Section: Effect of definitions on treaties, compacts, or agreements
3. a. This act shall provide coverage, for the policies and contracts specified in subsection b. of this section, to:
(1) persons who, regardless of where they reside (except for nonresident certificate holders under group policies or contracts), are the beneficiaries, assignees or payees of the persons covered under paragraph (2) of this subsection; and
(2) persons who are owners of or certificate holders under those policies or contracts, or in the case of unallocated annuity contracts, to the persons who are the contract holders and who:
(a) are residents, or
(b) are not residents, but only if:
(i) the insurers which issued the policies or contracts are domiciled in this State;
(ii) those insurers never held a license or certificate of authority in the states in which those persons reside;
(iii) those states have associations and coverage provisions with respect to residency similar to the association created by this act; and
(iv) those persons are not eligible for coverage by those associations.
b. This act shall provide coverage to the persons specified in subsection a. of this section for:
(1) direct, non-group life, health, annuity and supplemental policies or contracts, for certificates under direct group life, health, annuity and supplemental policies and contracts, for individual and group long-term care insurance policies and contracts, and for unallocated annuity contracts, issued by member insurers, except as limited by this act; and
(2) policies or contracts issued by medical service corporations declared to be insolvent or impaired by a court of competent jurisdiction on or after September 1, 1987, but prior to the effective date of this act, except as otherwise limited by this act.
c. This act shall not provide coverage for:
(1) any portion of a policy or contract not guaranteed by the insurer, or under which the risk is borne by the policy or contract holder;
(2) any policy or contract of reinsurance, unless assumption certificates have been issued;
(3) any portion of a policy or contract to the extent that the rate of interest on which it is based:
(a) averaged over the four-year period prior to the date on which the association becomes obligated with respect to that policy or contract, exceeds the lesser of:
(i) the rate of interest determined by subtracting three percentage points from Moody's Corporate Bond Yield Average averaged for that same four-year period, or for such lesser period if the policy or contract was issued less than four years before the association became obligated, or
(ii) the rate of interest specified in the standard valuation law, or the rules of this State for determining the minimum standard for the valuation of policies or contracts issued during the year of insolvency; and
(b) on and after the date on which the association becomes obligated with respect to that policy or contract, exceeds the rate of interest determined by subtracting four percentage points from Moody's Corporate Bond Yield Average as most recently available; except that the limitation of this paragraph shall not preclude the association from providing more extensive coverage if it is proceeding under the authority of section 7 of this act;
(4) any plan or program of an employer, association or similar entity to provide life, health, or annuity benefits to its employees or members to the extent that such plan or program is self-funded or uninsured, including, but not limited to, benefits payable by an employer, association or similar entity under:
(a) a Multiple Employer Welfare Arrangement as defined in the Employee Retirement Income Security Act of 1974 (29 U.S.C. s.1002);
(b) a minimum premium group insurance plan;
(c) a stop-loss group insurance plan; or
(d) an administrative services only contract;
(5) any portion of a policy or contract to the extent that it provides dividends or experience rating credits, or provides that any fees or allowances be paid to any person, including the holder of the policy or contract, in connection with the service to or administration of that policy or contract;
(6) any policy or contract issued in this State by a member insurer at a time when it was not licensed or did not have a certificate of authority to issue that policy or contract in this State;
(7) any unallocated annuity contract issued to an employee benefit plan covered by the Pension Benefit Guaranty Corporation and whose benefits will be paid under such system; and
(8) any portion of any unallocated annuity contract which is not issued to or in connection with a specific plan providing benefits to employees or an association of natural persons.
d. The benefits for which the association may become liable shall in no event exceed the lesser of:
(1) the contractual obligations for which the insurer is liable or would have been liable if it were not an impaired or insolvent insurer; or
(2) with respect to any one insured individual, regardless of the number of policies or contracts:
(a) $500,000 in life insurance death benefits, but not more than $100,000 in net cash surrender and net cash withdrawal values for life insurance;
(b) $500,000 in present value annuity benefits, including net cash surrender and net cash withdrawal values, but not more than $100,000 in net cash surrender and net cash withdrawal values for annuity benefits; provided, however, that in no event shall the association be liable to expend more than $500,000 in the aggregate with respect to any one individual under this paragraph (2); or
(3) with respect to any one unallocated annuity contract, $2,000,000 in benefits; or
(4) with respect to any one group, blanket, or individual accident or health insurance or group, blanket or individual accident or health insurance policy, unlimited benefits.
e. A provider of health care services, in order to receive payment directly from the association upon a claim of the provider against an insured, shall agree to forgive the insured of 20% of the obligation which would otherwise be paid by the insurer had it not been insolvent. The obligations of solvent insurers to pay all or part of the covered claim are not diminished by the forgiveness provided in this subsection. The association is not bound by an assignment of benefits executed with respect to the coverage provided by the insolvent insurer. The association may aggregate all claims owed health care providers when negotiating direct payment of claims of all covered individuals.
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