Illinois Life and Health Insurance Guaranty Association

Contact Information

Illinois Life and Health Insurance Guaranty Association
901 Warrenville Road
Lisle, IL 60532-4324
(p) 773.714.8050 (f) 773.442.0197
Association Web site: http://www.ilhiga.org
State Insurance Department: http://insurance.illinois.gov

Law Summaries Report

[ Current as of January 01, 2020 ] ]

Coverages

Covered Contracts

215 ILCS 5/531.03(2)(a). This Article shall provide coverage to the persons specified in subsection (1) of this Section for policies or contracts of direct, (i) nongroup life insurance, health insurance (that, for the purposes of this Article, includes health maintenance organization subscriber contracts and certificates), annuities and supplemental contracts to any of these, (ii) for certificates under direct group policies or contracts, (iii) for unallocated annuity contracts and (iv) for contracts to furnish health care services and subscription certificates for medical or health care services issued by persons licensed to transact insurance business in this State under this Code. Annuity contracts and certificates under group annuity contracts include but are not limited to guaranteed investment contracts, deposit administration contracts, unallocated funding agreements, allocated funding agreements, structured settlement agreements, lottery contracts and any immediate or deferred annuity contracts.

Non-Covered Contracts

215 ILCS 5/531.03(2)(b). Except as otherwise provided in paragraph (c) of this subsection, this Article shall not provide coverage for: (i) that portion of a policy or contract not guaranteed by the member insurer, or under which the risk is borne by the policy or contract owner; (ii) any such policy or contract or part thereof assumed by the impaired or insolvent insurer under a contract of reinsurance, other than reinsurance for which assumption certificates have been issued; (iii) 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 is determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (A) averaged over the period of 4 years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting 2 percentage points from Moody’s Corporate Bond Yield Average averaged for that same 4-year period or for such lesser period if the policy or contract was issued less than 4 years before the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier; and (B) on and after the date on which the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting 3 percentage points from Moody’s Corporate Bond Yield Average as most recently available; (iv) any unallocated annuity contract issued to or in connection with a benefit plan protected under the federal Pension Benefit Guaranty Corporation, regardless of whether the federal Pension Benefit Guaranty Corporation has yet become liable to make any payments with respect to the benefit plan; (v) 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 a government lottery; (vi) an obligation that does not arise under the express written terms of the policy or contract issued by the member insurer to the enrollee, certificate holder, contract owner, or policy owner, including without limitation: (A) a claim based on marketing materials; (B) a claim based on side letters, riders, or other documents that were issued by the member insurer without meeting applicable policy or contract form filing or approval requirements; (C) a misrepresentation of or regarding policy or contract benefits; (D) an extra-contractual claim; or (E) a claim for penalties or consequential or incidental damages; (vii) any stop-loss insurance, as defined in clause (b) of Class 1 or clause (a) of Class 2 of Section 4, and further defined in subsection (d) of Section 352 [215 ILCS 5/352]; (viii) any policy or contract providing any hospital, medical, prescription drug, or other health care benefits pursuant to Part C or Part D of Subchapter XVIII, Chapter 7 of Title 42 of the United States Code (commonly known as Medicare Part C & D), Subchapter XIX, Chapter 7 of Title 42 of the United States Code (commonly known as Medicaid), or any regulations issued pursuant thereto; (ix) any portion of a policy or contract to the extent that the assessments required by Section 531.09 of this Code [215 ILCS 5/531.09] with respect to the policy or contract are preempted or otherwise not permitted by federal or State law; (x) any portion of a policy or contract issued to a plan or program of an employer, association, or other person to provide life, health, or annuity benefits to its employees, members, or others to the extent that the plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association, or other person under: (A) a multiple employer welfare arrangement as defined in 29 U.S.C. Section 1002; (B) a minimum premium group insurance plan; (C) a stop-loss group insurance plan; or (D) an administrative services only contract; (xi) any portion of a policy or contract to the extent that it provides for: (A) dividends or experience rating credits; (B) voting rights; or (C) payment of any fees or allowances to any person, including the policy or contract owner, in connection with the service to or administration of the policy or contract; (xii) 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 the policy or contract in this State; (xiii) any contractual agreement that establishes the member insurer’s obligations to provide a book value accounting guaranty for defined contribution benefit plan participants by reference to a portfolio of assets that is owned by the benefit plan or its trustee, which in each case is not an affiliate of the member insurer; (xiv) any portion of a policy or contract to the extent that 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 have not been credited to the policy or contract, or as to which the policy or contract owner’s rights are subject to forfeiture, as of the date the member insurer becomes an impaired or insolvent insurer under this Code, 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 Section, 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; or (xv) that portion or part of a variable life insurance or variable annuity contract not guaranteed by a member insurer.

Non-Resident Coverage

215ILCS 5/531.03(1)(b)(ii). Yes. Covers nonresidents but only under all of the following conditions: (A) the member insurer that issued the policies or contracts is domiciled in this State; (B) the states in which the persons reside have associations similar to the Association created by this Article; (C) the persons are not eligible for coverage by an association in any other state due to the fact that the insurer or health maintenance organization was not licensed in that state at the time specified in that state’s guaranty association law.

Benefit Limits

215 ILCS 5/531.03(3). (b)(i) with respect to any one life, regardless of the number of policies or contracts: (A) $300,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance; (B) for health insurance benefits: (I) $100,000 for coverages not defined as disability income insurance or health benefit plans or long-term care insurance, including any net cash surrender and net cash withdrawal values; (II) $300,000 for disability income insurance and $300,000 for long-term care insurance; and (III) $500,000 for health benefit plans; (C) $250,000 in the present value of annuity benefits, including net cash surrender and net cash withdrawal values; (ii) with respect to each individual participating in a governmental retirement benefit 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 in present value annuity benefits, including net cash surrender and net cash withdrawal values; (iii) with respect to each payee of a structured settlement annuity or beneficiary or beneficiaries of the payee if deceased, $250,000 in present value annuity benefits, in the aggregate, including net cash surrender and net cash withdrawal values, if any; or (iv) with respect to either (1) one contract owner provided coverage under subparagraph (ii) of paragraph (c) of subsection (1) of this Section or (2) one plan sponsor whose plans own directly or in trust one or more unallocated annuity contracts not included in subparagraph (ii) of paragraph (b) of this subsection, $5,000,000 in benefits, irrespective of the number of contracts with respect to the contract owner or plan sponsor. However, in the case where one or more unallocated annuity contracts are covered contracts under this Article and are owned by a trust or other entity for the benefit of 2 or more plan sponsors, coverage shall be afforded by the Association if the largest interest in the trust or entity owning the contract or contracts is held by a plan sponsor whose principal place of business is in this State. In no event shall the Association be obligated to cover more than $5,000,000 in benefits with respect to all these unallocated contracts. In no event shall the Association be obligated to cover more than (1) an aggregate of $300,000 in benefits with respect to any one life under subparagraphs (i), (ii), and (iii) of this paragraph (b) except with respect to benefits for health benefit plans under item (B) of subparagraph (i) of this paragraph (b), in which case the aggregate liability of the Association shall not exceed $500,000 with respect to any one individual or (2) with respect to one owner of multiple nongroup policies of life insurance, whether the policy or contract owner is an individual, firm, corporation, or other person and whether the persons insured are officers, managers, employees, or other persons, $5,000,000 in benefits, regardless of the number of policies and contracts held by the owner.

Triggers

Discretionary Triggers

215 ILCS 5/531.08(a)(1). If a member insurer is an impaired insurer. Amended effective 8.20.2010.

Mandatory Triggers

215 ILCS 5/531.08(a)(2). If a member insurer is an insolvent insurer. Amended effective 8.20.2010.

Foreign Triggers

No separate provision. Amended effective 8.20.2010.

"Impaired Insurer"

215 ILCS 5/531.05 “Impaired insurer” means (A) a member insurer which, after the effective date of this amendatory Act of the 96th General Assembly, is not an insolvent insurer, and is placed under an order of rehabilitation or conservation by a court of competent jurisdiction or (B) a member insurer deemed by the Director after the effective date of this amendatory Act of the 96th General Assembly to be potentially unable to fulfill its contractual obligations and not an insolvent insurer. Amended effective 8.20.2010.

"Insolvent Insurer"

215 ILCS 5/531.05 “Insolvent insurer” means a member insurer that, after the effective date of this amendatory Act of the 96th General Assembly, is placed under a final order of liquidation by a court of competent jurisdiction with a finding of insolvency. Amended effective 8.20.2010.

"Member Insurer"

215 ILCS 5/531.05 “Member insurer” means an insurer or health maintenance organization licensed or holding a certificate of authority to transact in this State any kind of insurance or health maintenance organization business for which coverage is provided under Section 531.03 of this Code and includes an insurer or health maintenance organization whose license or certificate of authority in this State may have been suspended, revoked, not renewed, or voluntarily withdrawn or whose certificate of authority may have been suspended pursuant to Section 119 of this Code, but does not include: (1) a hospital or medical service organization, whether profit or nonprofit; (2) (blank); (3) any burial society organized under Article XIX of this Code [215 ILCS 5/338 et seq.], any fraternal benefit society organized under Article XVII of this Code [215 ILCS 5/282.1 et seq.], any mutual benefit association organized under Article XVIII of this Code [215 ILCS 5/316 et seq.], and any foreign fraternal benefit society licensed under Article VI of this Code [215 ILCS 5/254 et seq.]; (4) a mandatory State pooling plan; (5) a mutual assessment company or other person that operates on an assessment basis; (6) an insurance exchange; (7) an organization that is permitted to issue charitable gift annuities pursuant to Section 121-2.10 of this Code [215 ILCS 5/121-2.10]; (8) any health services plan corporation established pursuant to the Voluntary Health Services Plans Act [215 ILCS 165/1 et seq.]; (9) any dental service plan corporation established pursuant to the Dental Service Plan Act [215 ILCS 110/1 et seq.]; or (10) an entity similar to any of the above.

Account Structure

215 ILCS 5/531.06. For purposes of administration and assessment, the Association must maintain 2 accounts: (1) The life insurance and annuity account, which includes the following subaccounts: (a) Life Insurance Account; (b) Annuity account, which shall include annuity contracts owned by a governmental retirement plan (or its trustee) established under Section 401, 403(b), or 457 of the United States Internal Revenue Code, but shall otherwise exclude unallocated annuities; and (c) Unallocated annuity account, which shall exclude contracts owned by a governmental retirement benefit plan (or its trustee) established under Section 401, 403(b), or 457 of the United States Internal Revenue Code [215 ILCS 5/401, 215 ILCS 5/403(b), or 215 ILCS 5/457] (2) The health account.

Assessments

Assessment Limits

215 ILCS 5/531.09(5). (a) Subject to the provisions of this paragraph, the total of all assessments authorized by the Association with respect to a member insurer for each subaccount of the life insurance and annuity account and for the health account shall not in one calendar year exceed 2% of that member insurer’s average annual premiums received in this State on the policies and contracts covered by the subaccount or account during the 3 calendar years preceding the year in which the member insurer became an impaired or insolvent insurer.

Assessment Classes

215 ILCS 5/215 ILCS 5/531.09(2). There shall be 2 classes of assessments, as follows: (a) Class A assessments shall be made for the purpose of meeting administrative costs and other general expenses and examinations conducted under the authority of the Director under subsection (5) of Section 531.12 [215 ILCS 5/531.12]. (b) Class B assessments shall be made to the extent necessary to carry out the powers and duties of the Association under Section 531.08 [215 ILCS 5/531.08] with regard to an impaired or insolvent domestic insurer or insolvent foreign or alien insurers.

Interest Rate Adjustments

215 ILCS 5/531.03(2)(b)(iii) Guaranty Association excludes from coverage: (iii) 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 is determined by use of an index or other external reference stated in the policy or contract employed in calculating returns or changes in value: (A) averaged over the period of 4 years prior to the date on which the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting 2 percentage points from Moody’s Corporate Bond Yield Average averaged for that same 4-year period or for such lesser period if the policy or contract was issued less than 4 years before the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier; and (B) on and after the date on which the member insurer becomes an impaired or insolvent insurer under this Article, whichever is earlier, exceeds the rate of interest determined by subtracting 3 percentage points from Moody’s Corporate Bond Yield Average as most recently available;

Tax Offsets

215 ILCS 5/531.13. No. In the event the aggregate Class A, B and C assessments for all member insurers do not exceed $3,000,000 in any one calendar year, no member insurer shall receive a tax offset. However, for any one calendar year before 1998 in which the total of such assessments exceeds $3,000,000, the amount in excess of $3,000,000 shall be subject to a tax offset to the extent of 20% of the amount of such assessment for each of the 5 calendar years following the year in which such assessment was paid, and ending prior to January 1, 2003, and each member insurer may offset the proportionate amount of such excess paid by the insurer against its liabilities for the tax imposed by subsections (a) and (b) of Section 201 of the Illinois Income Tax Act. The provisions of this Section shall expire and be given no effect for any tax period commencing on and after January 1, 2003. (Eff. 5/29/98)

Definition of Premium

§ 531.05 “Premiums” mean amounts or considerations, by whatever name called, received on covered policies or contracts less returned premiums, considerations, and deposits and less dividends and experience credits. “Premiums” does not include: (A) amounts or considerations received for policies or contracts or for the portions of policies or contracts for which coverage is not provided under Section 531.03 of this Code except that assessable premium shall not be reduced on account of the provisions of subparagraph (iii) of paragraph (b) of subsection (2) of Section 531.03 of this Code relating to interest limitations and the provisions of paragraph (b) of subsection (3) of Section 531.03 relating to limitations with respect to one individual, one participant, and one policy owner or contract owner; (B) premiums in excess of $5,000,000 on an unallocated annuity contract not issued under a governmental retirement benefit plan (or its trustee) established under Section 401, 403(b) or 457 of the United States Internal Revenue Code; or (C) with respect to multiple nongroup policies of life insurance owned by one owner, whether the policy owner or contract owner is an individual, firm, corporation, or other person, and whether the persons insured are officers, managers, employees, or other persons, premiums in excess of $5,000,000 with respect to these policies or contracts, regardless of the number of policies or contracts held by the owner.

Advertising Prohibition

§531.19 “Prohibited advertisement of action of the Insurance Guaranty Association in sale of insurance” (a) No person, including a member insurer, agent or affiliate of a member insurer shall make, publish, disseminate, circulate, or place before the public, or cause directly or indirectly, to be made, published, disseminated, circulated or placed before the public, in any newspaper, magazine or other publication, or in the form of a notice, circular, pamphlet, letter or poster, or over any radio station or television station, or in any other way, any advertisement, announcement or statement, written or oral, which uses the existence of the Insurance Guaranty Association of this State for the purpose of sales, solicitation or inducement to purchase any form of insurance or other coverage covered by this Article; provided, however, that this Section shall not apply to the Illinois Life and Health Guaranty Association or any other entity which does not sell or solicit insurance or coverage by a health maintenance organization.

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