REPORT TITLE:
Insurance Coverage


DESCRIPTION:
Extends medical and other insurance benefits to reciprocal
beneficiaries.  Requires the Public Employees Health Fund to
establish a reciprocal beneficiary family coverage health
benefits plan.  (SB3176 HD1)

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                        3176
THE SENATE                              S.B. NO.           S.D. 2
TWENTIETH LEGISLATURE, 2000                                H.D. 1
STATE OF HAWAII                                            
                                                             
________________________________________________________________
________________________________________________________________


                   A  BILL  FOR  AN  ACT

RELATING TO INSURANCE.



BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

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

 
Page 2                                                     3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1      SECTION 2.  Chapter 432, Hawaii Revised Statutes, is amended
 
 2 by adding to part VI of article I a new section to be
 
 3 appropriately designated and to read as follows:
 
 4      "§432:1-      Reciprocal beneficiary coverage.
 
 5 Notwithstanding any law to the contrary, all individual and group
 
 6 hospital or medical service plan contracts that offer coverage
 
 7 for a subscriber's or member's spouse shall offer the same
 
 8 coverage for a subscriber's or member's reciprocal beneficiary."
 
 9      SECTION 3.  Section 431:10-206, Hawaii Revised Statutes, is
 
10 amended to read as follows:
 
11      "§431:10-206  Application for insurance:  consent of insured
 
12 required.  No life or disability insurance contract upon an
 
13 individual shall be made or effectuated unless at the time of the
 
14 making of the contract the individual insured, being of competent
 
15 legal capacity to contract, applies for or consents to the
 
16 insurance in writing, except in the following cases:
 
17      (1)  A spouse or reciprocal beneficiary may effectuate such
 
18           insurance upon the other spouse[.] or reciprocal
 
19           beneficiary.
 
20      (2)  Any person having an insurable interest in the life of
 
21           a minor, or any person upon whom a minor is dependent
 
22           for support and maintenance, may effectuate insurance
 
23           upon the life of or pertaining to the minor.
 

 
Page 3                                                     3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 This section shall not apply to contracts of group life insurance
 
 2 or of group or blanket disability insurance as defined in this
 
 3 code."
 
 4      SECTION 4.  Section 431:10-232, Hawaii Revised Statutes, is
 
 5 amended by amending subsections (a) and (b) to read as follows:
 
 6      "(a)  All proceeds payable because of the death of the
 
 7 insured and the aggregate net cash value of any or all life and
 
 8 endowment policies and annuity contracts payable to a spouse or
 
 9 reciprocal beneficiary of the insured, or to a child, parent, or
 
10 other person dependent upon the insured, whether the power to
 
11 change the beneficiary is reserved to the insured or not, and
 
12 whether the insured or the insured's estate is a contingent
 
13 beneficiary or not, shall be exempt from execution, attachment,
 
14 garnishment, or other process, for the debts or liabilities of
 
15 the insured incurred subsequent to May 19, 1939, except as to
 
16 premiums paid in fraud of creditors within the period limited by
 
17 law for the recovery of such payments.
 
18      (b)  When the terms of any life or endowment policy or
 
19 annuity contract require that the proceeds thereof be retained by
 
20 the insurer upon the death of the insured, or other maturity of
 
21 the policy or contract, for payment to any beneficiary other than
 
22 the insured in accordance with a settlement plan selected by the
 
23 insured, the beneficiary shall have no right or power, nor shall
 

 
Page 4                                                     3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 the beneficiary be permitted by any insurer, to commute,
 
 2 encumber, assign, or otherwise anticipate the beneficiary's
 
 3 interests under the plan if the right or power is expressly
 
 4 denied the beneficiary by the terms of the contract or policy.
 
 5 If the beneficiary under the settlement plan is or was the spouse
 
 6 or reciprocal beneficiary of the insured, or a child, parent, or
 
 7 other person dependent upon the insured, the beneficiary's
 
 8 interests thereunder, in any case, shall be exempt from
 
 9 execution, attachment, garnishment, or other process for the
 
10 beneficiary's debts or liabilities incurred after December 31,
 
11 1955."
 
12      SECTION 5.  Section 431:10A-103, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "§431:10A-103  Family coverage defined.  As used in this
 
15 part, family coverage means a policy that insures, originally or
 
16 upon subsequent amendment, an adult member of a family who shall
 
17 be deemed the policyholder and any two or more eligible members
 
18 of that family, including spouse, reciprocal beneficiary,
 
19 dependent children or any children under a specified age which
 
20 shall not exceed nineteen years, and any other person dependent
 
21 upon the policyholder."
 
22      SECTION 6.  Section 431:10A-105, Hawaii Revised Statutes, is
 
23 amended to read as follows:
 

 
Page 5                                                     3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1      "§431:10A-105  Required provisions.  Except as provided in
 
 2 section 431:10A-107, each policy of accident and sickness
 
 3 insurance delivered or issued for delivery to any person in this
 
 4 State shall contain the provisions set forth below.  These
 
 5 provisions shall be in the words in which they appear below,
 
 6 provided that the insurer may substitute corresponding provisions
 
 7 of different wording approved by the commissioner [which] that
 
 8 are in each instance not less favorable in any respect to the
 
 9 insured or the beneficiary.  The provisions shall be preceded
 
10 individually by the specified caption, or by such appropriate
 
11 individual or group captions or subcaptions as the commissioner
 
12 may approve.  The provisions are as follows:
 
13      (1)  "Entire Contract; Changes:  This policy, including the
 
14           endorsements and the attached papers, if any,
 
15           constitutes the entire contract of insurance.  No
 
16           change in this policy shall be valid until approved by
 
17           an executive officer of the insurer and unless the
 
18           approval is endorsed on or attached to this policy.  No
 
19           agent has authority to change this policy or to waive
 
20           any of its provisions."
 
21      (2)  (A)  "Time Limit on Certain Defenses:
 
22                (i)  After three years from the date of issue of
 
23                     this policy, no misstatements, except
 

 
Page 6                                                     3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                     fraudulent misstatements, made by the
 
 2                     applicant in the application for this policy
 
 3                     shall be used to void this policy or to deny
 
 4                     a claim for loss incurred or disability (as
 
 5                     defined in the policy) commencing after the
 
 6                     expiration of the three-year period.
 
 7               (ii)  No claim for loss incurred or disability (as
 
 8                     defined in the policy) commencing after three
 
 9                     years from the date of issue of this policy
 
10                     shall be reduced or denied on the ground that
 
11                     a disease or physical condition not excluded
 
12                     from coverage by name or specific description
 
13                     effective on the date of loss had existed
 
14                     prior to the effective date of coverage of
 
15                     this policy."
 
16           (B)  The policy provision set forth in subparagraph
 
17                (A)(i) shall not be construed to affect any legal
 
18                requirement for avoidance of a policy or denial of
 
19                a claim during the initial three-year period, nor
 
20                to limit the application of section 431:10A-106(1)
 
21                through (4) in the event of misstatement with
 
22                respect to age or occupation or other insurance.
 

 
 
 
Page 7                                                     3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1           (C)  A policy [which] that the insured has the right to
 
 2                continue in force subject to its terms by the
 
 3                timely payment of premium until at least age fifty
 
 4                or, in the case of a policy issued after age
 
 5                forty-four, for at least five years from its date
 
 6                of issue, may contain in lieu of subparagraph
 
 7                (A)(i) the following provision (from which the
 
 8                clause in parentheses may be omitted at the
 
 9                insurer's option):  "Incontestable:  After this
 
10                policy has been in force for a period of three
 
11                years during the lifetime of the insured
 
12                (excluding any period during which the insured is
 
13                disabled), it shall become incontestable as to the
 
14                statements contained in the application."
 
15      (3)  (A)  "Grace period:  A grace period of days (insert a
 
16                number not less than seven for weekly premium
 
17                policies, ten for monthly premium policies, and
 
18                thirty-one for all other policies) will be granted
 
19                for the payment of each premium falling due after
 
20                the first premium, during which grace period the
 
21                policy shall continue in force."
 
22           (B)  A policy [which] that contains a cancellation
 
23                provision may add at the end of the above
 

 
Page 8                                                     3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                provision:  "subject to the right of the insurer
 
 2                to cancel in accordance with the cancellation
 
 3                provision."
 
 4           (C)  A policy in which the insurer reserves the right
 
 5                to refuse any renewal shall have at the beginning
 
 6                of the above provision:  "Unless not less than
 
 7                thirty days prior to the premium due date the
 
 8                insurer has delivered to the insured or has mailed
 
 9                to the insured's last address as shown by the
 
10                records of the insurer written notice of its
 
11                intention not to renew this policy beyond the
 
12                period for which the premium has been accepted."
 
13      (4)  (A)  "Reinstatement:  If any renewal premium is not
 
14                paid within the time granted the insured for
 
15                payment, a subsequent acceptance of premium by the
 
16                insurer or by any agent duly authorized by the
 
17                insurer to accept the premium, without requiring
 
18                in connection therewith an application for
 
19                reinstatement, shall reinstate the policy;
 
20                provided[, however,] that if the insurer or agent
 
21                requires an application for reinstatement and
 
22                issues a conditional receipt for the premium
 
23                tendered, the policy shall be reinstated upon
 

 
Page 9                                                     3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                approval of the application by the insurer or,
 
 2                lacking approval, upon the forty-fifth day
 
 3                following the date of conditional receipt unless
 
 4                the insurer has previously notified the insured in
 
 5                writing of its disapproval of the application.
 
 6                The reinstated policy shall cover only loss
 
 7                resulting from accidental injury as may be
 
 8                sustained after the date of reinstatement and loss
 
 9                due to sickness as may begin more than ten days
 
10                after that date.  In all other respects, the
 
11                insured and insurer shall have the same rights as
 
12                they had under the policy immediately before the
 
13                due date of the defaulted premium, subject to any
 
14                provisions endorsed hereon or attached hereto in
 
15                connection with the reinstatement.  Any premium
 
16                accepted in connection with the reinstatement
 
17                shall be applied to a period for which premium has
 
18                not been previously paid, but not to any period
 
19                more than sixty days prior to the date of
 
20                reinstatement."
 
21           (B)  The last sentence of the above provision may be
 
22                omitted from any policy [which] that the insured
 
23                has the right to continue in force subject to its
 

 
Page 10                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                terms by the timely payment of premiums until at
 
 2                least age fifty or, in the case of a policy issued
 
 3                after age forty-four, for at least five years from
 
 4                its date of issue.
 
 5      (5)  (A)  "Notice of Claim:  Written notice of claim must be
 
 6                given to the insurer within twenty days after the
 
 7                occurrence or commencement of any loss covered by
 
 8                the policy, or as soon thereafter as is reasonably
 
 9                possible.  Notice given by or on behalf of the
 
10                insured or the beneficiary to the insurer at
 
11                (insert the location of the office as the insurer
 
12                may designate for the purpose) or to any
 
13                authorized agent of the insurer, with information
 
14                sufficient to identify the insured, shall be
 
15                deemed notice to the insurer."
 
16           (B)  In a policy providing a loss of time benefit
 
17                [which] that may be payable for at least two
 
18                years, an insurer may at its option insert the
 
19                following between the first and second sentences
 
20                of the above provision:  "Subject to the
 
21                qualification set forth below, if the insured
 
22                suffers loss of time on account of disability for
 
23                which indemnity may be payable for at least two
 

 
Page 11                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                years, the insured shall, at least once in every
 
 2                six months after having given notice of claim,
 
 3                give to the insurer notice of continuance of the
 
 4                disability, except in the event of legal
 
 5                incapacity.  The period of six months following
 
 6                any filing of proof by the insured or any payment
 
 7                by the insurer on account of the claim or any
 
 8                denial of liability in whole or in part by the
 
 9                insurer shall be excluded in applying this
 
10                provision.  Delay in giving notice shall not
 
11                impair the insured's right to any indemnity
 
12                [which] that would otherwise have accrued during
 
13                the period of six months preceding the date on
 
14                which notice is actually given."
 
15      (6)  "Claim Forms:  The insurer, upon receipt of a notice of
 
16           claim, will furnish to the claimant the forms, that are
 
17           usually furnished by it for filing proofs of loss.  If
 
18           the forms are not furnished within fifteen days after
 
19           the giving of notice, the claimant shall be deemed to
 
20           have complied with the requirements of this policy as
 
21           to proof of loss upon submitting, within the time fixed
 
22           in the policy for filing proofs of loss, written proof
 
23           covering the occurrence, the character, and the extent
 
24           of the loss for which claim is made."
 

 
Page 12                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1      (7)  "Proofs of Loss:  In case of claim for loss for which
 
 2           this policy provides any periodic payment contingent
 
 3           upon continuing loss, written proof of loss must be
 
 4           furnished to the insurer at its office within ninety
 
 5           days after the termination of the period for which the
 
 6           insurer is liable, and in case of claim for any other
 
 7           loss within ninety days after the date of loss.
 
 8           Failure to furnish proof of loss within the time
 
 9           required shall not invalidate nor reduce any claim if
 
10           it was not reasonably possible to give proof within the
 
11           time required, provided proof is furnished as soon as
 
12           reasonably possible and in no event, except in the
 
13           absence of legal capacity, later than fifteen months
 
14           from the time proof is otherwise required."
 
15      (8)  "Time of Payment of Claims:  Indemnities payable under
 
16           this policy for any loss other than loss for which this
 
17           policy provides any periodic payment will be paid
 
18           immediately upon receipt of due written proof of loss.
 
19           Subject to due written proof of loss, all accrued
 
20           indemnities for loss for which this policy provides
 
21           periodic payment will be paid (insert period for
 
22           payment which must not be less frequently than monthly)
 
23           and any balance remaining unpaid upon the termination
 

 
Page 13                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1           of liability will be paid immediately upon receipt of
 
 2           due written proof."
 
 3      (9)  (A)  "Payment of Claims:  Indemnity for loss of life
 
 4                will be payable in accordance with the beneficiary
 
 5                designation and the provisions respecting payment
 
 6                which may be prescribed herein and effective at
 
 7                the time of payment.  If no designation or
 
 8                provision is then effective, the indemnity shall
 
 9                be payable to the estate of the insured.  Any
 
10                other accrued indemnities unpaid at the insured's
 
11                death [may], at the option of the insurer, may be
 
12                paid either to the designated beneficiary or to
 
13                the estate of the insured.  All other indemnities
 
14                will be payable to the insured."
 
15           (B)  The following provisions, or either of them, may
 
16                be included with the above provision at the option
 
17                of the insurer:
 
18                (i)  "If any indemnity of this policy shall be
 
19                     payable to the estate of the insured, or to
 
20                     an insured or beneficiary who is a minor or
 
21                     otherwise not competent to give a valid
 
22                     release, the insurer may pay the indemnity,
 
23                     up to an amount not exceeding $2,000 to any
 

 
Page 14                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                     relative by blood or connection by marriage
 
 2                     or through reciprocal beneficiary status of
 
 3                     the insured or beneficiary who is deemed by
 
 4                     the insurer to be equitably entitled thereto.
 
 5                     Any payment made by the insurer in good faith
 
 6                     pursuant to this provision shall fully
 
 7                     discharge the insurer to the extent of the
 
 8                     payment."
 
 9               (ii)  "Subject to any written direction of the
 
10                     insured in the application or otherwise all
 
11                     or a portion of any indemnities provided by
 
12                     this policy on account of hospital, nursing,
 
13                     medical, or surgical services [may], at the
 
14                     insurer's option and unless the insured
 
15                     requests otherwise in writing not later than
 
16                     the time of filing proofs of loss, may be
 
17                     paid directly to the hospital or person
 
18                     rendering the services; but it is not
 
19                     required that the service be rendered by a
 
20                     particular hospital or person."
 
21     (10)  "Physical Examinations and Autopsy:  The insurer at its
 
22           own expense shall have the right and opportunity to
 
23           examine the person of the insured when and as often as
 

 
Page 15                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1           it may reasonably require during the pendency of a
 
 2           claim hereunder and to make an autopsy in case of death
 
 3           where it is not forbidden by law."
 
 4     (11)  "Legal Actions:  No action at law or in equity shall be
 
 5           brought to recover on this policy prior to the
 
 6           expiration of sixty days after written proof of loss
 
 7           has been furnished in accordance with the requirements
 
 8           of this policy.  No action at law or in equity shall be
 
 9           brought after the expiration of three years after the
 
10           time written proof of loss is required to be
 
11           furnished."
 
12     (12)  (A)  "Change of Beneficiary:  Unless the insured makes
 
13                an irrevocable designation of beneficiary, the
 
14                right to change of beneficiary is reserved to the
 
15                insured and the consent of the beneficiary or
 
16                beneficiaries shall not be requisite to surrender
 
17                or assignment of this policy or to any change of
 
18                beneficiary or beneficiaries, or to any other
 
19                changes in this policy."
 
20           (B)  The first clause of the above provision, relating
 
21                to the irrevocable designation of beneficiary, may
 
22                be omitted at the insurer's option."
 

 
 
 
Page 16                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1      SECTION 7.  Section 431:10A-202, Hawaii Revised Statutes, is
 
 2 amended to read as follows:
 
 3      "§431:10A-202  Health care groups.  A policy of group
 
 4 disability insurance may be issued to a corporation, as
 
 5 policyholder, existing primarily for the purpose of assisting
 
 6 individuals who are its subscribers in securing medical,
 
 7 hospital, dental, and other health care services for themselves
 
 8 and their dependents[,] including reciprocal beneficiaries,
 
 9 covering all and not less than five hundred such subscribers and
 
10 dependents, with respect only to medical, hospital, dental, and
 
11 other health care services."
 
12      SECTION 8.  Section 431:10A-401, Hawaii Revised Statutes, is
 
13 amended to read as follows:
 
14      "§431:10A-401  Purpose.  It is the purpose of this part to
 
15 provide a means of more adequately meeting the needs of persons
 
16 who are sixty-five years of age or older and their spouses or
 
17 reciprocal beneficiaries for insurance coverage against financial
 
18 loss from accident or disease through the combined resources and
 
19 experience of a number of insurers; to make possible the fullest
 
20 extension of such coverage by encouraging insurers to combine
 
21 their resources and experience and to exercise their collective
 
22 efforts in the development and offering of policies of such
 
23 insurance to all such applicants at costs lower than those
 

 
Page 17                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 generally available through individual insurers; and to regulate
 
 2 the joint activities herein authorized in accordance with the
 
 3 intent of Congress as expressed in the Act of Congress of
 
 4 March 9, 1945 (Public Law 15, 79th Congress), as amended."
 
 5      SECTION 9.  Section 431:10A-403, Hawaii Revised Statutes, is
 
 6 amended to read as follows:
 
 7      "§431:10A-403  Association of insurers; policyholder;
 
 8 policy.(a)  Any insurer may join with one or more other
 
 9 insurers to plan, develop, underwrite, offer, and provide to any
 
10 person who is sixty-five years of age or older and to the spouse
 
11 or reciprocal beneficiary of such person, extended health
 
12 insurance against financial loss from accident or disease, or
 
13 both.  The insurance may be offered, issued, and administered
 
14 jointly by two or more insurers by a group policy issued to a
 
15 policyholder through an association formed for the purpose of
 
16 offering, selling, issuing, and administering such insurance.
 
17      (b)  The policyholder may be an association, a trustee, or
 
18 any other person.  A master group policy issued to an association
 
19 or to a trustee or any person appointed by an association for the
 
20 purpose of providing the insurances described in this part shall
 
21 be another form of group disability insurance.
 
22      Any form of policy approved by the commissioner for an
 
23 association shall be offered throughout the State to all persons
 

 
Page 18                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 sixty-five and older and their spouses[,] or reciprocal
 
 2 beneficiaries, and the coverage of any person insured under such
 
 3 a form of policy shall not be cancellable except for nonpayment
 
 4 of premiums unless the coverage of all persons insured under such
 
 5 form of policy is also cancelled.
 
 6      (c)  Any such policy may provide, among other things, that
 
 7 the benefits payable under the policy are subject to reduction if
 
 8 the individual insured has any other coverage providing hospital,
 
 9 surgical, or medical benefits whether on an indemnity basis or a
 
10 provision of service basis resulting in such insured being
 
11 eligible for more than one hundred per cent of covered expenses
 
12 which the insured is required to pay.  Any insurer issuing
 
13 individual policies providing extended hospital, surgical, or
 
14 medical benefits to persons sixty-five years of age and older and
 
15 their spouses or reciprocal beneficiaries may also use such a
 
16 policy provision."
 
17      SECTION 10.  Section 431:10A-601, Hawaii Revised Statutes,
 
18 is amended to read as follows:
 
19      "[[]§431:10A-601[]]  Reciprocal beneficiary [family]
 
20 coverage [defined; policyholder and employer responsibility for
 
21 costs; availability].  [(a)  Any other law] Notwithstanding any
 
22 law to the contrary [notwithstanding,] for purposes of this
 
23 article, reciprocal [beneficiary family coverage, as defined in
 

 
Page 19                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 subsection (b), shall be made available to reciprocal
 
 2 beneficiaries, as defined in chapter 572C, but only to the extent
 
 3 that family coverage, as defined in section 431:10A-103, is
 
 4 currently available to individuals who are not reciprocal
 
 5 beneficiaries.
 
 6      (b)  As used in this section, reciprocal beneficiary family
 
 7 coverage means a policy that insures, originally or upon
 
 8 subsequent amendment, a reciprocal beneficiary who shall be
 
 9 deemed the policyholder, the other party to the policyholder's
 
10 reciprocal beneficiary relationship registered pursuant to
 
11 chapter 572C, dependent children or any child of any other person
 
12 dependent upon either reciprocal beneficiary.
 
13      (c)  If a reciprocal beneficiary policyholder incurs
 
14 additional costs or premiums, if any, by electing reciprocal
 
15 beneficiary family coverage under this section, the employer may
 
16 pay additional costs or premiums.] beneficiaries shall be offered
 
17 the same coverage as is offered to spouses."
 
18      SECTION 11.  Section 431:10B-105, Hawaii Revised Statutes,
 
19 is amended by amending subsection (a) to read as follows:
 
20      "(a)  Credit life insurance.
 
21      (1)  The initial amount of credit life insurance shall not
 
22           exceed the total amount repayable under the contract of
 
23           indebtedness and, where an indebtedness is repayable in
 

 
Page 20                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1           substantially equal installments, the amount of
 
 2           insurance shall at no time exceed the scheduled or
 
 3           actual amount of unpaid indebtedness, whichever is
 
 4           greater; except that if the sole purpose of the loan is
 
 5           to provide future advances to the debtor to meet
 
 6           education or education related expenses of the debtor,
 
 7           the debtor's spouse, reciprocal beneficiary, children,
 
 8           or other dependents, the amount of insurance may equal,
 
 9           but may not exceed, the total amount of the described
 
10           expenses forecast at the time of entry into the loan
 
11           agreement with the creditor, less the amount of all
 
12           repayments by the debtor.  In the case of revolving
 
13           loan or revolving charge accounts, the insurance shall
 
14           at no time exceed the unpaid indebtedness.
 
15      (2)  Notwithstanding [the provisions of] subsection (a)(1),
 
16           insurance on agricultural credit transaction
 
17           commitments not exceeding one year in duration may be
 
18           written up to the amount of the loan commitment, on a
 
19           nondecreasing or level term plan."
 
20      SECTION 12.  Section 431:10C-111, Hawaii Revised Statutes,
 
21 is amended by amending subsection (c) to read as follows:
 
22      "(c)  No insurer shall refuse to continue a motor vehicle
 
23 insurance policy based solely upon a person's race, creed, ethnic
 

 
Page 21                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 extraction, age, sex, length of driving experience, marital or
 
 2 reciprocal beneficiary status, residence, physical handicap, or
 
 3 because an insured has elected to obtain any required or optional
 
 4 coverage or deductible required by law.  If an insured alleges
 
 5 that the insurer's refusal to continue the motor vehicle
 
 6 insurance policy is based solely upon the insured's race, creed,
 
 7 ethnic extraction, age, sex, length of driving experience,
 
 8 marital or reciprocal beneficiary status, residence, physical
 
 9 handicap, or because the insured has elected to obtain any
 
10 required or optional coverage or deductible provided by law, the
 
11 burden of proof shall rest with the insurer to prove that the
 
12 refusal to continue the policy was not based on noncompliance
 
13 with this subsection."
 
14      SECTION 13.  Section 431:10C-207, Hawaii Revised Statutes,
 
15 is amended to read as follows:
 
16      "§431:10C-207  Discriminatory practices prohibited.  No
 
17 insurer shall base any standard or rating plan, in whole or in
 
18 part, directly or indirectly, upon a person's race, creed, ethnic
 
19 extraction, age, sex, length of driving experience, credit bureau
 
20 rating, marital or reciprocal beneficiary status, or physical
 
21 handicap."
 
22      SECTION 14.  Section 431:10C-302, Hawaii Revised Statutes,
 
23 is amended by amending subsection (a) to read as follows:
 

 
Page 22                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1      "(a)  In addition to the motor vehicle insurance coverages
 
 2 described in section 431:10C-301, every insurer issuing a motor
 
 3 vehicle insurance policy shall make available to the insured the
 
 4 following optional insurance under the following conditions.
 
 5 Every insurer issuing a commercial motor vehicle insurance policy
 
 6 shall make available to the insured the following optional
 
 7 insurance, except for those benefits under paragraphs (4), (5),
 
 8 (9), (10), and (11) under the following conditions:
 
 9      (1)  At the option of the insured, provisions covering loss
 
10           resulting from damage to the insured's motor vehicle
 
11           with such deductibles, including but not limited to
 
12           collision and comprehensive deductibles of $50, $100,
 
13           $250, $500, $1,000, $1,500, and $2,000, at
 
14           appropriately reduced premium rates, as the
 
15           commissioner, by rule, shall provide;
 
16      (2)  At the option of the insured, compensation to the
 
17           insured, the insured's spouse, the insured's reciprocal
 
18           beneficiary, any dependents, or any occupants of the
 
19           insured's vehicle for damages not covered by personal
 
20           injury protection benefits;
 
21      (3)  Additional coverages and benefits with respect to any
 
22           injury or any other loss from motor vehicle accidents
 
23           or from operation of a motor vehicle for which the
 

 
Page 23                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1           insurer may provide for aggregate limits with respect
 
 2           to such additional coverage so long as the basic
 
 3           liability coverages provided are not less than those
 
 4           required by section 431:10C-301(b)(1) and (2);
 
 5      (4)  At the option of the insured, an option in writing for
 
 6           coverage for wage loss benefits for monthly earnings
 
 7           loss for injury arising out of a motor vehicle
 
 8           accident.  Any change in the wage loss benefits
 
 9           coverage selected by an insured shall apply only to
 
10           benefits arising out of motor vehicle accidents
 
11           occurring after the date the change becomes effective.
 
12           Coverage shall be offered in multiples of $500 a
 
13           month/$3,000 per accident per person, from $500 a
 
14           month/$3,000 per accident to $2,000 a month/$12,000 per
 
15           accident; however, nothing shall prevent an insurer
 
16           from making available higher limits of coverage; 
 
17      (5)  An option in writing for minimum coverage for death
 
18           benefits for death arising out of a motor vehicle
 
19           accident in an amount of $25,000, to be paid to the
 
20           surviving spouse[,] or reciprocal beneficiary, for the
 
21           benefit of the spouse or reciprocal beneficiary and
 
22           dependent children, or if there are no surviving
 
23           spouse, reciprocal beneficiary, or dependent children,
 

 
Page 24                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1           then to the estate. Coverage shall also be made
 
 2           available for increased death benefits in increments of
 
 3           $25,000 up to $100,000; however, nothing shall prevent
 
 4           an insurer from making available higher limits of
 
 5           coverage.  At the option of the insured, coverage for
 
 6           funeral expenses of $2,000 shall be made available;
 
 7      (6)  Terms, conditions, exclusions, and deductible clauses,
 
 8           coverages, and benefits which:
 
 9           (A)  Are consistent with the required provisions of the
 
10                policy[,];
 
11           (B)  Limit the variety of coverage available so as to
 
12                give buyers of insurance reasonable opportunity to
 
13                compare the cost of insuring with various
 
14                insurers; and
 
15           (C)  Are approved by the commissioner as fair and
 
16                equitable;
 
17      (7)  At appropriately reduced premium rates, deductibles
 
18           applicable only to claims of an insured in the amounts
 
19           of $100, $300, $500, and $1,000 from all personal
 
20           injury protection benefits otherwise payable; provided
 
21           that if two or more insureds to whom the deductible is
 
22           applicable under the contract of insurance are injured
 
23           in the same accident, the aggregate amount of the
 

 
Page 25                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1           deductible applicable to all of them shall not exceed
 
 2           the specified deductible, which amount where necessary
 
 3           shall be allocated equally among them;
 
 4      (8)  Every insurer shall fully disclose the availability of
 
 5           all required and optional coverages and deductibles,
 
 6           including the nature and amounts, at the issuance or
 
 7           delivery of the policy; or, for a policy already issued
 
 8           on January 1, 1998, disclosure shall be made at the
 
 9           first renewal after January 1, 1998.  The insurer shall
 
10           also disclose at issuance or renewal, as applicable,
 
11           the effect on premium rates and savings of each option
 
12           and deductible.  Further offers or disclosures
 
13           thereafter shall be required to be included with every
 
14           other renewal or replacement policy.  All elections of
 
15           coverages, options, and deductibles by a named insured
 
16           shall be binding upon additional insureds covered under
 
17           the named insured's policy.  The purpose of this
 
18           paragraph is to inform insureds or prospective insureds
 
19           of the coverages under this article;
 
20      (9)  (A)  An insurer may make available, and provide at the
 
21                option of the named insured, the benefits
 
22                described in section 431:10C-103.5(a) through
 
23                managed care providers such as a health
 

 
Page 26                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                maintenance organization or a preferred provider
 
 2                organization.  The option may include conditions
 
 3                and limitations to coverage, including deductibles
 
 4                and coinsurance requirements, as approved by the
 
 5                commissioner. The commissioner shall approve those
 
 6                conditions and limitations which are substantially
 
 7                comparable to or exceed the coverage provided
 
 8                under section 431:10C-103.6;
 
 9           (B)  An insurer may make available, and provide at the
 
10                option of the named insured, deductible and
 
11                coinsurance arrangements whereby the recipient of
 
12                care, treatment, services, products, expenses, or
 
13                accommodations shares in the payment obligation;
 
14           (C)  No deductible or coinsurance under a policy
 
15                covered under section 431:10C-302(a)(9)(A) or (B)
 
16                shall be applied with respect to care, treatment,
 
17                services, products, or accommodation provided or
 
18                expenses incurred by an insured during the first
 
19                twenty-four hours in which emergency treatment has
 
20                been provided or until the insured patient's
 
21                emergency medical condition is stabilized,
 
22                whichever is longer;
 

 
 
 
Page 27                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1           (D)  (i)  The optional coverage prescribed in section
 
 2                     431:10C-302(a)(9)(A) and (B) shall apply only
 
 3                     to the named insured, resident spouse, or
 
 4                     resident relative; and
 
 5               (ii)  "Resident relative" means a person who, at
 
 6                     the time of the accident, is related by
 
 7                     blood, marriage, or adoption to the named
 
 8                     insured [or], resident spouse, or reciprocal
 
 9                     beneficiary and who resides in the named
 
10                     insured's household, even if temporarily
 
11                     living elsewhere, and any ward or foster
 
12                     child who usually resides with the named
 
13                     insured, even if living elsewhere;
 
14           (E)  An agreement made under section 431:10C-302(a)(9)
 
15                must be a voluntary agreement between the insured
 
16                and the insurer, and no insurer shall require an
 
17                insured to agree to those policy provisions as a
 
18                condition of providing insurance coverage.
 
19                Requiring an agreement as a precondition to the
 
20                provision of insurance shall constitute an unfair
 
21                insurance practice and shall be subject to the
 
22                provisions, remedies, and penalties provided in
 
23                article 13; and
 

 
Page 28                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1           (F)  An insurer providing the coverages authorized in
 
 2                section 431:10C-302(a)(9)(A) and (B) shall
 
 3                demonstrate in rate filings submitted to the
 
 4                commissioner the savings to the insured to be
 
 5                realized under the plan;
 
 6     (10)  An insurer shall make available optional coverage for
 
 7           naturopathic, acupuncture, nonmedical remedial care,
 
 8           and treatment rendered in accordance with the
 
 9           teachings, faith, or belief of any group which relies
 
10           upon spiritual means through prayer for healing; and
 
11     (11)  An insurer may make available optional coverage for
 
12           chiropractic treatment in addition to chiropractic
 
13           treatment provided under [§] section 431:10C-103.6 for
 
14           not more than the lesser of the following:
 
15           (A)  Thirty additional visits at no more than $75 a
 
16                visit; or
 
17           (B)  Treatment as defined by the Hawaii Chiropractic
 
18                Association guidelines in effect on January 25,
 
19                1997.
 
20      The commissioner shall adopt rules, including policy limits,
 
21 terms, and conditions as necessary to implement the requirements
 
22 of this section."
 

 
 
 
Page 29                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1      SECTION 15.  Section 431:10C-305, Hawaii Revised Statutes,
 
 2 is amended by amending subsection (b) to read as follows:
 
 3      "(b) (1)  Except as provided in paragraph (2), personal
 
 4           injury protection benefits shall be paid primarily from
 
 5           the following sources in the following conditions:
 
 6           (A)  The insurance on the vehicle occupied by the
 
 7                injured person at the time of the accident; or
 
 8           (B)  The insurance on the vehicle which caused
 
 9                accidental harm if the injured person is a
 
10                pedestrian (including a bicyclist).
 
11           If there is no insurance on the vehicle, any other
 
12           motor vehicle insurance applicable to the injured
 
13           person shall apply.
 
14           No person shall recover personal injury protection
 
15           benefits from more than one insurer for accidental harm
 
16           as a result of the same accident;
 
17      (2)  All personal injury protection benefits shall be paid
 
18           secondarily and net of any benefits a person is
 
19           entitled to receive because of the accidental harm from
 
20           workers' compensation laws; provided that:
 
21           (A)  The total amount a person is entitled to receive
 
22                for monthly earnings loss under this article shall
 
23                be limited to the amount of any applicable
 

 
Page 30                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1                coverage under section 431:10C-302, without any
 
 2                deduction of any amount received as compensation
 
 3                for lost earnings under any workers' compensation
 
 4                law;
 
 5           (B)  The aggregate of the payments from both sources
 
 6                shall not exceed eighty per cent of the person's
 
 7                monthly earnings as provided in section
 
 8                431:10C-302(a)(4).  However, if the person's
 
 9                employer provides both workers' compensation and
 
10                personal injury protection payments, the aggregate
 
11                shall not exceed the person's net monthly earnings
 
12                (computed by subtracting the total of federal and
 
13                state income taxes and employee social security
 
14                contributions from the gross monthly earnings),
 
15                provided that the workers' compensation payments
 
16                shall not be less than required by chapter 386;
 
17                and
 
18           (C)  This section shall not apply to benefits payable
 
19                to a surviving spouse or reciprocal beneficiary
 
20                and any surviving dependent as provided under
 
21                section 431:10C-304.
 
22           If the person does not collect such benefits under the
 
23           workers' compensation laws by reason of the contest of
 

 
Page 31                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
 
 
Page 32                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 33                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 34                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 35                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 36                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 37                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 38                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 39                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 40                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1      (6)  The insurance shall be payable to the creditor or any
 
 2           successor to the right, title, and interest of the
 
 3           creditor.  The payment shall reduce or extinguish the
 
 4           unpaid indebtedness of the debtor to the extent of the
 
 5           payment and, whenever the amount of insurance exceeds
 
 6           the unpaid indebtedness, any such excess shall be
 
 7           payable to a beneficiary, other than the creditor,
 
 8           named by the debtor or to the debtor's estate.
 
 9      (7)  Payment by the debtor insured under any such group life
 
10           insurance contract of an amount not in excess of the
 
11           premium charged the creditor by the insurer for such
 
12           insurance pertaining to the debtor, shall not be deemed
 
13           to constitute a charge upon a loan in violation of any
 
14           banking or usury law or any law regulating installment
 
15           sales."
 
16      SECTION 21.  Section 431:10D-212, Hawaii Revised Statutes,
 
17 is amended to read as follows:
 
18      "§431:10D-212  Spouses, reciprocal beneficiaries, and
 
19 dependents of insured individuals.  Except for a policy issued
 
20 under [section] sections 431:10D-203 and [section] 431:10D-211,
 
21 insurance under any group life insurance policy issued pursuant
 
22 to this article may be extended to insure the employees or
 
23 members of such groups against loss due to the death of their
 

 
Page 41                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 42                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

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

 
Page 43                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 after the death of the insured, or if the beneficiary is the
 
 2 estate of the insured or is a minor, or dies before the insured
 
 3 or is not legally competent to give a valid release, then the
 
 4 insurer may make payment under the policy to the personal
 
 5 representative of the insured, or to any of the insured's
 
 6 relatives by blood, legal adoption, or connection by marriage[,]
 
 7 or by reciprocal beneficiary relationship, or to any person
 
 8 appearing to the insurer to be equitably entitled to such payment
 
 9 by reason of having been named beneficiary, or by reason of
 
10 having incurred expense for the maintenance, medical attention,
 
11 or burial of the insured.  The policy may also include a similar
 
12 provision applicable to any other payment due under the policy."
 
13      SECTION 23.  Section 432D-23, Hawaii Revised Statutes, is
 
14 amended to read as follows:
 
15      "§432D-23  Required provisions and benefits.  (a)
 
16 Notwithstanding any provision of law to the contrary, each
 
17 policy, contract, plan, or agreement issued in the State after
 
18 January 1, 1995, by health maintenance organizations pursuant to
 
19 this chapter, shall include benefits provided in sections
 
20 431:10-212, 431:10A-115, 431:10A-115.5, 431:10A-116,
 
21 431:10A-116.5, 431:10A-116.6, [and] 431:10A-119, and 431:10A-120
 
22 and chapter 431M.
 

 
 
 
Page 44                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1      (b)  Notwithstanding any provision of law to the contrary,
 
 2 each policy, contract, plan, or agreement issued in the State
 
 3 after July 1, 2000, by health maintenance organizations pursuant
 
 4 to this chapter, shall offer the same coverage to reciprocal
 
 5 beneficiaries as is offered to spouses."
 
 6      SECTION 24.  Section 572C-4, Hawaii Revised Statutes, is
 
 7 amended to read as follows:
 
 8      "[[]§572C-4[]]  Requisites of a valid reciprocal beneficiary
 
 9 relationship.  [In order to] To enter into a valid reciprocal
 
10 beneficiary relationship, [it shall be necessary that:] the
 
11 following conditions shall be met:
 
12      (1)  Each of the parties be at least eighteen years old;
 
13      (2)  Neither of the parties be married nor a party to
 
14           another reciprocal beneficiary relationship;
 
15      (3)  The parties be legally prohibited from marrying one
 
16           another under chapter 572;
 
17      (4)  Consent of either party to the reciprocal beneficiary
 
18           relationship has not been obtained by force, duress, or
 
19           fraud; [and]
 
20      (5)  Each of the parties sign a declaration of reciprocal
 
21           beneficiary relationship as provided in section
 
22           572C-5[.]; and
 

 
 
 
Page 45                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1      (6)  Each of the parties be residents of the state of
 
 2           Hawaii."
 
 3      SECTION 25.  Section 87-25.5, Hawaii Revised Statutes, is
 
 4 repealed.
 
 5      ["[§87-25.5]  Reciprocal beneficiary family coverage
 
 6 defined; reciprocal beneficiary employees, State and counties,
 
 7 and fund responsibility costs.(a)  The board of trustees shall
 
 8 establish a reciprocal beneficiary family coverage health
 
 9 benefits plan for  an employee who is a reciprocal beneficiary
 
10 under chapter 572C and elects to enroll in reciprocal beneficiary
 
11 family coverage.
 
12      (b)  As used in this section, reciprocal beneficiary family
 
13 coverage means coverage under a health benefits plan that
 
14 insures, originally or upon subsequent amendment, an employee who
 
15 is a reciprocal beneficiary, the other party to the employee's
 
16 reciprocal beneficiary relationship, and any dependent-
 
17 beneficiary of the employee, any unmarried child of the non-
 
18 employee reciprocal beneficiary under age nineteen, or a
 
19 surviving beneficiary of the employee.
 
20      (c)  This section shall be repealed on June 30, 1999."]
 
21      SECTION 26.  If any provision of this Act, or the
 
22 application thereof to any person or circumstance is held
 
23 invalid, the invalidity does not affect other provisions or
 

 
Page 46                                                    3176
                                     S.B. NO.           S.D. 2
                                                        H.D. 1
                                                        

 
 1 applications of the Act which can be given effect without the
 
 2 invalid provision or application, and to this end the provision
 
 3 of this Act are severable."
 
 4      SECTION 27.  Statutory material to be repealed is bracketed.
 
 5 New statutory material is underscored.
 
 6      SECTION 28.  This Act shall take effect upon its approval.