

“Premiums” means amounts (or consideration by whatever name called) received on covered policies or contracts, or for the portions of policies or contracts, less premiums, considerations, deposits returned, dividends, and experience credits. The term “premiums” shall not include: (A) Any amounts received for policies or contracts for which coverage is not provided under § 31-5402(b), except that assessable premiums shall not be reduced on account of § 31-5402(b)(2)(C) relating to interest limitations, and § 31-5402(c)(2) relating to limitations with respect to any one individual, any one participant, and any one contract holder; or (B) With respect to multiple non-group policies of life insurance owned by one owner, whether the policy 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 these policies or contracts, regardless of the number of policies or contracts held by the owner.

§31-5416. Prohibited advertisement of Association act in insurance sale; notice to policyholders. (a)(1) No person, including an insurer, agent, or affiliate of an 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 District of Columbia Life and Health Insurance Guaranty Association for the purpose of sales, solicitation, or inducement to purchase any form of insurance covered by this chapter. (2) This subsection shall not apply to the Association or any other entity which does not sell or solicit insurance.