AN ACT relating to health insurance coverage by out-of-state insurers.

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AN ACT relating to health insurance coverage by out-of-state insurers. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 304.11-020 is amended to read as follows: 3
(1) Other than KRS 304.11 -050, the provisions of KRS 304.11 -020 to 304.11 -050, 4
shall not apply to any insurance company or underwriter issuing contracts of 5
insurance to ind ustrial insureds, government entity insureds, and exempt 6
commercial policyholders, nor to any contract of insurance issued to any one (1) or 7
more industrial insureds. 8
(2) For the purpose of this section: 9
(a) An "industrial insured" is: 10
1. An insured who procures the insurance of any risk or risks other than 11
life and annuity contracts by use of the services of a full -time employee 12
acting as an insurance manager or buyer or the services of a regularly 13
and continuously retained qualified insurance consultant; and 14
2. An insured whose aggregate annual premiums for insurance on all risks 15
total at least twenty-five thousand dollars ($25,000); and 16
3. An insured having at least twenty-five (25) full-time employees; and 17
4. All entities that have qualified as industrial insureds as of July 1, 1999; 18
(b) A "government entity insured" is an insured: 19
1. That is a government entity, municipal corporation, or public agency 20
located in a city or county having a population of less than fifty 21
thousand (50,000); and 22
2. That procures the insurance of any risk or risks, other than life and 23
annuity contracts, by use of the services of a full -time employee acting 24
as an insurance manager or buyer, or by the use of the services of a 25
regularly and continuously retained qualified insurance consultant; and 26
3. Whose aggregate annual premiums for insurance on all risks total at 27
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least one hundred thousand dollars ($100,000), exclusive of life, health, 1
medical, or annuity premiums; and 2
4. That has at least fifty (50) full-time employees; and 3
5. That satisfies the criteria the commissioner promulgates by 4
administrative regulation;[ and] 5
(c) 1. An "exempt commercial policyholder" means an insured that employs 6
the services of an insurance agent or broker, procures commercial 7
insurance with the services of a full -time risk manager, or a licensed 8
insurance consultant, pursuant to Subtitle 9 of this chapter and: 9
a. Is a city, county, or urban-county with a population of at least fifty 10
thousand (50,000) persons, or the Commonwealth, or a not-for-11
profit organization or a public entity with an annual budget of at 12
least twenty-five million dollars ($25,000,000) or assets of at least 13
twenty-five million dollars ($25,000,000) in the preceding fiscal 14
year; or 15
b. Certifies that it meets all four (4) of the following criteria: 16
i. Possesses a net worth of more than twenty -five million 17
dollars ($25,000,000) at the time the policy of insurance is issued; 18
ii. Generated net revenue or sales of more than fifty million 19
dollars ($50,000,000) in the preceding fiscal year; 20
iii. Employs more than one hundred (100) employees per 21
individual company or two hundred (200) employees per holding 22
company aggregate at the time the policy of insurance is issued; 23
and 24
iv. Paid annual aggregate insurance premiums of m ore than five 25
hundred thousand dollars ($500,000) in the preceding fiscal year. 26
2. As used in this subsection, "risk manager" means a person qualified to 27
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assess an exempt commercial policyholder's insurance needs and 1
analyze and negotiate a policy of insur ance on behalf of an exempt 2
commercial policyholder. A risk manager shall be: 3
a. A full-time employee of an exempt commercial policyholder who 4
holds a professional designation relevant to the type of insurance 5
to be purchased by the exempt commercial policyholder; or 6
b. A person retained by an exempt commercial policyholder who 7
holds a professional designation relevant to the type of insurance 8
to be purchased by the exempt commercial policyholder; and 9
(d) "Territory of the United States" includes America Sa moa, Puerto Rico, 10
Guam, the Northern Mariana Islands, and the United States Virgin Islands. 11
(3) (a) Policies issued to industrial insureds, government entity insureds, and exempt 12
commercial policyholders are exempt from the rate and policy form 13
requirements of this chapter. 14
(b) Policies issued to industrial insureds, government entity insureds, and exempt 15
commercial policyholders shall contain a disclaimer in language similar to the 16
following: "The rate provided for in this policy is exempt from the filing and 17
approval requirements of Subtitle 13 of KRS Chapter 304. The forms which 18
make up this policy contract are exempt from the filing and approval 19
requirements of Subtitle 14 of KRS Chapter 304." 20
(c) The exemption of commercial policyholders under this sect ion shall not apply 21
to Subtitle 39 of this chapter, KRS Chapter 342, sections in Subtitle 13 of this 22
chapter that pertain to workers' compensation insurance, and KRS 304.12 -23
230. 24
(4) All industrial insureds, government entity insureds, and exempt commercial 25
policyholders shall reapply to the commissioner for their respective insured status 26
every three (3) years, on a form the commissioner shall promulgate by 27
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administrative regulation. 1
(5) KRS 304.11-020 to 304.11-050, inclusive, shall not apply to: 2
(a) Any life insurance company organized and operated, without profit to any 3
private shareholder or individual, exclusively for the purpose of aiding 4
educational or scientific institutions organi zed and operated without profit to 5
any private shareholder or individual by issuing insurance and annuity 6
contracts directly from the home office of the company and without agents or 7
representatives in this state only to or for the benefit of such institutions and to 8
individuals engaged in the services of such institutions, nor to any policy or 9
contract which it issues . The [; but this] exemption authorized in this 10
paragraph shall be conditioned upon any such company complying with the 11
following requirements: 12
1.[(a)] Payment of an annual registration fee; 13
2.[(b)] Filing a copy of any policy or contract issued to Kentucky 14
residents with the commissioner; 15
3.[(c)] Filing a copy of its annual statement prepared pursuant to the laws 16
of its state of domicile, as we ll as such other financial material as may 17
be requested, with the commissioner; and 18
4.[(d)] Providing, in such form as may be acceptable for the appointment 19
of the Secretary of State as its true and lawful attorney upon whom may 20
be served all lawful proces s in any action or proceeding against such 21
company arising out of any policy or contract it has issued to, or which 22
is currently held by, a Kentucky citizen and process so served against 23
such company shall have the same force and validity as if served upon 24
the company; or 25
(b) 1. Any foreign insurer that issues or delivers an individual or group 26
health insurance policy, certificate, plan, or contract in this state. The 27
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exemption authorized in this paragraph shall be conditioned upon the 1
foreign insurer complying with the following requirements: 2
a. Securing regulatory approval from the relevant regulatory 3
authority of any territory of the United States to issue or deliver 4
the individual or group health insurance policy, certificate, plan, 5
or contract; 6
b. Submitting to the department all documentation, which may 7
include: 8
i. Financial statements and solvency documents; 9
ii. Forms, including applications for coverage, contracts, and 10
riders; 11
iii. Rates, including actuarial certifications; and 12
iv. Documentation of provider networks; 13
that the insurer's territorial regulatory authority requires; 14
c. Incorporating into the terms of the individual or group health 15
insurance policy, certificate, plan, or contract: 16
i. All requirements and consumer protections that the 17
insurer's relevant territorial regulatory authority requires 18
for the policy, certificate, plan, or contract; and 19
ii. The insurer's consent to have courts in this state enforce 20
all requirements and consumer protections required by the 21
insurer's relevant territori al regulatory authority for the 22
policy, certificate, plan, or contract; and 23
d. Displaying prominently on all marketing materials, applications, 24
and contracts that the laws of the relevant territory of the United 25
States, and not the laws of this state, gove rn the policy, 26
certificate, plan, or contract. 27
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2. A person in this state who is affected by a foreign insurer's failure to 1
comply with a requirement or consumer protection imposed by the 2
insurer's relevant territorial regulatory authority for a policy, 3
certificate, plan, or contract issued or delivered under this paragraph 4
may file an action in a court of competent jurisdiction in this state to 5
obtain an order requiring compliance with the requirement or 6
consumer protection. 7
(6) For any policy, certificate, plan, or contract issued in compliance with subsection 8
(5)(b) of this section, a foreign insurer shall be exempt from: 9
(a) All other requirements of this chapter, including but not limited to: 10
1. Rate, policy form, and reporting requirements; and 11
2. Taxes, assessments, surcharges, fees, and other charges; and 12
(b) Any other insurance-specific taxes, assessments, surcharges, fees, and other 13
charges imposed or allowed by this state, or imposed by a local government 14
of this state, including but not limited to in Section 2 of this Act and KRS 15
Chapter 136. 16
Section 2. KRS 91A.080 is amended to read as follows: 17
(1) The legislative body of each local government which elects to impose and collect 18
license fees or taxes upon insurance companies for the privilege of engaging in the 19
business of insurance may, except as provided in subsection (10) of this section, 20
enact or change its license fee or rate of tax to be effective July 1 of each year on a 21
prospective basis only and shall file with the commissioner of insurance at least one 22
hundred (100) days prior to the effective date, a copy of all ordinances and 23
amendments which impose a license fee or tax. No less than eighty -five (85) days 24
prior to the effective date, the commissioner of insurance shall promptly notify each 25
insurance company engaged in the business of insurance in the Commonwealth of 26
those local governments w hich have elected to impose the license fees or taxes and 27
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the current amount of the license fee or rate of tax. 1
(2) Any license fee or tax imposed by a local government upon an insurance company 2
with respect to life insurance policies may be based upon the first year's premiums, 3
and, if so based, shall be applied to the amount of the premiums actually collected 4
within each calendar quarter upon the lives of persons residing within the corporate 5
limits of the local government. 6
(3) Any license fee or tax imposed by a local government upon any insurance company 7
with respect to any policy which is not a life insurance policy shall be based upon 8
the premiums actually collected by the insurance company within each calendar 9
quarter on risks located within the corporate limits of the local government on those 10
classes of business which the insurance company is authorized to transact, less all 11
premiums returned to policyholders. In determining the amount of license fee or tax 12
to be collected and to be paid to the local government, the insurance company shall 13
use the tax rate effective on the first day of the policy term. When an insurance 14
company collects a premium as a result of a change in the policy during the policy 15
term, the tax rate used shall be the rate in effec t on the effective date of the policy 16
change. With respect to premiums returned to policyholders, the license fee or tax 17
shall be returned by the insurance company to the policyholder pro rata on the 18
unexpired amount of the premium at the same rate at whic h it was collected and 19
shall be taken as a credit by the insurance company on its next quarterly report to 20
the local government. 21
(4) The Department of Insurance shall, by administrative regulation, provide for a 22
reasonable collection fee to be retained by the insurance company or its agent as 23
compensation for collecting the tax, except that the collection fee shall not be more 24
than fifteen percent (15%) of the fee or tax collected and remitted to the local 25
government or two percent (2%) of the premiums subj ect to the tax, whichever is 26
less. To facilitate computation, collection, and remittance of the fee or tax and 27
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collection fee provided in this section, the fees or taxes set out in subsection (1), (2), 1
or (3) of this section, together with the collection f ee in this section, may be 2
rounded off to the nearest dollar amount. 3
(5) Pursuant to KRS 304.3 -270, if any other state retaliates against any Kentucky 4
domiciliary insurer because of the requirements of this section, the commissioner of 5
insurance shall impo se an equal tax upon the premiums written in this state by 6
insurers domiciled in the other state. 7
(6) Accounting and reporting procedures for collection and reporting of the fees or 8
taxes and the collection fee herein provided shall be determined by admini strative 9
regulations promulgated by the Department of Insurance. 10
(7) (a) Upon written request of the legislative body of any local government, at the 11
expense of the requesting local government, which shall be paid in advance 12
by the local government to the Department of Insurance, the Department of 13
Insurance shall audit, or cause to be audited by contract with qualified 14
auditors, the books or records of the insurance companies or agents subject to 15
the fee or tax to determine whether the fee or tax is being p roperly collected 16
and remitted, and the findings of the audit shall be reported to the local 17
government and the insurance company subject to the audit. An insurance 18
company may appeal the findings of the audit conducted under this subsection 19
and any assess ment issued pursuant to the audit findings in accordance with 20
the provisions of KRS 91A.0804(5). 21
(b) Willful failure to properly collect and remit the fee or tax imposed by a local 22
government pursuant to the authority granted by this section shall constitu te 23
grounds for the revocation of the license issued to an insurance company or 24
agent under the provisions of KRS Chapter 304. 25
(c) If the Department of Insurance finds that an insurance company has willfully 26
engaged in a pattern of business conduct that fai ls to properly collect and 27
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remit the fee or tax imposed by a local government pursuant to the authority 1
granted by this section, the Department of Insurance may assess the 2
responsible insurance company an appropriate penalty fee no greater than ten 3
percent (10%) of the additional license fees or taxes determined to be owed to 4
the local government. The penalty fee shall be paid to the local government 5
owed the license fee or tax less any administrative costs of the Department of 6
Insurance in enforcing this s ection. Any insurance company or agent held 7
responsible for a penalty fee may request a hearing with the Department of 8
Insurance to be conducted pursuant to KRS 304.2 -310 to 304.2-370 regarding 9
the finding of a willful violation and the subsequent penalty fee. 10
(8) The license fees or taxes provided for by subsections (2) and (3) of this section shall 11
be due thirty (30) days after the end of each calendar quarter. Annually, by March 12
31, each insurance company shall furnish each local government to which the tax or 13
fee is remitted with a breakdown of all collections in the preceding calendar year 14
for the following categories of insurance: 15
(a) Casualty; 16
(b) Automobile; 17
(c) Inland marine; 18
(d) Fire and allied perils; 19
(e) Health; and 20
(f) Life. 21
(9) Any license fee or tax not paid on or before the due date shall bear interest at the tax 22
interest rate as defined in KRS 131.010(6) from the date due until paid. Such 23
interest payable to the local government is separate of penalties provided for in 24
subsection (7) of this section. In addition, the local government may assess a ten 25
percent (10%) penalty for a tax or fee not paid within thirty (30) days after the due 26
date. 27
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(10) No license fee or tax imposed under this section shall apply to premiums: 1
(a) Received on policies of group health insurance provided for state employees 2
under KRS 18A.225; 3
(b) Received on policies insuring employers against liability for personal injuries 4
to their employees or the death of their employees caused thereby, under the 5
provisions of KRS Chapter 342; 6
(c) Received on health insurance policies issued to individuals; 7
(d) Received on policies issued through Kentucky Access created in Subtitle 17B 8
of KRS Chapter 304; 9
(e) Received on policies for high deductible health plans as defined in 26 U.S.C. 10
sec. 223(c)(2); 11
(f) Received on multistate surplus lines, defined as non -admitted insurance as 12
provided in Title V, Subtitle B, the Non -Admitted and Reinsurance Reform 13
Act of 2010, of the Dodd -Frank Wall Street Reform and Consumer Protection 14
Act, Pub. L. No. 111-203; 15
(g) Received on policies, certificates, plans, or contracts exempted under 16
subsection (6) of Section 1 of this Act; 17
(h) Paid to insurance companies or surplus lines brokers by nonprofit self -18
insurance groups or self -insurance entities whose me mbership consists of 19
school districts; or 20
(i)[(h)] Paid to insurance companies or surplus lines brokers by nonprofit self -21
insurance groups or self-insurance entities whose membership consists of 22
cities, counties, charter county governments, urban -county governments, 23
consolidated local governments, unified local governments, school districts, 24
or any other political subdivisions of the Commonwealth. 25
(11) No county may impose the tax authorized by this section upon the premiums 26
received on policies issued to public service companies which pay ad valorem 27
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taxes. 1
(12) Insurance companies which pay license fees or taxes pursuant to this section shall 2
credit city license fees or taxes against the same license fees or taxes levied by the 3
county, when the license fees or taxes are levied by the county on or after July 13, 4
1990. For purposes of this subsection, a consolidated local government, urban -5
county government, charter county government, or unified local government shall 6
be considered a county. 7
(13) No license fee or tax imposed under this section shall apply to premiums paid to 8
insurers of municipal bonds, leases, or other debt instruments issued by or on behalf 9
of a city, county, charter county government, urban -county government, 10
consolidated local government, special district, nonprofit corporation, or other 11
political subdivision of the Commonwealth. However, this exemption shall not 12
apply if the b onds, leases, or other debt instruments are issued for profit or on 13
behalf of for-profit or private organizations. 14
(14) A county may impose a license fee or tax covering the entire county or may limit 15
the application of the fee or tax to the unincorporated portions of the county. 16
SECTION 3. A NEW SECTION OF KRS CHAPTER 136 IS CREATED TO 17
READ AS FOLLOWS: 18
A foreign insurer shall be exempt from any tax, assessment, surcharge, fee, or other 19
charge set forth in this chapter that is imposed upon or measured by the premiums paid 20
to or received by the insurer for any policy, certificate, plan, or contract exempted 21
under subsection (6) of Section 1 of this Act. 22