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NO. 36.  AN ACT RELATING TO THE DEPARTMENT OF BANKING, INSURANCE, SECURITIES, AND HEALTH CARE ADMINISTRATION.

(S.62)

It is hereby enacted by the General Assembly of the State of Vermont:

* * * Banks and Financial Institutions * * *

Sec. 1.  8 V.S.A. § 2501(11) and (12) are amended and (13) is added to read:

§ 2501.  EXCLUSIONS

This chapter does not apply to:

* * *

(11)  the sale or issuance of stored value by a school to its students and employees; or

(12)  a seller of goods or services that cashes payment instruments incidental to or independent of a sale and does not charge for cashing the payment instrument in excess of $1.00 per instrument; or

(13)  a debt adjuster licensed pursuant to chapter 133 of this title when engaged in the business of debt adjustment.

Sec. 2.  8 V.S.A. § 2202(b) is amended to read:

(b)(1)  At the time of making application, the applicant shall pay to the commissioner a fee for investigating the application and a license fee for a period terminating on the last day of the current calendar year. The following fees are imposed on applicants:

(1)(A)  For an applicant for a lender’s license, $1,000.00 as a license fee, and $1,000.00 as an application and investigation fee.  An additional license fee of $100.00 shall be required of any applicant for a lender’s license who also intends to engage in mortgage brokerage.  An additional license fee of $100.00 shall be required for any applicant for a lender’s license who also intends to engage in sales finance;.

(2)(B)  For an applicant for a mortgage broker’s license, $250.00 as a license fee, and $250.00 as an application and investigation fee;.

(3)(C)  For an applicant for a sales finance company’s license, $300.00 as a license fee, and $250.00 as an application and investigation fee.

(2)  The license fee for an application submitted after September 30 of any year shall be prorated.

Sec. 3.  8 V.S.A. § 2203(a) is amended to read: 

(a)  Prior to issuance of a license, the applicant shall file with the commissioner, and shall keep in force thereafter for as long as the license remains in effect, a bond to be approved by the commissioner in which the applicant shall be the obligor, in such sum as the commissioner may require.  The aggregate liability for any and all claims on any bond shall in no event exceed the sum thereof.  No surety obligation on a bond shall be terminated unless at least 60 days’ prior written notice is given by the surety to the obligor and the commissioner.  When one person is issued licenses to conduct the licensed activity at more than one office, the commissioner may accept a single bond covering all such offices.  The bond shall run to the state for the use of the state and of any person or persons who may have cause of action against the obligor of such bond under the provisions of this chapter.  Such bond shall be conditioned that the obligor will faithfully conform to and abide by the provisions of this chapter and of all rules and regulations lawfully made by the commissioner hereunder, and will pay to the state and to any such person or persons any and all moneys that may become due or owing to the state or to such person or persons from such obligor under and by virtue of the provisions of this chapter.  The commissioner shall require, at a minimum:

(1)  For an applicant for a lender’s license, a surety bond of $25,000.00 $50,000.00;

(2)  For an applicant for a mortgage broker’s license, a surety bond of $10,000.00 $25,000.00;

(3)  For an applicant for a lender’s license engaged in commercial lending, a surety bond of $100,000.00.

Sec. 4.  8 V.S.A. § 4861(2) is amended to read:

§ 4861.  DEFINITIONS

As used in this chapter:

* * *

(2)  “Debt adjustment” means making a contract with a debtor whereby the debtor agrees to pay a sum or sums of money periodically and the other party to the contract distributes, or supervises, coordinates, negotiates, or controls the distribution of such money or evidences thereof among one or more of the debtor’s creditors in full or partial payment of obligations of the debtor.  For purposes of this chapter, engaging in debt adjustment in this state shall include:

(A)  soliciting debt adjustment business from within this state, whether by mail, by telephone, by electronic means, or by other means regardless of whether the debtor resides within this state or outside this state;

(B)  soliciting debt adjustment business with an individual residing in this state, whether by mail, by telephone, by electronic means, or by other means; or

(C)  entering into, or succeeding to, a debt adjustment contract with an individual residing in this state.

Sec. 5.  8 V.S.A. § 14403 is amended to read: 

§ 14403.  APPROVAL OF COMMISSIONER

No financial institution, not otherwise expressly authorized by its respective supervisory agency under state or federal law, may exercise the powers provided in this chapter subchapter until it has applied for and obtained approval of the commissioner to do so under subsection 11701(b) of this title.  The commissioner shall conduct inquiry into the affairs of the financial institution applying for those powers to determine if the financial institution is staffed, equipped, and able to furnish those services.

Sec. 6.  8 V.S.A. § 15205 is added to read: 

§ 15205.  OUT-OF-STATE ACTIVITIES BY VERMONT FINANCIAL

                INSTITUTIONS

(a)  Subject to subsection (b) of this section, a Vermont financial institution may maintain or conduct the following offices or activities in another state:

(1)  a temporary agency;

(2)  an office used solely for internal operations of the institution to which the public is not admitted for the conduct of financial institution business;

(3)  an automated teller machine owned by a Vermont financial institution; provided, however, that it does not accept deposits or transfer funds between accounts;

(4)  loan production;

(5)  foreign exchange services;

(6)  trust activities; or

(7)  any other financial institution-related activity that the host state determines may be maintained or conducted in such state.

(b)  The Vermont financial institution shall provide the commissioner with written evidence that the host state approved, did not object to, or otherwise allows the Vermont financial institution to maintain the office or conduct in the host state the activity described in subsection (a) of this section.  In order to engage in trust activities in the host state, a Vermont financial institution shall have previously obtained the commissioner’s approval to engage in trust activities under section 14403 of this title.

(c)  Nothing in this section shall be deemed to permit a Vermont financial institution to solicit or accept deposits, pay checks, or lend money within the host state, unless it is otherwise authorized to engage in such activity in the host state.

* * * Insurance * * *

Sec. 7.  8 V.S.A. § 3803 is amended to read:

§ 3803.  EMPLOYEE GROUPS

The lives of a group of individuals may be insured under a policy issued to an employer, or to the trustees of a fund established by an employer, which employer or trustees shall be deemed the policyholder, to insure employees of the employer for the benefit of persons other than the employer, subject to the following requirements:

(1)  The employees eligible for insurance under the policy shall be all of the employees of the employer, or all of any class or classes thereof determined by conditions pertaining to their employment.  The policy may provide that the term “employees” shall include the employees of one or more subsidiary corporations, and the employees, individual proprietors, and partners of one or more affiliated corporations, proprietors or partnerships if the business of the employer and of such affiliated corporations, proprietors, or partnerships is under common control through stock ownership, contract, or otherwise.  The policy may provide that the term “employees” shall include the individual proprietor or partners if the employer is an individual proprietor or a partnership.  The policy may provide that the term “employees” shall include retired employees.  No director of a corporate employer shall be eligible for insurance under the policy unless such person is otherwise eligible as a bona fide employee of the corporation, by performing services other than the usual duties of a director.  No individual proprietor or partner shall be eligible for insurance under the policy unless he or she is actively engaged in and devotes a substantial part of his or her time to the conduct of the business of the proprietor or partnership.  A policy issued to insure the employees of a public body may provide that the term “employees” shall include elected or appointed officials.

(2)  The premium for the policy shall be paid by the policyholder, either wholly from the employer’s funds or funds contributed by him or her, or partly from such funds and partly from funds contributed by the insured employees.  No policy may be issued on which the entire premium is to be derived from funds contributed by the insured employees.  A policy on which part of the premium is to be derived from funds contributed by the insured employees may be placed in force only if at least seventy-five 75 percent of the then eligible employees, excluding any as to whom evidence of individual insurability is not satisfactory to the insurer, elect to make the required contribution.  A policy on which no part of the premium is to be derived from funds contributed by the insured employees must insure all eligible employees, or all except any as to whom evidence of individual insurability is not satisfactory to the insurer.

(3)  The policy must cover at least ten two employees at date of issue.

(4)  The amounts of insurance under the policy must be based upon some plan precluding individual selection either by the employees or by the employer or trustees.

Sec. 8.  8 V.S.A. § 4813a(3) is amended to read:

§ 4813a.  DEFINITIONS

For purposes of this subchapter:

* * *

(3)  “Insurance producer” shall have the same meaning as in subdivision 4791(1) 4791(6) of this title.

Sec. 9.  8 V.S.A. § 3304 is amended to read:

§ 3304.  CAPITAL AND SURPLUS REQUIREMENTS

To qualify for authority to transact the business of insurance, a stock insurer seeking such authorization shall possess and thereafter maintain unimpaired paid-in capital of not less than $2,000,000.00 and, when first so authorized, shall possess and maintain free surplus of not less than $3,000,000.00.  Such capital and surplus shall be in the form of cash or marketable securities, a portion of which may be held on deposit with the state treasurer, such securities as designated by the insurer and approved by the commissioner, in an amount and subject to such conditions determined by the commissioner.  Such conditions shall include a requirement that any interest or other earnings attributable to such cash or marketable securities shall inure to the benefit of the insurer until such time as the commissioner determines that the deposit must be used for the benefit of the policyholders of the insurer or some other authorized public purpose relating to the regulation of the insurer.  The commissioner may prescribe additional capital or surplus for all stock insurers authorized to transact the business of insurance based upon the type, volume, and nature of insurance business transacted.  The commissioner may reduce or waive the capital and surplus amounts required by this section pursuant to a plan of dissolution for the company approved by the commissioner.

Sec. 10.  8 V.S.A. § 3366 is amended to read:

§ 3366.  ASSETS OF COMPANIES

Such insurer authorized to do business in this state shall possess and thereafter maintain unimpaired paid-in capital or basic surplus of not less than $2,000,000.00 and, when first so authorized, shall possess and maintain free surplus of not less than $3,000,000.00.  Such capital and surplus shall be in the form of cash or marketable securities, a portion of which may be held on deposit with the state treasurer, such securities as designated by the insurer and approved by the commissioner, in an amount and subject to such conditions determined by the commissioner.  Such conditions shall include a requirement that any interest or other earnings attributable to such cash or marketable securities shall inure to the benefit of the insurer until such time as the commissioner determines that the deposit must be used for the benefit of the policyholders of the insurer or some other authorized public purpose relating to the regulation of the insurer.  The commissioner may prescribe additional capital or surplus for all insurers authorized to transact the business of insurance based upon the type, volume, and nature of insurance business transacted.  The commissioner may reduce or waive the capital and surplus amounts required by this section pursuant to a plan of dissolution for the company approved by the commissioner.

* * * Captive Insurance * * *

Sec. 11.  8 V.S.A. § 6006(b)(2) is amended to read:

§ 6006.  FORMATION OF CAPTIVE INSURANCE COMPANIES IN THIS

              STATE

(b)  An association captive insurance company, an industrial insured captive insurance company, or a risk retention group may be:

(1)  incorporated as a stock insurer with its capital divided into shares and held by the stockholders;

(2)  incorporated as a mutual insurer without capital stock, the governing body of which is elected by its insureds corporation;

Sec. 12.  8 V.S.A. § 6006(m) is added to read:

(m)  With the commissioner’s approval, a captive insurance company organized as a stock insurer may convert to a nonprofit corporation with one or more members by filing with the secretary of state an irrevocable election for such conversion, provided that:

(1)  the irrevocable election shall certify that, at the time of the company’s original organization and at all times thereafter, the company conducted its business in a manner not inconsistent with a nonprofit purpose; and

(2)  at the time of the filing of its irrevocable election, the company shall file with both the commissioner and the secretary of state amended and restated articles of incorporation consistent with the provisions of this chapter and with Title 11B, duly authorized by the corporation.

Sec. 13.  8 V.S.A. § 6006(n) is added to read:

(n)  The following provisions of Title 11B shall not apply to captive insurance companies which are nonprofit corporations:

(1)  subsection 2.02(c) (relating to the signing of articles of incorporation by directors);

(2)  section 11.02, in the case of any merger in which a captive insurance company merges with and into a captive insurance company organized as a nonprofit corporation under Title 11B where the latter is the surviving corporation.

Sec. 14.  8 V.S.A. § 6010(a) is amended to read:

(a)  Association Except as may be otherwise authorized by the commissioner, association captive insurance companies and risk retention groups shall comply with the investment requirements contained in sections 3461 through 3472 of this title, as applicable.  Section 3463a of this title shall apply to association captive insurance companies and risk retention groups except to the extent it is inconsistent with approved accounting standards in use by the company.  Notwithstanding any other provision of this title, the commissioner may approve the use of alternative reliable methods of valuation and rating.

Sec. 15.  8 V.S.A. § 6043 is amended to read:

§ 6043.  SECURITY REQUIRED

In the case of a branch captive insurance company, as security for the payment of liabilities attributable to the branch operations, the commissioner shall require that either a trust fund, funded by an irrevocable letter of credit or other acceptable asset, assets acceptable to the commissioner or an irrevocable letter of credit be established and maintained in the United States for the benefit of United States policyholders and United States ceding insurers under insurance policies issued or reinsurance contracts issued or assumed by the branch captive insurance company through its branch operations.  The amount of such security may be no less than the amount set forth in subdivision 6004(a)(1) of this title and the reserves on such insurance policies or such reinsurance contracts, including reserves for losses, allocated loss adjustment expenses, incurred but not reported losses, and unearned  premiums with regard to business written through the branch operations; provided, however, the commissioner may permit a branch captive insurance company that is required to post security for loss reserves on branch business by its reinsurer to reduce the funds in the trust account or the amount payable under the irrevocable letter of credit required by this section by the same amount so long as the security remains posted with the reinsurer.  If the form of security selected is a letter of credit, the letter of credit must be established by, or issued or confirmed by, a bank chartered in this state or a member bank of the Federal Reserve System.

Sec. 16.  8 V.S.A. § 8207(e) is added to read:

(e)  The commissioner may modify or waive the notice, consent, and other requirements of this chapter where the transfer of the obligations or risks on contracts of insurance pursuant to an assumption reinsurance agreement is part of a voluntary plan of dissolution by the transferring insurer, and where the commissioner is satisfied the transfer will adequately protect the interests of the affected policyholders.

* * * Securities * * *

Sec. 17.  REPEAL

9 V.S.A. § 4203a(9) (exempted securities; permitted investments for financial institutions) is repealed.

Sec. 18.  8 V.S.A. § 5102b(l) is amended to read:

(l)  The commissioner shall adopt rules that establish solvency standards for provider-sponsored networks, including provider-sponsored organizations, for the Medicare+Choice Medicare Advantage program, as described in 42 U.S.C. § 1395w-21, in conformance with the solvency standards established by the Secretary of Health and Human Services under 42 U.S.C. § 1395w-26. Provider-sponsored networks shall be licensed under this chapter to offer a Medicare+Choice Medicare Advantage plan by complying with the solvency rules adopted under this subsection; except that a provider-sponsored network that offers any health plan other than or in addition to a Medicare+Choice Medicare Advantage plan shall comply with the solvency standards of this chapter instead of those adopted specifically for Medicare+Choice Medicare Advantage plans under this subsection.  A provider-sponsored network licensed under this chapter shall not be required to offer any insurance product apart from Medicare+Choice Medicare Advantage.  For purposes of this subsection, “provider-sponsored network” or “provider-sponsored organization” shall have the same definition as in 42 U.S.C. § 1395w-25(d).

Sec. 19.  RULES REQUIRED BY THE MEDICARE MODERNIZATION                            ACT

For the purpose of preventing federal preemption of state law with respect to Medicare supplemental insurance policies, the department of banking, insurance, securities, and health care administration may adopt amendments to its administrative rule (Regulation H-2001-02; Medicare Supplement Insurance Minimum Standards Regulations) on or before September 1, 2005 by emergency rule, provided the department is actively engaged in the process of proposing to amend such rule pursuant to the nonemergency rulemaking process.

Sec. 20.  8 V.S.A. § 4512(c) is amended to read:

(c)  Subject to the approval of the commissioner, a hospital or medical service corporation may establish, maintain and operate, or participate in the establishment, maintenance and operation of, health care services contracts or arrangements, including, but not limited to, health maintenance organizations authorized pursuant to chapter 139 of this title, all of which are intended to insure that subscriber benefits are provided at minimum cost under efficient and economical management.  A health maintenance organization established, maintained or operated under the authority of this subsection shall be organized so that its business and affairs will be managed by a governing board or committee of which a majority are members who are not providers, as those terms are defined in section 5101 of Title 8.  Notwithstanding the foregoing, subject to the approval of the commissioner, a hospital or medical service corporation may establish, maintain, and operate or participate in the establishment, maintenance, and operation of administrative claims processing services and related services.

Sec. 21.  EFFECTIVE DATE

This act shall take effect on passage, except that Secs. 2, 3, and 7 shall take effect on July 1, 2005.

Approved:  June 1, 2005



Published by:

The Vermont General Assembly
115 State Street
Montpelier, Vermont


www.leg.state.vt.us