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Minnesota Legislature

Office of the Revisor of Statutes

Key: (1) language to be deleted (2) new language

                            CHAPTER 258-S.F.No. 440 
                  An act relating to insurance; regulating coverages, 
                  notice provisions, enforcement provisions, and 
                  licensees; the comprehensive health association; 
                  increasing the lifetime benefit limit; making 
                  technical changes; providing for certain breast cancer 
                  coverage; prohibiting certain rate differentials 
                  within the same town or city; amending Minnesota 
                  Statutes 1994, sections 60A.06, subdivision 3; 
                  60A.085; 60A.111, subdivision 2; 60A.124; 60A.23, 
                  subdivision 8; 60A.26; 60A.951, subdivisions 2 and 5; 
                  60A.954, subdivision 1; 60A.955; 60K.03, subdivision 
                  7; 60K.14, subdivision 1; 61A.03, subdivision 1; 
                  61A.071; 61A.092, subdivisions 3 and 6; 61B.28, 
                  subdivisions 8 and 9; 62A.042; 62A.10; 62A.135; 
                  62A.136; 62A.14; 62A.141; 62A.31, subdivisions 1h and 
                  1i; 62A.46, subdivision 2, and by adding a 
                  subdivision; 62A.48, subdivisions 1 and 2; 62A.50, 
                  subdivision 3; 62C.14, subdivisions 5 and 14; 62D.02, 
                  subdivision 8; 62E.02, subdivision 7; 62E.12; 62F.02, 
                  subdivision 2; 62I.09, subdivision 2; 62L.02, 
                  subdivision 16; 62L.03, subdivision 5; 65A.01, by 
                  adding a subdivision; 65B.06, subdivision 3; 65B.08, 
                  subdivision 1; 65B.09, subdivision 1; 65B.10, 
                  subdivision 3; 65B.61, subdivision 1; 72A.20, 
                  subdivision 13, and by adding a subdivision; 72B.05; 
                  79.251, subdivision 5, and by adding a subdivision; 
                  79.34, subdivision 2; 79.35; 79A.01, by adding a 
                  subdivision; 79A.02, subdivision 4; 79A.03, by adding 
                  a subdivision; 176.181, subdivision 2; 299F.053, 
                  subdivision 2; 515A.3-112; and 515B.3-113; proposing 
                  coding for new law in Minnesota Statutes, chapters 
                  60A; and 62A; repealing Minnesota Statutes 1994, 
                  sections 61A.072, subdivision 3; and 65B.07, 
                  subdivision 5. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
           Section 1.  Minnesota Statutes 1994, section 60A.06, 
        subdivision 3, is amended to read: 
           Subd. 3.  [LIMITATION ON COMBINATION POLICIES.] (a) Unless 
        specifically authorized by subdivision 1, clause (4), it is 
        unlawful to combine in one policy coverage permitted by 
        subdivision 1, clauses (4) and (5)(a).  This subdivision does 
        not prohibit the simultaneous sale of these products, but the 
        sale must involve two separate and distinct policies.  
           (b) This subdivision does not apply to group policies.  
           (c) This subdivision does not apply to policies permitted 
        by subdivision 1, clause (4), that contain benefits providing 
        acceleration of life, endowment, or annuity benefits in advance 
        of the time they would otherwise be payable, or to long-term 
        care policies as defined in section 62A.46, subdivision 2.  
           Sec. 2.  Minnesota Statutes 1994, section 60A.085, is 
        amended to read: 
           60A.085 [CANCELLATION OF GROUP COVERAGE; NOTIFICATION TO 
        COVERED PERSONS.] 
           (a) No cancellation of any group life, group accidental 
        death and dismemberment, group disability income, or group 
        medical expense policy, plan, or contract regulated under 
        chapter 62A or 62C is effective unless the insurer has made a 
        good faith effort to notify all covered persons of the 
        cancellation at least 30 days before the effective cancellation 
        date.  For purposes of this section, an insurer has made a good 
        faith effort to notify all covered persons if the insurer has 
        notified all the persons included on the list required by 
        paragraph (b) at the home address given and only if the list has 
        been updated within the last 12 months. 
           (b) At the time of the application for coverage subject to 
        paragraph (a), the insurer shall obtain an accurate list of the 
        names and home addresses of all persons to be covered.  
           (c) Paragraph (a) does not apply if the group policy, plan, 
        or contract is replaced, or if the insurer has reasonable 
        evidence to indicate that it will be replaced, by a 
        substantially similar policy, plan, or contract. 
           (d) In no event shall this section extend coverage under a 
        group policy, plan, or contract more than 120 days beyond the 
        date coverage would otherwise cancel based on the terms of the 
        group policy, plan, or contract.  
           (e) If coverage under the group policy, plan, or contract 
        is extended by this section, then the time period during which 
        affected members may exercise any conversion privilege provided 
        for in the group policy, plan, or contract is extended for the 
        same length of time, plus 30 days. 
           Sec. 3.  Minnesota Statutes 1994, section 60A.111, 
        subdivision 2, is amended to read: 
           Subd. 2.  [PLAN.] If the commissioner determines that the 
        required liabilities of any company are greater than its 
        qualified assets and that the combined financial resources of 
        the insurance company members of any insurance holding company 
        system of which the company is a member are not adequate to 
        counterbalance that fact, the commissioner may require the 
        company to submit to the commissioner for approval a plan by 
        which the company undertakes to bring the ratio of its required 
        liabilities to its qualified assets to its required liabilities, 
        expressed as a percentage, up to at least 110 percent within a 
        reasonable period, usually not exceeding five years.  
           Sec. 4.  Minnesota Statutes 1994, section 60A.124, is 
        amended to read: 
           60A.124 [INDEPENDENT AUDIT.] 
           The audit report of the independent certified public 
        accountant that performs the audit of an insurer's annual 
        statement as required under section 60A.13 60A.129, 
        subdivision 3a 3, paragraph (a), should contain a statement as 
        to whether anything, in connection with their audit, came to 
        their attention that caused them to believe that the insurer 
        failed to adopt and consistently apply the valuation procedure 
        as required by sections 60A.122 and 60A.123. 
           Sec. 5.  Minnesota Statutes 1994, section 60A.23, 
        subdivision 8, is amended to read: 
           Subd. 8.  [SELF-INSURANCE OR INSURANCE PLAN ADMINISTRATORS 
        WHO ARE VENDORS OF RISK MANAGEMENT SERVICES.] (1)  [SCOPE.] This 
        subdivision applies to any vendor of risk management services 
        and to any entity which administers, for compensation, a 
        self-insurance or insurance plan.  This subdivision does not 
        apply (a) to an insurance company authorized to transact 
        insurance in this state, as defined by section 60A.06, 
        subdivision 1, clauses (4) and (5); (b) to a service plan 
        corporation, as defined by section 62C.02, subdivision 6; (c) to 
        a health maintenance organization, as defined by section 62D.02, 
        subdivision 4; (d) to an employer directly operating a 
        self-insurance plan for its employees' benefits; or (e) to an 
        entity which administers a program of health benefits 
        established pursuant to a collective bargaining agreement 
        between an employer, or group or association of employers, and a 
        union or unions; or (f) to an entity which administers a 
        self-insurance or insurance plan if a licensed Minnesota insurer 
        is providing insurance to the plan and if the licensed insurer 
        has appointed the entity administering the plan as one of its 
        licensed agents within this state. 
           (2)  [DEFINITIONS.] For purposes of this subdivision the 
        following terms have the meanings given them. 
           (a) "Administering a self-insurance or insurance plan" 
        means (i) processing, reviewing or paying claims, (ii) 
        establishing or operating funds and accounts, or (iii) otherwise 
        providing necessary administrative services in connection with 
        the operation of a self-insurance or insurance plan. 
           (b) "Employer" means an employer, as defined by section 
        62E.02, subdivision 2. 
           (c) "Entity" means any association, corporation, 
        partnership, sole proprietorship, trust, or other business 
        entity engaged in or transacting business in this state. 
           (d) "Self-insurance or insurance plan" means a plan 
        providing life, medical or hospital care, accident, sickness or 
        disability insurance, as an employee fringe benefit for the 
        benefit of employees or members of an association, or a plan 
        providing liability coverage for any other risk or hazard, which 
        is or is not directly insured or provided by a licensed insurer, 
        service plan corporation, or health maintenance organization. 
           (e) "Vendor of risk management services" means an entity 
        providing for compensation actuarial, financial management, 
        accounting, legal or other services for the purpose of designing 
        and establishing a self-insurance or insurance plan for an 
        employer. 
           (3)  [LICENSE.] No vendor of risk management services or 
        entity administering a self-insurance or insurance plan may 
        transact this business in this state unless it is licensed to do 
        so by the commissioner.  An applicant for a license shall state 
        in writing the type of activities it seeks authorization to 
        engage in and the type of services it seeks authorization to 
        provide.  The license may be granted only when the commissioner 
        is satisfied that the entity possesses the necessary 
        organization, background, expertise, and financial integrity to 
        supply the services sought to be offered.  The commissioner may 
        issue a license subject to restrictions or limitations upon the 
        authorization, including the type of services which may be 
        supplied or the activities which may be engaged in.  The license 
        fee is $100.  All licenses are for a period of two years. 
           (4)  [REGULATORY RESTRICTIONS; POWERS OF THE COMMISSIONER.] 
        To assure that self-insurance or insurance plans are financially 
        solvent, are administered in a fair and equitable fashion, and 
        are processing claims and paying benefits in a prompt, fair, and 
        honest manner, vendors of risk management services and entities 
        administering insurance or self-insurance plans are subject to 
        the supervision and examination by the commissioner.  Vendors of 
        risk management services, entities administering insurance or 
        self-insurance plans, and insurance or self-insurance plans 
        established or operated by them are subject to the trade 
        practice requirements of sections 72A.19 to 72A.30.  In lieu of 
        an unlimited guarantee from a parent corporation for a vendor of 
        risk management services or an entity administering insurance or 
        self-insurance plans, the commissioner may accept a fidelity 
        surety bond in a form satisfactory to the commissioner in an 
        amount equal to 120 percent of the total amount of claims 
        handled by the applicant in the prior year.  If at any time the 
        total amount of claims handled during a year exceeds the amount 
        upon which the bond was calculated, the administrator shall 
        immediately notify the commissioner.  The commissioner may 
        require that the bond be increased accordingly. 
           (5)  [RULEMAKING AUTHORITY.] To carry out the purposes of 
        this subdivision, the commissioner may adopt rules, including 
        emergency rules, pursuant to sections 14.001 to 14.69.  These 
        rules may: 
           (a) establish reporting requirements for administrators of 
        insurance or self-insurance plans; 
           (b) establish standards and guidelines to assure the 
        adequacy of financing, reinsuring, and administration of 
        insurance or self-insurance plans; 
           (c) establish bonding requirements or other provisions 
        assuring the financial integrity of entities administering 
        insurance or self-insurance plans; or 
           (d) establish other reasonable requirements to further the 
        purposes of this subdivision. 
           Sec. 6.  [60A.235] [STANDARDS FOR DETERMINING WHETHER 
        CONTRACTS ARE HEALTH PLAN CONTRACTS OR STOP LOSS CONTRACTS.] 
           Subdivision 1.  [FINDINGS AND PURPOSE.] The purpose of this 
        section is to establish a standard for the determination of 
        whether an insurance policy or other evidence or coverage should 
        be treated as a policy of accident and sickness insurance or a 
        stop loss policy for the purpose of the regulation of the 
        business of insurance.  The laws regulating the business of 
        insurance in Minnesota impose distinctly different requirements 
        upon accident and sickness insurance policies and stop loss 
        policies.  In particular, the regulation of accident and 
        sickness insurance in Minnesota includes measures designed to 
        reform the health insurance market, to minimize or prohibit 
        selective rating or rejection of employee groups or individual 
        group members based upon health conditions, and to provide 
        access to affordable health insurance coverage regardless of 
        preexisting health conditions.  The health care reform 
        provisions enacted in Minnesota will only be effective if they 
        are applied to all insurers and health carriers who in 
        substance, regardless of purported form, engage in the business 
        of issuing health insurance coverage to employees of an employee 
        group.  This section applies to insurance companies and health 
        carriers and the policies or other evidence of coverage that 
        they issue.  This section does not apply to employers or the 
        benefit plans they establish for their employees. 
           Subd. 2.  [DEFINITIONS.] For purposes of this section, the 
        terms defined in this subdivision have the meanings given. 
           (a) "Attachment point" means the claims amount beyond which 
        the insurance company or health carrier incurs a liability for 
        payment. 
           (b) "Direct coverage" means coverage under which an 
        insurance company or health carrier assumes a direct obligation 
        to an individual, under the policy or evidence of coverage, with 
        respect to health care expenses incurred by the individual or a 
        member of the individual's family. 
           (c) "Expected claims" means the amount of claims that, in 
        the absence of a stop loss policy or other insurance or evidence 
        of coverage, are projected to be incurred under an 
        employer-sponsored plan covering health care expenses. 
           (d) "Expected plan claims" means the expected claims less 
        the projected claims in excess of the specific attachment point, 
        adjusted to be consistent with the employer's aggregate contract 
        period. 
           (e) "Health plan" means a health plan as defined in section 
        62A.011 and includes group coverage regardless of the size of 
        the group. 
           (f) "Health carrier" means a health carrier as defined in 
        section 62A.011. 
           Subd. 3.  [HEALTH PLAN POLICIES ISSUED AS STOP LOSS 
        COVERAGE.] (a) An insurance company or health carrier issuing or 
        renewing an insurance policy or other evidence of coverage, that 
        provides coverage to an employer for health care expenses 
        incurred under an employer-sponsored plan provided to the 
        employer's employees, retired employees, or their dependents, 
        shall issue the policy or evidence of coverage as a health plan 
        if the policy or evidence of coverage: 
           (1) has a specific attachment point for claims incurred per 
        individual that is lower than $10,000; or 
           (2) has an aggregate attachment point that is lower than 
        the sum of: 
           (i) 140 percent of the first $50,000 of expected plan 
        claims; 
           (ii) 120 percent of the next $450,000 of expected plan 
        claims; and 
           (iii) 110 percent of the remaining expected plan claims. 
           (b) Where the insurance policy or evidence of coverage 
        applies to a contract period of more than one year, the dollar 
        amounts set forth in paragraph (a), clauses (1) and (2), must be 
        multiplied by the length of the contract period expressed in 
        years. 
           (c) The commissioner may adjust the constant dollar amounts 
        provided in paragraph (a), clauses (1) and (2), on January 1 of 
        any year, based upon changes in the medical component of the 
        Consumer Price Index (CPI).  Adjustments must be in increments 
        of $100 and must not be made unless at least that amount of 
        adjustment is required.  The commissioner shall publish any 
        change in these dollar amounts at least three months before 
        their effective date. 
           (d) A policy or evidence of coverage issued by an insurance 
        company or health carrier that provides direct coverage of 
        health care expenses of an individual including a policy or 
        evidence of coverage administered on a group basis is a health 
        plan regardless of whether the policy or evidence of coverage is 
        denominated as stop loss coverage. 
           Subd. 4.  [COMPLIANCE.] (a) An insurance company or health 
        carrier that is required to issue a policy or evidence of 
        coverage as a health plan under this section shall, even if the 
        policy or evidence of coverage is denominated as stop loss 
        coverage, comply with all the laws of this state that apply to 
        the health plan, including, but not limited to, chapters 62A, 
        62C, 62D, 62E, 62L, and 62Q. 
           (b) With respect to an employer who had been issued a 
        policy or evidence of coverage denominated as stop loss coverage 
        before the effective date of this section, compliance with this 
        section is required as of the first renewal date occurring on or 
        after the effective date of this section. 
           Sec. 7.  [60A.236] [STOP LOSS REGULATION.] 
           A contract providing stop loss coverage, issued or renewed 
        to a small employer, as defined in section 62L.02, subdivision 
        26, or to a plan sponsored by a small employer, must include a 
        claim settlement period no less favorable to the small employer 
        or plan than coverage of all claims incurred during the contract 
        period regardless of when the claims are paid. 
           Sec. 8.  Minnesota Statutes 1994, section 60A.26, is 
        amended to read: 
           60A.26 [SUSPENSION OF INSURERS, NOTICE TO OTHER STATES; 
        NOTIFICATIONS AND REPORTS.] 
           Subdivision 1.  [OTHER STATES.] The commissioner of 
        commerce shall notify the insurance departments of all other 
        states whenever, under any law then in effect, the commissioner 
        suspends the right of a foreign or domestic insurer to transact 
        business in this state.  
           Subd. 2.  [NAIC.] The commissioner of commerce shall report 
        public regulatory actions, investigative information, and 
        complaints to the appropriate reporting system or database of 
        the National Association of Insurance Commissioners. 
           Sec. 9.  Minnesota Statutes 1994, section 60A.951, 
        subdivision 2, is amended to read: 
           Subd. 2.  [AUTHORIZED PERSON.] "Authorized person" means 
        the county attorney, sheriff, or chief of police responsible for 
        investigations in the county where the suspected insurance fraud 
        occurred; the superintendent of the bureau of criminal 
        apprehension; the commissioner of commerce; the commissioner of 
        labor and industry; the attorney general; or any duly 
        constituted criminal investigative department or agency of the 
        United States. 
           Sec. 10.  Minnesota Statutes 1994, section 60A.951, 
        subdivision 5, is amended to read: 
           Subd. 5.  [INSURER.] "Insurer" means insurance company, 
        risk retention group as defined in section 60E.02, service plan 
        corporation as defined in section 62C.02, health maintenance 
        organization as defined in section 62D.02, integrated service 
        network as defined in section 62N.02, fraternal benefit society 
        regulated under chapter 64B, township mutual company regulated 
        under chapter 67A, joint self-insurance plan or multiple 
        employer trust regulated under chapter 60F, 62H, or section 
        471.617, subdivision 2, and persons administering a 
        self-insurance plan as defined in section 60A.23, subdivision 8, 
        clause (2), paragraphs (a) and (d), and the workers' 
        compensation reinsurance association established in section 
        79.34. 
           Sec. 11.  Minnesota Statutes 1994, section 60A.954, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [ESTABLISHMENT.] An insurer shall 
        institute, implement, and maintain an antifraud plan.  For the 
        purpose of this section, the term insurer does not include 
        reinsurers, the workers' compensation reinsurance association, 
        self-insurers, and excess insurers.  Within 30 days after 
        instituting or modifying an antifraud plan, the insurer shall 
        notify the commissioner in writing.  The notice must include the 
        name of the person responsible for administering the plan.  An 
        antifraud plan shall establish procedures to: 
           (1) prevent insurance fraud, including:  internal fraud 
        involving the insurer's officers, employees, or agents; fraud 
        resulting from misrepresentations on applications for insurance; 
        and claims fraud; 
           (2) report insurance fraud to appropriate law enforcement 
        authorities; and 
           (3) cooperate with the prosecution of insurance fraud cases.
           Sec. 12.  Minnesota Statutes 1994, section 60A.955, is 
        amended to read: 
           60A.955 [CLAIM FORMS TO CONTAIN FRAUD WARNING.] 
           All insurance claim forms issued by an insurer for use in 
        submitting a claim for payment or a claim for any other benefit 
        pursuant to a policy shall clearly contain a warning 
        substantially as follows:  "A person who submits an application 
        or files a claim with intent to defraud or helps commit a fraud 
        against an insurer is guilty of a crime."  An insurer may comply 
        with this section by including the warning on an addendum 
        attached to the application or claim form.  The absence of the 
        required warning does not constitute a defense in a prosecution 
        for a violation of chapter 609 or any other chapter of Minnesota 
        Statutes. 
           Sec. 13.  Minnesota Statutes 1994, section 60K.03, 
        subdivision 7, is amended to read: 
           Subd. 7.  [EXCEPTIONS.] The following are exempt from the 
        general licensing requirements prescribed by this section:  
           (1) agents of township mutuals who are exempted pursuant to 
        section 60K.04; 
           (2) fraternal benefit society representatives exempted 
        pursuant to section 60K.05; 
           (3) any regular salaried officer or employee of a licensed 
        insurer, without license or other qualification, may act on 
        behalf of that licensed insurer in the negotiation of insurance 
        for that insurer, provided that a licensed agent must 
        participate in the sale of the insurance; 
           (4) employers and their officers or employees, and the 
        trustees or employees of any trust plan, to the extent that the 
        employers, officers, employees, or trustees are engaged in the 
        administration or operation of any program of employee benefits 
        for the employees of the employers or employees of their 
        subsidiaries or affiliates involving the use of insurance issued 
        by a licensed insurance company; provided that the activities of 
        the officers, employees and trustees are incidental to clerical 
        or administrative duties and their compensation does not vary 
        with the volume of insurance or applications for insurance; 
           (5) employees of a creditor who enroll debtors for credit 
        life, credit accident and health, or credit involuntary 
        unemployment insurance; provided the employees receive no 
        commission or fee for it; 
           (6) clerical or administrative employees of an insurance 
        agent who take insurance applications or receive premiums in the 
        office of their employer, if the activities are incidental to 
        clerical or administrative duties and the employee's 
        compensation does not vary with the volume of the applications 
        or premiums; and 
           (7) rental vehicle companies and their employees in 
        connection with the offer of rental vehicle personal accident 
        insurance under section 72A.125; and 
           (8) employees of a retailer who enroll purchasers for 
        credit insurance associated with a retail purchase; provided the 
        employees receive no commission, fee, bonus, or other form of 
        compensation for it. 
           Sec. 14.  Minnesota Statutes 1994, section 60K.14, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [PERSONAL SOLICITATION OF INSURANCE SALES.] 
        (a)  [DEFINITIONS.] For the purposes of this section, the 
        following terms have the meanings given them:  
           (1) "agent" means a person, copartnership, or corporation 
        required to be licensed pursuant to section 60K.02; and 
           (2) "personal solicitation" means any contact by an agent, 
        or any person acting on behalf of an agent, made for the purpose 
        of selling or attempting to sell insurance, when either the 
        agent or a person acting for the agent contacts the buyer by 
        telephone or in person, except:  (i) an attempted sale in which 
        the buyer personally knows the identity of the agent, the name 
        of the general agency, if any, which the agent represents, and 
        the fact that the agent is an insurance agent; (ii) an attempted 
        sale in which the prospective purchaser of insurance initiated 
        the contact; or (iii) a personal contact which takes place at 
        the agent's place of business.  
           (b)  [DISCLOSURE REQUIREMENT.] Before a personal 
        solicitation, the agent or person acting for an agent shall, at 
        the time of initial personal contact or communication with the 
        potential buyer, clearly and expressly disclose in writing:  
           (1) the name and state insurance agent license number of 
        the person making the contact or communication; 
           (2) the name of the agent, general agency, or insurer that 
        person represents; and 
           (3) the fact that the agent, agency, or insurer is in the 
        business of selling insurance.  
           If the initial personal contact is made by telephone, the 
        disclosures required by this subdivision need not be made in 
        writing. 
           (c)  [FALSE REPRESENTATION OF GOVERNMENT AFFILIATION.] No 
        agent or person acting for an agent shall make any communication 
        to a potential buyer that indicates or gives the impression that 
        the agent is acting on behalf of a government agency.  
           Sec. 15.  Minnesota Statutes 1994, section 61A.03, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [GENERALLY.] No policy of life insurance 
        may be issued in this state or by a life insurance company 
        organized under the laws of this state unless it contains the 
        following provisions: 
           (a) [PREMIUM.] A provision that all premiums are payable in 
        advance either at the home office of the company, or to an agent 
        of the company, upon delivery of a receipt signed by one or more 
        officers named in the policy and countersigned by the agent, but 
        a policy may contain a provision that the policy itself is a 
        receipt for the first premium; 
           (b) [GRACE PERIOD.] A provision for a one month grace 
        period for the payment of every premium after the first, during 
        which the insurance will continue in force.  The provision may 
        subject the late payment to a finance charge and contain a 
        stipulation that if the insured dies during the grace period, 
        the overdue premium will be deducted in any settlement under the 
        policy; 
           (c) [ENTIRE CONTRACT.] A provision that the policy 
        constitutes the entire contract between the parties and is 
        incontestable after it has been in force during the lifetime of 
        the insured for two years from its date, except for nonpayment 
        of premiums and except for violations of the conditions of the 
        policy relating to naval and military services in time of war; 
        that at the option of the company, provisions relative to 
        benefits in the event of total and permanent disability and 
        provisions which grant additional insurance specifically against 
        death by accident, may be excepted; and that a special form of 
        policy may be issued on the life of a person employed in an 
        occupation classified by the company as extra hazardous or as 
        leading to hazardous employment, which provides that service in 
        certain designated occupations may reduce the company's 
        liability under the policy to a certain designated amount not 
        less than the full policy reserve; 
           (d) [REPRESENTATIONS AND WARRANTIES.] A provision that, in 
        the absence of fraud, all statements made by the insured are 
        representations and not warranties, and that no statement voids 
        the policy unless it is contained in a written application and a 
        copy of the application is endorsed upon or attached to the 
        policy when issued; 
           (e) [MISSTATEMENT OF AGE.] A provision that if the age of 
        the insured is understated the amount payable under the policy 
        will be the amount the premium would have purchased at the 
        correct age; 
           (f) [DIVIDENDS ON PARTICIPATING POLICIES.] A provision that 
        the policy will participate in the surplus of the company and 
        that, beginning not later than the end of the third policy year, 
        the company will annually determine and account for the portion 
        of the divisible surplus accruing on the policy, and that the 
        owner of the policy has the right, each year after the fifth, to 
        have the current dividend arising from the participation paid in 
        cash.  If the policy provides other dividend options, it must 
        specify which option is effective if the owner of the policy 
        does not elect an option.  The provision may condition any 
        dividends payable during the first five years of the policy upon 
        the payment of the next ensuing annual premium.  This provision 
        is not required in nonparticipating policies, in policies issued 
        on under-average lives, or in insurance in exchange for lapsed 
        or surrendered policies; 
           (g) [POLICY LOANS.] A provision (1) that after three full 
        years' premiums have been paid, the company at any time while 
        the policy is in force, will advance, on proper assignment of 
        the policy, and on the sole security thereof, at a specified 
        rate of interest, not to exceed eight percent per annum, or at 
        an adjustable rate of interest as otherwise provided for in this 
        section, a sum equal to, or, at the option of the owner of the 
        policy, less than the loan value thereof; (2) that the loan 
        value is the cash surrender value thereof at the end of the 
        current policy year; (3) that the loan, unless made to pay 
        premiums, may be deferred for not more than six months after the 
        application for it is made; (4) that the company will deduct 
        from the loan value any existing indebtedness on the policy and 
        any unpaid balance of the premium for current policy year, and 
        may collect interest in advance on the loan to the end of the 
        current policy year; (5) that the failure to repay an advance or 
        to pay interest does not void the policy unless the total 
        indebtedness thereon to the company equals or exceeds the loan 
        value at the time of the failure, nor until one month after 
        notice has been mailed by the company to the last known address 
        of the insured and of the assignee of record at the home office 
        of the company; and (6) that no condition other than those 
        provided in this section will be exacted as a prerequisite to an 
        advance.  This provision is not required in term insurance; 
           (h) [REINSTATEMENT.] A provision that if, in event of 
        default in premium payments, the nonforfeiture value of the 
        policy is applied to the purchase of other insurance, and if 
        that insurance is in force and the original policy has not been 
        surrendered to the company and canceled, the policy may be 
        reinstated within three years after the default upon evidence of 
        insurability satisfactory to the company and payment of arrears 
        of premiums with interest; 
           (i) [PAYMENT OF CLAIMS.] A provision that, when a policy 
        becomes a claim by the death of the insured, settlement will be 
        made within two months after receipt of due proof of death; 
           (j) [SETTLEMENT OPTION.] A table showing the amount of 
        installments in which the policy may provide its proceeds may be 
        payable; 
           (k) [DESCRIPTION OF POLICY.] A title on the face and on the 
        back of the policy briefly and correctly describing the policy 
        in bold letters stating its general character, dividend periods, 
        and other particulars, so that the holder will not be able to 
        mistake the nature and scope of the contract; 
           (l) [FORM NUMBER.] A form number in the lower left-hand 
        corner of the first page of each form, including riders and 
        endorsements. 
           Any of the foregoing provisions or portions thereof 
        relating to premiums not applicable to single premium policies 
        must not be incorporated therein.  
           Sec. 16.  Minnesota Statutes 1994, section 61A.071, is 
        amended to read: 
           61A.071 [APPLICATIONS.] 
           No individual life insurance policy, except life insurance 
        marketed on a direct response basis, shall be issued or 
        delivered in this state to a person age 65 or older unless a 
        signed and completed copy of the application for insurance is 
        left with the applicant at the time application is made.  This 
        requirement will not apply to life insurers who mail a copy of 
        the signed, completed application to the applicant within 24 
        hours of receiving the application.  However, where an 
        individual life policy is marketed on a direct response basis, a 
        copy of any application signed by the applicant shall be 
        delivered to the insured along with, or as part of, the policy. 
           Sec. 17.  Minnesota Statutes 1994, section 61A.092, 
        subdivision 3, is amended to read: 
           Subd. 3.  [NOTICE OF OPTIONS.] Upon termination of or 
        layoff from employment of a covered employee, the employer shall 
        inform the employee of: 
           (1) the employee's right to elect to continue the coverage; 
           (2) the amount the employee must pay monthly to the 
        employer to retain the coverage; 
           (3) the manner in which and the office of the employer to 
        which the payment to the employer must be made; and 
           (4) the time by which the payments to the employer must be 
        made to retain coverage. 
           The employee has 60 days within which to elect coverage.  
        The 60-day period shall begin to run on the date coverage would 
        otherwise terminate or on the date upon which notice of the 
        right to coverage is received, whichever is later. 
           If the covered employee or covered dependent dies during 
        the 60-day election period and before the covered employee makes 
        an election to continue or reject continuation, then the covered 
        employee will be considered to have elected continuation of 
        coverage.  The estate of the former employee or covered 
        dependent would then be entitled to a death benefit equal to the 
        amount of insurance that could have been continued less any 
        unpaid premium owing as of the date of death.  
           Notice must be in writing and sent by first class mail to 
        the employee's last known address which the employee has 
        provided to the employer. 
           A notice in substantially the following form is 
        sufficient:  "As a terminated or laid off employee, the law 
        authorizes you to maintain your group insurance benefits, in an 
        amount equal to the amount of insurance in effect on the date 
        you terminated or were laid off from employment, for a period of 
        up to 18 months.  To do so, you must notify your former employer 
        within 60 days of your receipt of this notice that you intend to 
        retain this coverage and must make a monthly payment of 
        $............ at ............. by the ............. of each 
        month." 
           Sec. 18.  Minnesota Statutes 1994, section 61A.092, 
        subdivision 6, is amended to read: 
           Subd. 6.  [APPLICATION.] This section applies to a policy, 
        certificate of insurance, or similar evidence of coverage issued 
        to a Minnesota resident or issued to provide coverage to a 
        Minnesota resident.  This section does not apply to:  (1) a 
        certificate of insurance or similar evidence of coverage that 
        meets the conditions of section 61A.093, subdivision 2; or (2) a 
        group life insurance policy that contains a provision permitting 
        the certificate holder, upon termination or layoff from 
        employment, to retain the coverage provided under the group 
        policy by paying premiums directly to the insurer, provided that 
        the employer shall give the employee notice of the employee's 
        and each related certificate holder's right to continue the 
        insurance by paying premiums directly to the insurer.  A related 
        certificate holder is an insured spouse of the employee. 
           Sec. 19.  Minnesota Statutes 1994, section 61B.28, 
        subdivision 8, is amended to read: 
           Subd. 8.  [FORM.] The form of notice referred to in 
        subdivision 7, paragraph (a), is as follows: 
                            ".................... 
                              .................... 
                             .................... 
                     (insert name, current address, and 
                         telephone number of insurer) 
                  NOTICE CONCERNING POLICYHOLDER RIGHTS IN AN 
                 INSOLVENCY UNDER THE MINNESOTA LIFE AND HEALTH 
                       INSURANCE GUARANTY ASSOCIATION LAW
           If the insurer that issued your life, annuity, or health 
        insurance policy becomes impaired or insolvent, you are entitled 
        to compensation for your policy from the assets of that insurer. 
        The amount you recover will depend on the financial condition of 
        the insurer. 
           In addition, residents of Minnesota who purchase life 
        insurance, annuities, or health insurance from insurance 
        companies authorized to do business in Minnesota are protected, 
        SUBJECT TO LIMITS AND EXCLUSIONS, in the event the insurer 
        becomes financially impaired or insolvent.  This protection is 
        provided by the Minnesota Life and Health Insurance Guaranty 
        Association. 
            Minnesota Life and Health Insurance Guaranty Association
                                (insert current
                         address and telephone number)
           The maximum amount the guaranty association will pay for 
        all policies issued on one life by the same insurer is limited 
        to $300,000.  Subject to this $300,000 limit, the guaranty 
        association will pay up to $300,000 in life insurance death 
        benefits, $100,000 in net cash surrender and net cash withdrawal 
        values for life insurance, $300,000 in health insurance 
        benefits, including any net cash surrender and net cash 
        withdrawal values, $100,000 in annuity net cash surrender and 
        net cash withdrawal values, $300,000 in present value of annuity 
        benefits for annuities which are part of a structured settlement 
        or for annuities in regard to which periodic annuity benefits, 
        for a period of not less than the annuitant's lifetime or for a 
        period certain of not less than ten years, have begun to be paid 
        on or before the date of impairment or insolvency, or if no 
        coverage limit has been specified for a covered policy or 
        benefit, the coverage limit shall be $300,000 in present value.  
        Unallocated annuity contracts issued to retirement plans, other 
        than defined benefit plans, established under section 401, 
        403(b), or 457 of the Internal Revenue Code of 1986, as amended 
        through December 31, 1992, are covered up to $100,000 in net 
        cash surrender and net cash withdrawal values, for Minnesota 
        residents covered by the plan provided, however, that the 
        association shall not be responsible for more than $7,500,000 in 
        claims from all Minnesota residents covered by the plan.  If 
        total claims exceed $7,500,000, the $7,500,000 shall be prorated 
        among all claimants.  These are the maximum claim amounts.  
        Coverage by the guaranty association is also subject to other 
        substantial limitations and exclusions and requires continued 
        residency in Minnesota.  If your claim exceeds the guaranty 
        association's limits, you may still recover a part or all of 
        that amount from the proceeds of the liquidation of the 
        insolvent insurer, if any exist.  Funds to pay claims may not be 
        immediately available.  The guaranty association assesses 
        insurers licensed to sell life and health insurance in Minnesota 
        after the insolvency occurs.  Claims are paid from this 
        assessment. 
           THE COVERAGE PROVIDED BY THE GUARANTY ASSOCIATION IS NOT A 
        SUBSTITUTE FOR USING CARE IN SELECTING INSURANCE COMPANIES THAT 
        ARE WELL MANAGED AND FINANCIALLY STABLE.  IN SELECTING AN 
        INSURANCE COMPANY OR POLICY, YOU SHOULD NOT RELY ON COVERAGE BY 
        THE GUARANTY ASSOCIATION. 
           THIS NOTICE IS REQUIRED BY MINNESOTA STATE LAW TO ADVISE 
        POLICYHOLDERS OF LIFE, ANNUITY, OR HEALTH INSURANCE POLICIES OF 
        THEIR RIGHTS IN THE EVENT THEIR INSURANCE CARRIER BECOMES 
        FINANCIALLY INSOLVENT.  THIS NOTICE IN NO WAY IMPLIES THAT THE 
        COMPANY CURRENTLY HAS ANY TYPE OF FINANCIAL PROBLEMS.  ALL LIFE, 
        ANNUITY, AND HEALTH INSURANCE POLICIES ARE REQUIRED TO PROVIDE 
        THIS NOTICE." 
           Additional language may be added to the notice if approved 
        by the commissioner prior to its use in the form.  This section 
        does not apply to fraternal benefit societies regulated under 
        chapter 64B. 
           Sec. 20.  Minnesota Statutes 1994, section 61B.28, 
        subdivision 9, is amended to read: 
           Subd. 9.  [COMBINATION FIXED-VARIABLE POLICY.] The notice 
        required in subdivision 8 must clearly describe what portions of 
        a combination fixed-variable policy are not covered by the 
        Minnesota life and health insurance guaranty association.  The 
        notice requirements specified in subdivision 8 7, paragraph (c), 
        do not apply to a combination fixed-variable policy. 
           Sec. 21.  [62A.023] [NOTICE OF RATE CHANGE.] 
           A health insurer or service plan corporation must send 
        written notice to its policyholders and contract holders at 
        their last known address at least 30 days in advance of the 
        effective date of a proposed rate change.  This notice 
        requirement does not apply to individual certificate holders 
        covered by group insurance policies or group subscriber 
        contracts.  
           Sec. 22.  Minnesota Statutes 1994, section 62A.042, is 
        amended to read: 
           62A.042 [FAMILY COVERAGE; COVERAGE OF NEWBORN INFANTS.] 
           Subdivision 1.  [INDIVIDUAL FAMILY POLICIES; RENEWALS.] (a) 
        No policy of individual accident and sickness insurance which 
        provides for insurance for more than one person under section 
        62A.03, subdivision 1, clause (3), and no individual health 
        maintenance contract which provides for coverage for more than 
        one person under chapter 62D, shall be renewed to insure or 
        cover any person in this state or be delivered or issued for 
        delivery to any person in this state unless the policy or 
        contract includes as insured or covered members of the family 
        any newborn infants, including dependent grandchildren who 
        reside with a covered grandparent, immediately from the moment 
        of birth and thereafter which insurance or contract shall 
        provide coverage for illness, injury, congenital malformation, 
        or premature birth. 
           (b) The coverage under paragraph (a) includes benefits for 
        inpatient or outpatient expenses arising from medical and dental 
        treatment up to age 18, including orthodontic and oral surgery 
        treatment, involved in the management of birth defects known as 
        cleft lip and cleft palate.  If orthodontic services are 
        eligible for coverage under a dental insurance plan and another 
        policy or contract, the dental plan shall be primary and the 
        other policy or contract shall be secondary in regard to the 
        coverage required under paragraph (a).  Payment for dental or 
        orthodontic treatment not related to the management of the 
        congenital condition of cleft lip and cleft palate shall not be 
        covered under this provision.  
           Subd. 2.  [GROUP POLICIES; RENEWALS.] (a) No group accident 
        and sickness insurance policy and no group health maintenance 
        contract which provide for coverage of family members or other 
        dependents of an employee or other member of the covered group 
        shall be renewed to cover members of a group located in this 
        state or delivered or issued for delivery to any person in this 
        state unless the policy or contract includes as insured or 
        covered family members or dependents any newborn infants, 
        including dependent grandchildren who reside with a covered 
        grandparent, immediately from the moment of birth and thereafter 
        which insurance or contract shall provide coverage for illness, 
        injury, congenital malformation, or premature birth.  
           (b) The coverage under paragraph (a) includes benefits for 
        inpatient or outpatient expenses arising from medical and dental 
        treatment up to age 18, including orthodontic and oral surgery 
        treatment, involved in the management of birth defects known as 
        cleft lip and cleft palate.  If orthodontic services are 
        eligible for coverage under a dental insurance plan and another 
        policy or contract, the dental plan shall be primary and the 
        other policy or contract shall be secondary in regard to the 
        coverage required under paragraph (a).  Payment for dental or 
        orthodontic treatment not related to the management of the 
        congenital condition of cleft lip and cleft palate shall not be 
        covered under this provision. 
           Sec. 23.  Minnesota Statutes 1994, section 62A.10, is 
        amended to read: 
           62A.10 [GROUP INSURANCE.] 
           Subdivision 1.  [REQUIREMENTS.] Group accident and health 
        insurance is hereby declared to be that form of accident and 
        health insurance covering may be issued to cover groups of not 
        less than two employees nor less than ten members, and which may 
        include the employee's or member's dependents, consisting of 
        husband, wife, children, and actual dependents residing in the 
        household, written under a.  The master policy may be issued to 
        any governmental corporation, unit, agency, or department 
        thereof, or to any corporation, copartnership, individual, 
        employer, or to any association as defined by section 60A.02, 
        subdivision 1a, where officers, members, employees, or classes 
        or divisions thereof, may be insured for their individual 
        benefit. 
           Subd. 2.  [GROUP ACCIDENTAL DEATH AND GROUP DISABILITY 
        INCOME POLICIES.] Group accidental death insurance and group 
        disability income insurance policies may be issued in connection 
        with first real estate mortgage loans to cover groups of not 
        less than ten debtors of a creditor written under a master 
        policy issued to a creditor to insure its debtors in connection 
        with first real estate mortgage loans, in amounts not to exceed 
        the actual or scheduled amount of their indebtedness.  No other 
        accident and health coverages may be issued in connection with 
        first real estate mortgage loans on a group basis to a 
        debtor-creditor group. 
           Subd. 3.  [AUTHORITY TO ISSUE.] Any insurer authorized to 
        write accident and health insurance in this state shall have 
        power to issue group accident and health policies. 
           Subd. 2 4.  [POLICY FORMS.] No policy of group accident and 
        health insurance may be issued or delivered in this state unless 
        the same has been approved by the commissioner in accordance 
        with section 62A.02, subdivisions 1 to 6.  These forms shall 
        contain the standard provisions relating and applicable to 
        health and accident insurance and shall conform with the other 
        requirements of law relating to the contents and terms of 
        policies of accident and sickness insurance in so far as they 
        may be applicable to group accident and health insurance, and 
        also the following provisions: 
           (1) [ENTIRE CONTRACT.] A provision that the policy and the 
        application of the creditor, employer, or executive officer or 
        trustee of any association, and the individual applications, if 
        any, of the debtors, employees, or members, insured, shall 
        constitute the entire contract between the parties, and that all 
        statements made by the creditor, employer, or any executive 
        officer or trustee in on behalf of the group to be insured, 
        shall, in the absence of fraud, be deemed representations and 
        not warranties, and that no such statement shall be used in 
        defense to a claim under the policy, unless it is contained in 
        the written application; 
           (2) [MASTER POLICY-CERTIFICATES.] A provision that the 
        insurer will issue a master policy to the creditor, employer, or 
        to the executive officer or trustee of the association; and the 
        insurer shall also issue to the creditor, the employer, or to 
        the executive officer or trustee of the association, for 
        delivery to the debtor, employee, or member, who is insured 
        under the policy, an individual certificate setting forth a 
        statement as to the insurance protection to which the debtor, 
        employee, or member is entitled and to whom payable, together 
        with a statement as to when and where the master policy, or a 
        copy thereof, may be seen for inspection by the individual 
        insured; this.  The individual certificate may contain the names 
        of, and insure the dependents of, the employee, or member, as 
        provided for herein; 
           (3) [NEW INSUREDS.] A provision that to the group or class 
        thereof originally insured may be added, from time to time, all 
        new employees of the employer or, members of the association, or 
        debtors of the creditor eligible to and applying for insurance 
        in that group or class and covered or to be covered by the 
        master policy. 
           (4) [CONVERSION PRIVILEGE.] In the case of accidental death 
        insurance and disability income insurance issued to debtors of a 
        creditor, the policy must contain a conversion privilege 
        permitting an insured debtor to convert, without evidence of 
        insurability, to an individual policy within 30 days of the date 
        the insured debtor's group coverage is terminated, and not 
        replaced with other group coverage, for any reason other than 
        nonpayment of premiums.  The individual policy must provide the 
        same amount of insurance and be subject to the same terms and 
        conditions as the group policy and the initial premium for the 
        individual policy must be the same premium the insured debtor 
        was paying under the group policy.  This provision does not 
        apply to a group policy which provides that the certificate 
        holder may, upon termination of coverage under the group policy 
        for any reason other than nonpayment of premium, retain coverage 
        provided under the group policy by paying premiums directly to 
        the insurer. 
           Sec. 24.  Minnesota Statutes 1994, section 62A.135, is 
        amended to read: 
           62A.135 [NONCOMPREHENSIVE FIXED INDEMNITY POLICIES; MINIMUM 
        LOSS RATIOS.] 
           (a) This section applies to individual or group policies, 
        certificates, or other evidence of coverage designed primarily 
        to provide coverage for hospital or medical expenses on a per 
        diem, fixed indemnity, or nonexpense incurred basis offered, 
        issued, or renewed, to provide coverage to a Minnesota resident. 
           (b) Notwithstanding section 62A.02, subdivision 3, relating 
        to loss ratios, policies must return to Minnesota policyholders 
        in the form of aggregate benefits under the policy, for each 
        year, on the basis of incurred claims experience and earned 
        premiums in Minnesota and in accordance with accepted actuarial 
        principles and practices:  
           (1) at least 75 percent of the aggregate amount of premiums 
        earned in the case of group policies; and 
           (2) at least 65 percent of the aggregate amount of premiums 
        earned in the case of individual policies.  
           (c) An insurer may only issue or renew an individual policy 
        on a guaranteed renewable or noncancelable basis. 
           (d) Noncomprehensive policies, certificates, or other 
        evidence of coverage subject to the provisions of this section 
        are also subject to the requirements, penalties, and remedies 
        applicable to medicare supplement policies, as set forth in 
        section 62A.36, subdivisions 1a, 1b, and 2. 
           The first supplement to the annual statement required to be 
        filed pursuant to this paragraph must be for the annual 
        statement required to be submitted on or after January 1, 1993. 
           Subdivision 1.  [DEFINITIONS.] For purposes of this 
        section, the following terms have the meanings given them: 
           (a) "fixed indemnity policy" is a policy form, other than a 
        long-term care policy as defined in section 62A.46, subdivision 
        2, that pays a predetermined, specified, fixed benefit for 
        services provided.  Claim costs under these forms are generally 
        not subject to inflation, although they may be subject to 
        changes in the utilization of health care services.  For policy 
        forms providing both expense-incurred and fixed benefits, the 
        policy form is a fixed indemnity policy if 50 percent or more of 
        the total claims are for predetermined, specified, fixed 
        benefits; 
           (b) "guaranteed renewable" means that, during the renewal 
        period (to a specified age) renewal cannot be declined nor 
        coverage changed by the insurer for any reason other than 
        nonpayment of premiums, fraud, or misrepresentation, but the 
        insurer can revise rates on a class basis upon approval by the 
        commissioner; 
           (c) "noncancelable" means that, during the renewal period 
        (to a specified age) renewal cannot be declined nor coverage 
        changed by the insurer for any reason other than nonpayment of 
        premiums, fraud, or misrepresentation and that rates cannot be 
        revised by the insurer.  This includes policies that are 
        guaranteed renewable to a specified age, such as 60 or 65, at 
        guaranteed rates; and 
           (d) "average annualized premium" means the average of the 
        estimated annualized premium per covered person based on the 
        anticipated distribution of business using all significant 
        criteria having a price difference, such as age, sex, amount, 
        dependent status, mode of payment, and rider frequency.  For 
        filing of rate revisions, the amount is the anticipated average 
        assuming the revised rates have fully taken effect. 
           Subd. 2.  [APPLICABILITY.] This section applies to 
        individual or group policies, certificates, or other evidence of 
        coverage meeting the definition of a fixed indemnity policy, 
        offered, issued, or renewed, to provide coverage to a Minnesota 
        resident. 
           Subd. 3.  [MINIMUM LOSS RATIO STANDARDS.] Notwithstanding 
        section 62A.02, subdivision 3, relating to loss ratios, the 
        minimum loss ratios for fixed indemnity policies are: 
           (1) as shown in the following table: 
           Type of Coverage               Renewal Provision
                                  Guaranteed Renewable   Noncancelable
               Group                      75%                 70%
             Individual                   65%                 60%
        or 
           (2) for policies or certificates where the average 
        annualized premium is less than $1,000, the average annualized 
        premium less $30, multiplied by the required loss ratio in 
        clause (1), divided by the average annualized premium.  However, 
        in no event may the minimum loss ratio be less than the required 
        loss ratio from clause (1) minus ten percent. 
           The commissioner of commerce may adjust the constant dollar 
        amounts provided in clause (2) on January 1 of any year, based 
        upon changes in the CPI-U, the consumer price index for all 
        urban consumers, published by the United States Department of 
        Labor, Bureau of Labor Statistics.  Adjustments must be in 
        increments of $5 and must not be made unless at least that 
        amount of adjustment is required to each amount. 
           All rate filings must include a demonstration that the 
        rates are not excessive.  Rates are not excessive if the 
        anticipated loss ratio and the lifetime anticipated loss ratio 
        meet or exceed the minimum loss ratio standard in this 
        subdivision. 
           Subd. 4.  [RENEWAL PROVISION.] An insurer may only issue or 
        renew an individual policy on a guaranteed renewable or 
        noncancelable basis. 
           Subd. 5.  [SUPPLEMENT TO ANNUAL STATEMENTS.] Each insurer 
        that has fixed indemnity policies in force in this state shall, 
        as a supplement to the annual statement required by section 
        60A.13, submit, in a form prescribed by the commissioner, the 
        experience data for the calendar year showing its incurred 
        claims, earned premiums, incurred to earned loss ratio, and the 
        ratio of the actual loss ratio to the expected loss ratio for 
        each fixed indemnity policy form in force in Minnesota.  The 
        experience data must be provided on both a Minnesota only and a 
        national basis.  If in the opinion of the company's actuary, the 
        deviation of the actual loss ratio from the expected loss ratio 
        for a policy form is due to unusual reserve fluctuations, 
        economic conditions, or other nonrecurring conditions, the 
        insurer should also file that opinion with appropriate 
        justification.  
           If the data submitted does not confirm that the insurer has 
        satisfied the loss ratio requirements of this section, the 
        commissioner shall notify the insurer in writing of the 
        deficiency.  The insurer shall have 30 days from the date of 
        receipt of the commissioner's notice to file amended rates that 
        comply with this section or a request for an exemption with 
        appropriate justification.  If the insurer fails to file amended 
        rates within the prescribed time and the commissioner does not 
        exempt the policy form from the need for a rate revision, the 
        commissioner shall order that the insurer's filed rates for the 
        nonconforming policy be reduced to an amount that would have 
        resulted in a loss ratio that complied with this section had it 
        been in effect for the reporting period of the supplement.  The 
        insurer's failure to file amended rates within the specified 
        time of the issuance of the commissioner's order amending the 
        rates does not preclude the insurer from filing an amendment of 
        its rates at a later time. 
           Subd. 6.  [PENALTIES.] Each sale of a policy that does not 
        comply with the loss ratio requirements of this section is 
        subject to the penalties in sections 72A.17 to 72A.32. 
           Subd. 7.  [SOLICITATIONS BY MAIL OR MEDIA ADVERTISEMENT.] 
        For purposes of this section, fixed indemnity policies issued 
        without the use of an agent as a result of solicitations of 
        individuals through the mail or mass media advertising, 
        including both print and broadcast advertising, must be treated 
        as group policies. 
           Sec. 25.  Minnesota Statutes 1994, section 62A.136, is 
        amended to read: 
           62A.136 [DENTAL AND VISION PLANS PLAN COVERAGE.] 
           The following provisions do not apply to health plans 
        providing dental or vision coverage only:  sections 62A.041,; 
        62A.047,; 62A.149,; 62A.151,; 62A.152,; 62A.154,; 
        62A.155,; 62A.21, subdivision 2b; 62A.26,; 62A.28,; and 
        62A.30. 
           Sec. 26.  Minnesota Statutes 1994, section 62A.14, is 
        amended to read: 
           62A.14 [HANDICAPPED CHILDREN.] 
           Subdivision 1.  [INDIVIDUAL FAMILY POLICIES.] An individual 
        hospital or medical expense insurance policy delivered or issued 
        for delivery in this state more than 120 days after May 16, 
        1969, or an individual health maintenance contract delivered or 
        issued for delivery in this state after August 1, 1984, which 
        provides that coverage of a dependent child shall terminate upon 
        attainment of the limiting age for dependent children specified 
        in the policy or contract shall also provide in substance that 
        attainment of such limiting age shall not operate to terminate 
        the coverage of such child while the child is and continues to 
        be both (a) incapable of self-sustaining employment by reason of 
        mental retardation, mental illness or disorder, or physical 
        handicap and (b) chiefly dependent upon the policyholder for 
        support and maintenance, provided proof of such incapacity and 
        dependency is furnished to the insurer or health maintenance 
        organization by the policyholder or enrollee within 31 days of 
        the child's attainment of the limiting age and subsequently as 
        may be required by the insurer or organization but not more 
        frequently than annually after the two-year period following the 
        child's attainment of the limiting age.  
           Subd. 2.  [GROUP POLICIES.] A group hospital or medical 
        expense insurance policy delivered or issued for delivery in 
        this state more than 120 days after May 16, 1969, or a group 
        health maintenance contract delivered or issued for delivery in 
        this state after August 1, 1984, which provides that coverage of 
        a dependent child of an employee or other member of the covered 
        group shall terminate upon attainment of the limiting age for 
        dependent children specified in the policy or contract shall 
        also provide in substance that attainment of such limiting age 
        shall not operate to terminate the coverage of such child while 
        the child is and continues to be both (a) incapable of 
        self-sustaining employment by reason of mental retardation, 
        mental illness or disorder, or physical handicap and (b) chiefly 
        dependent upon the employee or member for support and 
        maintenance, provided proof of such incapacity and dependency is 
        furnished to the insurer or organization by the employee or 
        member within 31 days of the child's attainment of the limiting 
        age and subsequently as may be required by the insurer or 
        organization but not more frequently than annually after the 
        two-year period following the child's attainment of the limiting 
        age. 
           Sec. 27.  Minnesota Statutes 1994, section 62A.141, is 
        amended to read: 
           62A.141 [COVERAGE FOR HANDICAPPED DEPENDENTS.] 
           No group policy or group plan of health and accident 
        insurance regulated under this chapter, chapter 62C, or 62D, 
        which provides for dependent coverage may be issued or renewed 
        in this state after August 1, 1983, unless it covers the 
        handicapped dependents of the insured, subscriber, or enrollee 
        of the policy or plan.  For purposes of this section, a 
        handicapped dependent is a person that is and continues to be 
        both:  (1) incapable of self-sustaining employment by reason of 
        mental retardation, mental illness or disorder, or physical 
        handicap; and (2) chiefly dependent upon the policyholder for 
        support and maintenance.  Consequently, the policy or plan shall 
        not contain any provision concerning preexisting condition 
        limitations, insurability, eligibility, or health underwriting 
        approval concerning handicapped dependents. 
           If ordered by the commissioner of commerce, the insurer of 
        a Minnesota-domiciled nonprofit association which is composed 
        solely of agricultural members may restrict coverage under this 
        section to apply only to Minnesota residents. 
           Sec. 28.  [62A.310] [BREAST CANCER COVERAGE.] 
           Subdivision 1.  [SCOPE OF COVERAGE.] This section applies 
        to all health plans as defined in section 62A.011. 
           Subd. 2.  [REQUIRED COVERAGE.] Every health plan included 
        in subdivision 1 must provide to each covered person who is a 
        resident of Minnesota coverage for the treatment of breast 
        cancer by high-dose chemotherapy with autologous bone marrow 
        transplantation and for expenses arising from the treatment.  
           Subd. 3.  [GREATER COINSURANCE OR COPAYMENT PROHIBITED.] 
        Coverage under this section shall not be subject to any greater 
        coinsurance or copayment than that applicable to any other 
        coverage provided by the health plan. 
           Subd. 4.  [GREATER DEDUCTIBLE PROHIBITED.] Coverage under 
        this section shall not be subject to any greater deductible than 
        that applicable to any other coverage provided by the health 
        plan. 
           Sec. 29.  Minnesota Statutes 1994, section 62A.31, 
        subdivision 1h, is amended to read: 
           Subd. 1h.  [LIMITATIONS ON DENIALS, CONDITIONS, AND PRICING 
        OF COVERAGE.] No issuer of Medicare supplement policies, 
        including policies that supplement Medicare issued by health 
        maintenance organizations or those policies governed by section 
        1833 or 1876 of the federal Social Security Act, United States 
        Code, title 42, section 1395, et seq., in this state may impose 
        preexisting condition limitations or otherwise deny or condition 
        the issuance or effectiveness of any Medicare supplement 
        insurance policy form available for sale in this state, nor may 
        it discriminate in the pricing of such a policy, because of the 
        health status, claims experience, receipt of health care, or 
        medical condition, or age of an applicant where an application 
        for such insurance is submitted during the six-month period 
        beginning with the first month in which an individual first 
        enrolled for benefits under Medicare Part B.  This paragraph 
        applies regardless of whether the individual has attained the 
        age of 65 years.  If an individual who is enrolled in Medicare 
        Part B due to disability status is involuntarily disenrolled due 
        to loss of disability status, the individual is eligible for the 
        six-month enrollment period provided under this subdivision if 
        the individual later becomes eligible for and enrolls again in 
        Medicare Part B. 
           Sec. 30.  Minnesota Statutes 1994, section 62A.31, 
        subdivision 1i, is amended to read: 
           Subd. 1i.  [REPLACEMENT COVERAGE.] If a Medicare supplement 
        policy or certificate replaces another Medicare supplement 
        policy or certificate, the issuer of the replacing policy or 
        certificate shall waive any time periods applicable to 
        preexisting conditions, waiting periods, elimination periods, 
        and probationary periods in the new Medicare supplement 
        policy or certificate for benefits to the extent the time was 
        spent under the original policy or certificate.  For purposes of 
        this subdivision, "Medicare supplement policy or certificate" 
        means all coverage described in section 62A.011, subdivision 4, 
        clause (10). 
           Sec. 31.  Minnesota Statutes 1994, section 62A.46, 
        subdivision 2, is amended to read: 
           Subd. 2.  [LONG-TERM CARE POLICY.] "Long-term care policy" 
        means an individual or group policy, certificate, subscriber 
        contract, or other evidence of coverage that provides benefits 
        for prescribed long-term care, including nursing facility 
        services and home care services, pursuant to the requirements of 
        sections 62A.46 to 62A.56.  A long-term care policy must contain 
        a designation specifying whether the policy is a long-term care 
        policy AA or A and a caption stating that the commissioner has 
        established two categories of long-term care insurance and the 
        minimum standards for each. 
           Sections 62A.46, 62A.48, and 62A.52 to 62A.56 do not apply 
        to a long-term care policy issued to (a) an employer or 
        employers or to the trustee of a fund established by an employer 
        where only employees or retirees, and dependents of employees or 
        retirees, are eligible for coverage or (b) to a labor union or 
        similar employee organization.  The associations exempted from 
        the requirements of sections 62A.31 to 62A.44 under 62A.31, 
        subdivision 1, clause (c) shall not be subject to the provisions 
        of sections 62A.46 to 62A.56 until July 1, 1988. 
           Sec. 32.  Minnesota Statutes 1994, section 62A.46, is 
        amended by adding a subdivision to read: 
           Subd. 13.  [BENEFIT DAY.] "Benefit day" means each day of 
        confinement in a nursing facility or each visit for home care 
        services.  For purposes of section 62A.48, subdivision 1, if the 
        policyholder receives more than one home care service visit 
        within a 24-hour period, each visit constitutes one benefit day. 
           Sec. 33.  Minnesota Statutes 1994, section 62A.48, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [POLICY REQUIREMENTS.] No individual or 
        group policy, certificate, subscriber contract, or other 
        evidence of coverage of nursing home care or other long-term 
        care services shall be offered, issued, delivered, or renewed in 
        this state, whether or not the policy is issued in this state, 
        unless the policy is offered, issued, delivered, or renewed by a 
        qualified insurer and the policy satisfies the requirements of 
        sections 62A.46 to 62A.56.  A long-term care policy must cover 
        prescribed long-term care in nursing facilities and at least the 
        prescribed long-term home care services in section 62A.46, 
        subdivision 4, clauses (1) to (5), provided by a home health 
        agency.  Coverage under a long-term care policy AA must 
        include:  a maximum lifetime benefit limit of at least $100,000 
        for services, and nursing facility and home care coverages must 
        not be subject to separate lifetime maximums.  Coverage under a 
        long-term care policy A must include:  a maximum minimum 
        lifetime benefit limit of at least $50,000 $25,000 for services, 
        and nursing facility and home care coverages must not be subject 
        to separate lifetime maximums.  Prior hospitalization may not be 
        required under a long-term care policy. 
           Coverage under either The policy designation must cover 
        preexisting conditions during the first six months of coverage 
        if the insured was not diagnosed or treated for the particular 
        condition during the 90 days immediately preceding the effective 
        date of coverage.  Coverage under either the policy designation 
        may include a waiting period of up to 90 days before benefits 
        are paid, but there must be no more than one waiting period per 
        benefit period; for purposes of this sentence, "days" means can 
        mean calendar or benefit days.  If benefit days are used, an 
        appropriate premium reduction and disclosure must be made.  No 
        policy may exclude coverage for mental or nervous disorders 
        which have a demonstrable organic cause, such as Alzheimer's and 
        related dementias.  No policy may require the insured to be 
        homebound or house confined to receive home care services.  The 
        policy must include a provision that the plan will not be 
        canceled or renewal refused except on the grounds of nonpayment 
        of the premium, provided that the insurer may change the premium 
        rate on a class basis on any policy anniversary date.  A 
        provision that the policyholder may elect to have the premium 
        paid in full at age 65 by payment of a higher premium up to age 
        65 may be offered.  A provision that the premium would be waived 
        during any period in which benefits are being paid to the 
        insured during confinement in a nursing facility must be 
        included.  A nongroup policyholder may return a policy within 30 
        days of its delivery and have the premium refunded in full, less 
        any benefits paid under the policy, if the policyholder is not 
        satisfied for any reason. 
           No individual long-term care policy shall be offered or 
        delivered in this state until the insurer has received from the 
        insured a written designation of at least one person, in 
        addition to the insured, who is to receive notice of 
        cancellation of the policy for nonpayment of premium.  The 
        insured has the right to designate up to a total of three 
        persons who are to receive the notice of cancellation, in 
        addition to the insured.  The form used for the written 
        designation must inform the insured that designation of one 
        person is required and that designation of up to two additional 
        persons is optional and must provide space clearly designated 
        for listing between one and three persons.  The designation 
        shall include each person's full name, home address, and 
        telephone number.  Each time an individual policy is renewed or 
        continued, the insurer shall notify the insured of the right to 
        change this written designation. 
           The insurer may file a policy form that utilizes a plan of 
        care prepared as provided under section 62A.46, subdivision 5, 
        clause (1) or (2). 
           Sec. 34.  Minnesota Statutes 1994, section 62A.48, 
        subdivision 2, is amended to read: 
           Subd. 2.  [PER DIEM COVERAGE.] If benefits are provided on 
        a per diem basis, the minimum daily benefit for care in a 
        nursing facility must be the lesser of $60 or actual charges 
        under a long-term care policy AA or the lesser of $40 or actual 
        charges under a long-term care policy A and the minimum benefit 
        per visit for home care under a long-term care policy AA or A 
        must be the lesser of $25 or actual charges.  The home care 
        services benefit must cover at least seven paid visits per week. 
           Sec. 35.  Minnesota Statutes 1994, section 62A.50, 
        subdivision 3, is amended to read: 
           Subd. 3.  [DISCLOSURES.] No long-term care policy shall be 
        offered or delivered in this state, whether or not the policy is 
        issued in this state, and no certificate of coverage under a 
        group long-term care policy shall be offered or delivered in 
        this state, unless a statement containing at least the following 
        information is delivered to the applicant at the time the 
        application is made: 
           (1) a description of the benefits and coverage provided by 
        the policy and the differences between this policy, a 
        supplemental Medicare policy and the benefits to which an 
        individual is entitled under parts A and B of Medicare and the 
        differences between policy designations A and AA; 
           (2) a statement of the exceptions and limitations in the 
        policy including the following language, as applicable, in bold 
        print:  "THIS POLICY DOES NOT COVER ALL NURSING CARE FACILITIES 
        OR NURSING HOME, HOME CARE, OR ADULT DAY CARE EXPENSES AND DOES 
        NOT COVER RESIDENTIAL CARE.  READ YOUR POLICY CAREFULLY TO 
        DETERMINE WHICH FACILITIES AND EXPENSES ARE COVERED BY YOUR 
        POLICY."; 
           (3) a statement of the renewal provisions including any 
        reservation by the insurer of the right to change premiums; 
           (4) a statement that the outline of coverage is a summary 
        of the policy issued or applied for and that the policy should 
        be consulted to determine governing contractual provisions; 
           (5) an explanation of the policy's loss ratio including at 
        least the following language:  "This means that, on the average, 
        policyholders may expect that $........ of every $100 in premium 
        will be returned as benefits to policyholders over the life of 
        the contract."; 
           (6) a statement of the out-of-pocket expenses, including 
        deductibles and copayments for which the insured is responsible, 
        and an explanation of the specific out-of-pocket expenses that 
        may be accumulated toward any out-of-pocket maximum as specified 
        in the policy; 
           (7) the following language, in bold print:  "YOUR PREMIUMS 
        CAN BE INCREASED IN THE FUTURE.  THE RATE SCHEDULE THAT LISTS 
        YOUR PREMIUM NOW CAN CHANGE."; 
           (8) the following language, if applicable, in bold print:  
        "IF YOU ARE NOT HOSPITALIZED PRIOR TO ENTERING A NURSING HOME OR 
        NEEDING HOME CARE, YOU WILL NOT BE ABLE TO COLLECT ANY BENEFITS 
        UNDER THIS PARTICULAR POLICY."; and 
           (9) a signed and completed copy of the application for 
        insurance is left with the applicant at the time the application 
        is made. 
           Sec. 36.  [62A.616] [COVERAGE FOR NURSING HOME CARE FOR 
        TERMINALLY ILL AND OTHER SERVICES.] 
           An insurer may offer a health plan that covers nursing home 
        care for the terminally ill, personal care attendants, and 
        hospice care.  For the purposes of this section, "terminally 
        ill" means a diagnosis certified by a physician that a person 
        has less than six months to live. 
           Sec. 37.  Minnesota Statutes 1994, section 62C.14, 
        subdivision 5, is amended to read: 
           Subd. 5.  [HANDICAPPED DEPENDENTS.] A subscriber's 
        individual contract or any group contract delivered or issued 
        for delivery in this state and providing that coverage of a 
        dependent child of the subscriber or a dependent child of a 
        covered group member shall terminate upon attainment of a 
        specified age shall also provide in substance that attainment of 
        that age shall not terminate coverage while the child is (a) 
        incapable of self-sustaining employment by reason of mental 
        retardation, mental illness or disorder, or physical handicap, 
        and (b) chiefly dependent upon the subscriber or employee for 
        support and maintenance, provided proof of incapacity and 
        dependency is furnished by the subscriber within 31 days of 
        attainment of the age, and subsequently as required by the 
        corporation, but not more frequently than annually after a two 
        year period following attainment of the age. 
           Sec. 38.  Minnesota Statutes 1994, section 62C.14, 
        subdivision 14, is amended to read: 
           Subd. 14.  No subscriber's individual contract or any group 
        contract which provides for coverage of family members or other 
        dependents of a subscriber or of an employee or other group 
        member of a group subscriber, shall be renewed, delivered, or 
        issued for delivery in this state unless such contract includes 
        as covered family members or dependents any newborn infants, 
        including dependent grandchildren, immediately from the moment 
        of birth and thereafter which insurance shall provide coverage 
        for illness, injury, congenital malformation or premature birth. 
           Sec. 39.  Minnesota Statutes 1994, section 62D.02, 
        subdivision 8, is amended to read: 
           Subd. 8.  "Health maintenance contract" means any contract 
        whereby a health maintenance organization agrees to provide 
        comprehensive health maintenance services to enrollees, provided 
        that the contract may contain reasonable enrollee copayment 
        provisions.  An individual or group health maintenance contract 
        may contain the copayment and deductible provisions specified in 
        this subdivision.  Copayment and deductible provisions in group 
        contracts shall not discriminate on the basis of age, sex, race, 
        length of enrollment in the plan, or economic status; and during 
        every open enrollment period in which all offered health benefit 
        plans, including those subject to the jurisdiction of the 
        commissioners of commerce or health, fully participate without 
        any underwriting restrictions, copayment and deductible 
        provisions shall not discriminate on the basis of preexisting 
        health status.  In no event shall the sum of the annual 
        copayment copayments and deductible exceed the maximum 
        out-of-pocket expenses allowable for a number three 
        qualified insurance policy plan under section 62E.06, nor shall 
        that sum exceed $5,000 per family.  The annual deductible must 
        not exceed $1,000 per person.  The annual deductible must not 
        apply to preventive health services as described in Minnesota 
        Rules, part 4685.0801, subpart 8.  Where sections 62D.01 to 
        62D.30 permit a health maintenance organization to contain 
        reasonable copayment provisions for preexisting health status, 
        these provisions may vary with respect to length of enrollment 
        in the plan.  Any contract may provide for health care services 
        in addition to those set forth in subdivision 7. 
           Sec. 40.  Minnesota Statutes 1994, section 62E.02, 
        subdivision 7, is amended to read: 
           Subd. 7.  [DEPENDENT.] "Dependent" means a spouse or 
        unmarried child under the age of 19 years, a dependent child who 
        is a student under the age of 25 and financially dependent upon 
        the parent, or a dependent child of any age who is disabled. 
           Sec. 41.  Minnesota Statutes 1994, section 62E.12, is 
        amended to read: 
           62E.12 [MINIMUM BENEFITS OF COMPREHENSIVE HEALTH INSURANCE 
        PLAN.] 
           The association through its comprehensive health insurance 
        plan shall offer policies which provide the benefits of a number 
        one qualified plan and a number two qualified plan, except that 
        the maximum lifetime benefit on these plans shall be 
        $1,000,000 $1,500,000, and an extended basic plan and a basic 
        Medicare plan as described in sections 62A.31 to 62A.44 and 
        62E.07.  The requirement that a policy issued by the association 
        must be a qualified plan is satisfied if the association 
        contracts with a preferred provider network and the level of 
        benefits for services provided within the network satisfies the 
        requirements of a qualified plan.  If the association uses a 
        preferred provider network, payments to nonparticipating 
        providers must meet the minimum requirements of section 72A.20, 
        subdivision 15.  They shall offer health maintenance 
        organization contracts in those areas of the state where a 
        health maintenance organization has agreed to make the coverage 
        available and has been selected as a writing carrier.  
        Notwithstanding the provisions of section 62E.06 the state plan 
        shall exclude coverage of services of a private duty nurse other 
        than on an inpatient basis and any charges for treatment in a 
        hospital located outside of the state of Minnesota in which the 
        covered person is receiving treatment for a mental or nervous 
        disorder, unless similar treatment for the mental or nervous 
        disorder is medically necessary, unavailable in Minnesota and 
        provided upon referral by a licensed Minnesota medical 
        practitioner. 
           Sec. 42.  Minnesota Statutes 1994, section 62F.02, 
        subdivision 2, is amended to read: 
           Subd. 2.  [DIRECTORS.] The association shall have a board 
        of directors composed of 11 persons chosen annually for a term 
        of four years as follows:  five persons elected by members of 
        the association at a meeting called by the commissioner; three 
        members who are health care providers appointed by the 
        commissioner prior to the election by the association; and three 
        public members, as defined in section 214.02, appointed by the 
        governor prior to the election by the association. 
           Sec. 43.  Minnesota Statutes 1994, section 62I.09, 
        subdivision 2, is amended to read: 
           Subd. 2.  [TERMS AND VACANCIES.] In the event of a member's 
        inability to continue to serve, the commissioner shall appoint a 
        replacement.  The committee shall elect a chair and vice-chair 
        from among the members.  The term of each member is one year 
        commencing four years beginning on June 1, except that the first 
        members to be appointed to the committee shall serve from the 
        date of their appointment until June 1 immediately following 
        their appointment. 
           Sec. 44.  Minnesota Statutes 1994, section 62L.02, 
        subdivision 16, is amended to read: 
           Subd. 16.  [HEALTH CARRIER.] "Health carrier" means an 
        insurance company licensed under chapter 60A to offer, sell, or 
        issue a policy of accident and sickness insurance as defined in 
        section 62A.01; a health service plan licensed under chapter 
        62C; a health maintenance organization licensed under chapter 
        62D; a community integrated services network and an integrated 
        service network operating under chapter 62N; a fraternal benefit 
        society operating under chapter 64B; a joint self-insurance 
        employee health plan operating under chapter 62H; and a multiple 
        employer welfare arrangement, as defined in United States Code, 
        title 29, section 1002(40), as amended.  For purposes of 
        sections 62L.01 to 62L.12, but not for purposes of sections 
        62L.13 to 62L.22, "health carrier" includes a community 
        integrated service network or integrated service network 
        licensed under chapter 62N.  Any use of this definition in 
        another chapter by reference does not include a community 
        integrated service network or integrated service network, unless 
        otherwise specified.  For the purpose of this chapter, companies 
        that are affiliated companies or that are eligible to file a 
        consolidated tax return must be treated as one health carrier, 
        except that any insurance company or health service plan 
        corporation that is an affiliate of a health maintenance 
        organization located in Minnesota, or any health maintenance 
        organization located in Minnesota that is an affiliate of an 
        insurance company or health service plan corporation, or any 
        health maintenance organization that is an affiliate of another 
        health maintenance organization in Minnesota, may treat the 
        health maintenance organization as a separate health carrier. 
           Sec. 45.  Minnesota Statutes 1994, section 62L.03, 
        subdivision 5, is amended to read: 
           Subd. 5.  [CANCELLATIONS AND FAILURES TO RENEW.] (a) No 
        health carrier shall cancel, decline to issue, or fail to renew 
        a health benefit plan as a result of the claim experience or 
        health status of the persons covered or to be covered by the 
        health benefit plan.  A health carrier may cancel or fail to 
        renew a health benefit plan: 
           (1) for nonpayment of the required premium; 
           (2) for fraud or misrepresentation by the small employer, 
        or, with respect to coverage of an individual eligible employee 
        or dependent, fraud or misrepresentation by the eligible 
        employee or dependent, with respect to eligibility for coverage 
        or any other material fact; 
           (3) if eligible employee participation during the preceding 
        calendar year declines to less than 75 percent, subject to the 
        waiver of coverage provision in subdivision 3; 
           (4) if the employer fails to comply with the minimum 
        contribution percentage required under subdivision 3; 
           (5) if the health carrier ceases to do business in the 
        small employer market under section 62L.09; 
           (6) if a failure to renew is based upon the health 
        carrier's decision to discontinue the health benefit plan form 
        previously issued to the small employer, but only if the health 
        carrier permits each small employer covered under the prior form 
        to switch to its choice of any other health benefit plan offered 
        by the health carrier, without any underwriting restrictions 
        that would not have been permitted for renewal purposes; or 
           (7) for any other reasons or grounds expressly permitted by 
        the respective licensing laws and regulations governing a health 
        carrier, including, but not limited to, service area 
        restrictions imposed on health maintenance organizations under 
        section 62D.03, subdivision 4, paragraph (m), to the extent that 
        these grounds are not expressly inconsistent with this chapter. 
           (b) A health carrier need not renew a health benefit plan, 
        and shall not renew a small employer plan, if an employer ceases 
        to qualify as a small employer as defined in section 62L.02.  If 
        a health benefit plan, other than a small employer plan, 
        provides terms of renewal that do not exclude an employer that 
        is no longer a small employer, the health benefit plan may be 
        renewed according to its own terms.  If a health carrier issues 
        or renews a health plan to an employer that is no longer a small 
        employer, without interruption of coverage, the health plan is 
        subject to section 60A.082.  Between July 1, 1994, and June 30, 
        1995, a health benefit plan in force during this time may be 
        renewed, if the number of employees exceeds two, but does not 
        exceed 49 employees. 
           Sec. 46.  Minnesota Statutes 1994, section 65A.01, is 
        amended by adding a subdivision to read: 
           Subd. 3b.  [RESCISSION AND VOIDABILITY.] This policy must 
        not be rescinded or voided except where the insured has 
        willfully and with intent to defraud concealed or misrepresented 
        a material fact or circumstance concerning this insurance or the 
        subject of this insurance or the interests of the insured in 
        this insurance.  This provision must not operate to defeat a 
        claim by a third party or a minor child of the named insured for 
        damage or loss for which the policy provides coverage. 
           Sec. 47.  Minnesota Statutes 1994, section 65B.06, 
        subdivision 3, is amended to read: 
           Subd. 3.  With respect to all automobiles not included in 
        subdivisions 1 and 2, the facility shall provide: 
           (1) Only the insurance the minimum limits of coverage 
        required by law section 65B.49, subdivisions 2, 3, 3a, and 4a, 
        or higher limits of liability coverage as recommended by the 
        governing committee and approved by the commissioner; 
           (2) for the equitable distribution of qualified applicants 
        for this coverage among the members in accord with the 
        applicable participation ratio, or among these insurance 
        companies as selected under the provisions of the plan of 
        operation; and 
           (3) for a school district or contractor transporting school 
        children under contract with a school district, that amount of 
        automobile liability insurance coverage, not to exceed 
        $1,000,000, required by the school district by resolution or 
        contract, or that portion of such $1,000,000 of coverage for 
        which the school district or contractor applies and for which it 
        is eligible under section 65B.10. 
           Sec. 48.  Minnesota Statutes 1994, section 65B.08, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [FILING.] As agent for members, the 
        facility shall file with the commissioner all manuals of 
        classification, all manuals of rules and rates, all rating 
        plans, and any modifications of same, proposed for use for 
        private passenger nonfleet automobile insurance placed through 
        the facility.  The classifications, rules and rates and any 
        amendments thereto shall be subject to prior written approval by 
        the commissioner.  Rates, surcharge points, and increased limits 
        factors filed by the facility shall not be excessive, 
        inadequate, or unfairly discriminatory.  No other entity, 
        service or organization shall make filings for the facility or 
        the members to apply to insurance placed through the facility. 
           Sec. 49.  Minnesota Statutes 1994, section 65B.09, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [AGENTS' RESPONSIBILITY.] Every person 
        licensed under chapter 60K sections 60K.02 and 60K.03 who is 
        authorized to solicit, negotiate or effect automobile insurance 
        on behalf of any member shall: 
           (1) offer to place coverage through the facility for any 
        qualified applicant who is ineligible or unacceptable for 
        coverage in the insurer or insurers for whom the agent is 
        authorized to solicit, negotiate or effect automobile 
        insurance.  Provided, that the failure of an agent to make such 
        an offer to a qualified applicant shall not subject the agent to 
        any liability to the applicant; 
           (2) forward to the facility all applications and any 
        deposit premiums which are required by the plan of operation, 
        rules and procedures of the facility, if the qualified applicant 
        accepts the offer to have coverage placed through the facility; 
           (3) be entitled to receive compensation for placing 
        insurance through the facility at the uniform rates of 
        compensation as provided in the plan of operation, and all 
        members shall pay such compensation. 
           Sec. 50.  Minnesota Statutes 1994, section 65B.10, 
        subdivision 3, is amended to read: 
           Subd. 3.  [REVIEW OF INSUREDS.] At least annually, every 
        member shall review every private passenger nonfleet applicant 
        which it insures through the facility and determine whether or 
        not such applicant is acceptable for voluntary insurance at a 
        rate lower than the facility rate.  If such applicant is 
        acceptable, the member shall make an offer to insure the 
        applicant under voluntary coverage at such lower rate.  
           Sec. 51.  Minnesota Statutes 1994, section 65B.61, 
        subdivision 1, is amended to read: 
           Subdivision 1.  Basic economic loss benefits shall be 
        primary with respect to benefits, except for those paid or 
        payable under a workers' compensation law, which any person 
        receives or is entitled to receive from any other source as a 
        result of injury arising out of the maintenance or use of a 
        motor vehicle.  Where workers' compensation benefits paid or 
        payable are primary, the reparation obligor shall make an 
        appropriate rebate or reduction in the premiums of the plan of 
        reparation security.  The amount of the rebate or rate reduction 
        shall be not less than the amount of the projected reduction in 
        benefits and claims for which the reparation obligor will be 
        liable on that class of risks.  The projected reduction or 
        rebate in benefits and claims shall be based upon sound 
        actuarial principles.  
           Sec. 52.  Minnesota Statutes 1994, section 72A.20, 
        subdivision 13, is amended to read: 
           Subd. 13.  [REFUSAL TO RENEW.] Refusing to renew, declining 
        to offer or write, or charging differential rates for an 
        equivalent amount of homeowner's insurance coverage, as defined 
        by section 65A.27, for property located in a town or statutory 
        or home rule charter city, in which the insurer offers to sell 
        or writes homeowner's insurance, solely because:  
           (a) of the geographic area in which the property is 
        located; 
           (b) of the age of the primary structure sought to be 
        insured; 
           (c) the insured or prospective insured was denied coverage 
        of the property by another insurer, whether by cancellation, 
        nonrenewal or declination to offer coverage, for a reason other 
        than those specified in section 65A.01, subdivision 3a, clauses 
        (a) to (e); or 
           (d) the property of the insured or prospective insured has 
        been insured under the Minnesota FAIR plan act, shall constitute 
        an unfair method of competition and an unfair and deceptive act 
        or practice.  
           This subdivision prohibits an insurer from filing or 
        charging different rates for different zip code areas within the 
        same town or statutory or home rule charter city. 
           This subdivision shall not prohibit the insurer from 
        applying underwriting or rating standards which the insurer 
        applies generally in all other locations in the state and which 
        are not specifically prohibited by clauses (a) to (d).  Such 
        underwriting or rating standards shall specifically include but 
        not be limited to standards based upon the proximity of the 
        insured property to an extraordinary hazard or based upon the 
        quality or availability of fire protection services or based 
        upon the density or concentration of the insurer's risks.  
        Clause (b) shall not prohibit the use of rating standards based 
        upon the age of the insured structure's plumbing, electrical, 
        heating or cooling system or other part of the structure, the 
        age of which affects the risk of loss.  Any insurer's failure to 
        comply with section 65A.29, subdivisions 2 to 4, either (1) by 
        failing to give an insured or applicant the required notice or 
        statement or (2) by failing to state specifically a bona fide 
        underwriting or other reason for the refusal to write shall 
        create a presumption that the insurer has violated this 
        subdivision.  
           Sec. 53.  Minnesota Statutes 1994, section 72A.20, is 
        amended by adding a subdivision to read: 
           Subd. 34.  [SUITABILITY OF INSURANCE FOR CUSTOMER.] In 
        recommending or issuing life, endowment, individual accident and 
        sickness, long-term care, annuity, life-endowment, or Medicare 
        supplement insurance to a customer, an insurer, either directly 
        or through its agent, must have reasonable grounds for believing 
        that the recommendation is suitable for the customer.  
           In the case of group insurance marketed on a direct 
        response basis without the use of direct agent contact, this 
        subdivision is satisfied if the insurer has reasonable grounds 
        to believe that the insurance offered is generally suitable for 
        the group to whom the offer is made. 
           Sec. 54.  Minnesota Statutes 1994, section 72B.05, is 
        amended to read: 
           72B.05 [NONRESIDENTS.] 
           A nonresident person may become licensed under sections 
        72B.01 to 72B.14, provided that the person meets all of the 
        requirements of sections 72B.01 to 72B.14, and complies with 
        their provisions, and, on a form prescribed by the commissioner, 
        appoints the commissioner as the attorney upon whom may be 
        served all legal process issued in connection with any action or 
        proceeding brought or pending in this state against or involving 
        the licensee and relating to transactions under the license; the 
        appointment shall be irrevocable and shall continue so long as 
        any such action or proceeding could arise or exist.  
           Duplicate copies Service of process shall be served upon 
        the commissioner, accompanied by payment of the fee specified in 
        section 60A.14, subdivision 1(3)(d).  Upon receiving such 
        service, the commissioner shall promptly forward a copy thereof 
        by registered or certified mail, with return receipt requested, 
        to the nonresident licensee at that person's last known 
        address.  Process served upon the commissioner in this manner 
        shall for all purposes constitute personal service thereof upon 
        the licensee must be made in compliance with section 45.028, 
        subdivision 2.  
           Sec. 55.  Minnesota Statutes 1994, section 79.251, 
        subdivision 5, is amended to read: 
           Subd. 5.  [ASSESSMENTS.] The commissioner shall assess all 
        insurers licensed pursuant to section 60A.06, subdivision 1, 
        clause (5), paragraph (b) an amount sufficient to fully fund the 
        obligations of the assigned risk plan, if the commissioner 
        determines that the assets of the assigned risk plan are 
        insufficient to meet its obligations.  The assessment of each 
        insurer shall be in a proportion equal to the proportion which 
        the amount of compensation insurance written in this state 
        during the preceding calendar year by that insurer bears to the 
        total compensation insurance written in this state during the 
        preceding calendar year by all licensed insurers.  
           Amounts assessed under this subdivision are considered a 
        liability of the assigned risk plan, to be repaid upon 
        dissolution of the plan. 
           Sec. 56.  Minnesota Statutes 1994, section 79.251, is 
        amended by adding a subdivision to read: 
           Subd. 8.  [DISSOLUTION.] Upon the dissolution of the 
        assigned risk plan, the commissioner shall proceed to wind up 
        the affairs of the plan, settle its accounts, and dispose of its 
        assets.  The assets and property of the assigned risk plan must 
        be applied and distributed in the following order of priority: 
           (1) to the establishment of reserves for claims under 
        policies and contracts of coverage issued by the assigned risk 
        plan before termination; 
           (2) to the payment of all debts and liabilities of the 
        assigned risk plan, including the repayment of loans and 
        assessments; 
           (3) to the establishment of reserves considered necessary 
        by the commissioner for contingent liabilities or obligations of 
        the assigned risk plan other than claims arising under policies 
        and contracts of coverage; and 
           (4) to the state of Minnesota. 
           If the commissioner determines that the assets of the 
        assigned risk plan are insufficient to meet its obligations 
        under clauses (1), (2), and (3), excluding the repayment of 
        assessments, the commissioner shall assess all insurers licensed 
        pursuant to section 60A.06, subdivision 1, clause (5), paragraph 
        (b), an amount sufficient to fully fund these obligations. 
           Sec. 57.  Minnesota Statutes 1994, section 79.34, 
        subdivision 2, is amended to read: 
           Subd. 2.  [LOSSES; RETENTION LIMITS.] The reinsurance 
        association shall provide and each member shall accept 
        indemnification for 100 percent of the amount of ultimate loss 
        sustained in each loss occurrence relating to one or more claims 
        arising out of a single compensable event, including aggregate 
        losses related to a single event or occurrence which constitutes 
        a single loss occurrence, under chapter 176 on and after October 
        1, 1979, in excess of $300,000 or $100,000 a low, a high, or a 
        super retention limit, at the option of the member.  In case of 
        occupational disease causing disablement on and after October 1, 
        1979, each person suffering disablement due to occupational 
        disease is considered to be involved in a separate loss 
        occurrence.  The lower retention limit shall be increased to the 
        nearest $10,000, on January 1, 1982 and on each January 1 
        thereafter by the percentage increase in the statewide average 
        weekly wage, as determined in accordance with section 176.011, 
        subdivision 20.  On January 1, 1982 and on each January 1 
        thereafter, the higher retention limit shall be increased by the 
        amount necessary to retain a $200,000 difference between the two 
        retention limits.  On January 1, 1995, the lower retention limit 
        is $250,000, which shall also be known as the 1995 base 
        retention limit.  On each January 1 thereafter, the cumulative 
        annual percentage changes in the statewide average weekly wage 
        after October 1, 1994, as determined in accordance with section 
        176.011, subdivision 20, shall first be multiplied by the 1995 
        base retention limit, the result of which shall then be added to 
        the 1995 base retention limit.  The resulting figure shall be 
        rounded to the nearest $10,000, yielding the low retention limit 
        for that year, provided that the low retention limit shall not 
        be reduced in any year.  The high retention limit shall be two 
        times the low retention limit and shall be adjusted when the low 
        retention limit is adjusted.  The super retention period shall 
        be four times the low retention period and shall be adjusted 
        when the low retention limit is adjusted.  Ultimate loss as used 
        in this section means the actual loss amount which a member is 
        obligated to pay and which is paid by the member for workers' 
        compensation benefits payable under chapter 176 and shall not 
        include claim expenses, assessments, damages or penalties.  For 
        losses incurred on or after January 1, 1979, any amounts paid by 
        a member pursuant to sections 176.183, 176.221, 176.225, and 
        176.82 shall not be included in ultimate loss and shall not be 
        indemnified by the reinsurance association.  A loss is incurred 
        by the reinsurance association on the date on which the accident 
        or other compensable event giving rise to the loss occurs, and a 
        member is liable for a loss up to its retention limit in effect 
        at the time that the loss was incurred, except that members 
        which are determined by the reinsurance association to be 
        controlled by or under common control with another member, and 
        which are liable for claims from one or more employees entitled 
        to compensation for a single compensable event, including 
        aggregate losses relating to a single loss occurrence, may 
        aggregate their losses and obtain indemnification from the 
        reinsurance association for the aggregate losses in excess of 
        the higher highest retention limit selected by any of the 
        members in effect at the time the loss was incurred.  Each 
        member is liable for payment of its ultimate loss and shall be 
        entitled to indemnification from the reinsurance association for 
        the ultimate loss in excess of the member's retention limit in 
        effect at the time of the loss occurrence. 
           A member that chooses the higher high or super retention 
        limit shall retain the liability for all losses below the higher 
        chosen retention limit itself and shall not transfer the 
        liability to any other entity or reinsure or otherwise contract 
        for reimbursement or indemnification for losses below its 
        retention limit, except in the following cases:  (a) when the 
        reinsurance or contract is with another member which, directly 
        or indirectly, through one or more intermediaries, control or 
        are controlled by or are under common control with the member; 
        (b) when the reinsurance or contract provides for reimbursement 
        or indemnification of a member if and only if the total of all 
        claims which the member pays or incurs, but which are not 
        reimbursable or subject to indemnification by the reinsurance 
        association for a given period of time, exceeds a dollar value 
        or percentage of premium written or earned and stated in the 
        reinsurance agreement or contract; (c) when the reinsurance or 
        contract is a pooling arrangement with other insurers where 
        liability of the member to pay claims pursuant to chapter 176 is 
        incidental to participation in the pool and not as a result of 
        providing workers' compensation insurance to employers on a 
        direct basis under chapter 176; (d) when the reinsurance or 
        contract is limited to all the claims of a specific insured of a 
        member which are reimbursed or indemnified by a reinsurer which, 
        directly or indirectly, through one or more intermediaries, 
        controls or is controlled by or is under common control with the 
        insured of the member so long as any subsequent contract or 
        reinsurance of the reinsurer relating to the claims of the 
        insured of a member is not inconsistent with the bases of 
        exception provided under clauses (a), (b) and (c); or (e) when 
        the reinsurance or contract is limited to all claims of a 
        specific self-insurer member which are reimbursed or indemnified 
        by a reinsurer which, directly or indirectly, through one or 
        more intermediaries, controls or is controlled by or is under 
        common control with the self-insurer member so long as any 
        subsequent contract or reinsurance of the reinsurer relating to 
        the claims of the self-insurer member are not inconsistent with 
        the bases for exception provided under clauses (a), (b) and (c). 
           Whenever it appears to the commissioner of labor and 
        industry that any member that chooses the higher high or super 
        retention limit has participated in the transfer of liability to 
        any other entity or reinsured or otherwise contracted for 
        reimbursement or indemnification of losses below its retention 
        limit in a manner inconsistent with the bases for exception 
        provided under clauses (a), (b), (c), (d), and (e), the 
        commissioner may, after giving notice and an opportunity to be 
        heard, order the member to pay to the state of Minnesota an 
        amount not to exceed twice the difference between the 
        reinsurance premium for the higher and lower high or super 
        retention limit, as appropriate, and the low retention limit 
        applicable to the member for each year in which the prohibited 
        reinsurance or contract was in effect.  Any member subject to 
        this penalty provision shall continue to be bound by its 
        selection of the higher high or super retention limit for 
        purposes of membership in the reinsurance association.  
           Sec. 58.  Minnesota Statutes 1994, section 79.35, is 
        amended to read: 
           79.35 [DUTIES; RESPONSIBILITIES; POWERS.] 
           The reinsurance association shall do the following on 
        behalf of its members: 
           (a) Assume 100 percent of the liability as provided in 
        section 79.34; 
           (b) Establish procedures by which members shall promptly 
        report to the reinsurance association each claim which, on the 
        basis of the injury sustained, may reasonably be anticipated to 
        involve liability to the reinsurance association if the member 
        is held liable under chapter 176.  Solely for the purpose of 
        reporting claims, the member shall in all instances consider 
        itself legally liable for the injury.  The member shall advise 
        the reinsurance association of subsequent developments likely to 
        materially affect the interest of the reinsurance association in 
        the claim; 
           (c) Maintain relevant loss and expense data relative to all 
        liabilities of the reinsurance association and require each 
        member to furnish statistics in connection with liabilities of 
        the reinsurance association at the times and in the form and 
        detail as may be required by the plan of operation; 
           (d) Calculate and charge to members a total premium 
        sufficient to cover the expected liability which the reinsurance 
        association will incur in excess of the higher retention limit 
        but less than the prefunded limit, together with incurred or 
        estimated to be incurred operating and administrative expenses 
        for the period to which this premium applies and actual claim 
        payments to be made by members, during the period to which this 
        premium applies, for claims in excess of the prefunded limit in 
        effect at the time the loss was incurred.  Each member shall be 
        charged a premium established by the board as sufficient to 
        cover the reinsurance association's incurred liabilities and 
        expenses between the member's selected retention limit and the 
        prefunded limit.  The prefunded limit shall be $2,500,000 on and 
        after October 1, 1979, provided that the prefunded limit shall 
        be increased on January 1, 1983 and on each January 1 thereafter 
        by the percentage increase in the statewide average weekly wage, 
        to the nearest $100,000, as determined in accordance with 
        section 176.011, subdivision 20 times the lower retention limit 
        established in section 79.34, subdivision 2.  Each member shall 
        be charged a proportion of the total premium calculated for its 
        selected retention limit in an amount equal to its proportion of 
        the exposure base of all members during the period to which the 
        reinsurance association premium will apply.  The exposure base 
        shall be determined by the board and is subject to the approval 
        of the commissioner of labor and industry.  In determining the 
        exposure base, the board shall consider, among other things, 
        equity, administrative convenience, records maintained by 
        members, amenability to audit, and degree of risk 
        refinement.  Each member exercising the lower retention option 
        shall also be charged a premium established by the board as 
        sufficient to cover incurred or estimated to be incurred claims 
        for the liability the reinsurance association is likely to incur 
        between the lower and higher retention limits for the period to 
        which the premium applies.  Each member shall also be charged a 
        premium determined by the board to equitably distribute excess 
        or deficient premiums from previous periods including any excess 
        or deficient premiums resulting from a retroactive change in the 
        prefunded limit.  The premiums charged to members shall not be 
        unfairly discriminatory as defined in section 79.074.  All 
        premiums shall be approved by the commissioner of labor and 
        industry; 
           (e) Require and accept the payment of premiums from members 
        of the reinsurance association; 
           (f) Receive and distribute all sums required by the 
        operation of the reinsurance association; 
           (g) Establish procedures for reviewing claims procedures 
        and practices of members of the reinsurance association.  If the 
        claims procedures or practices of a member are considered 
        inadequate to properly service the liabilities of the 
        reinsurance association, the reinsurance association may 
        undertake, or may contract with another person, including 
        another member, to adjust or assist in the adjustment of claims 
        which create a potential liability to the association.  The 
        reinsurance association may charge the cost of the adjustment 
        under this paragraph to the member, except that any penalties or 
        interest incurred under sections 176.183, 176.221, 176.225, and 
        176.82 as a result of actions by the reinsurance association 
        after it has undertaken adjustment of the claim shall not be 
        charged to the member but shall be included in the ultimate loss 
        and listed as a separate item; and 
           (h) Provide each member of the reinsurance association with 
        an annual report of the operations of the reinsurance 
        association in a form the board of directors may specify. 
           Sec. 59.  Minnesota Statutes 1994, section 79A.01, is 
        amended by adding a subdivision to read: 
           Subd. 10.  [COMMON CLAIMS FUND.] "Common claims fund," with 
        respect to group self-insurers, are the cash, cash equivalents, 
        or investment accounts maintained by the group to pay its 
        workers' compensation liabilities.  
           Sec. 60.  Minnesota Statutes 1994, section 79A.02, 
        subdivision 4, is amended to read: 
           Subd. 4.  [RECOMMENDATIONS TO COMMISSIONER REGARDING 
        REVOCATION.] After each fifth anniversary from the date each 
        individual and group self-insurer becomes certified to 
        self-insure, the committee shall review all relevant financial 
        data filed with the department of commerce that is otherwise 
        available to the public and make a recommendation to the 
        commissioner about whether each self-insurer's certificate 
        should be revoked.  For group self-insurers who have been in 
        existence for five years or more and have been granted renewal 
        authority, a level of funding in the common claims fund must be 
        maintained at not less than the greater of either:  (1) one 
        year's claim losses paid in the most recent year; or (2) 
        one-third of the security deposit posted with the department of 
        commerce according to section 79A.04, subdivision 2.  
           Sec. 61.  Minnesota Statutes 1994, section 79A.03, is 
        amended by adding a subdivision to read: 
           Subd. 4a.  [EXCEPTIONS.] Notwithstanding the requirements 
        of subdivisions 3 and 4, the commissioner, pursuant to a review 
        of an existing self-insurer's financial data, may continue a 
        self-insurer's authority to self-insure for one year if, in the 
        commissioner's judgment based on all factors relevant to the 
        self-insurer's financial status, the self-insurer will be able 
        to meet its obligations under this chapter for the following 
        year.  The relevant factors to be considered must include, but 
        must not be limited to, the liquidity ratios, leverage ratios, 
        and profitability ratios of the self-insurer.  Where a 
        self-insurer's authority to self-insure is continued under this 
        subdivision, the self-insurer may be required to post security 
        in the amount equal to two times the amount of security required 
        under section 79A.04, subdivision 2. 
           Sec. 62.  Minnesota Statutes 1994, section 176.181, 
        subdivision 2, is amended to read: 
           Subd. 2.  [COMPULSORY INSURANCE; SELF-INSURERS.] (1) Every 
        employer, except the state and its municipal subdivisions, 
        liable under this chapter to pay compensation shall insure 
        payment of compensation with some insurance carrier authorized 
        to insure workers' compensation liability in this state, or 
        obtain a written order from the commissioner of commerce 
        exempting the employer from insuring liability for compensation 
        and permitting self-insurance of the liability.  The terms, 
        conditions and requirements governing self-insurance shall be 
        established by the commissioner pursuant to chapter 14.  The 
        commissioner of commerce shall also adopt, pursuant to clause 
        (2)(c), rules permitting two or more employers, whether or not 
        they are in the same industry, to enter into agreements to pool 
        their liabilities under this chapter for the purpose of 
        qualifying as group self-insurers.  With the approval of the 
        commissioner of commerce, any employer may exclude medical, 
        chiropractic and hospital benefits as required by this chapter.  
        An employer conducting distinct operations at different 
        locations may either insure or self-insure the other portion of 
        operations as a distinct and separate risk.  An employer 
        desiring to be exempted from insuring liability for compensation 
        shall make application to the commissioner of commerce, showing 
        financial ability to pay the compensation, whereupon by written 
        order the commissioner of commerce, on deeming it proper, may 
        make an exemption.  An employer may establish financial ability 
        to pay compensation by providing financial statements of the 
        employer to the commissioner of commerce.  Upon ten days' 
        written notice the commissioner of commerce may revoke the order 
        granting an exemption, in which event the employer shall 
        immediately insure the liability.  As a condition for the 
        granting of an exemption the commissioner of commerce may 
        require the employer to furnish security the commissioner of 
        commerce considers sufficient to insure payment of all claims 
        under this chapter, consistent with subdivision 2b.  If the 
        required security is in the form of currency or negotiable 
        bonds, the commissioner of commerce shall deposit it with the 
        state treasurer.  In the event of any default upon the part of a 
        self-insurer to abide by any final order or decision of the 
        commissioner of labor and industry directing and awarding 
        payment of compensation and benefits to any employee or the 
        dependents of any deceased employee, then upon at least ten days 
        notice to the self-insurer, the commissioner of commerce may by 
        written order to the state treasurer require the treasurer to 
        sell the pledged and assigned securities or a part thereof 
        necessary to pay the full amount of any such claim or award with 
        interest thereon.  This authority to sell may be exercised from 
        time to time to satisfy any order or award of the commissioner 
        of labor and industry or any judgment obtained thereon.  When 
        securities are sold the money obtained shall be deposited in the 
        state treasury to the credit of the commissioner of commerce and 
        awards made against any such self-insurer by the commissioner of 
        commerce shall be paid to the persons entitled thereto by the 
        state treasurer upon warrants prepared by the commissioner of 
        commerce and approved by the commissioner of finance out of the 
        proceeds of the sale of securities.  Where the security is in 
        the form of a surety bond or personal guaranty the commissioner 
        of commerce, at any time, upon at least ten days notice and 
        opportunity to be heard, may require the surety to pay the 
        amount of the award, the payments to be enforced in like manner 
        as the award may be enforced. 
           (2)(a) No association, corporation, partnership, sole 
        proprietorship, trust or other business entity shall provide 
        services in the design, establishment or administration of a 
        group self-insurance plan under rules adopted pursuant to this 
        subdivision unless it is licensed, or exempt from licensure, 
        pursuant to section 60A.23, subdivision 8, to do so by the 
        commissioner of commerce.  An applicant for a license shall 
        state in writing the type of activities it seeks authorization 
        to engage in and the type of services it seeks authorization to 
        provide.  The license shall be granted only when the 
        commissioner of commerce is satisfied that the entity possesses 
        the necessary organization, background, expertise, and financial 
        integrity to supply the services sought to be offered.  The 
        commissioner of commerce may issue a license subject to 
        restrictions or limitations, including restrictions or 
        limitations on the type of services which may be supplied or the 
        activities which may be engaged in.  The license is for a 
        two-year period. 
           (b) To assure that group self-insurance plans are 
        financially solvent, administered in a fair and capable fashion, 
        and able to process claims and pay benefits in a prompt, fair 
        and equitable manner, entities licensed to engage in such 
        business are subject to supervision and examination by the 
        commissioner of commerce. 
           (c) To carry out the purposes of this subdivision, the 
        commissioner of commerce may promulgate administrative rules, 
        including emergency rules, pursuant to sections 14.001 to 14.69. 
        These rules may: 
           (i) establish reporting requirements for administrators of 
        group self-insurance plans; 
           (ii) establish standards and guidelines consistent with 
        subdivision 2b to assure the adequacy of the financing and 
        administration of group self-insurance plans; 
           (iii) establish bonding requirements or other provisions 
        assuring the financial integrity of entities administering group 
        self-insurance plans; 
           (iv) establish standards, including but not limited to 
        minimum terms of membership in self-insurance plans, as 
        necessary to provide stability for those plans; 
           (v) establish standards or guidelines governing the 
        formation, operation, administration, and dissolution of 
        self-insurance plans; and 
           (vi) establish other reasonable requirements to further the 
        purposes of this subdivision.  The rules may not require 
        excessive cash payments to a common claims fund by group 
        self-insurers.  However, a level of funding in the common claims 
        fund must always be maintained at not less than one year's claim 
        losses paid in the most recent year. 
           Sec. 63.  Minnesota Statutes 1994, section 299F.053, 
        subdivision 2, is amended to read: 
           Subd. 2.  [AUTHORIZED PERSON.] "Authorized person" means:  
           (a) the state fire marshal when authorized or charged with 
        the investigation of fires at the place where the fire actually 
        took place; 
           (b) superintendent of the bureau of criminal apprehension; 
           (c) the prosecuting attorney responsible for prosecutions 
        in the county where the fire occurred; 
           (d) the sheriff or chief of police responsible for 
        investigation in the county where the fire occurred; 
           (e) the county attorney responsible for the prosecution in 
        the county where the fire occurred; 
           (f) the Federal Bureau of Investigation or any other 
        federal agency; 
           (g) the United States attorney's office when authorized or 
        charged with investigation or prosecution of a case involving a 
        fire loss; or 
           (h) the chief administrative officer of the municipal arson 
        squad; or 
           (i) the commissioner of commerce. 
           Sec. 64.  Minnesota Statutes 1994, section 515A.3-112, is 
        amended to read: 
           515A.3-112 [INSURANCE.] 
           (a) Commencing not later than the time of the first 
        conveyance of a unit to a unit owner other than a declarant, the 
        association shall maintain, to the extent reasonably available: 
           (1) Property insurance on the common elements and units, 
        exclusive of land, excavations, foundations, and other items 
        normally excluded from property policies, insuring against all 
        risks of direct physical loss.  The total amount of insurance 
        after application of any deductibles shall be not less than 80 
        percent of the full insurable replacement cost of the insured 
        property.  The association or its authorized agent may enter a 
        unit at reasonable times upon reasonable notice for the purpose 
        of making appraisals for insurance purposes.  
           (2) Comprehensive general liability insurance, in an amount 
        determined by the board of directors but not less than any 
        amount specified in the declaration, covering all occurrences 
        commonly insured against for death, bodily injury, and property 
        damage arising out of or in connection with the use, ownership, 
        or maintenance of the common elements. 
           (b) If the insurance described in subsection (a) is not 
        maintained, the association shall immediately cause notice of 
        that fact to be sent postage prepaid by United States mail to 
        all unit owners at their respective units and other addresses 
        provided to the association.  The declaration may require the 
        association to carry any other insurance, and the association in 
        any event may carry any other insurance it deems appropriate to 
        protect the association or the unit owners. 
           (c) Insurance policies carried pursuant to subsection (a) 
        shall provide that: 
           (1) Each unit owner and holder of a vendor's interest in a 
        contract for deed is an insured person under the policy with 
        respect to liability arising out of ownership of an undivided 
        interest in the common elements; 
           (2) The insurer waives its right to subrogation under the 
        policy against any unit owner of the condominium or members of 
        the unit owner's household and against the association and 
        members of the board of directors; 
           (3) No act or omission by any unit owner or holder of an 
        interest as security for an obligation, unless acting within the 
        scope of authority on behalf of the association, shall void the 
        policy or be a condition to recovery under the policy; and 
           (4) If, at the time of a loss under the policy, there is 
        other insurance in the name of a unit owner covering the same 
        property covered by the policy, the policy is primary insurance 
        not contributing with the other insurance. 
           (d) Any loss covered by the property policy under 
        subsection (a)(1) shall be adjusted with the association, but 
        the insurance proceeds for that loss shall be payable to any 
        insurance trustee designated for that purpose, or otherwise to 
        the association.  The insurance trustee or the association shall 
        hold any insurance proceeds in trust for unit owners and holders 
        of an interest as security for an obligation as their interests 
        may appear.  The proceeds shall be disbursed first for the 
        repair or restoration of the damaged common elements and units, 
        and unit owners and holders of an interest as security for an 
        obligation are not entitled to receive payment of any portion of 
        the proceeds unless there is a surplus of proceeds after the 
        common elements and units have been completely repaired or 
        restored, or the condominium is terminated. 
           (e) An insurance policy issued to the association does not 
        prevent a unit owner from obtaining insurance for personal 
        benefit. 
           (f) An insurer that has issued an insurance policy under 
        this section shall issue certificates or memoranda of insurance, 
        upon request, to any unit owner, or holder of an interest as 
        security for an obligation.  The insurance may not be canceled 
        until 30 60 days after notice of the proposed cancellation has 
        been mailed to the association and to each unit owner and holder 
        of an interest as security for an obligation to whom 
        certificates of insurance have been issued. 
           (g) Any portion of the condominium damaged or destroyed 
        shall be promptly repaired or replaced by the association unless 
        (1) the condominium is terminated and the association votes not 
        to repair or replace all or part thereof, (2) repair or 
        replacement would be illegal under any state or local health or 
        safety statute or ordinance, or (3) 80 percent of the unit 
        owners, including every owner and first mortgagee of a unit or 
        assigned limited common element which will not be rebuilt, vote 
        not to rebuild.  The cost of repair or replacement of a unit or 
        the common area in excess of insurance proceeds and reserves 
        shall be a common expense.  If less than the entire condominium 
        is repaired or replaced, (1) the insurance proceeds attributable 
        to the damaged common elements shall be used to restore the 
        damaged area to a condition compatible with the remainder of the 
        condominium, (2) the insurance proceeds attributable to units 
        and limited common elements which are not rebuilt shall be 
        distributed to the owners of those units and the holders of an 
        interest as security for an obligation of those units and the 
        owners and holders of an interest as security for an obligation 
        of the units to which those limited common elements were 
        assigned, as their interests may appear, and (3) the remainder 
        of the proceeds shall be distributed to all the unit owners and 
        holders of an interest as security for an obligation as their 
        interests may appear in proportion to their common element 
        interest.  In the event the unit owners vote not to rebuild a 
        unit, that unit's entire common element interest, votes in the 
        association, and common expense liability are automatically 
        reallocated upon the vote as if the unit had been condemned 
        under section 515A.1-107(a), and the association shall promptly 
        prepare, execute and record an amendment to the declaration 
        reflecting the reallocations.  Notwithstanding the provisions of 
        this subsection, if the condominium is terminated, insurance 
        proceeds not used for repair or replacement shall be distributed 
        in the same manner as sales proceeds pursuant to section 
        515A.2-120.  
           (h) The provisions of this section may be varied or waived 
        in the case of a condominium all of the units of which are 
        restricted to nonresidential use. 
           Sec. 65.  Minnesota Statutes 1994, section 515B.3-113, is 
        amended to read: 
           515B.3-113 [INSURANCE.] 
           (a) Commencing not later than the time of the first 
        conveyance of a unit to a unit owner other than a declarant, the 
        association shall maintain, to the extent reasonably available: 
           (1) subject to subsection (b), property insurance (i) on 
        the common elements and, in a planned community, also on 
        property that must become common elements, (ii) for broad form 
        covered causes of loss, and (iii) in a total amount of not less 
        than the full insurable replacement cost of the insured 
        property, less deductibles, at the time the insurance is 
        purchased and at each renewal date, exclusive of items normally 
        excluded from property policies; and 
           (2) commercial general liability insurance against claims 
        and liabilities arising in connection with the ownership, 
        existence, use or management of the property in an amount, if 
        any, specified by the common interest community instruments or 
        otherwise deemed sufficient in the judgment of the board, 
        insuring the board, the association, the management agent, and 
        their respective employees, agents and all persons acting as 
        agents.  The declarant shall be included as an additional 
        insured in its capacity as a unit owner or board member.  The 
        unit owners shall be included as additional insureds but only 
        for claims and liabilities arising in connection with the 
        ownership, existence, use or management of the common elements.  
        The insurance shall cover claims of one or more insured parties 
        against other insured parties. 
           (b) In the case of a common interest community that 
        contains units sharing or having contiguous walls, siding or 
        roofs, the insurance maintained under subsection (a)(1) shall 
        include the units and the common elements.  The insurance need 
        not cover improvements and betterments to the units installed by 
        unit owners, but if improvements and betterments are covered, 
        any increased cost may be assessed by the association against 
        the units affected.  The association may, in the case of a claim 
        for damage to a unit or units, (i) pay the deductible amount as 
        a common expense, (ii) assess the deductible amount against the 
        units affected in any reasonable manner, or (iii) require the 
        unit owners of the units affected to pay the deductible amount 
        directly. 
           (c) If the insurance described in subsections (a) and (b) 
        is not reasonably available, the association shall promptly 
        cause notice of that fact to be hand delivered or sent prepaid 
        by United States mail to all unit owners.  The declaration may 
        require the association to carry any other insurance, and the 
        association in any event may carry any other insurance it 
        considers appropriate to protect the association, the unit 
        owners or officers, directors or agents of the association. 
           (d) Insurance policies carried pursuant to subsections (a) 
        and (b) shall provide that: 
           (1) each unit owner and secured party is an insured person 
        under the policy with respect to liability arising out of the 
        unit owner's interest in the common elements or membership in 
        the association; 
           (2) the insurer waives its right to subrogation under the 
        policy against any unit owner of the condominium or members of 
        the unit owner's household and against the association and 
        members of the board of directors; 
           (3) no act or omission by any unit owner or secured party, 
        unless acting within the scope of authority on behalf of the 
        association, shall void the policy or be a condition to recovery 
        under the policy; and 
           (4) if at the time of a loss under the policy there is 
        other insurance in the name of a unit owner covering the same 
        property covered by the policy, the association's policy is 
        primary insurance. 
           (e) Any loss covered by the property policy under 
        subsection (a)(1) shall be adjusted by and with the association. 
        The insurance proceeds for that loss shall be payable to the 
        association, or to an insurance trustee designated by the 
        association for that purpose.  The insurance trustee or the 
        association shall hold any insurance proceeds in trust for unit 
        owners and secured parties as their interests may appear.  The 
        proceeds shall be disbursed first for the repair or restoration 
        of the damaged common elements and units.  Unit owners and 
        secured parties are not entitled to receive any portion of the 
        proceeds unless there is a surplus of proceeds after the common 
        elements and units have been completely repaired or restored or 
        the common interest community is terminated. 
           (f) Unit owners may obtain insurance for personal benefit 
        in addition to insurance carried by the association. 
           (g) An insurer that has issued an insurance policy under 
        this section shall issue certificates or memoranda of insurance, 
        upon request, to any unit owner or secured party.  The insurance 
        may not be canceled until 30 60 days after notice of the 
        proposed cancellation has been mailed to the association, each 
        unit owner and each secured party for an obligation to whom 
        certificates of insurance have been issued. 
           (h) Any portion of the common interest community which is 
        damaged or destroyed as the result of a loss covered by the 
        association's insurance shall be promptly repaired or replaced 
        by the association unless (i) the common interest community is 
        terminated and the association votes not to repair or replace 
        all or part thereof, (ii) repair or replacement would be illegal 
        under any state or local health or safety statute or ordinance, 
        or (iii) 80 percent of the unit owners, including every owner 
        and holder of a first mortgage on a unit or assigned limited 
        common element which will not be rebuilt, vote not to rebuild.  
        The cost of repair or replacement of the common elements in 
        excess of insurance proceeds and reserves shall be paid as a 
        common expense, and the cost of repair of a unit in excess of 
        insurance proceeds shall be paid by the respective unit owner. 
           (i) If less than the entire common interest community is 
        repaired or replaced, (i) the insurance proceeds attributable to 
        the damaged common elements shall be used to restore the damaged 
        area to a condition compatible with the remainder of the common 
        interest community, (ii) the insurance proceeds attributable to 
        units and limited common elements which are not rebuilt shall be 
        distributed to the owners of those units, including units to 
        which the limited common elements were assigned, and the secured 
        parties of those units, as their interests may appear, and (iii) 
        the remainder of the proceeds shall be distributed to all the 
        unit owners and secured parties as their interests may appear in 
        proportion to their common element interest in the case of a 
        condominium or in proportion to their common expense liability 
        in the case of a planned community or cooperative. 
           (j) If the unit owners and holders of first mortgages vote 
        not to rebuild a unit, that unit's entire common element 
        interest, votes in the association, and common expense liability 
        are automatically reallocated upon the vote as if the unit had 
        been condemned under section 515B.1-107, and the association 
        shall promptly prepare, execute and record an amendment to the 
        declaration reflecting the reallocations.  Notwithstanding the 
        provisions of this subsection, if the common interest community 
        is terminated, insurance proceeds not used for repair or 
        replacement shall be distributed in the same manner as sales 
        proceeds pursuant to section 515B.2-119. 
           (k) The provisions of this section may be varied or waived 
        in the case of a common interest community in which all units 
        are restricted to nonresidential use. 
           Sec. 66.  [REPORT ON MANDATED INSURANCE DISCLOSURES AND 
        NOTICES.] 
           The commissioner of commerce shall report to the 
        legislature by February 1, 1996, on the status of insurance 
        disclosures and notices that are required by law to be 
        distributed with insurance applications, marketing materials, or 
        claim forms.  The report shall include recommendations on the 
        disclosures or notices that are no longer necessary and a 
        recommendation for consolidation of all legally required 
        disclosures or notices on a single disclosure form. 
           Sec. 67.  [REPEALER.] 
           Minnesota Statutes 1994, sections 61A.072, subdivision 3; 
        and 65B.07, subdivision 5, are repealed. 
           Sec. 68.  [EFFECTIVE DATES.] 
           Sections 1 to 4, 6 to 13, 16 to 18, 20, 22 to 25, 29, 31 to 
        35, 38, 40, 42, 43, 46, 53, 54, 56, 59 to 63, and 67 are 
        effective the day following final enactment. 
           Section 14 is effective January 1, 1997. 
           Section 39 is effective July 1, 1995. 
           Section 44 is effective retroactive to January 1, 1995. 
           Sections 57 and 58 are effective January 1, 1996. 
           Sections 26, 27, and 37 are effective January 1, 1996, and 
        apply to coverage issued or renewed on or after that date. 
           Section 28 is effective the day following final enactment 
        and applies to health plans offered, issued, sold, or renewed to 
        provide coverage to a Minnesota resident on or after that date. 
           Section 41 is effective July 1, 1995, and applies to 
        coverage issued or renewed on or after that date. 
           Section 45 is effective retroactive to July 1, 1994. 
           Presented to the governor May 30, 1995 
           Signed by the governor June 1, 1995, 11:40 a.m.