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Public Act 093-0477


 

Public Act 93-0477 of the 93rd General Assembly


Public Act 93-0477

HB3661 Enrolled                      LRB093 09245 JLS 09478 b

    AN ACT in relation to insurance.

    Be it enacted by the People of  the  State  of  Illinois,
represented in the General Assembly:

    Section  3.   The  State Employees Group Insurance Act of
1971 is amended by changing Section 6.2 as follows:

    (5 ILCS 375/6.2) (from Ch. 127, par. 526.2)
    Sec. 6.2.  When the Director, with the advice and consent
of the Commission, determines that it would be  in  the  best
interests  of  the  State  and  its employees, the program of
health benefits under this Act may be administered  with  the
State  as  a  self-insurer  in  whole  or in part.  The State
assumes the risks of the program. The State may  provide  the
administrative services in connection with the self-insurance
health  plan  or  purchase  administrative  services  from an
administrative service organization. A plan of self-insurance
may combine forms  of  re-insurance  or  stop-loss  insurance
which limits the amount of State liability.
    The   program   of   health   benefits  shall  provide  a
continuation and conversion privilege for persons whose State
employment is terminated and  a  continuation  privilege  for
members' spouses and dependent children who are covered under
the   provisions   of   the   program,  consistent  with  the
requirements of federal law and Sections 367.2, and 367e, and
367e.1 of the Illinois Insurance Code.
(Source: P.A. 85-848.)

    Section 5.  The Illinois Insurance  Code  is  amended  by
changing Sections 143.17a, 245.25, 367.2, 367e, and 404.1, by
resectioning Section 367e as Sections 367e and 367e.1, and by
adding Section 367.2-5 as follows:
    (215 ILCS 5/143.17a) (from Ch. 73, par. 755.17a)
    Sec. 143.17a.  Notice of intention not to renew.
    a.  No   company  shall  fail  to  renew  any  policy  of
insurance, to which Section 143.11 applies, except for  those
defined  in  subsections  (a),  (b),  (c), and (h) of Section
143.13, unless it shall send by mail to the named insured  at
least  60  days advance notice of its intention not to renew.
The company shall maintain proof of mailing of such notice on
one of the following forms:  a recognized  U.S.  Post  Office
form  or  a  form acceptable to the U.S. Post Office or other
commercial mail delivery service.   An  exact  and  unaltered
copy  of  such  notice  shall  also  be sent to the insured's
broker, if known, or the agent of record and to the mortgagee
or lien holder at the  last  mailing  address  known  by  the
company.  However,  where  cancellation  is for nonpayment of
premium, the notice of cancellation must be mailed  at  least
10 days before the effective date of the cancellation.
    b.  This  Section  does  not  apply  if  the  company has
manifested its willingness to renew  directly  to  the  named
insured.  Provided, however, that no company may increase the
renewal premium on any policy of insurance to  which  Section
143.11  applies, except for those defined in subsections (a),
(b), (c), and (h) of Section 143.13,  by  30%  or  more,  nor
impose  changes  in  deductibles  or coverage that materially
alter the policy,  unless the company shall  have  mailed  or
delivered  to  the  named  insured  written  notice  of  such
increase or change in deductible or coverage at least 60 days
prior  to  the  renewal  or anniversary date. The increase in
premium shall be the  renewal  premium  based  on  the  known
exposure  as  of  the  date  of the quotation compared to the
premium as of the last day of coverage for the current year's
policy, annualized.  The premium on the renewal policy may be
subsequently amended to reflect any  change  in  exposure  or
reinsurance  costs not considered in the quotation.  An exact
and unaltered copy of such notice shall also be sent  to  the
insured's  broker,  if  known, or the agent of record.  If an
insurer  fails  to  provide  the  notice  required  by   this
subsection,  then  the company must extend the current policy
under the same terms, conditions, and  premium  to  allow  60
days notice of renewal and provide the actual renewal premium
quotation  and  any  change  in coverage or deductible on the
policy.  Proof of mailing or proof of receipt may  be  proven
by  a  sworn  affidavit  by  the  insurer as to the usual and
customary business practices of mailing  notice  pursuant  to
this  Section  or  may  be  proven  consistent  with Illinois
Supreme Court Rule 236.  The company shall maintain proof  of
mailing or proof of receipt whichever is required.
    c.  Should  a company fail to comply with the non-renewal
notice requirements  of  subsection  a.,  this  Section,  the
policy  shall  be  extended for an additional year the policy
shall terminate only as provided in this subsection.  In  the
event  notice  is provided at least 31 days, but less than 60
days prior to expiration of the policy, the policy  shall  be
extended  for a period of 60 days or until the effective date
of any similar insurance procured by the  insured,  whichever
is  less,  on  the  same  terms  and conditions as the policy
sought to be terminated.  In the  event  notice  is  provided
less  than 31 days prior to the expiration of the policy, the
policy shall be extended for a period of one  year  or  until
the  effective  date of any similar insurance procured by the
insured, whichever is less, on the same terms and  conditions
as the policy sought to be terminated, unless the insurer has
manifested its intention to renew at a different premium that
represents  an  increase not exceeding 30% unless the insurer
has manifested its willingness to renew at  a  premium  which
represents  an  increase  not  exceeding 30%. The premium for
coverage shall be prorated in accordance with the  amount  of
the last year's premium, and the company shall be entitled to
this premium for the extension of coverage and such extension
may be contingent upon the payment of such premium.
    d.  Renewal  of  a policy does not constitute a waiver or
estoppel with  respect  to  grounds  for  cancellation  which
existed before the effective date of such renewal.
    e.  In  all  notices of intention not to renew any policy
of insurance, as defined in Section 143.11 the company  shall
provide a specific explanation of the reasons for nonrenewal.
(Source: P.A. 89-669, eff. 1-1-97.)

    (215 ILCS 5/245.25) (from Ch. 73, par. 857.25)
    Sec. 245.25.   Except for subparagraphs (1) (a), (1) (f),
(1)  (g)  and  (3)  of  Section 226 of the Illinois Insurance
Code,  in  the  case  of  a  variable  annuity  contract  and
subparagraphs (1) (b), (1) (f), (1) (g), (1)  (h),  (1)  (i),
and  (1)  (k) of Section 224, subparagraph (1) (c) of Section
225, and subparagraph (h) of Section 231 in  the  case  of  a
variable  life  insurance  policy, except for Sections 357.4,
357.5, and 367e, and 367e.1 in the case of a variable  health
insurance  policy,  and  except as otherwise provided in this
Article, all pertinent provisions of the  Illinois  Insurance
Code  which  are  appropriate  to  those  contracts  apply to
separate  accounts  and  contracts  relating   thereto.   Any
individual  variable  life  insurance  contract, delivered or
issued for  delivery  in  this  State,  must  contain  grace,
reinstatement  and  non-forfeiture  provisions appropriate to
such a contract. Any individual  variable  annuity  contract,
delivered  or issued for delivery in this State, must contain
grace and reinstatement  provisions  appropriate  to  such  a
contract.   Any   group  variable  life  insurance  contract,
delivered or issued for delivery in this State, must  contain
a  grace  provision  appropriate  to such a contract. A group
variable health insurance contract delivered  or  issued  for
delivery  in  this State must contain a continuation of group
coverage provision appropriate to the contract.  The  reserve
liability  for  variable  contracts  must  be  established in
accordance  with  actuarial  procedures  that  recognize  the
variable nature of the benefits provided  and  any  mortality
guarantees.
(Source: P.A. 90-381, eff. 8-14-97.)

    (215 ILCS 5/367.2) (from Ch. 73, par. 979.2)
    Sec.   367.2.  Spousal   continuation   privilege;  group
contracts.
    A.  No policy of group accident or health insurance,  nor
any   certificate thereunder shall be delivered or issued for
delivery in this State after December  1,  1985,  unless  the
policy  provides for a continuation of the existing insurance
benefits for an employee's spouse and dependent children  who
are  insured  under  the  provisions  of that group policy or
certificate thereunder, notwithstanding that the marriage  is
dissolved  by  judgment  or  terminated  by  the death of the
employee  spouse  or,  after  the  effective  date  of   this
amendatory   Act   of   the   93rd   General  Assembly  1991,
notwithstanding  the  retirement  of  the   employee   spouse
provided  that  the employee's spouse is at least 55 years of
age, in each case without any other eligibility requirements.
The provisions of this amendatory Act  of  the  93rd  General
Assembly  1991  apply  to  every  group policy of accident or
health insurance  and  every  certificate  issued  thereunder
delivered  or issued for delivery after the effective date of
this amendatory Act of the 93rd General Assembly 1991.
    B.  Within 30 days of the entry of judgment or the  death
or  retirement  of  the  employee  spouse,  the  spouse of an
employee insured under the policy who seeks a continuation of
coverage thereunder  shall  give  the  employer  or  and  the
insurer  written notice of the dissolution of the marriage or
the  death  or  retirement  of  the  employee  spouse.    The
employer,  within 15 days of receipt of the notice shall give
written notice of the dissolution of the employee's  marriage
or  the  death  or retirement of the employee and that former
spouse's or retired employee's  spouse's  residence,  to  the
insurance  company issuing the policy., of the dissolution of
the employee's marriage or the death  or  retirement  of  the
employee spouse and the former or retired employee's spouse's
residence.
    The  employer shall immediately send a copy of the notice
to the former spouse of the employee or  the  spouse  of  the
retired employee at the retired employee's spouse's residence
or  at  the  former spouse's residence.  For purposes of this
Act, the term "former spouse" includes "widow" or "widower".
    C.  Within 30 days after the date of receipt of a  notice
from the employer, retired employee's spouse or former spouse
or  of  the  initiation  of a new group policy, the insurance
company, by certified mail, return receipt  requested,  shall
notify  the retired employee's spouse or former spouse at his
or her residence that the policy may be continued for  as  to
that  retired  employee's spouse or former spouse and covered
dependents, and the notice shall include:
         (i)  a form for election to continue  the  insurance
    coverage;
         (ii)  the  amount of periodic premiums to be charged
    for continuation coverage and the  method  and  place  of
    payment; and
         (iii)  instructions  for returning the election form
    by certified mail, return receipt  requested,  within  30
    days  after  the  date it is received from of the mailing
    receipt of the instruction by the insurance company.
    Failure of the retired employee's spouse or former spouse
to exercise the election to continue  insurance  coverage  by
notifying the insurance company in writing by certified mail,
return  receipt  requested,  within  such 30 day period shall
terminate the continuation  of  benefits  and  the  right  to
continuation.
    If  the  insurance  company  fails  to notify the retired
employee's  spouse  or  former  spouse  as  provided  for  in
subsection C hereof, all premiums shall be  waived  from  the
date  the  notice  was required until notice is sent, and the
benefits shall continue under the terms and provisions of the
policy, from the date  the  notice  was  required  until  the
notice  is  sent, notwithstanding any other provision hereof,
except where the  benefits  in  existence  at  the  time  the
company's  notice was to be sent pursuant to subsection C are
terminated as to all employees.
    D.  With respect to a former spouse who has not  attained
the  age  of  55  at  the  time  continuation coverage begins
hereunder, the monthly  premium  for  continuation  shall  be
computed as follows:
         (i)  an  amount,  if  any,  that would be charged an
    employee if the former spouse were a current employee  of
    the employer, plus;
         (ii)  an  amount,  if  any,  that the employer would
    contribute toward the premium if the former spouse were a
    current employee.
    Failure to pay the initial monthly premium within 30 days
after the date of receipt of notice required in subsection  C
of  this Section terminates the continuation benefits and the
right to continuation benefits.
    The continuation coverage for right granted hereunder  to
former  spouses  who  have  not attained the age of 55 at the
time coverage  begins  hereunder  shall  terminate  upon  the
earliest to happen of the following:
         (i)  The failure to pay premiums when due, including
    any grace period allowed by the policy; or
         (ii)  When  coverage would terminate under the terms
    of the existing policy if the employee and former  spouse
    were  still  married to each other; however, the existing
    coverage shall not be modified or terminated  during  the
    first  120  consecutive  days  subsequent to the employee
    spouse's death or to the entry of the judgment dissolving
    the marriage existing between the employee and the former
    spouse unless the master policy in existence at the  time
    is modified or terminated as to all employees; or
         (iii)  the  date  on  which  the former spouse first
    becomes, after the date of election, an insured  employee
    under any other group health plan; or
         (iv)  the date on which the former spouse remarries;
    or
         (v)  the   expiration  of  2  years  from  the  date
    continuation coverage began hereunder.
    Upon the termination of continuation coverage  hereunder,
the  former  spouse shall be entitled to convert the coverage
to an individual policy.
    The continuation rights granted  to  former  spouses  who
have   not  attained  age  55  shall  also  include  eligible
dependents insured prior to the dissolution  of  marriage  or
the death of the employee.
    E.  With respect to a retired employee's spouse or former
spouse   who   has  attained  the  age  of  55  at  the  time
continuation coverage begins hereunder, the  monthly  premium
for the continuation shall be computed as follows:
         (i)  an  amount,  if  any,  that would be charged an
    employee if  the  retired  employee's  spouse  or  former
    spouse were a current employee of the employer, plus;
         (ii)  an  amount,  if  any,  that the employer would
    contribute toward the premium if the  retired  employee's
    spouse or former spouse were a current employee.
    Beginning  2  years  after  coverage  begins  under  this
paragraph, the monthly premium shall be computed as follows:
         (i)  an  amount,  if  any,  that would be charged an
    employee if  the  retired  employee's  spouse  or  former
    spouse were a current employee of the employer, plus;
         (ii)  an  amount,  if  any,  that the employer would
    contribute toward the premium if the  retired  employee's
    spouse or former spouse were a current employee.
         (iii)  an  additional  amount,  not to exceed 20% of
    (i) and (ii) above, for costs of administration.
    Failure to pay the initial monthly premium within 30 days
after  the  date  of  receipt  of  the  notice  required   in
subsection  C  of  this  Section  terminates the continuation
benefits and the right to continuation benefits.
    The continuation coverage for right  granted  to  retired
employees'  spouses  and former spouses who have attained the
age of  55  at  the  time  coverage  begins  hereunder  shall
terminate upon the earliest to happen of the following:
         (i)  The failure to pay premiums when due, including
    any grace period allowed by the policy; or
         (ii)  When  coverage  would terminate, except due to
    the retirement of an employee, under  the  terms  of  the
    existing  policy  if  the employee and former spouse were
    still  married  to  each  other;  however,  the  existing
    coverage shall not be modified or terminated  during  the
    first  120  consecutive  days  subsequent to the employee
    spouse's death or retirement to the entry of the judgment
    dissolving the marriage existing between the employee and
    the former spouse unless the master policy  in  existence
    at   the  time  is  modified  or  terminated  as  to  all
    employees; or
         (iii)  the date  on  which  the  retired  employee's
    spouse  or former spouse first becomes, after the date of
    election, an  insured  employee  under  any  other  group
    health plan; or
         (iv)  the date on which the former spouse remarries;
    or
         (v)  the date that person reaches the qualifying age
    or  otherwise  establishes eligibility under the Medicare
    Program pursuant to Title XVIII  of  the  federal  Social
    Security Act.
    Upon  the termination of continuation coverage hereunder,
the former spouse shall be entitled to convert  the  coverage
to an individual policy.
    The  continuation  rights  granted  to former spouses who
have attained age 55 shall also include  eligible  dependents
insured  prior  to  the dissolution of marriage, the death of
the employee, or the retirement of the employee.
    F.  The renewal, amendment, or  extension  of  any  group
policy  affected  by  this  Section  shall  be  deemed  to be
delivery or issuance for delivery of a new policy or contract
of insurance in this State.
    G.  If (i) the policy is  canceled  cancelled,  and  (ii)
another  insurance  company contracts to provide group health
and  accident  insurance   to   the   employer,   and   (iii)
continuation coverage is in effect for the retired employee's
spouse  or former spouse at the time of cancellation and (iv)
the employee is or would have been  included  under  the  new
group   policy,   then   the  new  insurer  must  also  offer
continuation coverage to the retired employee's spouse and to
an  employee's  former  spouse  under  the  same  terms   and
conditions as contained in this Section.
    H.  This Section shall not limit the right of the retired
employee's  spouse  or  any  former  spouse  to  exercise the
privilege to convert to an individual policy as contained  in
this Code.
    I.  No  person  who  obtains  coverage under this Section
shall be required to pay a rate greater than that  applicable
to  any employee or member covered under that group except as
provided  in  clause  (iii)  of  the  second   paragraph   of
subsection E.
(Source: P.A. 87-615.)

    (215 ILCS 5/367.2-5 new)
    Sec.  367.2-5.  Dependent  child  continuation privilege;
group contracts.
    (a)  No policy of group accident or health insurance, nor
any  certificate  thereunder  shall  be   amended,   renewed,
delivered, or issued for delivery in this State after July 1,
2004,  unless  the  policy provides for a continuation of the
existing insurance benefits for an employee's dependent child
who is insured under the provisions of that group  policy  or
certificate in the event of the death of the employee and the
child  is  not eligible for coverage as a dependent under the
provisions of  Section  367.2  or  the  dependent  child  has
attained the limiting age under the policy.
    (b)  In  the  event  of  the  death  of  the employee, if
continuation coverage is desired, the dependent  child  or  a
responsible  adult  acting  on  behalf of the dependent child
shall give the employer or the insurer written notice of  the
death  of  employee  within  30 days of the date the coverage
terminates. The employer, within 15 days of  receipt  of  the
notice,  shall  give  written notice to the insurance company
issuing the policy of the  death  of  the  employee  and  the
dependent  child's  residence. The employer shall immediately
send  a  copy  of  the  notice  to  the  dependent  child  or
responsible adult at the dependent child's residence.
    (c)  In the event of the dependent  child  attaining  the
limiting  age  under  the policy, if continuation coverage is
desired, the dependent child shall give the employer  or  the
insurer  written notice of the attainment of the limiting age
within 30 days of  the  date  the  coverage  terminates.  The
employer, within 15 days of receipt of the notice, shall give
written notice to the insurance company issuing the policy of
the attainment of the limiting age by the dependent child and
of the dependent child's residence.
    (d)  Within 30 days after the date of receipt of a notice
from  the  employer,  dependent  child,  or responsible adult
acting on behalf of the dependent child, or of the initiation
of a new group policy, the insurance  company,  by  certified
mail,  return  receipt  requested, shall notify the dependent
child or responsible adult at the dependent child's residence
that the policy may be continued  for  the  dependent  child.
The notice shall include:
         (1)  a  form  for election to continue the insurance
    coverage;
         (2)  the amount of periodic premiums to  be  charged
    for  continuation  coverage  and  the method and place of
    payment; and
         (3)  instructions for returning  the  election  form
    within  30  days  after  the date it is received from the
    insurance company.
    Failure of the dependent child or the  responsible  adult
acting  on  behalf  of  the  dependent  child to exercise the
election to continue  insurance  coverage  by  notifying  the
insurance  company in writing within such 30 day period shall
terminate the continuation  of  benefits  and  the  right  to
continuation.
    If  the  insurance  company fails to notify the dependent
child or responsible adult acting on behalf of the  dependent
child  as  provided  for in this subsection (d), all premiums
shall be waived from the date the notice was  required  until
notice  was  sent,  and the benefits shall continue under the
terms and provisions of the policy, from the date the  notice
was  required  until the notice was sent, notwithstanding any
other  provision  hereof,  except  where  the   benefits   in
existence  at  the  time  the company's notice was to be sent
pursuant to this subsection (d)  are  terminated  as  to  all
employees.
    (e)  The   monthly  premium  for  continuation  shall  be
computed as follows:
         (1)  an amount, if any, that  would  be  charged  an
    employee  if  the dependent child were a current employee
    of the employer, plus;
         (2)  an amount, if  any,  that  the  employer  would
    contribute toward the premium if the dependent child were
    a current employee.
    Failure to pay the initial monthly premium within 30 days
after  the  date  of receipt of notice required in subsection
(d) of this Section terminates the continuation benefits  and
the right to continuation benefits.
    Continuation  coverage  provided  under  this  Act  shall
terminate upon the earliest to happen of the following:
         (1)  the failure to pay premiums when due, including
    any grace period allowed by the policy;
         (2)  when  coverage  would terminate under the terms
    of the existing policy if the dependent child  was  still
    an eligible dependent of the employee;
         (3)  the  date  on  which  the dependent child first
    becomes, after the date of election, an insured  employee
    under any other group health plan; or
         (4)  the   expiration  of  2  years  from  the  date
    continuation coverage began.
    Upon  the  termination  of  continuation  coverage,   the
dependent  child shall be entitled to convert the coverage to
an individual policy.
    (f)  The renewal, amendment, or extension  of  any  group
policy  affected  by  this  Section  shall  be  deemed  to be
delivery or issuance for delivery of a new policy or contract
of insurance in this State.
    (g)  If (1) the policy  is  cancelled,  and  (2)  another
insurance  company  contracts  to  provide  group  health and
accident insurance to  the  employer,  and  (3)  continuation
coverage  is in effect for the dependent child at the time of
cancellation, and (4) the employee  is  or  would  have  been
included  under  the  new  group policy, then the new insurer
must also offer continuation coverage to the dependent  child
under  the  same  terms  and  conditions as contained in this
Section.
    (h)  This Section  shall  not  limit  the  right  of  any
dependent  child  to  exercise the privilege to convert to an
individual policy as contained in this Code.
    (i)  No person who obtains coverage  under  this  Section
shall  be required to pay a rate greater than that applicable
to any employee or member covered under that group.

    (215 ILCS 5/367e) (from Ch. 73, par. 979e)
    Sec. 367e.  Continuation of Group Hospital, Surgical  and
Major  Medical  Coverage  After  Termination of Employment or
Membership.
    A group policy delivered, issued for delivery, renewed or
amended in this state which insures employees or members  for
hospital,  surgical  or major medical insurance on an expense
incurred or service basis, other than for  specific  diseases
or for accidental injuries only, shall provide that employees
or  members  whose  insurance  under  the  group policy would
otherwise terminate because of termination of  employment  or
membership  or  because  of  a  reduction  in hours below the
minimum required by the  group  plan  shall  be  entitled  to
continue their hospital, surgical and major medical insurance
under  that  group  policy, for themselves and their eligible
dependents, subject to all of the group  policy's  terms  and
conditions  applicable to those forms of insurance and to the
following conditions:
    1.  Continuation shall only be available to  an  employee
or  member  who has been continuously insured under the group
policy (and for similar benefits under any group policy which
it replaced) during the entire 3 months  period  ending  with
such  termination  or  reduction  in  hours below the minimum
required by the group plan.
    2.  Continuation shall not be available  for  any  person
who  is covered by Medicare, except for those individuals who
have been covered under a group Medicare  supplement  policy.
Neither shall continuation be available for any person who is
covered by any other insured or uninsured plan which provides
hospital,  surgical  or medical coverage for individuals in a
group and under which the person was not covered  immediately
prior  to  such  termination  or reduction in hours below the
minimum required by the  group  plan  or  who  exercises  his
conversion privilege under the group policy.
    3.  Continuation  need  not  include dental, vision care,
prescription  drug  benefits,  disability  income,  specified
disease, or similar supplementary benefits which are provided
under the group policy in addition to its hospital,  surgical
or major medical benefits.
    4.  Upon  termination  or  reduction  in  hours below the
minimum  required  by  the  group  plan  written  notice   of
continuation  shall be presented to the employee or member by
the employer or mailed by the  employer  to  the  last  known
address  of  the  employee.  An employee or member who wishes
continuation of coverage must request  such  continuation  in
writing within the ten-day period following the later of: (i)
the  date of such termination or reduction in hours below the
minimum required by the group plan,  or  (ii)  the  date  the
employee is given written notice of the right of continuation
by  either  the  employer  or  the group policyholder.  In no
event, however, may the employee or member elect continuation
more than 60 days after  the  date  of  such  termination  or
reduction  in  hours  below the minimum required by the group
plan.  Written  notice  of  continuation  presented  to   the
employee  or  member  by  the  policyholder, or mailed by the
policyholder to the last known address of the employee, shall
constitute the giving of  notice  for  the  purpose  of  this
provision.
    5.  An  employee or member electing continuation must pay
to the group policyholder or his employer, on a monthly basis
in advance, the total  amount  of  premium  required  by  the
insurer, including that portion of the premium contributed by
the  policyholder  or employer, if any, but not more than the
group rate for the insurance being continued with appropriate
reduction in premium for  any  supplementary  benefits  which
have  been  discontinued under paragraph (3) of this Section.
The premium  rate  required  by  the  insurer  shall  be  the
applicable premium required on the due date of each payment.
    6.  Continuation  of insurance under the group policy for
any person shall  terminate  when  he  becomes  eligible  for
Medicare or is covered by any other insured or uninsured plan
which  provides  hospital,  surgical  or medical coverage for
individuals in a group and under which  the  person  was  not
covered immediately prior to such termination or reduction in
hours  below  the  minimum  required  by  the  group  plan as
provided in condition 2 above or, if earlier, at the first to
occur of the following:
         (a)  The date 9 months after the date the employee's
    or member's insurance under the  policy  would  otherwise
    have  terminated  because of termination of employment or
    membership  or  reduction  in  hours  below  the  minimum
    required by the group plan.
         (b)  If the employee or member fails to make  timely
    payment of a required contribution, the end of the period
    for which contributions were made.
         (c)  The   date   on   which  the  group  policy  is
    terminated or, in the case of an employee, the  date  his
    employer terminates participation under the group policy.
    However,  if this (c) applies and the coverage ceasing by
    reason  of  such  termination  is  replaced  by   similar
    coverage  under another group policy, the following shall
    apply:
              (i)  The employee  or  member  shall  have  the
         right  to  become  covered  under  that  other group
         policy, for the balance of the period that he  would
         have  remained  covered under the prior group policy
         in accordance with condition  6  had  a  termination
         described in this (c) not occurred.
              (ii)  The  prior group policy shall continue to
         provide  benefits  to  the  extent  of  its  accrued
         liabilities and extensions of  benefits  as  if  the
         replacement had not occurred.
    7.  A notification of the continuation privilege shall be
included in each certificate of coverage.
    8.  Continuation  shall not be available for any employee
who was discharged because of the commission of a  felony  in
connection  with  his work, or because of theft in connection
with  his  work,  for  which  the  employer  was  in  no  way
responsible; provided the employee admitted his commission of
the felony or theft or such act has resulted in a  conviction
or order of supervision by a court of competent jurisdiction.
    The  requirements  of  this  amendatory Act of 1983 shall
apply to  any  group  policy  as  defined  in  this  Section,
delivered  or  issued  for  delivery  on  or  after  180 days
following the effective date of this amendatory Act of 1983.
    The requirements of this amendatory  Act  of  1985  shall
apply  to  any  group  policy  as  defined  in  this Section,
delivered, issued for delivery,  renewed  or  amended  on  or
after   180   days  following  the  effective  date  of  this
amendatory Act of 1985.
(Source: P.A. 85-210; 86-1475.)

    (215 ILCS 5/367e.1 new)
    Sec.  367e.1.  Group  Accident   and   Health   Insurance
Conversion Privilege.
    (A)  A  group policy which provides hospital, medical, or
major medical expense insurance, or any combination of  these
coverages,  on an expense-incurred basis, but not including a
policy which provides benefits for specific diseases  or  for
accidental  injuries  only, shall provide that an employee or
member (i) whose insurance under the group  policy  has  been
terminated  for  any  reason other than discontinuance of the
group policy in its entirety  where  there  is  a  succeeding
carrier,  or  failure  of  the  employee or member to pay any
required contribution; and (ii)  who  has  been  continuously
insured  under  the  group policy (and under any group policy
providing similar benefits which it replaces)  for  at  least
three  months  immediately  prior  to  termination,  shall be
entitled to have issued to him by the  insurer  a  policy  of
health  insurance  (hereafter  referred  to  as the converted
policy), subject to the following conditions:
         (1)  Written application for  the  converted  policy
    shall  be  made and the first premium paid to the insurer
    not later than the latter of (i)  thirty-one  days  after
    such  termination  or  (ii) 15 days after the employee or
    member has been given written notice of the existence  of
    the  conversion  privilege, but in no event later than 60
    days after such termination.
      Written notice presented to the employee or  member  by
    the  policyholder,  or  mailed by the policyholder to the
    last known address  of  the  employee  or  member,  shall
    constitute  the  giving of notice for the purpose of this
    provision.
         (2)  The converted policy shall  be  issued  without
    evidence of insurability.
         (3)  The  initial  premium  for the converted policy
    shall be determined  in  accordance  with  the  insurer's
    table of premium rates applicable to the age and class of
    risk  of  each  person  to be covered under the converted
    policy and to  the  type  and  amount  of  the  insurance
    provided. Conditions pertaining to health shall not be an
    acceptable  basis  of  classification for the purposes of
    this subsection.  The frequency of premium payment  shall
    be  the frequency customarily required by the insurer for
    the policy form and  plan  selected,  provided  that  the
    insurer   shall   not   require   premium  payments  less
    frequently than quarterly  without  the  consent  of  the
    insured.
         (4)  The  effective  date  of  the  converted policy
    shall be the day following the termination  of  insurance
    under the group policy.
         (5)  The  converted  policy shall cover the employee
    or member and his dependents  who  were  covered  by  the
    group policy on the date of termination of insurance.  At
    the  option  of  the insurer, a separate converted policy
    may be issued to cover any dependent.
         (6)  The insurer shall not be required  to  issue  a
    converted policy covering any person if such person is or
    could  be  covered by Medicare (Title XVIII of the United
    States  Social  Security  Act  as  added  by  the  Social
    Security Amendments  of  1965  or  as  later  amended  or
    superseded).   Furthermore,  the  insurer  shall  not  be
    required to issue a converted policy covering any  person
    if  (i)  such  person  is covered for similar benefits by
    another hospital, surgical,  medical,  or  major  medical
    expense  insurance  policy or hospital or medical service
    subscriber  contract  or  medical   practice   or   other
    prepayment  plan or by any other plan or program; or (ii)
    such person is eligible for similar benefits (whether  or
    not  covered  therefor) under any arrangement of coverage
    for individuals in a group,  whether  on  an  insured  or
    uninsured  basis;  or (iii) similar benefits are provided
    for or available  to  such  person,  pursuant  to  or  in
    accordance  with the requirements of any statute, and the
    benefits provided or available under the sources referred
    to in (i), (ii), (iii) above  for  such  person  together
    with  the  converted policy would result in overinsurance
    according to the insurer's standards.
         (7)  In the event that coverage would  be  continued
    under  the  group  policy  on  an  employee following his
    retirement prior to the time he is or could be covered by
    Medicare, he may elect, in lieu of such  continuation  of
    such  group insurance, to have the same conversion rights
    as would apply had his insurance terminated at retirement
    by reason of termination of employment or membership.
         (8)  Subject to the conditions set forth above,  the
    conversion  privilege  shall also be available (i) to the
    surviving spouse, if any, at the death of the employee or
    member, with respect to  the  spouse  and  such  children
    whose  coverage  under  the  group  policy  terminates by
    reason of such death, otherwise to each  surviving  child
    whose  coverage  under  the  group  policy  terminates by
    reason of such death, or, if the  group  policy  provides
    for  continuation  of  dependents' coverage following the
    employee's  or  member's  death,  at  the  end  of   such
    continuation;  (ii)  to  the  spouse  of  the employee or
    member upon termination of coverage of the spouse,  while
    the  employee  or  member remains insured under the group
    policy, by reason of ceasing to  be  a  qualified  family
    member under the group policy, with respect to the spouse
    and  such  children whose coverage under the group policy
    terminates at the same time; or (iii) to a  child  solely
    with  respect to himself upon termination of his coverage
    by reason of ceasing to  be  a  qualified  family  member
    under  the group policy, if a conversion privilege is not
    otherwise   provided   above   with   respect   to   such
    termination.
         (9)  A  notification  of  the  conversion  privilege
    shall be included in each certificate.
         (10)  The  insurer  may  elect  to   provide   group
    insurance coverage in lieu of the issuance of a converted
    policy.
    (B)  A  converted  policy issued upon the exercise of the
conversion privilege  required  by  subsection  (A)  of  this
Section shall conform to the following minimum standards:
         (1)  If   the   group   policy   provided  hospital,
    surgical, or medical expense insurance, or a  combination
    thereof,  the  converted policy shall provide benefits on
    an expense-incurred basis equal to the lesser of (i)  the
    hospital room and board, miscellaneous hospital, surgical
    and medical benefits provided under the group policy; and
    (ii) the corresponding benefits described below:
              (a)  Hospital  room  and  board  benefits in an
         amount per day elected by  the  group  policyholder,
         but  in  no  event less than 60% of the then average
         semi-private hospital room and board charge  in  the
         State,  such benefits to be payable for a maximum of
         not less than 70 days for  any  period  of  hospital
         confinement, as defined in the converted policy.
              (b)  Miscellaneous  hospital  benefits  for any
         one period of hospital confinement in an  amount  up
         to  twenty  times  the hospital room and board daily
         benefit provided under the converted policy.
              (c)  Surgical benefits according to a  surgical
         schedule  providing  a benefit amount elected by the
         group policy holder, but in no event less  than  60%
         of the then average surgical charge in the State and
         with  a  maximum  amount  appropriate  thereto.  The
         maximum surgical benefit shall be applicable to  all
         surgical  operations of an individual resulting from
         or contributed to by the same and all related causes
         occurring in one period of disability.  Two or  more
         surgical  procedures  performed  in  the course of a
         single operation through the same  incision,  or  in
         the same natural body orifice, may be treated as one
         surgical  procedure  with  the payment determined by
         the  scheduled  benefit  for  the   most   expensive
         procedure performed.  The surgical schedule shall be
         consistent   with   the   schedule   of   operations
         customarily  offered  by  the insurer under group or
         individual health insurance policies.
              (d)  Non-surgical medical  attendance  benefits
         for in-hospital services in an amount elected by the
         group policyholder, but in no event less than 60% of
         the   then  average  in-hospital  physician's  visit
         charge in the State, such benefits may be limited to
         one visit per day of hospitalization and  a  maximum
         number of visits numbering not less than seventy for
         any period of hospital confinement as defined in the
         converted policy.
         (2)  If  the  group  policy  provided  major medical
    insurance, the insurer may offer the insurance  described
    in  (1)  above  only,  major medical insurance only, or a
    combination of the insurance described in (1)  above  and
    major  medical  insurance.   If  the  insurer  elects  to
    provide  major  medical  insurance,  the converted policy
    shall provide:
              (a)  A maximum benefit at least equal to (i) or
         (ii) below:
                   (i)  A  maximum  payment  of   twenty-five
              thousand   dollars   for  all  covered  medical
              expenses incurred during the  covered  person's
              lifetime  with  an  annual  restoration  of the
              lesser of, while  coverage  is  in  force,  one
              thousand dollars and the amount counted against
              the  maximum  benefit  which was not previously
              restored; or
                   (ii)  A  maximum  payment  of  twenty-five
              thousand dollars for each unrelated  injury  or
              illness.
              (b)  Payment  of  benefits  for covered medical
         expenses, in excess of the deductible, at a rate not
         less than 80% except as otherwise permitted below.
              (c)  A  deductible  for  each  benefit   period
         which,  at  the  option of the insurer, shall be (i)
         the greater of $500  and  the  benefits  deductible;
         (ii) the sum of the benefits deductible and $100; or
         (iii)  the  corresponding  deductible  in  the group
         policy.  The term "benefit period," as used  herein,
         means, when the maximum payment is determined by (a)
         (i)  above,  either  a  calendar year or a period of
         twelve consecutive months;  and,  when  the  maximum
         payment is determined by (a) (ii) above, a period of
         twenty-four  consecutive months.  The term "benefits
         deductible," as used herein, means the value of  any
         benefits provided on an expense-incurred basis which
         are   provided   with  respect  to  covered  medical
         expenses by any other hospital, surgical, or medical
         insurance policy  or  hospital  or  medical  service
         subscriber  contract  of  medical  practice or other
         prepayment plan,  or  any  other  plans  or  program
         whether  on an insured or uninsured basis, or of any
         similar  benefits  which  are   provided   or   made
         available  pursuant  to  or  in  accordance with the
         requirements of any statute and, if, pursuant to the
         provisions of this subsection, the converted  policy
         provides  both  the  coverage described in (1) above
         and  major  medical  insurance,  the  value  of  the
         coverage described in (1) above.   The  insurer  may
         require  that  the  deductible be satisfied during a
         period of not less than three months. If the maximum
         payment is determined by (a) (i) above,  and  if  no
         benefits become payable during the preceding benefit
         period   due   to  the  cash  deductible  not  being
         satisfied; credit shall be given, in the  succeeding
         benefit  period,  to  any expense applied toward the
         cash deductible of the preceding benefit period  and
         incurred  during  the  last  three  months  of  such
         preceding benefit period, subject to any requirement
         that  the deductible be satisfied during a specified
         period of time.
              (d)  The term "covered  medical  expenses,"  as
         used  above,  may  be  limited  (i)  in  the case of
         hospital room and board benefits,  maximum  surgical
         schedule,   and   non-surgical   medical  attendance
         benefits  to  amounts  not  less  than  the  amounts
         provided in (1) (a), (1) (c) and (1) (d) above;  and
         (ii)  in  the  case  of mental and nervous condition
         treatments while  the  patient  is  not  a  hospital
         in-patient,   to  co-insurance  of  50%,  a  maximum
         benefit  of  $500  per  calendar  year   or   twelve
         consecutive  month  periods subject to the inclusion
         by the insurer of reasonable limits on the number of
         visits  and  the  maximum  permissible  expense  per
         visit.
         (3)  The converted policy may contain any exclusion,
    reduction, or limitation contained in  the  group  policy
    and  any  exclusion, reduction, or limitation customarily
    used in individual accident and health policies delivered
    or issued for delivery in this state.  It is not required
    that the converted policy  contain  all  of  the  covered
    medical  expenses  or  the  same  level  of  benefits  as
    provided in the group policy.
         (4)  The  insurer  may,  at  its  option, also offer
    alternative  plans  for   group   accident   and   health
    conversion.
         (5)  The   converted   policy  may  only  exclude  a
    pre-existing condition  excluded  by  the  group  policy.
    Any hospital, surgical, medical or major medical benefits
    payable  under the converted policy may be reduced by the
    amount of any  such  benefits  payable  under  the  group
    policy   after   the   termination  of  the  individual's
    insurance thereunder and, during the first policy year of
    such converted policy, the  benefits  payable  under  the
    converted  policy  may be so reduced so that they are not
    in excess of the benefits that would  have  been  payable
    had  the  individual's  insurance  under the group policy
    remained in force and effect.
         (6)  The  converted  policy  may  provide  for   the
    termination  of coverage thereunder of any person when he
    is or could be covered by Medicare (Title  XVIII  of  the
    United  States Social Security Act as added by the Social
    Security Amendments  of  1965  or  as  later  amended  or
    superseded).
         (7)  The  converted  policy  may  provide  that  the
    insurer   may  request  information  from  the  converted
    policyholder, in advance of any premium due date  of  the
    converted policy, to determine whether any person covered
    thereunder (i) is covered for similar benefits by another
    hospital,  surgical,  medical,  or  major medical expense
    insurance  policy  or   hospital   or   medical   service
    subscriber   contract   or   medical  practice  or  other
    prepayment plan or by any other plan or program; or  (ii)
    is  eligible for similar benefits (whether or not covered
    therefor)  under  any   arrangement   of   coverage   for
    individuals   in  a  group,  whether  on  an  insured  or
    uninsured basis; or (iii) has similar  benefits  provided
    for  or  available  to  such  person,  pursuant  to or in
    accordance with the requirements  of  any  statute.   The
    converted  policy  may also provide that the insurer need
    not renew the converted policy or  the  coverage  of  any
    person insured thereunder if either the benefits provided
    or  available under the sources referred to in (i), (ii),
    (iii) above for such person, together with the  converted
    policy,  would  result  in overinsurance according to the
    insurer's standards, or  if  the  converted  policyholder
    refuses to provide the requested information.
         (8)  The  converted  policy  shall  not  contain any
    provision allowing the insurer  to  non-renew  due  to  a
    change in the health of an insured.
         (9)  The converted policy may contain any provisions
    permitted   herein   and   may  also  include  any  other
    provisions  not  expressly   prohibited   by   law.   Any
    provisions  required  or  permitted  herein may be made a
    part of the converted policy by means of  an  endorsement
    or rider.
         (10)  In the conversion of group health insurance in
    accordance  with  the provisions of subsection (A) above,
    the insurer may, at its option, accomplish the conversion
    by issuing one or more converted policies.
         (11)  With respect to any person who was covered  by
    the  group policy, the period specified in the Time Limit
    on Certain Defenses provisions of  the  converted  policy
    shall  commence  with  the  date  the  person's insurance
    became effective under the group policy.
         (12)  If  the  insurer  elects  to   provide   group
    insurance  coverage  in  lieu  of a converted policy, the
    benefit levels required for a converted  policy  must  be
    applicable to such group insurance coverage.
    (C)  The  requirements of this Section shall apply to any
group policy of  accident  and  health  insurance  delivered,
issued  for delivery, renewed or amended on or after 180 days
following the effective date of this Section.
(Source: P.A. 85-210; 86-1475.)

    (215 ILCS 5/404.1) (from Ch. 73, par. 1016.1)
    Sec. 404.1.  Safekeeping of deposits.  The  Director  may
maintain with a corporation qualified to administer trusts in
this  State  under  the  Corporate  Fiduciary  Act "An Act to
provide for and regulate  the  administration  of  trusts  by
trust companies", approved June 15, 1887, as amended, for the
securities  deposited  with  the  Director, a limited agency,
custodial, or depository account, or other  type  of  account
for  the  safekeeping of those securities, and for collecting
the income from those  securities  and  providing  supportive
accounting   services   relating   to  such  safekeeping  and
collection.   Such  a  corporation,   in   safekeeping   such
securities,  shall  have  all  the powers, rights, duties and
responsibilities that it has for holding  securities  in  its
fiduciary accounts under the Securities in Fiduciary Accounts
Act  "An Act concerning the powers of corporations authorized
to accept and execute trusts, to register and hold securities
of fiduciary accounts in bulk and  to  deposit  same  with  a
clearing   corporation",   approved  September  1,  1972,  as
amended.  The Director  shall  arrange  with  any  depository
institution  that  has  been authorized to accept and execute
trusts to provide for collateralization of any cash  accounts
resulting  from the failure of any depositing company to give
instruction regarding the investment of any such cash amounts
as provided for by Section 6 of the Public  Funds  Investment
Act.
(Source: P.A. 83-746.)
    Section  7.   The Comprehensive Health Insurance Plan Act
is amended by changing Section 2 as follows:

    (215 ILCS 105/2) (from Ch. 73, par. 1302)
    Sec. 2.  Definitions.  As used in this  Act,  unless  the
context otherwise requires:
    "Plan  administrator"  means  the  insurer or third party
administrator designated under Section 5 of this Act.
    "Benefits plan" means the coverage to be offered  by  the
Plan  to  eligible persons and federally eligible individuals
pursuant to this Act.
    "Board" means the Illinois Comprehensive Health Insurance
Board.
    "Church plan" has the same meaning given that term in the
federal Health Insurance Portability and  Accountability  Act
of 1996.
    "Continuation  coverage"  means  continuation of coverage
under a group health plan or other health insurance  coverage
for  former  employees or dependents of former employees that
would otherwise have  terminated  under  the  terms  of  that
coverage   pursuant  to  any  continuation  provisions  under
federal or State  law,  including  the  Consolidated  Omnibus
Budget  Reconciliation  Act  of  1985  (COBRA),  as  amended,
Sections   367.2,  and  367e,  and  367e.1  of  the  Illinois
Insurance Code, or any other similar requirement  in  another
State.
    "Covered  person"  means a person who is and continues to
remain eligible for Plan coverage and is covered under one of
the benefit plans offered by the Plan.
    "Creditable coverage" means, with respect to a  federally
eligible  individual, coverage of the individual under any of
the following:
         (A)  A group health plan.
         (B)  Health  insurance  coverage  (including   group
    health insurance coverage).
         (C)  Medicare.
         (D)  Medical assistance.
         (E)  Chapter 55 of title 10, United States Code.
         (F)  A  medical  care  program  of the Indian Health
    Service or of a tribal organization.
         (G)  A state health benefits risk pool.
         (H)  A health plan offered under Chapter 89 of title
    5, United States Code.
         (I)  A public health plan (as defined in regulations
    consistent  with  Section  104   of   the   Health   Care
    Portability  and  Accountability  Act of 1996 that may be
    promulgated by the Secretary of the  U.S.  Department  of
    Health and Human Services).
         (J)  A health benefit plan under Section 5(e) of the
    Peace Corps Act (22 U.S.C. 2504(e)).
         (K)  Any  other  qualifying coverage required by the
    federal Health Insurance Portability  and  Accountability
    Act  of  1996, as it may be amended, or regulations under
    that Act.
    "Creditable   coverage"   does   not   include   coverage
consisting  solely  of  coverage  of  excepted  benefits,  as
defined in Section 2791(c)  of  title  XXVII  of  the  Public
Health Service Act (42 U.S.C. 300 gg-91), nor does it include
any  period  of  coverage  under any of items (A) through (K)
that occurred before a break of more than 90 days during  all
of  which  the  individual was not covered under any of items
(A) through (K) above.  Any period that an individual is in a
waiting period for any coverage under a group health plan (or
for group health insurance coverage) or is in an  affiliation
period  under  the terms of health insurance coverage offered
by a health maintenance organization shall not be taken  into
account in determining if there has been a break of more than
90 days in any creditable coverage.

    "Department" means the Illinois Department of Insurance.
    "Dependent"  means an Illinois resident: who is a spouse;
or who is claimed as a dependent by the principal insured for
purposes of filing a federal income tax return and resides in
the  principal  insured's  household,  and  is   a   resident
unmarried  child  under  the  age  of  19 years; or who is an
unmarried child who also is a full-time student under the age
of 23  years  and  who  is  financially  dependent  upon  the
principal  insured;  or  who is a child of any age and who is
disabled  and  financially  dependent  upon   the   principal
insured.
    "Direct  Illinois premiums" means, for Illinois business,
an insurer's direct premium income for the kinds of  business
described  in  clause (b) of Class 1 or clause (a) of Class 2
of Section 4 of  the  Illinois  Insurance  Code,  and  direct
premium  income  of  a  health  maintenance organization or a
voluntary health services plan, except it shall  not  include
credit  health  insurance as defined in Article IX 1/2 of the
Illinois Insurance Code.
    "Director" means the Director of the Illinois  Department
of Insurance.
    "Eligible  person"  means  a  resident  of this State who
qualifies for Plan coverage under Section 7 of this Act.
    "Employee" means a resident of this State who is employed
by an employer or has entered into the employment of or works
under contract  or  service  of  an  employer  including  the
officers,  managers and employees of subsidiary or affiliated
corporations and the  individual  proprietors,  partners  and
employees  of  affiliated  individuals  and  firms  when  the
business  of the subsidiary or affiliated corporations, firms
or individuals is controlled by  a  common  employer  through
stock ownership, contract, or otherwise.
    "Employer"    means    any    individual,    partnership,
association,  corporation,  business  trust, or any person or
group  of  persons  acting  directly  or  indirectly  in  the
interest of an employer in relation to an employee, for which
one or more persons is gainfully employed.
    "Family" coverage means the coverage provided by the Plan
for the covered person and his or her eligible dependents who
also are covered persons.
    "Federally  eligible  individual"  means  an   individual
resident of this State:
         (1)(A)  for  whom,  as  of  the  date  on  which the
    individual seeks Plan coverage under Section 15  of  this
    Act,  the aggregate of the periods of creditable coverage
    is 18 or more months, and (B)  whose  most  recent  prior
    creditable  coverage  was  under  group  health insurance
    coverage offered by a health insurance  issuer,  a  group
    health  plan,  a  governmental plan, or a church plan (or
    health insurance coverage offered in connection with  any
    such plans) or any other type of creditable coverage that
    may   be   required   by  the  federal  Health  Insurance
    Portability and Accountability Act of 1996, as it may  be
    amended, or the regulations under that Act;
         (2)  who  is  not  eligible for coverage under (A) a
    group health plan, (B) part A or part B of  Medicare  due
    to  age,  or  (C)  medical  assistance, and does not have
    other health insurance coverage;
         (3)  with respect to whom the most  recent  coverage
    within  the coverage period described in paragraph (1)(A)
    of this definition was not terminated based upon a factor
    relating to nonpayment of premiums or fraud;
         (4)  if the individual had been offered  the  option
    of  continuation  coverage  under  a  COBRA  continuation
    provision  or  under a similar State program, who elected
    such coverage; and
         (5)  who,   if   the   individual    elected    such
    continuation  coverage,  has  exhausted such continuation
    coverage under such provision or program.
    "Group health insurance coverage"  means,  in  connection
with  a  group health plan, health insurance coverage offered
in connection with that plan.
    "Group health plan" has the same meaning given that  term
in    the    federal   Health   Insurance   Portability   and
Accountability Act of 1996.
    "Governmental plan" has the same meaning given that  term
in    the    federal   Health   Insurance   Portability   and
Accountability Act of 1996.
    "Health insurance coverage" means benefits consisting  of
medical   care   (provided  directly,  through  insurance  or
reimbursement, or otherwise and including items and  services
paid  for  as  medical  care)  under any hospital and medical
expense-incurred policy, certificate, or contract provided by
an insurer, non-profit health  care  service  plan  contract,
health maintenance organization or other subscriber contract,
or any other health care plan or arrangement that pays for or
furnishes   medical   or  health  care  services  whether  by
insurance or otherwise.  Health insurance coverage shall  not
include   short   term,  accident  only,  disability  income,
hospital confinement or fixed indemnity, dental only,  vision
only,  limited  benefit, or credit insurance, coverage issued
as a supplement to liability insurance, insurance arising out
of  a  workers'  compensation  or  similar  law,   automobile
medical-payment  insurance, or insurance under which benefits
are payable with or without regard  to  fault  and  which  is
statutorily   required  to  be  contained  in  any  liability
insurance policy or equivalent self-insurance.
    "Health insurance issuer"  means  an  insurance  company,
insurance  service,  or  insurance  organization (including a
health  maintenance  organization  and  a  voluntary   health
services   plan)   that  is  authorized  to  transact  health
insurance business in this State.  Such term does not include
a group health plan.
    "Health Maintenance Organization" means  an  organization
as defined in the Health Maintenance Organization Act.
    "Hospice"  means  a  program  as  defined in and licensed
under the Hospice Program Licensing Act.
    "Hospital" means a duly licensed institution  as  defined
in  the Hospital Licensing Act, an institution that meets all
comparable conditions and requirements in effect in the state
in which  it  is  located,  or  the  University  of  Illinois
Hospital  as  defined  in the University of Illinois Hospital
Act.
    "Individual  health  insurance  coverage"  means   health
insurance  coverage  offered to individuals in the individual
market, but does  not  include  short-term,  limited-duration
insurance.
    "Insured" means any individual resident of this State who
is  eligible  to receive benefits from any insurer (including
health insurance coverage offered in connection with a  group
health  plan)  or  health insurance issuer as defined in this
Section.
    "Insurer"  means  any  insurance  company  authorized  to
transact health insurance business  in  this  State  and  any
corporation  that  provides medical services and is organized
under the Voluntary Health Services Plans Act or  the  Health
Maintenance Organization Act.
    "Medical  assistance"  means the State medical assistance
or medical assistance no grant (MANG) programs provided under
Title XIX of the Social Security Act and Articles V  (Medical
Assistance)  and  VI  (General  Assistance)  of  the Illinois
Public Aid Code (or  any  successor  program)  or  under  any
similar program of health care benefits in a state other than
Illinois.
    "Medically  necessary"  means  that  a  service, drug, or
supply is necessary and  appropriate  for  the  diagnosis  or
treatment  of  an  illness or injury in accord with generally
accepted standards  of  medical  practice  at  the  time  the
service,  drug,  or  supply  is  provided.  When specifically
applied to a confinement it further means that the  diagnosis
or  treatment  of  the  covered  person's medical symptoms or
condition cannot be safely provided  to  that  person  as  an
outpatient. A service, drug, or supply shall not be medically
necessary if it: (i) is investigational, experimental, or for
research  purposes;  or  (ii)  is  provided  solely  for  the
convenience  of the patient, the patient's family, physician,
hospital, or any other provider; or (iii) exceeds  in  scope,
duration,  or  intensity that level of care that is needed to
provide  safe,  adequate,  and   appropriate   diagnosis   or
treatment;  or (iv) could have been omitted without adversely
affecting the covered person's condition or  the  quality  of
medical  care;  or  (v) involves the use of a medical device,
drug, or substance not formally approved by the United States
Food and Drug Administration.
    "Medical care" means the ordinary and usual  professional
services  rendered by a physician or other specified provider
during a professional visit for treatment of  an  illness  or
injury.
    "Medicare" means coverage under both Part A and Part B of
Title  XVIII of the Social Security Act, 42 U.S.C. Sec. 1395,
et seq.
    "Minimum premium plan" means  an  arrangement  whereby  a
specified  amount  of  health care claims is self-funded, but
the insurance company  assumes  the  risk  that  claims  will
exceed that amount.
    "Participating   transplant   center"  means  a  hospital
designated by the Board as a preferred or exclusive  provider
of  services  for one or more specified human organ or tissue
transplants for which the hospital has  signed  an  agreement
with  the  Board to accept a transplant payment allowance for
all expenses related to the transplant  during  a  transplant
benefit period.
    "Physician"  means a person licensed to practice medicine
pursuant to the Medical Practice Act of 1987.
    "Plan" means  the  Comprehensive  Health  Insurance  Plan
established by this Act.
    "Plan  of  operation"  means the plan of operation of the
Plan, including articles, bylaws and operating rules, adopted
by the board pursuant to this Act.
    "Provider" means any hospital, skilled nursing  facility,
hospice, home health agency, physician, registered pharmacist
acting  within  the  scope of that registration, or any other
person or entity licensed  in  Illinois  to  furnish  medical
care.
    "Qualified  high  risk  pool"  has the same meaning given
that term in the federal  Health  Insurance  Portability  and
Accountability Act of 1996.
    "Resident"  means  a  person  who  is and continues to be
legally domiciled and physically residing on a permanent  and
full-time  basis  in  a place of permanent habitation in this
State that remains that person's principal residence and from
which that person is absent only for temporary or  transitory
purpose.
    "Skilled  nursing  facility"  means  a  facility  or that
portion of a  facility  that  is  licensed  by  the  Illinois
Department  of  Public Health under the Nursing Home Care Act
or a comparable  licensing  authority  in  another  state  to
provide skilled nursing care.
    "Stop-loss  coverage"  means  an  arrangement  whereby an
insurer insures against the risk  that  any  one  claim  will
exceed  a specific dollar amount or that the entire loss of a
self-insurance plan will exceed a specific amount.
    "Third party administrator"  means  an  administrator  as
defined in Section 511.101 of the Illinois Insurance Code who
is licensed under Article XXXI 1/4 of that Code.
(Source:  P.A.  91-357,  eff.  7-29-99;  91-735, eff. 6-2-00;
92-153, eff. 7-25-01.)

    Section 10.  The Health Maintenance Organization  Act  is
amended by changing Sections 4-9.2 and 5-3 as follows:

    (215 ILCS 125/4-9.2) (from Ch. 111 1/2, par. 1409.2-2)
    Sec.  4-9.2.  Continuation  of  group  HMO coverage after
termination of  employee  or  membership.  A  group  contract
delivered,  issued for delivery, renewed,  or amended in this
State that  covers  employees  or  members  for  health  care
services  shall  provide  that  employees  or  members  whose
coverage  under  the group contract would otherwise terminate
because of termination of employment or membership or because
of a reduction in hours below the  minimum  required  by  the
group  contract  shall be entitled to continue their coverage
under that group contract, for themselves and their  eligible
dependents,  subject to all of the group contract's terms and
conditions applicable to those forms of coverage and  to  the
following conditions:
         (1)  Continuation  shall  only  be  available  to an
    employee or member  who  has  been  continuously  covered
    under  the group contract (and for similar benefits under
    any group contract that it replaced) during the entire  3
    month period ending with the termination of employment or
    membership  or  reduction  in  hours  below  the  minimum
    required by the group contract.
         (2)  Continuation  shall  not  be  available for any
    enrollee who is covered by  Medicare,  except  for  those
    individuals  who have been covered under a group Medicare
    supplement policy. Continuation shall  not  be  available
    for  any  enrollee who is covered by any other insured or
    uninsured  plan  that  provides  hospital,  surgical,  or
    medical coverage for individuals in  a  group  and  under
    which  the  enrollee  was  not covered immediately before
    termination or  reduction  in  hours  below  the  minimum
    required  by  the  group contract or who exercises his or
    her conversion privilege under the group policy.
         (3)  Continuation need not  include  dental,  vision
    care,   prescription   drug,   or  similar  supplementary
    benefits that are provided under the  group  contract  in
    addition to its basic health care services.
         (4)  Upon  termination  or  reduction in hours below
    the minimum  required  by  the  group  contract,  written
    notice of continuation shall be presented to the employee
    or  member  by  the employer or mailed by the employer to
    the last known address of the employee.  An  employee  or
    member  who  wishes continuation of coverage must request
    continuation  in  writing  within  the  10   day   period
    following  the  later  of  (i) the date of termination or
    reduction in hours below  the  minimum  required  by  the
    group  contract  or  (ii)  the date the employee is given
    written notice of the right of continuation by either the
    employer or the group policyholder. In no event, however,
    shall the employee or member elect continuation more than
    60 days after the date of  termination  or  reduction  in
    hours  below  the minimum required by the group contract.
    Written notice of continuation presented to the  employee
    or   member   by  the  policyholder,  or  mailed  by  the
    policyholder to the last known address of  the  employee,
    shall  constitute the giving of notice for the purpose of
    this paragraph.
         (5)  An employee  or  member  electing  continuation
    must  pay to the group policyholder or his employer, on a
    monthly basis in advance, the  total  amount  of  premium
    required  by  the  HMO,  including  that  portion  of the
    premium contributed by the policyholder or  employer,  if
    any,  but  not  more than the group rate for the coverage
    being continued with appropriate reduction in premium for
    any supplementary benefits that  have  been  discontinued
    under  paragraph  (3)  of  this Section. The premium rate
    required by the  HMO  shall  be  the  applicable  premium
    required on the due date of each payment.
         (6)  Continuation   of   coverage  under  the  group
    contract for any person shall terminate when  the  person
    becomes  eligible for Medicare or is covered by any other
    insured  or  uninsured  plan  that   provides   hospital,
    surgical,  or medical coverage for individuals in a group
    and under which the person was  not  covered  immediately
    before   termination  or  reduction  in  hours  below the
    minimum required by the group  contract  as  provided  in
    paragraph  (2)  of  this  Section  or, if earlier, at the
    first to occur of the following:
              (a)  The  expiration  of  9  months  after  the
         employee's   or   member's   coverage   because   of
         termination of employment or membership or reduction
         in hours below the minimum  required  by  the  group
         contract.
              (b)  If  the  employee  or member fails to make
         timely payment of a required contribution,  the  end
         of the period for which contributions were made.
              (c)  The  date  on  which the group contract is
         terminated or, in the case of an employee, the  date
         his  or  her employer terminates participation under
         the group  contract.  If,  however,  this  paragraph
         applies  and  the  coverage  ceasing  by  reason  of
         termination  is  replaced  by similar coverage under
         another group contract, then  (i)  the  employee  or
         member  shall have the right to become covered under
         the replacement group contract for  the  balance  of
         the  period  that  he  or  she  would  have remained
         covered under the prior group contract in accordance
         with paragraph (6) had a  termination  described  in
         this  item (c) not occurred and (ii) the prior group
         contract shall continue to provide benefits  to  the
         extent  of its accrued liabilities and extensions of
         benefits as if the replacement had not occurred.
         (7)  A notification of  the  continuation  privilege
    shall be included in each evidence of coverage.
         (8)  Continuation  shall  not  be  available for any
    employee who was discharged because of the commission  of
    a  felony  in connection with his or her work, or because
    of theft in connection with his or her  work,  for  which
    the  employer  was  in no way responsible if the employee
    (i) admitted to committing the felony or  theft  or  (ii)
    was  convicted  or placed under supervision by a court of
    competent jurisdiction.
         The requirements of  this  amendatory  Act  of  1992
    shall  apply  to  any  group contract, as defined in this
    Section, delivered or issued for delivery on or after 180
    days following the effective date of this amendatory  Act
    of 1992.
(Source: P.A. 87-1090.)

    (215 ILCS 125/5-3) (from Ch. 111 1/2, par. 1411.2)
    Sec. 5-3.  Insurance Code provisions.
    (a)  Health Maintenance Organizations shall be subject to
the  provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
141.3, 143, 143c, 147, 148, 149, 151, 152, 153,  154,  154.5,
154.6,  154.7,  154.8, 155.04, 355.2, 356m, 356v, 356w, 356x,
356y, 356z.2, 367.2, 367.2-5, 367i, 368a,  401,  401.1,  402,
403,  403A,  408,  408.2, 409, 412, 444, and 444.1, paragraph
(c) of subsection (2) of Section 367, and Articles IIA,  VIII
1/2,  XII,  XII  1/2,  XIII,  XIII  1/2, XXV, and XXVI of the
Illinois Insurance Code.
    (b)  For purposes of the Illinois Insurance Code,  except
for  Sections  444  and 444.1 and Articles XIII and XIII 1/2,
Health Maintenance Organizations in the following  categories
are deemed to be "domestic companies":
         (1)  a   corporation  authorized  under  the  Dental
    Service Plan Act or the Voluntary Health  Services  Plans
    Act;
         (2)  a  corporation organized under the laws of this
    State; or
         (3)  a  corporation  organized  under  the  laws  of
    another state, 30% or more of the enrollees of which  are
    residents  of this State, except a corporation subject to
    substantially the  same  requirements  in  its  state  of
    organization  as  is  a  "domestic company" under Article
    VIII 1/2 of the Illinois Insurance Code.
    (c)  In considering the merger, consolidation,  or  other
acquisition  of  control of a Health Maintenance Organization
pursuant to Article VIII 1/2 of the Illinois Insurance Code,
         (1)  the Director shall give  primary  consideration
    to  the  continuation  of  benefits  to enrollees and the
    financial conditions of the acquired  Health  Maintenance
    Organization  after  the  merger, consolidation, or other
    acquisition of control takes effect;
         (2)(i)  the criteria specified in subsection  (1)(b)
    of Section 131.8 of the Illinois Insurance Code shall not
    apply  and (ii) the Director, in making his determination
    with respect  to  the  merger,  consolidation,  or  other
    acquisition  of  control,  need not take into account the
    effect on competition of the  merger,  consolidation,  or
    other acquisition of control;
         (3)  the  Director  shall  have the power to require
    the following information:
              (A)  certification by an independent actuary of
         the  adequacy  of  the  reserves   of   the   Health
         Maintenance Organization sought to be acquired;
              (B)  pro  forma financial statements reflecting
         the combined balance sheets of the acquiring company
         and the Health Maintenance Organization sought to be
         acquired as of the end of the preceding year and  as
         of  a date 90 days prior to the acquisition, as well
         as  pro  forma   financial   statements   reflecting
         projected  combined  operation  for  a  period  of 2
         years;
              (C)  a pro forma  business  plan  detailing  an
         acquiring   party's   plans   with  respect  to  the
         operation of  the  Health  Maintenance  Organization
         sought  to be acquired for a period of not less than
         3 years; and
              (D)  such other  information  as  the  Director
         shall require.
    (d)  The  provisions  of Article VIII 1/2 of the Illinois
Insurance Code and this Section 5-3 shall apply to  the  sale
by any health maintenance organization of greater than 10% of
its  enrollee  population  (including  without limitation the
health maintenance organization's right, title, and  interest
in and to its health care certificates).
    (e)  In  considering  any  management contract or service
agreement subject to Section 141.1 of the Illinois  Insurance
Code,  the  Director  (i)  shall, in addition to the criteria
specified in Section 141.2 of the  Illinois  Insurance  Code,
take  into  account  the effect of the management contract or
service  agreement  on  the  continuation  of   benefits   to
enrollees   and   the   financial  condition  of  the  health
maintenance organization to be managed or serviced, and  (ii)
need  not  take  into  account  the  effect of the management
contract or service agreement on competition.
    (f)  Except for small employer groups as defined  in  the
Small  Employer  Rating,  Renewability and Portability Health
Insurance Act and except for medicare supplement policies  as
defined  in  Section  363  of  the Illinois Insurance Code, a
Health Maintenance Organization may by contract agree with  a
group  or  other  enrollment unit to effect refunds or charge
additional premiums under the following terms and conditions:
         (i)  the amount of, and other terms  and  conditions
    with respect to, the refund or additional premium are set
    forth  in the group or enrollment unit contract agreed in
    advance of the period for which a refund is to be paid or
    additional premium is to be charged (which  period  shall
    not be less than one year); and
         (ii)  the amount of the refund or additional premium
    shall   not   exceed   20%   of  the  Health  Maintenance
    Organization's profitable or unprofitable experience with
    respect to the group or other  enrollment  unit  for  the
    period  (and,  for  purposes  of  a  refund or additional
    premium, the profitable or unprofitable experience  shall
    be calculated taking into account a pro rata share of the
    Health   Maintenance  Organization's  administrative  and
    marketing expenses, but shall not include any  refund  to
    be made or additional premium to be paid pursuant to this
    subsection (f)).  The Health Maintenance Organization and
    the   group   or  enrollment  unit  may  agree  that  the
    profitable or unprofitable experience may  be  calculated
    taking into account the refund period and the immediately
    preceding 2 plan years.
    The  Health  Maintenance  Organization  shall  include  a
statement in the evidence of coverage issued to each enrollee
describing the possibility of a refund or additional premium,
and  upon request of any group or enrollment unit, provide to
the group or enrollment unit a description of the method used
to  calculate  (1)  the  Health  Maintenance   Organization's
profitable experience with respect to the group or enrollment
unit and the resulting refund to the group or enrollment unit
or  (2)  the  Health  Maintenance Organization's unprofitable
experience with respect to the group or enrollment  unit  and
the  resulting  additional premium to be paid by the group or
enrollment unit.
    In  no  event  shall  the  Illinois  Health   Maintenance
Organization  Guaranty  Association  be  liable  to  pay  any
contractual  obligation  of  an insolvent organization to pay
any refund authorized under this Section.
(Source: P.A. 91-357,  eff.  7-29-99;  91-406,  eff.  1-1-00;
91-549,  eff.  8-14-99;  91-605,  eff. 12-14-99; 91-788, eff.
6-9-00; 92-764, eff. 1-1-03.)

    Section 15.  The Voluntary Health Services Plans  Act  is
amended by changing Section 15.5 as follows:

    (215 ILCS 165/15.5) (from Ch. 32, par. 609.5)
    Sec.  15.5.   Conversion  Privilege-Group Type Contracts.
(1) Every service plan contract  of  a  health  service  plan
corporation  which  provides that the continued coverage of a
beneficiary is contingent upon the  continued  employment  or
membership  of  the  subscriber  with  a particular employer,
union, or association shall further provide for the right  of
said  person  to  make  application for an individual service
plan contract under the circumstances and in accordance  with
the  requirements  set  forth  in  Sections  Section 367e and
367e.1 of the "Illinois Insurance Code".  The application  of
Sections  Section  367e  and  367e.1 of the Code shall not be
construed in such a manner as to  require  a  health  service
plan  corporation to furnish a service or kind of benefit not
customarily  provided  by  such  corporation  and  which   is
inconsistent with the provision of this Act.
    (2)  The  requirements of this Section shall apply to all
such contracts delivered, issued  for  delivery,  renewed  or
amended  on or after 180 days following the effective date of
this Section.
(Source: P.A. 82-498.)

    Section 95.  If and only if House Bill 1640 of  the  93rd
General Assembly becomes law in the form it passed the House,
the  Use  of  Credit Information in Personal Insurance Act is
amended by changing Section 20 as follows:

    (093 HB 1640 eng, Sec. 20)
    Sec.  20.  Use  of  credit   information.    An   insurer
authorized  to  do  business  in  this State that uses credit
information to underwrite or rate risks shall not:
         (1)  Use an insurance score that is calculated using
    income, gender, address, ethnic group, religion,  marital
    status, or nationality of the consumer as a factor.
         (2)  Deny,  cancel, or nonrenew a policy of personal
    insurance solely on  the  basis  of  credit  information,
    without    consideration    of   any   other   applicable
    underwriting factor independent of credit information and
    not expressly prohibited by item (1).  An  insurer  shall
    not   be   considered   to  have  denied,  cancelled,  or
    nonrenewed a policy if coverage is available  through  an
    affiliate.
         (3)  Base  an  insured's  renewal rates for personal
    insurance  solely  upon   credit   information,   without
    consideration  of any other applicable factor independent
    of  credit  information.   An  insurer   shall   not   be
    considered   to   have   based  rates  solely  on  credit
    information if coverage is available in a different  tier
    of the same insurer.
         (4)  Take  an  adverse  action  against  a  consumer
    solely  because  he  or  she  does not have a credit card
    account, without consideration of  any  other  applicable
    factor independent of credit information.
         (5)  Consider an absence of credit information or an
    inability to calculate an insurance score in underwriting
    or rating personal insurance, unless the insurer does one
    of the following:
              (A)  Treats  the  consumer  as  otherwise filed
         with approved by  the  Department,  if  the  insurer
         presents   information   that  such  an  absence  or
         inability relates to the risk for  the  insurer  and
         submits  a  filing  certification  form signed by an
         officer  for  the  insurer  certifying   that   such
         treatment is actuarially justified.
              (B)  Treats the consumer as if the applicant or
         insured  had  neutral credit information, as defined
         by the insurer.
              (C)  Excludes the use of credit information  as
         a factor and uses only other underwriting criteria.
         (6)  Take an adverse action against a consumer based
    on credit information, unless an insurer obtains and uses
    a  credit  report issued or an insurance score calculated
    within 90 days from the date the policy is first  written
    or renewal is issued.
         (7)  Use  credit  information  unless not later than
    every 36 months following the last time that the  insurer
    obtained  current credit information for the insured, the
    insurer recalculates the insurance score  or  obtains  an
    updated   credit   report.   Regardless   of   the  other
    requirements of this Section:
              (A)  At annual renewal, upon the request  of  a
         consumer  or the consumer's agent, the insurer shall
         re-underwrite and re-rate the policy  based  upon  a
         current credit report or insurance score. An insurer
         need  not  recalculate the insurance score or obtain
         the  updated  credit  report  of  a  consumer   more
         frequently than once in a 12-month period.
              (B)  The  insurer  shall have the discretion to
         obtain current credit information upon  any  renewal
         before  the  expiration  of 36 months, if consistent
         with its underwriting guidelines.
              (C)  An  insurer  is  not  required  to  obtain
         current credit information for an  insured,  despite
         the  requirements of subitem (A) of item (7) of this
         Section if one of the following applies:
                   (a)  The insurer is treating the  consumer
              as   otherwise   filed  with  approved  by  the
              Department.
                   (b)  The   insured   is   in   the    most
              favorably-priced  tier of the insurer, within a
              group  of  affiliated  insurers.  However,  the
              insurer shall  have  the  discretion  to  order
              credit  information,  if  consistent  with  its
              underwriting guidelines.
                   (c)  Credit  was not used for underwriting
              or rating  the  insured  when  the  policy  was
              initially  written.  However, the insurer shall
              have  the  discretion   to   use   credit   for
              underwriting   or   rating   the  insured  upon
              renewal, if consistent  with  its  underwriting
              guidelines.
                   (d)  The  insurer re-evaluates the insured
              beginning  no  later  than  36   months   after
              inception   and  thereafter  based  upon  other
              underwriting  or  rating   factors,   excluding
              credit information.
         (8)  Use  the  following as a negative factor in any
    insurance scoring  methodology  or  in  reviewing  credit
    information  for  the purpose of underwriting or rating a
    policy of personal insurance:
              (A)  Credit  inquiries  not  initiated  by  the
         consumer or inquiries requested by the consumer  for
         his or her own credit information.
              (B)  Inquiries  relating to insurance coverage,
         if so identified on a consumer's credit report.
              (C)  Collection   accounts   with   a   medical
         industry code, if so identified  on  the  consumer's
         credit report.
              (D)  Multiple lender inquiries, if coded by the
         consumer  reporting  agency on the consumer's credit
         report as being from the home mortgage industry  and
         made  within 30 days of one another, unless only one
         inquiry is considered.
              (E)  Multiple lender inquiries, if coded by the
         consumer reporting agency on the  consumer's  credit
         report as being from the automobile lending industry
         and  made within 30 days of one another, unless only
         one inquiry is considered.
(Source: 093 HB 1640 eng, Sec. 20)

    Section  99.   Effective  date.   This  Section  and  the
changes made to Sec. 143.17a of the Illinois  Insurance  Code
in  Section  5  of  this  Act  take effect upon becoming law.
Section 95 of this Act takes effect on October 1, 2003.   The
rest  of  this Act takes effect on the uniform effective date
provided by law.

Effective Date: 08/08/03