HB 414 (BR 1547) - R. Damron
AN ACT relating to life insurance.
Create a new section of Subtitle 15 of KRS Chapter 304 to define terms and authorize the sale of a life insurance policy with a face value in excess of $10,000 in exchange for a life settlement contract to provide for long-term-care services; proceeds of the life settlement contract are to be held in an irrevocable state or federally insured account for the benefit of the recipient of the long-term-care services; the recipient shall be the only person authorized to select a provider and any attempt to require the use of a provider is prohibited and constitutes an unfair or deceptive act in violation of KRS 304.12-010; require the contract to include a provision that reserves the lesser of 5% of the face value of the policy or $5,000 for final expenses and require the balance of the proceeds to be paid to the owner's estate or a named beneficiary of the irrevocable account; require the life settlement provider to maintain either a surety bond in the amount of $500,000 in favor of this state and authorize recovery by the commissioner of the Department of Insurance on behalf of any person who sustained damages due to erroneous acts, failure to act, fraud, or conviction of unfair practices or to obtain a policy of errors and omissions insurance in the amount of $500,000 per occurrence and in the aggregate for legal liability from erroneous acts or failure to act; require any life settlement contract forms required pursuant to this section and advertising and marketing materials of a life settlement provider to be filed with the Department of Insurance; limit claims against the life settlement provider to the face amount of the policy, less proceeds paid, the total amount of premiums paid since entering into the contract and other reasonable costs or expenses payable from the irrevocable account; provide that nothing in this section is the exclusive method for exclusion of a life insurance policy as a resource or asset for Medicaid eligibility purposes, or to prevent conversion of a life insurance policy to a long-term-care policy; authorize the commissioner of the Department of Insurance to promulgate administrative regulations to implement this section; create a new section of KRS Chapter 205 to provide that life settlement contract proceeds are not to be considered as a resource or asset in determining a recipient's eligibility for Medicaid, but are only to be used for long-term-care services to the extent allowed by federal and state law; prohibit the use of state or federal funds for the recipient's care until the proceeds of the life settlement are utilized, less the amount retained for final expenses; require the cabinet to ensure that applied income payments from Medicaid begin on the day following exhaustion of the life settlement proceeds if the required notice is provided; authorize the cabinet to promulgate administrative regulations to define a service or support deemed a long-term-care are service and require the cabinet to prescribe the notice requirement to be utilized by the recipient to obtain Medicaid; require the cabinet to provide notice to all Medicaid applicants of the options available in Section 1 of this Act for a life insurance policy and to provide information about Section 1 of this Act to local and state private and public agencies and organizations in the state in cooperation with one or more nonprofit organizations; amend KRS 304.15-420 to require an insurer to perform a comparison of its insureds' in force life insurance policies, contracts, and retained asset accounts against a Death Master File on a semiannual, rather than a quarterly, basis and allow an insurer to perform one comparison against the entire Death Master File and to utilize Death Master File updates thereafter; authorize an insurer, for escheat purposes, to submit its next unclaimed property report to the State Treasurer unclaimed life insurance benefits or unclaimed retained asset accounts, plus accrued interest, rather than submitting a report immediately upon the expiration of the statutory time period for escheat; provide that failure to meet any requirement of this section with such frequency as to constitute a general business practice, rather than failure to meet any requirement of this section, shall constitute a trade practice or fraud in violation of Subtitle 12 of KRS Chapter 304 and provide that nothing in this section shall create a private cause of action; provide that if the insurer is making a good-faith effort to comply with this section, the insurer shall not be subject to fees, fines, penalties, or interest for failure to perform a comparison of its in-force life insurance policies, contracts, and retained asset accounts prior to the effective date of this Act; provide that the commissioner of the Department of Insurance shall have exclusive authority and jurisdiction based upon a demonstration of hardship to the insurer to allow an insurer to phase in compliance with this section for a time period not to exceed one year to allow for conversion of paper files, to searchable electronic files according to a plan and timeline approved by the commissioner.
HB 414 - AMENDMENTS
HCS - Retain original provisions, except delete Section 1(4)(b) that states nothing in Section 1 shall prevent conversion of a life insurance policy to a long-term care policy; require the cabinet to provide information to Medicaid applicants about options that do not allow a life insurance policy to be considered an asset or resource for determiniming Medicaid eligibility; require the cabinet to provide information about the options in Section 1 of this Act to state and local, public and private agencies in cooperation with a nonprofit or nonprofits, with no cost to the state for distribution of materials and information; delete the requirement in Section 9(3), relating to unclaimed life insurance benefits, that the extension of the time period for compliance be for conversion of paper to electronic searchable files.
HFA (1, M. Harmon) - Amend the requirement that a life settlement contract include a reserve for final expenses by providing that the amount shall be the greater of, rather than the lesser of, 5% of the face amount of the policy or $5,000.
HFA (2, M. Harmon) - Amend the provision for a reserve for final expenses to authorize five percent of the face amount of the life insurance policy, not to exceed $7,500, or $5,000, whichever is greater, to be reserved; require that any reserve be payable to the owner's estate.
Feb 20-introduced in House
Feb 24-to Banking & Insurance (H)
Mar 6-posted in committee
Mar 12-reported favorably, 1st reading, to Calendar with Committee Substitute ; floor amendment (1) filed to Committee Substitute
Mar 13-2nd reading, to Rules; taken from Rules; floor amendment (2) filed to Committee Substitute ; placed in the Orders of the Day
Mar 14-3rd reading, passed 91-0 with Committee Substitute, floor amendment (2)
Mar 17-received in Senate
Mar 19-to Banking & Insurance (S)
Mar 21-taken from Banking & Insurance (S); 1st reading; returned to Banking & Insurance (S)
Mar 24-taken from Banking & Insurance (S); 2nd reading; returned to Banking & Insurance (S)
Mar 25-reported favorably, to Rules as a Consent Bill
Mar 26-posted for passage in the Consent Orders of the Day for Wednesday, March 26, 2014; 3rd reading, passed 38-0
Mar 27-received in House; enrolled, signed by each presiding officer; delivered to Governor
Apr 8-signed by Governor (Acts, ch. 60)