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

                            CHAPTER 285-H.F.No. 2258 
                  An act relating to commerce; establishing risk-based 
                  capital requirements for health organizations; 
                  establishing the minimum standard of valuation for 
                  health insurance; enacting model regulations of the 
                  National Association of Insurance Commissioners; 
                  regulating loss revenue certifications; regulating 
                  disclosure of information to certain investigatory 
                  entities; amending Minnesota Statutes 2002, sections 
                  45.027, subdivision 7a; 60A.03, subdivision 9; 
                  60A.031, subdivision 4; 60A.129, subdivision 2; 
                  62C.09, by adding a subdivision; 62D.04, subdivision 
                  1; 62D.041, subdivision 2; 62D.042, subdivisions 1, 2; 
                  62N.25, subdivision 6; 62N.27, subdivision 1; 62N.29; 
                  proposing coding for new law in Minnesota Statutes, 
                  chapter 60A; repealing Minnesota Statutes 2002, 
                  sections 62C.09, subdivisions 3, 4; 62D.042, 
                  subdivisions 5, 6, 7; 62D.043; Minnesota Rules, part 
                  4685.0600. 
        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 

                                   ARTICLE 1 
                  RISK-BASED CAPITAL FOR HEALTH ORGANIZATIONS 
           Section 1.  [60A.50] [DEFINITIONS.] 
           Subdivision 1.  [SCOPE.] For purposes of sections 60A.50 to 
        60A.592 the terms in subdivisions 2 to 13 have the meanings 
        given them. 
           Subd. 2.  [ADJUSTED RBC REPORT] "Adjusted RBC report" means 
        an RBC report which has been adjusted by the commissioner in 
        accordance with section 60A.51, subdivision 3. 
           Subd. 3.  [COMMISSIONER.] "Commissioner" means the 
        commissioner of commerce or the commissioner of health, 
        whichever commissioner otherwise regulates the health 
        organization. 
           Subd. 4.  [CORRECTIVE ORDER.] "Corrective order" means an 
        order issued by the commissioner specifying corrective actions 
        which the commissioner has determined are required.  
           Subd. 5.  [DOMESTIC HEALTH ORGANIZATION.] "Domestic health 
        organization" means a health organization domiciled in this 
        state. 
           Subd. 6.  [FOREIGN HEALTH ORGANIZATION.] "Foreign health 
        organization" means a health organization that is licensed to do 
        business in this state but is not domiciled in this state. 
           Subd. 7.  [NAIC.] "NAIC" means the National Association of 
        Insurance Commissioners. 
           Subd. 8.  [HEALTH ORGANIZATION.] "Health organization" 
        means an entity licensed under this chapter or chapter 62C or 
        62D.  This definition does not include an organization that is 
        licensed or regulated as either a life and health insurer or a 
        property and casualty insurer that is otherwise subject to 
        either the life or property and casualty risk-based capital 
        requirements. 
           Subd. 9.  [RBC INSTRUCTIONS.] "RBC instructions" means the 
        RBC report including risk-based capital instructions adopted by 
        the NAIC, as these RBC instructions may be amended by the NAIC 
        from time to time in accordance with the procedures adopted by 
        the NAIC. 
           Subd. 10.  [RBC LEVEL.] "RBC level" means a health 
        organization's company action level RBC, regulatory action level 
        RBC, authorized control level RBC, or mandatory control level 
        RBC where: 
           (1) "company action level RBC" means, with respect to any 
        health organization, the product of 2.0 and its authorized 
        control level RBC; 
           (2) "regulatory action level RBC" means the product of 1.5 
        and its authorized control level RBC; 
           (3) "authorized control level RBC" means the number 
        determined under the risk-based capital formula in accordance 
        with the RBC instructions; and 
           (4) "mandatory control level RBC" means the product of .70 
        and the authorized control level RBC. 
           Subd. 11.  [RBC PLAN.] "RBC plan" means a comprehensive 
        financial plan containing the elements specified in section 
        60A.52, subdivision 2.  If the commissioner rejects the RBC 
        plan, and it is revised by the health organization, with or 
        without the commissioner's recommendation, the plan must be 
        called the "revised RBC plan." 
           Subd. 12.  [RBC REPORT.] "RBC report" means the report 
        required in section 60A.51. 
           Subd. 13.  [TOTAL ADJUSTED CAPITAL.] "Total adjusted 
        capital" means the sum of: 
           (1) a health organization's statutory capital and surplus 
        as determined in accordance with the statutory accounting 
        applicable to the annual financial statements required to be 
        filed; and 
           (2) such other items, if any, as the RBC instructions may 
        provide. 
           Sec. 2.  [60A.51] [RBC REPORTS.] 
           Subdivision 1.  [SUBMISSIONS.] A domestic health 
        organization shall, on or before each April 1, prepare and 
        submit to the commissioner a report of its RBC levels as of the 
        end of the calendar year just ended, in a form and containing 
        the information required by the RBC instructions.  In addition, 
        a domestic health organization shall file its RBC report: 
           (1) with the NAIC in accordance with the RBC instructions; 
        and 
           (2) with the insurance commissioner in any state in which 
        the health organization is authorized to do business, if the 
        insurance commissioner has notified the health organization of 
        its request in writing, in which case the health organization 
        shall file its RBC report not later than the later of: 
           (i) 15 days from the receipt of notice to file its RBC 
        report with that state; or 
           (2) the filing date. 
           Subd. 2.  [DETERMINATION.] A health organization's RBC must 
        be determined in accordance with the formula set forth in the 
        RBC instructions.  The formula must take the following into 
        account, and may adjust for the covariance between, determined 
        in each case by applying the factors in the manner set forth in 
        the RBC instructions: 
           (1) asset risk; 
           (2) credit risk; 
           (3) underwriting risk; and 
           (4) all other business risks and such other relevant risks 
        as are set forth in the RBC instructions. 
           Subd. 3.  [ADJUSTED REPORT.] If a domestic health 
        organization files an RBC report that in the judgment of the 
        commissioner is inaccurate, then the commissioner shall adjust 
        the RBC report to correct the inaccuracy and shall notify the 
        health organization of the adjustment.  The notice must contain 
        a statement of the reason for the adjustment.  An RBC report as 
        so adjusted is referred to as an "adjusted RBC report." 
           Sec. 3.  [60A.52] [COMPANY ACTION LEVEL EVENT.] 
           Subdivision 1.  [DEFINITION.] "Company action level event" 
        means the following events: 
           (1) the filing of an RBC report by a health organization 
        that indicates that the health organization's total adjusted 
        capital is greater than or equal to its regulatory action level 
        RBC but less than its company action level RBC; 
           (2) notification by the commissioner to the health 
        organization of an adjusted RBC report that indicates an event 
        in clause (1), provided the health organization does not 
        challenge the adjusted RBC report under section 60A.56; or 
           (3) if, pursuant to section 60A.56, a health organization 
        challenges an adjusted RBC report that indicates the event in 
        clause (1), the notification by the commissioner to the health 
        organization that the commissioner has, after a hearing, 
        rejected the health organization's challenge. 
           Subd. 2.  [RBC PLAN REQUIRED.] In the event of a company 
        action level event, the health organization shall prepare and 
        submit to the commissioner an RBC plan that: 
           (1) identifies the conditions that contribute to the 
        company action level event; 
           (2) contains proposals of corrective actions that the 
        health organization intends to take and that would be expected 
        to result in the elimination of the company action level event; 
           (3) provides projections of the health organization's 
        financial results in the current year and at least the two 
        succeeding years, both in the absence of proposed corrective 
        actions and giving effect to the proposed corrective actions, 
        including projections of statutory balance sheets, operating 
        income, net income, capital and surplus, and RBC levels.  The 
        projections for both new and renewal business might include 
        separate projections for each major line of business and 
        separately identify each significant income, expense, and 
        benefit component; 
           (4) identifies the key assumptions impacting the health 
        organization's projections and the sensitivity of the 
        projections to the assumptions; and 
           (5) identifies the quality of, and problems associated 
        with, the health organization's business, including, but not 
        limited to, its assets, anticipated business growth and 
        associated surplus strain, extraordinary exposure to risk, mix 
        of business, and use of reinsurance, if any, in each case. 
           Subd. 3.  [RBC PLAN SUBMISSION.] The RBC plan must be 
        submitted: 
           (1) within 45 days of the Company Action Level Event; or 
           (2) if the health organization challenges an adjusted RBC 
        report pursuant to section 60A.56, within 45 days after 
        notification to the health organization that the commissioner 
        has, after a hearing, rejected the health organization's 
        challenge. 
           Subd. 4.  [RBC PLAN IMPLEMENTATION.] Within 60 days after 
        the submission by a health organization of an RBC plan to the 
        commissioner, the commissioner shall notify the health 
        organization whether the RBC plan must be implemented or is, in 
        the judgment of the commissioner, unsatisfactory.  If the 
        commissioner determines the RBC plan is unsatisfactory, the 
        notification to the health organization must set forth the 
        reasons for the determination, and may set forth proposed 
        revisions which will render the RBC plan satisfactory, in the 
        judgment of the commissioner.  Upon notification from the 
        commissioner, the health organization shall prepare a revised 
        RBC plan, which may incorporate by reference any revisions 
        proposed by the commissioner, and shall submit the revised RBC 
        plan to the commissioner: 
           (1) within 45 days after the notification from the 
        commissioner; or 
           (2) if the health organization challenges the notification 
        from the commissioner under section 60A.56, within 45 days after 
        a notification to the health organization that the commissioner 
        has, after a hearing, rejected the health organization's 
        challenge. 
           Subd. 5.  [UNSATISFACTORY PLAN.] In the event of a 
        notification by the commissioner to a health organization that 
        the health organization's RBC plan or revised RBC plan is 
        unsatisfactory, the commissioner may, at the commissioner's 
        discretion, subject to the health organization's right to a 
        hearing under section 60A.56, specify in the notification that 
        the notification constitutes a regulatory action level event. 
           Subd. 6.  [ADDITIONAL FILING.] Every domestic health 
        organization that files an RBC plan or revised RBC plan with the 
        commissioner shall file a copy of the RBC plan or revised RBC 
        plan with the insurance commissioner in any state in which the 
        health organization is authorized to do business if: 
           (1) the state has an RBC provision substantially similar in 
        section 60A.57, subdivision 1; and 
           (2) the insurance commissioner of that state has notified 
        the health organization of its request for the filing in 
        writing, in which case the health organization shall file a copy 
        of the RBC plan or revised RBC plan in that state no later than 
        the later of: 
           (i) 15 days after the receipt of notice to file a copy of 
        its RBC plan or revised RBC plan with the state; or 
           (ii) the date on which the RBC plan or revised RBC plan is 
        filed under subdivisions 3 and 4. 
           Sec. 4.  [60A.53] [REGULATORY ACTION LEVEL EVENT.] 
           Subdivision 1.  [DEFINITION.] "Regulatory action level 
        event" means, with respect to a health organization, any of the 
        following events: 
           (1) the filing of an RBC report by the health organization 
        that indicates that the health organization's total adjusted 
        capital is greater than or equal to its authorized control level 
        RBC but less than its regulatory action level RBC; 
           (2) notification by the commissioner to a health 
        organization of an adjusted RBC report that indicates the event 
        in clause (1), provided the health organization does not 
        challenge the adjusted RBC report under section 60A.56; 
           (3) if, pursuant to section 60A.56, the health organization 
        challenges an adjusted RBC report that indicates the event in 
        clause (1), the notification by the commissioner to the health 
        organization that the commissioner has, after a hearing, 
        rejected the health organization's challenge; 
           (4) the failure of the health organization to file an RBC 
        report by the filing date, unless the health organization has 
        provided an explanation for the failure that is satisfactory to 
        the commissioner and has cured the failure within ten days after 
        the filing date; 
           (5) the failure of the health organization to submit an RBC 
        plan to the commissioner within the time period set forth in 
        section 60A.52, subdivision 3; 
           (6) notification by the commissioner to the health 
        organization that: 
           (i) the RBC plan or revised RBC plan submitted by the 
        health organization is, in the judgment of the commissioner, 
        unsatisfactory; and 
           (ii) notification constitutes a regulatory action level 
        event with respect to the health organization, provided the 
        health organization has not challenged the determination under 
        section 60A.56; 
           (7) if, pursuant to section 60A.56, the health organization 
        challenges a determination by the commissioner under clause (6), 
        the notification by the commissioner to the health organization 
        that the commissioner has, after a hearing, rejected the 
        challenge; 
           (8) notification by the commissioner to the health 
        organization that the health organization has failed to adhere 
        to its RBC plan or revised RBC plan, but only if the failure has 
        a substantial adverse effect on the ability of the health 
        organization to eliminate the company action level event in 
        accordance with its RBC plan or revised RBC plan and the 
        commissioner has so stated in the notification, provided the 
        health organization has not challenged the determination under 
        section 60A.50; or 
           (9) if, pursuant to section 60A.56, the health organization 
        challenges a determination by the commissioner under clause (8), 
        the notification by the commissioner to the health organization 
        that the commissioner has, after a hearing, rejected the 
        challenge. 
           Subd. 2.  [COMMISSIONER'S DUTIES.] In the event of a 
        regulatory action level event the commissioner shall: 
           (1) require the health organization to prepare and submit 
        an RBC plan or, if applicable, a revised RBC plan; 
           (2) perform any examination or analysis the commissioner 
        considers necessary of the assets, liabilities, and operations 
        of the health organization, including a review of its RBC plan 
        or revised RBC plan; and 
           (3) after the examination or analysis, issue a corrective 
        order specifying the corrective actions the commissioner 
        determines are required. 
           Subd. 3.  [CORRECTIVE ACTIONS.] In determining corrective 
        actions, the commissioner may take into account factors the 
        commissioner considers relevant with respect to the health 
        organization based upon the commissioner's examination or 
        analysis of the assets, liabilities, and operations of the 
        health organization, including, but not limited to, the results 
        of any sensitivity tests undertaken pursuant to the RBC 
        instructions.  The RBC plan or revised RBC plan must be 
        submitted: 
           (1) within 45 days after the occurrence of the regulatory 
        action level event; 
           (2) if the health organization challenges an adjusted RBC 
        report pursuant to section 60A.56 and the challenge is not 
        frivolous in the judgment of the commissioner within 45 days 
        after the notification to the health organization that the 
        commissioner has, after a hearing, rejected the health 
        organization's challenge; or 
           (3) if the health organization challenges a revised RBC 
        plan pursuant to section 60A.56 and the challenge is not 
        frivolous in the judgment of the commissioner, within 45 days 
        after the notification to the health organization that the 
        commissioner has, after a hearing, rejected the health 
        organization's challenge. 
           Subd. 4.  [CONSULTANTS.] The commissioner may retain 
        actuaries and investment experts and other consultants as may be 
        necessary in the judgment of the commissioner to review the 
        health organization's RBC plan or revised RBC plan, examine or 
        analyze the assets, liabilities, and operations, including 
        contractual relationships, of the health organization and 
        formulate the corrective order with respect to the health 
        organization.  The fees, costs, and expenses relating to 
        consultants must be borne by the affected health organization or 
        such other party as directed by the commissioner. 
           Sec. 5.  [60A.54] [AUTHORIZED CONTROL LEVEL EVENT.] 
           Subdivision 1.  [DEFINITION.] "Authorized control level 
        event" means any of the following events: 
           (1) the filing of an RBC report by the health organization 
        that indicates that the health organization's total adjusted 
        capital is greater than or equal to its mandatory control level 
        RBC but less than its authorized control level RBC; 
           (2) the notification by the commissioner to the health 
        organization of an adjusted RBC report that indicates the event 
        in clause (1), provided the health organization does not 
        challenge the adjusted RBC report under section 60A.56; 
           (3) if, pursuant to section 60A.56, the health organization 
        challenges an adjusted RBC report that indicates the event in 
        clause (1), notification by the commissioner to the health 
        organization that the commissioner has, after a hearing, 
        rejected the health organization's challenge; 
           (4) the failure of the health organization to respond, in a 
        manner satisfactory to the commissioner, to a corrective order, 
        provided the health organization has not challenged the 
        corrective order under section 60A.56; or 
           (5) if the health organization has challenged a corrective 
        order under section 60A.56 and the commissioner has, after a 
        hearing, rejected the challenge or modified the corrective 
        order, the failure of the health organization to respond, in a 
        manner satisfactory to the commissioner, to the corrective order 
        subsequent to rejection or modification by the commissioner. 
           Subd. 2.  [COMMISSIONER'S DUTIES.] In the event of an 
        authorized control level event with respect to a health 
        organization, the commissioner shall: 
           (1) take such actions as are required under section 60A.53 
        regarding a health organization with respect to which a 
        regulatory action level event has occurred; or 
           (2) if the commissioner considers it to be in the best 
        interests of the policyholders and creditors of the health 
        organization and of the public, take such actions as are 
        necessary to cause the health organization to be placed under 
        regulatory control under chapter 60B.  In the event the 
        commissioner takes such actions, the authorized control level 
        event is considered sufficient grounds for the commissioner to 
        take action under chapter 60B, and the commissioner shall have 
        the rights, powers, and duties with respect to the health 
        organization as are set forth in chapter 60B.  In the event the 
        commissioner takes actions under this clause pursuant to an 
        adjusted RBC report, the health organization is entitled to the 
        protections afforded health organizations under sections 60B.11 
        and 60B.13 pertaining to summary proceedings.  
           Sec. 6.  [60A.55] [MANDATORY CONTROL LEVEL EVENT.] 
           Subdivision 1.  [DEFINITION.] "Mandatory control level 
        event" means any of the following events: 
           (1) the filing of an RBC report which indicates that the 
        health organization's total adjusted capital is less than its 
        mandatory control level RBC; 
           (2) notification by the commissioner to the health 
        organization of an adjusted RBC report that indicates the event 
        in clause (1), provided the health organization does not 
        challenge the adjusted RBC report under section 60A.56; or 
           (3) if, pursuant to section 60A.56, the health organization 
        challenges an adjusted RBC report that indicates the event in 
        clause (1), notification by the commissioner to the health 
        organization that the commissioner has, after a hearing, 
        rejected the health organization's challenge. 
           Subd. 2.  [COMMISSIONER'S DUTIES.] (a) In the event of a 
        mandatory control level event, the commissioner shall take such 
        actions as are necessary to place the health organization under 
        regulatory control under section 60B.13.  In that event, the 
        mandatory control level event is considered sufficient grounds 
        for the commissioner to take action under section 60B.13, and 
        the commissioner shall have the rights, powers, and duties with 
        respect to the health organization as are set forth in section 
        60B.13.  If the commissioner takes actions pursuant to an 
        adjusted RBC report, the health organization is entitled to the 
        protections of sections 60B.11 and 60B.13 pertaining to summary 
        proceedings.  
           (b) Notwithstanding paragraph (a), the commissioner may 
        forego action for up to 90 days after the mandatory control 
        level event if the commissioner finds there is a reasonable 
        expectation that the mandatory control level event may be 
        eliminated within the 90-day period. 
           Sec. 7.  [60A.56] [HEARINGS.] 
           Upon the occurrence of any of the following events, the 
        health organization has the right to a confidential departmental 
        hearing, on a record, at which the health organization may 
        challenge any determination or action by the commissioner.  The 
        health organization shall notify the commissioner of its request 
        for a hearing within five days after the notification by the 
        commissioner under clause (1), (2), (3), or (4).  Upon receipt 
        of the health organization's request for a hearing, the 
        commissioner shall set a date for the hearing, which must be no 
        less than ten nor more than 30 days after the date of the health 
        organization's request.  The events include: 
           (1) notification to a health organization by the 
        commissioner of an adjusted RBC report; 
           (2) notification to a health organization by the 
        commissioner that: 
           (i) the health organization's RBC plan or revised RBC plan 
        is unsatisfactory; and 
           (ii) notification constitutes a regulatory action level 
        event with respect to the health organization; 
           (3) notification to a health organization by the 
        commissioner that the health organization has failed to adhere 
        to its RBC plan or revised RBC plan and that the failure has a 
        substantial adverse effect on the ability of the health 
        organization to eliminate the company action level event with 
        respect to the health organization in accordance with its RBC 
        plan or revised RBC plan; or 
           (4) notification to a health organization by the 
        commissioner of a corrective order with respect to the health 
        organization. 
           Sec. 8.  [60A.57] [ACCESS TO AND USE OF RBC INFORMATION.] 
           Subdivision 1.  [CONFIDENTIALITY; PROHIBITION ON 
        ANNOUNCEMENTS.] Section 60A.67, subdivisions 1 and 2, apply to 
        sections 60A.50 to 60A.592. 
           Subd. 2.  [PROHIBITION FOR RATE MAKING OR PREMIUM SETTING.] 
        The RBC instructions, RBC reports, adjusted RBC reports, RBC 
        plans, and revised RBC plans are intended solely for use by the 
        commissioner in monitoring the solvency of health organizations 
        and the need for possible corrective action with respect to 
        health organizations and shall not be used by the commissioner 
        for rate making nor considered or introduced as evidence in any 
        rate proceeding nor used by the commissioner to calculate or 
        derive any elements of an appropriate premium level or rate of 
        return for any line of insurance that a health organization or 
        any affiliate is authorized to write. 
           Sec. 9.  [60A.58] [SUPPLEMENTAL PROVISIONS.] 
           Subdivision 1.  [EFFECT.] Sections 60A.50 to 60A.592 are 
        supplemental to any other provisions of the laws of this state, 
        and must not preclude or limit any other powers or duties of the 
        commissioner under such laws, including, but not limited to, 
        chapter 60B and sections 62D.041, 62D.042, 62D.18, and 62D.181. 
           Subd. 2.  [EXEMPTION.] The commissioner may exempt from the 
        application of sections 60A.50 to 60A.592 a domestic health 
        organization that: 
           (1) writes direct business only in this state; 
           (2) assumes no reinsurance in excess of five percent of 
        direct premium written; and 
           (3) writes direct annual premiums for comprehensive medical 
        business of $2,000,000 or less.  
           Sec. 10.  [60A.59] [FOREIGN HEALTH ORGANIZATIONS.] 
           Subdivision 1.  [RBC REPORT.] (a) A foreign health 
        organization shall, upon the written request of the 
        commissioner, submit to the commissioner an RBC report as of the 
        end of the calendar year just ended the later of: 
           (1) the date an RBC report would be required to be filed by 
        a domestic health organization under sections 60A.50 to 60A.592; 
        or 
           (2) 15 days after the request is received by the foreign 
        health organization. 
           (b) A foreign health organization shall, at the written 
        request of the commissioner, promptly submit to the commissioner 
        a copy of any RBC plan that is filed with the insurance 
        commissioner of any other state. 
           Subd. 2.  [RBC PLAN.] In the event of a company action 
        level event, regulatory action level event, or authorized 
        control level event with respect to a foreign health 
        organization as determined under the RBC statute applicable in 
        the state of domicile of the health organization or, if no RBC 
        statute is in force in that state, under sections 60A.50 to 
        60A.592, if the insurance commissioner of the state of domicile 
        of the foreign health organization fails to require the foreign 
        health organization to file an RBC plan in the manner specified 
        under that state's RBC statute or, if no RBC statute is in force 
        in that state, under section 60A.52, the commissioner may 
        require the foreign health organization to file an RBC plan with 
        the commissioner.  In such event, the failure of the foreign 
        health organization to file an RBC plan with the commissioner 
        shall be grounds to order the health organization to cease and 
        desist from writing new insurance business in this state.  This 
        section does not limit the commissioner's authority to require a 
        foreign insurer to file a copy of the risk-based capital plan 
        submitted to the commissioner in the state of domicile. 
           Subd. 3.  [LIQUIDATION OF PROPERTY.] In the event of a 
        mandatory control level event with respect to a foreign health 
        organization, if no domiciliary receiver has been appointed with 
        respect to the foreign health organization under the 
        rehabilitation and liquidation statute applicable in the state 
        of domicile of the foreign health organization, the commissioner 
        may make application to the district court permitted under 
        chapter 60B with respect to the liquidation of property of 
        foreign health organizations found in this state, and the 
        occurrence of the mandatory control level event shall be 
        considered adequate grounds for the application. 
           Sec. 11.  [60A.591] [IMMUNITY.] 
           There is no liability on the part of, and no cause of 
        action arises against, the commissioner or the department or its 
        employees or agents for any action taken by them in the 
        performance of their powers and duties under sections 60A.50 to 
        60A.592. 
           Sec. 12.  [60A.592] [NOTICES.] 
           All notices by the commissioner to a health organization 
        that may result in regulatory action under sections 60A.50 to 
        60A.592 are effective upon dispatch if transmitted by registered 
        or certified mail, or in the case of any other transmission are 
        effective upon the health organization's receipt of notice. 

                                   ARTICLE 2 
                       MINIMUM STANDARD OF VALUATION FOR 
                                HEALTH INSURANCE 
           Section 1.  [60A.76] [PURPOSE AND SCOPE.] 
           Sections 60A.76 to 60A.768 apply to all individual and 
        group accident and health insurance coverages as defined in 
        section 60A.06, subdivision 1, paragraph (5)(a), including 
        single premium credit disability insurance.  Other credit 
        insurance is not subject to sections 60A.76 to 60A.768. 
           When an insurer determines that adequacy of its health 
        insurance reserves requires reserves in excess of the minimum 
        standards specified in sections 60A.76 to 60A.768, the increased 
        reserves must be held and must be considered the minimum 
        reserves for that insurer. 
           With respect to any block of contracts, or with respect to 
        an insurer's health business as a whole, a prospective gross 
        premium valuation is the ultimate test of reserve adequacy as of 
        a given valuation date.  The prospective gross premium valuation 
        must take into account, for contracts in force, in a claims 
        status, or in a continuation of benefits status on the valuation 
        date, the present value as of the valuation date of:  all 
        expected benefits unpaid, all expected expenses unpaid, and all 
        unearned or expected premiums, adjusted for future premium 
        increases reasonably expected to be put into effect. 
           The prospective gross premium valuation must be performed 
        whenever a significant doubt exists as to reserve adequacy with 
        respect to any major block of contracts, or with respect to the 
        insurer's health business as a whole.  In the event inadequacy 
        is found to exist, immediate loss recognition must be made and 
        the reserves restored to adequacy.  Adequate reserves, inclusive 
        of claim, premium, and contract reserves, if any, must be held 
        with respect to all contracts, regardless of whether contract 
        reserves are required for such contracts under sections 60A.76 
        to 60A.768. 
           Whenever minimum reserves, as defined in sections 60A.76 to 
        60A.768, exceed reserve requirements as determined by a 
        prospective gross premium valuation, such minimum reserves 
        remain the minimum requirement under sections 60A.76 to 60A.768. 
           Sec. 2.  [60A.761] [GLOSSARY OF TECHNICAL TERMS USED.] 
           Subdivision 1.  [SCOPE.] As used in sections 60A.76 to 
        60A.768, the terms in subdivisions 2 to 21 have the meaning 
        given them. 
           Subd. 2.  [ANNUAL CLAIM COST.] "Annual claim cost" means 
        the net annual cost per unit of benefit before the addition of 
        expenses, including claim settlement expenses, and a margin for 
        profit or contingencies.  For example, the annual claim cost for 
        a $100 monthly disability benefit, for a maximum disability 
        benefit period of one year, with an elimination period of one 
        week, with respect to a male at age 35, in a certain occupation 
        might be $12, while the gross premium for this benefit might be 
        $18.  The additional $6 would cover expenses and profit or 
        contingencies. 
           Subd. 3.  [CLAIMS ACCRUED.] "Claims accrued" means that 
        portion of claims incurred on or prior to the valuation date 
        which result in liability of the insurer for the payment of 
        benefits for medical services which have been rendered on or 
        before the valuation date, and for the payment of benefits for 
        days of hospitalization and days of disability which have 
        occurred on or prior to the valuation date, which the insurer 
        has not paid as of the valuation date, but for which it is 
        liable, and will have to pay after the valuation date.  This 
        liability is sometimes referred to as a liability for "accrued" 
        benefits.  A claim reserve, which represents an estimate of this 
        accrued claim liability, must be established. 
           Subd. 4.  [CLAIMS REPORTED.] "Claims reported" means when 
        an insurer has been informed that a claim has been incurred, if 
        the date reported is on or before the valuation date, the claim 
        is considered as a reported claim for annual statement purposes. 
           Subd. 5.  [CLAIMS UNACCRUED.] "Claims unaccrued" means that 
        portion of claims incurred on or before the valuation date which 
        result in liability of the insurer for the payment of benefits 
        for medical services expected to be rendered after the valuation 
        date, and for benefits expected to be payable for days of 
        hospitalization and days of disability occurring after the 
        valuation date.  This liability is sometimes referred to as a 
        liability for unaccrued benefits.  A claim reserve, which 
        represents an estimate of the unaccrued claim payments expected 
        to be made (which may or may not be discounted with interest) 
        must be established. 
           Subd. 6.  [CLAIMS UNREPORTED.] "Claims unreported" means 
        when an insurer has not been informed, on or before the 
        valuation date, concerning a claim that has been incurred on or 
        prior to the valuation date, the claim is considered as an 
        unreported claim for annual statement purposes. 
           Subd. 7.  [DATE OF DISABLEMENT.] "Date of disablement" 
        means the earliest date the insured is considered as being 
        disabled under the definition of disability in the contract, 
        based on a doctor's evaluation or other evidence.  Normally this 
        date will coincide with the start of any elimination period. 
           Subd. 8.  [ELIMINATION PERIOD.] "Elimination period" means 
        a specified number of days, weeks, or months starting at the 
        beginning of each period of loss, during which no benefits are 
        payable. 
           Subd. 9.  [GROSS PREMIUM.] "Gross premium" means the amount 
        of premium charged by the insurer.  It includes the net premium 
        (based on claim-cost) for the risk, together with any loading 
        for expenses, profit, or contingencies. 
           Subd. 10.  [GROUP INSURANCE.] "Group insurance" means the 
        term group insurance includes blanket insurance and franchise 
        insurance and any other forms of group insurance. 
           Subd. 11.  [LEVEL PREMIUM.] "Level premium" means a premium 
        calculated to remain unchanged throughout either the lifetime of 
        the policy, or for some shorter projected period of years.  The 
        premium need not be guaranteed; in which case, although it is 
        calculated to remain level, it may be changed if any of the 
        assumptions on which it was based are revised at a later time. 
           Generally, the annual claim costs are expected to increase 
        each year and the insurer, instead of charging premiums that 
        correspondingly increase each year, charges a premium calculated 
        to remain level for a period of years or for the lifetime of the 
        contract.  In this case, the benefit portion of the premium is 
        more than needed to provide for the cost of benefits during the 
        earlier years of the policy and less than the actual cost in the 
        later years.  The building of a prospective contract reserve is 
        a natural result of level premiums. 
           Subd. 12.  [LONG-TERM CARE INSURANCE.] "Long-term care 
        insurance" means a qualified long-term care insurance policy or 
        rider as defined in section 62S.01, subdivision 18, and a 
        nonqualified long-term insurance policy or rider as defined in 
        section 62A.46, subdivision 2. 
           Subd. 13.  [MODAL PREMIUM.] "Modal premium" refers to the 
        premium paid on a contract based on a premium term which could 
        be annual, semiannual, quarterly, monthly, or weekly.  Thus if 
        the annual premium is $100 and if, instead, monthly premiums of 
        $9 are paid then the modal premium is $9. 
           Subd. 14.  [NEGATIVE RESERVE.] "Negative reserve" means 
        normally the terminal reserve is a positive value.  However, if 
        the values of the benefits are decreasing with advancing age or 
        duration it could be a negative value, called a negative reserve.
           Subd. 15.  [PRELIMINARY TERM RESERVE METHOD.] "Preliminary 
        term reserve method" means that under this method of valuation 
        the valuation net premium for each year falling within the 
        preliminary term period is exactly sufficient to cover the 
        expected incurred claims of that year, so that the terminal 
        reserves will be zero at the end of the year.  As of the end of 
        the preliminary term period, a new constant valuation net 
        premium (or stream of changing valuation premiums) becomes 
        applicable such that the present value of all such premiums is 
        equal to the present value of all claims expected to be incurred 
        following the end of the preliminary term period. 
           Subd. 16.  [PRESENT VALUE OF AMOUNTS NOT YET DUE ON 
        CLAIMS.] "Present value of amounts not yet due on claims" means 
        the reserve for "claims unaccrued" which may be discounted at 
        interest. 
           Subd. 17.  [RATING BLOCK.] "Rating block" means a grouping 
        of contracts determined by the valuation actuary based on common 
        characteristics, such as a policy form or forms having similar 
        benefit designs. 
           Subd. 18.  [RESERVE.] "Reserve" includes all items of 
        benefit liability, whether in the nature of incurred claim 
        liability or in the nature of contract liability relating to 
        future periods of coverage, and whether the liability is accrued 
        or unaccrued. 
           An insurer under its contracts promises benefits, which 
        result in: 
           (a) claims which have been incurred, that is, for which the 
        insurer has become obligated to make payment, on or prior to the 
        valuation date.  On these claims, payments expected to be made 
        after the valuation date for accrued and unaccrued benefits are 
        liabilities of the insurer which should be provided for by 
        establishing claim reserves; or 
           (b) claims which are expected to be incurred after the 
        valuation date.  Any present liability of the insurer for these 
        future claims should be provided for by the establishment of 
        contract reserves and unearned premium reserves. 
           Subd. 19.  [TERMINAL RESERVE.] "Terminal reserve" means the 
        reserve at the end of a contract year, and is defined as the 
        present value of benefits expected to be incurred after that 
        contract year minus the present value of future valuation net 
        premiums. 
           Subd. 20.  [UNEARNED PREMIUM RESERVE.] "Unearned premium 
        reserve" means that portion of the premium paid or due to the 
        insurer which is applicable to the period of coverage extending 
        beyond the valuation date.  Thus if an annual premium of $120 
        was paid on November 1, $20 would be earned as of December 31 
        and the remaining $100 would be unearned.  The unearned premium 
        reserve could be on a gross basis as in this example, or on a 
        valuation net premium basis. 
           Subd. 21.  [VALUATION NET MODAL PREMIUM.] "Valuation net 
        modal premium" means the modal fraction of the valuation net 
        annual premium that corresponds to the gross modal premium in 
        effect on any contract to which contract reserves apply.  Thus 
        if the mode of payment in effect is quarterly, the valuation net 
        modal premium is the quarterly equivalent of the valuation net 
        annual premium. 
           Sec. 3.  [60A.762] [CATEGORIES OF RESERVES.] 
           The following sections set forth minimum standards for 
        three categories of health insurance reserves: 
           (1) section 60A.763, claim reserves; 
           (2) section 60A.764, premium reserves; and 
           (3) section 60A.765, contract reserves. 
           Adequacy of an insurer's health insurance reserves is to be 
        determined on the basis of all three categories combined.  
        However, sections 60A.76 to 60A.768 emphasize the importance of 
        determining appropriate reserves for each of the three 
        categories separately. 
           Sec. 4.  [60A.763] [CLAIM RESERVES.] 
           Subdivision 1.  [GENERALLY.] (a) Claim reserves are 
        required for all incurred but unpaid claims on all health 
        insurance policies. 
           (b) Appropriate claim expense reserves are required with 
        respect to the estimated expense of settlement of all incurred 
        but unpaid claims. 
           (c) Claim reserves for prior valuation years are to be 
        tested for adequacy and reasonableness along the lines of claim 
        runoff schedules in accordance with the statutory financial 
        statement including consideration of any residual unpaid 
        liability. 
           Subd. 2.  [MINIMUM STANDARDS FOR CLAIM RESERVES FOR 
        DISABILITY INCOME.] (a) The maximum interest rate for claim 
        reserves is specified in section 60A.768. 
           (b) Minimum standards with respect to morbidity are those 
        specified in section 60A.768, except that, at the option of the 
        insurer: 
           (1) for claims with a duration from date of disablement of 
        less than two years, reserves may be based on the insurer's 
        experience, if such experience is considered credible, or upon 
        other assumptions designed to place a sound value on the 
        liabilities; and 
           (2) for group disability income claims with a duration from 
        date of disablement of more than two years but less than five 
        years, reserves may, with the approval of the commissioner, be 
        based on the insurer's experience for which the insurer 
        maintains underwriting and claim administration control.  The 
        request for approval of a plan of modification to the reserve 
        basis must include: 
           (i) an analysis of the credibility of the experience; 
           (ii) a description of how all of the insurer's experience 
        is proposed to be used in setting reserves; 
           (iii) a description and quantification of the margins to be 
        included; 
           (iv) a summary of the financial impact that the proposed 
        plan of modification would have had on the insurer's last filed 
        annual statement; 
           (v) a copy of the approval of the proposed plan of 
        modification by the commissioner of the state of domicile; and 
           (vi) any other information deemed necessary by the 
        commissioner. 
           (c) For contracts with an elimination period, the duration 
        of disablement must be measured as dating from the time that 
        benefits would have begun to accrue had there been no 
        elimination period. 
           Subd. 3.  [MINIMUM STANDARDS FOR CLAIM RESERVES FOR ALL 
        OTHER BENEFITS.] (a) The maximum interest rate for claim 
        reserves is specified in section 60A.768. 
           (b) The reserve must be based on the insurer's experience, 
        if the experience is considered credible, or upon other 
        assumptions designed to place a sound value on the liabilities. 
           Subd. 4.  [CLAIM RESERVE METHODS GENERALLY.] A generally 
        accepted actuarial reserving method or other reasonable method 
        if the method is approved by the commissioner before the 
        statement date, or a combination of methods as described in this 
        section, may be used to estimate all claim liabilities.  The 
        methods used for estimating liabilities generally may be 
        aggregate methods, or various reserve items may be separately 
        valued.  Approximations based on groupings and averages may also 
        be employed.  Adequacy of the claim reserves, however, must be 
        determined in the aggregate. 
           Sec. 5.  [60A.764] [PREMIUM RESERVES.] 
           Subdivision 1.  [GENERALLY.] (a) Unearned premium reserves 
        are required for all contracts with respect to the period of 
        coverage for which premiums, other than premiums paid in 
        advance, have been paid beyond the date of valuation. 
           (b) If premiums due and unpaid are carried as an asset, the 
        premiums must be treated as premiums in force, subject to 
        unearned premium reserve determination.  The value of unpaid 
        commissions, premium taxes, and the cost of collection 
        associated with due and unpaid premiums must be carried as an 
        offsetting liability. 
           (c) The gross premiums paid in advance for a period of 
        coverage beginning after the next premium due date which follows 
        the date of valuation may be appropriately discounted to the 
        valuation date and must be held either as a separate liability 
        or as an addition to the unearned premium reserve which would 
        otherwise be required as a minimum. 
           Subd. 2.  [MINIMUM STANDARDS FOR UNEARNED PREMIUM 
        RESERVES.] (a) The minimum unearned premium reserve with respect 
        to a contract is the pro rata unearned modal premium that 
        applies to the premium period beyond the valuation date, with 
        the premium determined on the basis of: 
           (1) the valuation net modal premium on the contract reserve 
        basis applying to the contract; or 
           (2) the gross modal premium for the contract if no contract 
        reserve applies. 
           (b) However, in no event may the sum of the unearned 
        premium and contract reserves for all contracts of the insurer 
        subject to contract reserve requirements be less than the gross 
        modal unearned premium reserve on all such contracts, as of the 
        date of valuation.  The reserve must never be less than the 
        expected claims for the period beyond the valuation date 
        represented by the unearned premium reserve, to the extent not 
        provided for elsewhere. 
           Subd. 3.  [PREMIUM RESERVE METHODS GENERALLY.] The insurer 
        may employ suitable approximations and estimates, including, but 
        not limited to, groupings, averages, and aggregate estimation, 
        in computing premium reserves.  Approximations or estimates 
        should be tested periodically to determine the continuing 
        adequacy and reliability. 
           Sec. 6.  [60A.765] [CONTRACT RESERVES REQUIRED.] 
           (a) Contract reserves are required, unless otherwise 
        specified in paragraph (b) for: 
           (1) all individual and group contracts with which level 
        premiums are used; or 
           (2) all individual and group contracts with respect to 
        which, due to the gross premium pricing structure at issue, the 
        value of the future benefits at any time exceeds the value of 
        any appropriate future valuation net premiums at that time.  
        This evaluation may be applied on a rating block basis if the 
        total premiums for the block were developed to support the total 
        risk assumed and expected expenses for the block each year, and 
        a qualified actuary certifies the premium development.  The 
        actuary must state in the certification that premiums for the 
        rating block were developed such that each year's premium was 
        intended to cover that year's costs without any prefunding.  If 
        the premium is also intended to recover costs for any prior 
        years, the actuary must also disclose the reasons for and 
        magnitude of the recovery.  The values specified in this clause 
        must be determined on the basis specified in section 60A.766, 
        subdivisions 1 to 4. 
           (b) Contracts not requiring a contract reserve are: 
           (1) contracts that cannot be continued after one year from 
        issue; or 
           (2) contracts already in force on the effective date of 
        sections 60A.76 to 60A.768 for which no contract reserve was 
        required under the immediately preceding standards. 
           (c) The contract reserve is in addition to claim reserves 
        and premium reserves. 
           (d) The methods and procedures for contract reserves must 
        be consistent with those for claim reserves for a contract, or 
        else appropriate adjustment must be made when necessary to 
        assure provision for the aggregate liability.  The definition of 
        the date of incurral must be the same in both determinations. 
           Sec. 7.  [60A.766] [MINIMUM STANDARDS FOR CONTRACT 
        RESERVES.] 
           Subdivision 1.  [BASIS.] (a) Minimum standards with respect 
        to morbidity are those set forth in section 60A.768.  Valuation 
        net premiums used under each contract must have a structure 
        consistent with the gross premium structure at issue of the 
        contract as this relates to advancing age of insured, contract 
        duration, and period for which gross premiums have been 
        calculated. 
           Contracts for which tabular morbidity standards are not 
        specified in section 60A.768 must be valued using tables 
        established for reserve purposes by a qualified actuary and 
        acceptable to the commissioner.  The morbidity tables must 
        contain a pattern of incurred claims cost that reflects the 
        underlying morbidity and must not be constructed for the primary 
        purpose of minimizing reserves. 
           (b) The maximum interest rate is specified in section 
        60A.768. 
           (c) Termination rates used in the computation of reserves 
        must be on the basis of a mortality table as specified in 
        section 60A.768 except as noted in clauses (1) to (3): 
           (1) under contracts for which premium rates are not 
        guaranteed, and where the effects of insurer underwriting are 
        specifically used by policy duration in the valuation morbidity 
        standard or for return of premium or other deferred cash 
        benefits, total termination rates may be used at ages and 
        durations where these exceed specified mortality table rates, 
        but not in excess of the lesser of: 
           (i) 80 percent of the total termination rate used in the 
        calculation of the gross premiums; or 
           (ii) eight percent; 
           (2) for long-term care individual policies or group 
        certificates issued after January 1, 1997, the contract reserve 
        may be established on a basis of separate: 
           (i) mortality as specified in section 60A.768; and 
           (ii) terminations other than mortality, where the 
        terminations are not to exceed: 
           A.  for policy years one through four, the lesser of 80 
        percent of the voluntary lapse rate used in the calculation of 
        gross premiums and eight percent; 
           B.  for policy years five and later, the lesser of 100 
        percent of the voluntary lapse rate used in the calculation of 
        gross premiums and four percent; 
           (3) where a morbidity standard specified in section 60A.768 
        is on an aggregate basis, the morbidity standard may be adjusted 
        to reflect the effect of insurer underwriting by policy duration.
        The adjustments must be appropriate to the underwriting and be 
        acceptable to the commissioner. 
           Subd. 2.  [RESERVE METHOD.] (a) For insurance, except 
        long-term care and return of premium or other deferred cash 
        benefits, the minimum reserve is the reserve calculated on the 
        two-year full preliminary term method; that is, under which the 
        terminal reserve is zero at the first and also the second 
        contract anniversary. 
           (b) For long-term care insurance, the minimum reserve is 
        the reserve calculated as follows: 
           (1) for individual policies and group certificates issued 
        on or before December 31, 1991, reserves calculated on the 
        two-year full preliminary term methods; 
           (2) for individual policies and group certificates issued 
        on or after January 1, 1992, reserves calculated on the one-year 
        full preliminary term method. 
           (c) For return of premium or other deferred cash benefits, 
        the minimum reserve is the reserve calculated as follows: 
           (1) on the one-year preliminary term method if the benefits 
        are provided at any time before the 20th anniversary; 
           (2) on the two-year preliminary term method if the benefits 
        are only provided on or after the 20th anniversary. 
           The preliminary term method may be applied only in relation 
        to the date of issue of a contract.  Reserve adjustments 
        introduced later, as a result of rate increases, revisions in 
        assumptions, for example projected inflation rates, or for other 
        reasons, are to be applied immediately as of the effective date 
        of adoption of the adjusted basis. 
           Subd. 3.  [NEGATIVE RESERVES.] Negative reserves on any 
        benefit may be offset against positive reserves for other 
        benefits in the same contract, but the total contract reserve 
        with respect to all benefits combined may not be less than zero. 
           Subd. 4.  [NONFORFEITURE BENEFITS FOR LONG-TERM CARE 
        INSURANCE.] The contract reserve on a policy basis must not be 
        less than the net single premium for the nonforfeiture benefits 
        at the appropriate policy duration, where the net single premium 
        is computed according to the specifications in this section.  
        While the consideration for nonforfeiture benefits in this 
        section is specific to long-term care insurance, similar 
        consideration may be applicable for other lines of business. 
           Subd. 5.  [ALTERNATIVE VALUATION METHODS AND ASSUMPTIONS 
        GENERALLY.] Provided the contract reserve on all contracts to 
        which an alternative method or basis is applied is not less in 
        the aggregate than the amount determined according to the 
        applicable standards specified in this section, an insurer may 
        use any reasonable assumptions as to interest rates, termination 
        and mortality rates, and rates of morbidity or other contingency.
        Also, subject to the preceding condition, the insurer may employ 
        methods other than the methods stated in this section in 
        determining a sound value of its liabilities under such 
        contracts, including, but not limited to, the following:  the 
        net level premium method; the one-year full preliminary term 
        method; prospective valuation on the basis of actual gross 
        premiums with reasonable allowance for future expenses; the use 
        of approximations such as those involving age groupings, 
        groupings of several years of issue, average amounts of 
        indemnity, and grouping of similar contract forms; the 
        computation of the reserve for one contract benefit as a 
        percentage of, or by other relation to, the aggregate contract 
        reserves exclusive of the benefit or benefits so valued; and the 
        use of a composite annual claim cost for all or any combination 
        of the benefits included in the contracts valued. 
           Subd. 6.  [TEST FOR ADEQUACY AND REASONABLENESS OF CONTRACT 
        RESERVES.] Annually, an appropriate review must be made of the 
        insurer's prospective contract liabilities on contracts valued 
        by tabular reserves, to determine the continuing adequacy and 
        reasonableness of the tabular reserves giving consideration to 
        future gross premiums.  The insurer shall make appropriate 
        increments to such tabular reserves if such tests indicate that 
        the basis of such reserves is no longer adequate; subject, 
        however, to the minimum standards of section 60A.766, 
        subdivisions 1 to 4. 
           In the event a company has a contract or a group of related 
        similar contracts for which future gross premiums will be 
        restricted by contract, department rule, or for other reasons, 
        such that the future gross premiums reduced by expenses for 
        administration, commissions, and taxes will be insufficient to 
        cover future claims, the company shall establish contract 
        reserves for such shortfall in the aggregate. 
           Sec. 8.  [60A.767] [REINSURANCE.] 
           Increases to or credits against reserves carried, arising 
        because of reinsurance assumed or reinsurance ceded, must be 
        determined in a manner consistent with sections 60A.76 to 
        60A.768 and with all applicable provisions of the reinsurance 
        contracts which affect the insurer's liabilities. 
           Sec. 9.  [60A.768] [SPECIFIC STANDARDS FOR MORBIDITY, 
        INTEREST, AND MORTALITY.] 
           Subdivision 1.  [MORBIDITY.] A.  Minimum morbidity 
        standards for valuation of specified individual contract health 
        insurance benefits are as follows: 
           (1) Disability Income Benefits Due to Accident or Sickness. 
           (a) Contract Reserves: 
           Contracts issued on or after January 1, 2004: 
           The 1985 Commissioners Individual Disability Tables A 
        (85CIDA); or 
           The 1985 Commissioners Individual Disability Tables B 
        (85CIDB). 
           Each insurer shall elect, with respect to all individual 
        contracts issued in any one statement year, whether it will use 
        Tables A or Tables B as the minimum standard.  The insurer may, 
        however, elect to use the other tables with respect to any 
        subsequent statement year. 
           (b) Claim Reserves: 
           (i) For claims incurred on or after January 1, 2004: 
           The 1985 Commissioners Individual Disability Table A 
        (85CIDA) with claim termination rates multiplied by the 
        following adjustment factors: 
                                                Adjusted
              Duration       Adjustment         Termination
                             Factor             Rates*
         Week    1             0.366             0.04831
                 2             0.366             0.04172
                 3             0.366             0.04063
                 4             0.366             0.04355
                 5             0.365             0.04088
                 6             0.365             0.04271
                 7             0.365             0.04380
                 8             0.365             0.04344
                 9             0.370             0.04292
                10             0.370             0.04107
                11             0.370             0.03848
                12             0.370             0.03478
                13             0.370             0.03034
         Month   4             0.391             0.08758
                 5             0.371             0.07346
                 6             0.435             0.07531
                 7             0.500             0.07245
                 8             0.564             0.06655
                 9             0.613             0.05520
                10             0.663             0.04705
                11             0.712             0.04486
                12             0.756             0.04309
                13             0.800             0.04080
                14             0.844             0.03882
                15             0.888             0.03730
                16             0.932             0.03448
                17             0.976             0.03026
                18             1.020             0.02856
                19             1.049             0.02518
                20             1.078             0.02264
                21             1.107             0.02104
                22             1.136             0.01932
                23             1.165             0.01865
                24             1.195             0.01792
         Year    3             1.369             0.16839
                 4             1.204             0.10114
                 5             1.199             0.07434
                 6 and later   1.000               **
           *The adjusted termination rates derived from the 
        application of the adjustment factors to the DTS Valuation Table 
        termination rates shown in exhibits 3a, 3b, 3c, 4, and 5 
        (Transactions of the Society of Actuaries (TSA) XXXVII, pages 
        457-463) is displayed.  The adjustment factors for age, 
        elimination period, class, sex, and cause displayed in exhibits 
        3a, 3b, 3c, and 4 should be applied to the adjusted termination 
        rates shown in this table. 
           **Applicable DTS Valuation Table duration rate from 
        exhibits 3c and 4 (TSA XXXVII, pages 462-463). 
           The 85CIDA table so adjusted for the computation of claim 
        reserves shall be known as 85CIDC (The 1985 Commissioners 
        Individual Disability Table C). 
           (2) Hospital Benefits, Surgical Benefits, and Maternity 
        Benefits (Scheduled benefits or fixed time period benefits only).
           (a) Contract Reserves. 
           Contracts issued on or after January 1, 1982: 
           The 1974 Medical Expense Tables, Table A, Transactions of 
        the Society of Actuaries, Volume XXX, page 63.  Refer to the 
        paper (in the same volume, page 9) to which this table is 
        appended, including its discussions, for methods of adjustment 
        for benefits not directly valued in Table A:  "Development of 
        the 1974 Medical Expense Benefits," Houghton and Wolf. 
           (b) Claim Reserves: 
           No specific standard.  See (6). 
           (3) Cancer Expense Benefits (Scheduled benefits or fixed 
        time period benefits only). 
           (a) Contract Reserves: 
           Contracts issued on or after January 1, 2004: 
           The 1985 NAIC Cancer Claim Cost Tables. 
           (b) Claim Reserves: 
           No specific standard.  See (6). 
           (4) Accidental Death Benefits. 
           (a) Contract Reserves: 
           Contracts issued on or after January 1, 2004: 
           The 1959 Accidental Death Benefits Table. 
           (b) Claim Reserves: 
           Actual amount incurred. 
           (5) Single Premium Credit Disability. 
           (a) Contract Reserves: 
           (i) For contracts issued on or after January 1, 2004: 
           (I) For plans having less than a 30-day elimination period, 
        the 1985 Commissioners Individual Disability Table A (85CIDA) 
        with claim incidence rates increased by 12 percent. 
           (ii)(II) For plans having a 30-day and greater elimination 
        period, the 85CIDA for a 14-day elimination period with the 
        adjustment in item (I). 
           (b) Claim Reserves: 
           Claim reserves are to be determined as provided in section 
        60A.763. 
           (6) Other Individual Contract Benefits. 
           (a) Contract Reserves: 
           For all other individual contract benefits, morbidity 
        assumptions are to be determined as provided in section 60A.765. 
           (b) Claim Reserves: 
           For all benefits other than disability, claim reserves are 
        to be determined as provided in section 60A.763. 
           B.  Minimum morbidity standards for valuation of specified 
        group contract health insurance benefits are as follows: 
           (1) Disability Income Benefits Due to Accident or Sickness. 
           (a) Contract Reserves: 
           Contracts issued on or after January 1, 2004: 
           The 1987 Commissioners Group Disability Income Table 
        (87CGDT). 
           (b) Claim Reserves: 
           For claims incurred on or after January 1, 2004: 
           The 1987 Commissioners Group Disability Income Table 
        (87CGDT); 
           (2) Single Premium Credit Disability 
           (a) Contract Reserves: 
           (i) For contracts issued on or after January 1, 2004: 
           (I) For plans having less than a 30-day elimination period, 
        the 1985 Commissioners Individual Disability Table A (85CIDA) 
        with claim incidence rates increased by 12 percent. 
           (ii)(II) For plans having a 30-day and greater elimination 
        period, the 85CIDA for a 14-day elimination period with the 
        adjustment in item (I). 
           (b) Claim Reserves: 
           Claim reserves are to be determined as provided in section 
        60A.763. 
           (3) Other Group Contract Benefits. 
           (a) Contract Reserves: 
           For all other group contract benefits, morbidity 
        assumptions are to be determined as provided in section 60A.765. 
           (b) Claim Reserves: 
           For all benefits other than disability, claim reserves are 
        to be determined as provided in section 60A.763. 
           Subd. 2.  [INTEREST.] A.  For contract reserves the maximum 
        interest rate is the maximum rate permitted by law in the 
        valuation of whole life insurance issued on the same date as the 
        health insurance contract. 
           B.  For claim reserves on policies that require contract 
        reserves, the maximum interest rate is the maximum rate 
        permitted by law in the valuation of whole life insurance issued 
        on the same date as the claim incurred date. 
           C.  For claim reserves on policies not requiring contract 
        reserves, the maximum interest rate is the maximum rate 
        permitted by law in the valuation of single premium immediate 
        annuities issued on the same date as the claim incurred date, 
        reduced by 100 basis points. 
           Subd. 3.  [MORTALITY.] A.  For individual long-term care 
        insurance policies or group long-term care insurance 
        certificates issued on or after January 1, 2004, the mortality 
        basis used must be the 1983 Group Annuity Mortality Table 
        without projection. 
           B.  Other mortality tables adopted by the NAIC and adopted 
        by the commissioner may be used in the calculation of the 
        minimum reserves if appropriate for the type of benefits and if 
        approved by the commissioner.  The request for approval must 
        include the proposed mortality table and the reason that the 
        standard specified in subsection A is inappropriate. 
           C.  For single premium credit insurance using the 85CIDA 
        table, no separate mortality must be assumed. 

                                   ARTICLE 3
                                 MISCELLANEOUS 
           Section 1.  Minnesota Statutes 2002, section 60A.129, 
        subdivision 2, is amended to read: 
           Subd. 2.  [LOSS RESERVE CERTIFICATION.] (a) Each domestic 
        company engaged in providing the types of coverage described in 
        section 60A.06, subdivision 1, clause (1), (2), (3), (5)(b), 
        (6), (8), (9), (10), (11), (12), (13), or (14), must have its 
        loss reserves certified by a qualified actuary.  The company 
        must file the certification with the commissioner within 30 days 
        of completion of the certification, but not later than June 1.  
        The actuary providing the certification may be an employee of 
        the company but the commissioner may still require an 
        independent actuarial certification as described in subdivision 
        1.  This subdivision does not apply to township mutual 
        companies, or to other domestic insurers having less than 
        $1,000,000 of premiums written in any year and fewer than 1,000 
        policyholders.  The commissioner may allow an exception to the 
        stand alone certification where it can be demonstrated that a 
        company in a group has a pooling or 100 percent reinsurance 
        agreement used in a group which substantially affects the 
        solvency and integrity of the reserves of the company, or where 
        it is only the parent company of a group which is licensed to do 
        business in Minnesota.  If these circumstances exist, the 
        company may file a written request with the commissioner for an 
        exception.  Companies writing reinsurance alone are not exempt 
        from this requirement.  The certification must contain the 
        following statement:  "In my opinion, the reserves described in 
        this certification are consistent with reserves computed in 
        accordance with standards and principles established by the 
        Actuarial Standards Board and are fairly stated."  
           (b) Each foreign company engaged in providing the types of 
        coverage described in section 60A.06, subdivision 1, clause (1), 
        (2), (3), (5)(b), (6), (8), (9), (10), (11), (12), (13), or 
        (14), required by this section to file an annual audited 
        financial report, whose total net earned premium for Schedule P, 
        Part 1A to Part 1H plus Part 1R, (Schedule P, Part 1A to Part 1H 
        plus Part 1R, Column 4, current year premiums earned, from the 
        company's most currently filed annual statement) is equal to 
        one-third or more of the company's total net earned premium 
        (Underwriting and Investment Exhibit, Part 2, Column 4, total 
        line, of the annual statement) must have a reserve certification 
        by a qualified actuary at least every three years.  In the year 
        that the certification is due, the company must file the 
        certification with the commissioner within 30 days of completion 
        of the certification, but not later than June 1.  The actuary 
        providing the certification must not may be an employee of the 
        company.  Companies writing reinsurance alone are not exempt 
        from this requirement.  The certification must contain the 
        following statement:  "The loss reserves and loss expense 
        reserves have been examined and found to be calculated in 
        accordance with generally accepted actuarial principles and 
        practices and are fairly stated."  
           (c) Each company providing life and/or health insurance 
        coverages described in section 60A.06, subdivision 1, clause (4) 
        or (5)(a), required by this section to file an audited annual 
        financial report, whose premiums and annuity considerations (net 
        of reinsurance) from accident and health equal one-third or more 
        of the company's total premiums and annuity considerations (net 
        of reinsurance), as reported in the summary of operations, must 
        have its aggregate reserve for accident and health policies and 
        liability for policy and contract claims for accident and health 
        certified by a qualified actuary at least once every three 
        years.  The actuary providing the certification must not be an 
        employee of the company.  Companies writing reinsurance alone 
        are not exempt from this requirement.  The certification must 
        contain the following statement:  "The policy and contract 
        claims reserves for accident and health have been examined and 
        found to be calculated in accordance with generally accepted 
        actuarial principles and practices and are fairly stated." 
           Sec. 2.  Minnesota Statutes 2002, section 62C.09, is 
        amended by adding a subdivision to read: 
           Subd. 5.  [RISK-BASED CAPITAL REQUIREMENT.] A service plan 
        corporation is subject to regulation of its financial solvency 
        under sections 60A.50 to 60A.592. 
           Sec. 3.  Minnesota Statutes 2002, section 62D.04, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [APPLICATION REVIEW.] Upon receipt of an 
        application for a certificate of authority, the commissioner of 
        health shall determine whether the applicant for a certificate 
        of authority has: 
           (a) demonstrated the willingness and potential ability to 
        assure that health care services will be provided in such a 
        manner as to enhance and assure both the availability and 
        accessibility of adequate personnel and facilities; 
           (b) arrangements for an ongoing evaluation of the quality 
        of health care; 
           (c) a procedure to develop, compile, evaluate, and report 
        statistics relating to the cost of its operations, the pattern 
        of utilization of its services, the quality, availability and 
        accessibility of its services, and such other matters as may be 
        reasonably required by regulation of the commissioner of health; 
           (d) reasonable provisions for emergency and out of area 
        health care services; 
           (e) demonstrated that it is financially responsible and may 
        reasonably be expected to meet its obligations to enrollees and 
        prospective enrollees.  In making this determination, the 
        commissioner of health shall require the amounts amount of 
        initial net worth and working capital required in section 
        62D.042, compliance with the risk-based capital standards under 
        sections 60A.50 to 60A.592, the deposit required in section 
        62D.041, and in addition shall consider: 
           (1) the financial soundness of its arrangements for health 
        care services and the proposed schedule of charges used in 
        connection therewith; 
           (2) arrangements which will guarantee for a reasonable 
        period of time the continued availability or payment of the cost 
        of health care services in the event of discontinuance of the 
        health maintenance organization; and 
           (3) agreements with providers for the provision of health 
        care services; 
           (f) demonstrated that it will assume full financial risk on 
        a prospective basis for the provision of comprehensive health 
        maintenance services, including hospital care; provided, 
        however, that the requirement in this paragraph shall not 
        prohibit the following: 
           (1) a health maintenance organization from obtaining 
        insurance or making other arrangements (i) for the cost of 
        providing to any enrollee comprehensive health maintenance 
        services, the aggregate value of which exceeds $5,000 in any 
        year, (ii) for the cost of providing comprehensive health care 
        services to its members on a nonelective emergency basis, or 
        while they are outside the area served by the organization, or 
        (iii) for not more than 95 percent of the amount by which the 
        health maintenance organization's costs for any of its fiscal 
        years exceed 105 percent of its income for such fiscal years; 
        and 
           (2) a health maintenance organization from having a 
        provision in a group health maintenance contract allowing an 
        adjustment of premiums paid based upon the actual health 
        services utilization of the enrollees covered under the 
        contract, except that at no time during the life of the contract 
        shall the contract holder fully self-insure the financial risk 
        of health care services delivered under the contract.  Risk 
        sharing arrangements shall be subject to the requirements of 
        sections 62D.01 to 62D.30; 
           (g) demonstrated that it has made provisions for and 
        adopted a conflict of interest policy applicable to all members 
        of the board of directors and the principal officers of the 
        health maintenance organization.  The conflict of interest 
        policy shall include the procedures described in section 
        317A.255, subdivisions 1 and 2.  However, the commissioner is 
        not precluded from finding that a particular transaction is an 
        unreasonable expense as described in section 62D.19 even if the 
        directors follow the required procedures; and 
           (h) otherwise met the requirements of sections 62D.01 to 
        62D.30. 
           Sec. 4.  Minnesota Statutes 2002, section 62D.041, 
        subdivision 2, is amended to read: 
           Subd. 2.  [REQUIRED DEPOSIT.] Each health maintenance 
        organization shall deposit with any organization or trustee 
        acceptable to the commissioner through which a custodial or 
        controlled account is utilized, bankable funds in the amount 
        required in this section.  The commissioner may allow a health 
        maintenance organization's deposit requirement to be funded by a 
        guaranteeing an organization, as defined in section 
        62D.043 approved by the commissioner. 
           Sec. 5.  Minnesota Statutes 2002, section 62D.042, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [DEFINITIONS DEFINITION.] (a) For purposes 
        of this section, "guaranteeing organization" means an 
        organization that has agreed to make necessary contributions or 
        advancements to the health maintenance organization to maintain 
        the health maintenance organization's statutorily required net 
        worth. 
           (b) For this section, "working capital" means current 
        assets minus current liabilities. 
           (c) For purposes of this section, if a health maintenance 
        organization offers supplemental benefits as described in 
        section 62D.05, subdivision 6, "expenses" does not include any 
        expenses attributable to the supplemental benefit.  
           Sec. 6.  Minnesota Statutes 2002, section 62D.042, 
        subdivision 2, is amended to read: 
           Subd. 2.  [INITIAL NET WORTH REQUIREMENTS REQUIREMENT.] (a) 
        Beginning organizations shall maintain net worth of at least 
        8-1/3 percent of the sum of all expenses expected to be incurred 
        in the 12 months following the date the certificate of authority 
        is granted, or $1,500,000, whichever is greater. 
           (b) After the first full calendar year of operation, 
        organizations shall maintain net worth of at least 8-1/3 percent 
        and at most 25 percent of the sum of all expenses incurred 
        during the most recent calendar year, but in no case shall net 
        worth fall below $1,000,000. 
           (c) Notwithstanding paragraphs (a) and (b), any health 
        maintenance organization owned by a political subdivision of 
        this state, which has a higher than average percentage of 
        enrollees who are enrolled in medical assistance or general 
        assistance medical care, may exceed the maximum net worth limits 
        provided in paragraphs (a) and (b), with the advance approval of 
        the commissioner. 
           Sec. 7.  Minnesota Statutes 2002, section 62N.25, 
        subdivision 6, is amended to read: 
           Subd. 6.  [SOLVENCY.] A community integrated service 
        network is exempt from the deposit, reserve, and solvency 
        requirements specified in sections 62D.041, 62D.042, 62D.043, 
        and 62D.044 and shall comply instead with sections 62N.27 to 
        62N.32.  To the extent that there are analogous definitions or 
        procedures in chapter 62D or in rules promulgated thereunder, 
        the commissioner shall follow those existing provisions rather 
        than adopting a contrary approach or interpretation.  
           Sec. 8.  Minnesota Statutes 2002, section 62N.27, 
        subdivision 1, is amended to read: 
           Subdivision 1.  [APPLICABILITY.] For purposes of sections 
        62N.27 to 62N.32, the terms defined in this section have the 
        meanings given.  Other terms used in those sections have the 
        meanings given in sections 62D.041, 62D.042, 62D.043, and 
        62D.044. 
           Sec. 9.  Minnesota Statutes 2002, section 62N.29, is 
        amended to read: 
           62N.29 [GUARANTEEING ORGANIZATION.] 
           Subdivision 1.  [USE OF GUARANTEEING ORGANIZATION.] (a) A 
        community network may satisfy its net worth and deposit 
        requirements, in whole or in part, through the use of one or 
        more guaranteeing organizations, with the approval of the 
        commissioner, under the conditions permitted in chapter 62D this 
        section.  If the guaranteeing organization is used only to 
        satisfy the deposit requirement, the requirements of this 
        section do not apply to the guaranteeing organization.  
           (b) For purposes of this section, a "guaranteeing 
        organization" means an organization that has agreed to assume 
        the responsibility for the obligation of the community network's 
        net worth requirement. 
           (c) Governmental entities, such as counties, may serve as 
        guaranteeing organizations subject to the requirements of 
        chapter 62D this section.  
           Subd. 2.  [RESPONSIBILITIES OF GUARANTEEING ORGANIZATION.] 
        Upon an order of rehabilitation or liquidation, a guaranteeing 
        organization shall transfer funds to the commissioner in the 
        amount necessary to satisfy the net worth requirement. 
           Subd. 3.  [REQUIREMENTS FOR GUARANTEEING ORGANIZATION.] (a) 
        A community network's net worth requirement may be guaranteed 
        provided that the guaranteeing organization: 
           (1) transfers into a restricted asset account cash or 
        securities permitted by section 61A.28, subdivisions 2 and 6, in 
        an amount necessary to satisfy the net worth requirement.  
        Restricted asset accounts shall be considered admitted assets 
        for the purpose of determining whether a guaranteeing 
        organization is maintaining sufficient net worth.  Permitted 
        securities shall not be transferred to the restricted asset 
        account in excess of the limits applied to the community 
        network, unless approved by the commissioner in advance; 
           (2) designates the restricted asset account specifically 
        for the purpose of funding the community network's net worth 
        requirement; 
           (3) maintains positive working capital subsequent to 
        establishing the restricted asset account, if applicable; 
           (4) maintains net worth, retained earnings, or surplus in 
        an amount in excess of the amount of the restricted asset 
        account, if applicable, and allows the guaranteeing organization:
           (i) to remain a solvent business organization, which shall 
        be evaluated on the basis of the guaranteeing organization's 
        continued ability to meet its maturing obligations without 
        selling substantially all its operating assets and paying debts 
        when due; and 
           (ii) to be in compliance with any state or federal 
        statutory net worth, surplus, or reserve requirements applicable 
        to that organization or lesser requirements agreed to by the 
        commissioner; and 
           (5) fulfills requirements of clauses (1) to (4) by April 1 
        of each year. 
           (b) The commissioner may require the guaranteeing 
        organization to complete the requirements of paragraph (a) more 
        frequently if the amount necessary to satisfy the net worth 
        requirement increases during the year. 
           Subd. 4.  [EXCEPTIONS TO REQUIREMENTS.] When a guaranteeing 
        organization is a governmental entity, subdivision 3 is not 
        applicable.  The commissioner may consider factors which provide 
        evidence that the governmental entity is a financially reliable 
        guaranteeing organization.  Similarly, when a guaranteeing 
        organization is a Minnesota-licensed health maintenance 
        organization, health service plan corporation, or insurer, 
        subdivision 3, paragraphs (1) and (2), are not applicable.  
           Subd. 5.  [AMOUNTS NEEDED TO MEET NET WORTH REQUIREMENTS.] 
        The amount necessary for a guaranteeing organization to satisfy 
        the community network's net worth requirement is the lesser of: 
           (1) an amount needed to bring the community network's net 
        worth to the amount required by section 62N.28; or 
           (2) an amount agreed to by the guaranteeing organization. 
           Subd. 6.  [CONSOLIDATED CALCULATIONS FOR GUARANTEED 
        COMMUNITY NETWORKS.] (a) If a guaranteeing organization 
        guarantees one or more community networks, the guaranteeing 
        organization may calculate the amount necessary to satisfy the 
        community networks' net worth requirements on a consolidated 
        basis.  
           (b) Liabilities of the community network to the 
        guaranteeing organization must be subordinated in the same 
        manner as preferred ownership claims under section 60B.44, 
        subdivision 10. 
           Subd. 7.  [AGREEMENT BETWEEN GUARANTEEING ORGANIZATION AND 
        COMMUNITY NETWORK.] A written agreement between the guaranteeing 
        organization and the community network must include the 
        commissioner as a party and include the following provisions: 
           (1) any or all of the funds needed to satisfy the community 
        network's net worth requirement shall be transferred, 
        unconditionally and upon demand, according to subdivision 2; 
           (2) the arrangement shall not terminate for any reason 
        without the commissioner being notified of the termination at 
        least nine months in advance.  The arrangement may terminate 
        earlier if net worth requirements will be satisfied under other 
        arrangements, as approved by the commissioner; 
           (3) the guaranteeing organization shall pay or reimburse 
        the commissioner for all costs and expenses, including 
        reasonable attorney fees and costs, incurred by the commissioner 
        in connection with the protection, defense, or enforcement of 
        the guarantee; 
           (4) the guaranteeing organization shall waive all defenses 
        and claims it may have or the community network may have 
        pertaining to the guarantee including, but not limited to, 
        waiver, release, res judicata, statute of frauds, lack of 
        authority, usury, illegality; 
           (5) the guaranteeing organization waives present demand for 
        payment, notice of dishonor or nonpayment and protest, and the 
        commissioner shall not be required to first resort for payment 
        to other sources or other means before enforcing the guarantee; 
           (6) the guarantee may not be waived, modified, amended, 
        terminated, released, or otherwise changed except as provided by 
        the guarantee agreement, and as provided by applicable statutes; 
           (7) the guaranteeing organization waives its rights under 
        the Federal Bankruptcy Code, United States Code, title 11, 
        section 303, to initiate involuntary proceedings against the 
        community network and agrees to submit to the jurisdiction of 
        the commissioner and Minnesota state courts in any 
        rehabilitation or liquidation of the community network; 
           (8) the guarantee shall be governed by and construed and 
        enforced according to the laws of the state of Minnesota; and 
           (9) the guarantee must be approved by the commissioner. 
           Subd. 8.  [SUBMISSION OF GUARANTEEING ORGANIZATION'S 
        FINANCIAL STATEMENTS.] The community network shall submit to the 
        commissioner the guaranteeing organization's audited financial 
        statements annually by April 1 or at a different date if agreed 
        to by the commissioner.  The community network shall also 
        provide other relevant financial information regarding a 
        guaranteeing organization as may be requested by the 
        commissioner. 
           Subd. 9.  [PERFORMANCE AS GUARANTEEING ORGANIZATION 
        VOLUNTARY.] No provider may be compelled to serve as a 
        guaranteeing organization. 
           Subd. 10.  [GUARANTOR STATUS IN REHABILITATION OR 
        LIQUIDATION.] Any or all of the funds in excess of the amounts 
        needed to satisfy the community network's obligations as of the 
        date of an order of liquidation or rehabilitation shall be 
        returned to the guaranteeing organization in the same manner as 
        preferred ownership claims under section 60B.44, subdivision 10. 
           Sec. 10.  [REVISOR INSTRUCTION.] 
           The revisor of statutes shall change the heading of 
        Minnesota Statutes, section 62D.042, to read "INITIAL NET WORTH 
        REQUIREMENT." 
           Sec. 11.  [REPEALER.] 
           (a) Minnesota Statutes 2002, sections 62C.09, subdivisions 
        3 and 4; 62D.042, subdivisions 5, 6, and 7; and 62D.043, are 
        repealed. 
           (b) Minnesota Rules, part 4685.0600, is repealed. 

                                   ARTICLE 4 
                    SECURITIES REGULATION TECHNICAL CHANGES 
           Section 1.  Minnesota Statutes 2002, section 45.027, 
        subdivision 7a, is amended to read: 
           Subd. 7a.  [AUTHORIZED DISCLOSURES OF INFORMATION AND 
        DATA.] (a) The commissioner may release and disclose any active 
        or inactive investigative information and data on licensees to 
        any national securities exchange or national securities 
        association registered under the Securities Exchange Act of 1934 
        when necessary for the requesting agency in initiating, 
        furthering, or completing an investigation. 
           (b) The commissioner may release any active or inactive 
        investigative data relating to the conduct of the business of 
        insurance to the Office of the Comptroller of the Currency or 
        the Office of Thrift Supervision in order to facilitate the 
        initiation, furtherance, or completion of the investigation. 
           Sec. 2.  Minnesota Statutes 2002, section 60A.03, 
        subdivision 9, is amended to read: 
           Subd. 9.  [CONFIDENTIALITY OF INFORMATION.] The 
        commissioner may not be required to divulge any information 
        obtained in the course of the supervision of insurance 
        companies, or the examination of insurance companies, including 
        examination related correspondence and workpapers, until the 
        examination report is finally accepted and issued by the 
        commissioner, and then only in the form of the final public 
        report of examinations.  Nothing contained in this subdivision 
        prevents or shall be construed as prohibiting the commissioner 
        from disclosing the content of this information to the insurance 
        department of another state or, the National Association of 
        Insurance Commissioners, or any national securities association 
        registered under the Securities Exchange Act of 1934, if the 
        recipient of the information agrees in writing to hold it as 
        nonpublic data as defined in section 13.02, in a manner 
        consistent with this subdivision.  This subdivision does not 
        apply to the extent the commissioner is required or permitted by 
        law, or ordered by a court of law to testify or produce evidence 
        in a civil or criminal proceeding.  For purposes of this 
        subdivision, a subpoena is not an order of a court of law. 
           Sec. 3.  Minnesota Statutes 2002, section 60A.031, 
        subdivision 4, is amended to read: 
           Subd. 4.  [EXAMINATION REPORT; FOREIGN AND DOMESTIC 
        COMPANIES.] (a) The commissioner shall make a full and true 
        report of every examination conducted pursuant to this chapter, 
        which shall include (1) a statement of findings of fact relating 
        to the financial status and other matters ascertained from the 
        books, papers, records, documents, and other evidence obtained 
        by investigation and examination or ascertained from the 
        testimony of officers, agents, or other persons examined under 
        oath concerning the business, affairs, assets, obligations, 
        ability to fulfill obligations, and compliance with all the 
        provisions of the law of the company, applicant, organization, 
        or person subject to this chapter and (2) a summary of important 
        points noted in the report, conclusions, recommendations and 
        suggestions as may reasonably be warranted from the facts so 
        ascertained in the examinations.  The report of examination 
        shall be verified by the oath of the examiner in charge thereof, 
        and shall be prima facie evidence in any action or proceedings 
        in the name of the state against the company, applicant, 
        organization, or person upon the facts stated therein.  
           (b) No later than 60 days following completion of the 
        examination, the examiner in charge shall file with the 
        department a verified written report of examination under oath.  
        Upon receipt of the verified report, the department shall 
        transmit the report to the company examined, together with a 
        notice which provides the company examined with a reasonable 
        opportunity of not more than 30 days to make a written 
        submission or rebuttal with respect to matters contained in the 
        examination report. 
           (c) Within 30 days of the end of the period allowed for the 
        receipt of written submissions or rebuttals, the commissioner 
        shall fully consider and review the report, together with the 
        written submissions or rebuttals and the relevant portions of 
        the examiner's workpapers and enter an order: 
           (1) adopting the examination report as filed or with 
        modification or corrections.  If the examination report reveals 
        that the company is operating in violation of any law, rule, or 
        prior order of the commissioner, the commissioner may order the 
        company to take any action the commissioner considers necessary 
        and appropriate to cure the violation; 
           (2) rejecting the examination report with directions to the 
        examiners to reopen the examination for purposes of obtaining 
        additional data, documentation, or information, and refiling the 
        report as required under paragraph (b); or 
           (3) calling for an investigatory hearing with no less than 
        20 days' notice to the company for purposes of obtaining 
        additional documentation, data, information, and testimony. 
           (d)(1) All orders entered under paragraph (c), clause (1), 
        must be accompanied by findings and conclusions resulting from 
        the commissioner's consideration and review of the examination 
        report, relevant examiner workpapers, and any written 
        submissions or rebuttals.  The order is a final administrative 
        decision and may be appealed as provided under chapter 14.  The 
        order must be served upon the company by certified mail, 
        together with a copy of the adopted examination report.  Within 
        30 days of the issuance of the adopted report, the company shall 
        file affidavits executed by each of its directors stating under 
        oath that they have received a copy of the adopted report and 
        related orders.  
           (2) A hearing conducted under paragraph (c), clause (3), by 
        the commissioner or authorized representative, must be conducted 
        as a nonadversarial confidential investigatory proceeding as 
        necessary for the resolution of inconsistencies, discrepancies, 
        or disputed issues apparent upon the face of the filed 
        examination report or raised by or as a result of the 
        commissioner's review of relevant workpapers or by the written 
        submission or rebuttal of the company.  Within 20 days of the 
        conclusion of the hearing, the commissioner shall enter an order 
        as required under paragraph (c), clause (1).  
           (3) The commissioner shall not appoint an examiner as an 
        authorized representative to conduct the hearing.  The hearing 
        must proceed expeditiously.  Discovery by the company is limited 
        to the examiner's workpapers which tend to substantiate 
        assertions in a written submission or rebuttal.  The 
        commissioner or the commissioner's representative may issue 
        subpoenas for the attendance of witnesses or the production of 
        documents considered relevant to the investigation whether under 
        the control of the department, the company, or other persons.  
        The documents produced must be included in the record.  
        Testimony taken by the commissioner or the commissioner's 
        representative must be under oath and preserved for the record. 
           This section does not require the department to disclose 
        information or records which would indicate or show the 
        existence or content of an investigation or activity of a 
        criminal justice agency. 
           (4) The hearing must proceed with the commissioner or the 
        commissioner's representative posing questions to the persons 
        subpoenaed.  Thereafter, the company and the department may 
        present testimony relevant to the investigation.  
        Cross-examination may be conducted only by the commissioner or 
        the commissioner's representative.  The company and the 
        department shall be permitted to make closing statements and may 
        be represented by counsel of their choice.  
           (e)(1) Upon the adoption of the examination report under 
        paragraph (c), clause (1), the commissioner shall continue to 
        hold the content of the examination report as private and 
        confidential information for a period of 30 days except as 
        otherwise provided in paragraph (b).  Thereafter, the 
        commissioner may open the report for public inspection if a 
        court of competent jurisdiction has not stayed its publication. 
           (2) Nothing contained in this subdivision prevents or shall 
        be construed as prohibiting the commissioner from disclosing the 
        content of an examination report, preliminary examination report 
        or results, or any matter relating to the reports, to the 
        Commerce Department or the insurance department of another state 
        or country, or to law enforcement officials of this or another 
        state or agency of the federal government at any time, if the 
        agency or office receiving the report or matters relating to the 
        report agrees in writing to hold it confidential and in a manner 
        consistent with this subdivision.  
           (3) If the commissioner determines that regulatory action 
        is appropriate as a result of an examination, the commissioner 
        may initiate proceedings or actions as provided by law. 
           (f) All working papers, recorded information, documents and 
        copies thereof produced by, obtained by, or disclosed to the 
        commissioner or any other person in the course of an examination 
        made under this subdivision must be given confidential treatment 
        and are not subject to subpoena and may not be made public by 
        the commissioner or any other person, except to the extent 
        provided in paragraph (e).  Access may also be granted to the 
        National Association of Insurance Commissioners and any national 
        securities association registered under the Securities Exchange 
        Act of 1934.  The parties must agree in writing prior to 
        receiving the information to provide to it the same confidential 
        treatment as required by this section, unless the prior written 
        consent of the company to which it pertains has been obtained. 
           Sec. 4.  [EFFECTIVE DATE.] 
           Sections 1 to 3 are effective the day following final 
        enactment. 
           Presented to the governor May 18, 2004 
           Signed by the governor May 29, 2004, 1:00 p.m.

700 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, MN 55155 ♦ Phone: (651) 296-2868 ♦ TTY: 1-800-627-3529 ♦ Fax: (651) 296-0569