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H0060...........................................................by MR. SPEAKER
Requested by: Department of Insurance
INSURERS - Amends and repeals existing law to provide for investigation by the
director of the Department of Insurance upon application of a new insurer for
a certificate of authority; and to remove provisions requiring permits to
offer securities or to solicit qualifying applications for insurance.
01/06 House intro - 1st rdg - to printing
Rpt prt - to Bus
01/28 Rpt out - rec d/p - to 2nd rdg
01/29 2nd rdg - to 3rd rdg
01/31 3rd rdg - PASSED - 63-2-5
AYES -- Andersen, Barraclough, Bauer, Bell, Bieter, Black, Block, Boe,
Bolz, Bradford, Campbell, Cannon, Clark, Collins, Cuddy, Deal, Denney,
Douglas, Eberle, Edmunson, Ellsworth, Eskridge, Field(18), Field(23),
Garrett, Harwood, Henbest, Jones, Kellogg, Lake, Langford, Martinez,
McGeachin, McKague, Meyer, Miller, Mitchell, Moyle, Nacarrato, Nielsen,
Raybould, Ridinger, Ring, Ringo, Roberts, Robison, Rydalch, Sali,
Sayler, Schaefer, Shepherd, Shirley, Skippen, Smith(30), Smith(24),
Smylie, Snodgrass, Stevenson, Tilman, Trail, Wills, Wood, Mr. Speaker
NAYS -- Gagner, Kulczyk
Absent and excused -- Barrett, Bedke, Crow, Jaquet, Langhorst
Floor Sponsor - Douglas
Title apvd - to Senate
02/03 Senate intro - 1st rdg - to Com/HuRes
03/05 Rpt out - rec d/p - to 2nd rdg
03/06 2nd rdg - to 3rd rdg
03/11 3rd rdg - PASSED - 35-0-0
AYES -- Andreason, Bailey, Brandt, Bunderson, Burkett, Burtenshaw,
Calabretta, Cameron, Compton, Darrington, Davis, Gannon, Geddes, Goedde,
Hill, Ingram, Kennedy, Keough, Little, Lodge, Malepeai, Marley,
McKenzie, McWilliams, Noble, Noh, Pearce, Richardson, Schroeder,
Sorensen, Stegner, Stennett, Sweet, Werk, Williams
NAYS -- None
Absent and excused -- None
Floor Sponsor - Compton
Title apvd - to House
03/12 To enrol
03/13 Rpt enrol - Sp signed
03/14 Pres signed
03/17 To Governor
03/20 Governor signed
Session Law Chapter 103
Effective: 07/01/03
|||| LEGISLATURE OF THE STATE OF IDAHO |||| Fifty-seventh Legislature First Regular Session - 2003IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 60 BY MR. SPEAKER Requested by: Department of Insurance 1 AN ACT 2 RELATING TO STOCK AND MUTUAL INSURERS; AMENDING SECTION 41-2801, IDAHO CODE, 3 TO DELETE CODE REFERENCES; AMENDING SECTION 41-2805, IDAHO CODE, TO DELETE 4 LANGUAGE RELATING TO PERMITS FOR PROPOSED INSURERS; REPEALING SECTIONS 5 41-2806, 41-2807, 41-2808, 41-2810, 41-2811, 41-2812, 41-2813, 41-2814, 6 41-2815, 41-2816, 41-2817 AND 41-2819, IDAHO CODE; AMENDING SECTION 7 41-2809, IDAHO CODE, TO PROVIDE FOR INVESTIGATION BY THE DIRECTOR OF THE 8 DEPARTMENT OF INSURANCE UPON APPLICATION OF A NEW INSURER FOR A CERTIFI- 9 CATE OF AUTHORITY; AND AMENDING SECTION 41-2854A, IDAHO CODE, TO DELETE A 10 CODE REFERENCE AND TO MAKE TECHNICAL CORRECTIONS. 11 Be It Enacted by the Legislature of the State of Idaho: 12 SECTION 1. That Section 41-2801, Idaho Code, be, and the same is hereby 13 amended to read as follows: 14 41-2801. SCOPE OF CHAPTER. This chapter shall apply only to domestic 15 stock insurers and domestic mutual insurers, except thatsections 41-280616through 41-2817 and section 41-2819, Idaho Code, relative to sale of securi-17ties or other financing of insurers or insurance operations, shall apply also18as to reciprocal insurers and foreign insurers, andsection 41-2849, Idaho 19 Code, (nonassessable policies, mutual insurers) shall also apply as to foreign 20 insurers. 21 SECTION 2. That Section 41-2805, Idaho Code, be, and the same is hereby 22 amended to read as follows: 23 41-2805. FILING OF ARTICLES. (1) The incorporators shall submit the exe- 24 cuted articles of incorporation of a proposed stock or mutual insurer in trip- 25 licate to the director for review. If the director finds the articles to be in 26 compliance with this code he shall deliver an original thereof to the attorney 27 general for examination. After examining the articles, the attorney general 28 shall return them to the director accompanied by his opinion certifying as to 29 whether or not he has found the articles to be in accordance with the laws of 30 this state and not inconsistent with the constitution of this state. If the 31 attorney general has found the articles to be in accordance with law, the 32 director shall, upon payment of the fees prescribed by law therefor, and 33 except as provided in subsection (2) of this section, certify his approval 34 upon each of the three (3) originals of the articles, file one (1) of such 35 originals in his office and deliver two (2) of such originals to the incorpo- 36 rators, one (1) to be retained by the corporation as part of its corporate 37 records, and one (1) to be filed with the secretary of state. 38 (2)If a permit as to the offer of securities or receipt of funds is to39be required with respect to the proposed insurer, as provided for in section4041-2806, Idaho Code, the director shall not in any event approve the articles41of incorporation until the permit has been issued.2 1(3)If upon reviewing or examining the articles of incorporation as here- 2 inabove provided, the director or the attorney general finds that the articles 3 do not comply with this code or are not in accordance with the laws of this 4 state, or are inconsistent with the constitution of this state, as the case 5 may be,or that the permit referred to in subsection (2) of this section will6not be issued,the director shall refuse to approve the articles and shall 7 return all originals of the articles to the incorporators accompanied by a 8 written statement of the defects in the articles or reasons upon which his 9 refusal is based. 10 (43) The secretary of state shall not permit the filing with him or in 11 his office of any such articles of incorporation unless the same bear the 12 director's approval endorsed thereon as hereinabove provided. The director's 13 approval, when so endorsed, shall be deemed to relate only to the form of the 14 articles of incorporation, and shall not be deemed to constitute an approval 15 or commitment by the director as to any other aspect or operation of the pro- 16 posed insurer. 17 (54) The director and the attorney general shall perform all duties 18 required of them under this section within a reasonable time after the arti- 19 cles of incorporation have been submitted to the director as in subsection (1) 20 above provided. 21 SECTION 3. That Sections 41-2806, 41-2807, 41-2808, 41-2810, 41-2811, 22 41-2812, 41-2813, 41-2814, 41-2815, 41-2816, 41-2817 and 41-2819, Idaho Code, 23 be, and the same are hereby repealed. 24 SECTION 4. That Section 41-2809, Idaho Code, be, and the same is hereby 25 amended to read as follows: 26 41-2809. INVESTIGATION OF PROPOSED ORGANIZATION. Uponcompletion of the27application for a solicitation permit under sections 41-2807 or 41-2808appli- 28 cation of a new insurer for a certificate of authority, the director of the 29 department of insurance shall promptly make an investigation of: 30 (1) The character, reputation, financial standing and purposes of the 31 organizers, incorporators, and subscribers organizing the proposed insurer or 32 organization; 33 (2) The character, financial responsibility, insurance experience, and 34 business qualifications of its proposed officers and directors; and 35 (3) Such other aspects of the proposed insurer or financing as he may 36 deem advisable. 37 SECTION 5. That Section 41-2854A, Idaho Code, be, and the same is hereby 38 amended to read as follows: 39 41-2854A. MUTUALIZATION OF SERVICE CORPORATIONS. (1) Every corporation 40 organized or existing under chapter 34, title 41, Idaho Code, as a hospital 41 service corporation, a combined professional service and hospital service cor- 42 poration, or a professional service corporation whose articles of incorpora- 43 tion specify participant licensee services are to be provided by physicians or 44 surgeons, of either medicine and surgery or of osteopathic medicine and sur- 45 gery, shall file with the director of the department of insurance a plan of 46 mutualization on or before January 1, 1995. Any other corporation organized 47 under chapter 34, title 41, Idaho Code, may at any time file a plan of mutual- 48 ization. Any corporation organized under chapter 34, title 41, Idaho Code, may 49 hereafter be referred to in this section as a "service corporation." The 50 director of the department of insurance shall approve any plan of mutualiza- 3 1 tion so filed, and forthwith issue a certificate of authority to the filing 2 corporation to transact insurance in this state pursuant thereto, if: 3 (a) Except as herein provided and except as consistent with or implicit 4 in the conversion of the service corporation to a mutual insurer, the plan 5 does not deprive existing corporate members of statutory rights expressly 6 set forth in chapter 34, title 41, Idaho Code; 7 (b) The plan has been approved by the corporation's board of directors; 8 (c) The corporation satisfies the minimum surplus or deposit requirements 9 of this title for the type or types of mutual insurer to which it will 10 convert, as specified by the corporation in its plan; and 11 (d) The plan requires the corporation to honor subscribers' existing con- 12 tractual rights in their subscriber agreements as if the corporation had 13 not been converted to a mutual insurer. Approval by the service 14 corporation's board of directors of the plan of mutualization shall be 15 sufficient and effective without the approval or vote of the service 16 corporation's members, notwithstanding any other provision of law to the 17 contrary or of the service corporation's bylaws or articles of incorpora- 18 tion. The filing of such a board-approved plan, together with the issuance 19 by the director of the department of insurance of a certificate of author- 20 ity, shall constitute legal authority, effective from and after the effec- 21 tive date of the plan, specified in the plan, for the corporation to 22 transact insurance in Idaho as a nonprofit mutual insurer pursuant to such 23 plan. 24 (2) A plan of mutualization shall provide that, from and after its effec- 25 tive date, the corporation's reserves shall not be used for any purpose or 26 distributed in any manner contrary to this title. A plan of mutualization 27 shall also provide for a "transition period" commencing with the plan's effec- 28 tive date and ending with a date identified as the "transition period termina- 29 tion date," which shall be a date not later than the first anniversary of the 30 effective date of such plan. Prior to the expiration of the transition period, 31 the corporation's reserves shall not be used for any purpose or distributed in 32 any manner contrary to section 41-3421, Idaho Code. Following conversion, the 33 corporation shall continue to be a nonprofit corporation; provided however, 34 the board of directors of a mutualized service corporation may from time to 35 time declare, apportion, and pay or credit to the corporation's members divi- 36 dends pursuant to this title if the corporation's articles of incorporation 37 (as amended, if applicable, in conjunction with the filing or after the effec- 38 tive date of its plan of mutualization) expressly so provide. Notwithstanding 39 any other provision of law to the contrary, no corporation (including by way 40 of illustration and not limitation, any direct or indirect successor corpora- 41 tion or entity, by merger or acquisition of substantially all its assets) 42 mutualizing under this section shall, in the event of its dissolution, dis- 43 tribute any of its assets except as provided by its articles of incorporation 44 in effect immediately before the effective date of its plan of mutualization; 45 nor shall any such corporation take or fail to take any action that would pre- 46 vent it from making such distributions at the time of its dissolution. 47 (3) From and after the transition period termination date, the obliga- 48 tions of participant hospitals, participant physicians, and other licensees 49 under sections 41-3415, 41-3415A, 41-3416 and 41-3431, Idaho Code, and all 50 voting rights held by participant hospitals, participant physicians, and any 51 other participant licensees by virtue of participant status under chapter 34, 52 title 41, Idaho Code, shall be extinguished, but until such transition period 53 termination date, they shall retain such voting rights and obligations as they 54 held and for which they were accountable prior to mutualization hereunder, 55 including duties and responsibilities to the corporation and its subscribers. 4 1 Each policyholder of a policy issued on or after such plan's effective date 2 shall have all the rights and liabilities of a member of a mutual insurer 3 under the policy, under the corporation's articles of incorporation and 4 bylaws, and as provided by law. Before such transition period termination 5 date, the corporation shall replace, convert by agreement with subscribers, or 6 allow to lapse pursuant to their express terms all subscriber agreements, so 7 that from and after such transition period termination date the corporation 8 shall have no subscriber agreements in force. From and after the effective 9 date of its plan of mutualization, the corporation shall issue no subscriber 10 agreements, but shall be authorized to accept applications for and to issue 11 insurance policies of the kind or kinds specified by the plan and the corpora- 12 tion is qualified to issue pursuant to law. 13 (4) The service corporation shall file with the director of the depart- 14 ment of insurance, as part of its plan of mutualization, amended bylaws and 15 articles of amendment to articles of incorporation, approved by its board of 16 directors, which articles and bylaws shall conform in all respects with the 17 requirements of this chapter and any applicable rules duly promulgated hereun- 18 der, and shall become effective on the effective date of such plan. Approval 19 by the service corporation's board of directors of such amendments to its 20 articles and bylaws shall be sufficient and effective without the approval or 21 vote of the corporation's members, notwithstanding any contrary provision of 22 law or of the service corporation's bylaws or articles of incorporation. Pur- 23 suant to the Idaho nonprofit corporation act, the service corporation shall 24 also file with the Idaho secretary of state articles of amendment to its arti- 25 cles of incorporation. 26 (5) For the period ending on the transition period termination date, the 27 corporation's plan of mutualization and its articles of incorporation and 28 bylaws may contain provisions the corporation's board of directors, in the 29 exercise of its discretion and in fulfillment of its duties, deems necessary, 30 convenient or prudent to implement the plan of mutualization, including, but 31 not limited to, transition provisions, expressly identified as such, that 32 allocate voting power among policyholder members, participant licensees and 33 participant hospitals, as applicable and as the board of directors may deem 34 reasonably appropriate; provided however, all transition provisions, whether 35 in the corporation's articles of incorporation, bylaws or plan of mutualiza- 36 tion, shall, without further action or filing, expire upon the transition 37 period termination date. 38 (6) Within forty-two (42) days of the filing date of a corporation's plan 39 of mutualization, the director shall approve the same and issue a certificate 40 of authority to the corporation unless the director finds such plan does not 41 comply with subsection (1) of this section, in which case the director shall 42 within such forty-two (42) day period issue a written order disapproving such 43 plan and specifying the reasons therefor. The corporation may preserve the 44 legal effectiveness and effective date of its plan by curing or otherwise 45 responsibly addressing each asserted deficiency identified by the director and 46 filing within fourteen (14) days of the effective date of the director's order 47 an amended plan of mutualization that reflects corrections and responses made. 48 Within fourteen (14) days ofthesuch filing, the director shall issue a cer- 49 tificate of authority or a final order disapproving such amended plan and 50 specifying the reasons therefor, which final order may, within forty-two (42) 51 days after its effective date, be appealed to the district court for Ada 52Ccounty,Sstate of Idaho. Notwithstanding the director's final order, the cor- 53 poration shall be legally authorized to transact business pursuant to its plan 54 of mutualization until the forty-second day following the latest of: 55 (a) The effective date of the director's final order; 5 1 (b) The entry of final judgment by the district court in which review of 2 the director's final order has been sought; and 3 (c) The director's compliance and the district court's compliance (by 4 entry of a final judgment) with the opinion issued by the last appellate 5 court to which appeal may be taken that has reviewed the district court's 6 judgment concerning the director's final order. If the director has pre- 7 vailed upon final judgment being entered, the corporation's legal author- 8 ity to transact business pursuant to its plan of mutualization shall 9 expire at the end of such period; however, if the corporation has pre- 10 vailed or corrected all deficiencies identified in the director's final 11 order, the director shall, before or upon the expiration of such period, 12 issue a certificate of authority to the corporation. Issuance of a certif- 13 icate of authority under this section shall not preclude the director from 14 commencing any proceedings for alleged violations of this title. The pro- 15 cedure in this subsection shall apply to corporations existing under chap- 16 ter 34, title 41, Idaho Code, on December 31, 1993. 17 (7) Sections41-2805,and 41-2806,Idaho Code, and any other provision of 18 this title dealing with newly organized mutual insurers as such, shall have no 19 application to a plan of mutualization under this section or to the corpora- 20 tion adopting or implementing such plan. 21 (8) If, pursuant to section 41-3406, Idaho Code, a mutualizing service 22 corporation is also operating as a health maintenance organization immediately 23 prior to the effective date of its plan of mutualization, it shall be legally 24 authorized to continue such operations in the manner provided for in said plan 25 after the effective date thereof as if such service corporation had not become 26 a mutual insurer under this section. 27 (9) From and after the effective date of a plan of mutualization, a cor- 28 poration mutualizing under this section shall be liable for the tax imposed 29 and provided for in section 41-402, Idaho Code, but only with respect to 30 insurance policies (as opposed to subscriber agreements) issued by it, and 31 subject to refunds, reductions and other adjustments applicable to other 32 domestic mutual insurers. Until all subscriber agreements are terminated, 33 expire or are otherwise converted to policies of insurance issued by the cor- 34 poration as a mutual insurer, the corporation shall continue to be liable for 35 and pay the tax on subscriber contracts in the manner provided in section 36 41-3427, Idaho Code, subject to the same exemptions provided in that section, 37 except for premium taxes paid pursuant to this subsection on policies issued 38 as a mutual insurer. 39 (10) Except as modified in this section and other applicable law, after 40 the effective date of a service corporation's plan of mutualization, all con- 41 tracts, rights, powers, privileges, liabilities and obligations of such corpo- 42 ration shall continue unchanged and in effect until repealed, terminated,can-43celledcanceled, amended, waived, satisfied or otherwise legally extinguished.
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STATEMENT OF PURPOSE
RS 12343
This bill repeals Sections 41-2806, 41-2807, 41-2808, 41-2810, 41-
2811, 41-2812, 41-2813, 41-2814, 41-2815, 41-2816, 41-2817, and 41-
2819, Idaho Code, and amends Sections 41-2801, 41-2805, 41-2809,
and 41-2854A, Idaho Code, which require insurers and holding
companies to obtain a solicitation permit from the Department of
Insurance before offering securities, and is intended to eliminate
potential conflicts with federal securities laws and duplication of
review between the Department of Finance and the Department of
Insurance.
FISCAL IMPACT
There is no fiscal impact to the state's General Fund.
Contact: Shad D. Priest
Insurance, Dept. of
334-4250
STATEMENT OF PURPOSE/FISCAL NOTE H 6