South Carolina General Assembly
122nd Session, 2017-2018

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Indicates Matter Stricken
Indicates New Matter

R259, H4657

STATUS INFORMATION

General Bill
Sponsors: Reps. Sandifer and Spires
Document Path: l:\council\bills\nbd\11201cz18.docx

Introduced in the House on January 23, 2018
Introduced in the Senate on February 15, 2018
Last Amended on February 14, 2018
Passed by the General Assembly on May 8, 2018
Governor's Action: May 18, 2018, Signed

Summary: Insurance, Health Maintenance Organizations, penalties for violations of state and federal laws

HISTORY OF LEGISLATIVE ACTIONS

     Date      Body   Action Description with journal page number
-------------------------------------------------------------------------------
   1/23/2018  House   Introduced and read first time (House Journal-page 30)
   1/23/2018  House   Referred to Committee on Labor, Commerce and Industry 
                        (House Journal-page 30)
   2/13/2018  House   Committee report: Favorable with amendment Labor, 
                        Commerce and Industry (House Journal-page 10)
   2/14/2018  House   Amended (House Journal-page 16)
   2/14/2018  House   Read second time (House Journal-page 16)
   2/14/2018  House   Roll call Yeas-106  Nays-0 (House Journal-page 22)
   2/15/2018  House   Read third time and sent to Senate (House Journal-page 7)
   2/15/2018  Senate  Introduced and read first time (Senate Journal-page 7)
   2/15/2018  Senate  Referred to Committee on Banking and Insurance 
                        (Senate Journal-page 7)
   2/15/2018          Scrivener's error corrected
   4/25/2018  Senate  Committee report: Favorable Banking and Insurance 
                        (Senate Journal-page 13)
   4/26/2018          Scrivener's error corrected
    5/1/2018  Senate  Read second time (Senate Journal-page 38)
    5/1/2018  Senate  Roll call Ayes-41  Nays-0 (Senate Journal-page 38)
    5/8/2018  Senate  Read third time and enrolled (Senate Journal-page 39)
   5/14/2018          Ratified R 259
   5/18/2018          Signed By Governor

View the latest legislative information at the website

VERSIONS OF THIS BILL

1/23/2018
2/13/2018
2/14/2018
2/15/2018
4/25/2018
4/26/2018

(Text matches printed bills. Document has been reformatted to meet World Wide Web specifications.)

NOTE: THIS IS A TEMPORARY VERSION. THIS DOCUMENT WILL REMAIN IN THIS VERSION UNTIL FINAL APPROVAL BY THE LEGISLATIVE COUNCIL.

(R259, H4657)

AN ACT TO AMEND SECTION 38-2-10, CODE OF LAWS OF SOUTH CAROLINA, 1976, RELATING TO ADMINISTRATIVE PENALTIES FOR THE VIOLATION OF THE INSURANCE LAWS OF SOUTH CAROLINA, SO AS TO ALLOW THE DEPARTMENT OF INSURANCE TO ENFORCE THESE PENALTIES FOR VIOLATIONS OF FEDERAL INSURANCE LAWS SUBJECT TO ENFORCEMENT BY THE DEPARTMENT; TO AMEND SECTION 38-13-70, RELATING TO INVESTIGATIONS CONDUCTED BY THE DEPARTMENT OF INSURANCE, SO AS TO AUTHORIZE THE DEPARTMENT TO RESPOND TO MOTIONS AND COMPLAINTS AGAINST HEALTH MAINTENANCE ORGANIZATIONS AND PERSONS LICENSED TO TRANSACT THE BUSINESS OF INSURANCE IN THIS STATE AND TO ESTABLISH A DEADLINE FOR RESPONSES TO THE DEPARTMENT'S INQUIRIES; TO AMEND SECTION 38-33-170, RELATING TO THE EXAMINATIONS OF THE AFFAIRS OF A HEALTH MAINTENANCE ORGANIZATION, SO AS TO REQUIRE AN EXAMINATION NO LESS THAN EVERY FIVE YEARS; TO AMEND SECTION 38-33-230, RELATING TO LEVY OF ADMINISTRATIVE PENALTY IN LIEU OF OTHER PENALTIES, SO AS TO ALLOW THE LEVY OF AN ADMINISTRATIVE PENALTY FOR VIOLATIONS OF STATE AND FEDERAL INSURANCE LAWS SUBJECT TO ENFORCEMENT BY THE DEPARTMENT OF INSURANCE; TO AMEND SECTION 38-61-20, RELATING TO THE APPROVAL OF INSURANCE POLICIES, CONTRACTS, OR POLICIES BY THE DEPARTMENT OF INSURANCE, SO AS TO REQUIRE THAT ALL FORMS FILED WITH THE DEPARTMENT SATISFY ALL APPLICABLE STATE AND FEDERAL LAWS AND TO AUTHORIZE THE DIRECTOR TO IMPOSE A PENALTY IN CERTAIN CIRCUMSTANCES; TO AMEND SECTION 38-71-90, RELATING TO THE PENALTIES FOR ISSUING OR DELIVERING A POLICY THAT VIOLATES CHAPTER 71, SO AS TO EXTEND THE PENALTIES TO ANY INSURER OR HEALTH MAINTENANCE ORGANIZATION WHO VIOLATES APPLICABLE STATE OR FEDERAL LAWS GOVERNING THE TRANSACTION OF THE BUSINESS OF INSURANCE SUBJECT TO ENFORCEMENT BY THE DEPARTMENT OF INSURANCE; AND TO AMEND SECTIONS 38-51-20 AND 38-51-30, RELATING TO ADMINISTRATORS OF INSURANCE BENEFIT PLANS, SO AS TO PROVIDE THAT AN APPLICANT FOR LICENSURE AS AN ADMINISTRATOR MUST PROVIDE CERTAIN FINANCIAL STATEMENTS AND REPORTS AND REQUIRE THE SUBMISSION OF A SURETY BOND FOR THE RENEWAL OF AN ADMINISTRATOR'S LICENSE.

Be it enacted by the General Assembly of the State of South Carolina:

Administrative penalties for violations of insurance laws

SECTION    1.    Section 38-2-10 of the 1976 Code is amended to read:

"Section 38-2-10.    (A)    Unless otherwise specifically provided by law, the following administrative penalties apply for each violation of the insurance laws of this State or federal insurance laws subject to enforcement by the Department of Insurance:

(1)    If the violator is an insurer or a health maintenance organization licensed in this State, the director or his designee shall fine the violator in an amount not to exceed fifteen thousand dollars, suspend or revoke the violator's authority to do business in this State, or both. If the violation is wilful, the director or his designee shall fine the violator in an amount not to exceed thirty thousand dollars, suspend or revoke the violator's authority to do business in this State, or both.

(2)    If the violator is a person, other than an insurer or a health maintenance organization, licensed by the director or his designee in this State, the director or his designee shall fine the person in an amount not to exceed two thousand five hundred dollars, suspend or revoke the license of the person, or both. If the violation is wilful, the director or his designee shall fine the person in an amount not to exceed five thousand dollars, suspend or revoke the license of the person, or both.

(B)    The penalties in subsection (A) are in addition to any criminal penalties provided by law or any other remedies provided by law. The administrative proceedings in subsection (A) do not preclude civil or criminal proceedings from taking place before, during, or after the administrative proceeding."

Department of Insurance investigations into insurance law violations

SECTION    2.    Section 38-13-70 of the 1976 Code is amended to read:

"Section 38-13-70.    Upon his own motion or upon written complaint filed by a citizen of this State that an insurer, health maintenance organization, or other person licensed or authorized to transact business in this State has violated this title, the director or his designee shall investigate the matter and, if necessary, examine under oath the president and other officers or agents of the insurer, health maintenance organization, or other person and all books, records, and papers of the insurer, health maintenance organization, or other person. The insurer, health maintenance organization, or other person and its representatives shall respond to the department's inquiries, requests for information, or investigations within seven calendar days or within a larger timeframe granted by the director or his designee. If the director or his designee finds upon substantial evidence that a complaint is justified, the insurer, health maintenance organization, or other person, in addition to the penalties imposed for violation of this title, is liable for the expenses of the investigation, and the director or his designee shall promptly present the insurer with a statement of the expenses. If the insurer, health maintenance organization, or other person refuses or neglects to pay, the director or his designee is authorized to revoke its license and to bring civil action for the collection of the expenses."

Affairs of a health maintenance organization examined no less than every five years

SECTION    3.    Section 38-33-170(A) and (B) of the 1976 Code is amended to read:

"(A)    The director or his designee may make an examination of the affairs of a health maintenance organization and providers with whom the organization has contracts, agreements, or other arrangements as often as is reasonably necessary for the protection of the interests of the people of this State but not less frequently than once every five years. The director or his designee may accept the report of an examination made by the state where the health maintenance organization is domiciled.

(B)    The director or his designee may make an examination concerning the quality of health care service of a health maintenance organization and providers with whom the organization has contracts, agreements, or other arrangements as often as is reasonably necessary for the protection of the interests of the people of this State but not less frequently than once every five years."

Levy of an administrative penalty in lieu of revocation or suspension of a certificate of authority

SECTION    4.    Section 38-33-230(A) of the 1976 Code is amended to read:

"(A)    The director or his designee, in lieu of revocation or suspension of a certificate of authority under Section 38-33-180, may levy an administrative penalty of not more than fifteen thousand dollars for each violation of state or federal laws the Department of Insurance is authorized to enforce or ground as prescribed therein. A series of acts by an organization which merely implement a basic violation and are not separate and distinct violations of an independent nature are considered to be part of the basic violation and only one penalty may be imposed. A monetary penalty may be imposed under this paragraph only after notice and an opportunity to be heard have been afforded in accordance with Section 38-33-210."

Penalties for use of policies or contracts that violate applicable insurance laws governing accident and health insurance

SECTION    5.    Section 38-61-20(A) and (C) of the 1976 Code is amended to read:

"(A)    It is unlawful for an insurer doing business in this State to issue or sell in this State a policy, contract, or certificate until it has been filed with and approved by the director or his designee. The director or his designee may disapprove the form if it:

(1)    does not meet the requirements of applicable state or federal law the Department of Insurance is authorized to enforce;

(2)    contains provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory; or

(3)    is solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading.

However, this subsection does not apply to surety contracts or fidelity bonds, except as required in Section 38-15-10, or to insurance contracts, riders, or endorsements prepared to meet special, unusual, peculiar, or extraordinary conditions applying to an individual risk or exempt commercial policies.

(C)    At any time after having given written approval, and after an opportunity for a hearing for which at least thirty days' written notice has been given, the director or his designee may withdraw approval, impose the penalties pursuant to Section 38-2-10 if the insurer continues use of the form after it has been ordered withdrawn, or both, if he finds that the form:

(1)    does not meet the requirements of applicable state or federal law the Department of Insurance is authorized to enforce;

(2)    contains provisions which are unfair, deceptive, ambiguous, misleading, or unfairly discriminatory; or

(3)    is solicited by means of advertising, communication, or dissemination of information which is deceptive or misleading."

Administrative penalty for health maintenance organization that violates laws governing accident and health insurance

SECTION    6.    Section 38-71-90 of the 1976 Code is amended to read:

"Section 38-71-90.    An insurer, health maintenance organization, or its officer or agent that issues or delivers to any person in this State any policy in wilful violation of any of the provisions of this chapter or any other applicable state or federal law governing the transaction of business of insurance the Department of Insurance is authorized to enforce is subject to the provisions of Section 38-2-10 for each offense."

Administrator license application and surety bond requirements

SECTION    7.    Sections 38-51-20 and 38-51-30 of the 1976 Code is amended to read:

"Section 38-51-20.    No person may act as an administrator in this State without first being licensed by the director or his designee.

Any person who acts as an administrator without a license is guilty of a misdemeanor and, upon conviction, must be fined not more than ten thousand dollars or imprisoned for not more than two years, or both, and is subject to revocation of any insurance licenses issued by the director or his designee.

Application for a license must be upon forms prescribed by the director or his designee and must be accompanied by an initial license fee of one hundred dollars, annual financial statements or reports for the two preceding calendar years, and any other documents that the director or his designee may require to ensure that the administrator meets the requirements for licensure set forth in this section. Thereafter, the administrator shall pay to the department a license renewal fee of one hundred dollars by March first of each year.

Before granting any license, the director or his designee must be satisfied that the administrator is competent, trustworthy, financially responsible, has a good personal and business reputation, has not had an insurance license revoked, suspended, or denied in any jurisdiction within the preceding five years, and has not been convicted of a crime involving fraud, dishonesty, or moral turpitude in any jurisdiction. For purposes of this section, 'convicted' includes a plea of guilty or a plea of nolo contendere.

The director or his designee may revoke or suspend any license issued to an administrator when he finds that any condition exists which would have prohibited issuance of the original license, that the administrator has violated any provision of this chapter, or that the administrator has deceived or dealt unjustly with the citizens of this State. In lieu of revocation or suspension of license, the director or his designee may impose an administrative monetary penalty not to exceed one thousand dollars for each offense.

Section 38-51-30.    Every administrator shall file and maintain with the department a surety bond in favor of the state executed by a surety company authorized to transact business in this State. In lieu of bond, the administrator may file with the department letters of credit, certificates of deposit of building and loan associations, or federal savings and loan associations located within the state in which deposits are guaranteed by the Federal Savings and Loan Insurance Corporation, not to exceed the amount of insurance, or of banks located within the state in which deposits are guaranteed by the Federal Deposit Insurance Corporation, not to exceed the amount covered by insurance or any other financial instrument that the director or his designee deems appropriate. The director or his designee may also in his sole discretion accept in lieu of a bond or certificates of deposit or letter of credit a corporate guaranty by an insurer licensed to transact business in this State. The corporate guaranty must meet any requirements the director or his designee requires. The director or his designee may withdraw his acceptance of a corporate guaranty in lieu of bonds or certificates of deposit at any time. The amount of the bond, certificates of deposit, corporate guaranty letter of credit, or any other instrument the director or his designee deems appropriate, filed with the department must be in the amount of seventy-five thousand dollars for initial applicants. Upon renewal, the applicant shall submit a surety bond in an amount that represents ten percent of the total premiums handled or managed in South Carolina for the previous calendar year. The amount of the surety bond for renewal applications must not be less than seventy-five thousand dollars and may not exceed five hundred thousand dollars. All bonds must include a provision requiring a thirty-day advance notification of cancellation to the department. The bond must be on a form approved by the director or his designee. Any of the above-described financial instruments must be conditioned to pay any person who sustains a loss as a result of: (a) the administrator's violation of or failure to comply with any requirement of this chapter; (b) the administrator's failure to transmit properly any payment received by it for transmission to an insurer or other person; (c) the administrator's misapplication or misappropriation of funds received by it; or (d) any act of fraud or dishonesty committed by the administrator in the administration of an insurance benefit plan. Any aggrieved person may institute an action in the county of his residence against the administrator or his surety, or both, to recover on the bond or to recover from the certificates of deposit or corporate guaranty or letters of credit. Nothing in this section may be construed to prohibit agreements between administrators and insurers providing for additional bonds. The director or his designee may waive the bonding requirements of this section in whole or in part to the extent that funds handled by the administrator are handled on behalf of a licensed insurance company, if the administrator has furnished a bond or other security to the insurance company which meets the purposes of this section. Under no circumstances may the director or his designee waive the bonding requirements of this section with respect to funds handled by the administrator on behalf of self-insured persons, groups, or entities."

Time effective

SECTION    8.    This act takes effect upon approval by the Governor.

Ratified the 14th day of May, 2018.

__________________________________________

President of the Senate

___________________________________________

Speaker of the House of Representatives

Approved the ____________ day of _____________________2018.

___________________________________________

Governor

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This web page was last updated on May 21, 2018 at 9:03 AM