20100014u2s

Section 2.  The act is amended by adding articles to read:

ARTICLE IV-B

SUITABILITY OF ANNUITY TRANSACTIONS

Section 401-B.  Definitions.

The following words and phrases when used in this article shall have the meanings given to them in this section unless the context clearly indicates otherwise:

"Annuity."  A fixed annuity or variable annuity that is individually solicited, whether the product is classified as an individual or group annuity.

"Commissioner."  The Insurance Commissioner of the Commonwealth.

"General agent."  An insurance producer that provides supervision on behalf of an insurer to an insurer's sales force in a particular geographic region or territory.

"Independent agency."  A producer entity that does not exclusively represent one insurance company.

"Insurance producer."  A person who sells, solicits or negotiates contracts of insurance as defined in section 601-A of the act of May 17, 1921 (P.L.789, No.285), known as The Insurance Department Act of 1921.

"Insurer."  A life insurance company licensed or required to be licensed under section 202 or a fraternal benefit society as defined in section 2403.

"Recommendation."  Advice provided by an insurance producer, or an insurer where no producer is involved, to an individual consumer that results in a purchase or exchange of an annuity in accordance with that advice.

Section 402-B.  Applicability and scope of article.

(a)  General rule.--This article shall apply to any recommendation to purchase or exchange an annuity made to a consumer by an insurance producer, or an insurer where no producer is involved, that results in the purchase or exchange recommended.

(b)  Exclusions.--Unless otherwise specifically included, this article shall not apply to recommendations involving the following:

(1)  Direct response solicitations where there is no recommendation based on information collected from the consumer pursuant to this article.

(2)  Annuity contracts used to fund:

(i)  An employee pension or welfare benefit plan that is covered by the Employee Retirement Income Security Act of 1974 (Public Law 93-406, 88 Stat. 829).

(ii)  A plan described by sections 401(a) or (k), 403(b), 408(k) or (p) of the Internal Revenue Code of 1986 (Public Law 99-514, 26 U.S.C. §§ 401(a) or (k), 403(b), 408(k) or (p)), when the plan, for purposes of the Employee Retirement Income Security Act of 1974, is established or maintained by an employer.

(iii)  A governmental or church plan defined in section 414 of the Internal Revenue Code of 1986 or a deferred compensation plan of a State or local government or tax exempt organization under section 457 of the Internal Revenue Code of 1986.

(iv)  A nonqualified deferred compensation arrangement established or maintained by an employer or plan sponsor.

(v)  Settlements of or assumptions of liabilities associated with personal injury litigation or any dispute or claim resolution process.

(vi)  Formal prepaid funeral contracts.

Section 403-B.  Duties of insurers and insurance producers.

(a)  General duties.--In making a recommendation to a consumer for the purchase of an annuity or the exchange of an annuity that results in another insurance transaction or series of insurance transactions, the insurance producer, or the insurer where no insurance producer is involved, shall have reasonable grounds for believing that the recommendation is suitable for the consumer on the basis of the facts disclosed by the consumer as to the consumer's investments and other insurance products and as to the consumer's financial situation and needs.

(b)  Consumer information.--Prior to the execution of a purchase or exchange of an annuity resulting from a recommendation, an insurance producer, or an insurer where no insurance producer is involved, shall make reasonable efforts to obtain information concerning all of the following:

(1)  The consumer's financial status.

(2)  The consumer's tax status.

(3)  The consumer's investment objectives.

(4)  Other information used or considered to be reasonable by the insurance producer, or the insurer where no insurance producer is involved, in making recommendations to the consumer.

(c)  Obligation limits.--

(1)  Neither an insurance producer nor an insurer where no insurance producer is involved shall have any obligation to a consumer under subsection (a) related to any recommendation that is reasonable under all the circumstances actually known to the insurer or insurance producer at the time of the recommendation when a consumer:

(i)  Refuses to provide relevant information requested by the insurer or insurance producer.

(ii)  Decides to enter into an insurance transaction that is not based on a recommendation of the insurer or insurance producer.

(iii)  Fails to provide complete or accurate information.

(d)  Supervision of recommendations.--

(1)  An insurer shall assure that a system to supervise recommendations that is reasonably designed to achieve compliance with this article is established and maintained by complying with paragraphs (3) and (4) or shall establish and maintain such a system that includes at least the following:

(i)  Maintaining written procedures.

(ii)  Conducting periodic reviews of its records that are reasonably designed to assist in detecting and preventing violations of this article.

(2)  A general agent or independent agency shall adopt a system established by an insurer to supervise recommendations of its insurance producers that is reasonably designed to achieve compliance with this article or shall establish and maintain a system that is reasonably designed to achieve compliance with this article. The system must include at least the following:

(i)  Maintaining written procedures.

(ii)  Conducting periodic reviews of records that are reasonably designed to assist in detecting and preventing violations of this article.

(3)  An insurer may contract with a third party, including a general agent or independent agency, to establish and maintain a system of supervision as required by paragraph (1) with respect to insurance producers under contract with or employed by the third party.

(4)  An insurer shall make reasonable inquiry to assure that the third party contracting under paragraph (3) is performing the functions required under paragraph (1) and shall take such action as is reasonable under the circumstances to enforce the contractual obligation to perform the functions. An insurer may comply with its obligation to make reasonable inquiry by doing both of the following:

(i)  The insurer annually obtains, electronically or otherwise, a certification from a third party senior manager who has responsibility for the delegated functions that the manager has a reasonable basis to represent, and does represent, that the third party is performing the required functions.

(ii)  The insurer, based on reasonable selection criteria, periodically selects third parties contracting under paragraph (3) for a review to determine whether the third parties are performing the required functions. The insurer shall perform procedures to conduct the review that are reasonable under the circumstances.

(5)  An insurer that contracts with a third party under paragraph (3) and that complies with the requirements to supervise under paragraph (4) shall have fulfilled its responsibilities under paragraph (1).

(6)  An insurer, general agent or independent agency is not required to do either of the following:

(i)  Review or provide for review of all insurance producer-solicited transactions.

(ii)  Include in its system of supervision an insurance producer's recommendations to consumers of products other than the annuities offered by the insurer, general agent or independent agency.

(7)  A general agent or independent agency contracting with an insurer pursuant to paragraph (3) shall promptly, when requested by the insurer pursuant to paragraph (4), give a certification as described in paragraph (4) or give a clear statement that it is unable to meet the certification criteria.

(8)  No person may provide a certification under paragraph (4)(i) unless both the following conditions are met:

(i)  The person is a senior manager with responsibility for the delegated functions.

(ii)  The person has a reasonable basis for making the certification.

(e)  Compliance with other rules.--Compliance with the Financial Industry Regulatory Authority Conduct Rules pertaining to suitability shall satisfy the requirements under this section for the recommendation of annuities registered under the Securities Act of 1933 (48 Stat. 74, 15 U.S.C. § 77a et seq.) or rules and regulations adopted under the Securities Act of 1933. Nothing in this subsection shall limit the commissioner's ability to enforce the provisions of this article.

(f)  Internal audit and compliance procedures.--Nothing in this article shall exempt an insurer from the internal audit and compliance procedure requirements under section 405-A.

Section 404-B.  Mitigation of responsibility.

(a)  Corrective actions.--The commissioner may order:

(1)  An insurer to take reasonably appropriate corrective action for any consumer harmed by the insurer's or by its insurance producer's violation of this article.

(2)  An insurance producer to take reasonably appropriate corrective action for any consumer harmed by the insurance producer's violation of this article.

(3)  A general agent or independent agency that employs or contracts with an insurance producer to sell or solicit the sale of annuities to consumers to take reasonably appropriate corrective action for any consumer harmed by the insurance producer's violation of this article.

(b)  Reduction of penalty.--Any applicable penalty permitted under section 406-B may be reduced or eliminated if corrective action for the consumer was taken promptly after a violation was discovered.

Section 405-B.  Recordkeeping.

An insurer, general agent, independent agency and insurance producer shall maintain or be able to make available to the commissioner records of the information collected from the consumer and other information used in making the recommendations that were the basis for insurance transactions for five years after the insurance transaction is completed by the insurer. An insurer is permitted but shall not be required to maintain documentation on behalf of an insurance producer.

Section 406-B.  Enforcement.

(a)  Penalties and remedies.--Upon a determination by hearing that this article has been violated, the commissioner may pursue one or more of the following courses of action:

(1)  Issue an order requiring the person in violation to cease and desist from engaging in the violation.

(2)  Suspend or revoke or refuse to issue or renew the certificate or license of the person in violation.

(3)  Impose a civil penalty of not more than $5,000 for each violation.

(4)  Impose any other penalty or remedy deemed appropriate by the commissioner, including restitution.

(b)  Other remedies.--The enforcement remedies imposed under this section are in addition to any other remedies or penalties that may be imposed by any other applicable statute, including the act of July 22, 1974 (P.L.589, No.205), known as the Unfair Insurance Practices Act. Violations of this article are deemed and defined by the commissioner to be an unfair method of competition and an unfair or deceptive act or practice pursuant to the Unfair Insurance Practices Act.

Section 407-B.  Private cause of action.

Nothing in this article shall be construed to create or imply a private cause of action for a violation of this article.

ARTICLE VI-B

HEALTH INSURANCE COVERAGE PARITY

AND NONDISCRIMINATION

Section 601-B.  Short title of article.

This article shall be known and may be cited as the Health Insurance Coverage Parity and Nondiscrimination Act.

Section 602-B.  Purpose.

It is necessary to maintain the Commonwealth's sovereignty over the regulation of health insurance in this Commonwealth by implementing the requirements of the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343, 122 Stat. 3881), the Genetic Information Nondiscrimination Act of 2008 (Public Law 110-233, 122 Stat. 881) and Michelle's Law (Public Law 110-381, 122 Stat. 4081), collectively contained in the Public Health Service Act (58 Stat. 682, 42 U.S.C. § 201 et seq.). The provisions of this article are intended to meet these requirements while retaining the Commonwealth's authority to regulate health insurance in this Commonwealth, consistent with sections 2722 and 2761 of the Public Health Service Act.

Section 603-B.  Definitions.

(a)  General rule.--The following words and phrases when used in this article shall have the meanings given to them in this section unless the context clearly indicates otherwise:

"Commissioner."  The Insurance Commissioner of the Commonwealth.

"Department."  The Insurance Department of the Commonwealth.

"Federal acts."  The Federal laws known as the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (Public Law 110-343, 122 Stat. 3881), the Genetic Information Nondiscrimination Act of 2008 (Public Law 110-233, 122 Stat. 881) and Michelle's Law (Public Law 110-381, 122 Stat. 4081), collectively contained in the Public Health Service Act (58 Stat. 682, 42 U.S.C. § 201 et seq.).

"Fraternal benefit society."  An entity holding a current certificate of authority under Article XXIV.

"Health maintenance organization."  An entity holding a current certificate of authority under the act of December 29, 1972 (P.L.1701, No.364), known as the Health Maintenance Organization Act.

"Hospital plan corporation."  An entity holding a current certificate of authority organized and operated under 40 Pa.C.S. Ch. 61 (relating to hospital plan corporations).

"Insurer."  A foreign or domestic insurance company, association or exchange, health maintenance organization, hospital plan corporation, professional health services plan corporation, fraternal benefit society or risk-assuming preferred provider organization. The term shall not include a group health plan as defined in section 2791 of the Public Health Service Act (58 Stat. 682, 42 U.S.C. § 300gg-91).

"Preferred provider organization."  An entity holding a current certificate of authority under section 630.

"Professional health services plan corporation."  An entity holding a current certificate of authority under 40 Pa.C.S. Ch. 63 (relating to professional health services plan corporations). This term shall not include dental service corporations or optometric service corporations, as those terms are defined under 40 Pa.C.S. § 6302(a) (relating to definitions).

(b)  Federal law.--The words, terms and definitions found in the Federal acts, including those in section 2791 of the Public Health Service Act (58 Stat. 682, 42 U.S.C. 300gg-91), are adopted for purposes of implementing this article, except as noted in this subsection. The term "health insurance issuer" under section 2791(b)(2) of the Public Health Service Act shall have the meaning provided under "insurer" in subsection (a).

Section 604-B.  Adoption of Federal acts.

Insurers shall comply with the Federal acts as contained in sections 2701, 2702, 2705, 2707, 2721, 2753 and 2754 of the Public Health Service Act (58 Stat. 682, 42 U.S.C. §§ 300gg, 300gg-1, 300gg-5, 300gg-7, 300gg-21, 300gg-53 and 300gg-54).

Section 605-B.  Penalties.

(a)  General rule.--Upon satisfactory evidence of a violation of this article by any insurer or other person, the commissioner may, in the commissioner's discretion, pursue any one of the following courses of action:

(1)  Suspend, revoke or refuse to renew the license of the offending person.

(2)  Enter a cease and desist order.

(3)  Impose a civil penalty of not more than $5,000 for each action in violation of this article.

(4)  Impose a civil penalty of not more than $10,000 for each action in willful violation of this article.

(b)  Limitation.--Penalties imposed against a person under this article and under section 5 of the act of June 25, 1997 (P.L.295, No.29), known as the Pennsylvania Health Care Insurance Portability Act, shall not exceed $500,000 in the aggregate during a single calendar year.

Section 606-B.  Regulations.

The department may promulgate such regulations as may be necessary or appropriate to carry out this article.