Bill Text: IL SB0646 | 2013-2014 | 98th General Assembly | Chaptered

---

Bill Title: Amends the Children's Health Insurance Program Act. Makes a technical change in a Section concerning the legislative intent of the Act.

Spectrum: Bipartisan Bill

Status: (Passed) 2014-08-01 - Public Act . . . . . . . . . 98-0814 [SB0646 Detail]

Download: Illinois-2013-SB0646-Chaptered.html

---

Public Act 098-0814
SB0646 Enrolled LRB098 04895 RPM 34923 b
AN ACT concerning regulation.
Be it enacted by the People of the State of Illinois,
represented in the General Assembly:
Section 5. The Illinois Insurance Code is amended by
changing Sections 286.1, 291.1, 294.1, 297.1, 300.1, and 315.6
and by adding Sections 295.2 and 315.9 as follows:
(215 ILCS 5/286.1) (from Ch. 73, par. 898.1)
(Section scheduled to be repealed on January 1, 2017)
Sec. 286.1. Purposes and Powers.
(a) A society shall operate for the benefit of members and
their beneficiaries by:
(1) Providing benefits as specified in Section 297.1 of
this amendatory Act; and
(2) Operating for one or more social, intellectual,
educational, charitable, benevolent, moral, fraternal,
patriotic or religious purposes for the benefit of its
members, which may also be extended to others. Such
purposes may be carried out directly by the society or
indirectly through subsidiary corporations or affiliated
organizations.
(b) Every society shall have the power to adopt laws and
rules for the government of the society, the admission of its
members and the management of its affairs. It shall have the

power to change, alter, add to or amend such laws and rules and
shall have such other powers as are necessary and incidental to
carrying into effect the objects and purposes of the society.
(c) A domestic society that provides any of the benefits
specified in Section 297.1 of this Code must be governed by a
board of directors and managed by qualified officers subject to
the following requirements:
(1) The laws of a society must provide that:
(i) the board of directors shall have the powers
and perform the duties ordinarily possessed and
exercised by a board of directors under this Code,
including, but not limited to, the authority and
responsibility for the hiring and the discharge of a
president, chief executive officer, or an equivalent
position, except that a society that elects its
president, chief executive officer, or equivalent
position pursuant to its by-laws, as of the effective
date of this amendatory Act of the 98th General
Assembly, may continue to do so if it elects a
president, chief executive officer, or equivalent
position that meets qualifications set forth in a rule
adopted by the Director; and
(ii) the board of directors may remove a director
for cause and replace the director with another
qualified director.
After the effective date of this amendatory Act of the

98th General Assembly, a domestic society shall amend its
laws, as necessary, to comply with this paragraph (1) as
soon as reasonably practicable, but in no event later than
January 1, 2019.
(2) A person convicted of a felony may not be a
director or an officer of a domestic society.
(3) A society shall provide information regarding
qualifications of board candidates to voting members prior
to the time of election.
(4) Each newly elected director of a domestic society
shall participate in a board training or orientation
program within 6 months after their election to the board
that includes information regarding board duties and
responsibilities.
(5) At least annually, the board of directors shall
conduct a self-assessment.
(6) Each domestic society shall establish an audit
committee. The composition and responsibilities of the
audit committee shall comply with the Illinois
Administrative Code provisions relating to annual
financial reporting.
(Source: P.A. 84-303.)
(215 ILCS 5/291.1) (from Ch. 73, par. 903.1)
(Section scheduled to be repealed on January 1, 2017)
Sec. 291.1. Organization. A domestic society organized on

or after the effective date of this amendatory Act shall be
formed as follows:
(a) Seven or more citizens of the United States, a
majority of whom are citizens of this State, who desire to
form a fraternal benefit society may make, sign and
acknowledge, before some officer competent to take
acknowledgement of deeds, articles of incorporation, in
which shall be stated:
(1) The proposed corporate name of the society,
which shall not so closely resemble the name of any
society or insurance company already authorized to
transact business in this State as to be misleading or
confusing;
(2) The place where its principal office shall be
located within this State;
(3) The purposes for which it is being formed and
the mode in which its corporate powers are to be
exercised. Such purposes shall not include more
liberal powers than are granted by this amendatory Act;
and
(4) The names and residences of the incorporators
and the names, residences and official titles of all
the officers, trustees, directors or other persons who
are to have and exercise the general control of the
management of the affairs and funds of the society for
the first year or until the ensuing election, at which

all such officers shall be elected by the supreme
governing body, which election shall be held not later
than one year from the date of issuance of the
permanent certificate of authority;
(b) Duplicate originals of the articles of
incorporation, certified copies of the society's bylaws
and rules, copies of all proposed forms of certificates,
applicants and rates therefor, and circulars to be issued
by the society and a bond conditioned upon the return to
applicants of the advanced payments if the organization is
not completed within one year shall be filed with the
Director, who may require such further information as the
Director deems necessary. The bond with sureties approved
by the Director shall be in such amount, not less than
$300,000 nor more than $1,500,000, as required by the
Director. All documents filed are to be in the English
language. If the Director finds that the purposes of the
society conform to the requirements of this amendatory Act
and all provisions of the law have been complied with, the
Director shall approve the articles of incorporation and
issue the incorporators a preliminary certificate of
authority authorizing the society to solicit members as
hereinafter provided;
(c) No preliminary certificate of authority issued
under the provisions of this Section shall be valid after
one year from its date of issue or after such further

period, not exceeding one year, as may be authorized by the
Director, upon cause shown, unless the 500 applicants
hereinafter required have been secured and the
organization has been completed as herein provided. The
articles of incorporation and all other proceedings
thereunder shall become null and void in one year from the
date of the preliminary certificate of authority or at the
expiration of the extended period, unless the society shall
have completed its organization and received a certificate
of authority to do business as hereinafter provided;
(d) Upon receipt of a preliminary certificate of
authority from the Director, the society may solicit
members for the purpose of completing its organization,
shall collect from each applicant the amount of not less
than one regular monthly premium in accordance with its
table of rates and shall issue to each such applicant a
receipt for the amount so collected. No society shall incur
any liability other than for the return of such advance
premium nor issue any certificate nor pay, allow or offer
or promise to pay or allow any benefit to any person until:
(1) Actual bona fide applications for benefits
have been secured on not less than 500 applicants and
any necessary evidence of insurability has been
furnished to and approved by the society;
(2) At least 10 subordinate lodges have been
established into which the 500 applicants have been

admitted;
(3) There has been submitted to the Director, under
oath of the president or secretary, or corresponding
officer of the society, a list of such applicants,
giving their names, addresses, date each was admitted,
name and number of the subordinate lodge of which each
applicant is a member, amount of benefits to be granted
and premiums therefor; and
(4) It shall have been shown to the Director, by
sworn statement of the treasurer or corresponding
officer of such society, that a least 500 applicants
have each paid in cash at least one regular monthly
premium as herein provided, which premiums in the
aggregate shall amount to at least $150,000. Said
advance premiums shall be held in trust during the
period of organization, and, if the society has not
qualified for a certificate of authority within one
year unless extended by the Director, as herein
provided, such premiums shall be returned to said
applicants; and
(5) In the case of a domestic society that is
organized after the effective date of this amendatory
Act of the 98th General Assembly, the society meets the
following requirements:
(i) maintains a minimum surplus of $2,000,000,
or such higher amount as the Director may deem

necessary; and
(ii) meets any other requirements as
determined by the Director.
(e) The Director may make such examination and require
such further information as the Director deems necessary.
Upon presentation of satisfactory evidence that the
society has complied with all the provisions of law, the
Director shall issue to the society a certificate of
authority to that effect and that the society is authorized
to transact business pursuant to the provisions of this
amendatory Act; and
(f) Any incorporated society authorized to transact
business in this State at the time this amendatory Act
becomes effective shall not be required to reincorporate.
(Source: P.A. 84-303.)
(215 ILCS 5/294.1) (from Ch. 73, par. 906.1)
(Section scheduled to be repealed on January 1, 2017)
Sec. 294.1. Reinsurance.
(a) A domestic society may enter into reinsurance
transactions only in accordance with Article XI of this Code.
(b) A domestic society may reinsure the risks of another
society in connection with a merger transaction with approval
by the Director.
(Source: P.A. 84-303.)

(215 ILCS 5/295.2 new)
Sec. 295.2. Maintenance of solvency.
(a) In the event a domestic society has an authorized
control level event described in Section 35A-25 of this Code
under circumstances the Director determines will not be
promptly remedied, the Director may, in addition to all other
actions required or permitted by subsection (b) of Section
35A-25 of this Code, issue an order declaring the domestic
society to be in hazardous condition and ordering that all
steps be taken to remedy such condition pursuant to this
Section.
(b) A domestic society may negotiate an agreement to
transfer members, certificates, and other assets and
liabilities of the society, in whole or in part, to another
organization through merger, consolidation, assumption, or
other means. Such transfer shall be concluded within the
timeframe established by the Director and subject to approval
by the Director. Such transfer agreement shall be deemed fully
approved by the domestic society upon majority vote of its
board of directors. Such transfer shall be effective
notwithstanding the provisions of Section 295.1 of this Code or
any other law or regulation or laws of the domestic society
requiring another form of notice to or approval by members,
which shall be superseded by this Section.
(c) In the event of an agreement to transfer under this
Section to an organization without a certificate of authority

in this State, the Director may grant a limited certificate of
authority to such organization, upon request, if the
organization does not apply for and obtain a certificate of
authority to transact business in this State. Such limited
certificate of authority shall grant the organization
authority to service the certificates following the transfer
and fulfill all obligations owed to certificate holders but not
to otherwise transact insurance business in this State.
(d) The board of directors of a domestic society may
suspend or modify its qualifications for membership as
necessary or appropriate to facilitate an agreement to transfer
under this Section, notwithstanding the laws of the society, or
any other law or regulation to the contrary.
(215 ILCS 5/297.1) (from Ch. 73, par. 909.1)
(Section scheduled to be repealed on January 1, 2017)
Sec. 297.1. Benefits.
(a) A society may provide the following contractual
benefits in any form:
(1) Death benefits;
(2) Endowment benefits;
(3) Annuity benefits;
(4) Temporary or permanent disability benefits;
(5) Hospital, medical or nursing benefits;
(6) Monument or tombstone benefits to the memory of
deceased members; and

(7) Such other benefits as authorized for life insurers
and which are not inconsistent with this amendatory Act.
(b) A society shall specify in its rules those persons who
may be issued, or covered by, the contractual benefits in
subsection (a), consistent with providing benefits to members
and their dependents. A society may provide benefits on the
lives of children under the minimum age for adult membership
upon application of an adult person.
(c) After the effective date of this amendatory Act of the
98th General Assembly, a society shall provide an applicant for
contractual benefits a disclosure statement that reads
substantially as follows:
". . . . . . .(name of the society) is licensed to do
business in the State of Illinois as a fraternal benefit
society. As such, it is not included in the Illinois Life
and Health Guaranty Association (otherwise known as the
Guaranty Association). This means that fraternal benefit
societies cannot be assessed for the insolvency of other
life insurers or other fraternal benefit societies. By law,
a fraternal benefit society is responsible for its own
solvency. If there is an impairment of reserves, a
certificate holder may be assessed a proportionate share of
the impairment. This process is described in the
certificate issued by the society.".
The statement must appear immediately above the
applicant's signature on the society's membership application

or certificate or policy application, in uppercase and bold
type or boxed.
(Source: P.A. 84-303.)
(215 ILCS 5/300.1) (from Ch. 73, par. 912.1)
(Section scheduled to be repealed on January 1, 2017)
Sec. 300.1. The Benefit Contract.
(a) Every society authorized to do business in this State
shall issue to each owner of a benefit contract a certificate
specifying the amount of benefits provided thereby. The
certificate, together with any riders or endorsements attached
thereto, the laws of the society, the application for
membership, the application for insurance and declaration of
insurability, if any, signed by the applicant and all
amendments to each thereof shall constitute the benefit
contract, as of the date of issuance, between the society and
the owner, and the certificate shall so state. A copy of the
application for insurance and declaration of insurability, if
any, shall be endorsed upon or attached to the certificate. All
statements on the application shall be representations and not
warranties. Any waiver of this provision shall be void.
(b) Any changes, additions or amendments to the laws of the
society duly made or enacted subsequent to the issuance of the
certificate shall bind the owner and the beneficiaries and
shall govern and control the benefit contract in all respects
the same as though such changes, additions or amendments had

been made prior to and were in force at the time of the
application for insurance, except that no change, addition or
amendment shall destroy or diminish benefits which the society
contracted to give the owner as of the date of issuance.
(c) Any person upon whose life a benefit contract is issued
prior to attaining the age of majority shall be bound by the
terms of the application and certificate and by all the laws
and rules of the society to the same extent as though the age
of majority had been attained at the time of application.
(d) A society shall provide in its laws and its
certificates that, if its reserves as to all or any class of
certificates become impaired, its board of directors or
corresponding body may require that there shall be paid by the
owner to the society an assessment in the amount of the owner's
equitable proportion of such deficiency as ascertained by its
board, and that, if the payment is not made, either (1) it
shall stand as an indebtedness against the certificate and draw
interest not to exceed the rate specified for certificate loans
under the certificates; or (2) in lieu of or in combination
with (1), the owner may accept a proportionate reduction in
benefits under the certificate. However, in no event may an
assessment obligation be forgiven, credited, or repaid by
whatever means or however labeled by the society in lieu of
collection or reduction in benefits, unless provided to all
society members and approved in writing by the Director, except
that the forgiveness or repayment of any assessments issued by

a society that remain outstanding as of the date of this
amendatory Act of the 98th General Assembly may be forgiven or
repaid by any manner or plan certified by an independent
actuary and filed with the Director to make reasonable and
adequate provision for the forgiveness or repayment of the
assessment to all society members. Notwithstanding the
foregoing, a society may fully repay, credit, or forgive an
assessment from the date of death of any life insured under a
certificate so long as the plan to forgive or repay the
assessment is certified by an independent actuary and filed
with the Director to make reasonable and adequate provision for
the forgiveness or repayment of the assessment to all assessed
society members as a result of the death. The society may
specify the manner of the election and which alternative is to
be presumed if no election is made. No such assessment shall
take effect unless a 30-day notification has been provided to
the Director, who shall have the ability to disapprove the
assessment only if the Director finds that such assessment is
not in the best interests of the benefit members of the
domestic society. Disapproval by the Director shall be made
within 30 days after receipt of notice and shall be in writing
and mailed to the domestic society. If the Director disapproves
the assessment, the reasons therefore shall be stated in the
written notice.
(e) Copies of any of the documents mentioned in this
Section, certified by the secretary or corresponding officer of

the society, shall be received in evidence of the terms and
conditions thereof.
(f) No certificate shall be delivered or issued for
delivery in this State unless a copy of the form has been filed
with the Director in the manner provided for like policies
issued by life insurers in this State. Every life, accident,
health or disability insurance certificate and every annuity
certificate issued on or after one year from the effective date
of this amendatory Act shall meet the standard contract
provision requirements not inconsistent with this amendatory
Act for like policies issued by life insurers in this State
except that a society may provide for a grace period for
payment of premiums of one full month in its certificates. The
certificate shall also contain a provision stating the amount
of premiums which are payable under the certificate and a
provision reciting or setting forth the substance of any
sections of the society's laws or rules in force at the time of
issuance of the certificate which, if violated, will result in
the termination or reduction of benefits payable under the
certificate. If the laws of the society provide for expulsion
or suspension of a member, the certificate shall also contain a
provision that any member so expelled or suspended, except for
nonpayment of a premium or within the contestable period for
material misrepresentation in the application for membership
or insurance, shall have the privilege of maintaining the
certificate in force by continuing payment of the required

premium.
(g) Benefit contracts issued on the lives of persons below
the society's minimum age for adult membership may provide for
transfer of control or ownership to the insured at an age
specified in the certificate. A society may require approval of
an application for membership in order to effect this transfer
and may provide in all other respect for the regulation,
government and control of such certificates and all rights,
obligations and liabilities incident thereto and connected
therewith. Ownership rights prior to such transfer shall be
specified in the certificate.
(h) A society may specify the terms and conditions on which
benefit contracts may be assigned.
(Source: P.A. 84-303.)
(215 ILCS 5/315.6) (from Ch. 73, par. 927.6)
(Section scheduled to be repealed on January 1, 2017)
Sec. 315.6. Application of other Code provisions. Unless
otherwise provided in this amendatory Act, every fraternal
benefit society shall be governed by this amendatory Act and
shall be exempt from all other provisions of the insurance laws
of this State not only in governmental relations with the State
but for every other purpose, except for those provisions
specified in this amendatory Act and except as follows:
(a) Sections 1, 2, 2.1, 3.1, 117, 118, 132, 132.1,
132.2, 132.3, 132.4, 132.5, 132.6, 132.7, 133, 134, 136,

138, 139, 140, 141, 141.01, 141.1, 141.2, 141.3, 143, 143c,
144.1, 147, 148, 149, 150, 151, 152, 153, 154.5, 154.6,
154.7, 154.8, 155, 155.04, 155.05, 155.06, 155.07, 155.08
and 408 of this Code; and
(b) Articles VIII 1/2, XII, XII 1/2, XIII, XXIV, and
XXVIII of this Code.
(Source: P.A. 88-364; 89-97, eff. 7-7-95.)