Relating to matters under the purview of the department of insurance and financial services including financial literacy and exploitation, tax confidentiality, health insurance rates, health savings accounts, insurer withdrawals, property insurance, and service contracts, and including penalties

Description

House File 986 relates to matters under the purview of the Department of Insurance and Financial Services (DIFS), the Iowa Utilities Commission (IUC), and the Department of Transportation (DOT), including financial literacy and exploitation, tax confidentiality, health insurance rates, Health Savings Accounts, insurer withdrawals, property insurance, service contracts, the Iowa Individual Health Benefit Reinsurance Association, the Iowa Cemetery Act, and motor vehicle financial liability coverage, and including penalties and effective date provisions.

The following divisions of the Bill have no or minimal fiscal impact:

• Division III — Health Insurance Rate Increases — Public Hearings. This Division may decrease costs for the DIFS for a stenographer as a result of fewer public hearings; however, any impact is unknown but expected to be minimal.
• Division IV — Health Savings Accounts and Qualified High-Deductible Health Plans — Cost-Sharing.
• Division V — Insurance Company Withdrawal Requirements.
• Division VII — Iowa Individual Health Benefit Reinsurance Association – Membership. The following divisions of the Bill have a fiscal impact or impose new criminal penalties and are described in further detail below:
• Division I — Financial Literacy and Financial Exploitation.
• Division II — Tax on Gross Premiums — Confidentiality.
• Division VI — Service Companies, Service Contracts, and Licenses.
• Division VIII — Iowa Cemetery Act – Examinations, Care Funds, and Annual Reports.
• Division IX — Motor Vehicle Financial Liability Coverage.

Division I — Financial Literacy and Financial Exploitation

Description

Division I of the Bill does the following:

• Removes a requirement to deposit 60.0% of nonexamination revenues into the General Fund.
• Requires 100.0% of the nonexamination revenue to be deposited into the Commerce Revolving Fund (CMRF) and annually appropriated to the Division of Insurance for operations.
• Appropriates $10 to the Financial Literacy and Investor Education Fund and $10 to the Financial Exploitation Prevention Fund for every $40 fee collected. This includes the following $40 fees: the agent registration fee, the agent renewal fee, and the agent change of registration fee.
• Establishes the Financial Literacy and Investor Education Fund under the control of the Director of the Iowa Insurance Division (IID). Requires the Director to develop and implement financial literacy and investor education initiatives for the public. Moneys in the Financial Literacy and Investor Education Fund include the following:
• Moneys appropriated by the General Assembly.
• A transfer of up to $250,000 from the CMRF as determined by the Director.
• Civil penalties received pursuant to Iowa Code chapter 502 (Uniform Securities Act (Blue Sky Law)).
• Grants or donations from nonstate entities. The Director is permitted to collaborate with organizations with an interest in financial literacy and investor education under the Bill.
• Allows transfers from the Financial Literacy and Investor Education Fund to the Financial Exploitation Prevention Fund at the discretion of the Director.
• Allows the Financial Literacy and Investor Education Fund to retain interest earnings. Exempts deposits in the Fund from reversion requirements in Iowa Code section 8.33.
• Establishes the Financial Exploitation Prevention Fund. Requires the Director to develop and implement initiatives to educate the public on financial exploitation, assist victims of financial exploitation, and conduct and assist investigations of financial exploitation.
• Moneys in the Financial Exploitation Prevention Fund include the following:
• Moneys appropriated by the General Assembly.
• A transfer of up to $250,000 from the CMRF as determined by the Director.
• Civil penalties received pursuant to Iowa Code chapter 502.
• Grants or donations from nonstate entities. The Director is permitted to collaborate with organizations with an interest in financial exploitation prevention and education under the Bill.
• Allows the Financial Exploitation Prevention Fund to retain interest earnings. Exempts deposits in the Fund from reversion requirements in Iowa Code section 8.33.
• On the effective date of Division I of the Bill (July 1, 2025), any unobligated or unencumbered moneys in the Securities Investor Education and Financial Literacy Training Fund created in Iowa Code section 502.601 are to be transferred to the Financial Literacy and Investor Education Fund.

Background

Currently, $10 of every $40 agent fee is paid to the Securities Investor Education and Financial Literacy Training Fund established by Iowa Code section 502.601(5). As of April 18, 2025, there was approximately $3.8 million in the Fund. The remaining $30 of every agent fee is deposited into the CMRF. Figure 1 shows the agent fees deposited into the Securities Investor Education and Financial Literacy Training Fund and the CMRF for each of the last three fiscal years.

Figure 1 — Deposit of Agent Fees by Fund, FY 2022 – FY 2024FY 2022 FY 2023 FY 2024 Average

Securities Investor Education and

Financial Literacy Training Fund 1,800,000$ 1,900,000$ 1,900,000$ 1,900,000$ Commerce Revolving Fund 5,300,000 5,700,000 5,800,000 5,600,000 Total 7,100,000$ 7,700,000$ 7,700,000$ 7,500,000$ Note: Numbers may not total due to rounding.

Under current Iowa law, 40.0% of nonexamination revenues paid to the IID or the Iowa Department of Revenue (IDR) in connection with the regulation of insurance companies or other entities subject to the regulatory jurisdiction of the IID are deposited into the CMRF. The remaining 60.0% of nonexamination revenues are deposited into the General Fund. Figure 2 shows the breakdown of nonexamination revenue by Fund as required under current law for each of the last three fiscal years.

Figure 2 — Nonexamination Revenue by Fund as Required Under Current Law, FY 2022 – FY 2024 The CMRF is the operation account for the Divisions of the DIFS. A portion of the revenues are appropriated back to the Divisions to support the Divisions’ operations. The remaining unspent and unobligated revenue in the CMRF is transferred to the General Fund approximately once per year. The current practice for the IID is to transfer all unspent moneys, which has historically been more than 60.0% of nonexamination revenues. There was no transfer in FY 2023; however, there were two transfers, one for $15.0 million and another for $18.0 million, in FY 2024. Figure 3 shows the funding transferred from the CMRF to the General Fund for each of the last three fiscal years.

Figure 3 — CMRF Total Deposits to the General Fund, FY 2022 – FY 2024 Blue Sky laws are state-level securities regulations designed to protect investors from fraud and deceptive practices in the offering and sale of securities, requiring registration and disclosure of information. Figure 4 shows the civil penalty revenue received by the DIFS pursuant to Iowa Code chapter 502 for each of the last three fiscal years.

Figure 4 — Civil Penalties, Iowa Uniform Securities Act, FY 2022 – FY 2024

Assumptions

• Forecasted revenue is assumed to equal the average value of the previous three fiscal years.
• Agent fee revenue and nonexamination revenue received by the DIFS pursuant to Iowa Code chapter 502 will remain at current levels.
• Civil penalty revenue cannot be estimated; however, according to the DIFS, the $343,000 average is higher than usual. For the purposes of this Fiscal Note, it is assumed civil penalty revenue will be $250,000 annually.
• The balance of the Securities Investor Education and Financial Literacy Training Fund will remain at approximately $3.8 million at the close of the fiscal year.
• The total unspent nonexamination fee revenue that may be remitted to the General Fund at the close of the fiscal year is unknown.FY 2022 FY 2023 FY 2024 Average General Fund 12,100,000$ 12,400,000$ 12,300,000$ 12,300,000$

Commerce Revolving Fund 8,000,000 8,300,000 8,200,000 8,200,000 Total 20,100,000$ 20,700,000$ 20,600,000$ 20,500,000$ Note: Numbers may not total due to rounding.FY 2022 FY 2023 FY 2024 Average General Fund Transfer 20,000,000$ 0$ 33,000,000$ 17,700,000$ Note: Numbers may not total due to rounding.FY 2022 FY 2023 FY 2024 Average Civil Penalty Revenue 189,000$ 574,000$ 265,000$ 343,000$ Note: Numbers may not total due to rounding.

Fiscal Impact

Figure 5 shows the estimated fiscal impact by fund for Division I of HF 986. Figure 5 — Estimated Revenue Impact by Fund, Division I, House File 986 Under the changes in the Bill, the IID would not be required by Code to deposit $12.3 million into the General Fund annually. However, assuming the IID continues the current practice of reverting all unspent moneys to the General Fund, there will be no changes in revenue to the General Fund as a result of the Bill. However, there may be decreases to General Fund revenue in future fiscal years if this practice changes.

In addition to the fiscal impact in Figure 5, the Commissioner may transfer up to $250,000 from the CMRF to both the Financial Literacy and Investor Education Fund and the Financial Exploitation Prevention Fund.

Sources

• Iowa Insurance Division, Department of Insurance and Financial Services
• State Accounting System
• Legislative Services Agency (LSA) Fee Project
• Division II — Tax on Gross Premiums — Confidentiality
• Description
• Division II of the Bill does the following:
• • Establishes that tax returns filed under Iowa Code section 432.1 (Tax on Gross Premiums
• — Exclusions) or 432.1A (Tax on Premiums — Captive Companies) are not open to
• inspection under Iowa Code chapter 22 (Examination of Public Records (Open Records)).
• • Establishes a serious misdemeanor for any present or former officer or employee of the
• State to willfully or recklessly publish tax returns. Requires an individual who does so to be
• dismissed from office or discharged from State employment.
• Background
• Iowa Code section 432.1 establishes exclusions for a tax on gross premiums. Iowa Code
• section 432.1A establishes a tax on premiums for captive insurance companies. Captive
• insurance companies are a form of self-insurance in which the insurance provider is owned
• entirely by the insurance holder.
• Iowa Code chapter 22 contains the State’s public records law, which allows every person to
• inspect and copy public records and to publish or otherwise disseminate information contained
• in public records that are under the supervision of the lawful custodian of the public records or
• the custodian’s authorized deputy.Category
• Securities Investor
• Education and Financial
• Literacy Training Fund
• Financial Literacy
• and Investor
• Education Fund
• Commerce
• Revolving
• Fund
• Financial
• Exploitation
• Prevention Fund General Fund
• Agent Fees -1,900,000$ 1,900,000$ -1,900,000$ 1,900,000$ 0$
• Nonexamination Revenue 0 0 Unknown 0 Unknown
• Civil Penalties -250,000 125,000 0 125,000 0
• Transfer -3,800,000 3,800,000 0 0 0
• Total -5,950,000$ 5,825,000$ Unknown 2,025,000$ Unknown
• Note: Numbers may not total due to rounding.
• Assumptions
• • The following will not change over the projection period: charge, conviction, and sentencing
• patterns and trends; prisoner length of stay (LOS); revocation rates; plea bargaining; and
• other criminal justice system policies and practices.
• • A delay of six months is assumed from the effective date of this Bill to the date of first entry
• of affected offenders into the correctional system.
• • Marginal costs for county jails cannot be estimated due to a lack of data. For purposes of
• this analysis, the marginal cost for county jails is assumed to be $50 per day.
• • According to the Department of Corrections (DOC), crimes involving professionals are rare,
• and it is anticipated that officers and employees of the State would comply with the
• legislation.
• Correctional Impact
• Division II of House File 986 creates new criminal offenses; however, crimes involving
• professionals are rare. As a result, the correctional impact cannot be estimated due to a lack of
• existing conviction data. Figure 6 shows estimates for sentencing to State prison, parole,
• probation, or Community-Based Corrections (CBC) residential facilities; LOS in months under
• those supervisions; and supervision marginal costs per day for a serious misdemeanor. Refer
• to the LSA memo addressed to the General Assembly, Cost Estimates Used for Correctional
• Impact Statements, dated January 13, 2025, for information related to the correctional system.
• Figure 6 — Sentencing Estimates and Length of Stay (LOS) in Months
• Minority Impact
• Division II of the Bill creates new criminal offenses. As a result, the Department of
• Management (DOM) Criminal Justice Planning cannot use existing data to estimate the minority
• impact of the Bill. Refer to the LSA memo addressed to the General Assembly, Minority Impact
• Statements, dated January 13, 2025, for information related to minorities in the criminal justice
• system.
• Fiscal Impact
• Division II of the Bill establishes new criminal offenses. The fiscal impact cannot be estimated
• but is anticipated to be minimal. Figure 7 shows the average State cost per offense for a
• serious misdemeanor. The estimated impact to the General Fund includes operating costs
• incurred by the Judicial Branch, the Indigent Defense Fund, and the DOC.
• Figure 7 — Average State Cost Per Offense
• Sources
• Department of Management Criminal Justice Planning
• Department of CorrectionsConviction Offense Class
• Percent
• Ordered to
• State
• Prison
• Marginal
• Cost Per
• Day
• Percent
• Ordered to
• Probation
• FY24 Field
• Avg LOS on
• Probation
• Avg Cost
• Per Day on
• Probation
• Marginal
• Cost CBC
• Per Day
• Marginal
• Cost Per
• Day Jail
• Marginal
• Cost Per
• Day Parole
• Serious Misdemeanor 2.4% $24.51 53.4% 18.8 $7.68 $18.37 $50.00 $7.68Offense Class Average Cost
• Serious Misdemeanor $420 to $5,000
• Division VI — Service Companies, Service Contracts, and Licenses
• Description
• Division VI of the Bill does the following:
• • Adds the failure of a person in the business of service contracts to comply with Iowa Code
• chapter 523C (Residential and Motor Vehicle Service Contracts) as an unfair method of
• competition and unfair or deceptive act or practice in the business of insurance under Iowa
• Code section 507B.4.
• • Updates licensure requirements, including disciplinary requirements and application
• requirements.
• • Reduces the service company license renewal fee from $500 to $200.
• • Creates a new service company license reinstatement fee of $800.
• Background
• A violation of Iowa Code section 507B.4 may result in a hearing, a civil penalty, suspension or
• revocation of licensure, or an additional monetary penalty.
• Under current law, the service company license renewal fee is $500, of which one-third is paid
• to the Service Company Oversight Fund and two-thirds to the CMRF. Figure 8 shows service
• company license renewal fee revenue for each of the last three fiscal years.
• Figure 8 — Service Company License Renewals and Fee Revenue, FY 2022 – FY 2024
• There is not currently a service company license reinstatement fee. According to the IID, there
• have been 54 licensees that would have been required to pay this reinstatement fee over the
• past three fiscal years, for an average of 18 reinstatement fees assessing a total of $14,400
• annually. One-third of the fee revenue is to be paid to the Service Company Oversight Fund
• and two-thirds of the fee revenue is to be paid to the CMRF.
• Assumptions
• • Service company license renewal rates will remain at the current level.
• • There will be 18 service company license reinstatements each year.
• Fiscal Impact
• Figure 9 shows the estimated revenue impact by fund for Division VI of HF 986.
• Figure 9 — Estimated Fiscal Impact by Fund, Division VI, House File 986FY 2022 FY 2023 FY 2024 Average
• License Renewals 254 253 255 254
• Current Law ($500) 127,000$ 126,500$ 127,500$ 127,000$
• Proposed Law ($200) 50,800 50,600 51,000 50,800
• Difference ($300) 76,200$ 75,900$ 76,500$ 76,200$
• Note: Numbers may not total due to rounding.Fee Revenue Source
• Service Company
• Oversight Fund
• Commerce
• Revolving Fund
• Total by
• Fee
• Service Company License Renewal -25,400$ -50,800$ -76,200$
• Service Company License Reinstatement 4,800 9,600 14,400
• Total -20,600$ -41,200$ -61,800$
• Note: Numbers may not total due to rounding.
• Sources
• Iowa Insurance Division, Department of Insurance and Financial Services
• State Accounting System
• Division VIII — Iowa Cemetery Act – Examinations, Care Funds, and Annual Reports
• Description
• Division VIII of the Bill exempts cemeteries that are owned or operated by a governmental
• subdivision from examination and annual report requirements. Additionally, notwithstanding
• care fund requirements in Iowa Code section 523I.810, cemeteries that are owned or operated
• by a governmental subdivision are not required to establish a reasonable repayment schedule,
• provided that the distributions from the care funds are used in compliance with Iowa Code
• section 523I.811.
• Background
• Iowa Code chapter 523I (Iowa Cemetery Act) establishes applicability, administration and
• enforcement, management requirements, and general provisions for Iowa cemeteries.
• Perpetual care cemeteries are required to pay a $10 examination fee for each certificate of
• interment rights issued during the previous calendar year. Examination fees are deposited into
• the IID’s Enforcement Fund and are used to pay for expenses, including but not limited to the
• cost for examiners, examination expenses, investigative expenses, consumer education
• expenses, and educational program materials.
• In calendar year (CY) 2024, there were 314 perpetual care cemeteries that filed annual reports.
• Figure 10 shows perpetual care cemeteries by cemetery type and the amount of examination
• fees paid.
• Figure 10 — Perpetual Care Cemeteries in 2024, by Type of Cemetery
• Assumptions
• • The number of perpetual care cemeteries will remain the same.
• • The number of perpetual care cemeteries owned or operated by governmental subdivisions
• will remain the same.
• • Approximately 20.0% of cemeteries will be examined each year.
• • According to the IID, 169 cemeteries are not required to be examined under the Bill.
• • According to the IID, there will be a decrease in examination costs of approximately $57,000
• annually as a result of fewer examinations.
• • Examination fee revenue will decrease by approximately $22,000 annually.Type of Perpetual Care
• Cemetery (Owner or Operator)
• Number of
• Cemeteries by Type
• Number of Interment
• Agreements in 2023
• Total Examination
• Fees Paid in 2024
• Association 68 482 4,820$
• Church/Religious Organization 3 41 410
• Corporation 22 926 9,260
• Nonprofit Organization 28 984 9,840
• Privately Owned 24 614 6,140
• Subtotal 145 3,047 30,470$
• Non-Government
• Government/Political Subdivision 149 2,125 21,250
• Township 20 101 1,010
• Subtotal 169 2,226 22,260$
• Government
• Total 314 5,273 52,730$
• Fiscal Impact
• Division VIII of the Bill is expected to decrease examination costs by approximately $57,000
• annually and decrease examination fee revenue by approximately $22,000 annually. In total, it
• is estimated that Division VIII will decrease net costs by approximately $35,000 annually.
• Source
• Department of Insurance and Financial Services
• Division IX — Motor Vehicle Financial Liability Coverage
• Description
• Division IX of the Bill requires the owner of a motor vehicle to certify that financial liability
• coverage is in effect for the vehicle as required under Iowa Code section 321.20B at the time
• the vehicle is registered and each time the registration is renewed. A motor vehicle owner is
• required to provide a copy of the proof of financial liability coverage issued for the motor vehicle
• at the time of application for vehicle registration to the Department of Transportation (DOT).
• The DOT or county treasurer cannot register a motor vehicle or renew a registration in the
• absence of satisfactory proof that financial liability coverage is in effect for the vehicle. These
• provisions do not apply to motor vehicles excluded from the requirements of Iowa Code section
• 321.20B.
• A person who does not have financial liability coverage in effect for the vehicle or who does not
• carry proof of such coverage in the vehicle commits a simple misdemeanor punishable as a
• scheduled fine. The Bill increases the fine amount for a second violation of driving without
• insurance to double the scheduled fine amount and triples the scheduled fine amount for a third