When the association acts under certain sections for life or health policies, it must keep paying covered benefits, give notice before termination, and offer substitute coverage in some cases.
Sec. 463.254. LIFE OR HEALTH INSURANCE POLICIES OR CONTRACTS. (a) This section applies only when the association is taking an action under Section 463.252(b)(2) or 463.253 with respect to a life or health insurance policy or contract. (b) The association, in accordance with Subsections (c) and (d), as applicable, shall ensure payment of benefits identical to the benefits that would have been payable under the policy or contract of the insurer. (c) For a group policy or contract, the association shall ensure payment of benefits under Subsection (b) for claims incurred before the later of: (1) the earlier of the next renewal date under the policy or contract or the 45th day after the date the association becomes obligated with respect to the policy or contract; or (2) the 30th day after the date the association becomes obligated with respect to the policy or contract. (d) For an individual policy, the association shall ensure payment of benefits under Subsection (b) for claims incurred before the later of: (1) the earlier of the next renewal date under the policy, if any, or the first anniversary of the date the association becomes obligated with respect to the policy; or (2) the 30th day after the date the association becomes obligated with respect to the policy. (e) The association shall diligently attempt to provide each known insured, enrollee, or group policy or contract holder with notice before the 30th day before the date the benefits are terminated. (f) As provided by Subsections (g)-(i), the association shall make substitute coverage available on an individual basis to: (1) each known insured or enrollee under an individual policy, or the owner if other than the insured or enrollee; and (2) each individual who: (A) was formerly insured or enrolled under a group policy or contract; and (B) is not eligible for replacement group coverage. (g) Substitute coverage is available for an individual policy under Subsection (f) only if the insured, enrollee, or owner was entitled under law or the terminated policy to continue an individual policy in force until a specified age or for a specified period during which the insurer: (1) was not entitled to unilaterally change a provision of the policy; or (2) was entitled only to change a premium by class. (h) Substitute coverage is available for a group policy or contract under Subsection (f) only if the formerly insured or enrolled individual was entitled under law or the terminated policy or contract to convert group coverage to individual coverage. (i) To provide substitute coverage under Subsection (f), the association may offer to reissue the terminated coverage or issue an alternative policy. The association shall offer the reissued or alternative policy without requiring evidence of insurability, at actuarially justified rates. The reissued or alternative policy may not provide for a waiting period or exclusion that would not have applied under the terminated policy. The association may reinsure a reissued or alternative policy. Added by Acts 2005, 79th Leg., Ch. 727 (H.B. 2017), Sec. 1, eff. April 1, 2007. Amended by: Acts 2019, 86th Leg., R.S., Ch. 432 (S.B. 1153), Sec. 19, eff. September 1, 2019.