Vermont Life & Health Insurance Guaranty Association

Contact Information

Vermont Life & Health Insurance Guaranty Association

One National Life Drive, Suite M585
Montpelier, VT 05604
(p) 802.229.3553 (f) not available
Association Web site: http://www.vtlifega.org
State Insurance Department: http://www.bishca.state.vt.us/

Law Summaries Report

[ Current as of January 01, 2020 ] ]

Coverages

Covered Contracts

§4153(b)(1) 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, but are not limited to, 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.

Non-Covered Contracts

§4153(b)(2) (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 but not limited to 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, as 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 em-ployee, 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 deter-mined 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 Medicare Part C or Part D of subchapter XVIII, Chapter 7 of Title 42 of the United States Code, or any regulations issued pursuant thereto. Amended effective 7.1.2010.

Non-Resident Coverage

§4153(a)(2)(B). Yes. Covers nonresidents, but only if all of the following conditions are met: 1)the insurer that issued the policy or contract is domiciled in Vermont; 2)the insurer never held a license or certificate of authority in the state in which the person resides: 3)the state in which the person resides has an association similar to the association created by this chapter; and 4)the person is not eligible for coverage of the association of the state in which they reside.

Benefit Limits

§4158(8). (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 with-drawal 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 be-neficiaries 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; (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). Amended effective 7.1.2010.

Triggers

Discretionary Triggers

§4158(1). If a member insurer is an impaired insurer. Amended effective 7.1.2010.

Mandatory Triggers

§4158(2). If a member insurer is an insolvent insurer. Amended effective 7.1.2010.

Foreign Triggers

No separate provision. Amended effective 7.1.2010.

"Impaired Insurer"

8 V.S.A. § 4155(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. Amended effective 7.1.2010.

"Insolvent Insurer"

8 V.S.A. § 4155(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. Amended effective 7.1.2010.

"Member Insurer"

8 V.S.A. § 4155(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.

Account Structure

§4156(a). Four accounts, which include: health, life, annuity, and unallocated annuity accounts (including those contracts not otherwise excluded from coverage by the Act).

Assessments

Assessment Limits

§4159(d). Two percent (2%) of premiums in state for policies covered by each account. Provides that where this maximum assessment is insufficient to cover anticipated claims, the board may develop a method of allocating funds among claims.

Assessment Classes

§4159(b). Three classes of assessments: Class A for administrative costs and other general expenses; Class B to carry out the powers and duties of the association with regard to an impaired domestic insurer; and Class C to carry out the powers and duties of the association with regard to an impaired foreign or alien insurer.

Interest Rate Adjustments

§4153(b)(2)(C). Guaranty Association excludes from coverage: 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.

Tax Offsets

§4167(a). Yes. Member insurers may offset up to 100% of assessment for the first calendar year in which a certificate of contribution is issued. Thereafter, member insurers may offset up to 80% for the first calendar year after the year of issuance; 60% the second year; 40% the third year, and 20% the fourth year.

Definition of Premium

§ 4155(10) “Premiums” means amounts received on covered policies or contracts less premiums, considerations and deposits returned thereon, and less dividends and experience credits thereon. “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), 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 section 401, subsection 403 (b) or section 457 of the United States Internal Revenue Code.

Advertising Prohibition

§ 4164 Miscellaneous provisions … (e) No person shall make use in any manner of the protection afforded by this subchapter as a reason for buying insurance from him and the license of any person violating this provision may be revoked by the commissioner.

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