HOUSE BILL NO. 100
INTRODUCED BY B. SIMON
BY REQUEST OF THE STATE AUDITOR
AN ACT GENERALLY REVISING LAWS ADMINISTERED BY THE STATE AUDITOR; GENERALLY REVISING STATE SECURITY LAWS; GENERALLY REVISING STATE INSURANCE LAWS; DEFINING "INVOLUNTARY UNEMPLOYMENT INSURANCE"; DEFINING "GAP INSURANCE" AND "GAP AMOUNT"; DEFINING "SERVICE CONTRACT INSURANCE"; DEFINING "MECHANICAL BREAKDOWN INSURANCE"; DEFINING "PREPAID LEGAL PLAN"; PROVIDING FOR EXCLUSIONS FROM THE DEFINITION OF "PREPAID LEGAL PLAN"; AMENDING SECTIONS 27-1-306, 30-10-103, 30-10-104, 30-10-105, 30-10-107, 30-10-115, 30-10-201, 30-10-210, 31-1-233, 33-1-311, 33-1-411, 33-2-109, 33-2-502, 33-2-521, 33-2-701, 33-2-806, 33-3-202, 33-3-307, 33-4-101, 33-4-203, 33-4-311, 33-4-313, 33-5-402, 33-10-102, 33-15-336, 33-15-1107, 33-16-102, 33-16-104, 33-16-1021, 33-16-1022, 33-16-1026, 33-17-212, 33-17-236, 33-17-505, 33-17-507, 33-17-1203, 33-18-301, 33-18-1006, 33-20-121, 33-20-1201, 33-22-101, 33-22-111, 33-22-140, 33-22-307, 33-22-514, 33-22-523, 33-22-524, 33-22-1803, 33-22-1809, 33-22-1811, 33-22-1813, 33-22-1815, 33-22-1816, 33-23-212, 33-30-107, 33-30-201, 33-31-111, 33-31-202, 33-31-211, 33-31-216, 33-31-301, 33-31-401, 39-8-207, AND 61-12-303, MCA; REPEALING SECTIONS 33-2-1311, 33-7-526, 33-22-801, 33-22-802, 33-22-803, 33-22-804, 33-22-805, 33-22-806, 33-22-811, 33-22-812, 33-22-813, 33-22-814, 33-22-815, AND 33-22-816, MCA; AND PROVIDING EFFECTIVE DATES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MONTANA:
Section 1. Section 27-1-306, MCA, is amended to read:
"27-1-306. When replacement value to be allowed. The measure of damages in a case in which the cost of repairing a
motor vehicle exceeds its value is the actual replacement value of the motor vehicle rather than its "book" value unless,
after the damages arise, the parties agree to use the "book" value. "Book" value must be determined by referring to the used
car guides listed in 61-3-503(1)(c) the most recent volume of the Mountain States Edition of the National Automobile
Dealers Association (N.A.D.A.) Official Used Car Guide, the National Edition of the N.A.D.A. Appraisal Guides Official
Older Used Car Guide, or another nationally published used vehicle or appraisal guide approved by the department of
revenue. Actual replacement value is the actual cash value of the motor vehicle immediately prior to the damage. "Book"
value may be used to assist in determining the actual replacement value of the motor vehicle."
Section 2. Section 30-10-103, MCA, is amended to read:
"30-10-103. Definitions. When used in parts 1 through 3 of this chapter, unless the context requires otherwise, the following definitions apply:
(1) (a) "Broker-dealer" means any person engaged in the business of effecting transactions in securities for the account of others or for the person's own account.
(b) The term does not include:
(i) a salesperson, issuer, bank, savings institution, trust company, or insurance company; or
(ii) a person who does not have a place of business in this state if the person effects transactions in this state exclusively with or through the issuers of the securities involved in the transactions, other broker-dealers, or banks, savings institutions, trust companies, insurance companies, investment companies as defined in the Investment Company Act of 1940, pension or profit-sharing trusts, or other financial institutions or institutional buyers, whether acting for themselves or as trustee.
(2) "Commissioner" means the securities commissioner of this state.
(3) (a) "Commodity" means:
(i) any agricultural, grain, or livestock product or byproduct;
(ii) any metal or mineral, including a precious metal, or any gem or gem stone, whether characterized as precious, semiprecious, or otherwise;
(iii) any fuel, whether liquid, gaseous, or otherwise;
(iv) foreign currency; and
(v) all other goods, articles, products, or items of any kind.
(b) Commodity does not include:
(i) a numismatic coin with a fair market value at least 15% higher than the value of the metal it contains;
(ii) real property or any timber, agricultural, or livestock product grown or raised on real property and offered and sold by the owner or lessee of the real property; or
(iii) any work of art offered or sold by an art dealer at public auction or offered or sold through a private sale by the owner.
(4) "Commodity Exchange Act" means the federal statute of that name.
(5) "Commodity futures trading commission" means the independent regulatory agency established by congress to administer the Commodity Exchange Act.
(6) (a) "Commodity investment contract" means any account, agreement, or contract for the purchase or sale, primarily for speculation or investment purposes and not for use or consumption by the offeree or purchaser, of one or more commodities, whether for immediate or subsequent delivery or whether delivery is intended by the parties and whether characterized as a cash contract, deferred shipment or deferred delivery contract, forward contract, futures contract, installment or margin contract, leverage contract, or otherwise. Any commodity investment contract offered or sold, in the absence of evidence to the contrary, is presumed to be offered or sold for speculation or investment purposes.
(b) A commodity investment contract does not include a contract or agreement that requires, and under which the purchaser receives, within 28 calendar days after the payment in good funds of any portion of the purchase price, physical delivery of the total amount of each commodity to be purchased under the contract or agreement. The purchaser is not considered to have received physical delivery of the total amount of each commodity to be purchased under the contract or agreement when the commodity or commodities are held as collateral for a loan or are subject to a lien of any person when the loan or lien arises in connection with the purchase of each commodity or commodities.
(7) (a) "Commodity option" means any account, agreement, or contract giving a party to the account, agreement, or contract the right but not the obligation to purchase or sell one or more commodities or one or more commodity contracts, whether characterized as an option, privilege, indemnity, bid, offer, put, call, advance guaranty, decline guaranty, or otherwise.
(b) The term does not include an option traded on a national securities exchange registered with the U.S. securities and exchange commission.
(8) (a) "Federal covered adviser" means a person who is: is
(a) registered under section 203 of the Investment Advisers Act of 1940; or.
(b) excluded from the definition of "investment adviser" under section 202(a)(11) of the Investment Advisers Act of
1940 The term does not include a person who would be exempt from the definition of investment adviser pursuant to
subsection (11)(c)(i), (11)(c)(ii), (11)(c)(iii), (11)(c)(iv), (11)(c)(v), (11)(c)(vi), (11)(c)(vii), or (11)(c)(ix).
(9) "Federal covered security" means a security that is a covered security under section 18(b) of the Securities Act of 1933 or rules promulgated by the commissioner.
(10) "Guaranteed" means guaranteed as to payment of principal, interest, or dividends.
(11) (a) "Investment adviser" means a person who, for compensation, engages in the business of advising others, either directly or through publications or writings, as to the value of securities or as to the advisability of investing in, purchasing, or selling securities or who, for compensation and as a part of a regular business, issues or promulgates analyses or reports concerning securities.
(b) The term includes a financial planner or other person who:
(i) as an integral component of other financially related services, provides the investment advisory services described in subsection (11)(a) to others for compensation, as part of a business; or
(ii) represents to any person that the financial planner or other person provides the investment advisory services described in subsection (11)(a) to others for compensation.
(c) Investment adviser does not include:
(i) an investment adviser representative;
(ii) a bank, savings institution, trust company, or insurance company;
(iii) a lawyer or accountant whose performance of these services is solely incidental to the practice of the person's profession or who does not accept or receive, directly or indirectly, any commission, payment, referral, or other remuneration as a result of the purchase or sale of securities by a client, does not recommend the purchase or sale of specific securities, and does not have custody of client funds or securities for investment purposes;
(iv) a registered broker-dealer whose performance of services described in subsection (11)(a) is solely incidental to the conduct of business and for which the broker-dealer does not receive special compensation;
(v) a publisher of any newspaper, news column, newsletter, news magazine, or business or financial publication or service, whether communicated in hard copy form or by electronic means or otherwise, that does not consist of the rendering of advice on the basis of the specific investment situation of each client;
(vi) a person whose advice, analyses, or reports relate only to securities exempted by 30-10-104(1);
(vii) an engineer or teacher whose performance of the services described in subsection (11)(a) is solely incidental to the practice of the person's profession;
(viii) a federal covered adviser; or
(ix) other persons not within the intent of this subsection (11) as the commissioner may by rule or order designate.
(12) (a) "Investment adviser representative" means:
(i) any partner of, officer of, director of, or a person occupying a similar status or performing similar functions, or other individual, except clerical or ministerial personnel, employed by or associated with an investment adviser who:
(i)(A) makes any recommendation or otherwise renders advice regarding securities to clients;
(ii)(B) manages accounts or portfolios of clients;
(iii)(C) solicits, offers, or negotiates for the sale or sells investment advisory services; or
(iv)(D) supervises employees who perform any of the foregoing.; and
(ii) with respect to a federal covered adviser, any person who is an investment adviser representative with a place of business in this state as those terms are defined by the securities and exchange commission under the Investment Advisers Act of 1940.
(b) Investment adviser representative The term does not include a salesperson registered pursuant to 30-10-201(1)
whose performance of the services described in subsection (12)(a) is solely incidental to the conduct of business as a
salesperson and for which the salesperson does not receive special compensation other than fees relating to the solicitation
or offering of investment advisory services of a registered investment adviser or of a federal covered adviser who has made
a notice filing under parts 1 through 3 of this chapter.
(13) "Issuer" means any person who issues or proposes to issue any security, except that with respect to certificates of deposit, voting-trust certificates, or collateral-trust certificates or with respect to certificates of interest or shares in an unincorporated investment trust not having a board of directors, or persons performing similar functions, or of the fixed, restricted management, or unit type, the term "issuer" means the person or persons performing the acts and assuming the duties of depositor or manager pursuant to the provisions of the trust or other agreement or instrument under which the security is issued.
(14) "Nonissuer" means not directly or indirectly for the benefit of the issuer.
(15) "Offer" or "offer to sell" includes each attempt or offer to dispose of or solicitation of an offer to buy a security or interest in a security for value.
(16) "Person", for the purpose of parts 1 through 3 of this chapter, means an individual, a corporation, a partnership, an association, a joint-stock company, a trust in which the interests of the beneficiaries are evidenced by a security, an unincorporated organization, a government, or a political subdivision of a government.
(17) "Precious metal" means the following, in coin, bullion, or other form:
(a) silver;
(b) gold;
(c) platinum;
(d) palladium;
(e) copper; and
(f) other items as the commissioner may by rule or order specify.
(18) "Registered broker-dealer" means a broker-dealer registered pursuant to 30-10-201.
(19) "Sale" or "sell" includes each contract of sale of, contract to sell, or disposition of a security or interest in a security for value.
(20) "Salesperson" means an individual other than a broker-dealer who represents a broker-dealer or issuer in effecting or attempting to effect sales of securities. A partner, officer, or director of a broker-dealer or issuer is a salesperson only if the person otherwise comes within this definition. Salesperson does not include an individual who represents:
(a) an issuer in:
(i) effecting a transaction in a security exempted by 30-10-104(1), (2), (3), (8), (9), (10), or (11);
(ii) effecting transactions exempted by 30-10-105, except when registration as a salesperson, pursuant to 30-10-201, is required by 30-10-105 or by any rule promulgated under 30-10-105;
(iii) effecting transactions in a federal covered security described in section 18(b)(4)(D) of the Securities Act of 1933 for a qualified purchaser as defined in section 18(b)(3) of the Securities Act of 1933; or
(iv) effecting transactions with existing employees, partners, or directors of the issuer if no commission or other remuneration is paid or given directly or indirectly for soliciting any person in this state; or
(b) a broker-dealer in effecting in this state solely those transactions described in section 15(h)(2) of the Securities Exchange Act of 1934.
(21) "Securities Act of 1933", "Securities Exchange Act of 1934", "Public Utility Holding Company Act of 1935", "Investment Advisors Act of 1940", and "Investment Company Act of 1940" mean the federal statutes of those names.
(22) (a) "Security" means any note; stock; treasury stock; bond; commodity investment contract; commodity option; debenture; evidence of indebtedness; certificate of interest or participation in any profit-sharing agreement; collateral-trust certificate; preorganization certificate or subscription; transferable shares; investment contract; voting-trust certificate; certificate of deposit for a security; certificate of interest or participation in an oil, gas, or mining title or lease or in payments out of production under a title or lease; or, in general, any interest or instrument commonly known as a security, any put, call, straddle, option, or privilege on any security, certificate of deposit, or group or index of securities, including any interest in a security or based on the value of a security, or any certificate of interest or participation in, temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase any of the foregoing.
(b) Security does not include an insurance or endowment policy or annuity contract under which an insurance company promises to pay a fixed sum of money either in a lump sum or periodically for life or some other specified period.
(23) "State" means any state, territory, or possession of the United States, as well as the District of Columbia and Puerto Rico.
(24) "Transact", "transact business", or "transaction" includes the meanings of the terms "sale", "sell", and "offer"."
Section 3. Section 30-10-104, MCA, is amended to read:
"30-10-104. Exempt securities. Sections 30-10-202 through 30-10-207 and 30-10-211 do not apply to any of the following securities:
(1) any security, including a revenue obligation, issued or guaranteed by the United States, any state, any political subdivision of a state, or any agency or corporate or other instrumentality of one or more of the foregoing; provided, however, 30-10-202 through 30-10-207 and 30-10-211 apply to a security issued by any of the foregoing that is payable solely from payments to be received in respect of property or money used under a lease, sale, or loan arrangement by or for a nongovernmental industrial or commercial enterprise, unless the enterprise or any security of which it is the issuer is within any of the exemptions enumerated in subsections (2) through (15) of this section;
(2) any security issued or guaranteed by Canada, a Canadian province, a political subdivision of a province, or an agency or corporate or other instrumentality of one or more of the foregoing or any other foreign government with which the United States currently maintains diplomatic relations if the security is recognized as a valid obligation by the issuer or guarantor;
(3) any security issued by and representing an interest in or a debt of or guaranteed by a bank organized under the laws of the United States or a bank, savings institution, or trust company organized and supervised under the laws of any state;
(4) any security issued by and representing an interest in, or a debt of, or guaranteed by a federal savings and loan association or a building and loan or similar association organized under the laws of any state and authorized to do business in this state;
(5) any security issued or guaranteed by a federal credit union or a credit union, industrial loan association, or similar association organized and supervised under the laws of this state;
(6) any security issued or guaranteed by a railroad, other common carrier, public utility, or holding company which that
is:
(a) subject to the jurisdiction of the interstate commerce commission;
(b) a registered holding company under the Public Utility Holding Company Act of 1935 or a subsidiary of a registered holding company within the meaning of that act;
(c) regulated in respect of its rates and charges by a governmental authority of the United States or any state or municipality; or
(d) regulated in respect to the issuance or guarantee of the security by a governmental authority of the United States, any state, Canada, or any Canadian province; also equipment trust certificates in respect to equipment conditionally sold or leased to a railroad or public utility if other securities issued by the railroad or public utility would be exempt under this subsection;
(7) any security that meets all of the following conditions:
(a) if the issuer is not organized under the laws of the United States or a state, it has appointed a duly an authorized
agent in the United States for service of process and has set forth the name and address of the agent in its prospectus;
(b) a class of the issuer's securities is required to be and is registered under section 12 of the Securities Exchange Act of 1934 and has been registered for the 3 years immediately preceding the offering date;
(c) the issuer or a significant subsidiary has not had a material default during the last 7 years, or during the issuer's existence if that period is less than 7 years, in the payment of:
(i) principal, interest, dividend, or sinking fund installment on preferred stock or indebtedness for borrowed money; or
(ii) rentals under leases with terms of 3 years or more;
(d) the issuer has had consolidated net income, before extraordinary items and the cumulative effect of accounting changes, of at least $1 million in 4 of its last 5 fiscal years, including its last fiscal year; and if the offering is of interest-bearing securities, has had for its last fiscal year such net income, but before deduction for income taxes and depreciation, of at least 1 1/2 times the issuer's annual interest expense, giving effect to the proposed offering and the intended use of the proceeds. "Last fiscal year", as used in this subsection (7)(d), means the most recent year for which audited financial statements are available, provided that the statements cover a fiscal period ended not more than 15 months from the commencement of the offering.
(e) if the offering is of stock or shares, other than preferred stock or shares, the securities have voting rights and rights including the right to have at least as many votes per share and the right to vote on at least as many general corporate decisions as each of the issuer's outstanding classes of stock or shares, except as otherwise required by law;
(f) if the offering is of stock or shares, other than preferred stock or shares, the securities are owned beneficially or of record on any date within 6 months prior to the commencement of the offering by at least 1,200 persons and on that date there are at least 750,000 of the shares outstanding with an aggregate market value, based on the average bid price for that day, of at least $3,750,000. In connection with the determination of the number of persons who are beneficial owners of the stock or shares of an issuer, the issuer or broker-dealer may rely in good faith for the purposes of this section upon written information furnished by the record owners.
(8) any security issued by any person organized and operated not for private profit but exclusively for religious, educational, benevolent, charitable, fraternal, social, athletic, or reformatory purposes if the issuer pays a fee of $50 and files with the commissioner 20 days prior to the offering a written notice specifying the terms of the offer and the commissioner does not disallow the exemption in writing within the 20-day period;
(9) any commercial paper that arises out of a current transaction or the proceeds of which have been or are to be used
for the current transaction and that evidences an obligation to pay cash within 9 months of the date of issuance, exclusive of
days of grace, or any renewal of the paper which that is likewise limited or any guarantee of the paper or of any renewal,
when the commercial paper is sold to banks or insurance companies;
(10) any investment contract issued in connection with an employee's stock purchase, savings, pension, profit-sharing, or similar benefit plan;
(11) any security for which the commissioner determines by order that an exemption would better serve the purposes of 30-10-102 than would registration. The fee for this exemption must be as prescribed in 30-10-209(4).
(12) any security listed or approved for listing upon notice of issuance on the New York stock exchange, the American stock exchange, the Pacific stock exchange, the Midwest stock exchange, the Chicago board of options exchange, the Philadelphia stock exchange, the Boston stock exchange, or any other stock exchange registered with the federal securities and exchange commission and approved by the commissioner; any other security of the same issuer that is of senior or substantially equal rank; any security called for by subscription rights or warrants so listed or approved; or any warrant or right to purchase or subscribe to any of the foregoing. The commissioner may by rule or order limit, restrict, or otherwise condition the terms under which any security may be exempt under this subsection.
(13) any national market system security listed or approved for listing upon notice of issuance on the national association of securities dealers automated quotation system or any other national quotation system approved by the commissioner; any other security of the same issuer that is of senior or substantially equal rank; any security called for by subscription rights or warrants so listed or approved; or any warrant or right to purchase or subscribe to any of the securities listed in this subsection. The commissioner may by rule or order limit, restrict, or otherwise condition the terms under which any security may be exempt under this subsection.
(14) any security issued by and representing an interest in, or a debt of, or any security guaranteed by any insurer organized and authorized to transact business under the laws of any state;
(15) any security for which an offer or sale is not directed to or received by a person in this state, and the issuer does not maintain a place of business in the state."
Section 4. Section 30-10-105, MCA, is amended to read:
"30-10-105. Exempt transactions -- rulemaking. Except as expressly provided in this section, 30-10-201 through 30-10-207 and 30-10-211 do not apply to the following transactions:
(1) a nonissuer isolated transaction, whether effected through a broker-dealer or not. A transaction is presumed to be isolated if it is one of not more than three transactions during the prior 12-month period.
(2) (a) a nonissuer distribution of an outstanding security by a broker-dealer registered pursuant to 30-10-201 if:
(i) quotations for the securities to be offered or sold (or the securities issuable upon exercise of any warrant or right to
purchase or subscribe to the securities) are reported by the automated quotations system operated by the national
association of securities dealers, inc., (NASDAQ) or by any other quotation system approved by the commissioner by rule;
or
(ii) the security has a fixed maturity or a fixed interest or dividend provision and there has been no default during the current fiscal year or within the 3 preceding fiscal years or if the issuer and any predecessors have been in existence for less than 3 years and there has been no default in the payment of principal, interest, or dividends on the security.
(b) The commissioner may by order deny or revoke the exemption specified in subsection (2)(a) with respect to a specific security. Upon the entry of an order, the commissioner shall promptly notify all registered broker-dealers that it has been entered and give the reasons for the order and shall notify them that within 15 days of the receipt of a written request, the matter will be set for hearing. If a hearing is not requested and is not ordered by the commissioner, the order remains in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner, after notice of and opportunity for hearing to all interested persons, may modify or vacate the order or extend it until final determination. An order under this subsection may not operate retroactively. A person may not be considered to have violated parts 1 through 3 of this chapter by reason of any offer or sale effected after the entry of an order under this subsection if the person sustains the burden of proof that the person did not know and in the exercise of reasonable care could not have known of the order.
(3) a nonissuer transaction effected by or through a registered broker-dealer pursuant to an unsolicited order or offer to buy, but the commissioner may require that the customer acknowledge upon a specified form that the sale was unsolicited and that a signed copy of each form be preserved by the broker-dealer for a specified period;
(4) a transaction between the issuer or other person on whose behalf the offering is made and an underwriter or between underwriters;
(5) a transaction by an executor, administrator, sheriff, marshal, receiver, trustee in bankruptcy, guardian, or conservator in the performance of official duties;
(6) a transaction executed by a bona fide pledgee without any purpose of evading parts 1 through 3 of this chapter;
(7) an offer or sale to a bank, savings institution, trust company, insurance company, investment company as defined in the Investment Company Act of 1940, pension or profit-sharing trust, or other financial institution or institutional buyer or to a broker-dealer, whether the purchaser is acting for itself or in a fiduciary capacity;
(8) (a) a transaction pursuant to an offer made in this state directed by the offeror to not more than 10 persons (other than those designated in subsection (7)) during any period of 12 consecutive months, if:
(i) the seller reasonably believes that all the buyers are purchasing for investment; and
(ii) a commission or other remuneration is not paid or given directly or indirectly for soliciting a prospective buyer; provided, however, that a commission may be paid to a registered broker-dealer if the securities involved are registered with the United States securities and exchange commission under the federal Securities Act of 1933, as amended;
(b) any transaction pursuant to an offer made in this state directed by the offeror to not more than 25 persons, other than those designated in subsection (7), during any period of 12 consecutive months if:
(i) the seller reasonably believes that all the buyers are purchasing for investment;
(ii) a commission or other remuneration is not paid or given directly or indirectly for soliciting any a prospective buyer;
provided, however, that a commission may be paid to a registered broker-dealer if the securities involved are registered
with the United States securities and exchange commission under the federal Securities Act of 1933, as amended; and
(iii) the offeror applies for and obtains the written approval of the commissioner prior to making any offers in this state and pays a filing fee that must accompany the application for approval. The commissioner may deny an application.
(c) For the purpose of the exemptions provided for in this subsection (8), an offer to sell is made in this state, whether or not the offeror or any of the offerees is then present in this state, if the offer either originates from this state or is directed by the offeror to this state and received at the place to which it is directed (or at any post office in this state in the case of a mailed offer).
(9) an offer or sale of a preorganization certificate or subscription if:
(a) a commission or other remuneration is not paid or given directly or indirectly for soliciting a prospective subscriber;
(b) the number of subscribers does not exceed 25; and
(c) a payment is not made by a subscriber;
(10) a transaction pursuant to an offer to existing security holders of the issuer, including persons who at the time of the transaction are holders of convertible securities, nontransferable warrants, or transferable warrants exercisable within not more than 90 days of their issuance, if:
(a) a commission or other remuneration (other than a standby commission) is not paid or given directly or indirectly for soliciting any security holder in this state; or
(b) the issuer first files a notice specifying the terms of the offer and the commissioner does not by order disallow either subsection (10)(a) or the notice specifying the terms of the offer;
(11) an offer, but not a sale, of a security for which registration statements have been filed under both parts 1 through 3 of this chapter and the Securities Act of 1933 if a stop, refusal, denial, suspension, or revocation order is not in effect and a public proceeding or examination looking toward an order is not pending under either law;
(12) an offer, but not a sale, of a security for which a registration statement has been filed under parts 1 through 3 of this chapter and the commissioner does not disallow the offer in writing within 10 days of the filing;
(13) the issuance of a stock security dividend, whether the corporation distributing the dividend is the issuer of the stock
security or not, if nothing of value is given by stockholders security holders for the distribution other than the surrender of a
right to a cash dividend when the stockholder security holder can elect to take a dividend in cash or stock in securities;
(14) a transaction incident to a right of conversion, or a statutory or judicially approved reclassification, or a
recapitalization, reorganization, quasi-reorganization, stock split, reverse stock split, merger, consolidation, or sale of
assets;
(15) a transaction in compliance with rules that the commissioner may adopt to serve the purposes of 30-10-102. The
commissioner may require that 30-10-201 through 30-10-207 and 30-10-211 apply to any or all transactional exemptions
adopted by rule.
(16) a transaction in the securities of a certified Montana capital company or a certified Montana small business
investment capital company, as defined in 90-8-104, provided that if the company first files all disclosure documents, along
with a consent to service of process, with the commissioner. The commissioner may not charge a fee for the filing.
(17) the sale of a commodity investment contract traded on a commodities exchange recognized by the commissioner at the time of sale;
(18) a transaction within the exclusive jurisdiction of the commodity futures trading commission as granted under the Commodity Exchange Act;
(19) a transaction that:
(a) involves the purchase of one or more precious metals;
(b) requires, and under which the purchaser receives within 7 calendar days after payment in good funds of any portion of the purchase price, physical delivery of the quantity of the precious metals purchased. For the purposes of this subsection, physical delivery is considered to have occurred if, within the 7-day period, the quantity of precious metals, whether in specifically segregated or fungible bulk, purchased by the payment is delivered into the possession of a depository, other than the seller, that:
(i) (A) is a financial institution, meaning a bank, savings institution, or trust company organized under or supervised pursuant to the laws of the United States or of this state;
(B) is a depository the warehouse receipts of which are recognized for delivery purposes for any commodity on a contract market designated by the commodity futures trading commission; or
(C) is a storage facility licensed by the United States or any agency of the United States; and
(ii) issues, and the purchaser receives, a certificate, document of title, confirmation, or other instrument evidencing that the quantity of precious metals has been delivered to the depository and is being and will continue to be held on the purchaser's behalf, free and clear of all liens and encumbrances other than:
(A) liens of the purchaser;
(B) tax liens;
(C) liens agreed to by the purchaser; or
(D) liens of the depository for fees and expenses that previously have been disclosed to the purchaser.
(c) requires the quantity of precious metals purchased and delivered into the possession of a depository, as provided in subsection (19)(b), to be physically located within Montana at all times after the 7-day delivery period provided in subsection (19)(b), and the precious metals are in fact physically located within Montana at all times after that delivery period;
(20) a transaction involving a commodity investment contract solely between persons engaged in producing, processing, using commercially, or handling as merchants each commodity subject to the contract or any byproduct of the commodity;
(21) an offer or sale of a security to an employee of the issuer, pursuant to an employee stock ownership plan qualified under section 401 of the Internal Revenue Code; or
(22) (a) an offer or sale of securities by a cooperative association organized under the provisions of Title 35, chapter 15, or under the laws of another state that are substantially the same as the provisions of Title 35, chapter 15, if the offer and sale are only to members of the cooperative association or the purchase of the securities is necessary or incidental to establishing membership in the cooperative association;
(b) a cooperative organized under the laws of another state may not take advantage of the exemption created by this subsection (22) unless, not less than 10 days before the issuance or delivery of the securities, the cooperative has furnished the commissioner with a general written description of the transaction and any other information the commissioner may require by rule or otherwise. The commissioner shall promulgate rules establishing a list of states whose laws are considered substantially the same as Title 35, chapter 15, for the purposes of this subsection (22)."
Section 5. Section 30-10-107, MCA, is amended to read:
"30-10-107. Administration. (1) The administration of the provisions of parts 1 through 3 of this chapter must be
under the general supervision and control of the state auditor, the ex officio securities commissioner. The commissioner
may, from time to time, make, amend, and rescind rules and forms as necessary to carry out the provisions of parts 1
through 3 of this chapter. A rule or form may not be adopted unless the commissioner finds that the action is necessary or
appropriate in the public interest or for the protection of investors and consistent with the purposes of the policy and
provisions of parts 1 through 3 of this chapter. In prescribing rules and forms, the commissioner may cooperate with the
securities administrators of the other states and the securities and exchange commission with a view to effectuating the
policy of parts 1 through 3 of this chapter to achieve maximum uniformity in the form and content of registration
statements, applications, and reports wherever whenever practicable.
(2) It is unlawful for the commissioner or any of the commissioner's officers or employees to use for personal benefit any information filed with or obtained by the commissioner and not made public. The provisions of parts 1 through 3 of this chapter do not authorize the commissioner or any of the commissioner's officers or employees to disclose any information or the fact that any investigation is being made, except among themselves or when necessary or appropriate in a proceeding or investigation under parts 1 through 3 of this chapter.
(3) The provisions of parts 1 through 3 of this chapter imposing liability do not apply to any act done or omitted in good faith in conformity with any rule, form, or order of the commissioner, notwithstanding that the rule or form may later be amended or rescinded or be determined by judicial or other authority to be invalid for any reason.
(4) Every hearing in an administrative proceeding must be public unless the commissioner grants a request joined in by all the respondents that the hearing be conducted privately.
(5) A document is filed when it is received by the commissioner. The commissioner shall keep a register of all applications for registration and registration statements that are or have ever been effective under parts 1 through 3 of this chapter and all denial, suspension, or revocation orders that have ever been entered under parts 1 through 3 of this chapter. The register must be open for public inspection. The information contained in or filed with any registration statement, application, or report may be made available to the public under rules the commissioner prescribes.
(6) Upon request and at a reasonable charge, the commissioner shall furnish to any person photostatic or other copies, certified if requested, of any entry in the register or any document that is a matter of public record. In any proceeding or prosecution under parts 1 through 3 of this chapter, any certified copy is prima facie evidence of the contents of the entry or document certified.
(7) To serve the purposes of 30-10-102, the commissioner may cooperate with the securities and exchange commission, the commodity futures trading commission, the securities investor protection corporation, the securities registration depository, any national securities exchange, or national securities association registered under the Securities Exchange Act of 1934, any national or international organization of securities officials or agencies, and any governmental agency, corporation, or body.
(8) Except as specifically provided in this title, an order or notice may be given to a person by personal delivery or by mail addressed to that person at the person's last recorded principal place of business on file at the commissioner's office. An order or notice that is mailed is considered to have been given at the time it is mailed."
Section 6. Section 30-10-115, MCA, is amended to read:
"30-10-115. Deposits to the general fund. (1) All fees, examination charges, and miscellaneous charges received by
the commissioner pursuant to parts 1 through 3 of this chapter, except for portfolio registration fees described in
30-10-209(1)(d), must be deposited in the general fund.
(2) All portfolio registration fees collected under 30-10-209(1)(d) and examination costs collected under 30-10-210 must be deposited in the state special revenue account to the credit of the state auditor's office. The funds allocated by this section to the state special revenue account may only be used to defray the expenses of the state auditor's office in discharging its administrative and regulatory powers and duties in relation to portfolio registration and examinations. Any excess fees must be deposited in the general fund."
Section 7. Section 30-10-201, MCA, is amended to read:
"30-10-201. Registration and notice filing requirements of broker-dealers, salespersons, investment advisers, and investment adviser representatives. (1) It is unlawful for a person to transact business in this state as a broker-dealer or salesperson, except as provided in 30-10-105, unless the person is registered under parts 1 through 3 of this chapter.
(2) It is unlawful for a broker-dealer or issuer to employ a salesperson to represent the broker-dealer or issuer in this state, except in transactions exempt under 30-10-105, unless the salesperson is registered under parts 1 through 3 of this chapter.
(3) It is unlawful for any a person to transact business in this state as an investment adviser or as an investment adviser
representative unless:
(a) the person is registered under parts 1 through 3 of this chapter;
(b) the person does not have a place of business in the state and the person's only clients in this state are:
(i) investment companies, as defined in the Investment Company Act of 1940, or insurance companies;
(ii) other investment advisers;
(iii) federal covered advisers;
(iv) broker-dealers;
(v) banks;
(vi) trust companies;
(vii) savings and loan associations;
(viii) employee benefit plans with assets of not less than $1 million;
(ix) governmental agencies or instrumentalities, whether acting for themselves or as trustees with investment control; or
(x) other institutional investors as designated by rule or order of the commissioner; or
(c) the person does not have a place of business in this state and during the preceding 12-month period, the person has not had more than five clients who are residents of this state, other than those clients specified in subsection (3)(b).
(4) Except for federal covered advisers whose only clients are clients listed in subsection (3)(b) or who meet the requirements of subsection (3)(c), it is unlawful for a federal covered adviser to conduct advisory business in this state unless the federal covered adviser complies with the provisions of subsection (6)(b).
(5) (a) It is unlawful for a person required to be registered as an investment adviser under Title 30, chapter 10, parts 1 through 3, to employ an investment adviser representative unless the investment adviser representative is registered or exempt from registration under Title 30, chapter 10, parts 1 through 3.
(b) It is unlawful for a federal covered adviser to employ, supervise, or associate with an investment adviser representative who maintains a place of business in this state unless the investment adviser representative is registered or exempt from registration under Title 30, chapter 10, parts 1 through 3.
(6) (a) A broker-dealer or a salesperson, acting as an agent for an issuer or as an agent for a broker-dealer in the offer or sale of securities for an issuer, or an investment adviser or investment adviser representative may apply for registration by filing an application in the form that the commissioner prescribes and payment of the fee prescribed in 30-10-209.
(b) Except for a federal covered adviser whose only clients are those listed in subsection (3)(b) or who meet the
requirements of subsection (3)(c), a federal covered adviser shall, prior to acting as a federal covered adviser in this state,
pay submit a notice filing to the commissioner consisting of the fee prescribed in 30-10-209 and shall file with the
commissioner copies of any documents filed with the securities and exchange commission that the commissioner requires
by rule or order. A notice filing is effective upon its receipt by the commissioner.
(7) The application must contain whatever information the commissioner requires. A registration application of a broker-dealer, salesperson, investment adviser, or investment adviser representative may not be withdrawn before the commissioner approves or denies the registration, without the express written consent of the commissioner.
(8) When the registration requirements are met, the commissioner shall make the registration effective. An effective registration of a broker-dealer, salesperson, investment adviser, or investment adviser representative may not be withdrawn or terminated without the express written consent of the commissioner.
(9) Registration of a broker-dealer, salesperson, investment adviser, or investment adviser representative or a notice filing by a federal covered adviser:
(a) is effective until December 31 following the registration or notice filing or any other time as the commissioner may by rule adopt; and
(b) may be renewed pursuant to subsection (11).
(10) (a) The registration of a salesperson is not effective during any period when the salesperson is not associated with an issuer or a registered broker-dealer specified in the application. When a salesperson begins or terminates a connection with an issuer or registered broker-dealer, the salesperson and the issuer or broker-dealer shall promptly notify the commissioner.
(b) The registration of an investment adviser representative is not effective during any period when the person is not
associated with either an investment adviser registered under this act or a federal covered adviser with an effective notice
filing and who is specified in the application. When an investment adviser representative begins or terminates a connection
with an investment adviser, the investment adviser shall promptly notify the commissioner. When an investment adviser
representative begins or terminates a connection with a federal covered adviser, the investment adviser representative shall
promptly notify the commissioner.
(11) Registration of a broker-dealer, salesperson, investment adviser, or investment adviser representative or notice
filing for a federal covered adviser may be renewed by filing, prior to the expiration of the registration or notice filing, an
application containing information as the commissioner may require to indicate any material change in the information
contained in the original application or any renewal application for registration or notice filing, and payment of the fee
prescribed by 30-10-209. A broker-dealer who is not a member of NASD the national association of securities dealers, inc.,
is required to file a financial statement of the broker-dealer within 90 days of the end of the broker-dealer's fiscal year,
except as provided in section 15 of the Securities Exchange Act of 1934. A registered broker-dealer or investment adviser
may file an application for registration of a successor, to become effective upon approval of the commissioner.
(12) (a) Except as provided in section 15 of the Securities Exchange Act of 1934 in the case of a broker-dealer and section 222 of the Investment Advisers Act of 1940 in the case of an investment adviser, every registered broker-dealer and investment adviser shall make and keep accounts and other records, except with respect to securities exempt under 30-10-104(1), as may be prescribed by the commissioner by rule or order. All required records of an investment adviser must be preserved for the period the commissioner prescribes by rule or order. All the records of a registered broker-dealer or investment adviser are subject at any time or from time to time to reasonable periodic, special, or other examinations, within or outside this state, by representatives of the commissioner, as the commissioner considers necessary or appropriate in the public interest or for the protection of investors.
(b) The commissioner may require investment advisers who are registered or required to be registered to furnish or disseminate certain information as necessary or appropriate in the public interest or for the protection of investors and advisory clients.
(c) If information contained in any document filed with the commissioner is, or becomes, inaccurate or incomplete in
any material respect, the registrant or federal covered adviser must shall promptly file a correcting amendment.
(13) The commissioner may by order deny, suspend, or revoke registration of any broker-dealer, salesperson, investment adviser, or investment adviser representative if the commissioner finds that the order is in the public interest and that the applicant or registrant or, in the case of a broker-dealer or investment adviser, any partner, officer, director, person occupying a similar status or performing similar functions, or person directly or indirectly controlling the broker-dealer or investment adviser:
(a) has filed an application for registration under this section that, as of its effective date or as of any date after filing in
the case of an order denying effectiveness, was incomplete in any material respect or contained any statement that was, in
the light of the circumstances under which it was made, false or misleading with respect to any material fact;
(b) has willfully violated or willfully failed to comply with any provision of parts 1 through 3 of this chapter or a predecessor law or any rule or order under parts 1 through 3 of this chapter or a predecessor law;
(c) has been convicted of any misdemeanor involving a security or any aspect of the securities business or any felony;
(d) is permanently or temporarily enjoined by any court of competent jurisdiction from engaging in or continuing any conduct or practice involving any aspect of the securities business;
(e) is the subject of an order of the commissioner denying, suspending, or revoking registration as a broker-dealer, salesperson, investment adviser, or investment adviser representative;
(f) is the subject of an adjudication or determination, within the past 5 years, by a securities or commodities agency or administrator of another state or a court of competent jurisdiction, that the person has violated the Securities Act of 1933, the Securities Exchange Act of 1934, the Investment Advisors Act of 1940, the Investment Company Act of 1940, or the Commodity Exchange Act or the securities or commodities law of any other state;
(g) has engaged in dishonest or unethical practices in the securities business;
(h) is insolvent, either in the sense that the person's liabilities exceed the person's assets or in the sense that the person cannot meet obligations as they mature, but the commissioner may not enter an order against a broker-dealer or investment adviser under this subsection (13) without a finding of insolvency as to the broker-dealer or investment adviser;
(i) has not complied with a condition imposed by the commissioner under this section or is not qualified on the basis of such factors as training, experience, or knowledge of the securities business;
(j) has failed to pay the proper filing fee, but the commissioner may enter only a denial order under this subsection (13), and the commissioner shall vacate any order when the deficiency has been corrected; or
(k) has failed to reasonably supervise the person's salespersons or employees or investment adviser representatives or
employees to assure ensure their compliance with this act.
(14) The commissioner may not institute a suspension or revocation proceeding on the basis of a fact or transaction known to the commissioner when registration became effective unless the proceeding is instituted within 30 days after the date on which the registration became effective.
(15) The commissioner may by order summarily postpone or suspend registration pending final determination of any proceeding under this section.
(16) Upon the entry of the order under subsection (13), the commissioner shall promptly notify the applicant or registrant, as well as the employer or prospective employer if the applicant or registrant is a salesperson or investment adviser representative, that it has been entered and of the reasons for the order and that if requested by the applicant or registrant within 15 days after the receipt of the commissioner's notification, the matter will be promptly set for hearing. If a hearing is not requested within 15 days and none is ordered by the commissioner, the order will remain in effect until it is modified or vacated by the commissioner. If a hearing is requested or ordered, the commissioner, after notice of and opportunity for hearing, may modify or vacate the order or extend it until final determination.
(17) If the commissioner finds that any a registrant or applicant for registration is no longer in existence or has ceased to
do business as a broker-dealer, salesperson, investment adviser, or investment adviser representative or is subject to an
adjudication of mental incompetence or to the control of a committee, conservator, or guardian or cannot be located after
reasonable search, the commissioner may by order cancel the registration or application.
(18) The commissioner may, after suspending or revoking registration of any broker-dealer, salesperson, investment adviser, or investment adviser representative, impose a fine not to exceed $5,000 upon the broker-dealer, salesperson, investment adviser, or investment adviser representative. The fine is in addition to all other penalties imposed by the laws of this state and must be collected by the commissioner in the name of the state of Montana and deposited in the general fund. Imposition of any fine under this subsection is an order from which an appeal may be taken pursuant to 30-10-308. If any broker-dealer, salesperson, investment adviser, or investment adviser representative fails to pay a fine referred to in this subsection, the amount of the fine is a lien upon all of the assets and property of the broker-dealer, salesperson, investment adviser, or investment adviser representative in this state and may be recovered by suit by the commissioner and deposited in the general fund. Failure of a broker-dealer, salesperson, investment adviser, or investment adviser representative to pay a fine also constitutes a forfeiture of the right to do business in this state under parts 1 through 3 of this chapter.
(19) A sole proprietor registered as a broker-dealer or investment adviser who does not employ other salespersons or investment adviser representatives, other than the sole proprietor, is not required to register as both a broker-dealer and a salesperson or as an investment adviser and an investment adviser representative if the sole proprietor meets the examination requirements established by the commissioner by rule.
(20) A person who is subject to the provisions of this section and who has passed the general securities principal's examination is not required to also pass the uniform investment adviser law examination. The commissioner shall by rule provide for a form that a person who passes the general securities principal's examination shall file with the commissioner as a verification of having passed the examination unless the commissioner can verify electronically that the person has passed the exam."
Section 8. Section 30-10-210, MCA, is amended to read:
"30-10-210. Examination costs. (1) An issuer, broker-dealer, or investment adviser who is examined in connection
with a registration under parts 1 through 3 of this chapter shall reimburse the commissioner or any of his duly the
commissioner's authorized agents, officers, or employees for actual travel expenses, a reasonable living expense allowance,
and a per diem as compensation of examiners, as which are necessarily incurred on account of the examination, upon
presentation of a detailed account of such the charges and expenses by the commissioner or pursuant to his the
commissioner's written authorization; however, no reimbursement of expenses may not be required for routine
examinations performed in connection with an application for registration. No A person may not pay and no an examiner
may not accept additional emolument on account of such an examination.
(2) The commissioner shall pay to the state treasurer to the credit of the general fund all moneys received hereunder
deposit examination costs collected under this section in the special revenue account provided for in 30-10-115. The
commissioner may give written authorization for payment of the examination costs referred to in subsection (1) by the
person examined directly to the examiner.
(3) If an issuer, broker-dealer, or investment adviser fails to pay the charges and expenses referred to above in
subsection (1), the same shall charges and expenses must be paid out of the funds of the commissioner in the same manner
as other disbursements of such those funds. The amount so paid is a first lien upon all of the assets and property in this state
of the issuer, broker-dealer, or investment adviser and may be recovered by suit by the attorney general on behalf of the
state of Montana and restored to the appropriate fund. Failure of the issuer, broker-dealer, or investment adviser to pay the
charges and expenses also works a forfeiture of his or its the right to do business in this state under parts 1 through 3 of this
chapter."
Section 9. Section 31-1-233, MCA, is amended to read:
"31-1-233. Insurance. (1) The amount, if any, included for insurance that may be purchased by the holder of the
contract may not exceed the applicable premiums chargeable in accordance with the rates filed with the insurance
department of this state where when the rates are required by law to be approved by the insurance department.
(2) All insurance purchased by the holder of the contract must be written by an insurance company authorized to do
business in this state and must be countersigned by a duly licensed resident insurance producer authorized to engage in the
insurance business in this state.
(3) A buyer may be required to provide insurance on the goods at his the buyer's own cost for the protection of the seller
or holder as well as the buyer, but the insurance is limited to insurance against substantial risk of loss, damage, or
destruction of the goods.
(4) Any other insurance may be included in a retail installment transaction at the buyer's expense only if contracted for voluntarily by the buyer.
(5) If insurance for which an identified charge is made insures the life, safety, or health of the buyer or his the buyer's
interest in the goods and is purchased by the holder, the holder shall within 30 days after the execution of the retail
installment contract send or cause to be sent to the buyer a policy or policies or certificate or certificates of insurance,
written by an insurance company authorized to do business in this state, clearly setting forth:
(a) the amount of the premium;
(b) the kind or kinds of insurance;
(c) the coverages; and
(d) if a policy, all the terms, exceptions, limitations, restrictions, and conditions of the contract or contracts of insurance or, if a certificate, a summary of the terms, exceptions, limitations, restrictions, and conditions.
(6) The seller holder may not decline existing insurance written by an insurance company authorized to do business in
this state, and the buyer has the privilege of purchasing insurance from an insurance producer or broker of his the buyer's
own selection and of selecting his the buyer's insurance company, provided that if:
(a) the insurance company is acceptable to the holder, which acceptance may not be unreasonably or arbitrarily withheld; and
(b) the inclusion of the cost of the insurance premium in the retail installment contract when the buyer selects his the
buyer's insurance producer, broker, or company is optional with the seller holder.
(7) If any insurance is canceled or the premium adjusted, any refund of the insurance premium received by the holder must be credited to the final maturing installment of the contract except to the extent applied toward payment for a similar insurance protecting the interests of the buyer and the holder or either of them."
Section 10. Section 33-1-311, MCA, is amended to read:
"33-1-311. General powers and duties. (1) The commissioner shall enforce the applicable provisions of the laws of this state and shall execute the duties imposed on the commissioner by the laws of this state.
(2) The commissioner has the powers and authority expressly conferred upon the commissioner by or reasonably implied from the provisions of the laws of this state.
(3) The commissioner shall administer the department to ensure that the interests of insurance consumers are protected.
(4) The commissioner may conduct examinations and investigations of insurance matters, in addition to examinations and investigations expressly authorized, as the commissioner considers proper, to determine whether any person has violated any provision of the laws of this state or to secure information useful in the lawful administration of any provision. The cost of additional examinations and investigations must be borne by the state.
(5) The commissioner shall maintain as confidential any information or document received from:
(a) the national association of insurance commissioners; or
(b) an insurance department from another state that treats the same information or document as confidential. The commissioner may provide information or documents, including information or documents that are confidential, to the national association of insurance commissioners, a state or federal law enforcement agency, or an insurance department in another state, if the recipient agrees to maintain the confidentiality of the information or documents.
(5)(6) The department is a criminal justice agency as defined in 44-5-103."
Section 11. Section 33-1-411, MCA, is amended to read:
"33-1-411. Destruction of records -- hindrance of examination -- penalty. Any A director, officer, agent, or
employee of any a company who for the purpose of hindering any examination conducted pursuant to this part destroys any
books, records, or documents required to be kept by law shall be punished by a fine of not more than $1,000 as provided in
33-1-317. After notice and hearing in accordance with Title 33, chapter 1, part 7, the commissioner may revoke the
certificate of authority of such the company."
Section 12. Section 33-2-109, MCA, is amended to read:
"33-2-109. Capital or surplus funds required. (1) To qualify for authority to transact any one kind of insurance, as
defined in 33-1-205 through 33-1-212, or combinations of kinds of insurance as shown below, an insurer shall possess and
thereafter maintain unimpaired paid-in capital stock, (if a stock insurer), or surplus, (if a mutual or foreign reciprocal
insurer), in an amount not less than as is applicable under the schedule schedules below, and shall possess when first so
authorized such to transact insurance any additional funds as surplus as required under 33-2-110:
(a) Kind or kinds Minimum capital or
of insurance surplus required
Life $200,000
Disability 200,000
Life and disability 300,000
Credit life and disability 50,000
Property 400,000
Marine 400,000
Casualty
All lines, except workers' compensation 400,000
All lines, including workers' compensation 600,000
Surety 500,000
Title 200,000
Multiple lines, (two or more: of property, marine,
casualty, or surety) 800,000
(b) For insurers licensed on or after October 1, 1999:
Kind or kinds Minimum capital or
of insurance surplus required
Life $ 600,000
Disability 500,000
Life and disability 750,000
Credit life and disability 150,000
Property 500,000
Marine 500,000
Casualty
All lines, except workers' compensation 500,000
All lines, including workers' compensation 750,000
Surety 500,000
Title 500,000
Multiple lines, two or more of property, marine,
casualty, or surety 1,000,000
(2) As to surplus required Surplus requirements for qualification to transact one or more kinds of insurance and
thereafter to be maintained, for domestic mutual insurers shall be are governed by Title 33, chapter 3, and surplus
requirements for domestic reciprocal insurers shall be are governed by Title 33, chapter 5.
(3) Capital and surplus requirements shall must be based upon all the kinds of insurance actually transacted or to be
transacted by the insurer in any and all areas in which it operates, whether or not only a portion of such the kinds are to be
transacted in this state.
(4) A life insurer may also grant annuities without additional capital or additional surplus.
(5) For a credit life and disability insurer that is not a resident domestic insurer as defined in 33-1-201 and 33-1-202, the capital or surplus required by this section is an amount equal to four times the minimum capital or surplus required for credit life and disability pursuant to subsection (1)."
Section 13. Section 33-2-502, MCA, is amended to read:
"33-2-502. Assets expressly not allowed. In addition to assets impliedly excluded by the provisions of 33-2-501, the
following expressly shall may not be allowed as assets in any determination of the financial condition of an insurer:
(1) goodwill, trade names, and other like intangible assets;
(2) advances to officers, (other than policy loans), whether secured or not, and advances to employees, insurance
producers, and other persons on personal security only;
(3) stock of such issued and owned by the insurer, owned by it, or any equity therein in the stock issued by the insurer,
or loans secured thereby by stock issued by the insurer, or any proportionate interest in such the stock acquired or held
through the ownership by such the insurer of an interest in another firm, corporation, or business unit;
(4) furniture, fixtures, (other than electronic data processing machines authorized under 33-2-501(11)), furnishings,
safes, vehicles, libraries, stationery, literature, and supplies, except:
(a) in the case of title insurers, such materials and plants as that the insurer is expressly authorized to invest in under
33-2-851; and
(b) in the case of any insurer, such personal property as that the insurer is permitted to hold pursuant to part 8 of this
chapter, or which that is acquired through foreclosure of chattel mortgages acquired pursuant to 33-2-831, or which that is
reasonably necessary for the maintenance and operation of real estate lawfully acquired and held by the insurer other than
real estate used by it for home office, branch office, and similar purposes;
(5) the amount, if any, by which the aggregate book value of investments as carried in the ledger assets of the insurer
exceeds the aggregate value thereof of the investments as determined under this code title; and
(6) prepaid expenses."
Section 14. Section 33-2-521, MCA, is amended to read:
"33-2-521. Standard valuation of reserve liabilities law -- life insurance. (1) The commissioner shall annually value or cause to be valued the reserve liabilities (reserves) for all outstanding life insurance policies and annuity and pure endowment contracts of every life insurer doing business in this state and may certify the amount of any reserves, specifying the mortality table or tables, rate or rates of interest, and methods (net level premium method or other) used in the calculation of reserves. In calculating the reserves, the commissioner may use group methods and approximate averages for fractions of a year or otherwise.
(2) In lieu of the valuation of the reserves required in this section of any foreign or alien insurer, the commissioner may accept any valuation made or caused to be made by the insurance supervisory official of any state or other jurisdiction when the valuation complies with the minimum standard provided in this section and if the official of the other state or jurisdiction accepts as sufficient and valid for all legal purposes the certificate of valuation of the commissioner when the certificate states the valuation to have been made in a specified manner according to which the aggregate reserves would be at least as large as if they had been computed in the manner prescribed by the law of that state or jurisdiction.
(3) Any insurer that has adopted any standard of valuation producing greater aggregate reserves than those calculated according to the minimum standard provided in this section may, with the approval of the commissioner, adopt any lower standard of valuation but not lower than the minimum in this section. For the purposes of this section, the holding of additional reserves previously determined by a qualified actuary to be necessary to render the opinion required in subsection (4) may not be considered to be the adoption of a higher standard of valuation.
(4) (a) Each life insurer doing business in this state shall annually submit the opinion of a qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by rule are computed appropriately, are based on assumptions that satisfy contractual provisions, are consistent with prior reported amounts, and comply with applicable laws of this state. The commissioner by rule shall define the specifics of this opinion and add any other items considered necessary to its scope.
(b) Each life insurer, except as exempted by or pursuant to regulation, shall also annually include in the opinion required by subsection (4)(a) an opinion of the same qualified actuary as to whether the reserves and related actuarial items held in support of the policies and contracts specified by the commissioner by rule, when considered in light of the assets held by the insurer with respect to the reserves and related actuarial items, including but not limited to the investment earnings on the assets and the considerations anticipated to be received and retained under the policies and contracts, make adequate provision for the insurer's obligations under the policies and contracts, including but not limited to the benefits under and expenses associated with the policies and contracts.
(c) The commissioner may provide by rule for a transition period for establishing any higher reserves that the qualified actuary may consider necessary in order to render the opinion required by this subsection (4).
(d) Each opinion required by this subsection (4) must be governed by the following provisions:
(i) A memorandum, in form and substance acceptable to the commissioner as specified by rule, must be prepared to support each actuarial opinion.
(ii) If the insurer fails to provide a supporting memorandum at the request of the commissioner within a period specified by rule or if the commissioner determines that the supporting memorandum provided by the insurer fails to meet the standards prescribed by the rules or is otherwise unacceptable to the commissioner, the commissioner may engage a qualified actuary at the expense of the insurer to review the opinion and the basis for the opinion and to prepare any supporting memorandum as is required by the commissioner.
(iii) The opinion must be submitted with the annual statement reflecting the valuation of the reserve liabilities for each year ending on or after December 31, 1996.
(iv) The opinion must apply to all business in force, including individual and group health insurance plans, in form and substance acceptable to the commissioner as specified by rule.
(v) The opinion must be based on standards adopted from time to time by the actuarial standards board and on additional standards as the commissioner may prescribe by rule.
(vi) In the case of an opinion required to be submitted by a foreign or alien insurer, the commissioner may accept the opinion filed by that insurer with the insurance supervisory official of another state if the commissioner determines that the opinion reasonably meets the requirements applicable to a company domiciled in this state.
(vii) Except in cases of fraud or willful misconduct, the qualified actuary is not liable for damages to any person, other than the insurer and the commissioner, for any act, error, omission, decision, or conduct with respect to the actuary's opinion.
(viii) Disciplinary action by the commissioner against the insurer or the qualified actuary must be defined in rules by the commissioner.
(ix) Any memorandum in support of the opinion and any other material provided by the insurer to the commissioner in connection with those items must be kept confidential by the commissioner, may not be made public, and is not subject to subpoena, other than for the purpose of defending an action seeking damages from any person by reason of any action required by this subsection (4) or by rules promulgated under this subsection (4). However, the memorandum or other material may otherwise be released by the commissioner:
(A) with the written consent of the insurer; or
(B) to the American academy of actuaries upon request stating that the memorandum or other material is required for the purpose of professional disciplinary proceedings and setting forth procedures satisfactory to the commissioner for preserving the confidentiality of the memorandum or other material. Once any portion of the confidential memorandum is cited by the insurer in its marketing, is cited before any governmental agency other than a state insurance department, or is released by the insurer to the news media, all portions of the confidential memorandum are no longer confidential.
(5) For purposes of this section, "qualified actuary" means a member in good standing of the American academy of actuaries who meets the requirements set forth in the academy's rules."
Section 15. Section 33-2-701, MCA, is amended to read:
"33-2-701. Annual statement -- revocation or fine for failure to file -- penalty for perjury. (1) Each authorized
insurer shall annually on or before March 1 file with the commissioner a full and true statement of its financial condition,
transactions, and affairs as of the preceding December 31. The statement must be in the general form and context as is
required or not disapproved by the commissioner, as is in current use for similar reports to states in general with respect to
the type of insurer and kinds of insurance to be reported upon, and as supplemented for additional information required by
the commissioner. The statement must be completed in accordance with the annual statement instructions and the
accounting practices and procedures manual of the national association of insurance commissioners. The statement must be
accompanied by an actuarial opinion attesting to the adequacy of the insurer's reserves. The statement must be verified by
the oath of the insurer's president or vice-president vice president and secretary or, if a reciprocal insurer, by the oath of the
attorney-in-fact or its like officers if a corporation. The commissioner may waive the verification under oath.
(2) (a) Each domestic insurer shall file electronic diskette versions of its annual and quarterly financial statements with
the national association of insurance commissioners. The filing date for submission of the annual statement diskette
electronic filing is March 1. The filing dates dates for the submission of the quarterly statement diskettes electronic filings
are as follows:
(i) the first calendar quarter filing is due May 15;
(ii) the second calendar quarter filing is due August 15; and
(iii) the third calendar quarter filing is due November 15.
(b) The commissioner may exempt insurers that operate only in Montana from these filing requirements.
(3) The statement of an alien insurer must relate only to its transactions and affairs in the United States unless the commissioner requires otherwise. If the commissioner requires a statement as to an alien insurer's affairs throughout the world, the insurer shall file the statement with the commissioner as soon as reasonably possible. The statement must be verified by the insurer's United States manager or other authorized officer.
(4) The commissioner may refuse to accept the fee for continuance of the insurer's certificate of authority, as provided in 33-2-117, or may suspend or revoke the certificate of authority of any insurer failing to file its annual statement when due or within an extension of time that the commissioner may grant.
(5) Any A director, officer or insurance producer, or employee of any a company who subscribes to, makes, or concurs
in making or publishing any an annual statement or any other statement required by law knowing that the statement
contains any material statement which that is false shall be punished by a fine of not more than $1,000.
(6) At the time of filing, the insurer shall pay to the commissioner the fee for filing its statement as prescribed in 33-2-708.
(7) The commissioner may impose a fine not to exceed $100 a day for each day after March 1 that an insurer fails to file the annual statement referred to in subsection (1). The fine may not exceed a maximum of $1,000."
Section 16. Section 33-2-806, MCA, is amended to read:
"33-2-806. Diversification of investments. An insurer shall invest in or hold as admitted assets categories of investments only within applicable limits as follows:
(1) An insurer may not, except with the consent of the commissioner, have at any one time any combination of
investments in or loans upon the security of the obligations, property, or securities of any one person or insurer aggregating
an amount exceeding 5% of the insurer's assets. This restriction does not apply as to general obligations of the United States
of America or of any state or include policy loans made under 33-2-825.
(2) An insurer may not invest in or hold at any one time more than 10% of the outstanding voting stock of any corporation, except with the consent of the commissioner. This provision does not apply as to stock of a wholly owned subsidiary of the insurer or to controlling stock of an insurer acquired under 33-2-821.
(3) An insurer, other than title insurer, shall invest and maintain invested funds not less in amount than the minimum
paid-in capital stock required under this code of a domestic stock insurer transacting like kinds of insurance, only in cash
and the securities provided for in 33-2-811(1), 33-2-812, and 33-2-830.
(4)(3) A life insurer shall also invest and keep invested its funds in an amount not less than the reserves under its life
insurance policies and annuity contracts, other than variable annuities, in force in cash, in securities, in both cash and
securities, or in investments provided for in 33-2-531.
(5)(4) Except with the commissioner's consent, an insurer may not have invested at any one time more than 20% of its
assets in the class of securities described in 33-2-818, exclusive of obligations of public utilities.
(6)(5) Except with the commissioner's consent, an insurer may not invest and have invested at any one time in aggregate
amount more than 15% of its assets in all stocks provided for in 33-2-820 and 33-2-821. Determination of the amount that
an insurer has invested in common stocks for the purposes of this provision must be based on the cost of the stocks to the
insurer. This provision does not apply to stock of a controlled or subsidiary insurance corporation or other corporations
provided for in 33-2-821 and 33-2-822.
(7)(6) Except with the commissioner's consent, an insurer may not have invested at any one time more than 5% of its
assets in securities allowed in 33-2-824. Money market funds, as defined by the commissioner by rule, are exempt from the
5% limitation of this subsection.
(8)(7) Except with the commissioner's consent, an insurer may not have invested at any one time more than 10% of its
assets in the class of securities described in 33-2-814, 33-2-819, and 33-2-823.
(9)(8) Limits of investments in real estate must be as provided in 33-2-832. Other specific limits apply as stated in the
sections dealing with other respective kinds of investments."
Section 17. Section 33-3-202, MCA, is amended to read:
"33-3-202. Articles of incorporation -- filing and approval. (1) The incorporators of a proposed domestic insurer
shall deliver the quadruplicate triplicate originals of the articles of incorporation to the commissioner, together with the
filing fees therefor specified in 33-2-708. The commissioner shall examine the proposed articles of incorporation. If the
commissioner finds that the articles comply with this chapter and are not in conflict with the constitution and laws of the
United States or of this state, he the commissioner shall endorse his place an endorsement of approval upon each set of the
articles, except that. However, if the commissioner finds that the proposed insurer would not be eligible for a certificate of
authority under 33-2-112, he the commissioner shall refuse to approve the articles of incorporation and shall return them to
the proposed incorporators, together with a written statement of the reasons for such the refusal. If approved by him, the
commissioner shall then forward the endorsed articles of incorporation, with his approval endorsed thereon, to the
incorporators. The incorporators shall forthwith file one set of the articles of incorporation with the secretary of state, and
one set certified by the secretary of state with the commissioner, bearing the certification of the secretary of state, and one
set with the county clerk of the county wherein is to be located the corporation's principal place of business; and the. The
remaining set of articles shall must be made a part of the corporation's record.
(2) If the commissioner finds that the proposed articles of incorporation do not comply with law, he the commissioner
shall refuse to approve the same articles and shall return all sets of the proposed articles of incorporation to the proposed
incorporators, together with a written statement of the reasons for his the refusal to approve.
(3) The corporation shall have has legal existence as such a corporation upon the issuance of the certificate of
incorporation by the secretary of state and the completion of the filings filing with the commissioner referred to required in
subsection (1) above, but it shall the corporation may not transact business as an insurer until it has qualified for and
received from the commissioner a certificate of authority as provided in this code title.
(4) A copy of the certificate of incorporation, duly certified by the secretary of state, shall be is admissible in all the
courts of this state as prima facie evidence of due proper incorporation."
Section 18. Section 33-3-307, MCA, is amended to read:
"33-3-307. Bond Bonding of officers and employees. (1) The president, secretary, and treasurer When acting in a
fiduciary capacity, officers and employees of each mutual insurer or stock insurer shall each file with the commissioner and
maintain in force so long as that individual is an officer a fidelity bond in an amount set by the commissioner by rule and
issued by an authorized corporate surety in favor of the insurer. The commissioner shall consider the insurer's exposure,
total assets, and total income in determining the bond amount. In lieu of individual bonds, officers and employees may be
covered under a blanket bond for the same respective amounts. The insurer shall file the blanket bond must be filed with
the commissioner.
(2) The insurer shall pay the premium for the bond must be payable by the insurer.
(3) A bond is not subject to cancellation except upon written notice to both the insurer and the commissioner, delivered not less than 30 days in advance of the effective date of the cancellation.
(4) The insurer shall provide for the bonding by authorized corporate surety of all other officers in any way responsible
for the handling of the funds of the insurer.
(5)(4) This section may not be considered to limit the amount of bonded protection that the insurer may carry as to any
officer or employee.
(5) The commissioner may adopt rules to determine the bond amount for officers and employees who are subject to the provisions of this section."
Section 19. Section 33-4-101, MCA, is amended to read:
"33-4-101. Scope of chapter -- provisions applicable. (1) The chapter applies to:
(a) all domestic mutual hail, fire, and other casualty insurers of farm property and stock and rural buildings formed and immediately prior to January 1, 1961, lawfully transacting insurance under sections 40-1501 through 40-1517 of the Revised Codes of Montana, 1947;
(b) all domestic mutual rural insurers formed and immediately prior to January 1, 1961, lawfully transacting insurance under sections 40-1601 through 40-1625 of the Revised Codes of Montana, 1947;
(c) all insurers formed under this chapter.
(2) The insurance laws of this state do not apply to or govern, either directly or indirectly, domestic farm mutual
insurers except as contained or referred to provided in this chapter.
(3) The following chapters and sections of this title apply to farm mutual insurers to the extent applicable and not
inconsistent with the express provisions of this chapter and the reasonable implications of the express provisions of this
chapter: chapter 1, parts 1 through 4, and 7, 12, and 13; 33-2-112; 33-2-501; 33-2-502; 33-2-532 through 33-2-535;
33-2-708; chapter 2, parts 13 and 16; 33-2-1212; chapter 2, parts 13 and 16; 33-3-218; 33-3-308; 33-3-309; 33-3-401;
33-3-402; 33-3-431; 33-3-436; and chapter 18."
Section 20. Section 33-4-203, MCA, is amended to read:
"33-4-203. Approval of articles -- commencement of corporate existence. (1) If the commissioner finds the proposed
articles of incorporation to be in accordance with the provisions of this chapter and not in conflict with the constitution and
laws of the United States of America or of this state, the commissioner shall make a certificate of the facts.
(2) If the commissioner considers the name of the proposed corporation to be so similar to one already appropriated by another company or corporation as to be likely to mislead the public, the commissioner shall reject the name applied for and shall notify the incorporators of the rejection.
(3) When the proposed articles of incorporation have been approved by the commissioner, the commissioner shall
endorse the approval upon each set of the articles and forward four three sets of articles to the incorporators. The
incorporators shall file, with the required filing fee, one of the sets of articles with the secretary of state, and one set
certified by the secretary of state with the commissioner bearing the certification of the secretary of state, and one set with
the county clerk of the county in which the principal place of business of the corporation is located and shall pay to the
secretary of state and the county clerk the customary filing fees. The remaining set of articles must be made a part of the
corporation's records.
(4) The corporation has legal existence upon the approval of the articles by the commissioner and completion of the
filings referred to required in subsection (3), but it may not transact business as an insurer until it has fulfilled the
requirements for and has obtained a certificate of authority as provided in 33-4-505."
Section 21. Section 33-4-311, MCA, is amended to read:
"33-4-311. Bonds Bonding of officers, managers, and employees. (1) The treasurer and secretary of an insurer When
acting in a fiduciary capacity, officers, managers, and employees shall each give bonds to the insurer for the faithful
performance of their duties, in such amount as is designated by the board of directors. Any such The bond shall must be one
issued by an authorized corporate surety.
(2) The commissioner may adopt rules to determine the amount of the bonds required under this section."
Section 22. Section 33-4-313, MCA, is amended to read:
"33-4-313. Annual statement. The president and secretary of each insurer, on or before March 1 each year, shall
prepare, affirm under oath, affix the corporate seal to, and file with the commissioner, on forms prescribed and furnished by
the commissioner, an annual statement for the preceding calendar year showing the condition of the insurer as of December
31 of the preceding year and exhibiting the following facts:
(1) the names of the president and secretary;
(2) the date of the annual meeting;
(3) the amount of insurance in force;
(4) the number of members;
(5) the number of assessments made during the year;
(6) the amount paid in losses during the year;
(7) the amount of the losses claimed and not paid, with the reason for nonpayment;
(8)(7) the number of members withdrawn, suspended, and expelled during the year;
(9)(8) the number of new members admitted during the year;
(10)(9) the expenses during the year;
(11)(10) the amount of money on hand;
(12)(11) the amount and character of the insurer's assets;
(13)(12) the amount of the insurer's liabilities, including any reserves required to be established under this chapter; and
(14)(13) other information concerning the insurer's affairs that the commissioner may reasonably require."
Section 23. Section 33-5-402, MCA, is amended to read:
"33-5-402. Contributions to insurer. The attorney or other parties may advance to a domestic reciprocal insurer upon
reasonable terms funds that it may require from time to time in its operations. Sums advanced may not be treated as a
liability of the insurer. Except upon liquidation of the insurer, during any calendar year, the total of withdrawals and
repayments of the advanced sums may not exceed the lesser of the insured's insurer's realized earned surplus or 10% of the
sums advanced as of the previous December 31. A withdrawal or repayment may not be made without the advance approval
of the commissioner. This section does not apply to bank loans or to loans for which security is given."
Section 24. Section 33-10-102, MCA, is amended to read:
"33-10-102. Definitions. As used in this part, the following definitions apply:
(1) "Association" means the Montana insurance guaranty association created under 33-10-103.
(2) (a) "Covered claim" means an unpaid claim, including one for unearned premiums, which that arises out of and is
within the coverage and not in excess of the applicable limits of an insurance policy to which this part applies issued by an
insurer, if such the insurer becomes an insolvent insurer after July 1, 1971, and:
(i) the claimant or insured is a resident of this state at the time of the insured event; or
(ii) the property from which the claim arises is permanently located in this state.
(b) "Covered claim" shall Covered claim does not include any amount: due a reinsurer, insurer, insurance pool, or
underwriting association, as subrogation recoveries or otherwise.
(i) awarded as punitive or exemplary damages;
(ii) sought as a return of premium under a retrospective rating plan; or
(iii) due a reinsurer, insurer, insurance pool, or underwriting association as subrogation recoveries, reinsurance recoveries, contribution, or indemnification. If insolvent, a reinsurer, insurer, insurance pool, or underwriting association may not assert a claim in any amount against an insured except to the extent that the claim exceeds the policy limits of the insured's policy.
(3) "Insolvent insurer" means an insurer:
(a) authorized to transact insurance in this state either at the time the policy was issued or when the insured event occurred; and
(b) determined to be insolvent by a court of competent jurisdiction.
(4) "Member insurer" means any a person who:
(a) writes any kind of insurance to which this part applies under 33-10-101(3), including the exchange of reciprocal or interinsurance contracts; and
(b) is licensed to transact insurance in this state.
(5) (a) "Net direct written premiums" means direct gross premiums written in this state on insurance policies to which
this part applies, less return premiums thereon on the policies and dividends paid or credited to policyholders on such direct
business of policies to which this part applies.
(b) "Net Net direct written premiums" premiums does not include premiums on contracts between insurers or
reinsurers.
(6) "Person" means any individual, corporation, partnership, association, or voluntary organization."
Section 25. Section 33-15-336, MCA, is amended to read:
"33-15-336. Applicability. (1) Other statutes of this state setting simplification standards for language or format do not apply to property and casualty policies.
(2) Sections 33-15-333 through 33-15-340 do not apply to policies in manuscript form or to the following kinds of insurance:
(a) ocean marine;
(b) surety and financial institution bonds;
(c) reinsurance; or
(d) commercial aviation.; or
(e) large commercial risks whose aggregate annual premiums for insurance on all risks totals at least $100,000.
(3) A non-English policy is considered in compliance with 33-15-337 if it was translated from an English policy that complies with 33-15-337."
Section 26. Section 33-15-1107, MCA, is amended to read:
"33-15-1107. Information about grounds for nonrenewal. (1) If an insured questions the facts upon which an
insurer's decision to cancel or not renew is based, the insurer shall mail or deliver such information to the insured within 15
working days of receiving a written request from the insured. If the insurer or insurance producer receives a written request
from an insured within 60 business days from the date on which the insurer mailed a notice of cancellation or nonrenewal
to the insured, the insurer or insurance producer shall, within 21 days of receiving the insured's written request, furnish the
insured the information that the insurer or insurance producer used to make its decision. A notice is not effective unless it
contains adequate information about the insured's right to make the request.
(2) This section does not apply if the ground for cancellation or nonrenewal is nonpayment of the premium and the
reason is stated in the notice so states."
Section 27. Section 33-16-102, MCA, is amended to read:
"33-16-102. Definitions. In this chapter, the following definitions apply:
(1) "Advisory organization" means every each person, other than an admitted insurer, whether located within or outside
this state, who prepares policy forms or makes underwriting rules incident to but not including the making of rates, rating
plans, or rating systems or which who collects and furnishes to admitted insurers or rating organizations loss or expense
statistics or other statistical information and data and acts in an advisory, as distinguished from a ratemaking, capacity. No
duly authorized A licensed attorney at law, acting in the usual course of his the profession, shall may not be deemed to be
considered an advisory organization.
(2) "Dividend" means:
(a) a noncontractual and nonrecoverable payment or credit declared by an insurer's board of directors and paid out or credited out of earned surplus to policyholders, members, or subscribers; or
(b) in the absence of earned surplus, a noncontractual and nonrecoverable payment or credit declared by an insurer's board of directors and paid to policyholders, members, or subscribers with the written permission of the commissioner. The commissioner may grant permission only if the payment of the dividend or credit will not reduce the insurer's capital below an amount three times the minimum capital required under 33-2-109.
(2)(3) "Member" means an insurer who participates in or is entitled to participate in the management of a rating,
advisory, or other organization.
(3)(4) "Rating organization" means every each person, other than an admitted insurer, whether located within or outside
this state, who has as his with the object or purpose the of making of rates, rating plans, or rating systems. Two or more
admitted insurers which who act in concert for the purpose of making rates, rating plans, or rating systems and which who
do not operate within the specific authorizations contained in 33-16-105, 33-16-302, 33-16-304, 33-16-305, and 33-16-307
shall must be deemed to be considered a rating organization. No A single insurer shall may not be deemed to be considered
a rating organization.
(4)(5) "Subscriber" means an insurer which who is furnished at its request with rates and rating manuals by a rating
organization of which it the insurer is not a member or with advisory services by an advisory organization of which it is not
a member.
(5)(6) "Willful" or "willfully", in relation to an act or omission which that constitutes a violation of this chapter, means
with actual knowledge or belief that such the act or omission constitutes such a violation and with specific intent to commit
such the violation."
Section 28. Section 33-16-104, MCA, is amended to read:
"33-16-104. Payment of dividends, savings, or unabsorbed premium deposits not prohibited or regulated -- plan
for payment not rating system. Nothing in this chapter shall may be construed to prohibit or regulate the payment of
dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or
subscribers. A plan for the payment of dividends, savings, or unabsorbed premium deposits allowed or returned by insurers
to their policyholders, members, or subscribers shall may not be deemed considered a rating plan or system. A plan for the
payment of dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders,
members, or subscribers does not relieve the insurer from complying with any requirements of this chapter regarding rating
plans or systems."
Section 29. Section 33-16-1021, MCA, is amended to read:
"33-16-1021. Ratemaking standards -- review by commissioner. (1) Rates may not be excessive, inadequate, or unfairly discriminatory.
(2) Rates in a competitive market are not excessive. Rates in a noncompetitive market are excessive if they are likely to produce a long-run profit that is unreasonably high in relation to services rendered.
(3) A rate may not be determined to be inadequate unless:
(a) it is clearly insufficient to sustain projected losses and expenses; and
(b) the rate is unreasonably low and the use of the rate by the insurer has had or, if continued, will tend to create a monopoly in the market; or
(c) funds equal to the full, ultimate cost of anticipated losses and loss adjustment expenses are not produced when prospective loss costs are applied to anticipated payrolls.
(4) Unfair discrimination exists if, after allowing for practical limitations, price differentials fail to reflect equitably the differences in expected losses and expenses. A rate is not unfairly discriminatory because different premiums result for policyholders with different loss exposures or expense levels.
(5) In determining whether rates comply with standards under subsection (1), consideration must be given to:
(a) past and prospective loss experience within and outside Montana, in accordance with accepted actuarial principles;
(b) catastrophe hazards and contingencies;
(c) past and prospective expenses within and outside Montana;
(d) loadings for leveling premium rates over time for dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers;
(e) a reasonable margin for underwriting profit; and
(f) all other relevant factors within and outside Montana.
(6) The systems of expense provisions included in the rates for use by an insurer or group of insurers may differ from those of any other insurer or group of insurers to reflect the requirements of the operating methods of the insurer or group of insurers.
(7) The rate may contain provisions of contingencies and an allowance permitting a reasonable profit. In determining the reasonableness of a profit, consideration must be given to all investment income attributable to premiums and the reserves associated with those premiums.
(8) The commissioner may investigate and determine whether rates in Montana are excessive, inadequate, or unfairly discriminatory. In any investigation and determination, the commissioner shall also consider the factors specified in 33-16-1020."
Section 30. Section 33-16-1022, MCA, is amended to read:
"33-16-1022. Dividends -- no regulation or prohibition. (1) An advisory organization may not adopt a rule that
would regulate or prohibit the payment of dividends, savings, or unabsorbed premium deposits allowed or returned by
insurers to their policyholders, members, or subscribers.
(2) A plan for the payment of dividends, savings, or unabsorbed premium deposits allowed or returned by insurers to their policyholders, members, or subscribers is not a rating plan or system. A plan for the payment of dividends, savings, or unabsorbed premium deposits does not relieve an insurer from complying with any requirement of this chapter regarding rating plans or systems.
(3) It is an unfair trade practice under 33-18-1003 to make the payment of a dividend or any portion of it conditioned upon renewal of the policy or contract."
Section 31. Section 33-17-212, MCA, is amended to read:
"33-17-212. Examination required -- exceptions -- fees. (1) Except as provided in subsection (7), an individual applying for a license shall pass a written examination. The examination must test the knowledge of the individual concerning each kind of insurance listed in subsection (6) for which application is made, the duties and responsibilities of an insurance producer, and the insurance laws and rules of this state. The examination must be developed and conducted under rules adopted by the commissioner.
(2) The commissioner may conduct the examination or make arrangements, including contracting with an outside testing service, for administering the examination and collecting the fees required by 33-2-708. The commissioner may arrange for the testing service to recover the cost of the examination from the applicant.
(3) Each individual applying for an examination shall remit the fees required by 33-2-708.
(4) An individual who fails to appear for the examination as scheduled or fails to pass the examination may reapply for an examination and shall remit all required fees and forms before being rescheduled for another examination.
(5) If the applicant is a If the applicant is a partnership or corporation, each individual who is to be named in the license
as having authority to act for the applicant in its insurance transactions under the license shall take the examination., each
individual who is to be named in the license as having authority to act for the applicant in its insurance transactions under
the license shall meet the qualifications as provided in this section.
(6) Examination of an applicant for a license must cover all of the kinds of insurance for which the applicant has applied to be licensed, as constituted by any one or more of the following classifications:
(a) life insurance;
(b) disability insurance;
(c) property insurance. For the purposes of this provision, property insurance includes marine insurance.
(d) casualty insurance;
(e) surety insurance;
(f) credit life and disability insurance;
(g) title insurance.
(7) This section does not apply to and an examination is not required of:
(a) an individual lawfully licensed as an insurance producer as to the kind or kinds of insurance to be transacted as of or immediately prior to January 1, 1961, and who continues to be licensed;
(b) an applicant for a license covering the same kind or kinds of insurance as to which the applicant was licensed in this state, other than under a temporary license, within the 12 months immediately preceding the date of application unless the commissioner has suspended, revoked, or refused to continue the previous license, except that this subsection (7)(b) does not apply to a title insurance producer, as defined in 33-25-105;
(c) an applicant for a license as a nonresident insurance producer;
(d) an applicant for a license to sell all-risk federal crop insurance if the applicant provides certification from an appropriate governmental agency to the commissioner that the applicant is qualified to sell the insurance;
(e) transportation ticket agents of common carriers applying for a license to solicit and sell only:
(i) accident insurance ticket policies; or
(ii) insurance of personal effects while being carried as baggage on a common carrier, as incidental to their duties as transportation ticket agents;
(f) an association applying for a license under 33-17-211;
(g) a mechanical breakdown insurance producer;
(h) a service contract insurance producer; or
(h) a prepaid legal plans producer;
(i) a gap insurance producer;
(j) involuntary unemployment insurance producer; or
(i)(k) an individual who, within 60 days of cancellation of a license issued by the state of the individual's residence, files
with the commissioner a current letter of clearance certifying that the individual has passed an examination and held an
insurance license in good standing in the individual's state of licensure, except that the individual shall take an examination
pertaining to this state's law and each kind of insurance for which the individual has applied for a license and that is not
covered under the license held in the other state."
Section 32. Section 33-17-236, MCA, is amended to read:
"33-17-236. Appointments of insurance producers by insurers. (1) An insurance producer may not claim to be a
representative of or an authorized or appointed insurance producer of or use another term implying a contractual
relationship with a particular insurer and may not accept applications for the insurer unless the insurance producer becomes
is an appointed insurance producer of that insurer pursuant to this section. The following are the appointing insurer's
requirements for making appointment of a licensed insurance producer: This does not prevent an insurance producer from
obtaining and presenting a quotation from an insurer with whom the producer is not appointed. If the insurer consents, the
insurer may bind coverage on a risk in accordance with 33-15-411 prior to the execution of an agency contract and policy
issuance.
(a)(2) The insurer shall, no not later than 15 days from the date on which the agency contract is executed or the first
insurance application is submitted by with a licensed insurance producer, whichever is earlier, file with the insurance
department a written notice of appointment on a form prescribed by the insurance department. The notice may be
electronically filed pursuant to rules adopted by the commissioner.
(b) If there is no executed agency contract, the insurer shall mail to the licensed insurance producer, no later than 15
days from the date the first insurance application is submitted by him, a copy of the notice of appointment form filed with
the insurance department. If the licensed insurance producer does not receive the acknowledgment of appointment from the
insurer within 30 days from the date the first insurance application is submitted to the insurer, the insurance producer shall
immediately discontinue acting as an insurance producer on behalf of that insurer until the acknowledgment is received or
the agency contract is executed.
(2)(3) Upon receipt of the notice of appointment, the insurance department shall verify within 5 working days that the
licensed insurance producer is eligible for appointment. If the licensed insurance producer is determined to be ineligible for
appointment, the insurance department shall notify the insurer within 5 days of the determination.
(3)(4) An appointment is effective on the earlier of the date of the executed agency contract and or the date on which the
insurer files the notice of appointment with the insurance department, unless the appointment is disapproved by the
insurance department. A disapproved appointment is void on the date the department provides notification to the insurer.
(5) The appointment is perpetual until canceled by the insurer."
Section 33. Section 33-17-505, MCA, is amended to read:
"33-17-505. Qualification -- fee. (1) In order to determine the competency of an applicant for a consultant license, the commissioner shall require the applicant to pass an examination.
(2) The commissioner may conduct the examination or make arrangements, including contracting with an outside testing service, for administering the examination and collecting the fees required by 33-17-503. The commissioner may arrange for the testing service to recover its cost of the examination from the applicant.
(2)(3) The fee for taking the consultant license examination is $50. The commissioner shall deposit all fees collected in
the general fund. The fee for taking a second or subsequent examination may be no more than the cost of administering the
examination, not to exceed $50."
Section 34. Section 33-17-507, MCA, is amended to read:
"33-17-507. Revocation. The commissioner may revoke or suspend a consultant license for a specified period he
determines if, after giving notice and conducting a hearing. as specified in this chapter, he To revoke or suspend a license,
the commissioner shall determines determine that the licensee:
(1) has violated any provision of or any obligation imposed by the insurance law or has violated any law in the course of
his dealings dealing as an insurance consultant;
(2) has made a material misstatement in application for a consultant license;
(3) has been guilty of fraudulent or dishonest practices; or
(4) has demonstrated his incompetency or untrustworthiness to act as an insurance consultant."
Section 35. Section 33-17-1203, MCA, is amended to read:
"33-17-1203. Continuing education -- basic requirements -- exceptions. (1) Unless exempt under subsection (4):
(a) a person licensed to act as an insurance producer for property, casualty, surety, or title insurance or as a consultant for general insurance shall, during each calendar year, complete at least 10 credit hours of approved continuing education;
(b) a person licensed to act as an insurance producer for life or disability insurance or as a consultant for life insurance shall, during each calendar year, complete at least 10 credit hours of approved continuing education;
(c) a person holding multiple licenses shall, during each calendar year, complete at least 15 credit hours of approved continuing education;
(d) a person licensed to act as an insurance producer only for credit life and disability insurance shall, during each
calendar year, complete 5 2 1/2 credit hours of approved continuing education in the areas of insurance law, ethics, or credit
life and disability insurance;
(e) a person licensed as an insurance producer or consultant shall, during each biennium, complete at least 1 credit hour of approved continuing education on changes in Montana insurance statutes and administrative rules.
(2) If a person licensed as an insurance producer or consultant completes more credit hours of approved continuing education in a year than the minimum required in subsection (1), the excess credit hours may be carried forward and applied to the continuing education requirements of the next year.
(3) The commissioner may, for good cause, grant an extension of time, not to exceed 1 year, during which the requirements imposed by subsection (1) may be completed.
(4) The minimum continuing education requirements do not apply to:
(a) a person licensed to sell any kind of insurance for which an examination is not required under 33-17-212(7)(d)
through (7)(h) (7)(k);
(b) a person holding a temporary license issued under 33-17-216;
(c) a nonresident licensee who must meet continuing education requirements in the licensee's state of residence if that state grants substantially similar privileges to and has similar requirements for residents of this state;
(d) a newly licensed insurance producer or consultant during the calendar year in which the licensee first received a license;
(e) a person who only executes surety bail bonds; or
(f) an insurance producer or consultant otherwise exempted by the commissioner."
Section 36. Section 33-18-301, MCA, is amended to read:
"33-18-301. Prohibited relations with mortuaries. (1) A life insurer and its board of directors, officers, employees, or representatives may not own, manage, supervise, operate, or maintain any mortuary, funeral, or undertaking establishment in Montana.
(2) A life insurer may not contract or agree with any funeral director, mortuary, or undertaker that the funeral director, undertaker, or mortuary shall conduct the funeral or be named beneficiary of any person insured by the insurer. This subsection does not prohibit a life insurer from making insurance, designated as funeral insurance, available.
(3) A funeral insurance policy and any solicitation material for the policy must clearly indicate that:
(a) the policy is a life insurance product;
(b) the applicant may designate the beneficiary, provided that if there is an appropriate and insurable interest;
(c) the beneficiary may use the proceeds for any purpose; and
(d) any attempt by the insurer or its representative to have the insured designate a specific beneficiary, including but not limited to a funeral director, mortuary, or undertaker, constitutes a violation of this section punishable as a misdemeanor pursuant to subsection (4).
(4) Each violation of this section constitutes a misdemeanor punishable by a fine of not more than $1,000 or by imprisonment for not more than 6 months, or both."
Section 37. Section 33-18-1006, MCA, is amended to read:
"33-18-1006. Desist orders for prohibited practices. Violations of 33-18-221 through 33-18-223 33-18-224 are
subject to cease and desist orders of the commissioner issued under 33-18-1004."
Section 38. Section 33-20-121, MCA, is amended to read:
"33-20-121. Prohibited provisions -- limitations on liability. (1) A policy of life insurance may not be delivered or issued for delivery in this state if it contains a provision:
(a) for a period shorter than that provided by statute within which an action at law or in equity may be commenced on the policy; or
(b) that excludes or restricts liability for death caused in a certain specified manner or occurring while the insured has a specified status, except that a policy may contain provisions excluding or restricting coverage as specified in the policy in the event of death:
(i) as a result, directly or indirectly, of war, declared or undeclared, or of action by military forces or of an act or hazard of war or action or of service in the military, naval, or air forces or in civilian forces auxiliary to those military forces or from any cause while a member of military, naval, or air forces of a country at war, declared or undeclared, or of a country engaged in military action;
(ii) as a result of aviation, air travel, or flight;
(iii) as a result of a specified hazardous occupation or occupations;
(iv) while the insured is a resident outside the continental United States and Canada; or
(v) within 2 years from the date of issue of the policy as a result of suicide, while committed pursuant to 53-21-127. If a
life insurance policy contains a dependent rider, the dependent coverage may be continued upon payment of the premium
for the dependent rider.
(2) A policy that contains an exclusion or restriction pursuant to subsection (1) must also provide that in the event of
death under the circumstances to which the exclusion or restriction is applicable, the insurer will pay an amount not less
than a reserve determined according to the commissioner's reserve valuation method on the basis of the mortality table and
interest rate specified in the policy for the calculation of nonforfeiture benefits (or, if the policy does not provide for
nonforfeiture benefits, computed according to a mortality table and interest rate determined by the insurer and specified in
the policy) or by any other method more favorable to the policyholder, with adjustment for indebtedness or dividend credit.
(3) This section does not apply to industrial life insurance, group life insurance, disability insurance, reinsurance, or annuities or to a provision in a life insurance policy relating to disability benefits or to additional benefits in the event of death by accident or accidental means.
(4) This section does not prohibit a provision that in the opinion of the commissioner is more favorable to the policyholder than a provision permitted by this section."
Section 39. Section 33-20-1201, MCA, is amended to read:
"33-20-1201. Provisions required in group contracts. No A policy of group life insurance shall may not be delivered
in this state unless it contains in substance the provisions set forth in 33-20-1202 through 33-20-1211 this part or provisions
which that in the opinion of the commissioner are more favorable to the persons insured or at least as favorable to the
persons insured and more favorable to the policyholder; except, however, that:
(1) sections 33-20-1207 through 33-20-1211 shall do not apply to policies issued to a creditor to insure debtors of such
the creditor;
(2) the standard provisions required for individual life insurance policies shall do not apply to group life insurance
policies; and
(3) if the group life insurance policy is on a plan of insurance other than the term plan, it shall must contain a
nonforfeiture provision or provisions which that in the opinion of the commissioner is or are equitable to the insured
persons and to the policyholder, but nothing herein shall in this subsection may be construed to require that group life
insurance policies contain the same nonforfeiture provisions as are required for individual life insurance policies."
Section 40. Section 33-22-101, MCA, is amended to read:
"33-22-101. Exceptions to scope. Parts 1 through 4 of this chapter, except 33-22-107, 33-22-110, 33-22-111,
33-22-114, 33-22-125, 33-22-130 through 33-22-132, 33-22-134, 33-22-135, 33-22-141, 33-22-142, 33-22-243, and
33-22-304, and part 19 of this chapter, do not apply to or affect:
(1) any policy of liability or workers' compensation insurance with or without supplementary expense coverage;
(2) any group or blanket policy;
(3) life insurance, endowment, or annuity contracts or supplemental contracts that contain only those provisions relating to disability insurance as:
(a) provide additional benefits in case of death or dismemberment or loss of sight by accident or accidental means; or
(b) operate to safeguard contracts against lapse or to give a special surrender value or special benefit or an annuity in the event that the insured or annuitant becomes totally and permanently disabled, as defined by the contract or supplemental contract;
(4) reinsurance."
Section 41. Section 33-22-111, MCA, is amended to read:
"33-22-111. Policies to provide for freedom of choice of practitioners -- professional practice not enlarged. (1) All
policies of disability insurance, including individual, group, and blanket policies, must provide that the insured has full
freedom of choice in the selection of any licensed physician, physician assistant-certified, dentist, osteopath, chiropractor,
optometrist, podiatrist, psychologist, licensed social worker, licensed professional counselor, acupuncturist, or nurse
specialist advanced practice registered nurse as specifically listed in 37-8-202 for treatment of any illness or injury within
the scope and limitations of the person's practice. Whenever the policies insure against the expense of drugs, the insured has
full freedom of choice in the selection of any licensed and registered pharmacist.
(2) This section may not be construed as enlarging the scope and limitations of practice of any of the licensed professions enumerated in subsection (1). This section may not be construed as amending, altering, or repealing any statutes relating to the licensing or use of hospitals."
Section 42. Section 33-22-140, MCA, is amended to read:
"33-22-140. Definitions. As used in this chapter, unless the context requires otherwise, the following definitions apply:
(1) "Beneficiary" has the meaning given the term by 29 U.S.C. 1002(33).
(2) "Church plan" has the meaning given the term by 29 U.S.C. 1002(33).
(3) "COBRA continuation provision" means:
(a) section 4980B of the Internal Revenue Code, 26 U.S.C. 4980B, other than subsection (f)(1) of that section as it relates to pediatric vaccines;
(b) Title I, subtitle B, part 6, excluding section 609, of the Employee Retirement Income Security Act of 1974, Public Law 93-406; or
(c) Title XXII of the Public Health Service Act, 42 U.S.C. 300dd, et seq.
(4) (a) "Creditable coverage" means coverage of the individual under any of the following:
(i) a group health plan;
(ii) health insurance coverage;
(iii) Title XVIII, part A or B, of the Social Security Act, 42 U.S.C. 1395c through 1395i-4 or 42 U.S.C. 1395j through 1395w-4;
(iv) Title XIX of the Social Security Act, 42 U.S.C. 1396a through 1396u, other than coverage consisting solely of a benefit under section 1928, 42 U.S.C. 1396s;
(v) Title 10, chapter 55, United States Code;
(vi) a medical care program of the Indian health service or of a tribal organization;
(vii) the Montana comprehensive health association provided for in 33-22-1503;
(viii) a health plan offered under Title 5, chapter 89, of the United States Code;
(ix) a public health plan;
(x) a health benefit plan under section 5(e) of the Peace Corps Act, 22 U.S.C. 2504(e).
(b) Creditable coverage does not include coverage consisting solely of coverage of excepted benefits.
(5) "Elimination rider" means a provision attached to a policy that excludes coverage for a specific condition that would otherwise be covered under the policy.
(6) "Enrollment date" means, with respect to an individual covered under a group health plan or health insurance coverage, the date of enrollment of the individual in the plan or coverage or, if earlier, the first day of the waiting period for enrollment.
(7) "Excepted benefits" means:
(a) coverage only for accident, or disability income insurance, or both;
(b) coverage issued as a supplement to liability insurance;
(c) liability insurance, including general liability insurance and automobile liability insurance;
(d) workers' compensation or similar insurance;
(e) automobile medical payment insurance;
(f) credit-only insurance;
(g) coverage for onsite medical clinics;
(h) other similar insurance coverage under which benefits for medical care are secondary or incidental to other insurance benefits, as approved by the commissioner;
(i) if offered separately, any of the following:
(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 of these types of care; or
(iii) other similar, limited benefits as approved by the commissioner;
(j) if offered as independent, noncoordinated benefits, any of the following:
(i) coverage only for a specified disease or illness; or
(ii) hospital indemnity or other fixed indemnity insurance;
(k) if offered as a separate insurance policy:
(i) medicare supplement coverage;
(ii) coverage supplemental to the coverage provided under Title 10, chapter 55, of the United States Code; and
(iii) similar supplemental coverage provided under a group health plan.
(8) "Federally defined eligible individual" means an individual:
(a) for whom, as of the date on which the individual seeks coverage in the group market or individual market or under an association portability plan, as defined in 33-22-1501, the aggregate of the periods of creditable coverage is 18 months or more;
(b) whose most recent prior creditable coverage was under a group health plan, governmental plan, church plan, or health insurance coverage offered in connection with any of those plans;
(c) who is not eligible for coverage under:
(i) a group health plan;
(ii) Title XVIII, part A or B, of the Social Security Act, 42 U.S.C. 1395c through 1395i-4 or 42 U.S.C. 1395j through 1395w-4; or
(iii) a state plan under Title XIX of the Social Security Act, 42 U.S.C. 1396a through 1396u, or a successor program;
(d) who does not have other health insurance coverage;
(e) for whom the most recent coverage within the period of aggregate creditable coverage was not terminated for factors relating to nonpayment of premiums or fraud;
(f) who, if offered the option of continuation coverage under a COBRA continuation provision or under a similar state program, elected that coverage; and
(g) who has exhausted continuation coverage under the COBRA continuation provision or program described in subsection (8)(f) if the individual elected the continuation coverage described in subsection (8)(f).
(9) "Group health insurance coverage" means health insurance coverage offered in connection with a group health plan or health insurance coverage offered to an eligible group as described in 33-22-501.
(10) "Group health plan" means an employee welfare benefit plan, as defined in, 29 U.S.C. 1002(1), to the extent that the plan provides medical care and items and services paid for as medical care to employees or their dependents, directly or through insurance, reimbursement, or otherwise.
(11) "Health insurance coverage" means benefits consisting of medical care, including items and services paid for as medical care, that are provided directly, through insurance, reimbursement, or otherwise, under a policy, certificate, membership contract, or health care services agreement offered by a health insurance issuer.
(12) "Health insurance issuer" means an insurer, a health service corporation, or a health maintenance organization.
(13) "Individual health insurance coverage" means health insurance coverage offered to individuals in the individual market, but does not include short-term limited duration insurance.
(14) "Individual market" means the market for health insurance coverage offered to individuals other than in connection
with a group health plan insurance coverage.
(15) "Large employer" means, in connection with a group health plan, with respect to a calendar year and a plan year, an employer who employed an average of at least 51 employees on business days during the preceding calendar year and who employs at least 2 employees on the first day of the plan year.
(16) "Large group market" means the health insurance market under which individuals obtain health insurance coverage
directly or through any arrangement on behalf of themselves and their dependents through a group health plan or group
health insurance coverage issued to a large employer maintained by a large employer.
(17) "Late enrollee" means an eligible employee or dependent, other than a special enrollee under 33-22-523, who
requests enrollment in a group health plan following the initial enrollment period during which the individual was entitled
to enroll under the terms of the group health plan if the initial enrollment period was a period of at least 30 days. However,
an eligible employee or dependent is not considered a late enrollee if:
(a) the individual requests enrollment within 63 days after termination of the creditable coverage and:
(i) the individual was covered under creditable coverage at the time of the initial enrollment; or
(ii) the individual lost coverage under creditable coverage as a result of termination of employment or eligibility,
reduction in the number of hours of employment, involuntary termination of the creditable coverage, the death of a spouse,
divorce, or legal separation;
(b) the individual is employed by an employer that offers multiple health benefit plans and the individual elects a
different plan during an open enrollment period; or
(c) a court has ordered that coverage be provided for a spouse, minor, or dependent child under a covered employee's
health benefit plan and a request for enrollment is made within 30 days after issuance of the court order.
(18) "Medical care" means:
(a) the diagnosis, cure, mitigation, treatment, or prevention of disease or amounts paid for the purpose of affecting any structure or function of the body;
(b) transportation primarily for and essential to medical care referred to in subsection (18)(a); or
(c) insurance covering medical care referred to in subsections (18)(a) and (18)(b).
(19) "Network plan" means health insurance coverage offered by a health insurance issuer under which the financing and delivery of medical care, including items and services paid for as medical care, are provided, in whole or in part, through a defined set of providers under contract with the issuer.
(20) "Plan sponsor" has the meaning provided under section 3(16)(B) of the Employee Retirement Income Security Act of 1974, 29 U.S.C. 1002(16)(B).
(21) "Preexisting condition exclusion" means, with respect to coverage, a limitation or exclusion of benefits relating to a condition based on presence of a condition before the enrollment date coverage, whether or not any medical advice, diagnosis, care, or treatment was recommended or received before the enrollment date.
(22) "Small group market" means the health insurance market under which individuals obtain health insurance coverage
directly or through an arrangement, on behalf of themselves and their dependents, through a group health plan or group
health insurance coverage maintained by a small employer as defined in 33-22-1803 maintained by a small employer, as
defined in 33-22-1803.
(23) "Waiting period" means, with respect to a group health plan and an individual who is a potential participant or beneficiary in the group health plan, the period that must pass with respect to the individual before the individual is eligible to be covered for benefits under the terms of the group health plan."
Section 43. Section 33-22-307, MCA, is amended to read:
"33-22-307. Continuity of coverage. (1) Subject to the requirements of 33-22-305 through 33-22-311 and on the date
specified in the policy under which coverage otherwise terminates because of the death of the named insured or for any
other reason specified in 33-22-306, as to covered family members, other than for nonpayment of premium, nonrenewal of
the policy, or the expiration of the term for which the policy is issued, a covered person, (other than one eligible for
medicare or any other similar federal or state disability insurance program), including the spouse and any covered
dependent child of the last-named insured or the representative of such the child, has the right to continuation of coverage
under provisions that, at the option of the carrier, are consistent with:
(a) the continuation of the policy, with the person exercising the right of continuation designated as the named insured;
(b) the issuance of a converted policy with the person exercising the conversion right designated as the named insured; or
(c) both (1)(a) and (1)(b).
(2) When continuation of coverage or conversion is made in the name of the spouse of the named insured, the coverage may, at the option of the spouse, include covered dependent children for whom the spouse has the responsibility for care and support."
Section 44. Section 33-22-514, MCA, is amended to read:
"33-22-514. Preexisting conditions relating to group market. (1) A group health plan or a health insurance issuer offering group health insurance coverage may not exclude coverage for a preexisting condition unless:
(a) medical advice, diagnosis, care, or treatment was recommended or received by the participant or beneficiary within the 6-month period ending on the enrollment date;
(b) exclusion of coverage extends for a period of not more than 12 months or 18 months in the case of a late enrollee; and
(c) the period of the preexisting condition exclusion is reduced by the aggregate of the periods of creditable coverage applicable to the participant or beneficiary as of the enrollment date.
(2) Genetic information may not be excluded as a preexisting condition in the absence of a diagnosis of the condition related to the genetic information.
(3) Pregnancy may not be excluded as a preexisting condition."
Section 45. Section 33-22-523, MCA, is amended to read:
"33-22-523. Special enrollment periods. (1) A group health plan and a health insurance issuer offering group health insurance coverage in connection with a group health plan shall permit an employee or a dependent of an employee who is eligible, but not enrolled, for coverage under the terms of the group health plan to enroll for coverage under the terms of the group health plan if:
(a) the employee or dependent was covered under a group health plan or had health insurance coverage at the time that coverage was previously offered to the employee or dependent;
(b) the employee stated in writing at the time that coverage under a group health plan or health insurance coverage was the reason for declining enrollment, but only if the plan sponsor or health insurance issuer required the statement at the time and provided the employee with notice of the requirement and the consequences of the requirement at the time;
(c) the employee's or dependent's coverage described in subsection (1)(a) was:
(i) under a COBRA continuation provision and was exhausted; or
(ii) not under a COBRA continuation provision and was terminated as a result of loss of eligibility for the coverage or because employer contributions toward the coverage were terminated; and
(d) under the terms of the group health plan, the employee requests the enrollment not later than 30 days after the date of exhaustion of coverage described in subsection (1)(c)(i) or termination of coverage or employer contribution described in subsection (1)(c)(ii).
(2) (a) A group health plan shall must provide for a dependent special enrollment period described in subsection (2)(b)
during which a dependent may be enrolled under the group health plan as a dependent of the individual and, if the person
becomes a dependent of the individual through marriage, birth, adoption, or placement for adoption. in In the case of the
birth or adoption of a child, the spouse of the individual may be enrolled as a dependent of the individual if the spouse is
otherwise eligible for coverage.
(b) A dependent special enrollment period under this subsection (2) is a period of not less than 30 days that begins on the later of:
(i) the date dependent coverage is made available; or
(ii) the date of the marriage, birth, or adoption, or placement for adoption.
(3) If an individual seeks to enroll a dependent during the first 30 days of the dependent special enrollment period, the coverage of the dependent becomes effective:
(a) in the case of marriage, not later than the first day of the first month beginning after the date on which the completed request for enrollment is received;
(b) in the case of a dependent's birth, as of the date of birth; or
(c) in the case of a dependent's adoption or placement for adoption, the date of the adoption or placement for adoption."
Section 46. Section 33-22-524, MCA, is amended to read:
"33-22-524. Guaranteed renewability of coverage for employers in group market. (1) Except as provided in this section, if a health insurance issuer offers health insurance coverage in the small group market or large group market in connection with a group health plan, the health insurance issuer shall renew or continue the coverage in force at the option of the plan sponsor.
(2) A health insurance issuer may nonrenew or discontinue health insurance coverage offered in connection with a group health plan in the small group market or large group market if:
(a) the plan sponsor has failed to pay premiums or contributions in accordance with the terms of the health insurance coverage or if the health insurance issuer has not received timely premium payments;
(b) the plan sponsor has performed an act or practice that constitutes fraud or has made an intentional misrepresentation of material fact under the terms of the coverage;
(c) the plan sponsor has failed to comply with a material plan provision relating to employer contribution or group
health plan participation rules in the case of the small group market or pursuant to applicable state law in the case of the
large group market;
(d) the health insurance issuer is ceasing to offer coverage in that group market in accordance with this section and applicable state law;
(e) in the case of a health insurance issuer that offers health insurance coverage in the group market through a network plan, there is no longer any enrollee in connection with the group health plan who lives, resides, or works in the service area of the health insurance issuer and, in the case of the small group market, if the health insurance issuer would deny enrollment with respect to the plan under 33-22-1811(4)(a)(i); or
(f) in the case of health insurance coverage that is made available in the small group market or large group market only through one or more bona fide associations, the membership of an employer in the bona fide association ceases, but only if the coverage is terminated under this subsection (2)(f) uniformly without regard to any health status-related factor of a covered individual.
(3) A health insurance issuer may not discontinue offering a particular type of group health insurance coverage offered in the small group market or large group market unless in accordance with applicable state law and unless:
(a) the issuer provides notice to each plan sponsor, participant, and beneficiary provided coverage of this type in that group market of the discontinuation at least 90 days prior to the date of the discontinuation of the coverage;
(b) the issuer offers to each plan sponsor provided coverage of this type in the market the option to purchase any other health insurance coverage currently being offered by the health insurance issuer to a group health plan in the market; and
(c) the health insurance issuer acts uniformly without regard to the claims experience of those sponsors or any health status-related factor of any participants or beneficiaries covered or new participants or beneficiaries who may become eligible for the coverage.
(4) (a) A health insurance issuer may not discontinue offering all health insurance coverage in the small group market, the large group market, or both the small group market and the large group market, unless in accordance with applicable state law and unless:
(i) the issuer provides notice of discontinuation to the commissioner and to each plan sponsor, participant, and beneficiary covered at least 180 days prior to the date of the discontinuation of coverage; and
(ii) all health insurance issued or delivered for issuance in Montana in the group market or markets is discontinued and coverage under the health insurance coverage in the group market or markets is not renewed.
(b) In the case of a discontinuation under this section in a group market, the health insurance issuer may not provide for the issuance of any health insurance coverage in the group market for a period of 5 years beginning on the date of the discontinuation of the last health insurance coverage not renewed.
(5) A health insurance issuer may modify upon renewal health insurance coverage for a product offered to a group health plan in the large group market or in the small group market if, for coverage that is available in the small group market other than only through one or more bona fide associations, modification is consistent with applicable state law and effective on a uniform basis among group health plans with that product.
(6) In the case of health insurance coverage that is made available by a health insurance issuer in the small group market or large group market to employers only through one or more bona fide associations, references to "plan sponsor" under this section include those employers."
Section 47. Section 33-22-1803, MCA, is amended to read:
"33-22-1803. Definitions. As used in this part, the following definitions apply:
(1) "Actuarial certification" means a written statement by a member of the American academy of actuaries or other individual acceptable to the commissioner that a small employer carrier is in compliance with the provisions of 33-22-1809, based upon the person's examination, including a review of the appropriate records and of the actuarial assumptions and methods used by the small employer carrier in establishing premium rates for applicable health benefit plans.
(2) "Affiliate" or "affiliated" means any entity or person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with a specified entity or person.
(3) "Assessable carrier" means all carriers of disability insurance, including excess of loss and stop loss disability insurance.
(4) "Base premium rate" means, for each class of business as to a rating period, the lowest premium rate charged or that could have been charged under the rating system for that class of business by the small employer carrier to small employers with similar case characteristics for health benefit plans with the same or similar coverage.
(5) "Basic health benefit plan" means a health benefit plan, except a uniform health benefit plan, developed by a small employer carrier, that has a lower benefit value than the small employer carrier's standard benefit plan and that provides the benefits required by 33-22-1827.
(6) "Benefit value" means a numerical value based on the expected dollar value of benefits payable to an insured under a health benefit plan. The benefit value must be calculated by the small employer carrier using an actuarially based method and must take into account all health care expenses covered by the health benefit plan and all cost-sharing features of the health benefit plan, including deductibles, coinsurance, copayments, and the insured individual's maximum out-of-pocket expenses. The benefit value must apply equally to indemnity-type health benefit plans and to managed care health benefit plans, including health maintenance organization-type plans.
(7) "Board" means the board of directors of the program established pursuant to 33-22-1818.
(8) "Bona fide association" means an association that:
(a) has been actively in existence for at least 5 years;
(b) was formed and has been maintained in good faith for purposes other than obtaining insurance;
(c) does not condition membership in the association on a health status-related factor relating to an individual, including an employee of an employer or a dependent of an employee;
(d) makes health insurance coverage offered through the association available to a member regardless of a health status-related factor relating to the member or an individual eligible for coverage through a member; and
(e) does not make health insurance coverage offered through the association available other than in connection with a
member of the association; and.
(f) meets any additional requirements required by law.
(9) "Carrier" means any person who provides a health benefit plan in this state subject to state insurance regulation. The term includes but is not limited to an insurance company, a fraternal benefit society, a health service corporation, and a health maintenance organization. For purposes of this part, companies that are affiliated companies or that are eligible to file a consolidated tax return must be treated as one carrier, except that the following may be considered as separate carriers:
(a) an insurance company or health service corporation that is an affiliate of a health maintenance organization located in this state;
(b) a health maintenance organization located in this state that is an affiliate of an insurance company or health service corporation; or
(c) a health maintenance organization that operates only one health maintenance organization in an established geographic service area of this state.
(10) "Case characteristics" means demographic or other objective characteristics of a small employer that are considered by the small employer carrier in the determination of premium rates for the small employer, provided that gender, claims experience, health status, and duration of coverage are not case characteristics for purposes of this part.
(11) "Class of business" means all or a separate grouping of small employers established pursuant to 33-22-1808.
(12) "Dependent" means:
(a) a spouse or an unmarried child under 19 years of age;
(b) an unmarried child, under 23 years of age, who is a full-time student and who is financially dependent on the insured;
(c) a child of any age who is disabled and dependent upon the parent as provided in 33-22-506 and 33-30-1003; or
(d) any other individual defined as a dependent in the health benefit plan covering the employee.
(13) "Eligible employee" means an employee who works on a full-time basis with a normal workweek of 30 hours or more, except that at the sole discretion of the employer, the term may include an employee who works on a full-time basis with a normal workweek of between 20 and 40 hours as long as this eligibility criteria is applied uniformly among all of the employer's employees. The term includes a sole proprietor, a partner of a partnership, and an independent contractor if the sole proprietor, partner, or independent contractor is included as an employee under a health benefit plan of a small employer. The term also includes those persons eligible for coverage under 2-18-704. The term does not include an employee who works on a part-time, temporary, or substitute basis.
(14) "Established geographic service area" means a geographic area, as approved by the commissioner and based on the carrier's certificate of authority to transact insurance in this state, within which the carrier is authorized to provide coverage.
(15) "Health benefit plan" means any hospital or medical policy or certificate providing for physical and mental health care issued by an insurance company, a fraternal benefit society, or a health service corporation or issued under a health maintenance organization subscriber contract. Health benefit plan does not include coverage of excepted benefits if coverage is provided under a separate policy, certificate, or contract of insurance.
(16) "Index rate" means, for each class of business for a rating period for small employers with similar case characteristics, the average of the applicable base premium rate and the corresponding highest premium rate.
(17) "New business premium rate" means, for each class of business for a rating period, the lowest premium rate charged or offered or that could have been charged or offered by the small employer carrier to small employers with similar case characteristics for newly issued health benefit plans with the same or similar coverage.
(18) "Plan of operation" means the operation of the program established pursuant to 33-22-1818.
(19) "Premium" means all money paid by a small employer and eligible employees as a condition of receiving coverage from a small employer carrier, including any fees or other contributions associated with the health benefit plan.
(20) "Program" means the Montana small employer health reinsurance program created by 33-22-1818.
(21) "Rating period" means the calendar period for which premium rates established by a small employer carrier are assumed to be in effect.
(22) "Reinsuring carrier" means a small employer carrier participating in the reinsurance program pursuant to 33-22-1819.
(23) "Restricted network provision" means a provision of a health benefit plan that conditions the payment of benefits, in whole or in part, on the use of health care providers that have entered into a contractual arrangement with the carrier pursuant to Title 33, chapter 22, part 17, or Title 33, chapter 31, to provide health care services to covered individuals.
(24) "Small employer" means a person, firm, corporation, partnership, or bona fide association that is actively engaged in business and that, with respect to a calendar year and a plan year, employed at least 2 but not more than 50 eligible employees during the preceding calendar year and employed at least two employees on the first day of the plan year. In the case of an employer that was not in existence throughout the preceding calendar year, the determination of whether the employer is a small or large employer must be based on the average number of employees reasonably expected to be employed by the employer in the current calendar year. In determining the number of eligible employees, companies are considered one employer if they:
(a) are affiliated companies;
(b) are eligible to file a combined tax return for purposes of state taxation; or
(c) are members of a bona fide association.
(25) "Small employer carrier" means a carrier that offers health benefit plans that cover eligible employees of one or more small employers in this state.
(26) "Standard health benefit plan" means a health benefit plan that is developed by a small employer carrier and that contains the provisions required pursuant to 33-22-1828."
Section 48. Section 33-22-1809, MCA, is amended to read:
"33-22-1809. Restrictions relating to premium rates. (1) Premium rates for health benefit plans under this part are subject to the following provisions:
(a) The index rate for a rating period for any class of business may not exceed the index rate for any other class of business by more than 20%.
(b) For each class of business, the premium rates charged during a rating period to small employers with similar case characteristics for the same or similar coverage or the rates that could be charged to the employer under the rating system for that class of business may not vary from the index rate by more than 25% of the index rate.
(c) The percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of the following:
(i) the percentage change in the new business premium rate measured from the first day of the prior rating period to the first day of the new rating period; in the case of a health benefit plan into which the small employer carrier is no longer enrolling new small employers, the small employer carrier shall use the percentage change in the base premium rate, provided that the change does not exceed, on a percentage basis, the change in the new business premium rate for the most similar health benefit plan into which the small employer carrier is actively enrolling new small employers;
(ii) any adjustment, not to exceed 15% annually and adjusted pro rata for rating periods of less than 1 year, because of the claims experience, health status, or duration of coverage of the employees or dependents of the small employer, as determined from the small employer carrier's rate manual for the class of business; and
(iii) any adjustment because of a change in coverage or a change in the case characteristics of the small employer, as determined from the small employer carrier's rate manual for the class of business.
(d) Adjustments in rates for claims experience, health status, and duration of coverage may not be charged to individual employees or dependents. Any adjustment must be applied uniformly to the rates charged for all employees and dependents of the small employer.
(e) If a small employer carrier uses industry as a case characteristic in establishing premium rates, the rate factor associated with any industry classification may not vary from the average of the rate factors associated with all industry classifications by more than 15% of that coverage.
(f) In the case of health benefit plans delivered or issued for delivery prior to January 1, 1994, a premium rate for a
rating period may exceed the ranges set forth in subsections (1)(a) and (1)(b) until January 1, 1997. In that case, the
percentage increase in the premium rate charged to a small employer for a new rating period may not exceed the sum of the
following:
(i) the percentage change in the new business premium rate measured from the first day of the prior rating period to the
first day of the new rating period; in the case of a health benefit plan into which the small employer carrier is no longer
enrolling new small employers, the small employer carrier shall use the percentage change in the base premium rate,
provided that the change does not exceed, on a percentage basis, the change in the new business premium rate for the most
similar health benefit plan into which the small employer carrier is actively enrolling new small employers; and
(ii) any adjustment because of a change in coverage or a change in the case characteristics of the small employer, as
determined from the small employer carrier's rate manual for the class of business.
(g)(f) A small employer carrier shall:
(i) apply rating factors, including case characteristics, consistently with respect to all small employers in a class of business. Rating factors must produce premiums for identical groups that differ only by the amounts attributable to plan design and that do not reflect differences because of the nature of the groups. Differences among base premium rates may not be based in any way on the actual or expected health status or claims experience of the small employer groups that choose or are expected to choose a particular health benefit plan.
(ii) treat all health benefit plans issued or renewed in the same calendar month as having the same rating period.
(h)(g) For the purposes of this subsection (1), a health benefit plan that includes a restricted network provision may not
be considered similar coverage to a health benefit plan that does not include a restricted network provision.
(2) A small employer carrier may not transfer a small employer involuntarily into or out of a class of business. A small employer carrier may not offer to transfer a small employer into or out of a class of business unless the offer is made to transfer all small employers in the class of business without regard to case characteristics, claims experience, health status, or duration of coverage since the insurance was issued.
(3) The commissioner may suspend for a specified period the application of subsection (1)(a) for the premium rates applicable to one or more small employers included within a class of business of a small employer carrier for one or more rating periods upon a filing by the small employer carrier and a finding by the commissioner either that the suspension is reasonable in light of the financial condition of the small employer carrier or that the suspension would enhance the fairness and efficiency of the small employer health insurance market.
(4) In connection with the offering for sale of any health benefit plan to a small employer, a small employer carrier shall make a reasonable disclosure, as part of its solicitation and sales materials, of each of the following:
(a) the extent to which premium rates for a specified small employer are established or adjusted based upon the actual or expected variation in claims costs or upon the actual or expected variation in health status of the employees of small employers and the employees' dependents;
(b) the provisions of the health benefit plan concerning the small employer carrier's right to change premium rates and the factors, other than claims experience, that affect changes in premium rates;
(c) the provisions relating to renewability of policies and contracts; and
(d) the provisions relating to any preexisting condition.
(5) (a) Each small employer carrier shall maintain at its principal place of business a complete and detailed description of its rating practices and renewal underwriting practices, including information and documentation that demonstrate that its rating methods and practices are based upon commonly accepted actuarial assumptions and are in accordance with sound actuarial principles.
(b) Each small employer carrier shall file with the commissioner annually, on or before March 15, an actuarial certification certifying that the carrier is in compliance with this part and that the rating methods of the small employer carrier are actuarially sound. The actuarial certification must be in a form and manner and must contain information as specified by the commissioner. A copy of the actuarial certification must be retained by the small employer carrier at its principal place of business.
(c) The filing required in subsection (5)(b) must contain the small employer carrier's benefit value.
(d) A small employer carrier shall make the information and documentation described in subsection (5)(a) available to
the commissioner upon request. Except in cases of violations of the provisions of this part and except as agreed to by the
small employer carrier or as ordered by a court of competent jurisdiction, the information must be considered proprietary
and trade secret information and is not subject to disclosure by the commissioner to persons outside of the department.
(6) The commissioner may not require prior approval of the rating methods used by small employer carriers or the premium rates of the health benefit plans offered to small employers."
Section 49. Section 33-22-1811, MCA, is amended to read:
"33-22-1811. Availability of coverage -- required plans. (1) (a) As a condition of transacting business in this state with small employers, each small employer carrier must have approved for issuance to small employer groups at least two health benefit plans. One plan must be a basic health benefit plan, and one plan must be a standard health benefit plan.
(b) (i) A small employer carrier shall issue a basic health benefit plan or a standard health benefit plan all plans
marketed under this part to any eligible small employer that applies for either a plan and agrees to make the required
premium payments and to satisfy the other reasonable provisions of the health benefit plan not inconsistent with this part.
If, pursuant to Public Law 104-191, an agency of the United States or a court does not prohibit a small employer carrier
from doing so, a small employer carrier may offer and issue a group health benefit plan other than a basic or standard plan
on an underwritten basis.
(ii) In the case of a small employer carrier that establishes more than one class of business pursuant to 33-22-1808, the
small employer carrier shall maintain and offer to eligible small employers at least one basic health benefit plan and at least
one standard health benefit plan all plans marketed under this part in each established class of business. A small employer
carrier may apply reasonable criteria in determining whether to accept a small employer into a class of business, provided
that:
(A) the criteria are not intended to discourage or prevent acceptance of small employers applying for a health benefit plan;
(B) the criteria are not related to the health status or claims experience of the small employers' employees;
(C) the criteria are applied consistently to all small employers that apply for coverage in that class of business; and
(D) the small employer carrier provides for the acceptance of all eligible small employers into one or more classes of business.
(iii) The provisions of subsection (1)(b)(ii) may not be applied to a class of business into which the small employer carrier is no longer enrolling new small businesses.
(c) A small employer carrier that elects not to comply with the requirements of subsections (1)(a) and (1)(b) may continue to provide coverage under health benefit plans previously issued to small employers in this state for a period of no more than 7 years from October 1, 1995, if the carrier:
(i) complies with all other applicable provisions of this part, except 33-22-1810, 33-22-1813, and subsections (2)
through (4) of this section; and
(ii) does not amend or alter the benefits and coverages of the previously issued health benefit plans unless required to do
so by law or rule.; and
(iii) complies with all applicable provisions of Public Law 104-91.
(2) (a) A small employer carrier shall, pursuant to 33-1-501, file the basic health benefit plans and the standard health benefit plans to be used by the small employer carrier.
(b) The commissioner may at any time, after providing notice and an opportunity for a hearing to the small employer carrier, disapprove the continued use by a small employer carrier of a basic or standard health benefit plan on the grounds that the plan does not meet the requirements of this part.
(3) Health benefit plans covering small employers must comply with the following provisions:
(a) A health benefit plan may not:
(i) because of a preexisting condition, deny, exclude, or limit benefits for a covered individual for losses incurred more
than 12 months following the effective date of the individual's enrollment date coverage. A health benefit plan may not
define a preexisting condition exclusion more restrictively than 33-22-140.
(ii) use a preexisting condition exclusion more restrictive than exclusions allowed under 33-22-514.
(b) A health benefit plan must waive any time period applicable to a preexisting condition exclusion or limitation period with respect to particular services for the period of time that an individual was previously covered by creditable coverage that provided benefits with respect to those services if the creditable coverage was continuous to a date not more than 63 days prior to the submission of an application for new coverage. A health benefit plan may determine waivers of time periods applicable to preexisting condition exclusions or limitations on the basis of prior coverage of benefits within each of several classes or categories as specified in regulations implementing Public Law 104-191, rather than as provided in this subsection (3)(b). This subsection (3)(b) does not preclude application of any waiting period applicable to all new enrollees under the health benefit plan.
(c) A health benefit plan may exclude coverage for late enrollees for 18 months or for an 18-month preexisting condition exclusion, provided that if both a period of exclusion from coverage and a preexisting condition exclusion are applicable to a late enrollee, the combined period may not exceed 18 months from the date on which the individual enrolls for coverage under the health benefit plan.
(d) (i) Requirements used by a small employer carrier in determining whether to provide coverage to a small employer, including requirements for minimum participation of eligible employees and minimum employer contributions, must be applied uniformly among all small employers that have the same number of eligible employees and that apply for coverage or receive coverage from the small employer carrier.
(ii) A small employer carrier may vary the application of minimum participation requirements and minimum employer contribution requirements only by the size of the small employer group.
(e) (i) If a small employer carrier offers coverage to a small employer, the small employer carrier shall offer coverage to all of the eligible employees of a small employer and their dependents. A small employer carrier may not offer coverage only to certain individuals in a small employer group or only to part of the group, except in the case of late enrollees as provided in subsection (3)(c).
(ii) A small employer carrier may not modify a basic or standard health benefit plan marketed under this part with
respect to a small employer or any eligible employee or dependent, through riders, endorsements, or otherwise, to restrict or
exclude coverage for certain diseases or medical conditions otherwise covered by the health benefit plan.
(iii) A small employer carrier shall secure a waiver of coverage from each eligible employee who declines, at the sole discretion of the eligible employee, an offer of coverage under a health benefit plan provided by the small employer. The waiver must be signed by the eligible employee and must certify that the employee was informed of the availability of coverage under the health benefit plan and of the penalties for late enrollment. The waiver may not require the eligible employee to disclose the reasons for declining coverage.
(iv) A small employer carrier may not issue coverage to a small employer if the carrier or a producer for the carrier has evidence that the small employer induced or pressured an eligible employee to decline coverage due to the health status or risk characteristics of the eligible employee or of the dependents of the eligible employee.
(4) (a) A small employer carrier may not be required to offer coverage or accept applications pursuant to subsection (1) in the case of the following:
(i) to an employer whose employees do not work or reside within the small employer carrier's established geographic service area for a network plan, as defined in 33-22-140; or
(ii) within an area where the small employer carrier reasonably anticipates and demonstrates to the satisfaction of the commissioner that it will not have the capacity within its established geographic service area to deliver service adequately to the members of a group because of its obligations to existing group policyholders and enrollees. The small employer carrier may not deny coverage under this subsection unless the small employer carrier acts uniformly without regard to claims experience or health status-related factors of employers, employees, or dependents.
(b) A small employer carrier may not be required to provide coverage to small employers pursuant to subsection (1) for which the commissioner determines that the small employer carrier does not have the financial reserves necessary to underwrite additional coverage and that the small employer carrier has denied coverage of small employers uniformly throughout the state and without regard to the claims experience and health status-related factors of the applicant small employer groups. The small employer carrier exempted from providing coverage under this subsection may not offer coverage to small employer groups in this state for 180 days after the date on which coverage is denied or until the small employer carrier has demonstrated to the commissioner that the small employer carrier has sufficient financial reserves to underwrite additional coverage, whichever is later."
Section 50. Section 33-22-1813, MCA, is amended to read:
"33-22-1813. Standards to ensure fair marketing. (1) Each small employer carrier shall actively market health
benefit plan coverage, including the basic and standard health benefit plans, to eligible small employers in the state. If a
small employer carrier denies coverage other than the basic or standard health benefit plans to a small employer on the basis
of claims experience of the small employer or the health status or claims experience of its employees or dependents, the
small employer carrier shall offer the small employer the opportunity to purchase a basic health benefit plan or a standard
health benefit plan.
(2) (a) Except as provided in subsection (2)(b), a small employer carrier or producer may not directly or indirectly engage in the following activities:
(i) encouraging or directing small employers to refrain from filing an application for coverage with the small employer carrier because of the health status of the employer's employees or the claims experience, industry, occupation, or geographic location of the small employer;
(ii) encouraging or directing small employers to seek coverage from another carrier because of the health status of the employer's employees or the claims experience, industry, occupation, or geographic location of the small employer.
(b) The provisions of subsection (2)(a) do not apply with respect to information provided by a small employer carrier or producer to a small employer regarding the established geographic service area or a restricted network provision of a small employer carrier.
(3) (a) Except as provided in subsection (3)(b), a small employer carrier may not, directly or indirectly, enter into any contract, agreement, or arrangement with a producer that provides for or results in the compensation paid to a producer for the sale of a health benefit plan to be varied because of the health status of the employer's employees or the claims experience, industry, occupation, or geographic location of the small employer.
(b) Subsection (3)(a) does not apply with respect to a compensation arrangement that provides compensation to a producer on the basis of the percentage of a premium, provided that the percentage may not vary because of the health status of the employer's employees or the claims experience, industry, occupation, or geographic area of the small employer.
(4) A small employer carrier shall provide reasonable compensation, as provided under the plan of operation of the program, to a producer, if any, for the sale of a basic or standard health benefit plan.
(5) A small employer carrier may not terminate, fail to renew, or limit its contract or agreement of representation with a producer for any reason related to the health status of the employer's employees or the claims experience, industry, occupation, or geographic location of the small employers placed by the producer with the small employer carrier.
(6) A small employer carrier or producer may not induce or otherwise encourage a small employer to separate or otherwise exclude an employee from health coverage or benefits provided in connection with the employee's employment.
(7) Denial by a small employer carrier of an application for coverage from health insurance coverage for a small
employer must be in writing and must state the reason or reasons for the denial.
(8) The commissioner may adopt rules setting forth additional standards to provide for the fair marketing and broad availability of health benefit plans to small employers in this state.
(9) (a) A violation of this section by a small employer carrier or a producer is an unfair trade practice under 33-18-102.
(b) If a small employer carrier enters into a contract, agreement, or other arrangement with an administrator who holds a certificate of registration pursuant to 33-17-603 to provide administrative, marketing, or other services related to the offering of health benefit plans to small employers in this state, the administrator is subject to this section as if the administrator were a small employer carrier."
Section 51. Section 33-22-1815, MCA, is amended to read:
"33-22-1815. Qualifications for voluntary purchasing pool. A voluntary purchasing pool of disability insurance purchasers may be formed solely for the purpose of obtaining disability insurance upon compliance with the following provisions:
(1) It contains at least 1,000 eligible employees.
(2) It establishes requirements for membership. The voluntary purchasing pool shall accept for membership any small
employers and may accept for membership any employers with more than 25 50 eligible employees that otherwise meet the
requirements for membership. However, the voluntary purchasing pool may not exclude any small employers that otherwise
meet the requirements for membership on the basis of claim experience, occupation, or health status.
(3) It holds an open enrollment period at least once a year during which new members can join the voluntary purchasing pool.
(4) It offers coverage to eligible employees of member employers and to the employees' dependents. Coverage may not be limited to certain employees of member small employers except as provided in 33-22-1811(3)(c).
(5) It does not assume any risk or form self-insurance plans among its members.
(6) (a) It has the option of using the following types of rating arrangements with the disability insurance policies, certificates, or contracts:
(i) Disability insurance policies, certificates, or contracts offered through the voluntary purchasing pool that rate each member employer separately are subject to the provisions of this part.
(ii) Disability insurance policies, certificates, or contracts offered through the voluntary purchasing pool that rate the entire group as a whole must charge each insured person based on a community rate within the common group, adjusted for case characteristics as permitted by the laws governing group disability insurance.
(b) At its discretion, premiums may be paid to the disability insurance policies, certificates, or contracts by the voluntary purchasing pool, by member employers, or by eligible employees and their dependents.
(7) A person marketing disability insurance policies, certificates, or contracts for a voluntary purchasing pool must be licensed as an insurance producer."
Section 52. Section 33-22-1816, MCA, is amended to read:
"33-22-1816. Commissioner powers and duties -- application for registration -- reporting insolvency. (1) The commissioner shall develop forms for registration of an organization as a voluntary purchasing pool.
(2) An organization seeking to be registered as a voluntary purchasing pool shall make application to the commissioner. The commissioner shall register an organization as a voluntary purchasing pool upon proof of fulfillment of the qualifications provided in 33-22-1815.
(3) On Except as provided in subsection (5), on March 1 of each year, the voluntary purchasing pool shall provide a
report and financial statement for the previous calendar year to the commissioner in order that the commissioner may
determine:
(a) whether the operation of the voluntary purchasing pool is fiscally sound;
(b) whether the voluntary purchasing pool is bearing any risk; and
(c) the number of individuals covered.
(4) The annual report of the voluntary purchasing pool must disclose its total administrative cost.
(5) A voluntary purchasing pool may choose to operate on a fiscal year other than on the calendar year. A voluntary purchasing pool that establishes a fiscal year that is other than the calendar year shall provide the report required in subsection (3) to the commissioner within 60 days of the voluntary purchasing pool's fiscal yearend."
Section 53. Section 33-23-212, MCA, is amended to read:
"33-23-212. Notice required for cancellation -- statement that insurer will specify reason upon request --
exception -- penalty. (1) Notwithstanding any other provision of this code, no a cancellation by an insurer of a motor
vehicle liability insurance policy may not be effective prior to the mailing or delivery to the named insured, at the address
shown in the policy, of a written notice of the cancellation stating the date on which, not less than 30 days after the date of
such mailing or delivery, the cancellation becomes effective.
(2) No A notice of cancellation of a policy to which 33-23-211 applies may not be effective unless mailed or delivered
by the insurer to the named insured at least 30 days prior to the effective date of cancellation; provided, however, that
where cancellation is for nonpayment of premium, at least 10 days' notice of cancellation accompanied by the reason
therefor must be given. Unless the reason accompanies or is included in the notice of cancellation, the notice of cancellation
must state or be accompanied by a statement that upon written request of the named insured, mailed or delivered to the
insurer not less than 15 21 days prior to the effective date of cancellation, the insurer will shall specify the reason for such
the cancellation.
(3) Subsection (2) does not apply to nonrenewal.
(4) Any insurer willfully violating any provisions of subsection (2) of this section is guilty of a misdemeanor and is punishable by a fine not exceeding $500 for each violation thereof."
Section 54. Section 33-30-107, MCA, is amended to read:
"33-30-107. Annual statement. (1) On or before March 1 of each year, each health service corporation shall file an
annual statement for the preceding year on form No. 13 the N.A.I.C. health blank form with the commissioner of insurance.
This annual statement must be completed in accordance with the national association of insurance commissioners' annual
statement instructions. The statement must be accompanied by an actuarial opinion attesting to the insurer's reserves.
(2) The health service corporation shall file a statement containing any other information concerning its financial affairs that may be reasonably requested by the commissioner.
(3) (a) Each health service corporation shall file electronic diskette versions of its annual and quarterly financial
statements with the national association of insurance commissioners. The filing date for submission of the annual statement
diskette electronic filing is March 1. The filing dates for the other three submission of the quarterly statements statement
electronic filing are as follows:
(i) the first quarter statement filing is due May 15;
(ii) the second quarter statement filing is due August 15; and
(iii) the third quarter statement filing is due November 15.
(b) The commissioner may exempt health service corporations operating only in Montana from these filing requirements.
(4) The commissioner may, after notice and hearing, suspend or revoke a health service corporation's license or impose a fine not to exceed $100 a day and not to exceed $1,000 upon a health service corporation that fails to file an annual statement as required by this part."
Section 55. Section 33-30-201, MCA, is amended to read:
"33-30-201. Reserves -- requirements suspended. (1) The corporation shall maintain at all times unobligated funds adequate to:
(a) provide the hospital, medical-surgical, and other health services made available to its members and beneficiaries; and
(b) meet all costs and expenses.
(2) In addition, reserves of a health service corporation in cash, certificates of deposit, obligations issued or guaranteed
by the government of the United States, or other assets approved by the commissioner shall must be maintained in an
amount not less than:
(a) $500,000; or, if licensed under this chapter after October 1, 1999, $750,000; or
(b) an amount equal to 1 month's average income from dues or fees paid to the corporation by its members or beneficiaries, based on an average of the preceding 12 months, whichever is less.
(3) If the reserves are not equal to the average in subsection (2)(b), they must have been increased during the preceding
12 months by an amount equal to 1% of the gross dues or fee income during that period.
(4)(3) The determination of minimum reserves is subject, as to amounts payable to participating providers of the health
services, to any right of the corporation to prorate the amounts under the terms of its health service contracts with providers.
(5) The commissioner may decrease or suspend the requirements of this section if he finds that the action is in the best
interest of the members of the corporation.
(4) The commissioner may decrease or suspend the requirements of this section if the commissioner finds that the action is in the best interest of the members of the corporation."
Section 56. Section 33-31-111, MCA, is amended to read:
"33-31-111. Statutory construction and relationship to other laws. (1) Except as otherwise provided in this chapter, the insurance or health service corporation laws do not apply to any health maintenance organization authorized to transact business under this chapter. This provision does not apply to an insurer or health service corporation licensed and regulated pursuant to the insurance or health service corporation laws of this state except with respect to its health maintenance organization activities authorized and regulated pursuant to this chapter.
(2) Solicitation of enrollees by a health maintenance organization granted a certificate of authority or its representatives is not a violation of any law relating to solicitation or advertising by health professionals.
(3) A health maintenance organization authorized under this chapter is not practicing medicine and is exempt from Title 37, chapter 3, relating to the practice of medicine.
(4) This chapter does not exempt a health maintenance organization from the applicable certificate of need requirements under Title 50, chapter 5, parts 1 and 3.
(5) This section does not exempt a health maintenance organization from the prohibition of pecuniary interest under 33-3-308 or the material transaction disclosure requirements under 33-3-701 through 33-3-704. A health maintenance organization must be considered an insurer for the purposes of 33-3-308 and 33-3-701 through 33-3-704.
(6) This section does not exempt a health maintenance organization from:
(a) prohibitions against interference with certain communications as provided under chapter 1, part 8;
(b) the provisions of Title 33, chapter 22, part 19;
(c) the requirements of 33-22-134 and 33-22-135; or
(d) network adequacy and quality assurance requirements provided under chapter 36.
(7) Sections Chapter 1, parts 12 and 13, of this title, 33-3-431, 33-15-308, 33-22-141, 33-22-142, 33-22-246,
33-22-247, 33-22-514, 33-22-523, 33-22-524, and 33-22-526 apply to health maintenance organizations."
Section 57. Section 33-31-202, MCA, is amended to read:
"33-31-202. Issuance of certificate of authority. (1) The commissioner shall issue or deny a certificate of authority to any person filing an application pursuant to 33-31-201 within 180 days after receipt of the application. The commissioner shall grant a certificate of authority upon payment of the application fee prescribed in 33-31-212 if the commissioner is satisfied that each of the following conditions is met:
(a) The persons responsible for the conduct of the applicant's affairs are competent and trustworthy.
(b) The health maintenance organization will effectively provide or arrange for the provision of basic health care services on a prepaid basis, through insurance or otherwise, except to the extent of reasonable requirements for copayments. This requirement does not apply to the health care services provided by a health maintenance organization to a person receiving medicaid services under the Montana medicaid program as established in Title 53, chapter 6.
(c) The health maintenance organization is financially responsible and can reasonably be expected to meet its obligations to enrollees and prospective enrollees. In making this determination, the commissioner may consider:
(i) the financial soundness of the arrangements for health care services and the schedule of charges used in connection with the services;
(ii) the adequacy of working capital;
(iii) any agreement with an insurer, a health service corporation, a government, or any other organization for ensuring the payment of the cost of health care services or the provision for automatic applicability of an alternative coverage in the event of discontinuance of the health maintenance organization;
(iv) any agreement with providers for the provision of health care services;
(v) any deposit of cash or securities submitted in accordance with 33-31-216; and
(vi) any additional information that the commissioner may reasonably require.
(d) The enrollees must be afforded an opportunity to participate in matters of policy and operation pursuant to 33-31-222.
(e) Nothing in the proposed method of operation, as shown by the information submitted pursuant to 33-31-201 or by independent investigation, violates any provision of this chapter or rules adopted by the commissioner.
(2) The commissioner may deny a certificate of authority only if the requirements of 33-31-404 are complied with.
(3) The commissioner shall examine each health maintenance organization applying for an initial certificate of authority to do business in this state. In lieu of making an examination under this part of any health maintenance organization domiciled in another state, the commissioner may accept an examination report on the organization prepared by the insurance department of the organization's state of domicile."
Section 58. Section 33-31-211, MCA, is amended to read:
"33-31-211. Annual statements -- revocation for failure to file -- penalty for false swearing. (1) Unless it is operated by an insurer or a health service corporation as a plan, each authorized health maintenance organization shall annually on or before March 1 file with the commissioner a full and true statement of its financial condition, transactions, and affairs as of the preceding December 31. The statement must be in the general form and content required by the commissioner and must be completed in accordance with the national association of insurance commissioners' annual statement instructions. The statement must be verified by the oath of at least two principal officers of the health maintenance organization. The commissioner may waive any verification under oath. In addition, a health maintenance organization shall, unless it is operated by an insurer or a health service corporation as a plan, annually file on or before June 1 an audited financial statement. A health maintenance organization's audited financial statement must comply with rules adopted by the commissioner concerning audited financial statements.
(2) At the time of filing the annual statement required by March 1, the health maintenance organization shall pay the commissioner the fee for filing the statement as prescribed in 33-31-212. The commissioner may refuse to accept the fee for continuance of the insurer's certificate of authority, as provided in 33-31-212, may impose a penalty of $100, or may suspend or revoke the certificate of authority of a health maintenance organization that fails to file an annual statement when due. Each day that the insurer fails to file its annual statement constitutes a separate violation. The total penalty may not exceed $1,000.
(3) The commissioner may, after notice and hearing, impose a fine not to exceed $5,000 for each violation upon a director, officer, partner, member, insurance producer, or employee of a health maintenance organization who knowingly subscribes to or concurs in making or publishing an annual statement required by law that contains a material statement that is false.
(4) The commissioner may require reports considered reasonably necessary and appropriate to enable the commissioner to carry out the duties required of the commissioner under this chapter, including but not limited to a statement of operations, transactions, and affairs of a health maintenance organization operated by an insurer or a health service corporation as a plan."
Section 59. Section 33-31-216, MCA, is amended to read:
"33-31-216. Protection against insolvency. (1) Except as provided in subsections (4) through (7), each authorized health maintenance organization shall deposit with the commissioner cash, securities, or any combination of cash or securities acceptable to the commissioner in the amount set forth in this section.
(2) The amount of the deposit for a health maintenance organization during the first year of its operation is $200,000.
(3) At the beginning of each succeeding year, unless not applicable, the health maintenance organization shall deposit with the commissioner cash, securities, or any combination of cash or securities acceptable to the commissioner, in an amount equal to 4% of its estimated annual uncovered expenditures for that year.
(4) Unless not applicable, a health maintenance organization that is in operation on October 1, 1987, shall make a deposit equal to the greater of:
(a) 1% of the preceding 12 months' uncovered expenditures; or
(b) 4% of its estimated annual uncovered expenditures for each year.
(5) The commissioner may waive any of the deposit requirements set forth in subsections (1) through (4) whenever the commissioner is satisfied that:
(a) the health maintenance organization has sufficient net worth and an adequate history of generating net income to ensure its financial viability for the next year;
(b) the health maintenance organization's performance and obligations are guaranteed by an organization with sufficient net worth and an adequate history of generating net income; or
(c) the health maintenance organization's assets or its contracts with insurers, health service corporations, governments,
or other organizations are reasonably sufficient to assure ensure the performance of its obligations.
(6) When a health maintenance organization achieves a net worth not including land, buildings, and equipment of at least $1 million or achieves a net worth including organization-related land, buildings, and equipment of at least $5 million, the annual deposit requirement under subsection (3) does not apply. The annual deposit requirement under subsection (3) does not apply to a health maintenance organization if the total amount of the accumulated deposit is greater than the capital requirement for the formation or admittance of a disability insurer in this state. If the health maintenance organization has a guaranteeing organization that has been in operation for at least 5 years and has a net worth not including land, buildings, and equipment of at least $1 million or that has been in operation for at least 10 years and has a net worth including organization-related land, buildings, and equipment of at least $5 million, the annual deposit requirement under subsection (3) does not apply. If the guaranteeing organization is sponsoring more than one health maintenance organization, however, the net worth requirement is increased by a multiple equal to the number of those health maintenance organizations. This requirement to maintain a deposit in excess of the deposit required of a disability insurer does not apply during any time that the guaranteeing organization maintains for each health maintenance organization it sponsors a net worth at least equal to the capital and surplus requirements for a disability insurer.
(7) All income from deposits belongs to the depositing health maintenance organization and must be paid to it as it becomes available. A health maintenance organization that has made a securities deposit may withdraw the deposit or any part of it after making a substitute deposit of cash, securities, or any combination of cash or securities of equal amount and value. A health maintenance organization may not substitute securities without prior approval by the commissioner.
(8) In any year in which an annual deposit is not required of a health maintenance organization, at the health maintenance organization's request, the commissioner shall reduce the previously accumulated deposit by $100,000 for each $250,000 of net worth in excess of the amount that allows the health maintenance organization to be exempt from the annual deposit requirement. If the amount of net worth no longer supports a reduction of its required deposit, the health maintenance organization shall immediately redeposit $100,000 for each $250,000 of reduction in net worth. However, the health maintenance organization's total deposit may not be required to exceed the maximum required under this section.
(9) (a) Unless Subject to subsection (9)(b) and unless it is operated by an insurer or a health service corporation as a
plan, each health maintenance organization must have a minimum capital of at least $200,000 in addition to any deposit
requirements under this section. The capital account must be in excess of any accrued liabilities and be in the form of cash,
securities, or any combination of cash or securities acceptable to the commissioner.
(b) A health maintenance organization licensed under this chapter after October 1, 1999, must have a minimum capital of at least $750,000. The amount required to be deposited with the commissioner under subsection (2) must be included in the calculation of the capital needed to meet the $750,000 minimum.
(10) Each health maintenance organization shall demonstrate that if it becomes insolvent:
(a) enrollees hospitalized on the date of insolvency will be covered until discharged; and
(b) enrollees will be entitled to similar alternate insurance coverage that does not contain any medical underwriting or preexisting limitation requirements."
Section 60. Section 33-31-301, MCA, is amended to read:
"33-31-301. Evidence of coverage -- schedule of charges for health care services. (1) Each enrollee residing in this state is entitled to an evidence of coverage. The health maintenance organization shall issue the evidence of coverage, except that if the enrollee obtains coverage through an insurance policy issued by an insurer or a contract issued by a health service corporation, whether by option or otherwise, the insurer or the health service corporation shall issue the evidence of coverage.
(2) A health maintenance organization may not issue or deliver an enrollment form, an evidence of coverage, or an amendment to an approved enrollment form or evidence of coverage to a person in this state before a copy of the enrollment form, the evidence of coverage, or the amendment to the approved enrollment form or evidence of coverage is filed with and approved by the commissioner.
(3) An evidence of coverage issued or delivered to a person resident in this state may not contain a provision or statement that is untrue, misleading, or deceptive as defined in 33-31-312(1). The evidence of coverage must contain:
(a) a clear and concise statement, if a contract, or a reasonably complete summary, if a certificate, of:
(i) the health care services and the insurance or other benefits, if any, to which the enrollee is entitled;
(ii) any limitations on the services, kinds of services, or benefits to be provided, including any deductible or copayment feature;
(iii) the location at which and the manner in which information is available as to how services may be obtained;
(iv) the total amount of payment for health care services and the indemnity or service benefits, if any, that the enrollee is obligated to pay with respect to individual contracts; and
(v) a clear and understandable description of the health maintenance organization's method for resolving enrollee complaints;
(b) definitions of geographical service area, emergency care, urgent care, out-of-area services, dependent, and primary provider if these terms or terms of similar meaning are used in the evidence of coverage and have an effect on the benefits covered by the plan. The definition of geographical service area need not be stated in the text of the evidence of coverage if the definition is adequately described in an attachment that is given to each enrollee along with the evidence of coverage.
(c) clear disclosure of each provision that limits benefits or access to service in the exclusions, limitations, and exceptions sections of the evidence of coverage. The exclusions, limitations, and exceptions that must be disclosed include but are not limited to:
(i) emergency and urgent care;
(ii) restrictions on the selection of primary or referral providers;
(iii) restrictions on changing providers during the contract period;
(iv) out-of-pocket costs, including copayments and deductibles;
(v) charges for missed appointments or other administrative sanctions;
(vi) restrictions on access to care if copayments or other charges are not paid; and
(vii) any restrictions on coverage for dependents who do not reside in the service area.
(d) clear disclosure of any benefits for home health care, skilled nursing care, kidney disease treatment, diabetes, maternity benefits for dependent children, alcoholism and other drug abuse, and nervous and mental disorders;
(e) a provision requiring immediate accident and sickness coverage, from and after the moment of birth, to each newborn infant of an enrollee or the enrollee's dependents;
(f) a provision providing coverage as required in 33-22-133;
(g) a provision requiring medical treatment and referral services to appropriate ancillary services for mental illness and for the abuse of or addiction to alcohol or drugs in accordance with the limits and coverage provided in Title 33, chapter 22, part 7; however:
(i) after the primary care physician refers an enrollee for treatment of and appropriate ancillary services for mental illness, alcoholism, or drug addiction, the health maintenance organization may not limit the enrollee to a health maintenance organization provider for the treatment of and appropriate ancillary services for mental illness, alcoholism, or drug addiction;
(ii) if an enrollee chooses a provider other than the health maintenance organization provider for treatment and referral services, the enrollee's designated provider shall limit treatment and services to the scope of the referral in order to receive payment from the health maintenance organization;
(iii) the amount paid by the health maintenance organization to the enrollee's designated provider may not exceed the amount paid by the health maintenance organization to one of its providers for equivalent treatment or services;
(iv) the provisions of this subsection (3)(g) do not apply to services for mental illness provided under the Montana medicaid program as established in Title 53, chapter 6;
(h) a provision as follows:
"Conformity With State Statutes: Any provision of this evidence of coverage that on its effective date is in conflict with the statutes of the state in which the insured resides on that date is amended to conform to the minimum requirements of those statutes."
(i) a provision that the health maintenance organization shall issue, without evidence of insurability, to the enrollee, dependents, or family members continuing coverage on the enrollee, dependents, or family members:
(i) if the evidence of coverage or any portion of it on an enrollee, dependents, or family members covered under the evidence of coverage ceases because of termination of employment or termination of membership in the class or classes eligible for coverage under the policy or because the employer discontinues the business or the coverage;
(ii) if the enrollee had been enrolled in the health maintenance organization for a period of 3 months preceding the termination of group coverage; and
(iii) if the enrollee applied for continuing coverage within 31 days after the termination of group coverage. The conversion contract may not exclude, as a preexisting condition, any condition covered by the group contract from which the enrollee converts.
(j) a provision that clearly describes the amount of money an enrollee shall pay to the health maintenance organization to be covered for basic health care services.
(4) A health maintenance organization may amend an enrollment form or an evidence of coverage in a separate document if the separate document is filed with and approved by the commissioner and issued to the enrollee.
(5) (a) A health maintenance organization shall provide the same coverage for newborn infants, required by subsection (3)(e), as it provides for enrollees, except that for newborn infants, there may be no waiting or elimination periods. A health maintenance organization may not assess a deductible or reduce benefits applicable to the coverage for newborn infants unless the deductible or reduction in benefits is consistent with the deductible or reduction in benefits applicable to all covered persons.
(b) A health maintenance organization may not issue or amend an evidence of coverage in this state if it contains any disclaimer, waiver, or other limitation of coverage relative to the accident and sickness coverage or insurability of newborn infants of an enrollee or dependents from and after the moment of birth.
(c) If a health maintenance organization requires payment of a specific fee to provide coverage of a newborn infant beyond 31 days of the date of birth of the infant, the evidence of coverage may contain a provision that requires notification to the health maintenance organization, within 31 days after the date of birth, of the birth of an infant and payment of the required fee.
(6) A health maintenance organization may not use a schedule of charges for enrollee coverage for health care services
or an amendment to a schedule of charges before it files a copy of the schedule of charges or the amendment to it with the
commissioner. A health maintenance organization may evidence a subsequent amendment to a schedule of charges in a
separate document issued to the enrollee. The charges in the schedule must be established in accordance with actuarial
principles for various categories of enrollees, except that charges applicable to an enrollee may not be individually
determined based on the status of the enrollee's health.
(7)(6) The commissioner shall, within 60 days, approve a form if the requirements of subsections (1) through (5) are
met. A health maintenance organization may not issue a form before the commissioner approves the form. If the
commissioner disapproves the filing, the commissioner shall notify the filer. In the notice, the commissioner shall specify
the reasons for the disapproval. The commissioner shall grant a hearing within 30 days after receipt of a written request by
the filer.
(8)(7) The commissioner may require a health maintenance organization to submit any relevant information considered
necessary in determining whether to approve or disapprove a filing made pursuant to this section."
Section 61. Section 33-31-401, MCA, is amended to read:
"33-31-401. Examination. (1) The commissioner may examine the affairs of a health maintenance organization as often as is reasonably necessary to protect the interests of the people of this state. The commissioner shall make an examination at least once every 3 years. The provisions of 33-1-408 and 33-1-409 apply to examinations under this section.
(2) Each authorized health maintenance organization and provider shall submit its relevant books and records for the examinations and in every way facilitate the examinations. For the purpose of examination, the commissioner may administer oaths to and examine the officers and insurance producers of the health maintenance organization and the principals of the providers concerning their business.
(3) (a) Upon presentation of a detailed account of the charges and expenses of examinations by the commissioner, the health maintenance organization being examined shall pay to the examiner as necessarily incurred on account of the examination the actual travel expenses, a reasonable living-expense allowance, and a per diem, all at reasonable rates customary therefor and as established or adopted by the commissioner. The commissioner may present an account periodically during the course of the examination or at the termination of the examination as the commissioner considers proper. A person may not pay and an examiner may not accept any additional emolument on account of any examination.
(b) If a health maintenance organization fails to pay the charges and expenses as referred to in subsection (3)(a), the
commissioner shall pay them out of the funds of the commissioner in the same manner as other disbursements of funds.
The amount so paid must be is a lien upon all of the person's assets and property in this state and may be recovered by suit
by the attorney general on behalf of the state of Montana and restored to the appropriate fund.
(4) In lieu of an examination, the commissioner may accept the report of an examination made by the commissioner of another state."
Section 62. Section 39-8-207, MCA, is amended to read:
"39-8-207. Requirements of licensee. (1) A professional employer organization or group shall, by written contract with the client, establish the responsibilities and duties of each party. The contract must disclose to the client:
(a) the services provided, the administrative fee, and the respective rights and obligations of the parties;
(b) a statement providing that the professional employer organization or group:
(i) reserves a right of direction and control over employees assigned to the client's location. The client may retain sufficient direction and control over employees necessary to conduct business and without which the client would be unable to conduct business, discharge fiduciary responsibilities, or comply with state licensing laws.
(ii) assumes responsibility for the payment of wages of employees, workers' compensation premiums, payroll-related taxes, and employee benefits from its own accounts without regard to payments by the client; and
(iii) retains authority to hire, terminate, discipline, and reassign employees. The client has the right to accept or cancel the assignment of an employee.
(c) a statement that, with respect to a worker supplied to a client by a professional employer organization or group, the client shares joint and several liability for any wages, workers' compensation premiums, and payroll-related taxes and for any benefits left unpaid by the professional employer organization or group and that, in the event that the licensee's license is suspended or revoked, this liability is retroactive to the client's entering into a contract with the licensee; and
(d) a statement that the client is responsible for compliance with the Montana Safety Culture Act, Title 39, chapter 71, part 15.
(2) The professional employer organization or group shall:
(a) give written notice of the general nature of the relationship between the professional employer organization or group and the client to each employee assigned to perform services at the client's place of work. The disclosure must provide that the professional employer organization:
(i) reserves a right of direction and control over employees assigned to the client's location. The client may retain sufficient direction and control over employees necessary to conduct business and without which the client would be unable to conduct business, discharge fiduciary responsibilities, or comply with state licensing laws.
(ii) retains authority to hire, terminate, discipline, and reassign employees. The client has the right to accept or cancel the assignment of an employee.
(b) submit to the department, within 90 days of the end of each calendar quarter, information certified by an independent certified public accountant demonstrating that all payroll-related taxes for the quarter have been paid. Upon a showing of reasonable cause, one 30-day extension may be granted for each quarter.
(c) maintain and make available for the department or its agent all records relating to the licensee's business conduct. Records must be maintained for 5 years after terminating an employee leasing arrangement or professional employer arrangement.
(d) notify the department in writing within 20 days of a change of business address or a change in partners, directors, officers, members, or controlling persons designated in the license;
(e) notify the department in writing within 20 days after a client either commences or terminates a professional employer arrangement or an employee leasing arrangement with that professional employer organization or group; and
(f) post the license issued in a conspicuous place in the principal place of business and display, in clear public view in each licensee's office, a notice stating that the professional employer organization or group is licensed and regulated by the department.
(3) When a professional employer organization or group uses a professional employer arrangement with the client, both the professional employer organization or group and the client are the immediate employers of the workers subject to the arrangement for the purposes of the workers' compensation laws of this state. When a professional employer organization or group uses an employee leasing arrangement with the client, the professional employer organization or group is the immediate employer of the workers subject to the arrangement for the purposes of the workers' compensation laws of this state.
(4) A professional employer organization or group shall:
(a) pay wages and collect, report, and pay payroll-related taxes from its own accounts;
(b) pay unemployment taxes, pursuant to 39-51-1103, and provide, maintain, and secure all records and documents required of employers under the unemployment insurance laws of this state. For unemployment reporting purposes, each professional employer organization is the employing unit, as defined in 39-51-201, and shall keep separate records and submit quarterly wage lists for each of its clients.
(c) provide workers' compensation coverage for all employees and provide, maintain, and secure all records and documents required of employers under the workers' compensation laws of this state. A license may not be issued to a professional employer organization or group until the department receives proof of workers' compensation coverage for all employees assigned to any client location in this state.
(5) A professional employer organization or group is the employer for sponsoring and maintaining employee benefit and welfare plans. The plans, if limited to employees of the professional employer organization or group, are not multiple employer welfare arrangements.
(6) A professional employer organization or group shall disclose to the department, to each client, and to its employees information on any health or life fringe benefit program provided for its employees. The information must include:
(a) the type of benefits;
(b) the identity of each insurer providing each type of coverage;
(c) the amount of benefits for each type of coverage and to whom or on whose behalf the benefits will be paid;
(d) the policy limits on each insurance policy; and
(e) whether coverage is fully insured, partially insured, or fully self-funded.
(7) Disclosure required by this section may be made by any written means reasonably calculated to adequately inform the employees, including a summary plan description that meets the requirements of the Employee Retirement Income Security Act of 1974 (29 U.S.C. 1001, et seq.), as amended.
(8) (a) Subject to any contrary provisions of the contract between the client and the professional employer organization or group, the professional employer arrangement that exists between the parties must be interpreted for purposes of insurance, bonding, and employer liability pursuant to subsection (8)(b).
(b) The professional employer organization or group:
(i) is entitled, along with the client, to the exclusivity of the remedy under both the workers' compensation and employers' liability provisions of a workers' compensation policy or plan of either party; and
(ii) is not liable for the acts, errors, or omissions of a client or of an employee acting under the direction and control of a client, subject to the provisions of this chapter. Subject to the provisions of this chapter, a client is not liable for the acts, errors, or omissions of a professional employer organization or group or of any employee of a professional employer organization or group acting under the direction and control of the professional employer organization or group.
(9) A professional employer organization that applies for workers' compensation coverage shall also maintain and furnish to the insurer sufficient information to permit the calculation of an experience modification factor for each client employer, including but not limited to:
(a) the client employer's corporate or business name;
(b) the client employer's taxpayer or employer identification number;
(c) the client employer's risk identification number;
(d) a listing of all employees assigned to each client employer and the applicable classification code and payroll; and
(e) the client employer's first report of injury identifying the client employer and any other information necessary to permit the calculation of an experience modification factor for each client employer.
(10) An employee assigned to a client by a professional employer organization or group is considered the employee of the client for purposes of general liability insurance, motor vehicle insurance, fidelity bonds, surety bonds, and liquor liability insurance carried by the client. An employee assigned to a client by a professional employer organization or group is not an employee of the professional employer organization or group for purposes of general liability insurance, motor vehicle insurance, fidelity bonds, surety bonds, or liquor liability insurance carried by the professional employer organization or group unless the employee is included by reference in an employment arrangement contract, insurance contract, or bond.
(11) The sale of professional employer services pursuant to this chapter does not constitute the sale of insurance under Title 33 unless the professional employer organization or group:
(a) undertakes to indemnify another or pay or provide a specified or determinable amount of benefit based on determinable contingencies unless done through a licensed insurer or an employee welfare benefit plan as defined in 29 U.S.C. 1002(1);
(b) solicits, negotiates, effects, procures, delivers, renews, continues, or binds an insurance policy unless done through a licensed insurance producer; or
(c) is not exempt under 33-17-103(4).
(12) A sole proprietor or a working member of a partnership working under a professional employer arrangement may not receive unemployment insurance benefits unless the individual would otherwise be entitled to benefits if the professional employer arrangement did not exist.
(13) If the professional employer organization or group or the client complies with the provisions of 39-71-401 with respect to a worker under the professional employer arrangement, the professional employer organization or group and the client, with respect to those workers, are not uninsured employers, as defined in 39-71-501, and are not subject to the provisions of 39-71-508 or 39-71-515."
Section 63. Section 61-12-303, MCA, is amended to read:
"61-12-303. Requirements for license. (1) The commissioner may not issue a license to a company until the company
has filed with him the following:
(a) a formal application in such the form and detail as that the commissioner may require, executed under oath by its
president or other principal officer;
(b) a copy of the form of its contract;
(c) a certified copy of its charter or articles of incorporation and its bylaws, if any;
(d) a financial statement in such the form and detail as that the commissioner may require, executed on oath by its
president or other principal officer;
(e) a certificate from the commissioner that it has complied with 61-12-304 in all cases where in which a deposit of cash
or a bond is required by this part;
(f) if the company is a corporation, a certificate from the corporation commissioner secretary of the state of Montana, in
the event it be a corporation, that it the company has complied with the corporation laws of said state this state's corporate
laws.
(2) The commissioner may not issue a license to a company until the company has paid to the commissioner $100 as an
annual license fee, or the pro rata portion thereof of the $100 necessary to be paid to the end of the current calendar year
from the date of the application for the license.
(3) The commissioner may not issue a license to a company until the company has satisfied him by an examination and
evidence that the commissioner may require, in his discretion, that the company has complied with the laws of the state of
Montana, and that its management is trustworthy and competent, and that the company is financially responsible."
Section 64. Service contract. (1) Service contract means a contract or agreement for a separately stated consideration for a specific duration to perform the repair, replacement, or maintenance of property or to indemnify for the repair, replacement, or maintenance of property if an operational or structural failure is due to a defect in materials or manufacturing or to normal wear and tear, with or without an additional provision for incidental payment or indemnity under limited circumstances, including but not limited to towing, rental, and emergency road service. A service contract may provide for the repair, replacement, or maintenance of property for damage resulting from power surges or accidental damage from handling.
(2) The marketing, sale, offering for sale, issuance, making, proposing to make, and administration of a service contract is exempt from the provisions of Title 33, except for:
(a) chapter 1, part 3;
(b) chapter 1, part 6, excluding 33-1-616;
(c) chapter 1, part 7; and
(d) chapter 18.
Section 65. Mechanical breakdown insurance. (1) Mechanical breakdown insurance means a policy, contract, or agreement issued by an authorized insurer that provides for the repair, replacement, or service for the operational or structural failure of the property because of a defect in materials or workmanship or because of normal wear and tear.
(2) The term does not include motor club services, as defined in 61-12-301, or vehicle casualty insurance, as defined in 33-1-206.
Section 66. Prepaid legal plan. (1) For the purposes of this section, prepaid legal plan means the assumption of a contractual obligation that is to be spread directly or indirectly among a group of persons to provide specified legal services or reimbursement for legal expenses in consideration of a specified payment for an interval of time, regardless of whether the payment is made by the beneficiary or by a third person on behalf of the beneficiary.
(2) A prepaid legal plan does not include the provision of or reimbursement for legal services that are incidental to other insurance coverage. The following are not prepaid legal plans:
(a) retainer contracts made with individual clients with fees based on estimates of the nature and amount of services that will be required;
(b) contracts made with a group of clients involved in the same or closely related legal matters;
(c) plans providing only a referral service or a discount card for legal services;
(d) legal services provided by unions or employee associations to members pertaining to employment or occupation; or
(e) legal services provided by an agency of state or federal government to employees.
Section 67. Involuntary unemployment insurance. Involuntary unemployment insurance means insurance providing the insured borrower with coverage for consumer credit replacement obligations for a period or periods during which the borrower is involuntarily unemployed. Involuntary unemployment insurance must at least provide benefits for the loss of employment income caused by individual or mass layoff, a general strike, termination by an employer, a dispute involving organized labor, and a lockout.
Section 68. Gap amount -- gap insurance. (1) As used in this section, gap amount means the difference between the amount owed by the lessee or borrower under the purchase or lease agreement in the event of total loss of the personal property prior to the expiration of the agreement by theft or physical damage and the actual cash value or portion received by the lessor or creditor from insurance proceeds or from any other person on account of the total loss or destruction of the personal property.
(2) Gap insurance means insurance covering the gap amount that is payable upon the total loss of personal property, which is the subject of a lease or a loan or another credit transaction, occasioned by the theft of or physical damage to the property.
Section 69. Repealer. Sections 33-2-1311, 33-7-526, 33-22-801, 33-22-802, 33-22-803, 33-22-804, 33-22-805, 33-22-806, 33-22-811, 33-22-812, 33-22-813, 33-22-814, 33-22-815, and 33-22-816, MCA, are repealed.
Section 70. Codification instruction. [Sections 64 through 68] are intended to be codified as an integral part of Title 33, chapter 1, part 2, and the provisions of Title 33, chapter 1, part 2, apply to [sections 64 through 68].
Section 71. Severability. If a part of [this act] is invalid, all valid parts that are severable from the invalid part remain in effect. If a part of [this act] is invalid in one or more of its applications, the part remains in effect in all valid applications that are severable from the invalid applications.
Section 72. Saving clause. [This act] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of this act].
Section 73. Effective dates. (1) Except as provided in subsections (2) and (3), [this act] is effective October 1, 1999.
(2) [Sections 1 through 4, 31, 66, and 70 through 72 and this section] are effective on passage and approval.
(3) [Section 35] is effective January 1, 2000.
- END -
Latest Version of HB 100 (HB0100.ENR)
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