GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 2001

 

 

SESSION LAW 2001-334

HOUSE BILL 360

 

 

AN ACT TO CLARIFY THE LAW ON STIPULATIONS AS TO JURISDICTION AND LIMITATIONS OF ACTION AND THE PREFERRED PROVIDER PLAN LAW; AMEND THE SMALL EMPLOYER RATE GUARANTEE LAW; PROVIDE FOR THE PROMOTION OF ALCOHOL AND NARCOTIC SCREENING AND INTERVENTION; AMEND THE LAW ON NEWBORN AND FOSTER CHILD COVERAGE; PROVIDE FOR SUCCESSOR HEALTH PLAN COVERAGE FOR CONFINEMENT OR PREGNANCY; PROVIDE FOR A HEALTH INSURANCE CONTINUATION ELECTION PERIOD; REQUIRE AN HMO GROUP COVERAGE PREMIUM CHANGE NOTICE; CLARIFY THE HMO POINT-OF-SERVICE LAW; PROVIDE FOR SUCCESSOR HEALTH PLAN COVERAGE FOR CONDITIONS FIRST DIAGNOSED UNDER PREVIOUS COVERAGE; EXPAND MEDICARE SUPPLEMENT GUARANTEED ISSUANCE FOR DISABLED PERSONS; ALLOW THE INSURANCE COMMISSIONER TO ADOPT TEMPORARY RULES FOR MEDICARE SUPPLEMENT AND LONG-TERM CARE INSURANCE TO IMPLEMENT FEDERAL REQUIREMENTS; MAKE TECHNICAL CORRECTIONS TO REFLECT REPEALS OF LAWS; CLARIFY THE LAWS ON RECONSTRUCTIVE SURGERY NOTICES; CLARIFY THE LAW ON DEEMER PROVISIONS; CODIFY A RULE ON CLAIM STATUS UPDATES; MAKE TECHNICAL CHANGES IN MORTGAGE GUARANTY INSURANCE RESERVING LAWS; AUTHORIZE THE ADOPTION OF LIFE AND HEALTH ACTUARIAL RULES; AND CLARIFY LAWS ON LOCAL GOVERNMENT RISK POOLING.

 

 

The General Assembly of North Carolina enacts:

 

PART I.  JURISDICTION AND LIMITATION OF ACTIONS IN HEALTH INSURANCE POLICIES

 

SECTION 1.  G.S. 58-3-35 reads as rewritten:

"§ 58-3-35.  Stipulations as to jurisdiction and limitation of actions.

(a)       No company or order, domestic or foreign, authorized to do business in this State under Articles 1 through 64 of No insurer, self-insurer, service corporation, HMO, or MEWA licensed under this Chapter, may Chapter shall make any condition or stipulation in its insurance contracts or policies concerning the court or jurisdiction wherein in which any suit or action thereon on the contract may be brought.

(b)       may be brought, nor may it No insurer, self-insurer, service corporation, HMO, or MEWA licensed under this Chapter shall limit the time within which such any suit or action referred to in subsection (a) of this section may be commenced to less than one year after the cause of action accrues or to less than six months from any time at which a plaintiff takes a nonsuit to an action begun within the legal time. All conditions and stipulations forbidden by this section are void.the period prescribed by law.

(c)       All conditions and stipulations forbidden by this section are void."

 

PART II.  PREFERRED PROVIDER PLAN CLARIFICATION

 

SECTION 2.1.  G.S. 58-50-56(a)(3) reads as rewritten:

"(3)      "Preferred provider benefit plan" means a health benefit plan offered by an insurer in which covered services are available from health care providers who are under a contract with the insurer in accordance with this section and in which enrollees are given incentives through differentials in deductibles, coinsurance, or copayments to obtain covered health care services from contracted health care providers. both of the following features are present:

a.         Utilization review or quality management programs are used to manage the provision of covered health care services; and

b.         Enrollees are given incentives through benefit differentials to limit the receipt of covered health care services to those furnished by participating providers, and health care services are provided by preferred providers under a contract pursuant to this section."

SECTION 2.2.  G.S. 58-3-191(c) reads as rewritten:

"(c)      For purposes of this section, "health benefit plan" or "plan" means (i) health maintenance organization (HMO) subscriber contracts and (ii) insurance company or hospital and medical service corporation preferred provider benefit plans in which utilization review or quality management programs are used to manage the provision of covered health care services, and enrollees are given incentives through benefit differentials to limit the receipt of covered health care services to those provided by participating providers.as defined in G.S. 58-50-56."

 

PART III.  SMALL EMPLOYER RATE GUARANTEES

 

SECTION 3.  G.S. 58-50-130(b)(3) reads as rewritten:

"(3)      Small employer carriers A small employer carrier shall not modify the premium rate for charged to a small employer or a small employer group member, including changes in rates related to the increasing age of a group member, for 12 months from the initial issue date or renewal date, unless the group is composite rated and composition of the group changed by twenty percent (20%) or more or benefits are changed. The percentage increase in the premium rate charged to a small employer for a new rating period may shall not exceed the sum of the following:

a.         The percentage change in the adjusted community rate as measured from the first day of the prior rating period to the first day of the new rating period, and

b.         Any adjustment, not to exceed fifteen percent (15%) annually, due to claim experience, health status, or duration of coverage of the employees or dependents of the small employer, and

c.         Any adjustment because of change in coverage or change in case characteristics of the small employer group."

 

PART IV.  INTOXICANTS AND NARCOTICS

 

SECTION 4.1.  G.S. 58-51-15(b)(11) is repealed.

SECTION 4.2.  Article 51 of Chapter 58 of the General Statutes is amended by adding a new section to read:

"§ 58-51-16. Intoxicants and narcotics.

(a)       Except for the payment of benefits for the necessary care and treatment of chemical dependency as provided by law, an accident and health insurer shall not be liable for any loss sustained or contracted in consequence of the insured’s being intoxicated or under the influence of any narcotic unless administered on the advice of a physician.

 (b)      The provision in subsection (a) of this section may not be used with respect to a medical expense policy.

 (c)      For purposes of this section, 'medical expense policy' means an accident and health insurance policy that provides hospital, medical, and surgical expense coverage."

 

PART V.  NEWBORN, FOSTER CHILD, AND ADOPTED CHILD COVERAGE

 

SECTION 5.  G.S. 58-51-30 reads as rewritten:

"§ 58-51-30.  Policies to cover newborn infants and infants, foster children.children, and adopted children.

(a)       As used in this section:

(1)       "Foster child" means a minor (i) over whom a guardian has been appointed by the clerk of superior court of any county in North Carolina; or (ii) the primary or sole custody of whom has been assigned by order of a court of competent jurisdiction.

(2)       "Placement in the foster home" means physically residing with a person appointed as guardian or custodian of a foster child as long as that guardian or custodian has assumed the legal obligation for total or partial support of the foster child with the intent that the foster child reside with the guardian or custodian on more than a temporary or short-term basis.

(3)       "Placement for adoption" has the same meaning as defined in G.S. 58-51-125(a)(2).

(b)       Every health benefit plan, as defined in G.S. 58-51-115(a)(1), G.S. 58-3-167, that provides benefits for any sickness, illness, or disability of any minor child or that provides benefits for any medical treatment or service furnished by a health care provider or institution to any minor child shall provide the benefits for those occurrences beginning with the moment of the child's birth if the birth occurs while the plan is in force. Every health benefit plan shall extend coverage to a newborn child without requirements for prior notification unless an additional premium charge to add the dependent is due. If an additional premium charge is due to cover the dependent, the health benefit plan shall cover the newborn child from the moment of birth if the newborn is enrolled within 30 days after the date of birth. Foster children and adopted children shall be treated the same as newborn infants and eligible for coverage on the same basis upon placement in the foster home. home or placement for adoption. Every health benefit plan shall extend coverage to a foster child or adopted child without requirements for prior notification unless an additional premium charge to add the foster child or adopted child is due. If an additional premium charge is due to cover the foster child or adopted child, the health benefit plan shall cover the foster child or adopted child upon placement in the foster home or placement for adoption if the foster child or adopted child is enrolled within 30 days after the placement in the foster home or placement for adoption.

(c)       Benefits in such plans shall be the same for congenital defects or anomalies as are provided for most sicknesses or illnesses suffered by minor children that are covered by the plans. Benefits for congenital defects or anomalies shall specifically include, but not be limited to, all necessary treatment and care needed by individuals born with cleft lip or cleft palate.

(d)       No plan shall be approved by the Commissioner under this Chapter that does not comply with this section.

(e)       This section applies to insurers governed by Articles 1 through 63 of this Chapter and to corporations governed by Articles 65, 66, and 67 of this Chapter.

(f)        This section and G.S. 58-51-125 shall be construed in pari materia."

 

PART VI.  SUCCESSOR PLAN COVERAGE FOR CONFINEMENT OR PREGNANCY

 

SECTION 6.  G.S. 58-51-110(b) reads as rewritten:

"(b)      Whenever a contract described in subsection (a) of this section is replaced by another group contract within 15 days of termination of coverage of the previous group contract, the liability of the succeeding insurer for insuring persons covered under the previous group contract is:

(1)       Each person who is eligible for coverage in accordance with the succeeding insurer's plan of benefits with respect to classes eligible and activity at work and nonconfinement rules must benefits, regardless of any other provisions of the new group contract relating to active employment or hospital confinement or pregnancy, shall be covered by the succeeding insurer's plan of benefits; and

(2)       Each person not covered under the succeeding insurer's plan of benefits in accordance with subdivision (b)(1) of this section must nevertheless be covered by the succeeding insurer if that person was validly covered, including benefit extension, under the prior plan on the date of discontinuance and if the person is a member of the class of persons eligible for coverage under the succeeding insurer's plan."

 

PART VII.  CONTINUATION ELECTION PERIOD

 

SECTION 7.1.  G.S. 58-53-10 reads as rewritten:

"§ 58-53-10.  Eligibility.

Continuation shall only be available to an employee or member who has been continuously insured under the group policy, or for similar benefits under any other group policy that it replaced, during the period of three consecutive months immediately prior to before the date of termination. The employee or member may elect continuation for a period of not fewer than 60 days after the date of termination or loss of eligibility. The employee or member shall make the first contribution upon the election to continue coverage, and the coverage shall be retroactive to the date of termination or loss of eligibility."

SECTION 7.2.  G.S. 58-53-30 reads as rewritten:

"§ 58-53-30.  Payment of premiums.

An employee or member electing continuation must pay to the group policyholder or his employer, in advance, the amount of contribution required by the policyholder or employer, but not more than one hundred two percent (102%) of the full group rate for the insurance applicable under the group policy on the due date of each payment. The employee or member may not be required to pay the amount of the contribution less often than monthly. In order to be eligible for continuation of coverage, the employee or member must make a written election of continuation, on a form furnished by the group policyholder, and pay the first contribution, in advance, to the policyholder or employer on or before the date on which employee's or member's insurance would otherwise terminate.policyholder or by the insurer."

 

PART VIII.  HMO GROUP COVERAGE PREMIUM CHANGE NOTICE

 

SECTION 8.1.  G.S. 58-67-50(b) reads as rewritten:

"(b)      (1)       Premium approval. - No schedule of premiums for enrollee coverage for health care services, or any amendment thereto, may to the schedule, shall be used in conjunction with any health care plan until a copy of such schedule, or amendment thereto, the schedule or amendment has been filed with and approved by the Commissioner.

(2)       Individual coverage. - Premiums shall Such premiums may be established in accordance with actuarial principles for various categories of enrollees, provided that premiums enrollees. Premiums applicable to an enrollee shall not be individually determined based on the status of his the enrollee's health. However, the premiums Premiums shall not be excessive, inadequate, or unfairly discriminatory; and must shall exhibit a reasonable relationship to the benefits provided by the evidence of coverage. Such The premiums or any revisions thereto to the premiums with respect to nongroup enrollee coverage shall be guaranteed, as to every enrollee covered under the same category of enrollee coverage, for a period of not less than 12 months; or as an months. As an alternative to giving such this guarantee with respect only to for nongroup enrollee coverage, such the premium or premium revisions may be made applicable to all similar category of enrollee coverage at one time if the health maintenance organization chooses to apply for such the premium revision with respect to such categories of coverages no more frequently than once in any 12-month period. Such The premium revision shall be applicable to all categories of nongroup enrollee coverage of the same type; provided that no premium revision may become effective for any category of enrollee coverage unless the corporation HMO has given written notice of the premium revision to the enrollee 45 days prior to before the effective date of such the revision. The enrollee thereafter must pay the revised premium in order to continue the contract in force. The Commissioner may promulgate adopt reasonable rules, after notice and hearing, to require the submission submittal of supporting data and such information as is deemed as the Commissioner considers necessary to determine whether such the rate revisions meet these standards.the standards in this subdivision.

(3)       Group coverage. - Employer group premiums shall be established in accordance with actuarial principles for various categories of enrollees, provided that premiums applicable to an enrollee shall not be individually determined based on the status of the enrollee's health. Premiums shall not be excessive, inadequate, or unfairly discriminatory, and shall exhibit a reasonable relationship to the benefits provided by the evidence of coverage. The premiums or any revisions to the premiums for employer group coverage shall be guaranteed for a period of not less than 12 months. No premium revision shall become effective for any category of group coverage unless the HMO has given written notice of the premium revision to the master group contract holder upon receipt of the group's finalized benefits or 45 days before the effective date of the revision, whichever is earlier. The master group contract holder thereafter must pay the revised premium in order to continue the contract in force. The Commissioner may adopt reasonable rules, after notice and hearing, to require the submittal of supporting data and such information as the Commissioner considers necessary to determine whether the rate revisions meet the standards in this subdivision."

SECTION 8.2.  G.S. 58-67-35(a)(6) reads as rewritten:

"(6)      The offering and contracting for the provision or arranging of, in addition to health care services, of:

a.         Additional health care services;

b.         Indemnity benefits, covering out-of-area or emergency services;

c.         Indemnity benefits, in addition to those relating to out-of-area and emergency services, provided through insurers or hospital or medical service corporations; and

d.         Point-of-service products, for which an HMO may precertify out-of-plan covered services on the same basis as it precertifies in-plan covered services, and for which the Commissioner shall adopt rules governing:

1.         The percentage of an HMO's total health care expenditures for out-of-plan covered services for all of its members that may be spent on those services, which may not exceed twenty percent (20%);

2.         Product limitations, which may provide for payment differentials for services rendered by providers who are not in an HMO network, subject to G.S. 58-3-200(d).

3.         Deposit and other financial requirements; and

4.         Other requirements for marketing and administering those products."

 

PART IX.  HIPAA COVERAGE FOR CONDITIONS FIRST DIAGNOSED UNDER PREVIOUS COVERAGE

 

SECTION 9.  G.S. 58-68-30(d) reads as rewritten:

"(d)      Exceptions. -

(1)       Exclusion not applicable to certain newborns. - Subject to subdivision (4) of this subsection, a group health insurer shall not impose any preexisting condition exclusion in the case of an individual who, as of the last day of the 30-day period beginning with the individual's date of birth, is covered under creditable coverage.

(2)       Exclusion not applicable to certain adopted children. - Subject to subdivision (4) of this subsection, a group health insurer shall not impose any preexisting condition exclusion in the case of a child who is adopted or placed for adoption before attaining 18 years of age and who, as of the last day of the 30-day period beginning on the date of the adoption or placement for adoption, is covered under creditable coverage. The previous sentence does not apply to coverage before the date of the adoption or placement for adoption.

(3)       Exclusion not applicable to pregnancy. - A group health insurer shall not impose any preexisting condition exclusion relating to pregnancy as a preexisting condition.

(4)       Loss if break in coverage. - Subdivisions (1) and (2) of this subsection shall no longer apply to an individual after the end of the first 63-day period during all of which the individual was not covered under any creditable coverage.

(5)       Condition first diagnosed under previous coverage. - A group health insurer shall not impose any preexisting condition exclusion for a condition for which medical advice, diagnosis, care, or treatment was recommended or received for the first time while the covered person held qualifying previous coverage or prior creditable coverage and the condition was covered under the qualifying previous coverage or prior creditable coverage; provided that the qualifying previous coverage or prior creditable coverage was continuous to a date not more than 63 days before the enrollment date for the new coverage."

 

PART X.  MEDICARE SUPPLEMENT GUARANTEED ISSUANCE

 

SECTION 10.1.  G.S. 58-54-45 reads as rewritten:

"§ 58-54-45.  By reason of disability.

(a)       In addition to any rule adopted under this Article that is directly or indirectly related to open enrollment, an insurer shall at least make standardized Medicare Supplement Plan A Plans A, C, and J available to persons eligible for Medicare by reason of disability before age 65. This action shall be taken without regard to medical condition, claims experience, or health status. To be eligible, a person must submit an application during the six-month period beginning with the first month the person first enrolls in Medicare Part B.

(b)       Persons eligible for Medicare by reason of disability before age 65 who are enrolled in a managed care plan and whose coverage under the managed care plan is terminated through cancellation, nonrenewal, or disenrollment have the guaranteed right to purchase Medicare Supplement Plans A and C from any insurer within 63 days after the date of termination or disenrollment.

(c)       An insurer may develop premium rates specific to the disabled population. No insurer shall discriminate in the pricing of the Medicare supplement plans referred to in this section because of the health status, claims experience, receipt of health care, or medical condition of an applicant where an application for the plan is submitted during an open enrollment or is submitted within 63 days after the managed care plan is terminated. The rates and any applicable rating factors for the Medicare supplement plans referred to in this section shall be filed with and approved by the Commissioner."

SECTION 10.2.  Section 39 of S.L. 1998-211 reads as rewritten:

"Section 39. Except as otherwise provided herein, this act is effective as follows: this section and Sections 1, 2, 3, 4, 5, 6, 7, 9.1, 10, 11, 14, 15, 17, 18, 22, 27, 29, 32, 33, 34, 37.1, and 38 of this act are effective when they become law. Sections 9, 12, 13, 19, 20, 21, 23, 24, 25, 28, 30, 31, 35, 36, and 37 of this act become effective November 1, 1998. Sections 8, 16, and 26 of this act become effective January 1, 1999. G.S. 58-54-45, as enacted by Section 13 of this act, expires November 1, 2001."

 

PART XI.  MEDICARE SUPPLEMENT AND LONG-TERM CARE RULES

 

SECTION 11.1.  G.S. 58-54-50 reads as rewritten:

"§ 58-54-50.  Rules for compliance with federal law and regulations.

The Commissioner may adopt temporary rules necessary to conform Medicare supplement policies and certificates to the requirements of federal law and regulations, including:

(1)       Requiring refunds or credits if the policies or certificates do not meet loss ratio requirements.

(2)       Establishing a uniform methodology for calculating and reporting loss ratios.

(3)       Assuring public access to policies, premiums, and loss ratio information of issuers of Medicare supplement insurance.

(4)       Establishing standards for Medicare Select policies and certificates.

(5)       Any other changes required by Congress or the U.S. Department of Health and Human Services, or any successor agency."

SECTION 11.2.  Article 55 of Chapter 58 of the General Statutes is amended by adding the following new section to read:

"§ 58-55-50. Rules for compliance with federal law and regulations.

The Commissioner may adopt temporary rules necessary to conform long-term care policies and certificates to the requirements of federal law and regulations, including any changes required by Congress or the U.S. Department of Health and Human Services, or any successor agencies."

 

PART XII.  SHPPA REPEAL TECHNICAL CORRECTIONS

 

SECTION 12.1.  G.S. 58-50-110(1) is repealed.

SECTION 12.2.  G.S. 58-50-110(14) reads as rewritten:

"(14)   'Late enrollee' has the same meaning as defined in G.S. 58-68-30(b)(2); provided that the initial enrollment period shall be a period of at least 30 consecutive calendar days. In addition to the special enrollment provisions in G.S. 58-68-30(f), an eligible employee or dependent shall not be considered a late enrollee under a small employer health benefit plan if:

a.         Repealed by Session Laws 1998-211, s. 9.

1,         2. Repealed by Session Laws 1998-211, s. 9.

3,         4. Repealed by Session Laws 1993, c. 529, s. 3.3.

b.         The individual elects a different health benefit plan offered through the Alliance or by the small employer during an open enrollment period;

c.         Repealed by Session Laws 1998-211, s. 9.

d.         A court has ordered coverage be provided for a spouse or minor child under a covered employee's health benefit plan and the request for enrollment for a spouse is made within 30 days after issuance of the court order. A minor child shall be enrolled in accordance with the requirements of G.S. 58-51-120; or

e.         Repealed by Session Laws 1998-211, s. 9."

SECTION 12.3.  G.S. 58-50-130(a)(4a) reads as rewritten:

"(4a)    A carrier may continue to enforce reasonable employer participation and contribution requirements on small employers applying for coverage; however, participation and contribution requirements may vary among small employers only by the size of the small employer group and shall not differ because of the health benefit plan involved. In applying minimum participation requirements to a small employer, a small employer carrier shall not consider employees or dependents who have qualifying existing coverage in determining whether an applicable participation level is met. "Qualifying existing coverage" means benefits or coverage provided under: (i) Medicare, Medicaid, and other government funded programs; or (ii) an employer-based health insurance or health benefit arrangement, including a self-insured plan, that provides benefits similar to or in excess of benefits provided under the basic health care plan. An accountable health carrier shall not enforce participation or contribution requirements on member small employers, as defined in G.S. 143-622(18), unless those requirements meet with the standards adopted by the State Health Plan Purchasing Alliance Board."

 

PART XIII.  RECONSTRUCTIVE SURGERY NOTICES

 

SECTION 13.1.  G.S. 58-51-62(d) reads as rewritten:

"(d)      Written notice of the availability of the coverage provided by this section shall be delivered to every individual person insured policyholder under the an individual policy, contract, or plan and to every certificate holder under a group policy, contract, or plan upon initial coverage under the policy, contract, or plan and annually thereafter. The notice required by this subsection may be included as a part of any yearly informational packet sent to the policyholder or certificate holder."

SECTION 13.2.  G.S. 58-65-96(d) reads as rewritten:

"(d)      Written notice of the availability of the coverage provided by this section shall be delivered to every individual person insured subscriber under the an individual certificate, contract, or plan and to every certificate holder under a group policy, contract, or plan upon initial coverage under the certificate, contract, or plan and annually thereafter. The notice required by this subsection may be included as a part of any yearly informational packet sent to the subscriber or certificate holder."

SECTION 13.3.  G.S. 58-67-79(d) reads as rewritten:

"(d)      Written notice of the availability of the coverage provided by this section shall be delivered to every individual person insured subscriber under the plan upon enrollment and annually thereafter. The notice required by this subsection may be included as a part of any yearly informational packet sent to the subscriber."

 

PART xiv.  deemer provisions

 

SECTION 14.  Article 3 of Chapter 58 of the General Statutes is amended by adding a new section to read:

"§ 58-3-151. Deemer provisions.

No entity subject to the Commissioner's jurisdiction and regulation shall be fined or penalized by the Commissioner for using forms, contracts, schedules of premiums, or other documents required to be filed and approved under this Chapter or for executing contracts required to be filed and approved under this Chapter if those forms, contracts, schedules of premiums, or other documents have been by law deemed to have been approved, and the entity has notified the Commissioner before using the filing or executing the contract that the law has deemed the filing or the contract to be approved."

 

PART XV.  ACCIDENT, HEALTH, AND DISABILITY CLAIMS

 

SECTION 15.  G.S. 58-3-100(c) reads as rewritten:

"(c)      The Commissioner may impose a civil penalty under G.S. 58-2-70 if an HMO, service corporation, MEWA, or insurer fails to acknowledge a claim within 30 days after receiving written or electronic notice of the claim, but only if the notice contains sufficient information for the insurer to identify the specific coverage involved. Acknowledgement of the claim shall be made to the claimant or his legal representative advising that the claim is being investigated; or shall be a payment of the claim; or shall be a bona fide written offer of settlement; or shall be a written denial of the claim. A claimant includes an insured, a health care provider, or a health care facility that is responsible for directly making the claim with an insurer. With respect to a claim under an accident, health, or disability policy, if the acknowledgement sent to the claimant indicates that the claim remains under investigation, within 45 days after receipt by the insurer of the initial claim, the insurer shall send a claim status report to the insured and every 45 days thereafter until the claim is paid or denied. The report shall give details sufficient for the insured to understand why processing of the claim has not been completed and whether the insurer needs additional information to process the claim. If the claim acknowledgement includes information about why processing of the claim has not been completed and indicates whether additional information is needed, it may satisfy the requirement for the initial claim status report. This subsection does not apply to insurers subject to G.S. 58-3-225."

 

PART XVI.  MORTGAGE GUARANTY INSURANCE RESERVES

 

SECTION 16.1.  G.S. 58-10-130 reads as rewritten:

"§ 58-10-130. Unearned premium reserve.

(a)       The unearned premium reserve shall be computed as follows:

(1)       The unearned premium reserve for premiums paid in advance annually shall be calculated on the monthly pro rata fractional basis.

(2)       Premiums paid in advance for 10-year coverage shall be placed in the unearned premium reserve and shall be released from this reserve as follows:

a.         1st month - 1/132;

b.         2nd through 12th month - 2/132 each month;

c.         13th month - 3/264;

d.         14th through 120th month - 1/132 per month;

e.         121st month - 1/264.

(3)       Premiums paid in advance for periods in excess of 10 years. During the first 10 years of coverage the unearned portion of the premium shall be the premium collected minus an amount equal to the premium that would have been earned had the applicable premium for 10 years of coverage been received. The premium remaining after 10 years shall be released from the unearned premium reserve monthly pro rata over the remaining term of coverage.

(b)       Fifty percent (50%) of the premium remaining after establishment of the premium reserve specified in subsection (a) of this section shall be maintained as a special contingency reservation of premium and reported in the financial statement as a liability.

(c)       The case basis method shall be used to determine the loss reserve which shall include a reserve for claims reported and unpaid and a reserve for claims incurred but not reported."

SECTION 16.2.  G.S. 58-10-135(c) reads as rewritten:

"(c)      The contingency reserve established by this section shall be maintained for 120 months. months and reported in the financial statements as a liability. That portion of the contingency reserve established and maintained for more than 120 months shall be released and shall no longer constitute part of the contingency reserve."

SECTION 16.3.  G.S. 58-10-135(d) reads as rewritten:

"(d)      With the approval of the Commissioner, withdrawals may be made from the contingency reserve when incurred losses and incurred loss expenses exceed the greater of either thirty-five percent (35%) of the net earned premium or seventy percent (70%) of the amount which subsection (a) of this section requires to be contributed to the contingency reserve in such year. On a quarterly basis, provisional withdrawals may be made from the contingency reserve in an amount not to exceed seventy-five percent (75%) of the withdrawal calculated in accordance with subdivision (d)(1) of G.S. 58-10-125. this subsection."

 

PART XVII. ACTUARIAL RULES

 

SECTION 17.1.  G.S. 58-58-50 is amended by adding a new subsection to read:

"(l)       The Commissioner may adopt rules for life insurers for the following matters:

(1)       Reserves for contracts issued by insurers.

(2)       Optional smoker/nonsmoker mortality tables permitted for use in determining minimum reserve liabilities and nonforfeiture benefits.

(3)       Optional blended gender mortality tables permitted for use in determining nonforfeiture benefits for individual life policies.

(4)       Optional tables acceptable for use in determining reserves and minimum cash surrender values and amounts of paid-up nonforfeiture benefits.

In adopting these rules, the Commissioner may consider model laws and regulations promulgated and amended from time to time by the NAIC."

SECTION 17.2.  G.S. 58-7-16(f) reads as rewritten:

"(f)      The Commissioner has sole authority to regulate the issuance and sale of funding agreements on behalf of insurers. In addition to the authority in G.S. 58-2-40, the Commissioner may adopt rules relating to:

(1)       Standards to be followed in the approval of forms of funding agreements.

(2)       Reserves to be maintained by and valuation rules for insurers issuing funding agreements.

(3)       Accounting and reporting of funds credited under funding agreements.

(4)       Disclosure of information to be given to holders and prospective holders of funding agreements.

(5)       Qualification and compensation of persons selling funding agreements on behalf of insurers.

In determining minimum valuation reserves to be maintained by and valuation rules for insurers issuing funding agreements, the Commissioner may use any relevant actuarial guideline, regulation, interpretation, or paper published by the Society of Actuaries or the American Academy of Actuaries that the Commissioner considers reasonable."

SECTION 17.3.  G.S. 58-51-95(f) reads as rewritten:

"(f)      An insurer may increase rates chargeable on policies subject to this section, other than noncancellable policies, with the approval of the Commissioner if the Commissioner finds that such the rates are not excessive, not inadequate, and not unfairly discriminatory; and exhibit a reasonable relationship to the benefits provided by such the policies. Such The approved rates shall be guaranteed by the insurer, as to the policyholders thereby affected, affected by the rates,for a period of not less than 12 months; or as an alternative to the insurer giving such the guarantee, such the approved rates may be applicable to all policyholders at one time if the insurer chooses to apply for such that relief with respect to such those policies no more frequently than once in any 12-month period. Such The rates shall be applicable to all policies of the same type; provided that no rate increase may become effective for any policy unless the insurer has given the policyholder written notice of the rate revision 45 days prior to before the effective date of the revision. The policyholder thereafter must then pay the revised rate in order to continue the policy in force. The Commissioner may promulgate adopt reasonable rules, after notice and hearing, to require the submission of supporting data and such information as is deemed the Commissioner considers necessary to determine whether such the rate revisions meet these standards. In adopting the rules under this subsection, the Commissioner may require identification of the types of rating methodologies used by filers and may also address issue age or attained age rating, or both; policy reserves used in rating; and other recognized actuarial principles of the NAIC, the American Academy of Actuaries, and the Society of Actuaries."

SECTION 17.4.  G.S. 58-67-50(b) reads as rewritten:

"(b)      (1)       No schedule of premiums for enrollee coverage for health care services, services or any amendment thereto, to the schedule may be used in conjunction with any health care plan until a copy of such schedule, or amendment thereto, the schedule or amendment has been filed with and approved by the Commissioner.

(2)       Such The premiums may be established in accordance with actuarial principles for various categories of enrollees, provided that premiums applicable to an enrollee shall not be individually determined based on the status of his the enrollee’s health. However, the premiums Premiums shall not be excessive, inadequate, or unfairly discriminatory; and must exhibit a reasonable relationship to the benefits provided by the evidence of coverage. Such premiums Premiums or any premium revisions thereto with respect to for nongroup enrollee coverage shall be guaranteed, as to every enrollee covered under the same category of enrollee coverage, for a period of not less than 12 months; or as an alternative to giving such the guarantee with respect only to nongroup enrollee coverage, such the premium or premium revisions may be made applicable to all similar category of enrollee coverage at one time if the health maintenance organization chooses to apply for such the premium revision with respect to such the categories of coverages no more frequently than once in any 12-month period. Such The premium revision shall be applicable to all categories of nongroup enrollee coverage of the same type; provided that no premium revision may become effective for any category of enrollee coverage unless the corporation HMO has given written notice of the premium revision 45 days prior to before the effective date of such the revision. The enrollee thereafter must then must pay the revised premium in order to continue the contract in force. The Commissioner may promulgate adopt reasonable rules, after notice and hearing, to require the submission of supporting data and such information as is deemed the Commissioner considers necessary to determine whether such the rate revisions meet these standards. In adopting the rules under this subsection, the Commissioner may require identification of the types of rating methodologies used by filers and may also address standards for data in HMO rate filings for initial filings, filings by recently licensed HMOs, and rate revision filings; data requirements for service area expansion requests; policy reserves used in rating; incurred loss ratio standards; and other recognized actuarial principles of the NAIC, the American Academy of Actuaries, and the Society of Actuaries."

 

PART XVIII.  LOCAL GOVERNMENT POOLING CLARIFICATION

 

SECTION 18.1.  G.S. 58-49-1 reads as rewritten:

"§ 58-49-1. Purposes.

The purposes of this section and G.S. 58-49-5 through G.S. 58-49-25 are: To give the State jurisdiction over providers of health care benefits; to indicate how each provider of health care benefits may show under what jurisdiction it falls; to allow for examinations by the State if the provider of health care benefits is unable to show it is subject to the exclusive jurisdiction of another governmental agency; to make such a provider of health care benefits subject to the laws of the State if it cannot show that it is subject to the exclusive jurisdiction of another governmental agency; and to disclose the purchasers of such health care benefits whether or not the plans are fully insured. As used in G.S. 58-49-5 through G.S. 58-49-20, 'person' does not mean the State of North Carolina or any county, city, or other political subdivision of the State of North Carolina."

SECTION 18.2.  G.S. 58-1-5(9) reads as rewritten:

"(9)      'Person' means an individual, partnership, firm, association, corporation, joint-stock company, trust, any similar entity, or any combination of the foregoing acting in concert. ‘Person’ does not mean the State of North Carolina or any county, city, or other political subdivision of the State of North Carolina."

SECTION 18.3.  G.S. 58-23-5 reads as rewritten:

"§ 58-23-5.  Local government pooling of property, liability and workers' compensation coverages.

(a)       In addition to other authority granted pursuant to to local governments under Chapters 153A and 160A of the General Statutes, Statutes to jointly purchase insurance or pool retention of their risks,two or more local governments may enter into contracts or agreements pursuant to under this Article for the joint purchasing of insurance or to pool retention of their risks for property losses and liability claims and to provide for the payment of such losses of or claims made against any member of the pool on a cooperative or contract basis with one another, or may enter into a trust agreement to carry out the provisions of this Article.

(b)       In addition to other authority granted pursuant to to local governments under Chapters 153A and 160A of the General Statutes, Statutes or under G.S. 97-7 to jointly purchase insurance or pool retention of their risks, two or more local governments may enter into contracts or agreements pursuant to this Article to establish a separate workers' compensation pool to provide for the payment of workers' compensation claims pursuant to under Chapter 97 of the General Statutes or Statutes.

(c)       In addition to other authority granted to local governments under Chapters 153A and 160A of the General Statutes to pool retention of their risks, two or more local governments may enter into contracts or agreements under this Article to establish pools providing for life or accident and health insurance for their employees on a cooperative or contract basis with one another; or may enter into a trust agreement to carry out the provisions of this Article.

(d)       A workers' compensation pool established pursuant to under this Article may only provide coverage for workers' compensation, employers' liability, and occupational disease claims.

(e)       Such local Local governments that intend to operate under this Article shall give the Commissioner 30 days' advance written notification, in a form prescribed by the Commissioner, that they intend to organize and operate risk pools pursuant to this Article. Local governments that jointly purchase insurance or pool retention of their risks under authority granted to them in Chapters 153A and 160A of the General Statutes  or under G.S. 97-7 and that do not provide the Commissioner with the notification prescribed by this subsection shall not be subject to regulation by the Commissioner and shall not be under the jurisdiction of the Commissioner."

 

part xIx.  severability

 

SECTION 19.  If any section or provision of this act is declared unconstitutional, preempted, or otherwise invalid by the courts, it does not affect the validity of the act as a whole or any part other than the part so declared to be unconstitutional, preempted, or otherwise invalid.

 

part xx.  effect of headings

 

SECTION 20.  The headings to the parts of this act are a convenience to the reader and are for reference only.  The headings do not expand, limit, or define the text of this act.

 

part xxi.  effective dates

 


SECTION 21.  Parts I through X of this act become effective October 1, 2001. Part XV becomes effective July 1, 2001. The remainder of this act is effective when it becomes law.

In the General Assembly read three times and ratified this the 26th day of July, 2001.

 

 

                                                                    s/ Beverly E. Perdue

                                                                         President of the Senate

 

 

                                                                    s/ James B. Black

                                                                         Speaker of the House of Representatives

 

 

                                                                    s/ Michael F. Easley

                                                                         Governor

 

 

Approved 11:32 a.m. this 3rd day of August, 2001