1st Engrossment - 79th Legislature (1995 - 1996) Posted on 12/15/2009 12:00am
1.1 A bill for an act 1.2 relating to insurance; regulating coverages; modifying 1.3 agent cancellations or terminations; providing certain 1.4 filing requirements for domestic insurers; regulating 1.5 disclosures and policy and contract provisions; 1.6 providing for the operation and administration of the 1.7 medical malpractice joint underwriting association and 1.8 the Minnesota joint underwriting association; 1.9 regulating policy cancellations or terminations and 1.10 claims practices; regulating information handling 1.11 practices; establishing solvency requirements; making 1.12 technical changes; amending Minnesota Statutes 1994, 1.13 sections 60A.07, subdivision 8; 60A.08, subdivision 1.14 14; 60A.09, subdivision 4a; 60A.11, subdivision 21; 1.15 60A.171, subdivision 7, and by adding a subdivision; 1.16 60A.36, subdivision 1; 60C.09, subdivision 2; 60C.11, 1.17 by adding a subdivision; 61A.02, subdivision 2, and by 1.18 adding a subdivision; 61A.072, subdivision 4; 61A.32; 1.19 61B.20, subdivision 15; 61B.28, subdivision 7; 62A.02, 1.20 by adding a subdivision; 62A.31, subdivisions 1p, 1r, 1.21 1s, and 3; 62A.315; 62A.318; 62A.36, subdivision 1; 1.22 62A.39; 62A.44, subdivision 2; 62A.60; 62F.03, 1.23 subdivision 6; 62F.04, subdivision 1a; 62I.02, 1.24 subdivisions 2, 5, and by adding a subdivision; 1.25 62I.07; 62L.02, subdivision 15; 62L.09, subdivision 3; 1.26 65A.01, subdivision 3; 65A.295; 65B.14, by adding a 1.27 subdivision; 65B.15, subdivision 1; 70A.07; and 1.28 72A.20, subdivisions 17, 23, 26, 30, and by adding a 1.29 subdivision; Minnesota Statutes 1995 Supplement, 1.30 sections 60A.07, subdivision 10; 60A.67, subdivision 1.31 2; 60K.03, subdivision 7; 61A.09, subdivision 1; 1.32 62A.042; 62A.135, subdivision 1; 62A.31,subdivision 1.33 1h; 62C.14, subdivision 14; 62E.05, subdivision 1; 1.34 62F.02, subdivision 2; 62L.12, subdivision 2; and 1.35 65B.47, subdivision 1a; proposing coding for new law 1.36 in Minnesota Statutes, chapters 60A; 61A; 62A; and 1.37 72A; repealing Minnesota Statutes 1994, sections 1.38 60A.13, subdivision 8; 60A.40; 60B.27; 62I.20; 65A.25; 1.39 and 72A.205; Laws 1995, chapter 140, section 1. 1.40 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 1.41 ARTICLE 1 1.42 Section 1. Minnesota Statutes 1994, section 60A.08, 2.1 subdivision 14, is amended to read: 2.2 Subd. 14. [AGREEMENT TO RESCIND POLICY OR RELEASE BAD 2.3 FAITH CLAIM.] (a) If the insurer has knowledge of any claims 2.4 against the insured that would remain unsatisfied due to the 2.5 financial condition of the insured, the insurer and the insured 2.6 may not agree to: 2.7 (1) rescind the policy; or 2.8 (2) directly or indirectly transfer to, or release to, the 2.9 insurer the insured's claim or potential claim against the 2.10 insurer based upon the insurer's refusal to settle a claim 2.11 against the insured. 2.12 (b) Before entering into an agreementto rescind a policy2.13 described in paragraph (a), an insurer must make a good faith 2.14 effort to ascertain: (1) the existence and identity of all 2.15 claims against the policy; and (2) the financial condition of 2.16 the insured. 2.17 (c) The insured must provide reasonable financial 2.18 information upon request of the insurer. 2.19 (d) An agreement made in violation of this section is void 2.20 and unenforceable. 2.21 Sec. 2. Minnesota Statutes 1994, section 60A.09, 2.22 subdivision 4a, is amended to read: 2.23 Subd. 4a. [ASSUMPTION TRANSACTIONS REGULATED.] Nolife2.24 company, whether domestic, foreign, or alien, shall perform an 2.25 assumption transaction, including an assumption reinsurance 2.26 agreement, with respect to a policy issued to a Minnesota 2.27 resident, unless: 2.28 (1) the assumption agreement has been filed with the 2.29 commissioner; 2.30 (2) the assumption agreement specifically provides that the 2.31 original insurer remains liable to the insured in the event the 2.32 assuming insurer is unable to fulfill its obligations or the 2.33 original insurer acknowledges in writing to the commissioner 2.34 that it remains liable to the insured in the event the assuming 2.35 insurer is unable to fulfill its obligations; 2.36 (3) the proposed certificate of assumption to be provided 3.1 to the policyholder has been filed with the commissioner for 3.2 review and approval as provided in section 61A.02; and 3.3 (4) the proposed certificate of assumption contains, in 3.4 bold face type, the following language: 3.5 "Policyholder: Please be advised that you retain all 3.6 rights with respect to your policy against your original insurer 3.7 in the event the assuming insurer is unable to fulfill its 3.8 obligations. In such event, your original insurer remains 3.9 liable to you notwithstanding the terms of its assumption 3.10 agreement." 3.11 With respect to residents of Minnesota, the notice to 3.12 policyholders shall also include a statement as to the effect on 3.13 guaranty fund coverage, if any, that will result from the 3.14 transfer. 3.15 Clauses (2) and (4) above do not apply if the policyholder 3.16 consents in a signed writing to a release of the original 3.17 insurer from liability and to a waiver of the protections 3.18 provided in clauses (2) and (4) after being informed in writing 3.19 by the insurer of the circumstances relating to and the effect 3.20 of the assumption, provided that the consent form signed by the 3.21 policyholder has been filed with and approved by the 3.22 commissioner. 3.23 If a company is deemed by the commissioner to be in a 3.24 hazardous condition or is under a court ordered supervision, 3.25 rehabilitation, liquidation, conservation or receivership, and 3.26 the transfer of policies is in the best interest of the 3.27 policyholders, as determined by the commissioner, a transfer may 3.28 be effected notwithstanding the provisions in this subdivision 3.29 by using a different form of consent by policyholders. This may 3.30 include a form of implied consent and adequate notification to 3.31 the policyholder of the circumstances requiring the transfer as 3.32 approved by the commissioner. This paragraph does not apply 3.33 when a policy is transferred to the Minnesota life and health 3.34 guaranty association or to the Minnesota insurance guaranty 3.35 association. 3.36 Sec. 3. Minnesota Statutes 1994, section 60A.171, 4.1 subdivision 7, is amended to read: 4.2 Subd. 7. The provisions of this section do not apply to 4.3 the termination of an agent's contract for insolvency, 4.4 abandonment, gross and willful misconduct, or failure to pay 4.5 over to the company money due to the company after receipt by 4.6 the agent of a written demand therefor, or after revocation of 4.7 the agent's license by the commissioner of commerce; nor to the4.8termination of agents who write insurance business exclusively4.9for one company or agents in the direct employ of the4.10company. This section does not apply to the termination of an 4.11 agent's contract if the agent is directly employed by the 4.12 company or if the agent writes 80 percent or more of the agent's 4.13 gross annual insurance business for one company or any or all of 4.14 its subsidiaries. 4.15 Sec. 4. Minnesota Statutes 1994, section 60A.171, is 4.16 amended by adding a subdivision to read: 4.17 Subd. 12. For purposes of this section, a cancellation or 4.18 termination of an agent's contract is considered to have 4.19 occurred if the company cancels a line of insurance business or 4.20 a volume of insurance business that equals or exceeds 75 percent 4.21 of the insurance business placed by that agent with the company. 4.22 Sec. 5. [60A.179] [LIFE OR HEALTH INSURANCE POLICY QUOTAS 4.23 FOR EXCLUSIVE AGENTS.] 4.24 Subdivision 1. [APPLICATION.] This section applies to 4.25 licensed insurance agents as defined by section 60A.176. 4.26 Subd. 2. [PROHIBITED PRACTICE.] No insurer shall require 4.27 an agent who has been licensed as an agent three years or more 4.28 to sell a specified number of life or health insurance policies 4.29 or a specified dollar amount of life and health insurance in 4.30 relation to the sale of other insurance products. No insurer 4.31 may terminate an agent's contract or reduce or restrict an 4.32 agent's underwriting authority on property and casualty 4.33 insurance policies based upon the sale of life or health 4.34 insurance. 4.35 Sec. 6. Minnesota Statutes 1994, section 60A.36, 4.36 subdivision 1, is amended to read: 5.1 Subdivision 1. [REASON FOR CANCELLATION.] No insurer may 5.2 cancel a policy of commercial liability and/or property 5.3 insurance during the term of the policy, except for one or more 5.4 of the following reasons: 5.5 (1) nonpayment of premium; 5.6 (2) misrepresentation or fraud made by or with the 5.7 knowledge of the insured in obtaining the policy or in pursuing 5.8 a claim under the policy; 5.9 (3) actions by the insured that have substantially 5.10 increased or substantially changed the risk insured; 5.11 (4) refusal of the insured to eliminate known conditions 5.12 that increase the potential for loss after notification by the 5.13 insurer that the condition must be removed; 5.14 (5) substantial change in the risk assumed, except to the 5.15 extent that the insurer should reasonably have foreseen the 5.16 change or contemplated the risk in writing the contract; 5.17 (6) loss of reinsurance by the insurer which provided 5.18 coverage to the insurer for a significant amount of the 5.19 underlying risk insured. A notice of cancellation under this 5.20 clause shall advise the policyholder that the policyholder has 5.21 ten days from the date of receipt of the notice to appeal the 5.22 cancellation to the commissioner of commerce and that the 5.23 commissioner will render a decision as to whether the 5.24 cancellation is justified because of the loss of reinsurance 5.25 withinfive30 business days after receipt of the appeal; 5.26 (7) a determination by the commissioner that the 5.27 continuation of the policy could place the insurer in violation 5.28 of the insurance laws of this state; or 5.29 (8) nonpayment of dues to an association or organization, 5.30 other than an insurance association or organization, where 5.31 payment of dues is a prerequisite to obtaining or continuing the 5.32 insurance. This provision for cancellation for failure to pay 5.33 dues does not apply to persons who are retired at 62 years of 5.34 age or older or who are disabled according to social security 5.35 standards. 5.36 Sec. 7. Minnesota Statutes 1995 Supplement, section 6.1 60K.03, subdivision 7, is amended to read: 6.2 Subd. 7. [EXCEPTIONS.] The following are exempt from the 6.3 general licensing requirements prescribed by this section: 6.4 (1) agents of township mutuals who are exempted pursuant to 6.5 section 60K.04; 6.6 (2) fraternal benefit society representatives exempted 6.7 pursuant to section 60K.05; 6.8 (3) any regular salaried officer or employee of a licensed 6.9 insurer, without license or other qualification, may act on 6.10 behalf of that licensed insurer in the negotiation of insurance 6.11 for that insurer, provided that a licensed agent must 6.12 participate in the sale of the insurance; 6.13 (4) employers and their officers or employees, and the 6.14 trustees or employees of any trust plan, to the extent that the 6.15 employers, officers, employees, or trustees are engaged in the 6.16 administration or operation of any program of employee benefits 6.17 for the employees of the employers or employees of their 6.18 subsidiaries or affiliates involving the use of insurance issued 6.19 by a licensed insurance company; provided that the activities of 6.20 the officers, employees and trustees are incidental to clerical 6.21 or administrative duties and their compensation does not vary 6.22 with the volume of insurance or applications for insurance; 6.23 (5) employees of a creditor who enroll debtors for credit 6.24 life, credit accident and health, or credit involuntary 6.25 unemployment insurance; provided the employees receive no 6.26 commission or fee for it; 6.27 (6) clerical or administrative employees of an insurance 6.28 agent who take insurance applications or receive premiums in the 6.29 office of their employer, if the activities are incidental to 6.30 clerical or administrative duties and the employee's 6.31 compensation does not vary with the volume of the applications 6.32 or premiums; 6.33 (7) rental vehicle companies and their employees in 6.34 connection with the offer of rental vehicle personal accident 6.35 insurance under section 72A.125;and6.36 (8) employees of a retailer who enroll purchasers for 7.1 credit insurance associated with a retail purchase; provided the 7.2 employees receive no commission, fee, bonus, or other form of 7.3 compensation for it; and 7.4 (9) representatives of prepaid legal service plans in 7.5 connection with the sale and marketing of these plans. 7.6 Sec. 8. Minnesota Statutes 1994, section 61A.02, 7.7 subdivision 2, is amended to read: 7.8 Subd. 2. [APPROVAL REQUIRED.] No policy or certificate of 7.9 life insurance or annuity contract, issued to an individual, 7.10 group, or multiple employer trust, nor any rider of any kind or 7.11 description which is made a part thereof shall be issued or 7.12 delivered in this state, or be issued by a life insurance 7.13 company organized under the laws of this state, until the form 7.14 of the same has been approved by the commissioner. In making a 7.15 determination under this section, the commissioner may require 7.16 the insurer to provide rates and advertising materials related 7.17 to policies or contracts, certificates, or similar evidence of 7.18 coverage issued or delivered in this state. 7.19This section appliesSubdivisions 1 to 5 apply to a policy, 7.20 certificate of insurance, or similar evidence of coverage issued 7.21 to a Minnesota resident or issued to provide coverage to a 7.22 Minnesota resident.This section doesSubdivisions 1 to 5 do 7.23 not apply to a certificate of insurance or similar evidence of 7.24 coverage that meets the conditions of section 61A.093, 7.25 subdivision 2. 7.26 Sec. 9. Minnesota Statutes 1994, section 61A.02, is 7.27 amended by adding a subdivision to read: 7.28 Subd. 6. [FILING BY DOMESTIC INSURERS FOR PURPOSES OF 7.29 COMPLYING WITH ANOTHER STATE'S FILING REQUIREMENTS.] A domestic 7.30 insurer may file with the commissioner for informational 7.31 purposes only a policy, certificate of insurance, or annuity 7.32 contract that is not intended to be offered or sold within this 7.33 state. This subdivision only applies to the filing in Minnesota 7.34 of a policy, certificate of insurance, or annuity contract 7.35 issued to an insured, certificate holder, or annuitant located 7.36 outside of this state when the filing is for the express purpose 8.1 of complying with the law of the state in which the insured, 8.2 certificate holder, or annuitant resides. In no event may a 8.3 policy, certificate of insurance, or annuity contract filed 8.4 under this subdivision for out-of-state use be issued or 8.5 delivered in Minnesota unless and until the policy, certificate 8.6 of insurance, or annuity contract is approved under subdivision 8.7 2. 8.8 Sec. 10. Minnesota Statutes 1994, section 61A.072, 8.9 subdivision 4, is amended to read: 8.10 Subd. 4. [LONG-TERM CARE EXPENSES.] If the right to 8.11 receive accelerated benefits is contingent upon the insured 8.12 receiving long-term care services, the contract or supplemental 8.13 contract shall include the following provisions: 8.14 (1) the minimum accelerated benefit shall be $1,200 per 8.15 month if the insured is receiving nursing facility services and 8.16 $750 per month if the insured is receiving home services with a 8.17 minimum lifetime benefit limit of $50,000; 8.18 (2) coverage is effective immediately and benefits shall 8.19 commence with the receipt of services as defined in section 8.20 62A.46, subdivision 3, 4, or 5, but may include a waiting period 8.21 of not more than 90 days, provided that no more than one waiting 8.22 period may be required per benefit period as defined in section 8.23 62A.46, subdivision 11; 8.24 (3) premium shall be waived during any period in which 8.25 benefits are being paid to the insured during confinement to a 8.26 nursing home facility; 8.27 (4) coverage may not be canceled or renewal refused except 8.28 on the grounds of nonpayment of premium; 8.29 (5) coverage must include preexisting conditions during the 8.30 first six months of coverage if the insured was not diagnosed or 8.31 treated for the particular condition during the 90 days 8.32 immediately preceding the effective date of coverage; 8.33 (6)the contract or supplemental contract shall contain the8.34following disclosure:8.35"THE ACCELERATED LIFE INSURANCE BENEFITS PROVIDED UNDER8.36THIS CONTRACT MAY NOT COVER ALL NURSING HOME, HOME CARE, OR9.1ADULT DAY CARE EXPENSES. BENEFITS ARE NOT PAYABLE UPON RECEIPT9.2OF RESIDENTIAL CARE. READ YOUR POLICY CAREFULLY TO DETERMINE9.3YOUR BENEFIT AMOUNT.";9.4(7)coverage must include mental or nervous disorders which 9.5 have a demonstrable organic cause such as Alzheimer's and 9.6 related dementias; 9.7(8)(7) no prior hospitalization requirement shall be 9.8 allowed unless a similar requirement is allowed by section 9.9 62A.48, subdivision 1; and 9.10(9)(8) the contract shall include a cancellation provision 9.11 that meets the requirements of section 62A.50, subdivision 2. 9.12 Sec. 11. Minnesota Statutes 1995 Supplement, section 9.13 61A.09, subdivision 1, is amended to read: 9.14 Subdivision 1. No group life insurance policy or group 9.15 annuity shall be issued for delivery in this state until the 9.16 form thereof and the form of any certificates issued thereunder 9.17 have been filed in accordance with and subject to the provisions 9.18 of section 61A.02. Each person insured under such a group life 9.19 insurance policy (excepting policies which insure the lives of 9.20 debtors of a creditor or vendor to secure payment of 9.21 indebtedness) shall be furnished a certificate of insurance 9.22 issued by the insurer and containing the following: 9.23 (a) Name and location of the insurance company; 9.24 (b) A statement as to the insurance protection to which the 9.25 certificate holder is entitled, including any changes in such 9.26 protection depending on the age of the person whose life is 9.27 insured; 9.28 (c) Any and all provisions regarding the termination or 9.29 reduction of the certificate holder's insurance protection; 9.30 (d) A statement that the master group policy may be 9.31 examined at a reasonably accessible place; 9.32 (e) The maximum rate of contribution to be paid by the 9.33 certificate holder; 9.34 (f) Beneficiary and method required to change such 9.35 beneficiary; 9.36 (g) A statement that alternative methods for the payment of 10.1 group life policy proceeds of $15,000 or more must be offered to 10.2 beneficiaries in lieu of a lump sum distribution, at their 10.3 request. Alternative payment methods which must be offered at 10.4 the request of the beneficiaries must include, but are not 10.5 limited to, a life income option, an income option for fixed 10.6 amounts or fixed time periods, and the option to select an 10.7 interest-bearing account with the company with the right to 10.8 select another option at a later date; 10.9 (h) In the case of a group term insurance policy if the 10.10 policy provides that insurance of the certificate holder will 10.11 terminate, in case of a policy issued to an employer, by reason 10.12 of termination of the certificate holder's employment, or in 10.13 case of a policy issued to an organization of which the 10.14 certificate holder is a member, by reason of termination of 10.15 membership, a provision to the effect that in case of 10.16 termination of employment or membership, or in case of 10.17 termination of the group policy, the certificate holder shall be 10.18 entitled to have issued by the insurer, without evidence of 10.19 insurability, upon application made to the insurer within 31 10.20 days after the termination, and upon payment of the premium 10.21 applicable to the class of risk to which that person belongs and 10.22 to the form and amount of the policy at that person's then 10.23 attained age, a policy of life insurance only, in any one of the 10.24 forms customarily issued by the insurer except term insurance, 10.25 in an amount equal to the amount of the life insurance 10.26 protection under such group insurance policy at the time of such 10.27 termination; and shall contain a further provision to the effect 10.28 that upon the death of the certificate holder during such 31-day 10.29 period and before any such individual policy has become 10.30 effective, the amount of insurance for which the certificate 10.31 holder was entitled to make application shall be payable as a 10.32 death benefit by the insurer. 10.33 This section applies to a policy, certificate of insurance, 10.34 or similar evidence of coverage issued to a Minnesota resident 10.35 or issued to provide coverage to a Minnesota resident. This 10.36 section does not apply to a certificate of insurance or similar 11.1 evidence of coverage that meets the conditions of section 11.2 61A.093, subdivision 2. 11.3 Sec. 12. [61A.53] [DEFINITIONS.] 11.4 Subdivision 1. [APPLICABILITY.] For purposes of sections 11.5 61A.53 to 61A.60, the terms defined in this section have the 11.6 meanings given. 11.7 Subd. 2. [REPLACEMENT.] "Replacement" means any 11.8 transaction in which new life insurance or a new annuity is to 11.9 be purchased, and it is known or should be known to the 11.10 proposing agent or broker or to the proposing insurer if there 11.11 is no agent, that by reason of the transaction, existing life 11.12 insurance or annuity has been or is to be: 11.13 (1) lapsed, forfeited, surrendered, or otherwise 11.14 terminated; 11.15 (2) converted to reduced paid-up insurance, continued as 11.16 extended term insurance, or otherwise reduced in value by the 11.17 use of nonforfeiture benefits or other policy values; 11.18 (3) amended so as to effect either a reduction in benefits 11.19 or in the term for which coverage would otherwise remain in 11.20 force or for which benefits would be paid; 11.21 (4) reissued with any reduction in cash value; or 11.22 (5) pledged as collateral or subjected to borrowing, 11.23 whether in a single loan or under a schedule of borrowing over a 11.24 period of time for amounts in the aggregate exceeding 25 percent 11.25 of the loan value set forth in the policy. 11.26 Subd. 3. [CONSERVATION.] "Conservation" means any attempt 11.27 by the existing insurer or its agent or broker to dissuade a 11.28 policy owner or contract holder from the replacement of existing 11.29 life insurance or annuity. Conservation does not include 11.30 routine administrative procedures such as late payment 11.31 reminders, late payment offers, or reinstatement offers. 11.32 Subd. 4. [DIRECT-RESPONSE SALE.] "Direct-response sale" 11.33 means any sale of life insurance or annuity where the insurer 11.34 does not use an agent in the sale or delivery of the policy or 11.35 contract. 11.36 Subd. 5. [EXISTING INSURER.] "Existing insurer" means the 12.1 insurance company whose policy or contract is or will be changed 12.2 or terminated in such a manner as described within the 12.3 definition of "replacement." 12.4 Subd. 6. [EXISTING LIFE INSURANCE OR ANNUITY.] "Existing 12.5 life insurance or annuity" means any life insurance or annuity 12.6 in force, including life insurance under a binding or 12.7 conditional receipt or a life insurance policy or annuity 12.8 contract that is within an unconditional refund period. 12.9 Subd. 7. [REPLACING INSURER.] "Replacing insurer" means 12.10 the insurance company that issues or proposes to issue a new 12.11 policy or contract which is a replacement of existing life 12.12 insurance or annuity. 12.13 Sec. 13. [61A.54] [EXEMPTIONS.] 12.14 Unless otherwise specifically included, sections 61A.53 to 12.15 61A.60 do not apply to transactions involving: 12.16 (1) credit life insurance; 12.17 (2) group life insurance or group annuities; 12.18 (3) an application to the existing insurer that issued the 12.19 existing life insurance, where a contractual change or a 12.20 conversion privilege is being exercised; 12.21 (4) proposed life insurance that is to replace life 12.22 insurance under a binding or conditional receipt issued by the 12.23 same company; or 12.24 (5) transactions where the replacing insurer and the 12.25 existing insurer are the same, or are subsidiaries or affiliates 12.26 under common ownership or control; provided, however, that 12.27 agents or brokers proposing replacement shall comply with 12.28 section 61A.55, subdivision 1. 12.29 Sec. 14. [61A.55] [DUTIES OF AGENTS AND BROKERS.] 12.30 Subdivision 1. [SUBMISSION TO INSURER.] Each agent or 12.31 broker who initiates the application shall submit to the insurer 12.32 to which an application for life insurance or annuity is 12.33 presented, with or as part of each application: 12.34 (1) a statement signed by the applicant as to whether 12.35 replacement of existing life insurance or annuity is involved in 12.36 the transaction; and 13.1 (2) a signed statement as to whether the agent or broker 13.2 knows replacement is or may be involved in the transaction. 13.3 Subd. 2. [REPLACEMENT INFORMATION.] Where a replacement is 13.4 involved, the agent or broker shall: 13.5 (1) present to the applicant, not later than at the time of 13.6 taking the application, a "notice regarding replacement" in the 13.7 form as described in section 61A.60, subdivision 1, or other 13.8 substantially similar form approved by the commissioner. The 13.9 notice shall be fully completed and signed by both the applicant 13.10 and the agent or broker and left with the applicant. The 13.11 completed notice must list all existing life insurance and 13.12 annuity to be replaced, properly identified by name of insurer, 13.13 the insured, and contract number. If a contract number has not 13.14 been assigned by the existing insurer, alternative 13.15 identification, such as an application or receipt number, shall 13.16 be listed; 13.17 (2) leave with the applicant the original or a copy of any 13.18 written or printed communications used for presentation to the 13.19 applicant; and 13.20 (3) submit to the replacing insurer with the application a 13.21 copy of the fully completed and signed replacement notice 13.22 provided under this subdivision. 13.23 Subd. 3. [MATERIALS USED TO DISSUADE REPLACEMENT.] Each 13.24 agent or broker who uses written or printed communications in a 13.25 conservation shall leave with the applicant the original or a 13.26 copy of the communications. 13.27 Sec. 15. [61A.56] [DUTIES OF ALL INSURERS.] 13.28 Each insurer shall: 13.29 (1) inform its field representatives or other personnel 13.30 responsible for compliance with sections 61A.53 to 61A.60 of the 13.31 requirements of those sections; and 13.32 (2) require with or as a part of each completed application 13.33 for life insurance or annuity a statement signed by the 13.34 applicant as to whether the proposed insurance or annuity will 13.35 replace existing life insurance or annuity. 13.36 Sec. 16. [61A.57] [DUTIES OF INSURERS THAT USE AGENTS OR 14.1 BROKERS.] 14.2 Each insurer that uses an agent or broker in a life 14.3 insurance or annuity sale shall: 14.4 (a) Require with or as part of each completed application 14.5 for life insurance or annuity, a statement signed by the agent 14.6 or broker as to whether the agent or broker knows replacement is 14.7 or may be involved in the transaction. 14.8 (b) Where a replacement is involved: 14.9 (1) require from the agent or broker with the application 14.10 for life insurance or annuity, a copy of the fully completed and 14.11 signed replacement notice provided the applicant under section 14.12 61A.55. The existing life insurance or annuity must be 14.13 identified by name of insurer, insured, and contract number. If 14.14 a number has not been assigned by the existing insurer, 14.15 alternative identification, such as an application or receipt 14.16 number, must be listed; and 14.17 (2) send to each existing insurer a written communication 14.18 advising of the replacement or proposed replacement and the 14.19 identification information obtained under this section. This 14.20 written communication must be made within five working days of 14.21 the date that the application is received in the replacing 14.22 insurer's home or regional office, or the date the proposed 14.23 policy or contract is issued, whichever is sooner. 14.24 (c) The replacing insurer shall maintain evidence of the 14.25 "notice regarding replacement" and a replacement register, 14.26 cross-indexed, by replacing agent and existing insurer to be 14.27 replaced. Evidence that all requirements were met shall be 14.28 maintained for at least six years. 14.29 (d) The replacing insurer shall provide in its policy or 14.30 contract, or in a separate written notice that is delivered with 14.31 the policy or contract, that the applicant has a right to an 14.32 unconditional refund of all premiums paid, which right may be 14.33 exercised within a period of 20 days beginning from the date of 14.34 delivery of the policy. 14.35 Sec. 17. [61A.58] [DUTIES OF INSURERS WITH RESPECT TO 14.36 DIRECT RESPONSE SALES.] 15.1 (a) If in the solicitation of a direct response sale, the 15.2 insurer did not propose the replacement, and a replacement is 15.3 involved, the insurer shall send to the applicant with the 15.4 policy or contract a replacement notice as described in section 15.5 61A.60, subdivision 2, or other substantially similar form 15.6 approved by the commissioner. 15.7 (b) If the insurer proposed the replacement, it shall: 15.8 (1) provide to applicants or prospective applicants with or 15.9 as a part of the application a replacement notice as described 15.10 in section 61A.60, subdivision 2, or other substantially similar 15.11 form approved by the commissioner; 15.12 (2) request from the applicant with or as part of the 15.13 application, a list of all existing life insurance policies or 15.14 annuity contracts to be replaced and properly identified by name 15.15 of insurer and insured; and 15.16 (3) comply with the requirements of section 61A.57, 15.17 paragraph (b), clause (2), if the applicant furnishes the names 15.18 of the existing insurers, and the requirements of section 15.19 61A.57, paragraphs (c) and (d), except that it need not index 15.20 the replacement register by replacing agent. 15.21 Sec. 18. [61A.59] [ENFORCEMENT; EFFECT OF COMPLIANCE.] 15.22 (a) An agent, broker, or insurer shall not recommend the 15.23 replacement or conservation of an existing policy or contract by 15.24 use of a substantially inaccurate presentation or comparison of 15.25 an existing policy's or contract's premiums and benefits or 15.26 dividends and values, if any. An insurer, agent, 15.27 representative, officer, or employee of the insurer failing to 15.28 comply with the requirements of sections 61A.53 to 61A.60 is 15.29 subject to such penalties as may be appropriate under this 15.30 chapter. 15.31 (b) Patterns of action by policy holders or contract 15.32 holders who purchase replacing policies or contracts from the 15.33 same agent or broker, after indicating on applications that 15.34 replacement is not involved, are prima facie evidence of the 15.35 agent's or broker's knowledge that replacement was intended in 15.36 connection with the sale of those policies, and the patterns of 16.1 action are prima facie evidence of the agent's or broker's 16.2 intent to violate sections 61A.53 to 61A.60. 16.3 (c) Sections 61A.53 to 61A.60 do not prohibit the use of 16.4 additional material other than that which is required that does 16.5 not violate those sections or any other statute or rule. 16.6 (d) Compliance by an insurer, agent, or broker with 16.7 sections 61A.53 to 61A.60 does not limit any cause of action or 16.8 other remedies that the insured may otherwise have against an 16.9 insurer, agent, or broker. In a proceeding in which the 16.10 insured's knowledge or understanding is an issue, compliance 16.11 with those sections may be admitted as evidence on that issue, 16.12 but shall not be conclusive. 16.13 Sec. 19. [61A.60] [REQUIRED REPLACEMENT NOTICE AND FORM.] 16.14 Subdivision 1. [NOTICE FORM; AGENT SALES.] The notice 16.15 required where sections 61A.53 to 61A.60 refer to this 16.16 subdivision is as follows: 16.17 IMPORTANT NOTICE 16.18 16.19 DEFINITION: REPLACEMENT is any transaction where, in connection 16.20 with the purchase of New Insurance, you LAPSE, 16.21 SURRENDER, CONVERT to Paid-up Insurance, Place on 16.22 Extended Term, or BORROW all or part of the policy 16.23 loan values on an existing insurance policy or 16.24 an annuity. (See reverse side for DEFINITIONS.) 16.26 IF YOU In connection with the purchase of this insurance, 16.27 INTEND TO if you have REPLACED or intend to REPLACE your 16.28 REPLACE present life insurance coverage, you should be 16.29 COVERAGE certain that you understand all the relevant 16.30 factors involved. 16.31 You should BE AWARE that you may be required to 16.32 provide [EVIDENCE OF INSURABILITY] and 16.34 1) If your HEALTH condition has CHANGED since 16.35 the application was taken on your present 16.36 policies, you may be required to pay ADDITIONAL 17.1 PREMIUMS under the NEW POLICY, or be DENIED 17.2 coverage. 17.4 2) Your present occupation or activities [may not 17.5 be covered or could require additional premiums.] 17.7 3) The INCONTESTABLE and SUICIDE CLAUSE will 17.8 begin anew in a new policy. This could RESULT 17.9 in a [CLAIM under the new policy BEING DENIED] 17.10 that would otherwise have been paid. 17.12 4) Current law DOES NOT REQUIRE your present 17.13 insurer(s) to REFUND any premiums. 17.15 5) It is to your advantage to OBTAIN INFORMATION 17.16 regarding your existing policies [from the 17.17 insurer or agent from whom you purchased the 17.18 policy.] 17.20 17.21 (If you are purchasing an annuity, clauses 1, 2, and 3 17.22 above would not apply to the new annuity contract.) THE 17.23 INSURANCE I INTEND TO PURCHASE FROM 17.24 .......................................INSURANCE CO. MAY 17.25 REPLACE OR ALTER EXISTING LIFE INSURANCE POLICY(IES). The 17.26 following policy(ies) may be replaced as a result of this 17.27 transaction: [Insurer [Insured as it appears on the policy] 17.28 as it appears on the policy] 17.29 ............................................................. 17.30 ............................................................. 17.31 ............................................................. 17.32 ............................. ............................. 17.33 [Policy Number] [Insured Birthdate] 17.34 ............................. ............................. 17.35 ............................. ............................. 17.36 ............................. ............................. 18.1 ............................. ............................. 18.2 The proposed policy 18.3 ...................................... $...... 18.4 type of policy-generic name face amount 18.6 ........................................................ 18.7 signature of applicant date 18.9 ........................................................ 18.10 address of applicant city state 18.12 I certify that this form was given to and completed by 18.14 ........................................................ 18.15 (applicant-please print or type) 18.17 prior to taking an application and that I am leaving a 18.18 signed copy for the applicant. 18.20 ................................................... 18.21 agent's signature date 18.23 ................................................... 18.24 address 18.26 ................................................... 18.27 city state 18.28 [NOTE IMPORTANT STATEMENT ON REVERSE SIDE] 18.29 Subd. 2. [NOTICE FORM; DIRECT RESPONSE SALES.] The notice 18.30 required where sections 61A.53 to 61A.60 refer to this 18.31 subdivision is as follows: 18.32 IMPORTANT NOTICE 18.33 REQUIRED BY 18.34 MINNESOTA INSURANCE LAW 18.36 DEFINITION: REPLACEMENT is any transaction where, in connection 18.37 with the purchase of New Insurance or a New Annuity, 18.38 you LAPSE, SURRENDER, CONVERT to Paid-up Insurance, 18.39 Place on Extended Term, or BORROW all or part of 18.40 the policy loan values on an existing insurance 18.41 policy or an annuity. (See reverse side for 18.42 DEFINITIONS.) 18.44 IF YOU In connection with the purchase of this insurance 18.45 INTEND TO or annuity, if you have REPLACED or intend to 18.46 REPLACE REPLACE your present life insurance coverage or 18.47 COVERAGE annuity(ies), you should be certain that you 18.48 understand all the relevant factors involved. 19.2 You should BE AWARE that you may be required 19.3 to provide [Evidence of insurability] and 19.5 (1) If your HEALTH condition has CHANGED since 19.6 the application was taken on your present 19.7 policies, you may be required to pay 19.8 ADDITIONAL PREMIUMS under the NEW POLICY, 19.9 or be DENIED coverage. 19.10 (2) Your present occupation or activities [may 19.11 not be covered or could require additional 19.12 premiums.] 19.13 (3) The INCONTESTABLE and SUICIDE CLAUSE will 19.14 begin anew in a new policy. This could 19.15 RESULT in a [CLAIM under the new policy 19.16 BEING DENIED] that would otherwise have 19.17 been paid. 19.18 (4) Current law DOES NOT REQUIRE your present 19.19 insurer(s) to REFUND any premiums. 19.20 (5) It may be to your advantage to OBTAIN 19.21 INFORMATION regarding your existing 19.22 policies [from the insurer or agent from 19.23 whom you purchased the policy.] 19.25 (If an annuity is being purchased, Items 1, 19.26 2, and 3 above would not apply to the new 19.27 contract.) 19.29 CAUTION If after studying the information made 19.30 available to you, you decide to replace your 19.31 existing life insurance or annuity with our 19.32 contract, you are urged not to take action to 19.33 terminate or alter your existing coverage until 19.34 after you have been issued the new policy, 19.35 examined it, and found it to be acceptable to 19.36 you. If you should terminate or otherwise 20.1 materially alter your existing coverage and 20.2 fail to qualify for the life insurance for 20.3 which you have applied, you may find yourself 20.4 unable to purchase other life insurance or be 20.5 able to purchase it only at substantially 20.6 higher rates. 20.8 INSURER'S MAILING DATE: ............................. 20.9 Subd. 3. [DEFINITIONS.] The following definitions must 20.10 appear on the back of the notice forms provided in subdivisions 20.11 1 and 2: 20.12 DEFINITIONS 20.13 PREMIUMS: Premiums are the payments you make in exchange 20.14 for an insurance or annuity contract. They are unlike deposits 20.15 in a savings or investment program, because if you drop the 20.16 policy, you might get back less than you paid in. 20.17 CASH SURRENDER VALUE: This is the amount of money you can 20.18 get in cash if you surrender your life insurance policy or 20.19 annuity. If there is a policy loan, the cash surrender value is 20.20 the difference between the cash value printed in the policy and 20.21 the loan value. Not all policies have cash surrender values. 20.22 LAPSE: A life insurance policy may lapse when you do not 20.23 pay the premiums within the grace period. If you had a cash 20.24 surrender value, the insurer might change your policy to as much 20.25 extended term insurance or paid-up insurance as the cash 20.26 surrender value will buy. Sometimes the policy lets the insurer 20.27 borrow from the cash surrender value to pay the premiums. 20.28 SURRENDER: You surrender a life insurance policy when you 20.29 either let it lapse or tell the company you want to drop it. 20.30 Whenever a policy has a cash surrender value, you can get it in 20.31 cash if you return the policy to the company with a written 20.32 request. Most insurers will also let you exchange the cash 20.33 value of the policy for paid-up or extended term insurance. 20.34 CONVERT TO PAID-UP INSURANCE: This means you use your cash 20.35 surrender value to change your insurance to a paid-up policy 20.36 with the same insurer. The death benefit generally will be 21.1 lower than under the old policy, but you will not have to pay 21.2 any more premiums. 21.3 PLACE ON EXTENDED TERM: This means you use your cash 21.4 surrender value to change your insurance to term insurance with 21.5 the same insurer. In this case, the net death benefit will be 21.6 the same as before. However, you will only be covered for a 21.7 specified period of time stated in the policy. 21.8 BORROW POLICY LOAN VALUES: If your life insurance policy 21.9 has a cash surrender value, you can almost always borrow all or 21.10 part of it from the insurer. Interest will be charged according 21.11 to the terms of the policy, and if the loan with unpaid interest 21.12 ever exceeds the cash surrender value, your policy will be 21.13 surrendered. If you die, the amount of the loan and any unpaid 21.14 interest due will be subtracted from the death benefits. 21.15 EVIDENCE OF INSURABILITY: This means proof that you are an 21.16 acceptable risk. You have to meet the insurer's standards 21.17 regarding age, health, occupation, etc., to be eligible for 21.18 coverage. 21.19 INCONTESTABLE CLAUSE: This says that after two years, 21.20 depending on the policy or insurer, the life insurer will not 21.21 resist a claim because you made a false or incomplete statement 21.22 when you applied for the policy. For the early years, though, 21.23 if there are wrong answers on the application and the insurer 21.24 finds out about them, the insurer can deny a claim as if the 21.25 policy had never existed. 21.26 SUICIDE CLAUSE: This says that if you commit suicide after 21.27 being insured for less than two years, depending on the policy 21.28 and insurer, your beneficiaries will receive only a refund of 21.29 the premiums that were paid. 21.30 Subd. 4. [PRINTING OF NOTICES.] The notices in 21.31 subdivisions 1 and 2 must be reproduced in their entirety on one 21.32 side of an 8-1/2 by 11 inch sheet of plain paper. The 21.33 definitions contained in subdivision 3 must be printed on the 21.34 reverse side. The insurer may print its legal name in the space 21.35 provided. 21.36 Sec. 20. Minnesota Statutes 1994, section 61B.28, 22.1 subdivision 7, is amended to read: 22.2 Subd. 7. [NOTICE CONCERNING LIMITATIONS AND EXCLUSIONS.] 22.3 (a) No person, including an insurer, agent, or affiliate of an 22.4 insurer or agent, shall offer for sale in this state a covered 22.5 life insurance, annuity, or health insurance policy or contract 22.6 without delivering at the time of application for that policy or 22.7 contract a notice in the form specified in subdivision 8, or in 22.8 a form approved by the commissioner under paragraph (b), 22.9 relating to coverage provided by the Minnesota life and health 22.10 insurance guaranty association. The notice may be part of the 22.11 application. A copy of the notice must be given to the 22.12 applicant. The notice must be delivered to the applicant at the 22.13 time of application for the policy or contract, except that if 22.14 the application is not taken from the applicant in person, the 22.15 notice must be sent to the applicant within 72 hours after the 22.16 application is taken. The person offering the policy or 22.17 contract shall document the fact that the notice was given at 22.18 the time of application or was sent within the specified time. 22.19 This does not require that the receipt of the notice be 22.20 acknowledged by the applicant. 22.21 (b) The association may prepare, and file with the 22.22 commissioner for approval, a form of notice as an alternative to 22.23 the form of notice specified in subdivision 8 describing the 22.24 general purposes and limitations of this chapter. The form of 22.25 notice shall: 22.26 (1) state the name, address, and telephone number of the 22.27 Minnesota life and health insurance guaranty association; 22.28 (2) prominently warn the policy or contract holder that the 22.29 Minnesota life and health insurance guaranty association may not 22.30 cover the policy or, if coverage is available, it will be 22.31 subject to substantial limitations and exclusions and 22.32 conditioned on continued residence in the state; 22.33 (3) state that the insurer and its agents are prohibited by 22.34 law from using the existence of the Minnesota life and health 22.35 insurance guaranty association for the purpose of sales, 22.36 solicitation, or inducement to purchase any form of insurance; 23.1 (4) emphasize that the policy or contract holder should not 23.2 rely on coverage under the Minnesota life and health insurance 23.3 guaranty association when selecting an insurer; 23.4 (5) provide other information as directed by the 23.5 commissioner. The commissioner may approve any form of notice 23.6 proposed by the association and, as to the approved form of 23.7 notice, the association may notify all member insurers by mail 23.8 that the form of notice is available as an alternative to the 23.9 notice specified in subdivision 8. 23.10 (c) A policy or contract not covered by the Minnesota Life 23.11 and Health Insurance Guaranty Association or the Minnesota 23.12 Insurance Guaranty Association must contain the following notice 23.13 in ten-point type, stamped in red ink or contrasting type on the 23.14 policy or contract and the application: 23.15 "THIS POLICY OR CONTRACT IS NOT PROTECTED BY THE MINNESOTA 23.16 LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION OR THE 23.17 MINNESOTA INSURANCE GUARANTY ASSOCIATION. IN THE CASE OF 23.18 INSOLVENCY, PAYMENT OF CLAIMS IS NOT GUARANTEED. ONLY THE 23.19 ASSETS OF THIS INSURER WILL BE AVAILABLE TO PAY YOUR CLAIM." 23.20 This section does not apply to fraternal benefit societies 23.21 regulated under chapter 64B. 23.22 Sec. 21. Minnesota Statutes 1994, section 62A.02, is 23.23 amended by adding a subdivision to read: 23.24 Subd. 7. [FILING BY DOMESTIC INSURERS FOR PURPOSES OF 23.25 COMPLYING WITH ANOTHER STATE'S FILING REQUIREMENTS.] A domestic 23.26 insurer may file with the commissioner for informational 23.27 purposes only a policy or certificate of insurance that is not 23.28 intended to be offered or sold within this state. This 23.29 subdivision only applies to the filing in Minnesota of a policy 23.30 or certificate of insurance issued to an insured or certificate 23.31 holder located outside of this state when the filing is for the 23.32 express purpose of complying with the law of the state in which 23.33 the insured or certificate holder resides. In no event may a 23.34 policy or certificate of insurance filed under this subdivision 23.35 for out-of-state use be issued or delivered in Minnesota unless 23.36 and until the policy or certificate of insurance is approved 24.1 under subdivision 2. 24.2 Sec. 22. Minnesota Statutes 1995 Supplement, section 24.3 62A.042, is amended to read: 24.4 62A.042 [FAMILY COVERAGE; COVERAGE OF NEWBORN INFANTS.] 24.5 Subdivision 1. [INDIVIDUAL FAMILY POLICIES; RENEWALS.] (a) 24.6 No policy of individual accident and sickness insurance which 24.7 provides for insurance for more than one person under section 24.8 62A.03, subdivision 1, clause (3), and no individual health 24.9 maintenance contract which provides for coverage for more than 24.10 one person under chapter 62D, shall be renewed to insure or 24.11 cover any person in this state or be delivered or issued for 24.12 delivery to any person in this state unless the policy or 24.13 contract includes as insured or covered members of the family 24.14 any newborn infants, including dependent grandchildren who24.15reside with a covered grandparent,immediately from the moment 24.16 of birth and thereafter which insurance or contract shall 24.17 provide coverage for illness, injury, congenital malformation, 24.18 or premature birth. For purposes of this paragraph, "newborn 24.19 infants" includes grandchildren who are financially dependent 24.20 upon a covered grandparent and who reside with that covered 24.21 grandparent continuously from birth. No policy or contract 24.22 covered by this section may require notification to a health 24.23 carrier as a condition for this dependent coverage. However, if 24.24 the policy or contract mandates an additional premium for each 24.25 dependent, the health carrier shall be entitled to all premiums 24.26 that would have been collected had the health carrier been aware 24.27 of the additional dependent. The health carrier may withhold 24.28 payment of any health benefits for the new dependent until it 24.29 has been compensated with the applicable premium which would 24.30 have been owed if the health carrier had been informed of the 24.31 additional dependent immediately. 24.32 (b) The coverage under paragraph (a) includes benefits for 24.33 inpatient or outpatient expenses arising from medical and dental 24.34 treatment up to age 18, including orthodontic and oral surgery 24.35 treatment, involved in the management of birth defects known as 24.36 cleft lip and cleft palate. If orthodontic services are 25.1 eligible for coverage under a dental insurance plan and another 25.2 policy or contract, the dental plan shall be primary and the 25.3 other policy or contract shall be secondary in regard to the 25.4 coverage required under paragraph (a). Payment for dental or 25.5 orthodontic treatment not related to the management of the 25.6 congenital condition of cleft lip and cleft palate shall not be 25.7 covered under this provision. 25.8 Subd. 2. [GROUP POLICIES; RENEWALS.] (a) No group accident 25.9 and sickness insurance policy and no group health maintenance 25.10 contract which provide for coverage of family members or other 25.11 dependents of an employee or other member of the covered group 25.12 shall be renewed to cover members of a group located in this 25.13 state or delivered or issued for delivery to any person in this 25.14 state unless the policy or contract includes as insured or 25.15 covered family members or dependents any newborn infants,25.16including dependent grandchildren who reside with a covered25.17grandparent,immediately from the moment of birth and thereafter 25.18 which insurance or contract shall provide coverage for illness, 25.19 injury, congenital malformation, or premature birth. For 25.20 purposes of this paragraph, "newborn infants" includes 25.21 grandchildren who are financially dependent upon a covered 25.22 grandparent and who reside with that covered grandparent 25.23 continuously from birth. No policy or contract covered by this 25.24 section may require notification to a health carrier as a 25.25 condition for this dependent coverage. However, if the policy 25.26 or contract mandates an additional premium for each dependent, 25.27 the health carrier shall be entitled to all premiums that would 25.28 have been collected had the health carrier been aware of the 25.29 additional dependent. The health carrier may reduce the health 25.30 benefits owed to the insured, certificate holder, member, or 25.31 subscriber by the amount of past due premiums applicable to the 25.32 additional dependent. 25.33 (b) The coverage under paragraph (a) includes benefits for 25.34 inpatient or outpatient expenses arising from medical and dental 25.35 treatment up to age 18, including orthodontic and oral surgery 25.36 treatment, involved in the management of birth defects known as 26.1 cleft lip and cleft palate. If orthodontic services are 26.2 eligible for coverage under a dental insurance plan and another 26.3 policy or contract, the dental plan shall be primary and the 26.4 other policy or contract shall be secondary in regard to the 26.5 coverage required under paragraph (a). Payment for dental or 26.6 orthodontic treatment not related to the management of the 26.7 congenital condition of cleft lip and cleft palate shall not be 26.8 covered under this provision. 26.9 Sec. 23. [62A.3091] [NONDISCRIMINATE COVERAGE OF TESTS.] 26.10 Subdivision 1. [SCOPE OF REQUIREMENT.] This section 26.11 applies to any of the following if issued or renewed to a 26.12 Minnesota resident or to cover a Minnesota resident: 26.13 (1) a health plan, as defined in section 62A.011; 26.14 (2) coverage described in section 62A.011, subdivision 3, 26.15 clauses (2), (3), or (6) to (12); and 26.16 (3) a policy, contract, or certificate issued by a 26.17 community integrated service network or an integrated service 26.18 network licensed under chapter 62N. 26.19 Subd. 2. [REQUIREMENT.] Coverage described in subdivision 26.20 1 that covers laboratory tests, diagnostic tests, and X-rays 26.21 must provide the same coverage, without requiring additional 26.22 signatures, for all such tests ordered by an advanced practice 26.23 nurse operating pursuant to chapter 148. Nothing in this 26.24 section shall be construed to interfere with any written 26.25 agreement between a physician and an advanced practice nurse. 26.26 Sec. 24. [62A.3092] [EQUAL TREATMENT OF SURGICAL FIRST 26.27 ASSISTING SERVICES.] 26.28 Subdivision 1. [SCOPE OF REQUIREMENT.] This section 26.29 applies to any of the following if issued or renewed to a 26.30 Minnesota resident or to cover a Minnesota resident: 26.31 (1) a health plan, as defined in section 62A.011; 26.32 (2) coverage described in section 62A.011, subdivision 3, 26.33 clauses (2), (3), or (6) to (12); and 26.34 (3) a policy, contract, or certificate issued by a 26.35 community integrated service network or an integrated service 26.36 network licensed under chapter 62N. 27.1 Subd. 2. [REQUIREMENT.] Coverage described in subdivision 27.2 1 that provides for payment for surgical first assisting 27.3 benefits or services shall be construed as providing for payment 27.4 for a registered nurse who performs first assistant functions 27.5 and services that are within the scope of practice of a 27.6 registered nurse. 27.7 Sec. 25. Minnesota Statutes 1995 Supplement, section 27.8 62A.135, subdivision 1, is amended to read: 27.9 Subdivision 1. [DEFINITIONS.] For purposes of this 27.10 section, the following terms have the meanings given them: 27.11 (a) "fixed indemnity policy" is a policy form, other than 27.12 an accidental death and dismemberment policy, a disability 27.13 income policy, or a long-term care policy as defined in section 27.14 62A.46, subdivision 2, that pays a predetermined, specified, 27.15 fixed benefit for services provided. Claim costs under these 27.16 forms are generally not subject to inflation, although they may 27.17 be subject to changes in the utilization of health care 27.18 services. For policy forms providing both expense-incurred and 27.19 fixed benefits, the policy form is a fixed indemnity policy if 27.20 50 percent or more of the total claims are for predetermined, 27.21 specified, fixed benefits; 27.22 (b) "guaranteed renewable" means that, during the renewal 27.23 period (to a specified age) renewal cannot be declined nor 27.24 coverage changed by the insurer for any reason other than 27.25 nonpayment of premiums, fraud, or misrepresentation, but the 27.26 insurer can revise rates on a class basis upon approval by the 27.27 commissioner; 27.28 (c) "noncancelable" means that, during the renewal period 27.29 (to a specified age) renewal cannot be declined nor coverage 27.30 changed by the insurer for any reason other than nonpayment of 27.31 premiums, fraud, or misrepresentation and that rates cannot be 27.32 revised by the insurer. This includes policies that are 27.33 guaranteed renewable to a specified age, such as 60 or 65, at 27.34 guaranteed rates; and 27.35 (d) "average annualized premium" means the average of the 27.36 estimated annualized premium per covered person based on the 28.1 anticipated distribution of business using all significant 28.2 criteria having a price difference, such as age, sex, amount, 28.3 dependent status, mode of payment, and rider frequency. For 28.4 filing of rate revisions, the amount is the anticipated average 28.5 assuming the revised rates have fully taken effect. 28.6 Sec. 26. Minnesota Statutes 1995 Supplement, section 28.7 62A.31, subdivision 1h, is amended to read: 28.8 Subd. 1h. [LIMITATIONS ON DENIALS, CONDITIONS, AND PRICING 28.9 OF COVERAGE.] Noissuer of Medicare supplement policies,28.10including policies that supplement Medicare issued by health28.11maintenance organizations or those policies governed by section28.121833 or 1876 of the federal Social Security Act, United States28.13Code, title 42, section 1395, et seq.,health carrier issuing 28.14 Medicare-related coverage in this state may impose preexisting 28.15 condition limitations or otherwise deny or condition the 28.16 issuance or effectiveness of anyMedicare supplement insurance28.17policy formsuch coverage available for sale in this state, nor 28.18 may it discriminate in the pricing of sucha policycoverage, 28.19 because of the health status, claims experience, receipt of 28.20 health care, medical condition, or age of an applicant where an 28.21 application for suchinsurancecoverage is submitted prior to or 28.22 during the six-month period beginning with the first day of the 28.23 month in which an individual first enrolled for benefits under 28.24 Medicare Part B. Thisparagraphsubdivision applies to each 28.25 Medicare-related coverage offered by a health carrier regardless 28.26 of whether the individual has attained the age of 65 years. If 28.27 an individual who is enrolled in Medicare Part B due to 28.28 disability status is involuntarily disenrolled due to loss of 28.29 disability status, the individual is eligible fortheanother 28.30 six-month enrollment period provided under this subdivisionif28.31 beginning the first day of the month in which the individual 28.32 later becomes eligible for and enrolls again in Medicare Part 28.33 B. An individual who is or was previously enrolled in Medicare 28.34 Part B due to disability status is eligible for another 28.35 six-month enrollment period under this subdivision beginning the 28.36 first day of the month in which the individual has attained the 29.1 age of 65 years and either maintains enrollment in, or enrolls 29.2 again in, Medicare Part B. 29.3 Sec. 27. Minnesota Statutes 1994, section 62A.31, 29.4 subdivision 1p, is amended to read: 29.5 Subd. 1p. [RENEWAL OR CONTINUATION PROVISIONS.] Medicare 29.6 supplement policies and certificates shall include a renewal or 29.7 continuation provision. The language or specifications of the 29.8 provision shall be consistent with the type of contract issued. 29.9 The provision shall be appropriately captioned and shall appear 29.10 on the first page of the policy or certificate, and shall 29.11 include any reservation by the issuer of the right to change 29.12 premiums. Except for riders or endorsements by which the issuer 29.13 effectuates a request made in writing by the insured, exercises 29.14 a specifically reserved right under a Medicare supplement policy 29.15 or certificate, or is required to reduce or eliminate benefits 29.16 to avoid duplication of Medicare benefits, all riders or 29.17 endorsements added to a Medicare supplement policy or 29.18 certificate after the date of issue or at reinstatement or 29.19 renewal that reduce or eliminate benefits or coverage in the 29.20 policy or certificate shall require a signed acceptance by the 29.21 insured. After the date of policy or certificate issue, a rider 29.22 or endorsement that increases benefits or coverage with a 29.23 concomitant increase in premium during the policy or certificate 29.24 term shall be agreed to in writing and signed by the insured, 29.25 unless the benefits are required by the minimum standards for 29.26 Medicare supplement policies or if the increased benefits or 29.27 coverage is required by law. Where a separate additional 29.28 premium is charged for benefits provided in connection with 29.29 riders or endorsements, the premium charge shall be set forth in 29.30 the policy, declaration page, or certificate. If a Medicare 29.31 supplement policy or certificate contains limitations with 29.32 respect to preexisting conditions, the limitations shall appear 29.33 as a separate paragraph of the policy or certificate and be 29.34 labeled as "preexisting condition limitations." 29.35 Issuers of accident and sickness policies or certificates 29.36 that provide hospital or medical expense coverage on an expense 30.1 incurred or indemnity basis, other than incidentally, to a 30.2 person eligible for Medicare by reason of age shall provide to 30.3 such applicants aMedicare Supplement Buyer's"Guide to Health 30.4 Insurance for People with Medicare" in the form developed by the 30.5 Health Care Financing Administration and in a type size no 30.6 smaller than 12-point type. Delivery of theBuyer'sguide must 30.7 be made whether or not such policies or certificates are 30.8 advertised, solicited, or issued as Medicare supplement policies 30.9 or certificates as defined in this section. Except in the case 30.10 of direct response issuers, delivery of theBuyer'sguide must 30.11 be made to the applicant at the time of application, and 30.12 acknowledgment of receipt of theBuyer'sguide must be obtained 30.13 by the issuer. Direct response issuers shall deliver the 30.14Buyer'sguide to the applicant upon request, but no later than 30.15 the time at which the policy is delivered. 30.16 Sec. 28. Minnesota Statutes 1994, section 62A.31, 30.17 subdivision 1r, is amended to read: 30.18 Subd. 1r. [COMMUNITY RATE.] Each health maintenance 30.19 organization, health service plan corporation, insurer, or 30.20 fraternal benefit society that sellscoverage that supplements30.21 Medicare-related coverage shall establish a separate community 30.22 rate for that coverage. Beginning January 1, 1993, no coverage 30.23 that supplements Medicare or that is governed by section 1833or30.241876of the federal Social Security Act, United States Code, 30.25 title 42, section 1395, et seq., may be offered, issued, sold, 30.26 or renewed to a Minnesota resident, except at the community rate 30.27 required by this subdivision. The same community rate must 30.28 apply to newly issued coverage and to renewal coverage. 30.29 For coverage that supplements Medicare and for the Part A 30.30 rate calculation for plans governed by section 1833 of the 30.31 federal Social Security Act, United States Code, title 42, 30.32 section 1395, et seq., the community rate may take into account 30.33 only the following factors: 30.34 (1) actuarially valid differences in benefit designs or 30.35 provider networks; 30.36 (2) geographic variations in rates if preapproved by the 31.1 commissioner of commerce; and 31.2 (3) premium reductions in recognition of healthy lifestyle 31.3 behaviors, including but not limited to, refraining from the use 31.4 of tobacco. Premium reductions must be actuarially valid and 31.5 must relate only to those healthy lifestyle behaviors that have 31.6 a proven positive impact on health. Factors used by the health 31.7 carrier making this premium reduction must be filed with and 31.8 approved by the commissioner of commerce. 31.9 For insureds not residing in Anoka, Carver, Chisago, 31.10 Dakota, Hennepin, Ramsey, Scott, or Washington county, a health 31.11 plan may, at the option of the health carrier, phase in 31.12 compliance under the following timetable: 31.13 (i) a premium adjustment as of March 1, 1993, that consists 31.14 of one-half of the difference between the community rate that 31.15 would be applicable to the person as of March 1, 1993, and the 31.16 premium rate that would be applicable to the person as of March 31.17 1, 1993, under the rate schedule permitted on December 31, 1992. 31.18 A health plan may, at the option of the health carrier, 31.19 implement the entire premium difference described in this clause 31.20 for any person as of March 1, 1993, if the premium difference 31.21 would be 15 percent or less of the premium rate that would be 31.22 applicable to the person as of March 1, 1993, under the rate 31.23 schedule permitted on December 31, 1992, if the health plan does 31.24 so uniformly regardless of whether the premium difference causes 31.25 premiums to rise or to fall. The premium difference described 31.26 in this clause is in addition to any premium adjustment 31.27 attributable to medical cost inflation or any other lawful 31.28 factor and is intended to describe only the premium difference 31.29 attributable to the transition to the community rate; and 31.30 (ii) with respect to any person whose premium adjustment 31.31 was constrained under clause (i), a premium adjustment as of 31.32 January 1, 1994, that consists of the remaining one-half of the 31.33 premium difference attributable to the transition to the 31.34 community rate, as described in clause (i). 31.35 A health plan that initially follows the phase-in timetable 31.36 may at any subsequent time comply on a more rapid timetable. A 32.1 health plan that is in full compliance as of January 1, 1993, 32.2 may not use the phase-in timetable and must remain in full 32.3 compliance. Health plans that follow the phase-in timetable 32.4 must charge the same premium rate for newly issued coverage that 32.5 they charge for renewal coverage. A health plan whose premiums 32.6 are constrained by clause (i) may take the constraint into 32.7 account in establishing its community rate. 32.8 From January 1, 1993 to February 28, 1993, a health plan 32.9 may, at the health carrier's option, charge the community rate 32.10 under this paragraph or may instead charge premiums permitted as 32.11 of December 31, 1992. 32.12 Sec. 29. Minnesota Statutes 1994, section 62A.31, 32.13 subdivision 1s, is amended to read: 32.14 Subd. 1s. [PRESCRIPTION DRUG COVERAGE.] Beginning January 32.15 1, 1993, a health maintenance organization that issues 32.16 Medicare-related coveragethat supplements Medicare or that32.17issues coverage governed by section 1833 or 1876 of the federal32.18Social Security Act, United States Code, title 42, section 139532.19et seq.,must offer, to each person to whom it offers any 32.20 contract described in this subdivision, at least one contract 32.21 that either: 32.22 (1) covers 80 percent of the reasonable and customary 32.23 charge for prescription drugs or the copayment equivalency; or 32.24 (2) offers the coverage described in clause (1) as an 32.25 optional rider that may be purchased separately from other 32.26 optional coverages. 32.27 Sec. 30. Minnesota Statutes 1994, section 62A.31, 32.28 subdivision 3, is amended to read: 32.29 Subd. 3. [DEFINITIONS.] (a) "Accident," "accidental 32.30 injury," or "accidental means" means to employ "result" language 32.31 and does not include words that establish an accidental means 32.32 test or use words such as "external," "violent," "visible 32.33 wounds," or similar words of description or characterization. 32.34 (1) The definition shall not be more restrictive than the 32.35 following: "Injury or injuries for which benefits are provided 32.36 means accidental bodily injury sustained by the insured person 33.1 which is the direct result of an accident, independent of 33.2 disease or bodily infirmity or any other cause, and occurs while 33.3 insurance coverage is in force." 33.4 (2) The definition may provide that injuries shall not 33.5 include injuries for which benefits are provided or available 33.6 under a workers' compensation, employer's liability or similar 33.7 law, or motor vehicle no-fault plan, unless prohibited by law. 33.8 (b) "Applicant" means: 33.9 (1) in the case of an individual Medicare supplement policy 33.10 or certificate, the person who seeks to contract for insurance 33.11 benefits; and 33.12 (2) in the case of a group Medicare supplement policy or 33.13 certificate, the proposed certificate holder. 33.14 (c) "Benefit period" or "Medicare benefit period" shall not 33.15 be defined more restrictively than as defined in the Medicare 33.16 program. 33.17 (d) "Certificate" means a certificate delivered or issued 33.18 for delivery in this state or offered to a resident of this 33.19 state under a group Medicare supplement policy or certificate. 33.20 (e) "Certificate form" means the form on which the 33.21 certificate is delivered or issued for delivery by the issuer. 33.22 (f) "Convalescent nursing home," "extended care facility," 33.23 or "skilled nursing facility" shall not be defined more 33.24 restrictively than as defined in the Medicare program. 33.25 (g) "Health care expenses" means expenses of health 33.26 maintenance organizations associated with the delivery of health 33.27 care services which are analogous to incurred losses of 33.28 insurers. The expenses shall not include: 33.29 (1) home office and overhead costs; 33.30 (2) advertising costs; 33.31 (3) commissions and other acquisition costs; 33.32 (4) taxes; 33.33 (5) capital costs; 33.34 (6) administrative costs; and 33.35 (7) claims processing costs. 33.36 (h) "Hospital" may be defined in relation to its status, 34.1 facilities, and available services or to reflect its 34.2 accreditation by the joint commission on accreditation of 34.3 hospitals, but not more restrictively than as defined in the 34.4 Medicare program. 34.5 (i) "Issuer" includes insurance companies, fraternal 34.6 benefit societies, health care service plans, health maintenance 34.7 organizations, and any other entity delivering or issuing for 34.8 delivery Medicare supplement policies or certificates in this 34.9 state or offering these policies or certificates to residents of 34.10 this state. 34.11 (j) "Medicare" shall be defined in the policy and 34.12 certificate. Medicare may be defined as the Health Insurance 34.13 for the Aged Act, title XVIII of the Social Security Amendments 34.14 of 1965, as amended, or title I, part I, of Public Law Number 34.15 89-97, as enacted by the 89th Congress of the United States of 34.16 America and popularly known as the Health Insurance for the Aged 34.17 Act, as amended. 34.18 (k) "Medicare eligible expenses" means health care expenses 34.19 covered by Medicare, to the extent recognized as reasonable and 34.20 medically necessary by Medicare. 34.21 (l) "Medicare-related coverage" means a policy, contract, 34.22 or certificate issued as a supplement to Medicare, regulated 34.23 under sections 62A.31 to 62A.44, including Medicare select 34.24 coverage; policies, contracts, or certificates that supplement 34.25 Medicare issued by health maintenance organizations; or 34.26 policies, contracts, or certificates governed by section 1833 34.27 (known as "cost" or "HCPP" contracts) or 1876 (known as "TEFRA" 34.28 or "risk" contracts) of the federal Social Security Act, United 34.29 States Code, title 42, section 1395, et seq., as amended. 34.30 (m) "Medicare supplement policy or certificate" means a 34.31 group or individual policy of accident and sickness insurance or 34.32 a subscriber contract of hospital and medical service 34.33 associations or health maintenance organizations,other than a34.34policy or certificate issued under a contract underor those 34.35 policies or certificates covered by, section 1833or 1876of the 34.36 federal Social Security Act, United States Code, title 42, 35.1 section 1395, et seq., or an issued policy under a demonstration 35.2 projectauthorizedspecified under amendments to the federal 35.3 Social Security Act, which is advertised, marketed, or designed 35.4 primarily as a supplement to reimbursements under Medicare for 35.5 the hospital, medical, or surgical expenses of persons eligible 35.6 for Medicare. 35.7(m)(n) "Physician" shall not be defined more restrictively 35.8 than as defined in the Medicare program or section 62A.04, 35.9 subdivision 1, or 62A.15, subdivision 3a. 35.10(n)(o) "Policy form" means the form on which the policy is 35.11 delivered or issued for delivery by the issuer. 35.12(o)(p) "Sickness" shall not be defined more restrictively 35.13 than the following: 35.14 "Sickness means illness or disease of an insured person 35.15 which first manifests itself after the effective date of 35.16 insurance and while the insurance is in force." 35.17 The definition may be further modified to exclude 35.18 sicknesses or diseases for which benefits are provided under a 35.19 workers' compensation, occupational disease, employer's 35.20 liability, or similar law. 35.21 Sec. 31. Minnesota Statutes 1994, section 62A.315, is 35.22 amended to read: 35.23 62A.315 [EXTENDED BASIC MEDICARE SUPPLEMENT PLAN; 35.24 COVERAGE.] 35.25 The extended basic Medicare supplement plan must have a 35.26 level of coverage so that it will be certified as a qualified 35.27 plan pursuant to section 62E.07, and will provide: 35.28 (1) coverage for all of the Medicare part A inpatient 35.29 hospital deductible and coinsurance amounts, and 100 percent of 35.30 all Medicare part A eligible expenses for hospitalization not 35.31 covered by Medicare; 35.32 (2) coverage for the daily copayment amount of Medicare 35.33 part A eligible expenses for the calendar year incurred for 35.34 skilled nursing facility care; 35.35 (3) coverage for the copayment amount of Medicare eligible 35.36 expenses under Medicare part B regardless of hospital 36.1 confinement, and the Medicare part B deductible amount; 36.2 (4) 80 percent of the usual and customary hospital and 36.3 medical expenses and supplies described in section 62E.06, 36.4 subdivision 1, not to exceed any charge limitation established 36.5 by the Medicare program or state law, the usual and customary 36.6 hospital and medical expenses and supplies, described in section 36.7 62E.06, subdivision 1, while in a foreign country, and 36.8 prescription drug expenses, not covered byMedicare's eligible36.9expensesMedicare; 36.10 (5) coverage for the reasonable cost of the first three 36.11 pints of blood, or equivalent quantities of packed red blood 36.12 cells as defined under federal regulations under Medicare parts 36.13 A and B, unless replaced in accordance with federal regulations; 36.14 (6) 100 percent of the cost of immunizations and routine 36.15 screening procedures for cancer, including mammograms and pap 36.16 smears; 36.17 (7) preventive medical care benefit: coverage for the 36.18 following preventive health services: 36.19 (i) an annual clinical preventive medical history and 36.20 physical examination that may include tests and services from 36.21 clause (ii) and patient education to address preventive health 36.22 care measures; 36.23 (ii) any one or a combination of the following preventive 36.24 screening tests or preventive services, the frequency of which 36.25 is considered medically appropriate: 36.26 (A) fecal occult blood test and/or digital rectal 36.27 examination; 36.28 (B) dipstick urinalysis for hematuria, bacteriuria, and 36.29 proteinuria; 36.30 (C) pure tone (air only) hearing screening test 36.31 administered or ordered by a physician; 36.32 (D) serum cholesterol screening every five years; 36.33 (E) thyroid function test; 36.34 (F) diabetes screening; 36.35 (iii) any other tests or preventive measures determined 36.36 appropriate by the attending physician. 37.1 Reimbursement shall be for the actual charges up to 100 37.2 percent of the Medicare-approved amount for each service as if 37.3 Medicare were to cover the service as identified in American 37.4 Medical Association current procedural terminology (AMA CPT) 37.5 codes to a maximum of $120 annually under this benefit. This 37.6 benefit shall not include payment for any procedure covered by 37.7 Medicare; 37.8 (8) at-home recovery benefit: coverage for services to 37.9 provide short-term at-home assistance with activities of daily 37.10 living for those recovering from an illness, injury, or surgery: 37.11 (i) for purposes of this benefit, the following definitions 37.12 shall apply: 37.13 (A) "activities of daily living" include, but are not 37.14 limited to, bathing, dressing, personal hygiene, transferring, 37.15 eating, ambulating, assistance with drugs that are normally 37.16 self-administered, and changing bandages or other dressings; 37.17 (B) "care provider" means a duly qualified or licensed home 37.18 health aide/homemaker, personal care aide, or nurse provided 37.19 through a licensed home health care agency or referred by a 37.20 licensed referral agency or licensed nurses registry; 37.21 (C) "home" means a place used by the insured as a place of 37.22 residence, provided that the place would qualify as a residence 37.23 for home health care services covered by Medicare. A hospital 37.24 or skilled nursing facility shall not be considered the 37.25 insured's place of residence; 37.26 (D) "at-home recovery visit" means the period of a visit 37.27 required to provide at-home recovery care, without limit on the 37.28 duration of the visit, except each consecutive four hours in a 37.29 24-hour period of services provided by a care provider is one 37.30 visit; 37.31 (ii) coverage requirements and limitations: 37.32 (A) at-home recovery services provided must be primarily 37.33 services that assist in activities of daily living; 37.34 (B) the insured's attending physician must certify that the 37.35 specific type and frequency of at-home recovery services are 37.36 necessary because of a condition for which a home care plan of 38.1 treatment was approved by Medicare; 38.2 (C) coverage is limited to: 38.3 (I) no more than the number and type of at-home recovery 38.4 visits certified as medically necessary by the insured's 38.5 attending physician. The total number of at-home recovery 38.6 visits shall not exceed the number of Medicare-approved home 38.7 health care visits under a Medicare-approved home care plan of 38.8 treatment; 38.9 (II) the actual charges for each visit up to a maximum 38.10 reimbursement of $40 per visit; 38.11 (III) $1,600 per calendar year; 38.12 (IV) seven visits in any one week; 38.13 (V) care furnished on a visiting basis in the insured's 38.14 home; 38.15 (VI) services provided by a care provider as defined in 38.16 this section; 38.17 (VII) at-home recovery visits while the insured is covered 38.18 under the policy or certificate and not otherwise excluded; 38.19 (VIII) at-home recovery visits received during the period 38.20 the insured is receiving Medicare-approved home care services or 38.21 no more than eight weeks after the service date of the last 38.22 Medicare-approved home health care visit; 38.23 (iii) coverage is excluded for: 38.24 (A) home care visits paid for by Medicare or other 38.25 government programs; and 38.26 (B) care provided by family members, unpaid volunteers, or 38.27 providers who are not care providers. 38.28 Sec. 32. Minnesota Statutes 1994, section 62A.318, is 38.29 amended to read: 38.30 62A.318 [MEDICARE SELECT POLICIES AND CERTIFICATES.] 38.31 (a) This section applies to Medicare select policies and 38.32 certificates, as defined in this section, including those issued 38.33 by health maintenance organizations. No policy or certificate 38.34 may be advertised as a Medicare select policy or certificate 38.35 unless it meets the requirements of this section. 38.36 (b) For the purposes of this section: 39.1 (1) "complaint" means any dissatisfaction expressed by an 39.2 individual concerning a Medicare select issuer or its network 39.3 providers; 39.4 (2) "grievance" means dissatisfaction expressed in writing 39.5 by an individual insured under a Medicare select policy or 39.6 certificate with the administration, claims practices, or 39.7 provision of services concerning a Medicare select issuer or its 39.8 network providers; 39.9 (3) "Medicare select issuer" means an issuer offering, or 39.10 seeking to offer, a Medicare select policy or certificate; 39.11 (4) "Medicare select policy" or "Medicare select 39.12 certificate" means a Medicare supplement policy or certificate 39.13 that contains restricted network provisions; 39.14 (5) "network provider" means a provider of health care, or 39.15 a group of providers of health care, that has entered into a 39.16 written agreement with the issuer to provide benefits insured 39.17 under a Medicare select policy or certificate; 39.18 (6) "restricted network provision" means a provision that 39.19 conditions the payment of benefits, in whole or in part, on the 39.20 use of network providers; and 39.21 (7) "service area" means the geographic area approved by 39.22 the commissioner within which an issuer is authorized to offer a 39.23 Medicare select policy or certificate. 39.24 (c) The commissioner may authorize an issuer to offer a 39.25 Medicare select policy or certificate pursuant to this section 39.26 and section 4358 of the Omnibus Budget Reconciliation Act (OBRA) 39.27 of 1990, Public Law Number 101-508, if the commissioner finds 39.28 that the issuer has satisfied all of the requirements of 39.29 Minnesota Statutes. 39.30 (d) A Medicare select issuer shall not issue a Medicare 39.31 select policy or certificate in this state until its plan of 39.32 operation has been approved by the commissioner. 39.33 (e) A Medicare select issuer shall file a proposed plan of 39.34 operation with the commissioner, in a format prescribed by the 39.35 commissioner. The plan of operation shall contain at least the 39.36 following information: 40.1 (1) evidence that all covered services that are subject to 40.2 restricted network provisions are available and accessible 40.3 through network providers, including a demonstration that: 40.4 (i) the services can be provided by network providers with 40.5 reasonable promptness with respect to geographic location, hours 40.6 of operation, and after-hour care. The hours of operation and 40.7 availability of after-hour care shall reflect usual practice in 40.8 the local area. Geographic availability shall reflect the usual 40.9 travel times within the community; 40.10 (ii) the number of network providers in the service area is 40.11 sufficient, with respect to current and expected policyholders, 40.12 either: 40.13 (A) to deliver adequately all services that are subject to 40.14 a restricted network provision; or 40.15 (B) to make appropriate referrals; 40.16 (iii) there are written agreements with network providers 40.17 describing specific responsibilities; 40.18 (iv) emergency care is available 24 hours per day and seven 40.19 days per week; and 40.20 (v) in the case of covered services that are subject to a 40.21 restricted network provision and are provided on a prepaid 40.22 basis, there are written agreements with network providers 40.23 prohibiting the providers from billing or otherwise seeking 40.24 reimbursement from or recourse against an individual insured 40.25 under a Medicare select policy or certificate. This section 40.26 does not apply to supplemental charges or coinsurance amounts as 40.27 stated in the Medicare select policy or certificate; 40.28 (2) a statement or map providing a clear description of the 40.29 service area; 40.30 (3) a description of the grievance procedure to be used; 40.31 (4) a description of the quality assurance program, 40.32 including: 40.33 (i) the formal organizational structure; 40.34 (ii) the written criteria for selection, retention, and 40.35 removal of network providers; and 40.36 (iii) the procedures for evaluating quality of care 41.1 provided by network providers, and the process to initiate 41.2 corrective action when warranted; 41.3 (5) a list and description, by specialty, of the network 41.4 providers; 41.5 (6) copies of the written information proposed to be used 41.6 by the issuer to comply with paragraph (i); and 41.7 (7) any other information requested by the commissioner. 41.8 (f) A Medicare select issuer shall file proposed changes to 41.9 the plan of operation, except for changes to the list of network 41.10 providers, with the commissioner before implementing the 41.11 changes. The changes shall be considered approved by the 41.12 commissioner after 30 days unless specifically disapproved. 41.13 An updated list of network providers shall be filed with 41.14 the commissioner at least quarterly. 41.15 (g) A Medicare select policy or certificate shall not 41.16 restrict payment for covered services provided by nonnetwork 41.17 providers if: 41.18 (1) the services are for symptoms requiring emergency care 41.19 or are immediately required for an unforeseen illness, injury, 41.20 or condition; and 41.21 (2) it is not reasonable to obtain the services through a 41.22 network provider. 41.23 (h) A Medicare select policy or certificate shall provide 41.24 payment for full coverage under the policy or certificate for 41.25 covered services that are not available through network 41.26 providers. 41.27 (i) A Medicare select issuer shall make full and fair 41.28 disclosure in writing of the provisions, restrictions, and 41.29 limitations of the Medicare select policy or certificate to each 41.30 applicant. This disclosure must include at least the following: 41.31 (1) an outline of coverage sufficient to permit the 41.32 applicant to compare the coverage and premiums of the Medicare 41.33 select policy or certificate with: 41.34 (i) other Medicare supplement policies or certificates 41.35 offered by the issuer; and 41.36 (ii) other Medicare select policies or certificates; 42.1 (2) a description, including address, phone number, and 42.2 hours of operation, of the network providers, including primary 42.3 care physicians, specialty physicians, hospitals, and other 42.4 providers; 42.5 (3) a description of the restricted network provisions, 42.6 including payments for coinsurance and deductibles when 42.7 providers other than network providers are used; 42.8 (4) a description of coverage for emergency and urgently 42.9 needed care and other out-of-service area coverage; 42.10 (5) a description of limitations on referrals to restricted 42.11 network providers and to other providers; 42.12 (6) a description of the policyholder's rights to purchase 42.13 any other Medicare supplement policy or certificate otherwise 42.14 offered by the issuer; and 42.15 (7) a description of the Medicare select issuer's quality 42.16 assurance program and grievance procedure. 42.17 (j) Before the sale of a Medicare select policy or 42.18 certificate, a Medicare select issuer shall obtain from the 42.19 applicant a signed and dated form stating that the applicant has 42.20 received the information provided pursuant to paragraph (i) and 42.21 that the applicant understands the restrictions of the Medicare 42.22 select policy or certificate. 42.23 (k) A Medicare select issuer shall have and use procedures 42.24 for hearing complaints and resolving written grievances from the 42.25 subscribers. The procedures shall be aimed at mutual agreement 42.26 for settlement and may include arbitration procedures. 42.27 (1) The grievance procedure must be described in the policy 42.28 and certificates and in the outline of coverage. 42.29 (2) At the time the policy or certificate is issued, the 42.30 issuer shall provide detailed information to the policyholder 42.31 describing how a grievance may be registered with the issuer. 42.32 (3) Grievances must be considered in a timely manner and 42.33 must be transmitted to appropriate decision makers who have 42.34 authority to fully investigate the issue and take corrective 42.35 action. 42.36 (4) If a grievance is found to be valid, corrective action 43.1 must be taken promptly. 43.2 (5) All concerned parties must be notified about the 43.3 results of a grievance. 43.4 (6) The issuer shall report no later than March 31 of each 43.5 year to the commissioner regarding the grievance procedure. The 43.6 report shall be in a format prescribed by the commissioner and 43.7 shall contain the number of grievances filed in the past year 43.8 and a summary of the subject, nature, and resolution of the 43.9 grievances. 43.10 (l) At the time of initial purchase, a Medicare select 43.11 issuer shall make available to each applicant for a Medicare 43.12 select policy or certificate the opportunity to purchase a 43.13 Medicare supplement policy or certificate otherwise offered by 43.14 the issuer. 43.15 (m)(1) At the request of an individual insured under a 43.16 Medicare select policy or certificate, a Medicare select issuer 43.17 shall make available to the individual insured the opportunity 43.18 to purchase a Medicare supplement policy or certificate offered 43.19 by the issuer that has comparable or lesser benefits and that 43.20 does not contain a restricted network provision. The issuer 43.21 shall make the policies or certificates available without 43.22 requiring evidence of insurability after the Medicare supplement 43.23 policy or certificate has been in force for six months. If the 43.24 issuer does not have available for sale a policy or certificate 43.25 without restrictive network provisions, the issuer shall provide 43.26 enrollment information for the Minnesota comprehensive health 43.27 association Medicare supplement plans. 43.28 (2) For the purposes of this paragraph, a Medicare 43.29 supplement policy or certificate will be considered to have 43.30 comparable or lesser benefits unless it contains one or more 43.31 significant benefits not included in the Medicare select policy 43.32 or certificate being replaced. For the purposes of this 43.33 paragraph, a significant benefit means coverage for the Medicare 43.34 part A deductible, coverage for prescription drugs, coverage for 43.35 at-home recovery services, or coverage for part B excess charges. 43.36 (n) Medicare select policies and certificates shall provide 44.1 for continuation of coverage if the secretary of health and 44.2 human services determines that Medicare select policies and 44.3 certificates issued pursuant to this section should be 44.4 discontinued due to either the failure of the Medicare select 44.5 program to be reauthorized under law or its substantial 44.6 amendment. 44.7 (1) Each Medicare select issuer shall make available to 44.8 each individual insured under a Medicare select policy or 44.9 certificate the opportunity to purchase a Medicare supplement 44.10 policy or certificate offered by the issuer that has comparable 44.11 or lesser benefits and that does not contain a restricted 44.12 network provision. The issuer shall make the policies and 44.13 certificates available without requiring evidence of 44.14 insurability. 44.15 (2) For the purposes of this paragraph, a Medicare 44.16 supplement policy or certificate will be considered to have 44.17 comparable or lesser benefits unless it contains one or more 44.18 significant benefits not included in the Medicare select policy 44.19 or certificate being replaced. For the purposes of this 44.20 paragraph, a significant benefit means coverage for the Medicare 44.21 part A deductible, coverage for prescription drugs, coverage for 44.22 at-home recovery services, or coverage for part B excess charges. 44.23 (o) A Medicare select issuer shall comply with reasonable 44.24 requests for data made by state or federal agencies, including 44.25 the United States Department of Health and Human Services, for 44.26 the purpose of evaluating the Medicare select program. 44.27 (p) Medicare select policies and certificates under this 44.28 section shall be regulated and approved by the department of 44.29 commerce. 44.30 (q)Medicare select policies and certificates must be44.31either a basic plan or an extended basic plan.Before a Medicare 44.32 select policy or certificate is sold or issued in this state, 44.33 the applicant must be provided with an explanation of coverage 44.34 for both a Medicare select basic and a Medicare select extended 44.35 basic policy or certificate and must be provided with the 44.36 opportunity of purchasing either a Medicare select basic or a 45.1 Medicare select extended basic policy. The basic plan may also 45.2 include any of the optional benefit riders authorized by section 45.3 62A.316. Preventive care provided by Medicare select policies 45.4 or certificates must be provided as set forth in section 62A.315 45.5 or 62A.316, except that the benefits are as defined in chapter 45.6 62D. 45.7 (r) Medicare select policies and certificates are exempt 45.8 from the requirements of section 62A.31, subdivision 1, 45.9 paragraph (d). This paragraph expires January 1, 1994. 45.10 Sec. 33. Minnesota Statutes 1994, section 62A.36, 45.11 subdivision 1, is amended to read: 45.12 Subdivision 1. [LOSS RATIO STANDARDS.] (a) For purposes of 45.13 this section, "Medicare supplement policy or certificate" has 45.14 the meaning given in section 62A.31, subdivision 3, but also 45.15 includes a policy, contract, or certificate issued under a 45.16 contract under section 1833or 1876of the federal Social 45.17 Security Act, United States Code, title 42, section 1395 et 45.18 seq. A Medicare supplement policy form or certificate form 45.19 shall not be delivered or issued for delivery unless the policy 45.20 form or certificate form can be expected, as estimated for the 45.21 entire period for which rates are computed to provide coverage, 45.22 to return to policyholders and certificate holders in the form 45.23 of aggregate benefits, not including anticipated refunds or 45.24 credits, provided under the policy form or certificate form: 45.25 (1) at least 75 percent of the aggregate amount of premiums 45.26 earned in the case of group policies, and 45.27 (2) at least 65 percent of the aggregate amount of premiums 45.28 earned in the case of individual policies, calculated on the 45.29 basis of incurred claims experience or incurred health care 45.30 expenses where coverage is provided by a health maintenance 45.31 organization on a service rather than reimbursement basis and 45.32 earned premiums for the period and according to accepted 45.33 actuarial principles and practices. An insurer shall 45.34 demonstrate that the third year loss ratio is greater than or 45.35 equal to the applicable percentage. 45.36 All filings of rates and rating schedules shall demonstrate 46.1 that expected claims in relation to premiums comply with the 46.2 requirements of this section when combined with actual 46.3 experience to date. Filings of rate revisions shall also 46.4 demonstrate that the anticipated loss ratio over the entire 46.5 future period for which the revised rates are computed to 46.6 provide coverage can be expected to meet the appropriate loss 46.7 ratio standards, and aggregate loss ratio from inception of the 46.8 policy or certificate shall equal or exceed the appropriate loss 46.9 ratio standards. 46.10 An application form for a Medicare supplement policy or 46.11 certificate, as defined in this section, must prominently 46.12 disclose the anticipated loss ratio and explain what it means. 46.13 (b) An issuer shall collect and file with the commissioner 46.14 by May 31 of each year the data contained in the National 46.15 Association of Insurance Commissioners Medicare Supplement 46.16 Refund Calculating form, for each type of Medicare supplement 46.17 benefit plan. 46.18 If, on the basis of the experience as reported, the 46.19 benchmark ratio since inception (ratio 1) exceeds the adjusted 46.20 experience ratio since inception (ratio 3), then a refund or 46.21 credit calculation is required. The refund calculation must be 46.22 done on a statewide basis for each type in a standard Medicare 46.23 supplement benefit plan. For purposes of the refund or credit 46.24 calculation, experience on policies issued within the reporting 46.25 year shall be excluded. 46.26 A refund or credit shall be made only when the benchmark 46.27 loss ratio exceeds the adjusted experience loss ratio and the 46.28 amount to be refunded or credited exceeds a de minimis level. 46.29 The refund shall include interest from the end of the calendar 46.30 year to the date of the refund or credit at a rate specified by 46.31 the secretary of health and human services, but in no event 46.32 shall it be less than the average rate of interest for 13-week 46.33 treasury bills. A refund or credit against premiums due shall 46.34 be made by September 30 following the experience year on which 46.35 the refund or credit is based. 46.36 (c) An issuer of Medicare supplement policies and 47.1 certificates in this state shall file annually its rates, rating 47.2 schedule, and supporting documentation including ratios of 47.3 incurred losses to earned premiums by policy or certificate 47.4 duration for approval by the commissioner according to the 47.5 filing requirements and procedures prescribed by the 47.6 commissioner. The supporting documentation shall also 47.7 demonstrate in accordance with actuarial standards of practice 47.8 using reasonable assumptions that the appropriate loss ratio 47.9 standards can be expected to be met over the entire period for 47.10 which rates are computed. The demonstration shall exclude 47.11 active life reserves. An expected third-year loss ratio which 47.12 is greater than or equal to the applicable percentage shall be 47.13 demonstrated for policies or certificates in force less than 47.14 three years. 47.15 As soon as practicable, but before the effective date of 47.16 enhancements in Medicare benefits, every issuer of Medicare 47.17 supplement policies or certificates in this state shall file 47.18 with the commissioner, in accordance with the applicable filing 47.19 procedures of this state: 47.20 (1) a premium adjustment that is necessary to produce an 47.21 expected loss ratio under the policy or certificate that will 47.22 conform with minimum loss ratio standards for Medicare 47.23 supplement policies or certificates. No premium adjustment that 47.24 would modify the loss ratio experience under the policy or 47.25 certificate other than the adjustments described herein shall be 47.26 made with respect to a policy or certificate at any time other 47.27 than on its renewal date or anniversary date; 47.28 (2) if an issuer fails to make premium adjustments 47.29 acceptable to the commissioner, the commissioner may order 47.30 premium adjustments, refunds, or premium credits considered 47.31 necessary to achieve the loss ratio required by this section; 47.32 (3) any appropriate riders, endorsements, or policy or 47.33 certificate forms needed to accomplish the Medicare supplement 47.34 insurance policy or certificate modifications necessary to 47.35 eliminate benefit duplications with Medicare. The riders, 47.36 endorsements, or policy or certificate forms shall provide a 48.1 clear description of the Medicare supplement benefits provided 48.2 by the policy or certificate. 48.3 (d) The commissioner may conduct a public hearing to gather 48.4 information concerning a request by an issuer for an increase in 48.5 a rate for a policy form or certificate form if the experience 48.6 of the form for the previous reporting period is not in 48.7 compliance with the applicable loss ratio standard. The 48.8 determination of compliance is made without consideration of a 48.9 refund or credit for the reporting period. Public notice of the 48.10 hearing shall be furnished in a manner considered appropriate by 48.11 the commissioner. 48.12 (e) An issuer shall not use or change premium rates for a 48.13 Medicare supplement policy or certificate unless the rates, 48.14 rating schedule, and supporting documentation have been filed 48.15 with, and approved by, the commissioner according to the filing 48.16 requirements and procedures prescribed by the commissioner. 48.17 Sec. 34. Minnesota Statutes 1994, section 62A.39, is 48.18 amended to read: 48.19 62A.39 [DISCLOSURE.] 48.20 No individual Medicare supplement plan shall be delivered 48.21 or issued in this state and no certificate shall be delivered 48.22 under a group Medicare supplement plan delivered or issued in 48.23 this state unless the plan is shown on the cover page and an 48.24 outline containing at least the following information in no less 48.25 than 12-point type is delivered to the applicant at the time the 48.26 application is made: 48.27 (a) A description of the principal benefits and coverage 48.28 provided in the policy; 48.29 (b) A statement of the exceptions, reductions, and 48.30 limitations contained in the policy including the following 48.31 language, as applicable, in bold print: "THIS POLICY DOES NOT 48.32 COVER ALL MEDICAL EXPENSES BEYOND THOSE COVERED BY MEDICARE. 48.33 THIS POLICY DOES NOT COVER ALL SKILLED NURSING HOME CARE 48.34 EXPENSES AND DOES NOT COVER CUSTODIAL OR RESIDENTIAL NURSING 48.35 CARE. READ YOUR POLICY CAREFULLY TO DETERMINE WHICH NURSING 48.36 HOME FACILITIES AND EXPENSES ARE COVERED BY YOUR POLICY."; 49.1 (c) A statement of the renewal provisions including any 49.2 reservations by the insurer of a right to change premiums. The 49.3 premium and manner of payment shall be stated for all plans that 49.4 are offered to the prospective applicant. All possible premiums 49.5 for the prospective applicant shall be illustrated; 49.6 (d) [READ YOUR POLICY OR CERTIFICATE VERY CAREFULLY.] A 49.7 statement that the outline of coverage is a summary of the 49.8 policy issued or applied for and that the policy should be 49.9 consulted to determine governing contractual provisions. 49.10 Additionally, it does not give all the details of Medicare 49.11 coverage. Contact your local Social Security office or consult 49.12 the Medicare handbook for more details; 49.13 (e) A statement of the policy's loss ratio as follows: 49.14 "This policy provides an anticipated loss ratio of (..%). This 49.15 means that, on the average, policyholders may expect that 49.16 ($....) of every $100.00 in premium will be returned as benefits 49.17 to policyholders over the life of the contract."; 49.18 (f) When the outline of coverage is provided at the time of 49.19 application and the Medicare supplement policy or certificate is 49.20 issued on a basis that would require revision of the outline, a 49.21 substitute outline of coverage properly describing the policy or 49.22 certificate shall accompany the policy or certificate when it is 49.23 delivered and contain the following statement, in no less than 49.24 12-point type, immediately above the company name: 49.25 "NOTICE: Read this outline of coverage carefully. It is not 49.26 identical to the outline of coverage provided upon application, 49.27 and the coverage originally applied for has not been issued."; 49.28 (g) [RIGHT TO RETURN POLICY OR CERTIFICATE.] "If you find 49.29 that you are not satisfied with your policy or certificate for 49.30 any reason, you may return it to (insert issuer's address). If 49.31 you send the policy or certificate back to us within 30 days 49.32 after you receive it, we will treat the policy or certificate as 49.33 if it had never been issued and return all of your payments 49.34 within ten days."; 49.35 (h) [POLICY OR CERTIFICATE REPLACEMENT.] "If you are 49.36 replacing another health insurance policy or certificate, do NOT 50.1 cancel it until you have actually received your new policy or 50.2 certificate and are sure you want to keep it."; 50.3 (i) [NOTICE.] "This policy or certificate may not fully 50.4 cover all of your medical costs." 50.5 A. (for agents:) 50.6 "Neither (insert company's name) nor its agents are 50.7 connected with Medicare." 50.8 B. (for direct response:) 50.9 "(insert company's name) is not connected with Medicare." 50.10 (j) Notice regarding policies or certificates which are not 50.11 Medicare supplement policies. 50.12 Any accident and sickness insurance policy or certificate, 50.13 other than a Medicare supplement policy, or a policy or 50.14 certificate issued pursuant to a contract under the federal 50.15 Social Security Act, section 1833or 1876(United States Code, 50.16 title 42, section 1395, et seq.), disability income policy; 50.17 basic, catastrophic, or major medical expense policy; single 50.18 premium nonrenewable policy; or other policy, issued for 50.19 delivery in this state to persons eligible for Medicare shall 50.20 notify insureds under the policy that the policy is not a 50.21 Medicare supplement policy or certificate. The notice shall 50.22 either be printed or attached to the first page of the outline 50.23 of coverage delivered to insureds under the policy, or if no 50.24 outline of coverage is delivered, to the first page of the 50.25 policy or certificate delivered to insureds. The notice shall 50.26 be in no less than 12-point type and shall contain the following 50.27 language: 50.28 "THIS (POLICY OR CERTIFICATE) IS NOT A MEDICARE SUPPLEMENT 50.29 (POLICY OR CONTRACT). If you are eligible for Medicare, 50.30 review theMedicare supplement buyer's"Guide to Health 50.31 Insurance for People with Medicare" available from the 50.32 company." 50.33 (k) [COMPLETE ANSWERS ARE VERY IMPORTANT.] "When you fill 50.34 out the application for the new policy or certificate, be sure 50.35 to answer truthfully and completely all questions about your 50.36 medical and health history. The company may cancel your policy 51.1 or certificate and refuse to pay any claims if you leave out or 51.2 falsify important medical information." If the policy or 51.3 certificate is guaranteed issue, this paragraph need not appear. 51.4 "Review the application carefully before you sign it. Be 51.5 certain that all information has been properly recorded." 51.6 Include for each plan, prominently identified in the cover 51.7 page, a chart showing the services, Medicare payments, plan 51.8 payments, and insured payments for each plan, using the same 51.9 language, in the same order, using uniform layout and format. 51.10 The outline of coverage provided to applicants pursuant to 51.11 this section consists of four parts: a cover page, premium 51.12 information, disclosure pages, and charts displaying the 51.13 features of each benefit plan offered by the insurer. 51.14 Sec. 35. Minnesota Statutes 1994, section 62A.44, 51.15 subdivision 2, is amended to read: 51.16 Subd. 2. [QUESTIONS.] (a) Application forms shall include 51.17 the following questions designed to elicit information as to 51.18 whether, as of the date of the application, the applicant has 51.19 another Medicare supplement or other health insurance policy or 51.20 certificate in force or whether a Medicare supplement policy or 51.21 certificate is intended to replace any other accident and 51.22 sickness policy or certificate presently in force. A 51.23 supplementary application or other form to be signed by the 51.24 applicant and agent containing the questions and statements may 51.25 be used. 51.26 "(1) You do not need more than one Medicare supplement 51.27 policy or certificate. 51.28 (2) If youare 65 or older,purchase this policy, you may 51.29 want to evaluate your existing health coverage and decide 51.30 if you need multiple coverages. 51.31 (3) You may be eligible for benefits under Medicaid and may 51.32 not need a Medicare supplement policy or certificate. 51.33(3)(4) The benefits and premiums under your Medicare 51.34 supplement policy or certificatewillcan be suspended, if 51.35 requested, during your entitlement to benefits under 51.36 Medicaid for 24 months. You must request this suspension 52.1 within 90 days of becoming eligible for Medicaid. If you 52.2 are no longer entitled to Medicaid, your policy or 52.3 certificate will be reinstated if requested within 90 days 52.4 of losing Medicaid eligibility. 52.5 (5) Counseling services may be available in Minnesota to 52.6 provide advice concerning medical assistance through state 52.7 Medicaid, Qualified Medicare Beneficiaries (QMBs), and 52.8 Specified Low-Income Medicare Beneficiaries (SLMBs). 52.9 To the best of your knowledge: 52.10 (1) Do you have another Medicare supplement policy or 52.11 certificate in force, including health care service52.12contract or health maintenance organization contract? 52.13 (a) If so, with which company? 52.14 (b) If so, do you intend to replace your current Medicare 52.15 supplement policy with this policy or certificate? 52.16 (2) Do you have any other health insurance policies that 52.17 provide benefitsthatwhich this Medicare supplement policy 52.18 or certificate would duplicate? 52.19 (a) Ifyou doso, please name the companyand the. 52.20 (b) What kind of policy.? 52.21 (3)If the answer to question 1 or 2 is yes, do you intend52.22to replace these medical or health policies with this52.23policy or certificate?52.24(4)Are you coveredbyfor medical assistance through the 52.25 state Medicaid program? If so, which of the following 52.26 programs provides coverage for you? 52.27 a. Specified Low-Income Medicare Beneficiary (SLMB), 52.28 b. Qualified Medicare Beneficiary (QMB), or 52.29 c. full Medicaid Beneficiary?" 52.30 (b) Agents shall list any other health insurance policies 52.31 they have sold to the applicant. 52.32 (1) List policies sold that are still in force. 52.33 (2) List policies sold in the past five years that are no 52.34 longer in force. 52.35 (c) In the case of a direct response issuer, a copy of the 52.36 application or supplemental form, signed by the applicant, and 53.1 acknowledged by the insurer, shall be returned to the applicant 53.2 by the insurer on delivery of the policy or certificate. 53.3 (d) Upon determining that a sale will involve replacement 53.4 of Medicare supplement coverage, any issuer, other than a direct 53.5 response issuer, or its agent, shall furnish the applicant, 53.6 before issuance or delivery of the Medicare supplement policy or 53.7 certificate, a notice regarding replacement of Medicare 53.8 supplement coverage. One copy of the notice signed by the 53.9 applicant and the agent, except where the coverage is sold 53.10 without an agent, shall be provided to the applicant and an 53.11 additional signed copy shall be retained by the issuer. A 53.12 direct response issuer shall deliver to the applicant at the 53.13 time of the issuance of the policy or certificate the notice 53.14 regarding replacement of Medicare supplement coverage. 53.15 (e) The notice required by paragraph (d) for an issuer 53.16 shall be provided in substantially the following form in no less 53.17 than 12-point type: 53.18 "NOTICE TO APPLICANT REGARDING REPLACEMENT 53.19 OF MEDICARE SUPPLEMENT INSURANCE 53.20 (Insurance company's name and address) 53.21 SAVE THIS NOTICE! IT MAY BE IMPORTANT TO YOU IN THE FUTURE. 53.22 According to (your application) (information you have 53.23 furnished), you intend to terminate existing Medicare supplement 53.24 insurance and replace it with a policy or certificate to be 53.25 issued by (Company Name) Insurance Company. Your new policy or 53.26 certificate will provide 30 days within which you may decide 53.27 without cost whether you desire to keep the policy or 53.28 certificate. 53.29 You should review this new coverage carefully. Compare it 53.30 with all accident and sickness coverage you now have.Terminate53.31your present policy onlyIf, after due consideration, you find 53.32 that purchase of this Medicare supplement coverage is a wise 53.33 decision you should terminate your present Medicare supplement 53.34 policy. You should evaluate the need for other accident and 53.35 sickness coverage you have that may duplicate this policy. 53.36 STATEMENT TO APPLICANT BY ISSUER, AGENT, (BROKER OR OTHER 54.1 REPRESENTATIVE): I have reviewed your current medical or 54.2 health insurance coverage.The replacement of insurance54.3involved in this transaction does not duplicate coverage,54.4 To the best of my knowledge this Medicare supplement policy 54.5 will not duplicate your existing Medicare supplement policy 54.6 because you intend to terminate the existing Medicare 54.7 supplement policy. The replacement policy or certificate 54.8 is being purchased for the following reason(s) (check one): 54.9 ______ Additional benefits 54.10 ______ No change in benefits, but lower premiums 54.11 ______ Fewer benefits and lower premiums 54.12 ______ Other (please specify) 54.13 ____________________________________________________________ 54.14 ____________________________________________________________ 54.15 ____________________________________________________________ 54.16 (1) Health conditions which you may presently have 54.17 (preexisting conditions) may not be immediately or fully 54.18 covered under the new policy or certificate. This could 54.19 result in denial or delay of a claim for benefits under the 54.20 new policy or certificate, whereas a similar claim might 54.21 have been payable under your present policy or certificate. 54.22 (2) State law provides that your replacement policy or 54.23 certificate may not contain new preexisting conditions, 54.24 waiting periods, elimination periods, or probationary 54.25 periods. The insurer will waive any time periods 54.26 applicable to preexisting conditions, waiting periods, 54.27 elimination periods, or probationary periods in the new 54.28 policy (or coverage) for similar benefits to the extent the 54.29 time was spent (depleted) under the original policy or 54.30 certificate. 54.31 (3) If you still wish to terminate your present policy or 54.32 certificate and replace it with new coverage, be certain to 54.33 truthfully and completely answer all questions on the 54.34 application concerning your medical and health history. 54.35 Failure to include all material medical information on an 54.36 application may provide a basis for the company to deny any 55.1 future claims and to refund your premium as though your 55.2 policy or certificate had never been in force. After the 55.3 application has been completed and before you sign it, 55.4 review it carefully to be certain that all information has 55.5 been properly recorded. (If the policy or certificate is 55.6 guaranteed issue, this paragraph need not appear.) 55.7 Do not cancel your present policy or certificate until you 55.8 have received your new policy or certificate and you are 55.9 sure that you want to keep it. 55.10 55.11 _____________________________________________________ 55.12 (Signature of Agent, Broker, or Other Representative)* 55.13 55.14 _____________________________________________________ 55.15 (Typed Name and Address of Issuer, Agent, or Broker) 55.16 55.17 _____________________ 55.18 (Date) 55.19 55.20 __________________________________ 55.21 (Applicant's Signature) 55.22 55.23 _____________________ 55.24 (Date) 55.25 55.26 *Signature not required for direct response sales." 55.27 55.28 (f) Paragraph (e), clauses (1) and (2), of the replacement 55.29 notice (applicable to preexisting conditions) may be deleted by 55.30 an issuer if the replacement does not involve application of a 55.31 new preexisting condition limitation. 55.32 Sec. 36. Minnesota Statutes 1994, section 62A.60, is 55.33 amended to read: 55.34 62A.60 [RETROACTIVE DENIAL OF EXPENSES.] 55.35 In cases where the subscriber or insured is liable for 55.36 costs beyond applicable copayments or deductibles, no insurer 56.1 may retroactively deny payment to a person who is covered when 56.2 the services are provided for health care services that are 56.3 otherwise covered, if the insurer or its representative failed 56.4 to provide prior or concurrent review or authorization for the 56.5 expenses when required to do so under the policy, plan, or 56.6 certificate. If prior or concurrent review or authorization was 56.7 provided by the insurer or its representative, and the 56.8 preexisting condition limitation provision, the general 56.9 exclusion provision and any other coinsurance, or other policy 56.10 requirements have been met, the insurer may not deny payment for 56.11 the authorized service or time period except in cases where 56.12 fraud or substantive misrepresentation occurred. 56.13 Sec. 37. Minnesota Statutes 1995 Supplement, section 56.14 62C.14, subdivision 14, is amended to read: 56.15 Subd. 14. No subscriber's individual contract or any group 56.16 contract which provides for coverage of family members or other 56.17 dependents of a subscriber or of an employee or other group 56.18 member of a group subscriber, shall be renewed, delivered, or 56.19 issued for delivery in this state unless such contract includes 56.20 as covered family members or dependents any newborn infants,56.21including dependent grandchildren,immediately from the moment 56.22 of birth and thereafter which insurance shall provide coverage 56.23 for illness, injury, congenital malformation or premature 56.24 birth. For purposes of this paragraph, "newborn infants" 56.25 includes grandchildren who are financially dependent upon a 56.26 covered grandparent and who reside with that covered grandparent 56.27 continuously from birth. No policy, contract, or agreement 56.28 covered by this section may require notification to a health 56.29 carrier as a condition for this dependent coverage. However, if 56.30 the policy, contract, or agreement mandates an additional 56.31 premium for each dependent, the health carrier shall be entitled 56.32 to all premiums that would have been collected had the health 56.33 carrier been aware of the additional dependent. The health 56.34 carrier may withhold payment of any health benefits for the new 56.35 dependent until it has been compensated with the applicable 56.36 premium which would have been owed if the health carrier had 57.1 been informed of the additional dependent immediately. 57.2 Sec. 38. Minnesota Statutes 1995 Supplement, section 57.3 62E.05, subdivision 1, is amended to read: 57.4 Subdivision 1. [CERTIFICATION.] Upon application by an 57.5 insurer, fraternal, or employer for certification of a plan of 57.6 health coverage as a qualified plan or a qualified medicare 57.7 supplement plan for the purposes of sections 62E.01 to 62E.16, 57.8 the commissioner shall make a determination within 90 days as to 57.9 whether the plan is qualified. All plans of health coverage, 57.10 except Medicare supplement policies, shall be labeled as 57.11 "qualified" or "nonqualified" on the front of the policy or 57.12evidence of insurancecontract, or on the schedule page. All 57.13 qualified plans shall indicate whether they are number one, two, 57.14 or three coverage plans. 57.15 Sec. 39. Minnesota Statutes 1995 Supplement, section 57.16 62F.02, subdivision 2, is amended to read: 57.17 Subd. 2. [DIRECTORS.] The association shall have a board 57.18 of directors composed of 11 persons chosen for a term of four 57.19 years as follows: five persons elected by members of the 57.20 association at a meeting called by the commissioner; three 57.21 members who are health care providers appointed by the 57.22 commissioner prior to the election by the association; and three 57.23 public members, as defined in section 214.02, appointed by the 57.24 governor prior to the election by the association. If the 57.25 commissioner determines that it is no longer cost-effective or 57.26 efficient to operate a separate board of directors to administer 57.27 the medical malpractice joint underwriting association, the 57.28 commissioner shall deactivate the board and assign all of the 57.29 board's authority and responsibilities under this chapter to the 57.30 Minnesota joint underwriting association board of directors 57.31 established under section 62I.02. 57.32 Sec. 40. Minnesota Statutes 1994, section 62F.03, 57.33 subdivision 6, is amended to read: 57.34 Subd. 6. "Net direct premiums" means gross direct premiums 57.35 written on personal injury liability insurance, including the 57.36 liability component of multiple peril package policies as 58.1 computed by the commissioner, less return premiums for the 58.2 unused or unabsorbed portions of premium deposits. Net direct 58.3 premiums do not include policyholder dividends. 58.4 Sec. 41. Minnesota Statutes 1994, section 62F.04, 58.5 subdivision 1a, is amended to read: 58.6 Subd. 1a. [REAUTHORIZATION.] The authorization to issue 58.7 insurance is valid for a period of two years from the date it 58.8 was made. The commissioner may reauthorize the issuance of 58.9 insurance for additional two-year periodsunder the terms of58.10subdivision 1according to the procedures set forth in sections 58.11 62I.21 and 62I.22. This subdivision is not a limitation on the 58.12 number of times the commissioner may reauthorize the issuance of 58.13 insurance. 58.14 Sec. 42. Minnesota Statutes 1994, section 62I.02, 58.15 subdivision 2, is amended to read: 58.16 Subd. 2. [DIRECTORBOARD OF DIRECTORS.] The association 58.17 shall have a board of directors composed of 11 persons chosen as 58.18 follows: five persons elected by members of the association at 58.19 a meeting called by the commissioner; three public members, as 58.20 defined in section 214.02, appointed by the commissioner; and 58.21 three members, appointed by the commissioner representing groups 58.22 to whom coverage has been extended by the association. The 58.23 terms of the members shall be four years. Terms may be 58.24 staggered so that no more than six members are appointed or 58.25 elected every two years. Members may serve until their 58.26 successors are appointed or elected. If at any time no coverage 58.27 is currently extended by the association, then either additional 58.28 public members may be appointed to fill these three positions 58.29 or, at the option of the commissioner, representatives from 58.30 groups who had previously been covered by the association may 58.31 serve as directors. In the event that the commissioner assigns 58.32 the responsibility for administering chapter 62F to the 58.33 Minnesota joint underwriting association, the board of directors 58.34 must be increased by four additional members. These four 58.35 additional members must be appointed by the commissioner. One 58.36 of the additional members must be a licensed health care 59.1 provider, two of the additional members must be representatives 59.2 of medical malpractice insurers, and the fourth additional 59.3 member must be a public member. 59.4 Sec. 43. Minnesota Statutes 1994, section 62I.02, 59.5 subdivision 5, is amended to read: 59.6 Subd. 5. [ACCOUNTS.] (a) For the purposes of 59.7 administration and assessment, and except as otherwise 59.8 authorized under paragraph (b), the association shall be divided 59.9 into two separate accounts: 59.10 (1) the property and casualty insurance account; and 59.11 (2) the personal injury liability insuranceaccount59.12 account-liquor. 59.13 (b) If the association is authorized by the commissioner to 59.14 issue medical malpractice insurance, the association shall 59.15 establish a third account for purposes of administration and 59.16 assessment. This account must be identified as the personal 59.17 injury liability insurance account-medical malpractice. 59.18 Sec. 44. Minnesota Statutes 1994, section 62I.02, is 59.19 amended by adding a subdivision to read: 59.20 Subd. 6. [MEDICAL MALPRACTICE.] If the association is 59.21 authorized by the commissioner to issue medical malpractice 59.22 insurance, it shall administer the medical malpractice insurance 59.23 program according to chapter 62F. 59.24 Sec. 45. Minnesota Statutes 1994, section 62I.07, is 59.25 amended to read: 59.26 62I.07 [MEMBERSHIP ASSESSMENTS.] 59.27 Subdivision 1. [GENERAL ASSESSMENT.] Each member of the 59.28 association that is authorized to write property and casualty 59.29 insurance in the state shall participate in its losses and 59.30 expenses in the proportion that the direct written premiums of 59.31 the member on the kinds of insurance in that account bears to 59.32 the total aggregate direct written premiums written in this 59.33 state by all members on the kinds of insurance in that account. 59.34 The members' participation in the association shall be 59.35 determined annually on the direct written premiums written 59.36 during the preceding calendar year as reported on the annual 60.1 statements and other reports filed by the member with the 60.2 commissioner. Direct written premiums mean that amount at page 60.3 14, column (2), lines 5, 8, 9, 17, 21.2, 22, 23, 24, 25, 26, and 60.4 27 of the annual statement filed annually with the department of 60.5 commerce under section 60A.13. 60.6 Subd. 2. [PERSONAL INJURY LIABILITY INSURANCE ASSESSMENT; 60.7 LIQUOR LIABILITY.] A member of the association shall participate 60.8 in its writings, expenses, servicing allowance, management fees, 60.9 and losses in the proportion that the net direct premiums of the 60.10 member, excluding that portion of premiums attributable to the 60.11 operation of the association, written during the preceding 60.12 calendar year on the kinds of insurance in that account bears to 60.13 the aggregate net direct premiums written in this state by all 60.14 members on the kinds of insurance in that account. The member's 60.15 participation in the association shall be determined annually on 60.16 the basis of net direct premiums written during the preceding 60.17 calendar year, as reported in the annual statements and other 60.18 reports filed by the member with the commissioner. Net direct 60.19 premiums mean gross direct premiums written on personal injury 60.20 liability insurance, including the liability component of 60.21 multiple peril package policies as computed by the commissioner, 60.22 less return premiums for the unused or unabsorbed portions of 60.23 premium deposits. The net direct premiums are calculated using 60.24 lines 5.2 CMP, and 17-other liability from page 14, column (2) 60.25 of the annual statement filed annually with the department of 60.26 commerce pursuant to section 60A.13. 60.27 Subd. 3. [PERSONAL INJURY LIABILITY INSURANCE ASSESSMENT; 60.28 MEDICAL MALPRACTICE.] If an assessment is needed for medical 60.29 malpractice, the assessment is made using the following lines 60.30 from page 14, column (2) of the annual statement filed annually 60.31 with the department of commerce pursuant to section 60A.13 using 60.32 the following lines: 5.2 commercial multiperil liability, 11 60.33 medical malpractice, 17-other liability, 19.1 PIP-private 60.34 passenger, 19.3 PIP-commercial. 60.35 Sec. 46. Minnesota Statutes 1994, section 62L.02, 60.36 subdivision 15, is amended to read: 61.1 Subd. 15. [HEALTH BENEFIT PLAN.] "Health benefit plan" 61.2 means a policy, contract, or certificate offered, sold, issued, 61.3 or renewed by a health carrier to a small employer for the 61.4 coverage of medical and hospital benefits. Health benefit plan 61.5 includes a small employer plan. Health benefit plan does not 61.6 include coverage that is: 61.7 (1) limited to disability or income protection coverage; 61.8 (2) automobile medical payment coverage; 61.9 (3) supplemental to liability insurance; 61.10 (4) designed solely to provide payments on a per diem, 61.11 fixed indemnity, or non-expense-incurred basis; 61.12 (5) credit accident and health insurance as defined in 61.13 section 62B.02; 61.14 (6) designed solely to provide dental or vision care; 61.15 (7) blanket accident and sickness insurance as defined in 61.16 section 62A.11; 61.17 (8) accident-only coverage; 61.18 (9) a long-term care policy as defined in section 62A.46; 61.19 (10) issued as a supplement to Medicare, as defined in 61.20 sections 62A.31 to 62A.44, or policies, contracts, or 61.21 certificates that supplement Medicare issued by health 61.22 maintenance organizations or those policies, contracts, or 61.23 certificates governed by section 1833or 1876of the federal 61.24 Social Security Act, United States Code, title 42, section 1395, 61.25 et seq., as amended; 61.26 (11) workers' compensation insurance; or 61.27 (12) issued solely as a companion to a health maintenance 61.28 contract as described in section 62D.12, subdivision 1a, so long 61.29 as the health maintenance contract meets the definition of a 61.30 health benefit plan. 61.31 For the purpose of this chapter, a health benefit plan 61.32 issued to eligible employees of a small employer who meets the 61.33 participation requirements of section 62L.03, subdivision 3, is 61.34 considered to have been issued to a small employer. A health 61.35 benefit plan issued on behalf of a health carrier is considered 61.36 to be issued by the health carrier. 62.1 Sec. 47. Minnesota Statutes 1994, section 62L.09, 62.2 subdivision 3, is amended to read: 62.3 Subd. 3. [REENTRY PROHIBITION.] (a) Except as otherwise 62.4 provided in paragraph (b), a health carrier that ceases to do 62.5 business in the small employer market after July 1, 1993, is 62.6 prohibited from writing new business in the small employer 62.7 market in this state for a period of five years from the date of 62.8 notice to the commissioner. This subdivision applies to any 62.9 health maintenance organization that ceases to do business in 62.10 the small employer market in one service area with respect to 62.11 that service area only. Nothing in this subdivision prohibits 62.12 an affiliated health maintenance organization from continuing to 62.13 do business in the small employer market in that same service 62.14 area. 62.15 (b) The commissioner of commerce or the commissioner of 62.16 health may permit a health carrier that ceases to do business in 62.17 the small employer market in this state after July 1, 1993, to 62.18 immediately begin writing new business in the small employer 62.19 market if the commissioner considers it appropriate. 62.20 Sec. 48. Minnesota Statutes 1995 Supplement, section 62.21 62L.12, subdivision 2, is amended to read: 62.22 Subd. 2. [EXCEPTIONS.] (a) A health carrier may sell, 62.23 issue, or renew individual conversion policies to eligible 62.24 employees otherwise eligible for conversion coverage under 62.25 section 62D.104 as a result of leaving a health maintenance 62.26 organization's service area. 62.27 (b) A health carrier may sell, issue, or renew individual 62.28 conversion policies to eligible employees otherwise eligible for 62.29 conversion coverage as a result of the expiration of any 62.30 continuation of group coverage required under sections 62A.146, 62.31 62A.17, 62A.21, 62C.142, 62D.101, and 62D.105. 62.32 (c) A health carrier may sell, issue, or renew conversion 62.33 policies under section 62E.16 to eligible employees. 62.34 (d) A health carrier may sell, issue, or renew individual 62.35 continuation policies to eligible employees as required. 62.36 (e) A health carrier may sell, issue, or renew individual 63.1 health plans if the coverage is appropriate due to an unexpired 63.2 preexisting condition limitation or exclusion applicable to the 63.3 person under the employer's group health plan or due to the 63.4 person's need for health care services not covered under the 63.5 employer's group health plan. 63.6 (f) A health carrier may sell, issue, or renew an 63.7 individual health plan, if the individual has elected to buy the 63.8 individual health plan not as part of a general plan to 63.9 substitute individual health plans for a group health plan nor 63.10 as a result of any violation of subdivision 3 or 4. 63.11 (g) Nothing in this subdivision relieves a health carrier 63.12 of any obligation to provide continuation or conversion coverage 63.13 otherwise required under federal or state law. 63.14 (h) Nothing in this chapter restricts the offer, sale, 63.15 issuance, or renewal of coverage issued as a supplement to 63.16 Medicare under sections 62A.31 to 62A.44, or policies or 63.17 contracts that supplement Medicare issued by health maintenance 63.18 organizations, or those contracts governed by section 1833or63.191876of the federal Social Security Act, United States Code, 63.20 title 42, section 1395 et. seq., as amended. 63.21 (i) Nothing in this chapter restricts the offer, sale, 63.22 issuance, or renewal of individual health plans necessary to 63.23 comply with a court order. 63.24 Sec. 49. Minnesota Statutes 1994, section 65A.01, 63.25 subdivision 3, is amended to read: 63.26 Subd. 3. [POLICY PROVISIONS.] On said policy following 63.27 such matter as provided in subdivisions 1 and 2, printed in the 63.28 English language in type of such size or sizes and arranged in 63.29 such manner, as is approved by the commissioner of commerce, the 63.30 following provisions and subject matter shall be stated in the 63.31 following words and in the following sequence, but with the 63.32 convenient placing, if desired, of such matter as will act as a 63.33 cover or back for such policy when folded, with the blanks below 63.34 indicated being left to be filled in at the time of the issuing 63.35 of the policy, to wit: 63.36 (Space for listing the amounts of insurance, rates and 64.1 premiums for the basic coverages provided under the standard 64.2 form of policy and for additional coverages or perils provided 64.3 under endorsements attached. The description and location of 64.4 the property covered and the insurable value(s) of any 64.5 building(s) or structure(s) covered by the policy or its 64.6 attached endorsements; also in the above space may be stated 64.7 whether other insurance is limited and if limited the total 64.8 amount permitted.) 64.9 In consideration of the provisions and stipulations herein 64.10 or added hereto and of the premium above specified this company, 64.11 for a term of ..... from ..... (At 12:01 a.m. Standard Time) to 64.12 ..... (At 12:01 a.m. Standard Time) at location of property 64.13 involved, to an amount not exceeding the amount(s) above 64.14 specified does insure ..... and legal representatives 64.15 ........................................... 64.16 (In above space may be stated whether other insurance is 64.17 limited.) (And if limited the total amount permitted.) 64.18 Subject to form No.(s) ..... attached hereto. 64.19 This policy is made and accepted subject to the foregoing 64.20 provisions and stipulations and those hereinafter stated, which 64.21 are hereby made a part of this policy, together with such 64.22 provisions, stipulations and agreements as may be added hereto 64.23 as provided in this policy. 64.24 The insurance effected above is granted against all loss or 64.25 damage by fire originating from any cause, except as hereinafter 64.26 provided, also any damage by lightning and by removal from 64.27 premises endangered by the perils insured against in this 64.28 policy, to the property described hereinafter while located or 64.29 contained as described in this policy, or pro rata for five days 64.30 at each proper place to which any of the property shall 64.31 necessarily be removed for preservation from the perils insured 64.32 against in this policy, but not elsewhere. The amount of said 64.33 loss or damage, except in case of total loss on buildings, to be 64.34 estimated according to the actual value of the insured property 64.35 at the time when such loss or damage happens. 64.36 If the insured property shall be exposed to loss or damage 65.1 from the perils insured against, the insured shall make all 65.2 reasonable exertions to save and protect same. 65.3 This entire policy shall be void if, whether before a loss, 65.4 the insured has willfully, or after a loss, the insured has 65.5 willfully and with intent to defraud, concealed or 65.6 misrepresented any material fact or circumstance concerning this 65.7 insurance or the subject thereof, or the interests of the 65.8 insured therein. 65.9 This policy shall not cover accounts, bills, currency, 65.10 deeds, evidences of debt, money or securities; nor, unless 65.11 specifically named hereon in writing, bullion, or manuscripts. 65.12 This company shall not be liable for loss by fire or other 65.13 perils insured against in this policy caused, directly or 65.14 indirectly by: (a) enemy attack by armed forces, including 65.15 action taken by military, naval or air forces in resisting an 65.16 actual or immediately impending enemy attack; (b) invasion; (c) 65.17 insurrection; (d) rebellion; (e) revolution; (f) civil war; (g) 65.18 usurped power; (h) order of any civil authority except acts of 65.19 destruction at the time of and for the purpose of preventing the 65.20 spread of fire, providing that such fire did not originate from 65.21 any of the perils excluded by this policy. 65.22 Other insurance may be prohibited or the amount of 65.23 insurance may be limited by so providing in the policy or an 65.24 endorsement, rider or form attached thereto. 65.25 Unless otherwise provided in writing added hereto this 65.26 company shall not be liable for loss occurring: 65.27 (a) while the hazard is increased by any means within the 65.28 control or knowledge of the insured; or 65.29 (b) while the described premises, whether intended for 65.30 occupancy by owner or tenant, are vacant or unoccupied beyond a 65.31 period of 60 consecutive days; or 65.32 (c) as a result of explosion or riot, unless fire ensue, 65.33 and in that event for loss by fire only. 65.34 Any other peril to be insured against or subject of 65.35 insurance to be covered in this policy shall be by endorsement 65.36 in writing hereon or added hereto. 66.1 The extent of the application of insurance under this 66.2 policy and the contributions to be made by this company in case 66.3 of loss, and any other provision or agreement not inconsistent 66.4 with the provisions of this policy, may be provided for in 66.5 writing added hereto, but no provision may be waived except such 66.6 as by the terms of this policy is subject to change. 66.7 No permission affecting this insurance shall exist, or 66.8 waiver of any provision be valid, unless granted herein or 66.9 expressed in writing added hereto. No provision, stipulation or 66.10 forfeiture shall be held to be waived by any requirements or 66.11 proceeding on the part of this company relating to appraisal or 66.12 to any examination provided for herein. 66.13 This policy shall be canceled at any time at the request of 66.14 the insured, in which case this company shall, upon demand and 66.15 surrender of this policy, refund the excess of paid premium 66.16 above the customary short rates for the expired time. This 66.17 policy may be canceled at any time by this company by giving to 66.18 the insureda ten30 days' written notice of cancellation with 66.19 or without tender of the excess of paid premium above the pro 66.20 rata premium for the expired time, which excess, if not 66.21 tendered, shall be refunded on demand. Notice of cancellation 66.22 shall state that said excess premium (if not tendered) will be 66.23 refunded on demand. 66.24 If loss hereunder is made payable, in whole or in part, to 66.25 a designated mortgagee or contract for deed vendor not named 66.26 herein as insured, such interest in this policy may be canceled 66.27 by giving to such mortgagee or vendor a ten days' written notice 66.28 of cancellation. 66.29 Notwithstanding any other provisions of this policy, if 66.30 this policy shall be made payable to a mortgagee or contract for 66.31 deed vendor of the covered real estate, no act or default of any 66.32 person other than such mortgagee or vendor or the mortgagee's or 66.33 vendor's agent or those claiming under the mortgagee or vendor, 66.34 whether the same occurs before or during the term of this 66.35 policy, shall render this policy void as to such mortgagee or 66.36 vendor nor affect such mortgagee's or vendor's right to recover 67.1 in case of loss on such real estate; provided, that the 67.2 mortgagee or vendor shall on demand pay according to the 67.3 established scale of rates for any increase of risks not paid 67.4 for by the insured; and whenever this company shall be liable to 67.5 a mortgagee or vendor for any sum for loss under this policy for 67.6 which no liability exists as to the mortgagor, vendee, or owner, 67.7 and this company shall elect by itself, or with others, to pay 67.8 the mortgagee or vendor the full amount secured by such mortgage 67.9 or contract for deed, then the mortgagee or vendor shall assign 67.10 and transfer to the company the mortgagee's or vendor's 67.11 interest, upon such payment, in the said mortgage or contract 67.12 for deed together with the note and debts thereby secured. 67.13 This company shall not be liable for a greater proportion 67.14 of any loss than the amount hereby insured shall bear to the 67.15 whole insurance covering the property against the peril involved. 67.16 In case of any loss under this policy the insured shall 67.17 give immediate written notice to this company of any loss, 67.18 protect the property from further damage, and a statement in 67.19 writing, signed and sworn to by the insured, shall within 60 67.20 days be rendered to the company, setting forth the value of the 67.21 property insured, except in case of total loss on buildings the 67.22 value of said buildings need not be stated, the interest of the 67.23 insured therein, all other insurance thereon, in detail, the 67.24 purposes for which and the persons by whom the building insured, 67.25 or containing the property insured, was used, and the time at 67.26 which and manner in which the fire originated, so far as known 67.27 to the insured. 67.28 The insured, as often as may be reasonably required, shall 67.29 exhibit to any person designated by this company all that 67.30 remains of any property herein described, and, after being 67.31 informed of the right to counsel and that any answers may be 67.32 used against the insured in later civil or criminal proceedings, 67.33 the insured shall, within a reasonable period after demand by 67.34 this company, submit to examinations under oath by any person 67.35 named by this company, and subscribe the oath. The insured, as 67.36 often as may be reasonably required, shall produce for 68.1 examination all records and documents reasonably related to the 68.2 loss, or certified copies thereof if originals are lost, at a 68.3 reasonable time and place designated by this company or its 68.4 representatives, and shall permit extracts and copies thereof to 68.5 be made. 68.6 In case the insured and this company, except in case of 68.7 total loss on buildings, shall fail to agree as to the actual 68.8 cash value or the amount of loss, then, on the written demand of 68.9 either, each shall select a competent and disinterested 68.10 appraiser and notify the other of the appraiser selected within 68.11 20 days of such demand. In case either fails to select an 68.12 appraiser within the time provided, then a presiding judge of 68.13 the district court of the county wherein the loss occurs may 68.14 appoint such appraiser for such party upon application of the 68.15 other party in writing by giving five days' notice thereof in 68.16 writing to the party failing to appoint. The appraisers shall 68.17 first select a competent and disinterested umpire; and failing 68.18 for 15 days to agree upon such umpire, then a presiding judge of 68.19 the above mentioned court may appoint such an umpire upon 68.20 application of party in writing by giving five days' notice 68.21 thereof in writing to the other party. The appraisers shall 68.22 then appraise the loss, stating separately actual value and loss 68.23 to each item; and, failing to agree, shall submit their 68.24 differences, only, to the umpire. An award in writing, so 68.25 itemized, of any two when filed with this company shall 68.26 determine the amount of actual value and loss. Each appraiser 68.27 shall be paid by the selecting party, or the party for whom 68.28 selected, and the expense of the appraisal and umpire shall be 68.29 paid by the parties equally. 68.30 It shall be optional with this company to take all of the 68.31 property at the agreed or appraised value, and also to repair, 68.32 rebuild or replace the property destroyed or damaged with other 68.33 of like kind and quality within a reasonable time, on giving 68.34 notice of its intention so to do within 30 days after the 68.35 receipt of the proof of loss herein required. 68.36 There can be no abandonment to this company of any property. 69.1 The amount of loss for which this company may be liable 69.2 shall be payable 60 days after proof of loss, as herein 69.3 provided, is received by this company and ascertainment of the 69.4 loss is made either by agreement between the insured and this 69.5 company expressed in writing or by the filing with this company 69.6 of an award as herein provided. It is moreover understood that 69.7 there can be no abandonment of the property insured to the 69.8 company, and that the company will not in any case be liable for 69.9 more than the sum insured, with interest thereon from the time 69.10 when the loss shall become payable, as above provided. 69.11 No suit or action on this policy for the recovery of any 69.12 claim shall be sustainable in any court of law or equity unless 69.13 all the requirements of this policy have been complied with, and 69.14 unless commenced within two years after inception of the loss. 69.15 This company is subrogated to, and may require from the 69.16 insured an assignment of all right of recovery against any party 69.17 for loss to the extent that payment therefor is made by this 69.18 company; and the insurer may prosecute therefor in the name of 69.19 the insured retaining such amount as the insurer has paid. 69.20 Assignment of this policy shall not be valid except with 69.21 the written consent of this company. 69.22 IN WITNESS WHEREOF, this company has executed and attested 69.23 these presents. 69.24 69.25 ........................ ........................ 69.26 (Signature) (Signature) 69.27 ........................ ........................ 69.28 (Name of office) (Name of office) 69.29 Sec. 50. Minnesota Statutes 1994, section 65A.295, is 69.30 amended to read: 69.31 65A.295 [HOMEOWNER'S INSURANCE COVERAGE.] 69.32 (a) Every insurer writing homeowner's insurance in this 69.33 state shall make available at least one form of homeowner's 69.34 policy for each level of peril coverage offered by the insurer 69.35 in which the insured has the option to specify the dollar amount 69.36 of coverage provided for structures other than the dwelling and 70.1 for personal property. The premium must be reduced to reflect 70.2 the reduced risk of lesser coverage. 70.3 (b)A written notice must be provided to all applicants for70.4homeowner's insurance at the time of application informing them70.5of the options provided in paragraph (a).70.6(c)Coverage for structures other than the dwelling is the 70.7 coverage provided under "Coverage B, Other Structures" in the 70.8 standard homeowner's policy. Coverage for personal property is 70.9 the coverage provided under "Coverage C, Personal Property" in 70.10 the standard homeowner's package policy. 70.11(d)(c) "Level of peril" refers to basic, broad, and all 70.12 risk levels of coverage. 70.13 Sec. 51. Minnesota Statutes 1994, section 65B.14, is 70.14 amended by adding a subdivision to read: 70.15 Subd. 5. [VIOLATIONS.] "Violations" means all moving 70.16 traffic violations that are recorded by the department of public 70.17 safety on a household member's motor vehicle record, and 70.18 violations reported by a similar authority in another state or 70.19 moving traffic violations reported by the insured. 70.20 Sec. 52. Minnesota Statutes 1994, section 65B.15, 70.21 subdivision 1, is amended to read: 70.22 Subdivision 1. No cancellation or reduction in the limits 70.23 of liability of coverage during the policy period of any policy 70.24 shall be effective unless notice thereof is given and unless 70.25 based on one or more reasons stated in the policy which shall be 70.26 limited to the following: 70.27 1. Nonpayment of premium; or 70.28 2. The policy was obtained through a material 70.29 misrepresentation; or 70.30 3. Any insured made a false or fraudulent claim or 70.31 knowingly aided or abetted another in the presentation of such a 70.32 claim; or 70.33 4. The named insured failed to disclose fully motor 70.34 vehicle accidents and moving traffic violations of the named 70.35 insured for the preceding 36 months if called for in the written 70.36 application; or 71.1 5. The named insured failed to disclose in the written 71.2 application any requested information necessary for the 71.3 acceptance or proper rating of the risk; or 71.4 6. The named insured knowingly failed to give any required 71.5 written notice of loss or notice of lawsuit commenced against 71.6 the named insured, or, when requested, refused to cooperate in 71.7 the investigation of a claim or defense of a lawsuit; or 71.8 7. The named insured or any other operator who either 71.9 resides in the same household, or customarily operates an 71.10 automobile insured under such policy, unless the other operator 71.11 is identified as a named insured in another policy as an insured: 71.12 (a) has, within the 36 months prior to the notice of 71.13 cancellation, had that person's driver's license under 71.14 suspension or revocation because the person committed a moving 71.15 traffic violation or because the person refused to be tested 71.16 under section 169.121, subdivision 1, paragraph (a); or 71.17 (b) is or becomes subject to epilepsy or heart attacks, and 71.18 such individual does not produce a written opinion from a 71.19 physician testifying to that person's medical ability to operate 71.20 a motor vehicle safely, such opinion to be based upon a 71.21 reasonable medical probability; or 71.22 (c) has an accident record, conviction record (criminal or 71.23 traffic), physical condition or mental condition, any one or all 71.24 of which are such that the person's operation of an automobile 71.25 might endanger the public safety; or 71.26 (d) has been convicted, or forfeited bail, during the 24 71.27 months immediately preceding the notice of cancellation for 71.28 criminal negligence in the use or operation of an automobile, or 71.29 assault arising out of the operation of a motor vehicle, or 71.30 operating a motor vehicle while in an intoxicated condition or 71.31 while under the influence of drugs; or leaving the scene of an 71.32 accident without stopping to report; or making false statements 71.33 in an application for a driver's license, or theft or unlawful 71.34 taking of a motor vehicle; or 71.35 (e) has been convicted of, or forfeited bail for, one or 71.36 more violations within the 18 months immediately preceding the 72.1 notice of cancellation, of any law, ordinance, or rule which 72.2 justify a revocation of a driver's license. 72.3 8. The insured automobile is: 72.4 (1) so mechanically defective that its operation might 72.5 endanger public safety; or 72.6 (2) used in carrying passengers for hire or compensation, 72.7 provided however that the use of an automobile for a car pool 72.8 shall not be considered use of an automobile for hire or 72.9 compensation; or 72.10 (3) used in the business of transportation of flammables or 72.11 explosives; or 72.12 (4) an authorized emergency vehicle; or 72.13 (5) subject to an inspection law and has not been inspected 72.14 or, if inspected, has failed to qualify within the period 72.15 specified under such inspection law; or 72.16 (6) substantially changed in type or condition during the 72.17 policy period, increasing the risk substantially, such as 72.18 conversion to a commercial type vehicle, a dragster, sports car 72.19 or so as to give clear evidence of a use other than the original 72.20 use. 72.21 Sec. 53. Minnesota Statutes 1995 Supplement, section 72.22 65B.47, subdivision 1a, is amended to read: 72.23 Subd. 1a. [EXEMPTIONS.] Subdivision 1 does not apply to: 72.24 (1) a commuter van; 72.25 (2) a vehicle being used to transport children as part of a 72.26 family or group family day care program; 72.27 (3) a vehicle being used to transport children to school or 72.28 to a school-sponsored activity; 72.29 (4) a bus while it is in operation within the state of 72.30 Minnesota as to any Minnesota resident who is an insured as 72.31 defined in section 65B.43, subdivision 5; or 72.32 (5) a passenger in a taxi; or72.33(6) a taxi driver. 72.34 Sec. 54. Minnesota Statutes 1994, section 70A.07, is 72.35 amended to read: 72.36 70A.07 [RATES OPEN TO INSPECTION.] 73.1 All rates and supplementary rate information, furnished to 73.2 the commissioner under this chapter shall, as soon as the rates 73.3 areeffectivereviewed by the commissioner, be open to public 73.4 inspection at any reasonable time. 73.5 Sec. 55. Minnesota Statutes 1994, section 72A.20, 73.6 subdivision 17, is amended to read: 73.7 Subd. 17. [RETURN OF PREMIUMS.] (a) Refusing, upon 73.8 surrender of an individual policy of life insurance in the case 73.9 of the insured's death, or in the case of a surrender prior to 73.10 death, of an individual insurance policy not covered by the 73.11 standard nonforfeiture laws under section 61A.24, to refund to 73.12 the owner all unearned premiums paid on the policy covering the 73.13 insured as of the time of the insured's death or surrender if 73.14 the unearned premium is for a period of more than one month. 73.15 (b) Refusing, upon termination or cancellation of a policy 73.16 of automobile insurance under section 65B.14, subdivision 2, or 73.17 a policy of homeowner's insurance under section 65A.27, 73.18 subdivision 4, or a policy of accident and sickness insurance 73.19 under section 62A.01, or a policy of comprehensive health 73.20 insurance under chapter 62E, to refund to the insured all 73.21 unearned premiums paid on the policy covering the insured as of 73.22 the time of the termination or cancellation if the unearned 73.23 premium is for a period of more than one month. The return of 73.24 unearned premium must be delivered to the insured within 30 days 73.25 following receipt by the insurer of the insured's request for 73.26 cancellation. 73.27 (c) This subdivision does not apply to policies of 73.28 insurance providing coverage only for motorcycles or other 73.29 seasonally rated or limited use vehicles where the rate is 73.30 reduced to reflect seasonal or limited use. 73.31 (d) For purposes of this section, a premium is unearned 73.32 during the period of time the insurer has not been exposed to 73.33 any risk of loss. Except for premiums for motorcycle coverage 73.34 or other seasonally rated or limited use vehicles where the rate 73.35 is reduced to reflect seasonal or limited use, the unearned 73.36 premium is determined by multiplying the premium by the fraction 74.1 that results from dividing the period of time from the date of 74.2 termination to the date the next scheduled premium is due by the 74.3 period of time for which the premium was paid. 74.4 (e) The owner may cancel a policy referred to in this 74.5 section at any time during the policy period. This provision 74.6 supersedes any inconsistent provision of law or any inconsistent 74.7 policy provision. 74.8 Sec. 56. Minnesota Statutes 1994, section 72A.20, 74.9 subdivision 23, is amended to read: 74.10 Subd. 23. [DISCRIMINATION IN AUTOMOBILE INSURANCE 74.11 POLICIES.] (a) No insurer that offers an automobile insurance 74.12 policy in this state shall: 74.13 (1) use the employment status of the applicant as an 74.14 underwriting standard or guideline; or 74.15 (2) deny coverage to a policyholder for the same reason. 74.16 (b) No insurer that offers an automobile insurance policy 74.17 in this state shall: 74.18 (1) use the applicant's status as a tenant, as the term is 74.19 defined in section 566.18, subdivision 2, as an underwriting 74.20 standard or guideline; or 74.21 (2) deny coverage to a policyholder for the same reason; or 74.22 (3) make any discrimination in offering or establishing 74.23 rates, premiums, dividends, or benefits of any kind, or by way 74.24 of rebate, for the same reason. 74.25 (c) No insurer that offers an automobile insurance policy 74.26 in this state shall: 74.27 (1) use the failure of the applicant to have an automobile 74.28 policy in force during any period of time before the application 74.29 is made as an underwriting standard or guideline; or 74.30 (2) deny coverage to a policyholder for the same reason. 74.31 This provision does not apply if the applicant was required 74.32 by law to maintain automobile insurance coverage and failed to 74.33 do so. 74.34 An insurer may require reasonable proof that the applicant 74.35 did not fail to maintain this coverage. The insurer is not 74.36 required to accept the mere lack of a conviction or citation for 75.1 failure to maintain this coverage as proof of failure to 75.2 maintain coverage. The insurer must provide the applicant with 75.3 information identifying the documentation that is required to 75.4 establish reasonable proof that the applicant failed to maintain 75.5 the coverage. 75.6 (d) No insurer that offers an automobile insurance policy 75.7 in this state shall use an applicant's prior claims for benefits 75.8 paid under section 65B.44 as an underwriting standard or 75.9 guideline if the applicant was 50 percent or less negligent in 75.10 the accident or accidents causing the claims. 75.11 Sec. 57. Minnesota Statutes 1994, section 72A.20, 75.12 subdivision 26, is amended to read: 75.13 Subd. 26. [LOSS EXPERIENCE.] An insurer shall without cost 75.14 to the insured provide an insured with the loss or claims 75.15 experience of that insured for the current policy period and for 75.16 the two policy periods preceding the current one for which the 75.17 insurer has provided coverage, within 30 days of a request for 75.18 the information by the policyholder. Claims experience data 75.19 must be provided to the insured in accordance with state and 75.20 federal requirements regarding the confidentiality of medical 75.21 data. The insurer shall not be responsible for providing 75.22 information without cost more often than once in a 12-month 75.23 period. The insurer is not required to provide the information 75.24 if the policy covers the employee of more than one employer and 75.25 the information is not maintained separately for each employer 75.26 and not all employers request the data. 75.27 An insurer, health maintenance organization, or a 75.28 third-party administrator may not request more than three years 75.29 of loss or claims experience as a condition of submitting an 75.30 application or providing coverage. 75.31 This subdivisiondoes not apply to individual life and75.32health insurance policies or personal automobile or homeowner's75.33insuranceonly applies to group life policies and group health 75.34 policies. 75.35 Sec. 58. Minnesota Statutes 1994, section 72A.20, 75.36 subdivision 30, is amended to read: 76.1 Subd. 30. [RECORDS RETENTION.] An insurer shall retain 76.2 copies of all underwriting documents, policy forms, and 76.3 applications for three years from the effective date of the 76.4 policy. An insurer shall retain all claim files and 76.5 documentation related to a claim for three years from the date 76.6 the claim was paid or denied. This subdivision does not relieve 76.7 the insurer of its obligation to produce these documents to the 76.8 department after the retention period has expired in connection 76.9 with an enforcement action or administrative proceeding against 76.10 the insurer from whom the documents are requested, if the 76.11 insurer has retained the documents. Records required to be 76.12 retained by this section may be retained in paper, photograph, 76.13 microprocess, magnetic, mechanical, or electronic media, or by 76.14 any process which accurately reproduces or forms a durable 76.15 medium for the reproduction of a record. 76.16 Sec. 59. Minnesota Statutes 1994, section 72A.20, is 76.17 amended by adding a subdivision to read: 76.18 Subd. 35. [DETERMINATION OF HEALTH PLAN POLICY 76.19 LIMITS.] Any health plan that includes a specific policy limit 76.20 within its insurance policy, certificate, or subscriber 76.21 agreement shall calculate the policy limit by using the amount 76.22 actually paid on behalf of the insured, subscriber, or 76.23 dependents for services covered under the policy, subscriber 76.24 agreement, or certificate unless the amount paid is greater than 76.25 the billed charge. 76.26 Sec. 60. [72A.207] [GRADED DEATH BENEFITS.] 76.27 For the purpose of this section, a graded death benefit is 76.28 a provision within a life insurance policy in which the death 76.29 benefit, in the early years of the policy, is less than the face 76.30 amount of the policy, but which increases with the passage of 76.31 time. 76.32 No policy of life insurance paying a graded death benefit 76.33 may be issued in this state unless the graded death benefit is 76.34 equal to at least four times the first year premium. This 76.35 section does not prohibit the return of premiums or premiums 76.36 plus interest in connection with the voluntary or judicially 77.1 ordered rescission of the policy, or according to the terms of 77.2 the exclusions from coverage for suicide, aviation, or war risk. 77.3 Sec. 61. [MEDICAL MALPRACTICE INSURANCE COVERAGE; 77.4 REAUTHORIZATION.] 77.5 Any authorization to issue insurance according to Minnesota 77.6 Statutes, section 62F.04, valid on the effective date of this 77.7 section remains valid for an additional two-year period at the 77.8 end of the initial two-year authorization. The additional 77.9 authorization period granted by this section applies only to the 77.10 types of coverages authorized as of the effective date of this 77.11 section. 77.12 Sec. 62. [COMMITTEE STUDY; DISCLOSURE OF FINANCIAL 77.13 INCENTIVES.] 77.14 The house committee on financial institutions and insurance 77.15 shall study how best to disclose to consumers any financial 77.16 arrangements between health plan companies and health care 77.17 providers that may provide financial incentives for providers to 77.18 restrict care provided to consumers. 77.19 Sec. 63. [REPEALER.] 77.20 (a) Minnesota Statutes 1994, sections 60A.40; 60B.27; 77.21 62I.20; 65A.25; and 72A.205, are repealed. 77.22 (b) Laws 1995, chapter 140, section 1, is repealed. 77.23 Sec. 64. [EFFECTIVE DATES.] 77.24 Sections 2 to 4, 8, 9, 11, 20, 21, 25 to 30, 33, 38 to 46, 77.25 54, 57, 59, and 60 are effective the day following final 77.26 enactment. 77.27 Section 48 is effective retroactive to July 1, 1995. 77.28 Sections 1 and 12 to 19 are effective January 1, 1997. 77.29 ARTICLE 2 77.30 Section 1. Minnesota Statutes 1994, section 60A.07, 77.31 subdivision 8, is amended to read: 77.32 Subd. 8. [SPECIAL PROVISIONS AS TO MUTUAL COMPANIES.] (1) 77.33 [AMENDMENT OF ARTICLES OR CERTIFICATE OF INCORPORATION.] The 77.34 certificate of incorporation or articles of association of any 77.35 domestic insurance company without capital stock, now or 77.36 hereafter organized and existing under the laws of this state, 78.1 may be amended in respect to any matter which an original 78.2 certificate of incorporation or articles of association of a 78.3 corporation of the same kind might lawfully have contained by 78.4 the adoption of a resolution specifying the proposed amendment, 78.5 at a regular meeting of the members thereof or at a special 78.6 meeting called for that expressly stated purpose, by the 78.7 affirmative vote of a majority of the members present, in person 78.8 or by proxy, at the meeting, and by causing the resolution to be 78.9 embraced in a certificate duly executed by its president and 78.10 secretary or other presiding and recording officers, under its 78.11 corporate seal, and approved, filed, recorded, and published in 78.12 the manner prescribed by law for the execution, approval, 78.13 filing, recording, and publishing of a like original certificate 78.14 of incorporation or articles of association. 78.15 (2) [RENEWAL OF CORPORATE EXISTENCE.] Any domestic 78.16 insurance company or corporation having no capital stock, 78.17 heretofore or hereafter organized and existing under the laws of 78.18 this state, whose period of duration has expired or is about to 78.19 expire, may, on or before the date of the expiration, or within 78.20 six months after the date of expiration, renew its corporate 78.21 existence from the date of such expiration for any period 78.22 permitted by the laws of this state, by the adoption of a 78.23 resolution to that effect by the affirmative vote of 78.24 three-fourths of the members present, in person or by proxy, at 78.25 a regular meeting of the members, or at any special meeting 78.26 called for that expressly stated purpose, and by causing the 78.27 resolution to be embraced in a certificate duly executed by its 78.28 president and secretary or other presiding and recording 78.29 officers, under its corporate seal, and approved, filed, 78.30 recorded, and published in the manner prescribed by law for the 78.31 execution, approval, filing, recording, and publishing of an 78.32 original certificate of incorporation or articles of association. 78.33 (3) [BYLAWS.] The bylaws of any domestic insurance 78.34 corporation without capital stock, in cases where the bylaws 78.35 must be adopted or approved by the members thereof, may be 78.36 adopted, altered, or amended at a regular meeting of the members 79.1 thereof, or at a special meeting called for that expressly 79.2 stated purpose, by the affirmative vote of a majority of the 79.3 members present, in person or by proxy, at the meeting. 79.4(4) [CONVERSION OF A DOMESTIC MUTUAL INTO A STOCK INSURANCE79.5CORPORATION.] A domestic mutual corporation may be converted79.6into a stock insurance corporation as follows:79.7(a) [ACTION BY BOARD OF DIRECTORS.] The board of directors79.8shall adopt a plan of conversion.79.9(b) [PLAN OF CONVERSION.] (i) The plan of conversion shall79.10provide that, upon consummation of the conversion, each79.11policyholder at the date of the passage of the resolution by the79.12board of directors shall be entitled to such shares of stock of79.13the new company as the policyholder's equitable share of the79.14surplus of the company will purchase. This equitable share79.15shall be determined by independent certified auditors or79.16consulting actuaries and shall be subject to approval by the79.17commissioner. If a policyholder's equitable share of the79.18surplus of the company produces a fractional share, the79.19policyholder shall be given the option of either receiving the79.20value of the fractional share in cash or of purchasing the79.21fractional part of a share that will entitle the policyholder to79.22a full share.79.23(ii) No shares of the corporation being organized shall be79.24issued or subscribed for, formally or informally, directly or79.25indirectly during the conversion except as authorized under79.26subparagraph (i).79.27(iii) The corporation shall not pay compensation or79.28remuneration of any kind to any person in connection with the79.29proposed conversion, except at reasonable rates for printing79.30costs, and for legal and other professional fees for services79.31actually rendered.79.32(iv) The plan of conversion shall include a copy of the79.33proposed articles of incorporation which shall comply with the79.34requirements of chapter 300. Except as otherwise specifically79.35provided, the corporation resulting from conversion under this79.36section shall be deemed to have been organized as of the date of80.1issuance of the initial certificate of authority to the mutual80.2corporation being converted.80.3(c) [APPROVAL BY POLICYHOLDERS.] Within 30 days after its80.4adoption by the board of directors, the plan of conversion shall80.5be submitted to the policyholders for approval by the80.6affirmative vote of a majority of the policyholders entitled to80.7vote, in the manner prescribed by subparagraph (1). Every80.8policyholder as of the date of the adoption under subparagraph80.9(a) shall be entitled to one vote for each policy held. Only80.10such policyholders shall be entitled to vote.80.11(d) [APPROVAL BY THE COMMISSIONER.] (i) Within 30 days80.12after its adoption by the policyholders, the plan of conversion80.13shall be submitted to the commissioner with an application for80.14approval.80.15(ii) The commissioner shall not approve if the value of80.16single shares is set at a figure that substantially burdens80.17policyholders who wish to purchase a fractional share under80.18subparagraph (b)(i).80.19(iii) If the commissioner finds that the plan of conversion80.20has been duly approved by the policyholders, that the conversion80.21would not violate any law and would not be contrary to the80.22interests of the policyholders, the commissioner shall approve80.23the plan of conversion and shall issue a new certificate of80.24authority to the corporation.80.25(e) [CONVERSION.] After filing an amendment of the articles80.26of incorporation as provided by chapter 300, the corporation80.27shall become a stock corporation and shall no longer be a mutual80.28corporation, and the board of directors shall execute the plan80.29of conversion.80.30(f) [SECURITIES REGULATION.] The filing with the80.31commissioner of commerce of a certified copy of the plan of80.32conversion as adopted by the policyholders and approved by the80.33commissioner shall constitute registration under chapter 80A, of80.34the securities authorized to be issued to policyholders80.35thereunder.80.36 Sec. 2. Minnesota Statutes 1995 Supplement, section 81.1 60A.07, subdivision 10, is amended to read: 81.2 Subd. 10. [SPECIAL PROVISIONS AS TO LIFE COMPANIES.] (1) 81.3 [PREREQUISITES OF LIFE COMPANIES.] No mutual life company shall 81.4 be qualified to issue any policy until applications for at least 81.5 $200,000 of insurance, upon lives of at least 200 separate 81.6 residents, have been actually and in good faith made, accepted, 81.7 and entered upon its books and at least one full annual premium 81.8 thereunder, based upon the authorized table of mortality, 81.9 received in cash or in absolutely payable and collectible 81.10 notes. A duplicate receipt for each premium, conditioned for 81.11 the return thereof unless the policy be issued within one year 81.12 thereafter, shall be issued, and one copy delivered to the 81.13 applicant and the other filed with the commissioner, together 81.14 with the certificate of a solvent authorized bank in the state, 81.15 of the deposit therein of such cash and notes, aggregating the 81.16 amount aforesaid, specifying the maker, payee, date, maturity, 81.17 and amount of each. Such cash and notes shall be held by it not 81.18 longer than one year, and at or before the expiration thereof to 81.19 be by it paid or delivered, upon the written order of the 81.20 commissioner, to such company or applicants, respectively. 81.21 (2)[FOREIGN COMPANIES MAY BECOME DOMESTIC.] Any company81.22organized under the laws of any other state or country, which81.23might have been originally incorporated under the laws of this81.24state, and which has been admitted to do business therein for81.25either or both the purpose of life or accident insurance, upon81.26complying with all the requirements of law relative to the81.27execution, filing, recording and publishing of original81.28certificates and payment of incorporation fees by like domestic81.29corporations, therein designating its principal place of81.30business at a place in this state, may become a domestic81.31corporation, and be entitled to like certificates of its81.32corporate existence and license to transact business in this81.33state, and be subject in all respects to the authority and81.34jurisdiction thereof.81.35(3)[TEMPORARY CAPITAL STOCK OF MUTUAL LIFE COMPANIES.] A 81.36 new mutual life insurance company which has complied with the 82.1 provisions of clause (1) or an existing mutual life insurance 82.2 company may establish, a temporary capital of, such amount not 82.3 less than $100,000, as may be approved by the commissioner. 82.4 Such temporary capital shall be invested by the company in the 82.5 same manner as is provided for the investment of its other 82.6 funds. Out of the net surplus of the company the holders of the 82.7 temporary capital stock may receive a dividend which may be 82.8 cumulative. This capital stock shall not be a liability of the 82.9 company but shall be retired within a reasonable time and 82.10 according to terms approved by the commissioner. At the time 82.11 for the retirement of this capital stock, the holders shall be 82.12 entitled to receive from the company the par value thereof and 82.13 any dividends thereon due and unpaid, and thereupon the stock 82.14 shall be surrendered and canceled. In the event of the 82.15 liquidation of the company, the holders of temporary capital 82.16 stock shall have the same preference in the assets of the 82.17 company as shareholders have in a stock insurance company. 82.18 Dividends on this stock are subject to section 60D.20, 82.19 subdivision 2. 82.20 Temporary capital stock may be issued with or without 82.21 voting rights. If issued with voting rights, the holders shall, 82.22 at all meetings, be entitled to one vote for each $10 of 82.23 temporary capital stock held. 82.24 Sec. 3. [60A.075] [MUTUAL COMPANY CONVERSION TO STOCK 82.25 COMPANY.] 82.26 Subdivision 1. [DEFINITIONS.] For the purposes of this 82.27 section, the terms in this subdivision have the meanings given 82.28 them. 82.29 (a) "Eligible member" means a policyholder whose policy is 82.30 in force as of the record date, which is the date that the 82.31 mutual company's board of directors adopts a plan of conversion 82.32 or some other date specified as the record date in the plan of 82.33 conversion and approved by the commissioner. Unless otherwise 82.34 provided in the plan, a person insured under a group policy is 82.35 not an eligible member, unless on the record date: 82.36 (1) the person is insured or covered under a group life 83.1 policy or group annuity contract under which funds are 83.2 accumulated and allocated to the respective covered persons; 83.3 (2) the person has the right to direct the application of 83.4 the funds so allocated; 83.5 (3) the group policyholder makes no contribution to the 83.6 premiums or deposits for the policy or contract; and 83.7 (4) the converting mutual company has the names and 83.8 addresses of the persons covered under the group life policy or 83.9 group annuity contract. 83.10 (b) "Reorganized company" means a Minnesota domestic stock 83.11 insurance company that has converted from a Minnesota domestic 83.12 mutual insurance company according to this section. 83.13 (c) "Plan of conversion" or "plan" means a plan adopted by 83.14 a Minnesota domestic mutual insurance company's board of 83.15 directors under this section to convert the mutual company into 83.16 a Minnesota domestic stock insurance company. 83.17 (d) "Policy" means a policy or contract of insurance issued 83.18 by a converting mutual company, including an annuity contract. 83.19 (e) "Commissioner" means the commissioner of commerce. 83.20 (f) "Converting mutual company" means a Minnesota domestic 83.21 mutual insurance company seeking to convert to a Minnesota 83.22 domestic stock insurance company according to this section. 83.23 (g) "Effective date of a conversion" means the date 83.24 determined according to subdivision 6. 83.25 (h) "Membership interests" means all policyholders' rights 83.26 as members of the converting mutual company, including but not 83.27 limited to, rights to vote and to participate in any 83.28 distributions of surplus, whether or not incident to the 83.29 company's liquidation. 83.30 (i) "Equitable surplus" means the converting mutual 83.31 company's surplus as regards policyholders as of the effective 83.32 date of the conversion determined in a manner that is not unfair 83.33 or inequitable to policyholders. 83.34 (j) "Permitted issuer" means: (1) a corporation organized 83.35 and owned by the converting mutual company or by any other 83.36 insurance company or insurance holding company for the purpose 84.1 of purchasing and holding all of the stock of the reorganized 84.2 company; (2) a stock insurance company owned by the converting 84.3 mutual company or by any other insurance company or insurance 84.4 holding company into which the converting mutual company will be 84.5 merged; or (3) any other corporation approved by the 84.6 commissioner. 84.7 Subd. 2. [AUTHORIZATION.] A mutual insurance company may 84.8 become a stock insurance company according to a plan of 84.9 conversion established and approved in the manner provided by 84.10 this section. 84.11 Subd. 3. [ADOPTION OF A PLAN OF CONVERSION BY THE BOARD OF 84.12 DIRECTORS.] (a) A converting mutual company shall, by the 84.13 affirmative vote of a majority of its board of directors, adopt 84.14 a plan of conversion consistent with the requirements of this 84.15 section. 84.16 (b) At any time before approval of a plan by the 84.17 commissioner, the converting mutual company, by the affirmative 84.18 vote of a majority of its board of directors, may amend or 84.19 withdraw the plan. 84.20 Subd. 4. [APPROVAL OF THE PLAN OF CONVERSION BY THE 84.21 COMMISSIONER.] (a) [DOCUMENTS TO BE FILED.] After adoption of 84.22 the plan by the converting mutual company's board of directors, 84.23 but before the member's approval of the plan, the converting 84.24 mutual company shall file the following documents with the 84.25 commissioner for review and approval: 84.26 (1) the plan of conversion, including an independent 84.27 evaluation of the pro forma market value and of the equitable 84.28 surplus of the company and of the estimated value of any shares 84.29 to be issued and an independent actuarial opinion, if required; 84.30 (2) the form of notice of meeting for eligible members to 84.31 vote on the plan; 84.32 (3) the form of any proxies to be solicited from eligible 84.33 members; 84.34 (4) the proposed articles of incorporation and bylaws of 84.35 the converted stock company; 84.36 (5) information required under chapter 60D if the plan 85.1 results in a change of control of the converting mutual company; 85.2 and 85.3 (6) other information or documentation requested by the 85.4 commissioner or required by rule. 85.5 (b) [REQUIRED FINDINGS.] The commissioner shall approve or 85.6 conditionally approve the plan upon finding that: 85.7 (1) the provisions of this section have been fully met; and 85.8 (2) the plan will not be unfair or inequitable to 85.9 policyholders. 85.10 (c) [TIME.] The plan of conversion shall, by order, be 85.11 approved, conditionally approved, or disapproved by the 85.12 commissioner within the later of 30 days from the commissioner's 85.13 receipt of all required information from the converting mutual 85.14 company or 30 days after the conclusion of a public hearing held 85.15 according to paragraph (e). An approval or conditional approval 85.16 of a plan expires if the reorganization is not completed within 85.17 180 days unless this time period is extended by the commissioner 85.18 for good cause shown. 85.19 (d) [CONSULTANTS.] The commissioner may retain, at the 85.20 converting mutual company's expense, qualified experts not 85.21 otherwise a part of the commissioner's staff to assist in 85.22 reviewing the plan and supplemental materials and valuations. 85.23 (e) [HEARING.] The commissioner may, but need not, conduct 85.24 a public hearing regarding the proposed plan of conversion. The 85.25 hearing must begin no later than 30 days after submission to the 85.26 commissioner of a plan of conversion and all required 85.27 information. The commissioner shall give the converting mutual 85.28 company at least 20 days' notice of the hearing. At the 85.29 hearing, the converting mutual company, its policyholders, and 85.30 any other person whose interest may be affected by the proposed 85.31 conversion may present evidence, examine and cross-examine 85.32 witnesses, and offer oral and written arguments or comments 85.33 according to the procedure for contested cases under chapter 85.34 14. The persons participating may conduct discovery proceedings 85.35 in the same manner as prescribed for the district courts of this 85.36 state. All discovery proceedings must be concluded no later 86.1 than three days before the scheduled commencement date of the 86.2 public hearing. 86.3 Subd. 5. [APPROVAL OF THE PLAN BY THE ELIGIBLE 86.4 MEMBERS.] (a) [NOTICE.] Following approval or conditional 86.5 approval of the plan by the commissioner, all eligible members 86.6 shall be given notice of a regular or special meeting of the 86.7 policyholders called for the purpose of considering the plan and 86.8 any corporate actions that are a part of, or are reasonably 86.9 attendant to, the accomplishment of the plan. 86.10 (b) [NOTICE REQUIRED.] A copy of the plan or a summary of 86.11 the plan must accompany the notice. The notice must be mailed 86.12 to each eligible member's last known address, as shown on the 86.13 converting mutual company's records, within 45 days of the 86.14 commissioner's approval of the plan, unless the commissioner 86.15 directs an earlier date for mailing. The meeting to vote upon 86.16 the plan must be set for a date no less than 45 days after the 86.17 date when the notice of the meeting is mailed by the converting 86.18 mutual company unless the commissioner directs an earlier date 86.19 for the meeting. If the meeting to vote upon the plan is held 86.20 coincident with the converting mutual company's annual meeting 86.21 of policyholders, only one combined notice of meeting is 86.22 required. 86.23 (c) [FAILURE TO GIVE NOTICE.] If the converting mutual 86.24 company complies substantially and in good faith with the notice 86.25 requirements of this section, the converting mutual company's 86.26 failure to give any member or members any required notice does 86.27 not impair the validity of any action taken under this section. 86.28 (d) [VOTING.] (1) The plan must be adopted upon receiving 86.29 the affirmative vote of a majority of the votes cast by eligible 86.30 members. 86.31 (2) Eligible members may vote in person or by proxy. The 86.32 form of any proxy must be filed with and approved by the 86.33 commissioner. 86.34 (3) The number of votes each eligible member may cast shall 86.35 be determined by the converting mutual company's bylaws. If the 86.36 bylaws are silent, or if the commissioner determines that the 87.1 voting requirements under the bylaws would be unfair or would 87.2 prejudice the rights of the eligible members, each eligible 87.3 member may cast one vote. 87.4 Subd. 6. [CONVERSION.] (a) [FILING.] Following approval by 87.5 the members, the converting mutual company shall file a copy of 87.6 the company's amended or restated articles of incorporation with 87.7 the commissioner, together with a certified copy of the minutes 87.8 of the meeting at which the plan was adopted and a certified 87.9 copy of the plan. The commissioner shall review and, if 87.10 appropriate, approve the amended or restated articles. After 87.11 approval by the commissioner, the converting mutual company 87.12 shall file the articles with the secretary of state as provided 87.13 by chapter 300. 87.14 (b) [EFFECTIVE DATE.] Effective on the date of filing an 87.15 amendment or restatement of the articles of incorporation with 87.16 the secretary of state as provided by chapter 300, or on a later 87.17 date if the plan so specifies, the converting mutual corporation 87.18 shall become a stock corporation and shall no longer be a mutual 87.19 corporation. 87.20 Subd. 7. [PLAN NOT UNFAIR OR INEQUITABLE.] A plan of 87.21 conversion shall not be unfair or inequitable to policyholders. 87.22 A plan of conversion is not unfair or inequitable if it 87.23 satisfies the conditions of subdivision 7, 8, or 9. The 87.24 commissioner may determine that any other plan proposed by a 87.25 converting mutual company is not unfair or inequitable to 87.26 policyholders. 87.27 Subd. 8. [SHARE CONVERSION.] A plan of conversion under 87.28 this subdivision shall provide for exchange of policyholders' 87.29 membership interests in return for shares in the reorganized 87.30 company, according to paragraphs (a) to (c). 87.31 (a) The policyholders' membership interests shall be 87.32 exchanged, in a manner that takes into account the estimated 87.33 proportionate contribution of equitable surplus of each class of 87.34 participating policies and contracts, for all of the common 87.35 shares of the reorganized company or its parent company or a 87.36 permitted issuer, or for a combination of the common shares of 88.1 the reorganized company or its parent company or a permitted 88.2 issuer. 88.3 (b) Unless the anticipated issuance within a shorter period 88.4 is disclosed, the issuer of common shares shall not, within two 88.5 years after the effective date of reorganization, issue either 88.6 of the following: 88.7 (1) any of its common shares or any securities convertible 88.8 with or without consideration into the common shares or carrying 88.9 any warrant to subscribe to or purchase common shares; and 88.10 (2) any warrant, right, or option to subscribe to or 88.11 purchase the common shares or other securities described in 88.12 paragraph (a), except for the issue of common shares to or for 88.13 the benefit of policyholders according to the plan of conversion 88.14 and the issue of options for the purchase of common shares being 88.15 granted to officers, directors, or employees of the reorganized 88.16 company or its parent company, if any, according to this section. 88.17 (c) Unless the common shares have a public market when 88.18 issued, the issuer shall use its best efforts to encourage and 88.19 assist in the establishment of a public market for the common 88.20 shares within two years of the effective date of the conversion 88.21 or a longer period as disclosed in the plan of conversion. 88.22 Within one year after any offering of stock other than the 88.23 initial distribution, but no later than six years after the 88.24 effective date of the conversion, the reorganized company shall 88.25 offer to make available to policyholders who received and 88.26 retained shares of common stock or securities described in 88.27 paragraph (b), clause (1), a procedure to dispose of those 88.28 shares of stock at market value without brokerage commissions or 88.29 similar fees. 88.30 Subd. 9. [SURPLUS DISTRIBUTION.] A plan of conversion 88.31 under this subdivision shall provide for the exchange of the 88.32 policyholders' membership interests in return for the operation 88.33 of the converting mutual company's participating policies as a 88.34 closed block of business and for the distribution of the 88.35 company's equitable surplus to policyholders, and shall provide 88.36 for the issuance of new shares of the reorganized company or its 89.1 parent corporation, each according to paragraphs (a) to (i). 89.2 (a) The converting mutual company's participating business, 89.3 comprised of its participating policies and contracts in force 89.4 on the effective date of the conversion or other reasonable date 89.5 as provided in the plan, shall be operated by the reorganized 89.6 company as a closed block of participating business. However, 89.7 at the option of the converting mutual company, group policies 89.8 and group contracts may be omitted from the closed block. 89.9 (b) Assets of the converting mutual company must be 89.10 allocated to the closed block of participating business in an 89.11 amount equal to the reserves and liabilities for the converting 89.12 mutual life insurer's participating policies and contracts in 89.13 force on the effective date of the conversion. The plan must be 89.14 accompanied by an opinion of an independent qualified actuary 89.15 who meets the standards set forth in the insurance laws or 89.16 regulations for the submission of actuarial opinions as to the 89.17 adequacy of reserves or assets. The opinion must relate to the 89.18 adequacy of the assets allocated to support the closed block of 89.19 business. The actuarial opinion must be based on methods of 89.20 analysis considered appropriate for those purposes by the 89.21 Actuarial Standards Board. 89.22 (c) The reorganized company shall keep a separate 89.23 accounting for the closed block and shall make and include in 89.24 the annual statement to be filed with the commissioner each year 89.25 a separate statement showing the gains, losses, and expenses 89.26 properly attributable to the closed block. 89.27 (d) Notwithstanding the establishment of a closed block, 89.28 the entire assets of the reorganized company shall be available 89.29 for the payment of benefits to policyholders. Payment must 89.30 first be made from the assets supporting the closed block until 89.31 exhausted, and then from the general assets of the reorganized 89.32 company. 89.33 (e) The converting mutual company's equitable surplus shall 89.34 be distributed to eligible participating policyholders in a form 89.35 or forms selected by the converting mutual company. The form of 89.36 distribution may consist of cash, securities of the reorganized 90.1 company, securities of another institution, a certificate of 90.2 contribution, additional life insurance, annuity benefits, 90.3 increased dividends, reduced premiums, or other equitable 90.4 consideration or any combination of forms of consideration. The 90.5 consideration, if any, given to a class or category of 90.6 policyholders may differ from the consideration given to another 90.7 class or category of policyholders. A certificate of 90.8 contribution must be repayable in ten years, be equal to 100 90.9 percent of the value of the policyholders' membership interest, 90.10 and bear interest at the highest rate charged by the reorganized 90.11 company for policy loans on the effective date of the conversion. 90.12 (f) The consideration must be allocated among the 90.13 policyholders in a manner that is fair and equitable to the 90.14 policyholders. 90.15 (g) The reorganized company or its parent corporation shall 90.16 issue and sell shares of one or more classes having a total 90.17 price equal to the estimated value in the market of the shares 90.18 on the initial offering date. The estimated value must take 90.19 into account all of the following: 90.20 (1) the pro forma market value of the reorganized company; 90.21 (2) the consideration to be given to policyholders 90.22 according to paragraph (e); 90.23 (3) the proceeds of the sale of the shares; and 90.24 (4) any additional value attributable to the shares as a 90.25 result of a purchaser or a group of purchasers who acted in 90.26 concert to obtain shares in the initial offering, attaining, 90.27 through such purchase, control of the reorganized company or its 90.28 parent corporation. 90.29 (h) If a purchaser or a group of purchasers acting in 90.30 concert is to attain control in the initial offering, the mutual 90.31 company shall not, directly or indirectly, pay for any of the 90.32 costs or expenses of conversion of the mutual company, whether 90.33 or not the conversion is effected. 90.34 (i) Periodically, with the commissioner's approval, the 90.35 reorganized company may share in the profits of the closed block 90.36 of participating business for the benefit of stockholders if the 91.1 assets allocated to the closed block are in excess of those 91.2 necessary to support the closed block. 91.3 Subd. 10. [SUBSCRIPTION RIGHTS.] A plan of conversion 91.4 under this subdivision shall provide for exchange of the 91.5 policyholders' membership interests in return for the operation 91.6 of the converting mutual company's participating policies as a 91.7 closed block of business, for the creation of a liquidation 91.8 account to protect the interests of policyholders, and for the 91.9 issuance of subscription rights to eligible policyholders, and 91.10 shall provide for the issuance of shares by the reorganized 91.11 company, each according to paragraphs (a) to (j). 91.12 (a) The converting mutual company's participating business, 91.13 comprised of its participating policies and contracts in force 91.14 on the effective date of the conversion, or such other 91.15 reasonable date specified in the plan, and excluding at the 91.16 converting mutual company's option any group policies or group 91.17 contracts, shall be operated by the reorganized company as a 91.18 closed block of participating business according to subdivision 91.19 8, paragraphs (a) to (c). 91.20 (b) The reorganized company or its parent corporation or a 91.21 permitted issuer shall issue and sell shares of one or more 91.22 classes having a total price equal to the estimated value of the 91.23 shares in the market on the initial offering date taking into 91.24 account the proceeds of the sale of shares and the consideration 91.25 given to policyholders. 91.26 (c) The policyholders shall receive nontransferable 91.27 preemptive subscription rights to purchase all of the common 91.28 shares of the issuer according to paragraph (b). 91.29 (d) The preemptive subscription rights to purchase the 91.30 common shares must be allocated among the participating 91.31 policyholders in whole shares in a manner provided in the plan 91.32 that takes into account the estimated contribution of each class 91.33 of participating policies and contracts to the total amount of 91.34 the policyholders' consideration. The plan must provide a fair 91.35 and equitable means for the allocation of shares in the event of 91.36 an oversubscription. The plan must further provide that any 92.1 shares of capital stock not subscribed by eligible members must 92.2 be sold in a public offering through an underwriter, unless the 92.3 number of shares unsubscribed is so small in number so as not to 92.4 warrant the expense of a public offering, in which case the plan 92.5 may provide for the purchase of the unsubscribed shares by 92.6 private placement or through any fair and equitable alternative 92.7 means approved by the commissioner. 92.8 (e) The number of the common shares that a person, together 92.9 with any affiliates or group of persons acting in concert, may 92.10 subscribe or purchase in the reorganization, must be limited to 92.11 not more than five percent of the common shares. For this 92.12 purpose, neither the members of the board of directors of the 92.13 reorganized company nor its parent corporation, if any, is 92.14 considered to be affiliates or a group of persons acting in 92.15 concert solely by reason of their board membership. 92.16 (f) Unless the common shares have a public market when 92.17 issued, officers and directors of the issuer and their 92.18 affiliates shall not, for at least three years after the date of 92.19 conversion, purchase common shares of the issuer, except with 92.20 the approval of the commissioner. 92.21 (g) Unless the common shares have a public market when 92.22 issued, the issuer shall use its best efforts to encourage and 92.23 assist in the establishment of a public market for the common 92.24 shares. 92.25 (h) The issuer shall not, for at least three years 92.26 following the conversion, repurchase any of its common shares 92.27 except according to a pro rata tender offer to all shareholders, 92.28 or with the approval of the commissioner. 92.29 (i) A liquidation account must be established for the 92.30 benefit of policyholders in the event of a complete liquidation 92.31 of the reorganized company. The liquidation account must be 92.32 equal to the equitable surplus of the converting mutual company 92.33 as of the effective date of the conversion. The function of the 92.34 liquidation account is solely to establish a priority on 92.35 liquidation and its existence does not restrict the use or 92.36 application of the surplus of the reorganized company except as 93.1 specified in paragraph (a). The liquidation account must be 93.2 allocated equitably as of the effective date of conversion among 93.3 the then participating policyholders. The amount allocated to a 93.4 policy or contract must not increase and must be reduced to zero 93.5 when the policy or contract terminates. In the event of a 93.6 complete liquidation of the reorganized company, the 93.7 policyholders among which the liquidation account is allocated 93.8 are entitled to receive a liquidation distribution in the amount 93.9 of the liquidation account before any liquidation distribution 93.10 is made with respect to shares. 93.11 (j) Until the liquidation account has been reduced to zero, 93.12 the issuer shall not declare or pay a cash dividend on, or 93.13 repurchase any of, its common shares in an amount in excess of 93.14 its cumulative earned surplus generated after the conversion 93.15 determined according to statutory accounting principles, if the 93.16 effect would be to cause the amount of the statutory surplus of 93.17 the reorganized company to be reduced below the then amount of 93.18 the liquidation account. 93.19 Subd. 11. [OPTIONAL PROVISIONS.] A plan under subdivision 93.20 8, 9, or 10 may include, with the approval of the commissioner, 93.21 any of the provisions in paragraphs (a) and (b). 93.22 (a) A plan may provide that any shares of the stock of the 93.23 reorganized company or its parent corporation or a permitted 93.24 issuer included in the policyholders' consideration must be 93.25 placed on the effective date of the conversion in a trust or 93.26 other entity existing for the exclusive benefit of the 93.27 participating policyholders and established solely for the 93.28 purposes of effecting the reorganization. Under this option, 93.29 the shares placed in trust must be sold over a period of not 93.30 more than ten years and the proceeds of the shares must be 93.31 distributed using the distribution priorities prescribed in the 93.32 plan. 93.33 (b) A plan may provide that the directors and officers of 93.34 the converting mutual company shall receive, without payment, 93.35 nontransferable subscription rights to purchase capital stock of 93.36 the reorganized company, its parent, or a permitted issuer. 94.1 Those subscription rights must be allocated among the directors 94.2 and officers by a fair and equitable formula. 94.3 (1) The total number of shares that may be purchased under 94.4 this clause, may not exceed 35 percent of the total number of 94.5 shares to be issued in the case of a converting mutual company 94.6 with total assets of less than $50,000,000 or 25 percent of the 94.7 total shares to be issued in the case of a converting mutual 94.8 company with total assets of more than $500,000,000. For 94.9 converting mutual companies with total assets between 94.10 $50,000,000 and $500,000,000, the total number of shares that 94.11 may be purchased may not exceed an interpolated percentage 94.12 between 25 and 35 percent. 94.13 (2) Stock purchased by a director or officer under clause 94.14 (1) may not be sold within one year following the effective date 94.15 of the conversion. 94.16 (3) The plan may also provide that a director or officer, 94.17 or person acting in concert with a director or officer of the 94.18 converting mutual company, may not acquire any capital stock of 94.19 the reorganized company for three years after the effective date 94.20 of the conversion, except through a licensed securities broker 94.21 or dealer, without the permission of the commissioner. That 94.22 provision may not apply to prohibit the directors and officers 94.23 from purchasing stock through subscription rights received in 94.24 the plan under clause (1). 94.25 (c) A plan may allocate to a tax-qualified employee benefit 94.26 plan nontransferable subscription rights to purchase up to ten 94.27 percent of the capital stock of the reorganized company, its 94.28 parent, or a permitted issuer. The employee benefit plan must 94.29 be entitled to exercise its subscription rights regardless of 94.30 the amount of shares purchased by other persons. 94.31 Subd. 12. [ALTERNATIVE PLAN OF CONVERSION.] In lieu of 94.32 selecting a plan of conversion provided for in this section, the 94.33 converting mutual company may convert according to a plan 94.34 approved by the commissioner if the commissioner finds that the 94.35 plan does not prejudice the interests of the members, is fair 94.36 and equitable, and is based upon an independent appraisal of the 95.1 market value of the mutual company by a qualified person, and is 95.2 a fair and equitable allocation of any consideration to be given 95.3 eligible members. The commissioner may retain, at the 95.4 converting mutual company's expense, any qualified expert not 95.5 otherwise a part of the commissioner's staff to assist in 95.6 reviewing whether the alternative plan may be approved and the 95.7 valuation of the company. 95.8 Subd. 13. [EFFECT OF CONVERSION.] (a) Upon the conversion 95.9 of a converting mutual company to a reorganized company 95.10 according to this section, the corporate existence of the 95.11 converting mutual company must be continued in the reorganized 95.12 company. All the rights, franchises, and interests of the 95.13 converting mutual company in and to all property and things in 95.14 action belonging to this property, is considered transferred to 95.15 and vested in the reorganized company without any deed or 95.16 transfer. Simultaneously, the reorganized company is considered 95.17 to have assumed all the obligations and liabilities of the 95.18 converting mutual company. 95.19 (b) The directors and officers of the converting mutual 95.20 company, unless otherwise specified in the plan of conversion, 95.21 shall serve as directors and officers of the reorganized company 95.22 until new directors and officers of the reorganized company are 95.23 duly elected according to the articles of incorporation and 95.24 bylaws of the reorganized company. 95.25 (c) All policies in force on the effective date of the 95.26 conversion continue to remain in force under the terms of those 95.27 policies, except that any voting rights of the policyholders 95.28 provided for under the policies are extinguished on the 95.29 effective date of the conversion. 95.30 Subd. 14. [CONFLICT OF INTEREST.] No director, officer, 95.31 agent, employee of the converting mutual company, or any other 95.32 person shall receive a fee, commission, or other valuable 95.33 consideration, other than the person's usual regular salary and 95.34 compensation, for in any manner aiding, promoting, or assisting 95.35 in the conversion except as set forth in the plan approved by 95.36 the commissioner. This provision does not prohibit the payment 96.1 of reasonable fees and compensation to attorneys, accountants, 96.2 investment bankers, and actuaries for services performed in the 96.3 independent practice of their professions. 96.4 Subd. 15. [COSTS AND EXPENSES.] All the costs and expenses 96.5 connected with a plan of conversion must be paid for or 96.6 reimbursed by the converting mutual company or the reorganized 96.7 company except where the plan provides otherwise. 96.8 Subd. 16. [LIMITATION OF ACTIONS.] (a) An action 96.9 challenging the validity of or arising out of acts taken or 96.10 proposed to be taken according to this section must be commenced 96.11 within 180 days after the effective date of the conversion. 96.12 (b) The converting mutual company, the reorganized company, 96.13 or any defendant in an action described in paragraph (a), may 96.14 petition the court in the action to order a party to give 96.15 security for the reasonable attorney fees that may be incurred 96.16 by a party to the action. The amount of security may be 96.17 increased or decreased in the discretion of the court having 96.18 jurisdiction if a showing is made that the security provided is 96.19 or may become inadequate or excessive. 96.20 Subd. 17. [SUPERVISORY CONVERSIONS.] The commissioner may 96.21 waive or alter any of the requirements of this section to 96.22 protect the interests of policyholders if the converting mutual 96.23 company is subject to the commissioner's administrative 96.24 supervision under chapter 60G or rehabilitation under chapter 96.25 60B. 96.26 Sec. 4. [60A.076] [MUTUAL INSURANCE HOLDING COMPANIES.] 96.27 Subdivision 1. [FORMATION.] (a) A domestic mutual 96.28 insurance company, upon approval of the commissioner, may 96.29 reorganize by forming an insurance holding company based upon a 96.30 mutual plan and continuing the corporate existence of the 96.31 reorganizing insurance company as a stock insurance company. 96.32 The commissioner, if satisfied that the interests of the 96.33 policyholders are properly protected and that the plan of 96.34 reorganization is fair and equitable to the policyholders, may 96.35 approve the proposed plan of reorganization and may require as a 96.36 condition of approval the modifications of the proposed plan or 97.1 reorganization as the commissioner finds necessary for the 97.2 protection of the policyholders' interests. The commissioner 97.3 shall retain jurisdiction over the mutual insurance holding 97.4 company according to this section and chapter 60D to assure that 97.5 policyholder interests are protected. 97.6 (b) All of the initial shares of the capital stock of the 97.7 reorganized insurance company must be issued to the mutual 97.8 insurance holding company or to an intermediate stock holding 97.9 company that is wholly owned by the mutual insurance holding 97.10 company. The membership interests of the policyholders of the 97.11 reorganized insurance company become membership interests in the 97.12 mutual insurance holding company. "Membership interests" means 97.13 those interests described in section 60A.075, subdivision 1, 97.14 paragraph (h). Policyholders of the reorganized insurance 97.15 company shall be members of the mutual insurance holding company 97.16 in accordance with the articles of incorporation and bylaws of 97.17 the mutual insurance holding company. The mutual insurance 97.18 holding company shall, at all times, directly or through an 97.19 intermediate stock holding company, control a majority of the 97.20 voting shares of the capital stock of the reorganized insurance 97.21 company. 97.22 Subd. 2. [MERGER.] (a) A domestic mutual insurance 97.23 company, upon the approval of the commissioner, may reorganize 97.24 by merging its policyholders' membership interests into a mutual 97.25 insurance holding company formed according to subdivision 1 and 97.26 continuing the corporate existence of the reorganizing insurance 97.27 company as a stock insurance company subsidiary of the mutual 97.28 insurance holding company. "Membership interests" means those 97.29 interests described in section 60A.075, subdivision 1, paragraph 97.30 (h). The commissioner, if satisfied that the interests of the 97.31 policyholder are properly protected and that the merger is fair 97.32 and equitable to the policyholders, may approve the proposed 97.33 merger and may require as a condition of approval the 97.34 modifications of the proposed merger as the commissioner finds 97.35 necessary for the protection of the policyholders' interests. 97.36 The commissioner shall retain jurisdiction over the mutual 98.1 insurance holding company organized according to this section to 98.2 assure that policyholder interests are protected. 98.3 (b) All of the initial shares of the capital stock of the 98.4 reorganized insurance company must be issued to the mutual 98.5 insurance holding company, or to an intermediate stock holding 98.6 company that is wholly owned by the mutual insurance holding 98.7 company. The membership interests of the policyholders of the 98.8 reorganized insurance company become membership interests in the 98.9 mutual insurance holding company. Policyholders of the 98.10 reorganized insurance company shall be members of the mutual 98.11 insurance holding company according to the articles of 98.12 incorporation and bylaws of the mutual insurance holding company. 98.13 Subd. 3. [PLAN OF REORGANIZATION; APPROVAL BY 98.14 COMMISSIONER.] (a) The reorganizing or merging insurer shall 98.15 file a plan of reorganization, approved by the affirmative vote 98.16 of a majority of its board of directors, for review and approval 98.17 by the commissioner. The plan must provide for the following: 98.18 (1) establishing a mutual insurance holding company with at 98.19 least one stock insurance company subsidiary, the majority of 98.20 shares of which must be owned either directly or through an 98.21 intermediate stock holding company, by the mutual insurance 98.22 holding company; 98.23 (2) analyzing the benefits and risks attendant to the 98.24 proposed reorganization, including the rationale for the 98.25 reorganization and analysis of the comparative benefits and 98.26 risks of a demutualization under section 60A.075; 98.27 (3) protecting the immediate and long-term interests of 98.28 existing policyholders; 98.29 (4) ensuring immediate membership in the mutual insurance 98.30 holding company of all existing policyholders of the 98.31 reorganizing domestic insurance company; 98.32 (5) describing a plan providing for membership interests of 98.33 future policyholders; 98.34 (6) describing the number of members of the board of 98.35 directors of the mutual insurance holding company required to be 98.36 policyholders; 99.1 (7) ensuring that, in the event of proceedings under 99.2 chapter 60B involving a stock insurance company subsidiary of 99.3 the mutual insurance holding company that resulted from the 99.4 reorganization of a domestic mutual insurance company, the 99.5 assets of the mutual insurance holding company will be available 99.6 to satisfy the policyholder obligations of the stock insurance 99.7 company; 99.8 (8) for periodic distribution of accumulated holding 99.9 company earnings to members; 99.10 (9) describing the nature and content of the annual report 99.11 and financial statement to be sent to each member; 99.12 (10) a copy of the proposed mutual insurance holding 99.13 company's articles of incorporation and bylaws specifying all 99.14 membership rights; 99.15 (11) the names, addresses, and occupational information of 99.16 all corporate officers and members of the proposed mutual 99.17 insurance holding company board of directors; 99.18 (12) information sufficient to demonstrate that the 99.19 financial condition of the reorganizing or merging company will 99.20 not be diminished upon reorganization; 99.21 (13) a copy of the articles of incorporation and bylaws for 99.22 any proposed insurance company subsidiary or intermediate 99.23 holding company subsidiary; 99.24 (14) describing any plans for the initial sale of stock for 99.25 the reorganized insurance company; and 99.26 (15) any other information requested by the commissioner or 99.27 required by rule. 99.28 (b) The commissioner may approve the plan upon finding that 99.29 the requirements of this section have been fully met and the 99.30 plan will protect the immediate and long-term interests of 99.31 policyholders. 99.32 (c) The commissioner may retain, at the reorganizing or 99.33 merging mutual company's expense, any qualified experts not 99.34 otherwise a part of the commissioner's staff to assist in 99.35 reviewing the plan. 99.36 (d) The commissioner may, but need not, conduct a public