BILL REQ. #:  Z-0831.2 

Read first time 01/19/2004.   Referred to Committee on Financial Services, Insurance & Housing.

     AN ACT Relating to insurance; amending RCW 48.02.180, 48.05.340, 48.11.100, 48.11.140, 48.18.430, 48.21.047, 48.23.010, 48.24.030, 48.29.010, 48.29.020, 48.29.120, 48.29.130, 48.29.170, 48.30.300, 48.30A.045, 48.30A.060, 48.30A.065, 48.31.100, 48.38.030, 48.44.240, 48.66.020, 48.66.055, 48.92.120, and 48.98.015; adding a new section to chapter 48.66 RCW; and repealing RCW 48.05.360, 48.29.030, 48.29.060, 48.29.070, 48.29.090, 48.29.100, 48.29.110, and 48.34.910.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

Sec. 1   RCW 48.02.180 and 1981 c 339 s 1 are each amended to read as follows:
     (1) ((In addition to such publications as are otherwise authorized under this code,)) The commissioner may ((from time to time)) periodically prepare and publish:
     (a) ((Booklets containing the insurance code, or supplements thereto, and such related statutes as the commissioner deems suitable and useful for inclusion in an appendix of such booklet or supplement.)) Title 48 RCW, Title 284 WAC, insurance bulletins and technical assistance advisories, and other laws or regulations relevant to the regulation of insurance;
     (b) Manuals and other material ((relative)) relating to examinations for ((licensing as provided in chapter 48.17 RCW)) licensure; and
     (c) Any other publications authorized under Title 48 RCW.
     (2) The commissioner may ((furnish)) provide copies of the ((insurance code, supplements thereto, and related statutes)) publications referred to in subsection (1)(a) of this section free of charge to:
     (a) Public offices and officers in this state ((concerned therewith, to));
     (b) Public officials of other states and jurisdictions ((having supervision of)) that regulate insurance((, to));
     (c) The library of congress((,)); and ((to))
     (d) Officers of the armed forces of the United States of America located at military installations in this state who are concerned with insurance transactions at or involving ((such)) the military installations.
     (3) Except as provided in subsection (2) of this section, the commissioner shall sell ((copies of the insurance code, supplements thereto, examination manuals, and materials as)) the publications referred to in subsection (1) of this section((, at)). The commissioner may charge a reasonable price((, fixed by the commissioner, in amount)) that is not less than the cost of publication, handling, and distribution ((thereof)). The commissioner ((shall)) must promptly deposit all funds received ((by him pursuant to)) under this subsection with the state treasurer to the credit of the general fund. For appropriation purposes, ((such)) the funds received and deposited by the commissioner ((shall)) must be treated as a recovery of a previous expenditure.

Sec. 2   RCW 48.05.340 and 1995 c 83 s 14 are each amended to read as follows:
     (1) Subject to RCW 48.05.350 ((and 48.05.360)) to qualify for authority to transact any one kind of insurance as defined in chapter 48.11 RCW or combination of kinds of insurance as ((shown below)) set forth in this subsection, a foreign or alien insurer, whether stock or mutual, or a domestic insurer ((hereafter)) formed ((shall)) after the effective date of this section must possess unimpaired paid-in capital stock, if a stock insurer, or unimpaired surplus if a mutual insurer, and additional funds in surplus, as follows, and ((shall)) must thereafter maintain unimpaired a combined total of: (a) The paid-in capital stock if a stock insurer or surplus if a mutual insurer, plus (b) ((such)) additional funds in surplus equal to the total of the following initial requirements:

Sec. 3   RCW 48.11.100 and 1947 c 79 s .11.10 are each amended to read as follows:
     "Title insurance" is insurance of owners of real property or others having an interest ((therein)) in real property, against loss by encumbrance, or defective titles, or adverse claim to title, and associated services ((connected therewith)).

Sec. 4   RCW 48.11.140 and 1993 c 462 s 53 are each amended to read as follows:
     (1) ((No)) An insurer ((shall)) may not retain any risk on any one subject of insurance, whether located or to be performed in this state or elsewhere, in an amount exceeding ten percent of its surplus to policyholders.
     (2) For the purposes of this section, a "subject of insurance" as to insurance against fire includes all properties insured by the same insurer ((which)) that are reasonably subject to loss or damage from the same fire.
     (3) Reinsurance in an alien reinsurer not qualified under RCW ((48.05.300)) 48.12.166 may not be deducted in determining risk retained for the purposes of this section.
     (4) In the case of surety insurance, the net retention shall be computed after deduction of reinsurances, the amount assumed by any co-surety, the value of any security deposited, pledged, or held subject to the consent of the surety and for the protection of the surety.
     (5) This section does not apply to life insurance, disability insurance, title insurance, or insurance of marine risks or marine protection and indemnity risks.

Sec. 5   RCW 48.18.430 and 1949 c 190 s 25 are each amended to read as follows:
     (1) The benefits, rights, privileges, and options ((which)) under any annuity contract ((heretofore or hereafter issued are due or prospectively)) that are due the annuitant who paid the consideration for the annuity contract((, shall not be)) are not subject to execution ((nor shall)) and the annuitant may not be compelled to exercise ((any such)) those rights, powers, or options, ((nor shall)) and creditors ((be)) are not allowed to interfere with or terminate the contract, except:
     (a) As to amounts paid for or as premium on ((any such)) an annuity with intent to defraud creditors, with interest thereon, and of which the creditor has given the insurer written notice at its home office prior to ((the)) making ((of)) the payments to the annuitant out of which the creditor seeks to recover. ((Any such)) The notice ((shall)) must specify the amount claimed or ((such)) the facts ((as)) that will enable the insurer to ((ascertain such)) determine the amount, and ((shall)) must set forth ((such)) the facts ((as)) that will enable the insurer to ((ascertain)) determine the insurance or annuity contract, the person insured or annuitant and the payments sought to be avoided on the ((ground)) basis of fraud.
     (b) The total exemption of benefits presently due and payable to ((any)) an annuitant periodically or at stated times under all annuity contracts ((under which he is an annuitant, shall)) may not at any time exceed two thousand five hundred ((and fifty)) dollars per month for the length of time represented by ((such)) the installments, and ((that such)) a periodic payment in excess of two thousand five hundred ((and fifty)) dollars per month ((shall be)) is subject to garnishee execution to the same extent as are wages and salaries.
     (c) If the total benefits presently due and payable to ((any)) an annuitant under all annuity contracts ((under which he is an annuitant, shall)) at any time exceeds payment at the rate of two thousand five hundred ((and fifty)) dollars per month, then the court may order ((such)) the annuitant to pay to a judgment creditor or apply on the judgment, in installments, ((such)) the portion of ((such)) the excess benefits ((as to)) that the court ((may appear)) determines to be just and proper, after due regard for the reasonable requirements of the judgment debtor and ((his family, if dependent upon him)) the judgment debtor's dependent family, as well as any payments required to be made by the annuitant to other creditors under prior court orders.
     (2) The benefits, rights, privileges, or options accruing under ((such)) an annuity contract to a beneficiary or assignee ((shall not be)) are not transferable ((nor)) or subject to commutation, and if the benefits are payable periodically or at stated times, the same exemptions and exceptions contained ((herein)) in this section for the annuitant((, shall apply with respect to such)) apply to the beneficiary or assignee.
     (3) An annuity contract within the meaning of this section ((shall be)) is any obligation to pay certain sums at stated times, during life or lives, or for a specified term or terms, issued for a valuable consideration, regardless of whether or not ((such)) the sums are payable to one or more persons, jointly or otherwise, but does not include payments under life insurance contracts at stated times during life or lives, or for a specified term or terms.

Sec. 6   RCW 48.21.047 and 1995 c 265 s 22 are each amended to read as follows:
     (1) ((No insurer shall)) An insurer may not offer any health benefit plan to any small employer without complying with ((the provisions of)) RCW 48.21.045(((5))) (3).
     (2) Employers purchasing health plans provided through associations or through member-governed groups formed specifically for the purpose of purchasing health care ((shall not be considered)) are not small employers and ((such plans shall not be subject to the provisions of RCW 48.21.045(5))) the plans are not subject to RCW 48.21.045(3).
     (3) For purposes of this section, "health benefit plan," "health plan," and "small employer" mean the same as defined in RCW 48.43.005.

Sec. 7   RCW 48.23.010 and 1979 c 130 s 2 are each amended to read as follows:
     ((The provisions of this chapter apply)) This chapter applies to contracts of life insurance and annuities other than group life insurance, group annuities, and, except for RCW 48.23.260, 48.23.270, and 48.23.340, ((and 48.23.350,)) other than industrial life insurance((: PROVIDED, That the provisions of)). However, Title 48 RCW ((shall)) does not apply to charitable gift annuities issued by a board of a state university, regional university, or a state college, nor to the issuance thereof.

Sec. 8   RCW 48.24.030 and 1993 c 132 s 1 are each amended to read as follows:
     (1) Insurance under any group life insurance policy issued ((pursuant to)) under RCW 48.24.020, ((or)) 48.24.050, ((or)) 48.24.060, ((or)) 48.24.070, or 48.24.090 may, if seventy-five percent of the then insured employees or labor union members or public employee association members or members of the Washington state patrol elect, be extended to insure the spouse and dependent children, or any class or classes thereof, of each ((such)) insured employee or member who so elects, in amounts in accordance with a plan ((which)) that precludes individual selection by the employees or members or by the employer or labor union or trustee((, and which insurance on the life of any one family member including a spouse shall not be in excess of fifty percent of the insurance on the life of the insured employee or member)).
     Premiums for the insurance on ((such)) the family members shall be paid by the policyholder, either from the employer's funds or funds contributed by him, trustee's funds, or labor union funds, and/or from funds contributed by the insured employees or members, or from both.
     (2) ((Such)) A spouse insured ((pursuant to)) under this section ((shall have)) has the same conversion right as to the insurance on his or her life as is vested in the employee or member under this chapter.

Sec. 9   RCW 48.29.010 and 1997 c 14 s 1 are each amended to read as follows:
     (1) This chapter relates only to title insurers for real property.
     (2) ((None of the provisions of)) This code ((shall be deemed to)) does not apply to persons engaged in the business of preparing and issuing abstracts of title to property and certifying to ((the)) their correctness ((thereof)) so long as ((such)) the persons do not guarantee or insure ((such)) the titles.
     (3) For purposes of this chapter, unless the context clearly requires otherwise:
     (a) "Title policy" means any written instrument, contract, or guarantee by means of which title insurance liability is assumed.
     (b) "Abstract of title" means a written representation, provided ((pursuant to)) under contract, whether written or oral, intended to be relied upon by the person who has contracted for the receipt of ((such)) this representation, listing all recorded conveyances, instruments, or documents ((which)) that, under the laws of the state of Washington, impart constructive notice with respect to the chain of title to the real property described. An abstract of title is not a title policy as defined in this subsection.
     (c) "Preliminary report," "commitment," or "binder" means reports furnished in connection with an application for title insurance and are offers to issue a title policy subject to the stated exceptions ((set forth)) in the reports, the conditions and stipulations of the report and the issued policy, and ((such)) other matters as may be incorporated by reference. The reports are not abstracts of title, nor are any of the rights, duties, or responsibilities applicable to the preparation and issuance of an abstract of title applicable to the issuance of any report. ((Any such)) The report ((shall not be construed as, nor constitute,)) is not a representation as to the condition of the title to real property, but ((shall constitute)) is a statement of terms and conditions upon which the issuer is willing to issue its title policy, if ((such)) the offer is accepted.

Sec. 10   RCW 48.29.020 and 1990 c 76 s 1 are each amended to read as follows:
     A title insurer ((shall not be)) is not entitled to have a certificate of authority unless it otherwise qualifies ((therefor, nor)) for a certificate of authority, or unless:
     (1) It is a stock corporation.
     (2) It owns or leases and maintains a complete set of tract indexes of the county in this state in which its principal office ((within this state)) is located.
     (3) ((It deposits and keeps on deposit with the commissioner a guaranty fund in amount as set forth in RCW 48.29.030 and comprised of cash or public obligations as specified in RCW 48.13.040.)) It has and maintains the capital and surplus requirements set forth in RCW 48.05.340.

Sec. 11   RCW 48.29.120 and 1947 c 79 s .29.12 are each amended to read as follows:
     (((1) Each title insurer shall annually apportion to a special reserve fund an amount determined by applying the rate of twenty-five cents for each one thousand dollars of net increase of insurance it has in force as at the end of such year. Such apportionment shall be continued or resumed as needed to maintain the special reserve fund at an amount equal to not less than the guaranty fund deposit required of the insurer.
     (2) The special reserve fund shall be held by the insurer as an additional guaranty fund, and shall be used only for the payment of losses after the insurer's liquid resources available for the payment of losses, other than such special reserve fund or the guaranty fund deposit, have been exhausted.
     (3) For the purposes of computing the special reserve fund as provided in subsection (1) of this section, net increase of insurance in force resulting from reinsurance of the risks of another title insurer shall not be included to the extent that a like special reserve fund on such insurance is maintained by the ceding insurer.)) In determining the financial condition of a title insurer doing business under this title, the general provisions of chapter 48.12 RCW requiring the establishment of reserves sufficient to cover all known and unknown liabilities including allocated and unallocated loss adjustment expense apply, except that a title insurer shall establish and maintain:
     (1) A known claim reserve in an amount estimated to be sufficient to cover all unpaid losses, claims, and allocated loss adjustment expenses arising under title insurance policies, guaranteed certificates of title, guaranteed searches, and guaranteed abstracts of title, and all unpaid losses, claims, and allocated loss adjustment expenses for which the title insurer may be liable, and for which the insurer has received notice by or on behalf of the insured, holder of a guarantee or escrow, or security depositor;
     (2)(a) A statutory or unearned premium reserve consisting of:
     (i) The amount of the special reserve fund that was required prior to the effective date of this section, which balance must be released in accordance with (b) of this subsection; and
     (ii) Additions to the reserve after the effective date of this section must be made out of total charges for title insurance policies and guarantees written, as set forth in the title insurer's most recent annual statement on file with the commissioner, equal to the sum of the following:
     (A) For each title insurance policy on a single risk written or assumed after the effective date of this section, fifteen cents per one thousand dollars of net retained liability for policies under five hundred thousand dollars; and
     (B) For each title insurance policy on a single risk written or assumed after the effective date of this section, ten cents per one thousand dollars of net retained liability for policies of five hundred thousand or greater.
     (b) The aggregate of the amounts set aside in this reserve in any calendar year pursuant to (a) of this subsection must be released from the reserve and restored to net profits over a period of twenty years under the following formula:
     (i) Thirty-five percent of the aggregate sum on July 1st of the year next succeeding the year of addition;
     (ii) Fifteen percent of the aggregate sum on July 1st of each of the succeeding two years;
     (iii) Ten percent of the aggregate sum on July 1st of the next succeeding year;
     (iv) Three percent of the aggregate sum on July 1st of each of the next three succeeding years;
     (v) Two percent of the aggregate sum on July 1st of each of the next three succeeding years; and
     (vi) One percent of the aggregate sum on July 1st of each of the next succeeding ten years.
     (c) The insurer shall calculate an adjusted statutory unearned premium reserve as of the effective date of this section. The adjusted reserve is calculated as if (a)(ii) and (b) of this subsection had been in effect for all years beginning twenty years prior to the effective date of this section. For purposes of this calculation, the balance of the reserve as of that date is deemed to be zero. If the adjusted reserve so calculated exceeds the aggregate amount set aside for statutory or unearned premiums in the insurer's annual statement on file with the commissioner on the effective date of this section, the insurer shall, out of total charges for policies of title insurance, increase its statutory or unearned premium reserve by an amount equal to one-sixth of that excess in each of the succeeding six years, commencing with the calendar year that includes the effective date of this section, until the entire excess has been added.
     (d) The aggregate of the amounts set aside in this reserve in any calendar year as adjustments to the insurer's statutory or unearned premium reserve under (c) of this subsection shall be released from the reserve and restored to net profits, or equity if the additions required by (c) of this subsection reduced equity directly, over a period not exceeding ten years under to the following table:

Sec. 12   RCW 48.29.130 and 1967 c 150 s 30 are each amended to read as follows:
     ((The funds of a domestic title insurer, other than those representing its guaranty fund deposit, shall be invested)) A domestic title insurer shall invest its funds as follows:
     (1) Funds in an amount not less than its reserve required ((special reserve shall)) by RCW 48.29.120 must be kept invested in investments eligible for domestic life insurers.
     (2) Other funds may be invested in:
     (a) The insurer's plant and equipment, up to a maximum of fifty percent of capital plus surplus.
     (b) Stocks and bonds of abstract companies when approved by the commissioner.
     (c) Investments eligible for the investment of funds of any domestic insurer.

Sec. 13   RCW 48.29.170 and 1981 c 223 s 2 are each amended to read as follows:
     Title insurance agents ((shall be)) are exempt from the provisions of RCW ((48.17.090(2) and)) 48.17.180(1) ((which otherwise)) that require that each individual empowered to exercise the authority of a licensed firm or corporation must be separately licensed.

Sec. 14   RCW 48.30.300 and 1993 c 492 s 287 are each amended to read as follows:
     Notwithstanding any provision contained in Title 48 RCW to the contrary:
     (((1) No)) A person or entity engaged in the business of insurance in this state ((shall)) may not refuse to issue any contract of insurance or cancel or decline to renew such contract because of the sex or marital status, or the presence of any sensory, mental, or physical handicap of the insured or prospective insured. The amount of benefits payable, or any term, rate, condition, or type of coverage ((shall)) may not be restricted, modified, excluded, increased, or reduced on the basis of the sex or marital status, or be restricted, modified, excluded, or reduced on the basis of the presence of any sensory, mental, or physical handicap of the insured or prospective insured. ((Subject to the provisions of subsection (2) of this section these provisions shall)) This subsection does not prohibit fair discrimination on the basis of sex, or marital status, or the presence of any sensory, mental, or physical handicap when bona fide statistical differences in risk or exposure have been substantiated.
     (((2) With respect to disability policies issued or renewed on and after July 1, 1994, that provide coverage against loss arising from medical, surgical, hospital, or emergency care services:
     (a) Policies shall guarantee continuity of coverage. Such provision, which shall be included in every policy, shall provide that:
     (i) The policy may be canceled or nonrenewed without the prior written approval of the commissioner only for nonpayment of premium or as permitted under RCW 48.18.090; and
     (ii) The policy may be canceled or nonrenewed because of a change in the physical or mental condition or health of a covered person only with the prior written approval of the commissioner. Such approval shall be granted only when the insurer has discharged its obligation to continue coverage for such person by obtaining coverage with another insurer, health care service contractor, or health maintenance organization, which coverage is comparable in terms of premiums and benefits as defined by rule of the commissioner.
     (b) It is an unfair practice for a disability insurer to modify the coverage provided or rates applying to an in-force disability insurance policy and to fail to make such modification in all such issued and outstanding policies.
     (c) Subject to rules adopted by the commissioner, it is an unfair practice for a disability insurer to:
     (i) Cease the sale of a policy form unless it has received prior written authorization from the commissioner and has offered all policyholders covered under such discontinued policy the opportunity to purchase comparable coverage without health screening; or
     (ii) Engage in a practice that subjects policyholders to rate increases on discontinued policy forms unless such policyholders are offered the opportunity to purchase comparable coverage without health screening.
     The insurer may limit an offer of comparable coverage without health screening to a period not less than thirty days from the date the offer is first made.))

Sec. 15   RCW 48.30A.045 and 1997 c 92 s 1 are each amended to read as follows:
     (1) Each insurer licensed to write direct insurance in this state, except those exempted in subsection (2) of this section, ((shall)) must institute and maintain an insurance antifraud plan. ((An insurer licensed on July 1, 1995, shall file its antifraud plan with the insurance commissioner no later than December 31, 1995.)) An insurer licensed after July 1, 1995, ((shall)) must file its antifraud plan within six months of licensure. An insurer ((shall)) must file any change to the antifraud plan with the insurance commissioner within thirty days after the plan has been modified.
     (2) This section does not apply to:
     (a) Health carriers, as defined in RCW 48.43.005((,));
     (b) Life insurers((, or));
     (c) Title insurers; ((or))
     (d) Property or casualty insurers with annual gross written medical malpractice insurance premiums in this state that exceed fifty percent of their total annual gross written premiums in this state; ((or all))
     (e) Credit-related insurance written in connection with a credit transaction in which the creditor is named as a beneficiary or loss payee under the policy, except vendor single-interest or collateral protection coverage as defined in RCW 48.22.110(4); or
     (f) Insurers with gross written premiums of less than one thousand dollars in Washington during the reporting year.

Sec. 16   RCW 48.30A.060 and 1995 c 285 s 12 are each amended to read as follows:
     By March 31st of each year, each insurer ((shall annually)) must provide to the insurance commissioner a summary report on actions taken under its antifraud plan to prevent and combat insurance fraud. The report must also include, but not be limited to, measures taken to protect and ensure the integrity of electronic data processing-generated data and manually compiled data, statistical data on the amount of resources committed to combatting fraud, and the amount of fraud identified and recovered during the reporting period. The antifraud plans and summary of the insurer's antifraud activities are not public records and are exempt from chapter 42.17 RCW, are proprietary, are not subject to public examination, and are not discoverable or admissible in civil litigation.

Sec. 17   RCW 48.30A.065 and 1995 c 285 s 13 are each amended to read as follows:
     An insurer that fails to file a timely antifraud plan or ((who does not)) summary report or that fails to make a good faith attempt to file an antifraud plan that complies with RCW 48.30A.050 or a summary report that complies with RCW 48.30A.060, is subject to the penalty provisions of RCW 48.01.080, but no penalty may be imposed for the first filing made by an insurer under this chapter. An insurer that fails to follow the antifraud plan is subject to a civil penalty not to exceed ten thousand dollars for each violation, at the discretion of the commissioner after consideration of all relevant factors, including the willfulness of the violation.

Sec. 18   RCW 48.31.100 and 1947 c 79 s .31.10 are each amended to read as follows:
     (1) An order to conserve the assets of a foreign or alien insurer ((shall)) must direct the commissioner ((forthwith)) immediately to take possession of the property of the insurer within this state and to conserve it, subject to the further direction of the court.
     (2) Whenever a domiciliary receiver is appointed for ((any such)) a foreign or alien insurer in its domiciliary state ((which)) that is also a reciprocal state, as defined in RCW ((48.31.110)) 48.99.010, the court shall on application of the commissioner appoint the commissioner as the ancillary receiver in this state, subject to the provisions of the uniform insurers liquidation act.

Sec. 19   RCW 48.38.030 and 1979 c 130 s 8 are each amended to read as follows:
     Each charitable annuity contract or policy form ((shall)) must include the following information:
     (1) The value of the property to be transferred;
     (2) The amount of the annuity to be paid to the transferor or the transferor's nominee;
     (3) The manner in which and the intervals at which payment is to be made;
     (4) The age of the person during whose life payment is to be made; and
     (5) The reasonable value as of the date of the agreement of the benefits ((thereby)) created. This value ((shall)) may not exceed by more than fifteen percent the net single premium for the benefits, determined ((in accordance with)) according to the standard of valuation set forth in RCW 48.38.020(((1))) (3).

Sec. 20   RCW 48.44.240 and 1990 1st ex.s. c 3 s 12 are each amended to read as follows:
     Each group contract for health care services ((which)) that is delivered or issued for delivery or renewed, on or after January 1, 1988, ((shall)) must contain provisions providing benefits for the treatment of chemical dependency rendered to covered persons by a provider ((which)) that is an "approved treatment ((facility or)) program" under RCW 70.96A.020(3).

NEW SECTION.  Sec. 21   A new section is added to chapter 48.66 RCW to read as follows:
     (1) An issuer may not deny or condition the issuance or effectiveness of any medicare supplement policy or certificate available for sale in this state, or discriminate in the pricing of a policy or certificate because of the health status, claims experience, receipt of health care, or medical condition of an applicant in the case of an application for a policy or certificate that is submitted prior to or during the six-month period beginning with the first day of the first month in which an individual is both sixty-five years of age or older and is enrolled for benefits under medicare part B. Each medicare supplement policy and certificate currently available from an insurer must be made available to all applicants who qualify under this subsection without regard to age.
     (2) If an applicant qualifies under this section and submits an application during the time period referenced in subsection (1) of this section and, as of the date of application, has had a continuous period of creditable coverage of at least six months, the issuer may not exclude benefits based on a preexisting condition.
     (3) If an applicant qualified under this section and submits an application during the time period referenced in subsection (1) of this section and, as of the date of application, has had a continuous period of creditable coverage that is less than six months, the issuer must reduce the period of any preexisting condition exclusion by the aggregate of the period of creditable coverage applicable to the applicant as of the enrollment date.

Sec. 22   RCW 48.66.020 and 1996 c 269 s 1 are each amended to read as follows:
     Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.
     (1) "Medicare supplemental insurance" or "medicare supplement insurance policy" refers to a group or individual policy of disability insurance or a subscriber contract of a health care service contractor, a health maintenance organization, or a fraternal benefit society, which relates its benefits to medicare, or which is advertised, marketed, or designed primarily as a supplement to reimbursements under medicare for the hospital, medical, or surgical expenses of persons eligible for medicare. Such term does not include:
     (a) A policy or contract of one or more employers or labor organizations, or of the trustees of a fund established by one or more employers or labor organizations, or combination thereof, for employees or former employees, or combination thereof, or for members or former members, or combination thereof, of the labor organizations; or
     (b) A policy issued pursuant to a contract under Section 1876 of the federal social security act (42 U.S.C. Sec. 1395 et seq.), or an issued policy under a demonstration specified in 42 U.S.C. Sec. 1395(g)(1); or
     (c) Insurance policies or health care benefit plans, including group conversion policies, provided to medicare eligible persons, that are not marketed or held to be medicare supplement policies or benefit plans.
     (2) "Medicare" means the "Health Insurance for the Aged Act," Title XVIII of the Social Security Amendments of 1965, as then constituted or later amended.
     (3) "Medicare eligible expenses" means health care expenses of the kinds covered by medicare, to the extent recognized as reasonable and medically necessary by medicare.
     (4) "Applicant" means:
     (a) In the case of an individual medicare supplement insurance policy or subscriber contract, the person who seeks to contract for insurance benefits; and
     (b) In the case of a group medicare supplement insurance policy or subscriber contract, the proposed certificate holder.
     (5) "Certificate" means any certificate delivered or issued for delivery in this state under a group medicare supplement insurance policy.
     (6) "Loss ratio" means the incurred claims as a percentage of the earned premium computed under rules adopted by the insurance commissioner.
     (7) "Preexisting condition" means a covered person's medical condition that caused that person to have received medical advice or treatment during a specified time period immediately prior to the effective date of coverage.
     (8) "Disclosure form" means the form designated by the insurance commissioner which discloses medicare benefits, the supplemental benefits offered by the insurer, and the remaining amount for which the insured will be responsible.
     (9) "Issuer" includes insurance companies, health care service contractors, health maintenance organizations, fraternal benefit societies, and any other entity delivering or issuing for delivery medicare supplement policies or certificates to a resident of this state.
     (10)(a) "Creditable coverage" means, with respect to an individual, coverage of the individual provided under any of the following:
     (i) A group health plan;
     (ii) Health insurance coverage;
     (iii) Part A or Part B of Title XVIII of the social security act (medicare);
     (iv) Title XIX of the social security act (medicaid), other than coverage consisting solely of benefits under section 1928;
     (v) Chapter 55 of Title 10 United States Code (CHAMPUS);
     (vi) A medical care program of the Indian health service or of a tribal organization;
     (vii) A state health benefits risk pool;
     (viii) A health plan offered under chapter 89 of Title 5 United States Code (federal employees health benefits program);
     (ix) A public health plan as defined in federal regulation; and
     (x) A health benefit plan under section 5(e) of the peace corps act (22 U.S.C. Sec. 2504(e)).
     (b) "Creditable coverage" does not include one or more, or any combination, of the following:
     (i) Coverage only for accident or disability income insurance, or any combination thereof;
     (ii) Coverage issued as a supplement to liability insurance;
     (iii) Liability insurance, including general liability insurance and automobile liability insurance;
     (iv) Worker's compensation or similar insurance;
     (v) Automobile medical payment insurance;
     (vi) Credit-only insurance;
     (vii) Coverage for on-site medical clinics; and
     (viii) Other similar insurance coverage, specified in federal regulations, under which benefits for medical care are secondary or incidental to other insurance benefits.
     (c) "Creditable coverage" does not include the following benefits if they are provided under a separate policy, certificate, or contract of insurance or are otherwise not an integral part of the plan:
     (i) Limited scope dental or vision benefits;
     (ii) Benefits for long-term care, nursing home care, home health care, community-based care, or any combination thereof; and
     (iii) Other similar, limited benefits as are specified in federal regulations.
     (d) "Creditable coverage" does not include the following benefits if offered as independent, noncoordinated benefits:
     (i) Coverage only for a specified disease or illness; and
     (ii) Hospital indemnity or other fixed indemnity insurance.
     (e) "Creditable coverage" does not include the following if it is offered as a separate policy, certificate, or contract of insurance:
     (i) Medicare supplemental health insurance as defined under section 1882(g)(1) of the social security act;
     (ii) Coverage supplemental to the coverage provided under chapter 55 of Title 10, United States Code; and
     (iii) Similar supplemental coverage provided to coverage under a group health plan.

Sec. 23   RCW 48.66.055 and 2002 c 300 s 4 are each amended to read as follows:
     (1) Under this section, persons eligible for a medicare supplement policy or certificate are those individuals described in subsection (3) of this section who, subject to subsection (3)(b)(ii) of this section, apply to enroll under the policy not later than sixty-three days after the date of the termination of enrollment described in subsection (3) of this section, and who submit evidence of the date of termination or disenrollment with the application for a medicare supplement policy.
     (2) With respect to eligible persons, an issuer may not deny or condition the issuance or effectiveness of a medicare supplement policy described in subsection (4) of this section that is offered and is available for issuance to new enrollees by the issuer, ((shall)) may not discriminate in the pricing of such a medicare supplement policy because of health status, claims experience, receipt of health care, or medical condition, and ((shall)) may not impose an exclusion of benefits based on a preexisting condition under such a medicare supplement policy.
     (3) "Eligible persons" means an individual that meets the requirements of (a), (b), (c), (d), (e), or (f) of this subsection, as follows:
     (a) The individual is enrolled under an employee welfare benefit plan that provides health benefits that supplement the benefits under medicare; and the plan terminates, or the plan ceases to provide all such supplemental health benefits to the individual;
     (b)(i) The individual is enrolled with a medicare+choice organization under a medicare+choice plan under part C of medicare, and any of the following circumstances apply, or the individual is sixty-five years of age or older and is enrolled with a program of all inclusive care for the elderly (PACE) provider under section 1894 of the social security act, and there are circumstances similar to those described in this subsection (3)(b) that would permit discontinuance of the individual's enrollment with the provider if the individual were enrolled in a medicare+choice plan:
     (A) The certification of the organization or plan under this subsection (3)(b) has been terminated, or the organization or plan has notified the individual of an impending termination of such a certification;
     (B) The organization has terminated or otherwise discontinued providing the plan in the area in which the individual resides, or has notified the individual of an impending termination or discontinuance of such a plan;
     (C) The individual is no longer eligible to elect the plan because of a change in the individual's place of residence or other change in circumstances specified by the secretary of the United States department of health and human services, but not including termination of the individual's enrollment on the basis described in section 1851(g)(3)(B) of the federal social security act (where the individual has not paid premiums on a timely basis or has engaged in disruptive behavior as specified in standards under section 1856 of the federal social security act), or the plan is terminated for all individuals within a residence area;
     (D) The individual demonstrates, in accordance with guidelines established by the secretary of the United States department of health and human services, that:
     (I) The organization offering the plan substantially violated a material provision of the organization's contract under this part in relation to the individual, including the failure to provide an enrollee on a timely basis medically necessary care for which benefits are available under the plan or the failure to provide such covered care in accordance with applicable quality standards; or
     (II) The organization, an agent, or other entity acting on the organization's behalf materially misrepresented the plan's provisions in marketing the plan to the individual; or
     (E) The individual meets other exceptional conditions as the secretary of the United States department of health and human services may provide.
     (ii)(A) An individual described in (b)(i) of this subsection may elect to apply (a) of this subsection by substituting, for the date of termination of enrollment, the date on which the individual was notified by the medicare+choice organization of the impending termination or discontinuance of the medicare+choice plan it offers in the area in which the individual resides, but only if the individual disenrolls from the plan as a result of such notification.
     (B) In the case of an individual making the election under (b)(ii)(A) of this subsection, the issuer involved shall accept the application of the individual submitted before the date of termination of enrollment, but the coverage under subsection (1) of this section ((shall only become)) is only effective upon termination of coverage under the medicare+choice plan involved;
     (c)(i) The individual is enrolled with:
     (A) An eligible organization under a contract under section 1876 (medicare risk or cost);
     (B) A similar organization operating under demonstration project authority, effective for periods before April 1, 1999;
     (C) An organization under an agreement under section 1833(a)(1)(A) (health care prepayment plan); or
     (D) An organization under a medicare select policy; and
     (ii) The enrollment ceases under the same circumstances that would permit discontinuance of an individual's election of coverage under (b)(i) of this subsection;
     (d) The individual is enrolled under a medicare supplement policy and the enrollment ceases because:
     (i)(A) Of the insolvency of the issuer or bankruptcy of the nonissuer organization; or
     (B) Of other involuntary termination of coverage or enrollment under the policy;
     (ii) The issuer of the policy substantially violated a material provision of the policy; or
     (iii) The issuer, an agent, or other entity acting on the issuer's behalf materially misrepresented the policy's provisions in marketing the policy to the individual;
     (e)(i) The individual was enrolled under a medicare supplement policy and terminates enrollment and subsequently enrolls, for the first time, with any medicare+choice organization under a medicare+choice plan under part C of medicare, any eligible organization under a contract under section 1876 (medicare risk or cost), any similar organization operating under demonstration project authority, any PACE program under section 1894 of the social security act, an organization under an agreement under section 1833(a)(1)(A) (health care prepayment plan), or a medicare select policy; and
     (ii) The subsequent enrollment under (e)(i) of this subsection is terminated by the enrollee during any period within the first twelve months of such subsequent enrollment (during which the enrollee is permitted to terminate such subsequent enrollment under section 1851(e) of the federal social security act); or
     (f) The individual, upon first becoming eligible for benefits under part A of medicare at age sixty-five, enrolls in a medicare+choice plan under part C of medicare, or in a PACE program under section 1894, and disenrolls from the plan or program by not later than twelve months after the effective date of enrollment.
     (4) An eligible person under subsection (3) of this section is entitled to a medicare supplement policy as follows:
     (a) A person eligible under subsection (3)(a), (b), (c), and (d) of this section is entitled to a medicare supplement policy that has a benefit package classified as plan A through G offered by any issuer;
     (b) A person eligible under subsection (3)(e) of this section is entitled to the same medicare supplement policy in which the individual was most recently previously enrolled, if available from the same issuer, or, if not so available, a policy described in (a) of this subsection; and
     (c) A person eligible under subsection (3)(f) of this section is entitled to any medicare supplement policy offered by any issuer.
     (5)(a) At the time of an event described in subsection (3) of this section, and because of which an individual loses coverage or benefits due to the termination of a contract, agreement, policy, or plan, the organization that terminates the contract or agreement, the issuer terminating the policy, or the administrator of the plan being terminated, respectively, must notify the individual of his or her rights under this section, and of the obligations of issuers of medicare supplement policies under subsection (1) of this section. The notice must be communicated contemporaneously with the notification of termination.
     (b) At the time of an event described in subsection (3) of this section, and because of which an individual ceases enrollment under a contract, agreement, policy, or plan, the organization that offers the contract or agreement, regardless of the basis for the cessation of enrollment, the issuer offering the policy, or the administrator of the plan, respectively, must notify the individual of his or her rights under this section, and of the obligations of issuers of medicare supplement policies under subsection (1) of this section. The notice must be communicated within ten working days of the issuer receiving notification of disenrollment.
     (6) In the case of an individual described in subsection (3)(e) of this section whose enrollment with an organization or provider described in subsection (3)(e)(i) of this section is involuntarily terminated within the first twelve months of enrollment, and who, without an intervening enrollment, enrolls with another organization or provider, the subsequent enrollment is an initial enrollment as described in subsection (3)(e) of this section.
     (7) In the case of an individual described in subsection (3)(f) of this section whose enrollment with a plan or in a program described in subsection (3)(f) of this section is involuntarily terminated within the first twelve months of enrollment, and who, without an intervening enrollment, enrolls in another plan or program, the subsequent enrollment is an initial enrollment as described in subsection (3)(f) of this section.
     (8) For purposes of subsection (3)(e) and (f) of this section, an enrollment of an individual with an organization or provider described in subsection (3)(e)(i) of this section, or with a plan or in a program described in subsection (3)(f) of this section is not an initial enrollment under this subsection after the two-year period beginning on the date on which the individual first enrolled with such an organization, provider, plan, or program.

Sec. 24   RCW 48.92.120 and 1993 c 462 s 101 are each amended to read as follows:
     (1) ((No)) A person may not act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this state from a risk retention group unless the person is licensed as an insurance agent or broker for casualty insurance in accordance with chapter 48.17 RCW and pays the fees designated for the license under RCW 48.14.010.
     (2)(a) ((No)) A person may not act or aid in any manner in soliciting, negotiating, or procuring liability insurance in this state for a purchasing group from an authorized insurer or a risk retention group chartered in a state unless the person is licensed as an insurance agent or broker for casualty insurance in accordance with chapter 48.17 RCW and pays the fees designated for the license under RCW 48.14.010.
     (b) ((No)) A person may not act or aid in any manner in soliciting, negotiating, or procuring liability insurance coverage in this state for a member of a purchasing group under a purchasing group's policy unless the person is licensed as an insurance agent or broker for casualty insurance in accordance with chapter 48.17 RCW and pays the fees designated for the license under RCW 48.14.010.
     (c) ((No)) A person may not act or aid in any manner in soliciting, negotiating, or procuring liability insurance from an insurer not authorized to do business in this state on behalf of a purchasing group located in this state unless the person is licensed as a surplus lines broker in accordance with chapter 48.15 RCW and pays the fees designated for the license under RCW 48.14.010.
     (3) For purposes of acting as an agent or broker for a risk retention group or purchasing group under subsections (1) and (2) of this section, the requirement of residence in this state does not apply.
     (4) Every person licensed under chapters 48.15 and 48.17 RCW, on business placed with risk retention groups or written through a purchasing group, ((shall)) must inform each prospective insured of the provisions of the notice required under RCW 48.92.040(7) in the case of a risk retention group and RCW 48.92.090(((3))) (2) in the case of a purchasing group.

Sec. 25   RCW 48.98.015 and 1993 c 462 s 37 are each amended to read as follows:
     ((No)) A managing general agent may not place business with an insurer unless there is in force a written contract between the managing general agent and the insurer that sets forth the responsibilities of each party and, where both parties share responsibility for a particular function, that specifies the division of the responsibilities, and that contains the following minimum provisions:
     (1) The insurer may terminate the contract for cause upon written notice to the managing general agent. The insurer may suspend the underwriting authority of the managing general agent during the pendency of a dispute regarding the cause for termination.
     (2) The managing general agent ((shall)) must render accounts to the insurer detailing all transactions and remit all funds due under the contract to the insurer on not less than a monthly basis.
     (3) The managing general agent ((shall)) must hold funds collected for the account of an insurer in a fiduciary capacity in ((a)) an FDIC insured financial institution ((located in this state that is a member of the federal reserve system)). This account must be used for all payments on behalf of the insurer. The managing general agent may retain no more than three months' estimated claims payments and allocated loss adjustment expenses.
     (4) The managing general agent ((shall)) must maintain separate records of business written for each insurer. The insurer has access to and the right to copy all accounts and records related to its business in a form usable by the insurer, and the commissioner has access to all books, bank accounts, and records of the managing general agent in a form usable to the commissioner. Those records ((shall)) must be retained according to the requirements of this title and rules adopted under it.
     (5) The managing general agent may not assign the contract in whole or part.
     (6)(a) Appropriate underwriting guidelines must include at least the following: The maximum annual premium volume; the basis of the rates to be charged; the types of risks that may be written; maximum limits of liability; applicable exclusions; territorial limitations; policy cancellation provisions; and the maximum policy period.
     (b) The insurer has the right to cancel or not renew any policy of insurance, subject to the applicable laws and rules, including those in chapter 48.18 RCW.
     (7) If the contract permits the managing general agent to settle claims on behalf of the insurer:
     (a) All claims must be reported to the insurer in a timely manner.
     (b) A copy of the claim file must be sent to the insurer at its request or as soon as it becomes known that the claim:
     (i) Has the potential to exceed an amount determined by the commissioner, or exceeds the limit set by the insurer, whichever is less;
     (ii) Involves a coverage dispute;
     (iii) May exceed the managing general agent's claims settlement authority;
     (iv) Is open for more than six months; or
     (v) Is closed by payment in excess of an amount set by the commissioner or an amount set by the insurer, whichever is less.
     (c) All claim files are the joint property of the insurer and the managing general agent. However, upon an order of liquidation of the insurer, those files become the sole property of the insurer or its liquidator or successor. The managing general agent has reasonable access to and the right to copy the files on a timely basis.
     (d) Settlement authority granted to the managing general agent may be terminated for cause upon the insurer's written notice to the managing general agent or upon the termination of the contract. The insurer may suspend the managing general agent's settlement authority during the pendency of a dispute regarding the cause for termination.
     (8) Where electronic claims files are in existence, the contract must address the timely transmission of the data.
     (9) If the contract provides for a sharing of interim profits by the managing general agent, and the managing general agent has the authority to determine the amount of the interim profits by establishing loss reserves or controlling claim payments or in any other manner, interim profits ((shall)) may not be paid to the managing general agent until one year after they are earned for property insurance business and five years after they are earned on casualty business and not until the profits have been verified under RCW 48.98.020.
     (10) The managing general agent may not:
     (a) Bind reinsurance or retrocessions on behalf of the insurer, except that the managing general agent may bind automatic reinsurance contracts under obligatory automatic agreements if the contract with the insurer contains reinsurance underwriting guidelines including, for both reinsurance assumed and ceded, a list of reinsurers with which the automatic agreements are in effect, the coverages and amounts or percentages that may be reinsured, and commission schedules;
     (b) Commit the insurer to participate in insurance or reinsurance syndicates;
     (c) Use an agent that is not appointed to represent the insurer in accordance with the requirements of chapter 48.17 RCW;
     (d) Without prior approval of the insurer, pay or commit the insurer to pay a claim over a specified amount, net of reinsurance, that ((shall)) may not exceed one percent of the insurer's policyholder surplus as of December 31st of the last-completed calendar year;
     (e) Collect a payment from a reinsurer or commit the insurer to a claim settlement with a reinsurer, without prior approval of the insurer. If prior approval is given, a report ((shall)) must be promptly forwarded to the insurer;
     (f) Permit an agent appointed by it to serve on the insurer's board of directors;
     (g) Jointly employ an individual who is employed by the insurer; or
     (h) Appoint a submanaging general agent.

NEW SECTION.  Sec. 26   The following acts or parts of acts are each repealed:
     (1) RCW 48.05.360 (Special surplus requirements for certain combinations) and 1963 c 195 s 9;
     (2) RCW 48.29.030 (Amount of deposit) and 1957 c 193 s 16 & 1947 c 79 s .29.03;
     (3) RCW 48.29.060 (Impairment of deposit) and 1947 c 79 s .29.06;
     (4) RCW 48.29.070 (Levy of execution against deposit) and 1955 c 86 s 14 & 1947 c 79 s .29.07;
     (5) RCW 48.29.090 (Purpose of deposit) and 1955 c 86 s 16 & 1947 c 79 s .29.09;
     (6) RCW 48.29.100 (Termination of deposit) and 1947 c 79 s .29.10;
     (7) RCW 48.29.110 (Release of securities) and 1955 c 86 s 17 & 1947 c 79 s .29.11; and
     (8) RCW 48.34.910 (Small loan act [Consumer finance act] not affected) and 1961 c 219 s 14.