Bulletin 2020-11 New Guaranty Association Notice Requirement

<$ ' TO: FROM: RE: DATE: 01 South carolina Department of Insurance 1201 Main Street, Suite 1000 Columbia, SC 29201 ------ .._,. -- Mailing Address P.O. Box 100105 Columbia, SC 29202 BULLETIN NUMBER 2020-11 All Members of the South Carolina Life and Accident and Health Insurance Guaranty Association Raymond G. Farmer Director of Insurance New Guaranty Association Notice Requirement, S.C. Code Ann. § 38-29-200(2) December14,2020 The purpose of this Bulletin is to inform members of the South Carolina Life and Accident and Health Insurance Guaranty Association of the new requirement to issue a notice that describes the coverages, exclusions and limitations of coverage provided by the SCLAHIGA Section 38-29-200(2) requires the SCLAHIGA to prepare a summary document describing the general purposes and current limitations of Chapter 29 of Title 38 of the South Carolina Code of Laws. See S.C. Code Ann.§ 38-29-200(2) (2020). The notice must be submitted to the Director of Insurance for approval. Attached to this bulletin is a copy of the notice as approved for the SCLAHIGA in accordance with the requirements of the statute. Effective sixty days from the date of this bulletin, no SCLAHIGA member insurer may deliver a policy or contract to a policy owner, contract owner, certificate holder, or enrollee unless the summary document (notice) is delivered to the policy owner> contract owner, certificate holder, or enrollee at the time of delivery of the policy or contract. The document must also be made available upon request by a policy owner, contract owner, certificate holder, or enrollee. This notice requirement applies to new policies and renewals. Please note the attached notice may be amended as changes are made to Chapter 29, if necessary. Please direct any questions about the content of this bulletin to the attention of Shari Miles at lahmail@doi.sc.gov or 803-737-6230. Bulletins arc the method by which the Din.>ctor of Insurance fom1ally communicates with persons and entities regulated by the Department. Bulletins arc departmental interpretations of South Carolina insurance laws and regulations and provide guidance on the Department's enforcement approach. Bulletins do not provide legal advice. Readers should consult applicable statutes and regulations or contact an attorney for legal advice or for additional infonnation on the impact of that legislation on their specific situation. Governor Henry McMaster Director Raymond G. Farmer Summary of the South Carolina Life and Accident and Health Insurance Guaranty Association Act and Notice Concerning Coverage Limitations and Exclusions Residents of South Carolina who hold life insurance, annuities, or health insurance policies should know that the insurance companies and health maintenance organizations (HMOs) licensed in this state to write these types of insurance are required by law to be members of the South Carolina Life and Accident and Health Insurance Guaranty Association (SCLAHIGA). The purpose of SCLAHIGA is to assure that policyholders will be protected, within limits, in the unlikely event that a member insurer becomes financially unable to meet its obligations. If this happens, SC LAH I GA will assess its other member insurance companies for the money to pay the claims of insured persons who live in this state and, in some cases, to keep coverage in force. However, the valuable extra protection provided by these insurers through SCLAHIGA is limited. Consumers should shop around for insurance coverage and exercise care and diligence when selecting insurance coverage. Disclaimer Under South Carolina law, the South Carolina Life and Accident and Health Insurance Guaranty Association (SCLAHIGA) may provide coverage of certain direct !if e insurance policies, accident and health insurance policies, annuity contracts and contracts supplemental to life, accident and health insurance policies and annuity contract claims (covered claims) if the insurer becomes impaired or insolvent. South Carolina law does not require the SCLAHIGA to provide coverage for every policy. COVERAGE MAY NOT BE AVAILABLE FOR YOUR POLICY. Coverage is generally conditioned upon residence in this state. Other conditions that may preclude or exclude coverage are described in this notice. Even if coverage is provided, there are significant limits and exclusions. Please read the entire notice for further details on limitations and exclusions. Insurance companies and insurance agents are prohibited by law from using the existence of the SCLAHIGA or its coverage to sell you an insurance policy. You should not rely on the availability of coverage under SCLAHIGA when selecting an insurer. The South Carolina Life and Accident and Health Insurance Guaranty Association or the Department of Insurance will respond to any questions you may have which are not answered by this document. If you think the law has been violated, you may file a written complaint with the SCLAHIGA or the South Carolina Department of Insurance at the addresses listed below: South Carolina Life and Accident and Health Insurance Guaranty Association Attention: Executive Director P.O. Box 8625 Columbia, SC 29202 South Carolina Department of Insurance Attention: Office of Consumer Services 1201 Main Street, Suite 1000 Columbia, SC 29201 Electronic complaint submission via w._ww .9oi .sc.gov/Źom,pl_aint Please attach copies of all pertinent documentation. You may submit a written complaint or a complaint electronically to the Department through submission of the electronic fonn on the Department's website at www.doi.sc.gov/complaint. You should receive a response to your complaint within 10 days. This safety-net coverage is provided for in the South Carolina Life and Accident and Health Insurance Guaranty Association Act (the Act). The following summary of the Act's coverages, exclusions and limits does not cover all provisions of the Act; nor does it in any way change any person's rights or obligations under the Act or the rights or obligations of the SCLAHIGA. COVERAGE Generally, individuals will be protected by the SCLAHIGA if they live in this state and hold a covered life, accident, health or annuity policy, plan or contract issued by an insurer (including a health maintenance organization) authorized to conduct business in South Carolina. The beneficiaries, payees or assignees of insured persons may also be protected if they live in another state unless circumstances described under the Act exclude coverage. EXCLUSIONS FROM COVERAGE Persons who hold a covered life, accident, health or annuity policy, plan or contract are r1ot protected by SCLAHIGA if: • They are eligible for protection under the laws of another state (This may occur when the insolvent insurer was incorporated in another state whose guaranty association protects insureds who live outside that state.); • The insurer was not authorized to do business in this state; or • They acquired rights to receive payments through a structured settlement factoring agreement. SCLAHIGA also does not provide coverage for: • A portion of a policy or contract or part thereof not guaranteed by the member insurer, or under which the risk is borne by the policy or contract owner; • A policy or contract of reinsurance, unless assumption certificates have been issued; • Interest rate or crediting rate yields or similar factors employed in calculating value changes that exceed an average rate; • Any policy or contract issued by assessment mutuals, fraternals, and nonprofit hospital and medical service plans; • Benefits payable by an employer, association or other person under: (a) a multiple employer welfare arrangement; (b) a minimum premium group insurance plan; (c) a stop-loss group insurance plan; or (d) an administrative services contract; • A portion of a policy or contract to the extent that it provides for (a) dividends or experience rating credits; (b) voting rights; or (c) payment of any fees or allowances to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract; • A portion of a policy or contract to the extent that the assessments required by Section 38-29-80 with respect to the policy or contract are preempted by federal or state law; • An obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner or policy owner, including without limitation: (a) Claims based on marketing materials; (b) Claims based on side letters, riders or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements; (c) Misrepresentations of or regarding policy or contract benefits; (d) Extra-contractual claims; or (e) A claim for penalties or consequential or incidental damages; • An unallocated annuity contract; • A policy or contract providing any hospital, medical, prescription drug or other health care benefits pursuant to Medicare Part C or Dor Medicaid; or • Interest or other changes in value to be determined by the use of an index or other external references but which have not been credited to the policy or contract or as to which the policy or contract owner's rights are subject to forfeiture, as of the date the member insurer becomes impaired or insolvent insurer, whichever is earlier. LIMITS ON AMOUNTS OF COVERAGE The South Carolina Life and Accident and Health Insurance Guaranty Association Act also limits the amount that SCLAHIGA is obligated to pay for covered claims. The benefits for which SCLAHIGA may become liable shall in no event exceed the lesser of the following: • With respect to one life, regardless of the number of policies or contracts: $300,000 in life insurance death benefits, or not more than $300,000 in net cash surrender and net cash withdrawal values for life insurance; • For health insurance benefits: (a) $300,000 for coverages not defined as disability income insurance or health benefit plans or long-term care insurance, including any net cash surrender and net cash withdrawal values; (b) $300,000 for disability income insurance; (c) $300,000 for long-term care insurance; (d) $500,000 for health benefit plans; or • $300,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values. 2