Insurance Coverage

Amends the statutes relating to insurance coverage, health
maintenance organizations, and mutual benefit societies; adds a
new section relating to the public employees health fund.

THE SENATE                              S.B. NO.           
TWENTIETH LEGISLATURE, 2000                                
STATE OF HAWAII                                            

                   A  BILL  FOR  AN  ACT



 1      SECTION 1.  Chapter 87, Hawaii Revised Statutes, is amended
 2 by adding a new section to be appropriately designated and to
 3 read as follows:
 4      "87-     Reciprocal beneficiary family coverage defined;
 5 reciprocal beneficiary employees, State and counties, and fund
 6 responsibility costs.  (a)  The board of trustees shall establish
 7 a reciprocal beneficiary family coverage health benefits plan for
 8 an employee who is a reciprocal beneficiary under chapter 572C
 9 and elects to enroll in reciprocal beneficiary family coverage.
10      (b)  As used in this section, reciprocal beneficiary family
11 coverage means coverage under a health benefits plan that
12 insures, originally or upon subsequent amendment, an employee who
13 is a reciprocal beneficiary, the other party to the employee's
14 reciprocal beneficiary relationship, and any dependent-
15 beneficiary of the employee, any unmarried child of the non-
16 employee reciprocal beneficiary under age nineteen, or a
17 surviving beneficiary of the employee.
18      SECTION 2.  Section 431:10-206, Hawaii Revised Statutes, is
19 amended to read as follows:
20      "431:10-206  Application for insurance:  consent of insured

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 1 required.  No life or disability insurance contract upon an
 2 individual shall be made or effectuated unless at the time of the
 3 making of the contract the individual insured, being of competent
 4 legal capacity to contract, applies for or consents to the
 5 insurance in writing, except in the following cases:
 6      (1)  A spouse or reciprocal beneficiary may effectuate such
 7           insurance upon the other spouse[.] or reciprocal
 8           beneficiary.
 9      (2)  Any person having an insurable interest in the life of
10           a minor, or any person upon whom a minor is dependent
11           for support and maintenance, may effectuate insurance
12           upon the life of or pertaining to the minor
13 This section shall not apply to contracts of group life insurance
14 or of group or blanket disability insurance as defined in this
15 code."
16      SECTION 3.  Section 431:10-232, Hawaii Revised Statutes, is
17 amended by amending subsections (a) and (b) to read as follows:
18      "(a)  All proceeds payable because of the death of the
19 insured and the aggregate net cash value of any or all life and
20 endowment policies and annuity contracts payable to a spouse or
21 reciprocal beneficiary of the insured, or to a child, parent, or
22 other person dependent upon the insured, whether the power to
23 change the beneficiary is reserved to the insured or not, and

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 1 whether the insured or the insured's estate is a contingent
 2 beneficiary or not, shall be exempt from execution, attachment,
 3 garnishment, or other process, for the debts or liabilities of
 4 the insured incurred subsequent to May 19, 1939, except as to
 5 premiums paid in fraud of creditors within the period limited by
 6 law for the recovery of such payments.
 7      (b)  When the terms of any life or endowment policy or
 8 annuity contract require that the proceeds thereof be retained by
 9 the insurer upon the death of the insured, or other maturity of
10 the policy or contract, for payment to any beneficiary other than
11 the insured in accordance with a settlement plan selected by the
12 insured, the beneficiary shall have no right or power, nor shall
13 the beneficiary be permitted by any insurer, to commute,
14 encumber, assign, or otherwise anticipate the beneficiary's
15 interests under the plan if the right or power is expressly
16 denied the beneficiary by the terms of the contract or policy.
17 If the beneficiary under the settlement plan is or was the spouse
18 or reciprocal beneficiary of the insured, or a child, parent, or
19 other person dependent upon the insured, the beneficiary's
20 interests thereunder, in any case, shall be exempt from
21 execution, attachment, garnishment, or other process for the
22 beneficiary's debts or liabilities incurred after December 31,
23 1955."

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 1      SECTION 4.  Section 431:10A-103, Hawaii Revised Statutes, is
 2 amended to read as follows:
 3      "431:10A-103  Family coverage defined.  As used in this
 4 part, family coverage means a policy that insures, originally or
 5 upon subsequent amendment, an adult member of a family who shall
 6 be deemed the policyholder and any two or more eligible members
 7 of that family, including spouse, reciprocal beneficiary,
 8 dependent children or any children under a specified age which
 9 shall not exceed nineteen years, and any other person dependent
10 upon the policyholder."
11      SECTION 5.  Section 431:10A-105, Hawaii Revised Statutes, is
12 amended to read as follows:
13      "431:10A-105  Required provisions.  Except as provided in
14 section 431:10A-107, each policy of accident and sickness
15 insurance delivered or issued for delivery to any person in this
16 State shall contain the provisions set forth below.  These
17 provisions shall be in the words in which they appear below,
18 provided that the insurer may substitute corresponding provisions
19 of different wording approved by the commissioner which are in
20 each instance not less favorable in any respect to the insured or
21 the beneficiary.  The provisions shall be preceded individually
22 by the specified caption, or by such appropriate individual or
23 group captions or subcaptions as the commissioner may approve.

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 1 The provisions are as follows:
 2      (1)  "Entire Contract; Changes:  This policy, including the
 3           endorsements and the attached papers, if any,
 4           constitutes the entire contract of insurance.  No
 5           change in this policy shall be valid until approved by
 6           an executive officer of the insurer and unless the
 7           approval is endorsed on or attached to this policy.  No
 8           agent has authority to change this policy or to waive
 9           any of its provisions."
10      (2)  (A)  "Time Limit on Certain Defenses:
11                (i)  After three years from the date of issue of
12                     this policy no misstatements, except
13                     fraudulent misstatements, made by the
14                     applicant in the application for this policy
15                     shall be used to void this policy or to deny
16                     a claim for loss incurred or disability (as
17                     defined in the policy) commencing after the
18                     expiration of the three-year period.
19               (ii)  No claim for loss incurred or disability (as
20                     defined in the policy) commencing after three
21                     years from the date of issue of this policy
22                     shall be reduced or denied on the ground that
23                     a disease or physical condition not excluded

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 1                     from coverage by name or specific description
 2                     effective on the date of loss had existed
 3                     prior to the effective date of coverage of
 4                     this policy."
 5           (B)  The policy provision set forth in subparagraph
 6                (A)(i) shall not be construed to affect any legal
 7                requirement for avoidance of a policy or denial of
 8                a claim during the initial three-year period, nor
 9                to limit the application of section 431:10A-106(1)
10                through (4) in the event of misstatement with
11                respect to age or occupation or other insurance.
12           (C)  A policy which the insured has the right to
13                continue in force subject to its terms by the
14                timely payment of premium until at least age fifty
15                or, in the case of a policy issued after age
16                forty-four, for at least five years from its date
17                of issue, may contain in lieu of subparagraph
18                (A)(i) the following provision (from which the
19                clause in parentheses may be omitted at the
20                insurer's option):  "Incontestable:  After this
21                policy has been in force for a period of three
22                years during the lifetime of the insured
23                (excluding any period during which the insured is

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 1                disabled), it shall become incontestable as to the
 2                statements contained in the application."
 3      (3)  (A)  "Grace period:  A grace period of days (insert a
 4                number not less than seven for weekly premium
 5                policies, ten for monthly premium policies, and
 6                thirty-one for all other policies) will be granted
 7                for the payment of each premium falling due after
 8                the first premium, during which grace period the
 9                policy shall continue in force."
10           (B)  A policy which contains a cancellation provision
11                may add at the end of the above provision:
12                "subject to the right of the insurer to cancel in
13                accordance with the cancellation provision."
14           (C)  A policy in which the insurer reserves the right
15                to refuse any renewal shall have at the beginning
16                of the above provision:  "Unless not less than
17                thirty days prior to the premium due date the
18                insurer has delivered to the insured or has mailed
19                to the insured's last address as shown by the
20                records of the insurer written notice of its
21                intention not to renew this policy beyond the
22                period for which the premium has been accepted."
23      (4)  (A)  "Reinstatement:  If any renewal premium is not

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 1                paid within the time granted the insured for
 2                payment, a subsequent acceptance of premium by the
 3                insurer or by any agent duly authorized by the
 4                insurer to accept the premium, without requiring
 5                in connection therewith an application for
 6                reinstatement, shall reinstate the policy;
 7                provided, however, that if the insurer or agent
 8                requires an application for reinstatement and
 9                issues a conditional receipt for the premium
10                tendered, the policy shall be reinstated upon
11                approval of the application by the insurer or,
12                lacking approval, upon the forty-fifth day
13                following the date of conditional receipt unless
14                the insurer has previously notified the insured in
15                writing of its disapproval of the application.
16                The reinstated policy shall cover only loss
17                resulting from accidental injury as may be
18                sustained after the date of reinstatement and loss
19                due to sickness as may begin more than ten days
20                after that date.  In all other respects the
21                insured and insurer shall have the same rights as
22                they had under the policy immediately before the
23                due date of the defaulted premium, subject to any

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 1                provisions endorsed hereon or attached hereto in
 2                connection with the reinstatement.  Any premium
 3                accepted in connection with the reinstatement
 4                shall be applied to a period for which premium has
 5                not been previously paid, but not to any period
 6                more than sixty days prior to the date of
 7                reinstatement."
 8           (B)  The last sentence of the above provision may be
 9                omitted from any policy which the insured has the
10                right to continue in force subject to its terms by
11                the timely payment of premiums until at least age
12                fifty or, in the case of a policy issued after age
13                forty-four, for at least five years from its date
14                of issue.
15      (5)  (A)  "Notice of Claim:  Written notice of claim must be
16                given to the insurer within twenty days after the
17                occurrence or commencement of any loss covered by
18                the policy, or as soon thereafter as is reasonably
19                possible.  Notice given by or on behalf of the
20                insured or the beneficiary to the insurer at
21                (insert the location of the office as the insurer
22                may designate for the purpose) or to any
23                authorized agent of the insurer, with information

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 1                sufficient to identify the insured, shall be
 2                deemed notice to the insurer."
 3           (B)  In a policy providing a loss of time benefit which
 4                may be payable for at least two years, an insurer
 5                may at its option insert the following between the
 6                first and second sentences of the above provision:
 7                "Subject to the qualification set forth below, if
 8                the insured suffers loss of time on account of
 9                disability for which indemnity may be payable for
10                at least two years, the insured shall, at least
11                once in every six months after having given notice
12                of claim, give to the insurer notice of
13                continuance of the disability, except in the event
14                of legal incapacity.  The period of six months
15                following any filing of proof by the insured or
16                any payment by the insurer on account of the claim
17                or any denial of liability in whole or in part by
18                the insurer shall be excluded in applying this
19                provision.  Delay in giving notice shall not
20                impair the insured's right to any indemnity which
21                would otherwise have accrued during the period of
22                six months preceding the date on which notice is
23                actually given."

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 1      (6)  "Claim Forms:  The insurer, upon receipt of a notice of
 2           claim, will furnish to the claimant the forms, that are
 3           usually furnished by it for filing proofs of loss.  If
 4           the forms are not furnished within fifteen days after
 5           the giving of notice the claimant shall be deemed to
 6           have complied with the requirements of this policy as
 7           to proof of loss upon submitting, within the time fixed
 8           in the policy for filing proofs of loss, written proof
 9           covering the occurrence, the character, and the extent
10           of the loss for which claim is made."
11      (7)  "Proofs of Loss:  In case of claim for loss for which
12           this policy provides any periodic payment contingent
13           upon continuing loss, written proof of loss must be
14           furnished to the insurer at its office within ninety
15           days after the termination of the period for which the
16           insurer is liable, and in case of claim for any other
17           loss within ninety days after the date of loss.
18           Failure to furnish proof of loss within the time
19           required shall not invalidate nor reduce any claim if
20           it was not reasonably possible to give proof within the
21           time required, provided proof is furnished as soon as
22           reasonably possible and in no event, except in the
23           absence of legal capacity, later than fifteen months

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 1           from the time proof is otherwise required."
 2      (8)  "Time of Payment of Claims:  Indemnities payable under
 3           this policy for any loss other than loss for which this
 4           policy provides any periodic payment will be paid
 5           immediately upon receipt of due written proof of loss.
 6           Subject to due written proof of loss, all accrued
 7           indemnities for loss for which this policy provides
 8           periodic payment will be paid (insert period for
 9           payment which must not be less frequently than monthly)
10           and any balance remaining unpaid upon the termination
11           of liability will be paid immediately upon receipt of
12           due written proof."
13      (9)  (A)  Payment of Claims:  Indemnity for loss of life
14                will be payable in accordance with the beneficiary
15                designation and the provisions respecting payment
16                which may be prescribed herein and effective at
17                the time of payment.  If no designation or
18                provision is then effective, the indemnity shall
19                be payable to the estate of the insured.  Any
20                other accrued indemnities unpaid at the insured's
21                death may, at the option of the insurer, be paid
22                either to the designated beneficiary or to the
23                estate of the insured.  All other indemnities will

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 1                be payable to the insured."
 2           (B)  The following provisions, or either of them, may
 3                be included with the above provision at the option
 4                of the insurer:
 5                (i)  "If any indemnity of this policy shall be
 6                     payable to the estate of the insured, or to
 7                     an insured or beneficiary who is a minor or
 8                     otherwise not competent to give a valid
 9                     release, the insurer may pay the indemnity,
10                     up to an amount not exceeding $2,000 to any
11                     relative by blood or connection by marriage
12                     or through reciprocal beneficiary status of
13                     the insured or beneficiary who is deemed by
14                     the insurer to be equitably entitled thereto.
15                     Any payment made by the insurer in good faith
16                     pursuant to this provision shall fully
17                     discharge the insurer to the extent of the
18                     payment."
19               (ii)  "Subject to any written direction of the
20                     insured in the application or otherwise all
21                     or a portion of any indemnities provided by
22                     this policy on account of hospital, nursing,
23                     medical, or surgical services may, at the

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 1                     insurer's option and unless the insured
 2                     requests otherwise in writing not later than
 3                     the time of filing proofs of loss, be paid
 4                     directly to the hospital or person rendering
 5                     the services; but it is not required that the
 6                     service be rendered by a particular hospital
 7                     or person."
 8     (10)  "Physical Examinations and Autopsy:  The insurer at its
 9           own expense shall have the right and opportunity to
10           examine the person of the insured when and as often as
11           it may reasonably require during the pendency of a
12           claim hereunder and to make an autopsy in case of death
13           where it is not forbidden by law."
14     (11)  "Legal Actions:  No action at law or in equity shall be
15           brought to recover on this policy prior to the
16           expiration of sixty days after written proof of loss
17           has been furnished in accordance with the requirements
18           of this policy.  No action at law or in equity shall be
19           brought after the expiration of three years after the
20           time written proof of loss is required to be
21           furnished."
22     (12)  (A)  "Change of Beneficiary:  Unless the insured makes
23                an irrevocable designation of beneficiary, the

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 1                right to change of beneficiary is reserved to the
 2                insured and the consent of the beneficiary or
 3                beneficiaries shall not be requisite to surrender
 4                or assignment of this policy or to any change of
 5                beneficiary or beneficiaries, or to any other
 6                changes in this policy."
 7           (B)  The first clause of the above provision, relating
 8                to the irrevocable designation of beneficiary, may
 9                be omitted at the insurer's option."
10      SECTION 6.  Section 431:10A-202, Hawaii Revised Statutes, is
11 amended to read as follows:
12      "431:10A-202  Health care groups.  A policy of group
13 disability insurance may be issued to a corporation, as
14 policyholder, existing primarily for the purpose of assisting
15 individuals who are its subscribers in securing medical,
16 hospital, dental, and other health care services for themselves
17 and their dependents[,] including reciprocal beneficiaries,
18 covering all and not less than five hundred such subscribers and
19 dependents, with respect only to medical, hospital, dental, and
20 other health care services."
21      SECTION 7.  Section 431:10A-401, Hawaii Revised Statutes, is
22 amended to read as follows:
23      "431:10A-401  Purpose.  It is the purpose of this part to

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 1 provide a means of more adequately meeting the needs of persons
 2 who are sixty-five years of age or older and their spouses or
 3 reciprocal beneficiaries for insurance coverage against financial
 4 loss from accident or disease through the combined resources and
 5 experience of a number of insurers; to make possible the fullest
 6 extension of such coverage by encouraging insurers to combine
 7 their resources and experience and to exercise their collective
 8 efforts in the development and offering of policies of such
 9 insurance to all such applicants at costs lower than those
10 generally available through individual insurers;  and to regulate
11 the joint activities herein authorized in accordance with the
12 intent of Congress as expressed in the Act of Congress of March
13 9, 1945 (Public Law 15, 79th Congress), as amended."
14      SECTION 8.  Section 431:10A-403, Hawaii Revised Statutes, is
15 amended to read as follows:
16      "431:10A-403  Association of insurers; policyholder;
17 policy.(a)  Any insurer may join with one or more other
18 insurers to plan, develop, underwrite, offer and provide to any
19 person who is sixty-five years of age or older and to the spouse
20 or reciprocal beneficiary of such person, extended health
21 insurance against financial loss from accident or disease, or
22 both.  The insurance may be offered, issued and administered
23 jointly by two or more insurers by a group policy issued to a

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 1 policyholder through an association formed for the purpose of
 2 offering, selling, issuing and administering such insurance.
 3      (b)  The policyholder may be an association, a trustee, or
 4 any other person.  A master group policy issued to an association
 5 or to a trustee or any person appointed by an association for the
 6 purpose of providing the insurances described in this part shall
 7 be another form of group disability insurance.
 8      Any form of policy approved by the commissioner for an
 9 association shall be offered throughout the State to all persons
10 sixty-five and older and their spouses[,] or reciprocal
11 beneficiaries, and the coverage of any person insured under such
12 a form of policy shall not be cancellable except for nonpayment
13 of premiums unless the coverage of all persons insured under such
14 form of policy is also cancelled.
15      (c)  Any such policy may provide, among other things, that
16 the benefits payable under the policy are subject to reduction if
17 the individual insured has any other coverage providing hospital,
18 surgical or medical benefits whether on an indemnity basis or a
19 provision of service basis resulting in such insured being
20 eligible for more than one hundred per cent of covered expenses
21 which the insured is required to pay.  Any insurer issuing
22 individual policies providing extended hospital, surgical or
23 medical benefits to persons sixty-five years of age and older and

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 1 their spouses or reciprocal beneficiaries may also use such a
 2 policy provision."
 3      SECTION 9.  Section 431:10A-601, Hawaii Revised Statutes, is
 4 amended to read as follows:
 5      "[[] 431:10A-601[]]  Reciprocal beneficiary [family]
 6 coverage [defined; policyholder and employer responsibility for
 7 costs; availability].(a)  Any other law to the contrary
 8 notwithstanding, reciprocal [beneficiary family coverage, as
 9 defined inn subsection (b), shall be made available to reciprocal
10 beneficiaries, as defined in chapter 572C, but only to the extent
11 that family coverage, as defined in section 431:10A-103, is
12 currently available to individuals who are not reciprocal
13 beneficiaries.
14      (b)  As used in this section, reciprocal beneficiary family
15 coverage means a policy that insures, originally or upon
16 subsequent amendment, a reciprocal beneficiary who shall be
17 deemed the policyholder, the other party to the policyholder's
18 reciprocal beneficiary relationship registered pursuant to
19 chapter 572C, dependent children or any child of any other person
20 dependent upon either reciprocal beneficiary.
21      (c)  If a reciprocal beneficiary policyholder incurs
22 additional costs or premiums, if any, by electing reciprocal
23 beneficiary family coverage under this section, the employer may

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 1 pay additional costs or premiums.] beneficiaries shall be treated
 2 the same as spouses for purposes of this article."
 3      SECTION 10.  Section 431:10B-105, Hawaii Revised Statutes,
 4 is amended by amending subsection (a) to read as follows:
 5      "(a)  Credit life insurance.
 6      (1)  The initial amount of credit life insurance shall not
 7           exceed the total amount repayable under the contract of
 8           indebtedness and, where an indebtedness is repayable in
 9           substantially equal installments, the amount of
10           insurance shall at no time exceed the scheduled or
11           actual amount of unpaid indebtedness, whichever is
12           greater; except that if the sole purpose of the loan is
13           to provide future advances to the debtor to meet
14           education or education related expenses of the debtor,
15           the debtor's spouse, reciprocal beneficiary, children,
16           or other dependents, the amount of insurance may equal,
17           but may not exceed, the total amount of the described
18           expenses forecast at the time of entry into the loan
19           agreement with the creditor, less the amount of all
20           repayments by the debtor.  In the case of revolving
21           loan or revolving charge accounts, the insurance shall
22           at no time exceed the unpaid indebtedness.
23      (2)  Notwithstanding the provisions of subsection (a)(1),

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 1           insurance on agricultural credit transaction
 2           commitments not exceeding one year in duration may be
 3           written up to the amount of the loan commitment, on a
 4           nondecreasing or level term plan."
 5      SECTION 11.  Section 431:10C-111, Hawaii Revised Statutes,
 6 is amended by amending subsection (c) to read as follows:
 7      "(c)  No insurer shall refuse to continue a motor vehicle
 8 insurance policy based solely upon a person's race, creed, ethnic
 9 extraction, age, sex, length of driving experience, marital or
10 reciprocal beneficiary status, residence, physical handicap, or
11 because an insured has elected to obtain any required or optional
12 coverage or deductible required by law.  If an insured alleges
13 that the insurer's refusal to continue the motor vehicle
14 insurance policy is based solely upon the insured's race, creed,
15 ethnic extraction, age, sex, length of driving experience,
16 marital or reciprocal beneficiary status, residence, physical
17 handicap, or because the insured has elected to obtain any
18 required or optional coverage or deductible provided by law, the
19 burden of proof shall rest with the insurer to prove that the
20 refusal to continue the policy was not based on noncompliance
21 with this subsection."
22      SECTION 12.  Section 431:10C-207, Hawaii Revised Statutes,
23 is amended to read as follows:

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                                     S.B. NO.           

 1      "431:10C-207  Discriminatory practices prohibited.  No
 2 insurer shall base any standard or rating plan, in whole or in
 3 part, directly or indirectly, upon a person's race, creed, ethnic
 4 extraction, age, sex, length of driving experience, credit bureau
 5 rating, marital or reciprocal beneficiary status, or physical
 6 handicap."
 7      SECTION 13.  Section 431:10C-302, Hawaii Revised Statutes,
 8 is amended to read as follows:
 9      "(a)  In addition to the motor vehicle insurance coverages
10 described in section 431:10C-301, every insurer issuing a motor
11 vehicle insurance policy shall make available to the insured the
12 following optional insurance under the following conditions:
13      (1)  At the option of the insured, provisions covering loss
14           resulting from damage to the insured's motor vehicle
15           with such deductibles, including but not limited to
16           collision and comprehensive deductibles of $50, $100,
17           $250, $500, $1,000, $1,500, and $2,000, at
18           appropriately reduced premium rates, as the
19           commissioner, by regulation, shall provide;
20      (2)  At the option of the insured, compensation to the
21           insured, the insured's spouse, the insured's reciprocal
22           beneficiary, any dependents, or any occupants of the
23           insured's vehicle for damages not covered by personal

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                                     S.B. NO.           

 1           injury protection benefits;
 2      (3)  Additional coverages and benefits with respect to any
 3           injury or any other loss from motor vehicle accidents
 4           or from operation of a motor vehicle for which the
 5           insurer may provide for aggregate limits with respect
 6           to such additional coverage so long as the basic
 7           liability coverages provided are not less than those
 8           required by section 431:10C-301(b)(1) and (b)(2);
 9      (4)  At the option of the insured, an option in writing for
10           coverage for wage loss benefits for monthly earnings
11           loss for injury arising out of a motor vehicle
12           accident.  Any change in the wage loss benefits
13           coverage selected by an insured shall apply only to
14           benefits arising out of motor vehicle accidents
15           occurring after the date the change becomes effective.
16           Coverage shall be offered in the amounts of $1,000 a
17           month to $5,000 a month in increments of $500 a month;
18           however, nothing shall prevent an insurer from making
19           available higher limits of coverage.
20      Benefit payments under this paragraph shall be for no less
21 than two years following the date of the accidental harm and be
22 made for lost net income after taxes for as long as the treating
23 health care provider determines that the covered person's

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                                     S.B. NO.           

 1 injuries prevent the person from engaging in the employment in
 2 which the person was engaged immediately prior to the accident.
 3 Benefit payments after more than two years following the date of
 4 the accident shall continue if the treating health care provider
 5 determines the person is disabled from employment to which the
 6 person is suited by education, training, and experience.  If,
 7 pursuant to this requirement, the covered person engages in a
 8 form of employment other than that in which the person was
 9 engaged immediately prior to the accident, the person shall
10 receive payment for the difference between the person's resulting
11 net income after taxes and the person's net income after taxes
12 immediately prior to the accident;
13      (5)  An option in writing for minimum coverage for death
14           benefits in an amount of $25,000, to be paid to named
15           beneficiaries.  If there is no named beneficiary, the
16           amount shall be paid to the estate.  Coverage shall
17           also be made available for increased death benefits in
18           increments of $25,000 up to $100,000; however, nothing
19           shall prevent an insurer from making available higher
20           limits of coverage.  At the option of the insured,
21           coverage for funeral expenses of $2,000 shall be made
22           available;
23      (6)  Terms, conditions, exclusions, and deductible clauses,

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                                     S.B. NO.           

 1           coverages, and benefits which:
 2           (A)  Are consistent with the required provisions of
 3                such policy,
 4           (B)  Limit the variety of coverage available so as to
 5                give buyers of insurance reasonable opportunity to
 6                compare the cost of insuring with various
 7                insurers, and
 8           (C)  Are approved by the commissioner as fair and
 9                equitable;
10      (7)  At appropriately reduced premium rates, deductibles
11           applicable only to claims of an insured in the amounts
12           of $100, $300, $500, and $1,000 from all personal
13           injury protection benefits otherwise payable; provided
14           that if two or more insureds to whom the deductible is
15           applicable under the contract of insurance are injured
16           in the same accident, the aggregate amount of the
17           deductible applicable to all of them shall not exceed
18           the specified deductible, which amount where necessary
19           shall be allocated equally among them;
20      (8)  Every insurer shall fully disclose the availability of
21           all required and optional coverages and deductibles,
22           including the nature and amounts, at the issuance or
23           delivery of the policy; or, for a policy already issued

Page 25                                                    3176
                                     S.B. NO.           

 1           at the time of the effective date of this Act,
 2           disclosure shall be made at the first renewal after the
 3           effective date of this Act.  The insurer shall also
 4           disclose at issuance or renewal, as applicable, the
 5           effect on premium rates and savings of each option and
 6           deductible.  Further offers or disclosures thereafter
 7           shall be required to be included with every other
 8           renewal or replacement policy.  All elections of
 9           coverages, options, and deductibles by a named insured
10           shall be binding upon additional insureds covered under
11           the named insured's policy.  The purpose of this
12           paragraph is to inform insureds or prospective insureds
13           of the coverages under this article;
14      (9)  (A)  An insurer may make available, and provide at the
15                option of the named insured, the benefits
16                described in section 431:10C-A(a) through managed
17                care providers such as a health maintenance
18                organization or a preferred provider organization.
19                The option may include conditions and limitations
20                to coverage, including deductibles and coinsurance
21                requirements, as approved by the commissioner.
22                The commissioner shall approve those conditions
23                and limitations which are substantially comparable

Page 26                                                    3176
                                     S.B. NO.           

 1                to or exceed the coverage provided under section
 2                431:10C-B;
 3           (B)  An insurer may make available, and provide at the
 4                option of the named insured, deductible and
 5                coinsurance arrangements whereby the recipient of
 6                care, treatment, services, products, expenses, or
 7                accommodations shares in the payment obligation;
 8           (C)  No deductible or coinsurance under a policy
 9                covered under section 431:10C-302(a)(9)(A) or (B)
10                shall be applied with respect to care, treatment,
11                services, products, or accommodation provided or
12                expenses incurred by an insured during the first
13                twenty-four hours in which emergency treatment has
14                been provided or until the insured patient's
15                emergency medical condition is stabilized,
16                whichever is longer;
17           (D)  (i)  The optional coverage prescribed in section
18                     431:10C-302(a)(9)(A) and (B) shall apply only
19                     to the named insured, resident spouse,
20                     resident reciprocal beneficiary, or resident
21                     relative; and
22                (ii) "Resident relative" means a person who, at
23                     the time of the accident, is related by

Page 27                                                    3176
                                     S.B. NO.           

 1                     blood, marriage, or adoption to the named
 2                     insured or resident spouse and who resides in
 3                     the named insured's household, even if
 4                     temporarily living elsewhere, and any ward or
 5                     foster child who usually resides with the
 6                     named insured, even if living elsewhere;
 7           (E)  An agreement made under section 431:10C-302(a)(9)
 8                must be a voluntary agreement between the insured
 9                and the insurer, and no insurer shall require an
10                insured to agree to those policy provisions as a
11                condition of providing insurance coverage.
12                Requiring an agreement as a precondition to the
13                provision of insurance shall constitute an unfair
14                insurance practice and shall be subject to the
15                provisions, remedies, and penalties provided in
16                article 13; and
17           (F)  An insurer providing the coverages authorized in
18                section 431:10C-302(a)(9)(A) and (B) shall
19                demonstrate in rate filings submitted to the
20                commissioner the savings to the insured to be
21                realized under the plan;
22      and
23      (10) An insurer shall make available optional coverage for

Page 28                                                    3176
                                     S.B. NO.           

 1           naturopathic, acupuncture, and nonremedial care and
 2           treatment rendered in accordance with the teachings,
 3           faith, or belief of any group which relies upon
 4           spiritual means through prayer for healing.
 5      The commissioner shall adopt rules, including policy limits,
 6 terms, and conditions as necessary to implement the requirements
 7 of this section."
 8      SECTION 14.  Section 431:10C-305, Hawaii Revised Statutes,
 9 is amended by amending subsection (b) to read as follows:
10      "(b)(1)  Except as provided in paragraph (2), personal
11 injury protection benefits shall be paid primarily from the
12 following sources in the following conditions:
13      (A)  The insurance on the vehicle occupied by the injured
14           person at the time of the accident; or
15      (B)  The insurance on the vehicle which caused accidental
16           harm if the injured person is a pedestrian (including a
17           bicyclist).
18 If there is no insurance on the vehicle, any other motor vehicle
19 insurance applicable to the injured person shall apply. No person
20 shall recover personal injury protection benefits from more than
21 one insurer for accidental harm as a result of the same accident;
22      (2)  All personal injury protection benefits shall be paid
23           secondarily and net of any benefits a person is

Page 29                                                    3176
                                     S.B. NO.           

 1           entitled to receive because of the accidental harm from
 2           workers' compensation laws; provided that:
 3           (A)  The total amount a person is entitled to receive
 4                for monthly earnings loss under this article shall
 5                be limited to the amount of any applicable
 6                coverage under section 431:10C-302, without any
 7                deduction of any amount received as compensation
 8                for lost earnings under any workers' compensation
 9                law;
10           (B)  The aggregate of the payments from both sources
11                shall not exceed eighty per cent of the person's
12                monthly earnings as provided in section
13                431:10C-302(a)(4).  However, if the person's
14                employer provides both workers' compensation and
15                personal injury protection payments, the aggregate
16                shall not exceed the person's net monthly earnings
17                (computed by subtracting the total of federal and
18                state income taxes and employee social security
19                contributions from the gross monthly earnings),
20                provided that the workers' compensation payments
21                shall not be less than required by chapter 386;
22                and
23           (C)  This section shall not apply to benefits payable

Page 30                                                    3176
                                     S.B. NO.           

 1                to a surviving spouse or reciprocal beneficiary
 2                and any surviving dependent as provided under
 3                section 431:10C-304.
 4 If the person does not collect such benefits under the workers'
 5 compensation laws by reason of the contest of this right to so
 6 collect by the person or organization responsible for payment
 7 thereof, the injured person, if otherwise eligible, shall,
 8 nevertheless, be entitled to receive personal injury protection
 9 benefits and, upon payment thereof, the personal injury
10 protection insurer shall be subrogated to the injured person's
11 rights to collect such benefits."
12      SECTION 15.  Section 431:10C-409, Hawaii Revised Statutes,
13 is amended to read as follows:
14      "431:10C-409  Establishment and criteria.  The commissioner
15 shall, after consultation with the board, establish and
16 promulgate the rating rules, classification standards and rules,
17 rates, rating plans, territories, and policy forms for use in the
18 provision of all motor vehicle insurance issued under the joint
19 underwriting plan, in accordance with the following provisions:
20      (1)  Rates shall not be excessive, inadequate or unfairly
21           discriminatory.
22      (2)  Consideration shall be given to the following:
23           (A)  The plan's past and prospective loss experience

Page 31                                                    3176
                                     S.B. NO.           

 1                within the State;
 2           (B)  Contingencies in the administration of motor
 3                vehicle insurance sold;
 4           (C)  Past and prospective expenses in the sale and
 5                administration of motor vehicle insurance;
 6           (D)  Income from investments of premiums and other
 7                proceeds received on account of joint underwriting
 8                plan motor vehicle insurance sold; and
 9           (E)  All other factors demonstrated to be relevant by a
10                current actuarially sound study of the definable
11                risks involved.
12      (3)  The commissioner may:
13           (A)  Establish rating territories and group risks by
14                classifications for the establishing of rates and
15                minimum premiums;
16           (B)  Provide for, by regulation, a uniform
17                classification of risks and rating territories for
18                the various coverages;
19           (C)  Modify classification rates to produce rates in
20                accordance with rating plans which establish
21                standards for measuring variations in hazards or
22                expense provisions, or both.  Such standards may
23                measure any differences among risks including

Page 32                                                    3176
                                     S.B. NO.           

 1                vehicles, occupations, past traffic convictions,
 2                and involvement in past accidents, provided they
 3                are established to have a demonstrable effect upon
 4                losses or expense; and
 5           (D)  Ensure that no standard or rating plan shall be
 6                based, in whole or in part, directly or
 7                indirectly, upon a person's race, creed, ethnic
 8                extraction, age, sex, length of driving
 9                experience, credit bureau rating, marital or
10                reciprocal beneficiary status, or physical
11                handicap."
12      SECTION 16.  Section 431:10D-104, Hawaii Revised Statutes,
13 is amended by amending subsection (c) to read as follows:
14      "(c)  Cash surrender value - life:
15      (1)  Any cash surrender value available under the policy in
16           the event of default in a premium payment due on any
17           policy anniversary, whether or not required by
18           subsection (b), shall be an amount not less than the
19           excess, if any, of the present value, on the
20           anniversary, of the future guaranteed benefits which
21           would have been provided for by the policy including
22           any existing  paid-up additions, if there had been no
23           default, over the sum of:

Page 33                                                    3176
                                     S.B. NO.           

 1           (A)  The then present value of the adjusted premiums as
 2                defined in subsection (e) corresponding to
 3                premiums which would have fallen due on and after
 4                the anniversary, and
 5           (B)  The amount of any indebtedness to the insurer on
 6                account of or secured by the policy.  Provided
 7                that for any policy issued on or after the
 8                operative date of subsection (e)(8) as defined
 9                therein, which provides supplemental life
10                insurance or annuity benefits at the option of the
11                insured and for an identifiable additional premium
12                by rider or supplemental policy provision, the
13                cash surrender value referred to in item (1) shall
14                be an amount not less than the sum of the cash
15                surrender value as defined in such paragraph for
16                an otherwise similar policy issued at the same age
17                without such rider or supplemental policy
18                provision and the cash surrender value as defined
19                in such paragraph for a policy which provides only
20                the benefits otherwise provided by such rider or
21                supplemental policy provision.
22                     Provided further that for any family policy
23                issued on or after the operative date of

Page 34                                                    3176
                                     S.B. NO.           

 1                subsection (e)(8) as defined therein, which
 2                defines a primary insured and provides term
 3                insurance on the life of the spouse or reciprocal
 4                beneficiary of the primary insured expiring before
 5                the spouse's or reciprocal beneficiary's age
 6                seventy-one, the cash surrender value referred to
 7                in item (1) shall be an amount not less than the
 8                sum of the cash surrender value as defined in such
 9                paragraph for an otherwise similar policy issued
10                at the same age without such term insurance on the
11                life of the spouse or reciprocal beneficiary and
12                the cash surrender value as defined in such
13                paragraph for an otherwise similar policy issued
14                at the same age without such rider or supplemental
15                policy provision and the cash surrender value as
16                defined in such paragraph [for] a policy which
17                provides only the benefits otherwise provided by
18                such term insurance on the life of the spouse[.]
19                or reciprocal beneficiary.
20      (2)  Any cash surrender value available within thirty days
21           after any policy anniversary, of the future guaranteed
22           benefits provided for by the policy including any
23           existing paid-up additions, decreased by any

Page 35                                                    3176
                                     S.B. NO.           

 1           indebtedness to the insurer on account of or secured by
 2           the policy."
 3      SECTION 17.  Section 431:10D-114, Hawaii Revised Statutes,
 4 is amended to read as follows:
 5      "431:10D-114  Miscellaneous proceeds.  Upon the death of
 6 the insured and except as is otherwise expressly provided by the
 7 policy or premium deposit agreement, a life insurer may pay to
 8 the surviving spouse[,] or reciprocal beneficiary, children,
 9 beneficiary, or person other than the insured's estate, appearing
10 to the insurer to be equitably entitled to such payment, sums
11 then held by it and comprising:
12      (1)  Premiums paid in advance, if such premiums did not fall
13           due prior to the death, or funds held on deposit for
14           the payment of future premiums.
15      (2)  Dividends theretofore declared on the policy and held
16           by the insurer under the insured's option.
17      (3)  Dividends becoming payable on or after the death of the
18           insured."
19      SECTION 18.  Section 431:10D-201, Hawaii Revised Statutes,
20 is amended by amending subsection (b) to read as follows:
21      "(b)  Subsection (a) shall not apply to contracts of life
22 insurance insuring only individuals:
23      (1)  Related by marriage, by a reciprocal beneficiary

Page 36                                                    3176
                                     S.B. NO.           

 1           relationship, by blood, or by legal adoption;  or
 2      (2)  Having a common interest through ownership of a
 3           business enterprise, or of a substantial legal interest
 4           or equity in the business enterprise, and who are
 5           actively engaged in its management; or
 6      (3)  Otherwise having an insurable interest in each other's
 7           lives."
 8      SECTION 19.  Section 431:10D-203, Hawaii Revised Statutes,
 9 is amended to read as follows:
10      "431:10D-203  Debtor groups.  The lives of a group of
11 individuals may be insured under a policy issued to a creditor or
12 its parent holding company or to a trustee or trustees or agent
13 designated by two or more creditors, which creditor, holding
14 company, affiliate, trustee, trustees or agent shall be deemed
15 the policyholder, to insure debtors of the creditor or creditors,
16 subject to the following requirements:
17      (1)  The debtors eligible for insurance under the policy
18           shall be all of the debtors of the creditor or
19           creditors or all of any class or classes thereof.  The
20           policy may provide that the term debtors shall include:
21           (A)  Borrowers of money or purchasers or lessees of
22                goods, services, or property for which payment is
23                arranged through a credit transaction;

Page 37                                                    3176
                                     S.B. NO.           

 1           (B)  The debtors of one or more subsidiary
 2                corporations; and
 3           (C)  The debtors of one or more affiliated
 4                corporations, proprietorships, or partnerships, if
 5                the business of the policyholder and the affiliate
 6                is under common control.
 7      (2)  The premiums for the policy shall be paid either from
 8           the creditor's funds, or from charges collected from
 9           the insured debtors, or from both.  A policy on which
10           part or all of the premiums is to be derived from the
11           collection from the insured debtors of identifiable
12           charges not required of uninsured debtors shall not
13           include, in the class or classes of debtors eligible
14           from insurance, debtors under obligations outstanding
15           at its date of issue without evidence of individual
16           insurability unless at least seventy-five per cent of
17           the then eligible debtors elect to pay the required
18           charges.  Except as provided in item (3), a policy on
19           which no part of the premium is to be derived from the
20           collection of such identifiable charges must insure all
21           eligible debtors.
22      (3)  An insurer may exclude any debtors as to whom evidence
23           of individual insurability is not satisfactory to the

Page 38                                                    3176
                                     S.B. NO.           

 1           insurer.
 2      (4)  The policy may be issued only if the group of eligible
 3           debtors is then receiving new entrants at the rate of
 4           at least one hundred persons yearly, or may reasonably
 5           be expected to receive at least one hundred new
 6           entrants during the first policy year, and only if the
 7           policy reserves to the insurer the right to require
 8           evidence of individual insurability if less than
 9           seventy-five per cent of the new entrants become
10           insured.
11      (5)  The amount of the insurance on the life of any debtor
12           shall at no time exceed the greater of the scheduled or
13           actual amount of unpaid indebtedness to the creditor,
14           except that if the sole purpose of the loan is to
15           provide future advances to the debtor to meet education
16           or education-related expenses of the debtor, the
17           debtor's spouse, reciprocal beneficiary, children, or
18           other dependents, the amount of insurance may equal,
19           but may not exceed, the total amount of the described
20           expenses forecast at the time of entry into the loan
21           agreement with the creditor, less the amount of all
22           repayments by the debtor.  In the case of revolving
23           loan or revolving charge accounts, the insurance shall

Page 39                                                    3176
                                     S.B. NO.           

 1           at no time exceed the unpaid indebtedness.
 2      (6)  The insurance shall be payable to the creditor or any
 3           successor to the right, title and interest of the
 4           creditor.  The payment shall reduce or extinguish the
 5           unpaid indebtedness of the debtor to the extent of the
 6           payment and, whenever the amount of insurance exceeds
 7           the unpaid indebtedness, any such excess shall be
 8           payable to a beneficiary, other than the creditor,
 9           named by the debtor or to the debtor's estate.
10      (7)  Payment by the debtor insured under any such group life
11           insurance contract of an amount not in excess of the
12           premium charged the creditor by the insurer for such
13           insurance pertaining to the debtor, shall not be deemed
14           to constitute a charge upon a loan in violation of any
15           banking or usury law or any law regulating installment
16           sales."
17      SECTION 20.  Section 431:10D-212, Hawaii Revised Statutes,
18 is amended to read as follows:
19      "431:10D-212  Spouses, reciprocal beneficiaries, and
20 dependents of insured individuals.  Except for a policy issued
21 under section 431:10D-203 and section 431:10D-211, insurance
22 under any group life insurance policy issued pursuant to this
23 article may be extended to insure the employees or members of

Page 40                                                    3176
                                     S.B. NO.           

 1 such groups against loss due to the death of their spouses,
 2 reciprocal beneficiaries, and dependent children subject to the
 3 following:
 4      (1)  The spouse, reciprocal beneficiary, and dependent of
 5           the individual insured may be covered in amounts of
 6           insurance equivalent to the amount of coverage of the
 7           insured individual, provided that in the case of a
 8           dependent other than a spouse or reciprocal beneficiary
 9           of the insured individual the amount of insurance for
10           the dependent shall not be in excess of fifty per cent
11           of the coverage of the insured individual or $5,000
12           whichever is less, and provided further that in the
13           case of a dependent whose age at death is under six
14           months, the amount shall not be in excess of $2,000.
15      (2)  The premiums for the insurance of the spouse,
16           reciprocal beneficiary, or dependent shall be paid
17           either from funds contributed by the employer, union,
18           association or other person to whom the policy has been
19           issued, or from funds contributed by the individual
20           insured, or from both.
21      (3)  An insurer may exclude or limit the coverage on any
22           spouse, reciprocal beneficiary, or dependent child as
23           to whom evidence of individual insurability is not

Page 41                                                    3176
                                     S.B. NO.           

 1           satisfactory to the insurer.
 2      (4)  For purposes of this section:
 3           (A)  A dependent shall be a child of the insured
 4                individual:
 5                (i)  Under eighteen years of age; or
 6                (ii) Under twenty-three years of age who is
 7                     attending an educational institution and
 8                     relying upon the insured individual for
 9                     financial support; or
10               (iii) Regardless of age who is incapable of self-
11                     sustaining employment by reason of mental
12                     retardation or physical handicap and is
13                     chiefly dependent upon the insured individual
14                     for support and maintenance.
15           (B)  The term individual shall be deemed to include a
16                person or a member of any group provided in
17                section 431:10D-202 and section 431:10D-204
18                through section 431:10D-210."
19      SECTION 21.  Section 431:10D-308, Hawaii Revised Statutes,
20 is amended to read as follows:
21      "431:10D-308  Facility of payment.  Such a policy may also
22 provide that if the beneficiary designated in the policy does not
23 surrender the policy with due proof of death within the period

Page 42                                                    3176
                                     S.B. NO.           

 1 stated in the policy, which shall not be less than thirty days
 2 after the death of the insured, or if the beneficiary is the
 3 estate of the insured or is a minor, or dies before the insured
 4 or is not legally competent to give a valid release, then the
 5 insurer may make payment under the policy to the personal
 6 representative of the insured, or to any of the insured's
 7 relatives by blood, legal adoption or connection by marriage[,]
 8 or by reciprocal beneficiary relationship, or to any person
 9 appearing to the insurer to be equitably entitled to such payment
10 by reason of having been named beneficiary, or by reason of
11 having incurred expense for the maintenance, medical attention,
12 or burial of the insured.  The policy may also include a similar
13 provision applicable to any other payment due under the policy."
14      SECTION 22.  Chapter 432, Hawaii Revised Statutes, is
15 amended by adding to part VI of article I a new section to be
16 appropriately designated and to read as follows:
17      "432:1-    Reciprocal beneficiary coverage.  Any other law
18 to the contrary notwithstanding, all individual and group
19 hospital or medical service plan contracts which provide coverage
20 for a subscriber's or member's spouse shall provide the same
21 coverage for a subscriber's or member's reciprocal beneficiary."
22      SECTION 23.  Section 432D-23, Hawaii Revised Statutes, is
23 amended to read as follows:

Page 43                                                    3176
                                     S.B. NO.           

 1      "[[]432D-23[]]  Required provisions and benefits.  (a)
 2 Notwithstanding any provision of law to the contrary, each
 3 policy, contract, plan, or agreement issued in the State after
 4 January 1, 1995, by health maintenance organizations pursuant to
 5 this chapter, shall include benefits provided in sections 431:10-
 6 212, 431:10A-115, 431:10A-115.5, 431:10A-116, 431:10A-116.5, and
 7 431:10A-116.6 and chapter 431M.
 8      (b)  Notwithstanding any provision of law to the contrary,
 9 each policy, contract, plan, or agreement issued in the State
10 after July 1, 19999, by health maintenance organizations pursuant
11 to this chapter, shall provide the same coverage to reciprocal
12 beneficiaries as is provided to spouses."
13      SECTION 24.  If any provision of this Act, or the
14 application thereof to any person or circumstance is held
15 invalid, the invalidity does not affect other provisions or
16 applications of the Act which can be given effect without the
17 invalid provision or application, and to this end the provision
18 of this Act are severable.
19      SECTION 25.  Statutory material to be repealed is bracketed.
20 New statutory material is underscored.
21      SECTION 26.  This Act shall take effect on approval.
23                           INTRODUCED BY:  _______________________