The Vermont Statutes Online
Title 8: Banking and Insurance
Chapter 112: LIFE AND HEALTH INSURANCE GUARANTY ASSOCIATION
- Subchapter 001: LIFE AND HEALTH INSURANCE COMPANIES
§ 4151. Short title
This subchapter shall be known and may be cited as the Vermont Life and Health Insurance Guaranty Association Act. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972.)
§ 4152. Purpose
The purpose of this subchapter is to protect policyowners, insureds, beneficiaries, annuitants, payees, and assignees of life insurance policies, health insurance policies, annuity contracts, and supplemental contracts, subject to certain limitations, against failure in the performance of contractual obligations due to the impairment or insolvency of the insurer issuing such policies or contracts. To provide this protection:
(1) an association of insurers is created to enable the guaranty of payment of benefits and of continuation of coverages;
(2) members of the association are subject to assessment to provide funds to carry out the purpose of this subchapter; and
(3) the Association is authorized to assist the Commissioner, in the prescribed manner, in the detection and prevention of insurer impairment or insolvency. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 2009, No. 137 (Adj. Sess.), § 7e, eff. May 29, 2010.)
§ 4153. Scope
(a) This subchapter shall provide coverage for the policies and contracts specified in subsection (b) of this section:
(1) To persons who, regardless of where they reside (except for nonresident certificate holders under group policies or contracts and except for payees and beneficiaries of structured settlement annuities as specified in subdivision (3) of this subsection), are the beneficiaries, assignees, or payees of the persons covered under subdivision (2) of this subsection.
(2) To persons who are owners of or certificate holders under such policies or contracts or, in the case of unallocated annuity contracts, to the persons who are the contract holders; and who
(A) are residents of this State, or
(B) are not residents of this State, but only if all of the following conditions are met:
(i) the insurers which issued such policies or contracts are domiciled in this State;
(ii) such insurers never held a license or certificate of authority in the states in which such persons reside;
(iii) such states have associations similar to the Association created by this subchapter; and
(iv) such persons are not eligible for coverage by such associations.
(3) To persons who are payees under structured settlement annuities, or beneficiaries of such deceased payees, but only if the payees:
(A) are residents of this State, regardless of where the contract owners reside; or
(B) are not residents of this State, but only if both of the following conditions are met:
(i)(I) the contract owners of such structured settlement annuities are residents of this State; or
(II) the contract owners of such structured settlement annuities are not residents of this State, but only if:
(aa) the insurers which issued such structured settlement annuities are domiciled in this State; and
(bb) the states in which such contract owners reside have associations similar to the Association created by this subchapter; and
(ii) Neither the payees, beneficiaries, nor the contract owners are eligible for coverage by the associations of the states in which such payees or contract owners reside.
(b)(1) This subchapter shall provide coverage to the persons specified in subsection (a) of this section for direct, nongroup life, health, annuity, and supplemental policies or contracts, for certificates under direct group policies and contracts, and for unallocated annuity contracts issued by member insurers, except as limited by this subchapter. Annuity contracts and certificates under group annuity contracts include guaranteed investment contracts, guaranteed interest contracts, guaranteed accumulation contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement agreements, lottery contracts, and any immediate or deferred annuity contracts.
(2) This subchapter shall not provide coverage for:
(A) any portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract holder;
(B) any policy or contract of reinsurance, unless assumption certificates have been issued;
(C) any portion of a policy or contract to the extent that the rate of interest on which it is based, or the interest rate, crediting rate, or similar factor determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value:
(i) averaged over the period of four years prior to the date on which the Association becomes obligated with respect to such policy or contract, exceeds a rate of interest determined by subtracting two percentage points from Moody’s Corporate Bond Yield Average averaged for that same four-year period or for such lesser period if the policy or contract was issued less than four years before the Association became obligated; and
(ii) on and after the date on which the Association becomes obligated with respect to such policy or contract, exceeds the rate of interest determined by subtracting three percentage points from Moody’s Corporate Bond Yield Average as most recently available;
(D) any plan or program of an employer, association, or similar entity to provide life, health, or annuity benefits to its employees or members to the extent that such plan or program is self-funded or uninsured, including benefits payable by an employer, association, or similar entity under:
(i) a Multiple Employer Welfare Arrangement as defined in Section 514 of the Employee Retirement Income Security Act of 1974, Pub. L. No. 93-406, as may be amended;
(ii) a minimum premium group insurance plan;
(iii) a stop-loss group insurance plan; or
(iv) an administrative services only contract;
(E) any portion of a policy or contract to the extent that it provides dividends or experience rating credits, or provides that any fees or allowances be paid to any person, including the policy or contract holder, in connection with the service to or administration of such policy or contract;
(F) any policy or contract issued in this State by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue such policy or contract in this State;
(G) any unallocated annuity contract issued to an employee benefit plan protected under the federal Pension Benefit Guaranty Corporation;
(H) any portion of any unallocated annuity contract which is not issued to or in connection with a specific employee, union, or association of natural persons benefit plan, or government lottery;
(I) any portion of a policy or contract to the extent it provides for interest or other changes in value to be determined by the use of an index or other external reference stated in the policy or contract, but which has 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 an impaired or insolvent insurer under this chapter, whichever is earlier. If a policy’s or contract’s interest or changes in value are credited less frequently than annually, then for purposes of determining the values that have been credited and are not subject to forfeiture under this subdivision, the interest or change in value determined by using the procedures defined in the policy or contract will be credited as if the contractual date of crediting interest or changing values was the date of impairment or insolvency, whichever is earlier, and will not be subject to forfeiture; and
(J) any policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Medicare Part C, 42 U.S.C. §§ 1395w-21 to 1395w-29, or Medicare Part D, 42 U.S.C. §§ 1395w-101 to 1395w-154, or any regulations issued pursuant to those sections. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 1993, No. 55, § 1, eff. June 3, 1993; 2009, No. 137 (Adj. Sess.), §§ 7a, 7b, eff. May 29, 2010; 2021, No. 105 (Adj. Sess.), § 159, eff. July 1, 2022.)
§ 4154. Construction
This subchapter shall be liberally construed to effect the purpose under section 4152 of this title which shall constitute an aid and guide to interpretation. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972.)
§ 4155. Definitions
As used in this subchapter:
(1) “Account” means either of the four accounts created under section 4156 of this title.
(2) “Affiliate” means affiliate as defined in section 3681 of this title.
(3) “Association” means the Vermont Life and Health Insurance Guaranty Association created under section 4156 of this title.
(4) “Commissioner” means the Commissioner of Financial Regulation of this State.
(5) “Contractual obligation” means any obligation under covered policies.
(6) “Covered policy” means any policy, contract, or certificate within the scope of this subchapter under section 4153 of this title.
(7) “Impaired insurer” means a member insurer which, after the effective date of this subchapter, is not an insolvent insurer and who is placed under an order of rehabilitation or conservation by a court of competent jurisdiction.
(8) “Insolvent insurer” means a member insurer which, after the effective date of this subchapter, is placed under an order of liquidation by a court of competent jurisdiction with a finding of insolvency.
(9) “Member insurer” means any person authorized to transact in this State any kind of insurance to which this subchapter applies under section 4153 of this title.
(10) “Premiums” means amounts received on covered policies or contracts less any returned premiums, considerations, and deposits, and less any dividends and experience credits. “Premiums” does not include any amounts received for any policies or contracts or for the portions of any policies or contracts for which coverage is not provided under subsection 4153(b) of this title except that assessable premium shall not be reduced on account of subdivisions 4153(b)(2)(C) of this title, relating to interest limitations, and 4158(8) of this title, relating to limitations with respect to any one individual, any one participant, and any one contract holder, provided that “premiums” shall not include any premiums in excess of $5,000,000.00 on any unallocated annuity contract not issued under a governmental retirement plan established under 26 U.S.C. § 401, 403(b), or 457.
(11) “Person” means any individual, corporation, partnership, association, or voluntary organization.
(12) “Resident” means any person who resides in this State on the date of entry of a court order that determines a member insurer to be an impaired insurer or of a court order that determines a member insurer to be an insolvent insurer, and to whom contractual obligations are owed. A person may be a resident of only one state, which in the case of a person other than a natural person shall be its principal place of business.
(13) “Moody’s Corporate Bond Yield Average” means the Monthly Average Corporates as published by Moody’s Investors Service, Inc., or any successor thereto.
(14) “Supplemental contract” means any agreement entered into for the distribution of policy or contract proceeds.
(15) “Unallocated annuity contract” means any annuity contract or group annuity certificate which is not issued to and owned by an individual except to the extent of any annuity benefits guaranteed to an individual by an insurer under such contract or certificate and shall include guaranteed investment contracts, guaranteed interest contracts, guaranteed accumulation contracts, deposit administration contracts, and unallocated funding agreements. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 1989, No. 225 (Adj. Sess.), § 25; 1993, No. 55, §§ 2-4, eff. June 3, 1993; 1995, No. 180 (Adj. Sess.), § 38; 2009, No. 137 (Adj. Sess.), §§ 7c, 7e, eff. May 29, 2010; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012; 2021, No. 105 (Adj. Sess.), § 160, eff. July 1, 2022.)
§ 4156. Creation of the Association
(a) There is created a nonprofit legal entity to be known as the Vermont Life and Health Insurance Guaranty Association. All member insurers shall be and remain members of the Association as a condition of their authority to transact insurance in this State. The Association shall perform its functions under the plan of operation established and approved under section 4160 of this title and shall exercise its powers through a Board of Directors established under section 4157 of this title. For purposes of administration and assessment, the Association shall maintain four accounts:
(1) The health insurance account;
(2) The life insurance account;
(3) The annuity account; and
(4) The unallocated annuity account which shall include unallocated annuity contracts not excluded from coverage by subsection 4153(b) of this title.
(b) The Association shall come under the immediate supervision of the Commissioner and shall be subject to the applicable provisions of the insurance laws of this State. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 1993, No. 55, § 5, eff. June 3, 1993.)
§ 4157. Board of Directors
(a) The Board of Directors of the Association shall consist of not less than five nor more than nine persons serving terms as established in the plan of operation. The members of the Board shall be selected by member insurers subject to the approval of the Commissioner. Vacancies on the Board shall be filled for the remaining period of the term in the same manner as initial appointments. At least one of the directors shall be a person who is an officer, director, or employee of an insurance company incorporated under the laws of this State; provided, however, this provision shall not apply in the event there is no member insurer incorporated under the laws of this State.
(b) In approving selections or in appointing members to the Board, the Commissioner shall consider, among other things, whether all member insurers are fairly represented.
(c) Members of the Board may be reimbursed from the assets of the Association for expenses incurred by them as members of the Board of Directors but members of the Board shall not otherwise be compensated by the Association for their services. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 2001, No. 17, § 1.)
§ 4158. Powers and duties of the Association
In addition to the powers and duties enumerated in other sections of this subchapter:
(1) If a member insurer is an impaired insurer, the Association, in its discretion and subject to any conditions imposed by the Association that do not impair the contractual obligations of the impaired insurer and that are approved by the Commissioner, may:
(A) guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, any or all of the policies or contracts of the impaired insurer; and
(B) provide such monies, pledges, loans, notes, guarantees, or other means as are proper to effectuate subdivision (A) of this subdivision (1) and ensure payment of the contractual obligations of the impaired insurer pending action under subdivision (A) of this subdivision (1).
(2) If a member insurer is an insolvent insurer, the Association, in its discretion, shall either:
(A)(i)(I) Guarantee, assume, or reinsure, or cause to be guaranteed, assumed, or reinsured, the policies or contracts of the insolvent insurer; or
(II) ensure payment of the contractual obligations of the insolvent insurer; and
(ii) Provide monies, pledges, loans, notes, guarantees, or other means reasonably necessary to discharge the Association’s duties; or
(B) Provide benefits and coverages in accordance with the following provisions:
(i) With respect to life and health insurance policies and annuities, ensure payment of benefits for premiums identical to the premiums and benefits, except for terms of conversion and renewability, that would have been payable under the policies or contracts of the insolvent insurer, for claims incurred:
(I) With respect to group policies and contracts, not later than the earlier of the next renewal date under those policies or contracts or 45 days, but in no event less than 30 days, after the date on which the Association becomes obligated with respect to the policies and contracts.
(II) With respect to nongroup policies, contracts, and annuities, not later than the earlier of the next renewal date, if any, under the policies or contracts or one year, but in no event less than 30 days, from the date on which the Association becomes obligated with respect to the policies or contracts.
(ii) Make diligent efforts to provide all known insureds or annuitants, for nongroup policies and contracts, or group policy owners with respect to group policies and contracts, 30 days’ notice of the termination, pursuant to subdivision (i) of this subdivision (B), of the benefits provided.
(iii) With respect to nongroup life and health insurance policies and annuities covered by the Association, make available to each known insured or annuitant, or owner if other than the insured or annuitant, and with respect to an individual formerly insured or formerly an annuitant under a group policy who is not eligible for replacement group coverage, make available substitute coverage on an individual basis in accordance with the provisions of subdivision (iv) of this subdivision (B), if the insureds or annuitants had a right under law or the terminated policy or annuity to convert coverage to individual coverage or to continue an individual policy or annuity in force until a specified age or for a specified time, during which the insurer had no right unilaterally to make changes in any provision of the policy or annuity or had a right only to make changes in premium by class.
(iv)(I) In providing the substitute coverage required under subdivision (iii) of this subdivision (B), the Association may offer either to reissue the terminated coverage or to issue an alternative policy.
(II) Alternative or reissued policies shall be offered without requiring evidence of insurability, and shall not provide for any waiting period or exclusion that would not have applied under the terminated policy.
(III) The Association may reinsure any alternative or reissued policy.
(v)(I) Alternative policies adopted by the Association shall be subject to the approval of the domiciliary insurance commissioner and the receivership court. The Association may adopt alternative policies of various types for future issuance without regard to any particular impairment or insolvency.
(II) Alternative policies shall contain at least the minimum statutory provisions required in this State and provide benefits that shall not be unreasonable in relation to the premium charged. The Association shall set the premium in accordance with a table of rates that it shall adopt. The premium shall reflect the amount of insurance to be provided and the age and class of risk of each insured, but shall not reflect any changes in the health of the insured after the original policy was last underwritten.
(III) Any alternative policy issued by the Association shall provide coverage of a type similar to that of the policy issued by the impaired or insolvent insurer, as determined by the Association.
(vi) If the Association elects to reissue terminated coverage at a premium rate different from that charged under the terminated policy, the premium shall be set by the Association in accordance with the amount of insurance provided and the age and class of risk, subject to approval of the domiciliary insurance commissioner and the receivership court;
(vii) The Association’s obligations with respect to coverage under any policy of the impaired or insolvent insurer or under any reissued or alternative policy shall cease on the date the coverage or policy is replaced by another similar policy by the policy owner, the insured, or the Association;
(viii) When proceeding under subdivision (B) with respect to a policy or contract carrying guaranteed minimum interest rates, the Association shall ensure the payment or crediting of a rate of interest consistent with subdivision 4153(b)(2)(C) of this title.
(3)(A) In carrying out its duties under subdivisions (1)(B) and (2) of this section, the Association may request that there be imposed policy liens, contract liens, moratoriums on payments, or other similar means, and such liens, moratoriums, or similar means may be imposed if the Commissioner:
(i) Finds that the amounts that can be assessed under this subchapter are less than the amounts needed to ensure full and prompt performance of the impaired or insolvent insurer’s contractual obligations, or that the economic or financial conditions as they affect member insurers are sufficiently adverse to render the imposition of policy or contract liens, moratoriums, or similar means to be in the public interest; and
(ii) Approves the specific policy liens, contract liens, moratoriums, or similar means to be used.
(B) Before being obligated under subdivisions (1)(B) and (2) of this section the Association may request that there be imposed temporary moratoriums or liens on payments of cash values and policy loans and such temporary moratoriums and liens may be imposed if they are approved by the Commissioner.
(4) The Association shall have no liability under this section for any covered policy of a foreign or alien insurer whose domiciliary jurisdiction or state of entry provides by statute or regulation, for residents of this State protection substantially similar to that provided by this subchapter for residents of other states.
(5) The Association may render assistance and advice to the Commissioner, upon the Commissioner’s request, concerning rehabilitation, payment of claims, continuations of coverage, or the performance of other contractual obligations of any impaired or insolvent insurer.
(6) The Association shall have standing to appear before any court in this State with jurisdiction over an impaired or insolvent insurer concerning which the Association is or may become obligated under this subchapter. Such standing shall extend to all matters germane to the powers and duties of the Association.
(7)(A) Any person receiving benefits under this subchapter shall be deemed to have assigned the person’s rights under the covered policy to the Association to the extent of the benefits received because of this subchapter whether the benefits are payments of contractual obligations or continuation of coverage. The Association may require an assignment to it of such rights by any payee, policy or contract owner, beneficiary, insured, or annuitant as a condition precedent to the receipt of any rights or benefits conferred by this subchapter upon such person. The Association shall be subrogated to these rights against the assets of any impaired or insolvent insurer.
(B) The subrogation rights of the Association under this subdivision shall have the same priority against the assets of the impaired or insolvent insurer as that possessed by the person entitled to receive benefits under this subchapter.
(8) The benefits for which the Association may become liable shall in no event exceed the lesser of:
(A) the contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or
(B)(i) with respect to any one life, regardless of the number of policies or contracts:
(I) $300,000.00 in life insurance death benefits, but not more than $100,000.00 in net cash surrender and net cash withdrawal values for life insurance;
(II) in health insurance benefits:
(aa) $100,000.00 for coverages not defined as disability insurance or basic hospital, medical, and surgical insurance, or major medical insurance, or long-term care insurance, including any net cash surrender and net cash withdrawal values;
(bb) $300,000.00 for disability insurance and $300,000.00 for long-term care insurance;
(cc) $500,000.00 for basic hospital, medical, and surgical insurance, or major medical insurance; or
(III) $250,000.00 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; or
(ii) with respect to each individual participating in a governmental retirement plan established under Section 401, 403(b), or 457 of the U.S. Internal Revenue Code covered by an unallocated annuity contract or the beneficiaries of each such individual if deceased, in the aggregate, $250,000.00 in present value annuity benefits, including net cash surrender and net cash withdrawal values; or
(iii) with respect to each payee of a structured settlement annuity (or beneficiary or beneficiaries of the payee if deceased) for which coverage is provided under subdivision 4153(a)(3) of this title, $250,000.00 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any; or
(iv) with respect to any one contract holder covered by any unallocated annuity contract not included in subdivision (B)(ii) of this subdivision (8), $5,000,000.00 in benefits, irrespective of the number of such contracts held by that contract holder; and
(v) provided, however, that in no event shall the Association be liable to expend more than $300,000.00 in the aggregate with respect to any one individual under subdivisions (B)(i)(I), (B)(i)(II)(aa) and (bb), (B)(i)(III), (B)(ii), and (B)(iii) of this subdivision (8); and provided further, however, that in no event shall the Association be liable to expend more than $500,000.00 in the aggregate with respect to any one individual under subdivision (B)(i)(II)(cc) of this subdivision (8).
(9) The Association may:
(A) Enter into such contracts as are necessary or proper to carry out the provisions and purposes of this subchapter.
(B) Sue or be sued, including taking any legal actions necessary or proper for recovery of any unpaid assessments under section 4159 of this title.
(C) Borrow money to effect the purposes of this subchapter. Any notes or other evidence of indebtedness of the Association not in default shall be legal investments for domestic insurers and may be carried as admitted assets.
(D) Employ or retain such persons as are necessary to handle the financial transactions of the Association, and to perform such other functions as become necessary or proper under this subchapter.
(E) Negotiate and contract with any liquidator, rehabilitator, conservator, or ancillary receiver to carry out the powers and duties of the Association.
(F) Take such legal action as may be necessary to avoid payment of improper claims.
(G) Exercise, for the purposes of this subchapter and to the extent approved by the Commissioner, the powers of a domestic life or health insurer, but in no case may the Association issue insurance policies or annuity contracts other than those issued to perform the contractual obligations of the impaired or insolvent insurer.
(10)(A)(i) At any time within 180 days after the date of the order of liquidation, the Association may elect to succeed to the rights and obligations of the ceding member insurer that relate to policies or annuities covered, in whole or in part, by the Association, in each case under any one or more reinsurance contracts entered into by the insolvent insurer and its reinsurers and selected by the Association. Any such assumption shall be effective as of the date of the order of liquidation. The election shall be effected by the Association or the National Organization of Life and Health Insurance Guaranty Associations (NOLHGA) on its behalf sending written notice, return receipt requested, to the affected reinsurers.
(ii) To facilitate the earliest practicable decision about whether to assume any of the contracts of reinsurance, and in order to protect the financial position of the estate, the receiver, and each reinsurer of the ceding member insurer shall make available upon request to the Association or to NOLHGA on its behalf as soon as possible after commencement of formal delinquency proceedings: copies of in-force contracts of reinsurance and all related files and records relevant to the determination of whether such contracts should be assumed; and notices of any defaults under the reinsurance contacts or any known event or condition which with the passage of time could become a default under the reinsurance contracts.
(iii) The following subdivisions (I) through (IV) shall apply to reinsurance contracts so assumed by the Association:
(I) The Association shall be responsible for all unpaid premiums due under the reinsurance contracts for periods both before and after the date of the order of liquidation, and shall be responsible for the performance of all other obligations to be performed after the date of the order of liquidation, in each case which relate to policies or annuities covered, in whole or in part, by the Association. The Association may charge policies or annuities covered in part by the Association, through reasonable allocation methods, the costs for reinsurance in excess of the obligations of the Association and shall provide notice and an accounting of these charges to the receiver.
(II) The Association shall be entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods after the date of the order of liquidation and that relate to policies or annuities covered, in whole or in part, by the Association, provided that, upon receipt of any such amounts, the Association shall be obliged to pay to the beneficiary under the policy or annuity on account of which the amounts were paid a portion of the amount equal to the lesser of:
(aa) The amount received by the Association; and
(bb) The excess of the amount received by the Association over the amount equal to the benefits paid by the Association on account of the policy or annuity less the retention of the insurer applicable to the loss or event.
(III) Within 30 days following the Association’s election (the “election date”), the Association and each reinsurer under contracts assumed by the Association shall calculate the net balance due to or from the Association under each reinsurance contract as of the election date with respect to policies or annuities covered, in whole or in part, by the Association, which calculation shall give full credit to all items paid by either the insurer or its receiver or the reinsurer prior to the election date. The reinsurer shall pay the receiver any amounts due for losses or events prior to the date of the order of liquidation, subject to any set-off for premiums unpaid for periods prior to the date, and the Association or reinsurer shall pay any remaining balance due the other, in each case within five days of the completion of the aforementioned calculation. Any disputes over the amounts due to either the Association or the reinsurer shall be resolved by arbitration pursuant to the terms of the affected reinsurance contracts or, if the contract contains no arbitration clause, as otherwise provided by law. If the receiver has received any amounts due the Association pursuant to subdivision (iii)(II) of this subdivision (A), the receiver shall remit the same to the Association as promptly as practicable.
(IV) If the Association or receiver, on the Association’s behalf, within 60 days of the election date, pays the unpaid premiums due for periods both before and after the election date that relate to policies or annuities covered, in whole or in part, by the Association, the reinsurer shall not be entitled to terminate the reinsurance contracts for failure to pay premium insofar as the reinsurance contracts relate to policies or annuities covered, in whole or in part, by the Association, and shall not be entitled to set off any unpaid amounts due under other contracts, or unpaid amounts due from parties other than the Association, against amounts due the Association.
(B) During the period from the date of the order of liquidation until the election date (or, if the election date does not occur, until 180 days after the date of the order of liquidation):
(i)(I) Neither the Association nor the reinsurer shall have any rights or obligations under reinsurance contracts that the Association has the right to assume under subdivision (A) of this subdivision (10), whether for periods prior to or after the date of the order of liquidation; and
(II) The reinsurer, the receiver, and the Association shall, to the extent practicable, provide each other data and records reasonably requested;
(ii) Provided that once the Association has elected to assume a reinsurance contract, the parties’ rights and obligations shall be governed by subdivision (A) of this subdivision (10).
(C) If the Association does not elect to assume a reinsurance contract by the election date pursuant to subdivision (A) of this subdivision (10), the Association shall have no rights or obligations, in each case for periods both before and after the date of the order of liquidation, with respect to the reinsurance contract.
(D) When policies or annuities, or covered obligations with respect to those policies or annuities, are transferred to an assuming insurer, reinsurance on the policies or annuities may also be transferred by the Association, in the case of contracts assumed under subdivision (A) of this subdivision (10), subject to the following:
(i) Unless the reinsurer and the assuming insurer agree otherwise, the reinsurance contract transferred shall not cover any new policies of insurance or annuities in addition to those transferred;
(ii) The obligations described in subdivision (A) of this subdivision (10) shall no longer apply with respect to matters arising after the effective date of the transfer; and
(iii) Notice shall be given in writing, return receipt requested, by the transferring party to the affected reinsurer not less than 30 days prior to the effective date of the transfer.
(E) The provisions of this subdivision (10) shall supersede the provisions of any law or of any affected reinsurance contract that provides for or requires any payment of reinsurance proceeds, on account of losses or events that occur in periods after the date of the order of liquidation, to the receiver of the insolvent insurer or any other person. The receiver shall remain entitled to any amounts payable by the reinsurer under the reinsurance contracts with respect to losses or events that occur in periods prior to the date of the order of liquidation, subject to applicable setoff provisions.
(F) Except as otherwise provided in this section, nothing in this subdivision (10) shall alter or modify the terms and conditions of any reinsurance contract. Nothing in this section shall abrogate or limit any rights of any reinsurer to claim that it is entitled to rescind a reinsurance contract. Nothing in this section shall give a policyholder or beneficiary an independent cause of action against a reinsurer that is not otherwise set forth in the reinsurance contract. Nothing in this section shall limit or affect the Association’s rights as a creditor of the estate against the assets of the estate. Nothing in this section shall apply to reinsurance agreements covering property or casualty risks. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 1993, No. 55, § 6, eff. June 3, 1993; 2009, No. 42, § 16, eff. May 27, 2009; 2009, No. 137 (Adj. Sess.), §§ 7d, 7e, eff. May 29, 2010; 2015, No. 97 (Adj. Sess.), § 17; 2021, No. 105 (Adj. Sess.), § 161, eff. July 1, 2022.)
§ 4159. Assessments
(a) For the purpose of providing the funds necessary to carry out the powers and duties of the Association, the Board of Directors shall assess the member insurers, separately for each account, at such times and for such amounts as the Board finds necessary. The Board shall collect the assessment after 30 days written notice to the member insurers before payment is due.
(b) There shall be three classes of assessments, as follows:
(1) Class A assessments shall be made for the purpose of meeting administrative costs and other general expenses not related to a particular impaired or insolvent insurer.
(2) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the Association under section 4158 of this title with regard to an impaired or insolvent domestic insurer.
(3) Class C assessments shall be made to the extent necessary to carry out the powers and duties of the Association under section 4158 of this title with regard to an impaired or insolvent foreign or alien insurer.
(c)(1) The amount of any Class A assessment for each account shall be determined by the Board. The amount of any Class B or C assessment shall be divided among the accounts in the proportion that the premiums received by the impaired or insolvent insurer on the policies covered by each account bears to the premiums received by such insurer on all covered policies.
(2) Class A and Class C assessments against member insurers for each account shall be in the proportion that the premiums received on business in this State by each assessed member insurer on policies covered by each account bears to such premiums received on business in this State by all assessed member insurers.
(3) Class B assessments for each account shall be made separately for each state in which the impaired or insolvent domestic insurer was authorized to transact insurance at any time, in the proportion that the premiums received on business in such state by the impaired or insolvent insurer on policies covered by such account bears to such premiums received in all such states by the impaired or insolvent insurer. The assessments against member insurers shall be in the proportion that the premiums received on business in each such state by each assessed member insurer on policies covered by each account bears to such premiums received on business in each such state by all assessed member insurers.
(4) Assessments for funds to meet the requirements of the Association with respect to an impaired or insolvent insurer shall not be made until necessary to implement the purposes of this subchapter. Classification of assessments under subdivision (2) of this subsection and computation of assessments under this subdivision shall be made with a reasonable degree of accuracy, recognizing that exact determinations may not always be possible.
(d) The Association may abate or defer, in whole or in part, the assessment of a member insurer if, in the opinion of the Board, payment of the assessment would endanger the ability of the member insurer to fulfill its contractual obligations. The total of all assessments upon a member insurer for each account shall not in any one calendar year exceed two percent of such insurer’s premiums in this State on the policies covered by the account.
(e)(1) In the event an assessment against a member insurer is abated or deferred, in whole or in part, because of the limitations set forth in subsection (d) of this section, the amount by which such assessment is abated or deferred may be assessed against the other member insurers in a manner consistent with the basis for assessments set forth in this section. If the maximum assessment, together with the other assets of the Association in any account, does not provide in any one year in any account an amount sufficient to carry out the responsibilities of the Association, the necessary additional funds shall be assessed as soon thereafter as permitted by this subchapter.
(2) The Board may provide in the plan of operation a method of allocating funds among claims, whether relating to one or more impaired or insolvent insurers, when the maximum assessment will be insufficient to cover anticipated claims.
(f) The Board may, by an equitable method as established in the plan of operation, refund to member insurers, in proportion to the contribution of each member insurer to that account, the amount by which the assets of the account exceed the amount the Board finds is necessary to carry out during the coming year the obligations of the Association with regard to that account, including assets accruing from net realized gains and income from investments. A reasonable amount may be retained in any account to provide funds for the continuing expenses of the Association and for future losses if refunds are impractical. In lieu of sending a refund directly to a member insurer, the Board may, in its discretion, pay all or any portion of the refund to the Commissioner of Taxes, who shall apply the payment to the insurer’s obligation to repay the amount of any insurance premium taxes previously offset by the insurer pursuant to subsection 4167(b) of this title. To effectuate this payment, the Commissioner of Taxes is specifically authorized to disclose to the Association and to the Commissioner of Financial Regulation the amount of insurance premium taxes offset by the insurer.
(g) The Association shall issue to each insurer paying an assessment under this subchapter a certificate of contribution, in a form prescribed by the Commissioner, for the amount so paid. All outstanding certificates shall be of equal dignity and priority without reference to amounts or dates of issue. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 1989, No. 222 (Adj. Sess.), § 2, eff. May 31, 1990; 1989, No. 225 (Adj. Sess.), § 25; 1993, No. 55, § 7, eff. June 3, 1993; 1995, No. 180 (Adj. Sess.), § 38; 2009, No. 137 (Adj. Sess.), § 7e, eff. May 29, 2010; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)
§ 4160. Plan of operation
(a)(1) The Association shall submit to the Commissioner a plan of operation and any amendments to the plan necessary or suitable to ensure the fair, reasonable, and equitable administration of the Association. The plan of operation and any amendments to the plan shall become effective upon approval in writing by the Commissioner.
(2) If the Association fails to submit a suitable plan of operation within 180 days following April 27, 1972 or if at any time thereafter the Association fails to submit suitable amendments to the plan, the Commissioner shall, after notice and hearing, adopt such reasonable rules as are necessary or advisable to effectuate the provisions of this subchapter. Such rules shall continue in force until modified by the Commissioner or superseded by a plan submitted by the Association and approved by the Commissioner.
(b) All member insurers shall comply with the plan of operation.
(c) The plan of operation shall, in addition to requirements enumerated elsewhere in this subchapter:
(1) Establish procedures for handling the assets of the Association.
(2) Establish the amount and method of reimbursing members of the Board of Directors under section 4157 of this title.
(3) Establish regular places and times for meetings of the Board of Directors.
(4) Establish procedures for records to be kept of all financial transactions of the Association, its agents, and the Board of Directors.
(5) Establish the procedures whereby selections for the Board of Directors will be made and submitted to the Commissioner.
(6) Establish any additional procedures for assessments under section 4159 of this title.
(7) Contain additional provisions necessary or proper for the execution of the powers and duties of the Association.
(d) The plan of operation may provide that any or all powers and duties of the Association, except those under subdivision 4158(9)(C) and section 4159 of this title, are delegated to a corporation, association, or other organization which performs or will perform functions similar to those of this Association, or its equivalent in two or more states. Such a corporation, association, or organization shall be reimbursed for any payments made on behalf of the Association and shall be paid for its performance of any function of the association. A delegation under this subsection shall take effect only with the approval of both the Board of Directors and the Commissioner, and may be made only to a corporation, association, or organization which extends protection not substantially less favorable and effective than that provided by this subchapter. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 2015, No. 23, § 83; 2021, No. 105 (Adj. Sess.), § 162, eff. July 1, 2022.)
§ 4161. Duties and powers of the Commissioner
In addition to the duties and powers enumerated elsewhere in this subchapter,
(1) The Commissioner shall:
(A) Notify the Board of Directors of the existence of an impaired or insolvent insurer not later than three days after a determination of impairment or insolvency is made or he or she receives notice of impairment or insolvency.
(B) Permit the Association to examine such records in his or her office as are necessary to obtain a statement of the premiums in the appropriate states for each member insurer.
(C) When an impairment or insolvency is declared and the amount of the impairment or insolvency is determined, serve a demand upon the impaired or insolvent insurer to make good the impairment or insolvency within a reasonable time. Notice to the impaired or insolvent insurer shall constitute notice to its shareholders, if any. The failure of the insurer to promptly comply with such demand shall not excuse the Association from the performance of its powers and duties under this subchapter.
(D) In any liquidation or rehabilitation proceeding involving a domestic insurer, be appointed as the liquidator or rehabilitator. If a foreign or alien member insurer is subject to a liquidation proceeding in its domiciliary jurisdiction or state of entry, the Commissioner shall be appointed conservator.
(2) The Commissioner may suspend or revoke, after notice and hearing, the certificate of authority to transact insurance in this State of any member insurer which fails to pay an assessment when due or fails to comply with the plan of operation. As an alternative, the Commissioner may levy a forfeiture on any member insurer which fails to pay an assessment when due. Such forfeiture shall not exceed five percent of the unpaid assessment per month, but no forfeiture shall be less than $500.00 per month.
(3) Any action of the Board of Directors or the Association may be appealed to the Commissioner by any member insurer if such appeal is taken within 30 days of the action being appealed. Any final action or order of the Commissioner shall be subject to judicial review in the Supreme Court.
(4) The liquidator, rehabilitator, or conservator of any impaired or insolvent insurer may notify all interested persons of the effect of this subchapter. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 1995, No. 167 (Adj. Sess.), § 12; 1997, No. 161 (Adj. Sess.), § 7, eff. Jan. 1, 1998; 2009, No. 137 (Adj. Sess.), § 7e, eff. May 29, 2010.)
§ 4162. Prevention of impairment or insolvency
To aid in the detection and prevention of insurer impairment or insolvency:
(1) The Board of Directors shall, upon majority vote, notify the Commissioner of any information indicating any member insurer may be unable or potentially unable to fulfill its contractual obligations.
(2) The Board of Directors may, upon majority vote, request that the Commissioner order an examination of any member insurer which the Board in good faith believes may be unable or potentially unable to fulfill its contractual obligations. The Commissioner may conduct such examination. The examination may be conducted as a National Association of Insurance Commissioners examination or may be conducted by such persons as the Commissioner designates. The cost of such examination shall be paid by the Association and the examination report shall be treated as are other examination reports. In no event shall such examination report be released to the Board of Directors of the Association prior to its release to the public, but this shall not excuse the Commissioner from his or her obligation to comply with subdivision (3) of this section. The Commissioner shall notify the Board of Directors when the examination is completed. The request for an examination shall be kept on file by the Commissioner but it shall not be open to public inspection prior to the release of the examination report to the public and shall be released at that time only if the examination discloses that the examined insurer is unable or potentially unable to meet its contractual obligations.
(3) The Commissioner shall report to the Board of Directors when he or she has reasonable cause to believe that any member insurer examined at the request of the Board of Directors may be unable or potentially unable to fulfill its contractual obligations.
(4) The Board of Directors may, upon majority vote, make reports and recommendations to the Commissioner upon any matter germane to the solvency, liquidation, rehabilitation, or conservation of any member insurer. Such reports and recommendations shall not be considered public documents.
(5) The Board of Directors may, upon majority vote, make recommendations to the Commissioner for the detection and prevention of insurer impairment or insolvency.
(6) The Board of Directors shall, at the conclusion of any insurer impairment or insolvency in which the Association carried out its duties under this subchapter or exercised any of its powers under this subchapter, prepare a report on the history and causes of such impairment or insolvency, based on the information available to the Association, and submit such report to the Commissioner. (Added 1971, No. 170 (Adj. Sess.), § 2, April 27, 1972; amended 2009, No. 137 (Adj. Sess.), § 7e, eff. May 29, 2010.)
§ 4163. Appointment of special deputy
The Commissioner may appoint a person to serve, at the expense of the Association, as a special deputy to act for and under his or her supervision in the liquidation, rehabilitation, or conservation of any member insurer. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972.)
§ 4164. Miscellaneous provisions
(a) Nothing in this subchapter shall be construed to reduce the liability for unpaid assessments of the insureds of an impaired or insolvent insurer operating under a plan with assessment liability.
(b) Records shall be kept of all negotiations and meetings in which the Association or its representatives are involved to discuss the activities of the Association in carrying out its powers and duties under section 4158 of this title. Records of such negotiations or meetings shall be made public only upon the termination of a liquidation, rehabilitation, or conservation proceeding involving the impaired or insolvent insurer, upon the termination of the impairment or insolvency of the insurer, or upon the order of a court of competent jurisdiction. Nothing in this subsection shall limit the duty of the Association to render a report of its activities under section 4165 of this title.
(c) For the purpose of carrying out its obligations under this subchapter, the Association shall be deemed to be a creditor of the impaired or insolvent insurer to the extent of assets attributable to covered policies reduced by any amounts to which the Association is entitled as subrogee pursuant to subdivision 4158(7) of this title. All assets of the impaired or insolvent insurer attributable to covered policies shall be used to continue all covered policies and pay all contractual obligations of the impaired or insolvent insurer as required by this subchapter. Assets attributable to covered policies, as used in this subsection, is that proportion of the assets which the reserves that should have been established for such policies bear to the reserves that should have been established for all policies of insurance written by the impaired or insolvent insurer.
(d)(1) Prior to the termination of any liquidation, rehabilitation, or conservation proceeding, the Court may take into consideration the contributions of the respective parties, including the Association, the shareholders and policyowners of the impaired or insolvent insurer, and any other party with a bona fide interest, in making an equitable distribution of the ownership rights of such impaired or insolvent insurer. In such a determination, consideration shall be the welfare of the policyholders of the continuing or successor insurer.
(2) No distribution to stockholders, if any, of an impaired or insolvent insurer shall be made until and unless the total amount of assessments levied by the Association with respect to such insurer have been fully recovered by the Association.
(e) No person shall make use in any manner of the protection afforded by this subchapter as a reason for buying insurance from him or her and the license of any person violating this provision may be revoked by the Commissioner.
(f)(1) If an order for liquidation or rehabilitation of an insurer domiciled in this State has been entered, the receiver appointed under such order shall have a right to recover on behalf of the insurer from any affiliate that controlled it the amount of distributions, other than stock dividends paid by the insurer on its capital stock, at any time during the five years preceding the petition for liquidation or rehabilitation subject to the limitations of subdivisions (2)-(4) of this subsection.
(2) No such distribution shall be recoverable if the insurer shows that when paid the distribution was lawful and reasonable, and that the insurer did not know and could not reasonably have known that the distribution might adversely affect the ability of the insurer to fulfill its contractual obligations.
(3) Any person who was an affiliate that controlled the insurer at the time the distributions were paid shall be liable up to the amount of distributions he or she received. Any person who was an affiliate that controlled the insurer at the time the distributions were declared shall be liable up to the amount of distributions he or she would have received if they had been paid immediately. If two persons are liable with respect to the same distributions they shall be jointly and severally liable.
(4) The maximum amount recoverable under this subsection shall be the amount needed in excess of all other available assets to pay the contractual obligations of the impaired or insolvent insurer.
(5) If any person liable under subdivision (3) of this subsection is insolvent, all its affiliates that controlled it at the time the dividend was paid shall be jointly and severally liable for any resulting deficiency in the amount recovered from the insolvent affiliate. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 1993, No. 55, § 8, eff. June 3, 1993; 2009, No. 137 (Adj. Sess.), § 7e, eff. May 29, 2010.)
§ 4165. Examination of the Association; annual report
The Association shall be subject to examination and regulation by the Commissioner. The Board of Directors shall submit to the Commissioner, not later than May 1 of each year, a financial report for the preceding calendar year in a form approved by the Commissioner and a report of its activities during the preceding calendar year. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972.)
§ 4166. Tax exemptions
The Association shall be exempt from payment of all fees and all taxes levied by this State or any of its subdivisions, except taxes levied on real property. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972.)
§ 4167. Tax write-offs of certificates of contribution
(a) Unless a longer period has been allowed by the Commissioner, a member insurer shall at its option have the right to show a certificate of contribution as an asset in the form approved by the Commissioner pursuant to subsection 4159(g) of this title, at percentages of the original face amount approved by the Commissioner, for calendar years as follows:
(1) 100 percent for the calendar year of issuance;
(2) 80 percent for the first calendar year after the year of issuance;
(3) 60 percent for the second calendar year after the year of issuance;
(4) 40 percent for the third calendar year after the year of issuance;
(5) 20 percent for the fourth calendar year after the year of issuance;
(6) 0 percent for the fifth calendar year after the year of issuance and thereafter.
(b) The insurer may offset the amount written off by it in a calendar year under subsection (a) of this section, against its premium tax liability to this State accrued with respect to business transacted in such year.
(c) Any sums acquired by refund, pursuant to subsection 4159(f) of this title, from the Association that have been written off by contributing insurers and offset against premium taxes as provided in subsection (b) of this section, and are not then needed for purposes of this subchapter, shall be paid by the insurer to the Commissioner, who shall deposit them with the State Treasurer for credit to the General Fund. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 2021, No. 105 (Adj. Sess.), § 163, eff. July 1, 2022.)
§ 4168. Immunity
There shall be no liability on the part of and no cause of action of any nature shall arise against any member insurer or its agents or employees, the Association or its agents or employees, members of the Board of Directors, or the Commissioner or his or her representatives for any action taken by them in the performance of their powers and duties under this chapter. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972.)
§ 4169. Stay of proceedings; reopening default judgments
All proceedings in which the impaired or insolvent insurer is a party in any court in this State shall be stayed 60 days from the date an order of liquidation, rehabilitation, or conservation is final to permit proper legal action by the Association on any matters germane to its powers or duties. As to a judgment under any decision, order, verdict, or finding based on the default, the Association may apply to have such judgment set aside by the same court that made such judgment and shall be permitted to defend against such suit on the merits. (Added 1971, No. 170 (Adj. Sess.), § 2, eff. April 27, 1972; amended 2009, No. 137 (Adj. Sess.), § 7e, eff. May 29, 2010.)
- Subchapter 002: HEALTH MAINTENANCE ORGANIZATION GUARANTY ASSOCIATION
§ 4181. Purpose; creation of Association; coverage
(a) The purpose of this subchapter is to protect members of health care plans who reside in this State, and their beneficiaries, payees, and assignees against failure in the performance of contractual obligations due to the impairment or insolvency of the health maintenance organization operating such health care plans. Nonresident members of such health care plans shall be protected by this Association if:
(1) they reside in states which have associations similar to the Association created by this subchapter;
(2) they are not eligible for coverage by such association;
(3) the organization which operated such health care plan never held a license or certificate of authority in such states; and
(4) such organization was domiciled in this State.
(b) In order to provide the protection intended by this subchapter:
(1) an association of health maintenance organizations is created to enable the guaranty of payment of benefits and of continuation of coverages;
(2) members of the Association are subject to assessment to provide funds to carry out the purpose of this subchapter; and
(3) the Association is authorized to assist the Commissioner, in the prescribed manner, in the detection and prevention of health maintenance organization impairments and insolvencies.
(c) This subchapter shall provide coverage to the persons specified in subsection (a) of this section for direct individual contract, group contracts and certificates issued under such contracts, or any other evidence of coverage, each of which provides coverage under a health care plan, and has been issued by any organization holding a certificate of authority under chapter 139 of this title, but not for any business of such organization not transacted under its certificate of authority as a health maintenance organization. (Added 1993, No. 30, § 15, eff. May 21, 1993.)
§ 4182. Construction
This subchapter shall be liberally construed to effect its purposes under section 4181 of this title, which shall constitute an aid and guide to interpretation. (Added 1993, No. 30, § 15, eff. May 21, 1993.)
§ 4183. Definitions
As defined in this subchapter:
(1) “Association” means the Vermont Health Maintenance Organization Guaranty Association created under this subchapter.
(2) “Commissioner” means the Commissioner of Financial Regulation of this State.
(3) “Contractual obligation” means any obligation under covered health care plan certificates.
(4) “Covered person” means any member or person who is entitled to the protection of the Association as described in section 4181 of this title.
(5) “Covered health care plan certificate” means any health care plan certificate, contract, or other evidence of coverage within the scope of this subchapter.
(6) “Fund” means the Fund created under section 4184 of this title.
(7) “Impaired organization” means a member organization deemed by the Commissioner after May 21, 1993 to be unable or potentially unable to fulfill its contractual obligations, and not an insolvent organization.
(8) “Insolvent organization” means a member organization which becomes insolvent and is placed under a final order of liquidation or rehabilitation by a court of competent jurisdiction.
(9) “Member organization” means any person who holds a certificate of authority under chapter 139 of this title, and includes any person whose certificate of authority has been suspended, revoked, or nonrenewed.
(10) “Premiums” means direct gross premiums or subscriptions received on covered health care plan certificates.
(11) “Person” means any individual, corporation, partnership, association, or voluntary organization.
(12) “Resident” means any person who resides in this State at the time the organization is determined to be impaired or insolvent and to whom contractual obligations are owed. A person may be a resident of only one state. In the case of a person other than a natural person, residence shall be its principal place of business. (Added 1993, No. 30, § 15, eff. May 21, 1993; amended 1995, No. 180 (Adj. Sess.), § 38; 2011, No. 78 (Adj. Sess.), § 2, eff. April 2, 2012.)
§ 4184. Creation of the Health Maintenance Organization Guaranty Association
Upon a finding by the Commissioner that the interests of members would be best served by the establishment of a Health Maintenance Organization Guaranty Association, the Commissioner shall order all organizations holding a certificate of authority under chapter 139 of this title to establish a nonprofit legal entity to be known as the Vermont Health Maintenance Organization Guaranty Association. All member organizations shall be and must remain members of the Association as a condition of the authority to transact business in this State. The Association shall perform its functions under the plan of operation approved by the Commissioner and shall exercise its powers through a Board of Directors. For purposes of administration and assessment, the Association must maintain the Vermont Health Maintenance Organization Guaranty Association Fund. The Association shall be supervised by the Commissioner and is subject to the provisions of this subchapter and the provisions of subchapter 1 of this chapter as further set forth in section 4185 of this title. (Added 1993, No. 30, § 15, eff. May 21, 1993.)
§ 4185. Application of subchapter 1 to the Vermont Health Maintenance Organization Guaranty Association; maximum benefits
(a) Sections 4157, 4158, 4159, 4160, 4161, 4162, 4163, 4164, 4165, 4168, and 4169 of this title shall govern and apply to the Association established under this subchapter except as otherwise provided in this subchapter.
(b) Sections 4166 and 4167 of this title shall not apply to the Association established under this subchapter.
(c)(1) Benefits for which the Association may become liable shall in no event exceed the lesser of:
(A) the contractual obligations for which the Health Maintenance Organization is liable or would have been liable if it were not impaired or insolvent; or
(B) $300,000.00 with respect to any one natural person.
(2) In no event shall the Association be required to pay any provider participating in the insolvent organization any amount for in-plan services rendered by such provider prior to the insolvency of the organization in excess of:
(A) the amount provided by a contract between a physician provider and the insolvent organization for such services; or
(B) the amounts provided by contract between a hospital provider and the Department of Vermont Health Access for similar services to recipients of Medicaid; or
(C) in the event neither subdivision (A) nor (B) of this subdivision (2) is applicable, then the amounts paid under the Medicare area prevailing rate for the area where the services were provided, or if no such rate exists with respect to such services, then 80 percent of the usual and customary rates established by the Health Insurance Association of America or any successor organization that calculates the usual and customary rates for medical services and procedures. The payments required to be made by the Association under this subsection shall constitute full and complete payment of such provider services for the member. (Added 1993, No. 30, § 15, eff. May 21, 1993; amended 1999, No. 147 (Adj. Sess.), § 4; 2005, No. 174 (Adj. Sess.), § 11; 2009, No. 156 (Adj. Sess.), § I.14.)
