Bill 234

                    Current Status

Bill Number:               234
Ratification Number:       206
Act Number:                137
Introducing Body:          Senate
Subject:                        Multiple employer self-insured
                           health plans

(A137, R206, S234)

AN ACT TO PROVIDE FOR THE LICENSING AND REGULATION OF MULTIPLE EMPLOYER SELF-INSURED HEALTH PLANS.

Be it enacted by the General Assembly of the State of South Carolina:

Definitions

SECTION 1. As used in this act:

(1) "Multiple employer self-insured health plan" means any plan or arrangement which is established or maintained for the purpose of offering or providing health, dental, or short-term disability benefits to employees of two or more employers but which is not fully insured. A plan or arrangement is considered "fully insured" only if all benefits payable are guaranteed under a contract or policy of insurance issued by an insurance company authorized to transact business in this State.

(2) "Commissioner" means the Chief Insurance Commissioner.

License required

SECTION 2. It is unlawful for any multiple employer self-insured health plan to transact business in this State without a license issued by the Commissioner. Any of the acts described in items (1) through (8) of Section 38-53-30(b), Code of Laws of South Carolina, 1976, effected by mail or otherwise by or on behalf of a multiple employer self-insured health plan constitutes the transaction of business in this State.

The requirements of this act shall not apply to any plan or arrangement established or maintained by municipalities, counties, or other political subdivisions of the State.

A multiple employer self-insured health plan which was in existence prior to July 1, 1985, and which is associated with or organized or sponsored by a homogenous association exempt from taxation under United States Code, Title 26, Section 501(c)(6), and controlled by a board of directors a majority of whom are members of the association, is exempt from the requirements of this act and the insurance laws of this State. To prove exemption from taxation under 26 U.S.C. Section 501(c)(6), the association must provide to the Commissioner a certificate issued by the United States Internal Revenue Service demonstrating the association's tax-exempt status.

The requirements of this act do not apply to any multiple employer self-insured health plan which is not subject to the application of state insurance laws under the provisions of the Employee Retirement Income Security Act of 1974 (29 U.S.C., Sections 1001 et seq.).

Any multiple employer self-insured health plan which transacts business in this State without the license required by this act is considered to be an unauthorized insurer within the meaning of Chapters 52 and 53 of Title 38 of the 1976 Code and all remedies and penalties prescribed therein are fully applicable.

Application for license

SECTION 3. Application for a license is made on forms prescribed by the commissioner. No multiple employer self-insured health plan may be licensed unless it has and maintains a minimum of two hundred fifty covered employees.

A multiple employer self-insured health plan shall include aggregate excess stop-loss coverage and individual excess stop-loss coverage provided by an insurance company licensed by the State. Aggregate excess stop-loss coverage shall include provisions to cover incurred, unpaid claim liability in the event of plan termination. The excess or stop-loss insurer shall bear the risk of coverage for any member of the pool that becomes insolvent with outstanding contributions due. In addition, the plan shall have a participating employer's fund in an amount at least equal to the point at which the excess or stop-loss insurer shall assume one hundred percent of additional liability. A plan shall submit its proposed excess or stop-loss insurance contract to the commissioner at least thirty days prior to the proposed plan's effective date and at least thirty days subsequent to any renewal date. The commissioner shall review the contract to determine if it meets the standards established by this act and respond within a thirty-day period. Any excess or stop-loss insurance plan must be noncancellable for a minimum term of two years.

At the time application for a license is made, the multiple employer self-insured health plan shall file with the commissioner a copy of the plan's bylaws, all schedules of benefits, and all management, administration, and trust agreements which the plan has made or proposes to make for the conduct of its business and affairs. Any proposed changes or amendments to the foregoing must also be filed with the commissioner.

Funds must be held in trust

SECTION 4. Funds collected from the participating employers under multiple employer self-insured health plans must be held in trust subject to the following requirements:

(a) A board of trustees elected by participating employers shall serve as fund managers on behalf of participants. Trustees must be plan participants. No participating employer may be represented by more than one trustee. A minimum of three and a maximum of seven trustees may be elected. Trustees shall receive no remuneration but they may be reimbursed for actual and reasonable expenses incurred in connection with duties as trustee.

(b) Trustees must be bonded in an amount not less than one hundred fifty thousand dollars from a licensed surety company.

(c) Investment of plan funds is subject to the same restrictions as are applicable to insurance companies pursuant to Sections 38-5-1040 and 38-5-1050 of the 1976 Code. All investments must be managed by a bank or other investment organization licensed to operate in South Carolina.

(d) Trustees, on behalf of the plan, shall file an annual report with the commissioner on or before March first of each year showing the condition and affairs of the plan as of the preceding thirty-first day of December. The report must be made on forms prescribed by the commissioner. The report must summarize the financial condition of the fund, itemize collections from participating employers, detail all fund expenditures, and provide any additional information as the commissioner shall require.

Plan shall establish loss reserve

SECTION 5. A plan shall establish loss reserves for all incurred losses, both reported and unreported, and for unearned premiums, in the same manner required for health insurers under Sections 38-5-770 and 38-5-780 of the 1976 Code.

A plan also shall establish a surplus account equal to the greater of:

(a) three times the average paid monthly premium during the plan's most recent fund year;

(b) for plans which do not yet have one fund year's experience, three times estimated monthly premium; or

(c) one hundred thousand dollars.

Fee

SECTION 6. Not later than March first of each year every multiple employer self-insured health plan shall pay to the commissioner a license fee equal to two percent of the claims paid by the plan during the immediately preceding calendar year. All the funds collected by the commissioner must be deposited into the general fund of the State.

Records required to be kept

SECTION 7. Every multiple employer self-insured health plan shall make and keep a full and correct record of its business and affairs and the commissioner or his representative shall inspect these records at least every three years. The information from these records must be furnished to the commissioner or his representatives on demand and the original books or records must be open to examination by the commission or his representatives when demanded.

Applications to dissolve

SECTION 8. A plan that desires to cease existence shall apply to the commissioner for authority to dissolve. Applications to dissolve must be on forms prescribed by the commissioner and must be approved or disapproved by the commissioner within sixty days of receipt. Dissolution without authorization is prohibited and does not absolve a plan or its participants from fulfilling the plan's continuing obligations. An application to dissolve must be granted if either of the following conditions is met:

(1) The plan demonstrates that it has no outstanding liabilities, including incurred but not reported liabilities.

(2) The plan has obtained an irrevocable commitment from a licensed insurance company which provides for payment of all outstanding liabilities and for providing all related services including payment of claims, preparation of reports, and administration of transactions associated with the period when the plan provided coverage.

Upon dissolution, after payment of all outstanding liabilities and indebtedness, the assets of the plan are distributed to all employers participating in the plan during the last five years immediately preceding dissolution. The distributive share of each employer must be in the proportion that all contributions made by the employer during such five-year period bears to the total contributions made by all participating employers during such five-year period.

Commissioner may promulgate regulations

SECTION 9. The commissioner may promulgate regulations as may be necessary to implement the provisions of this act and to ensure the safe and proper operation of multiple employer self-insured health plans in this State.

If the commissioner is of the opinion that a multiple employer self-insured health plan is in an unsound condition, that it has failed to comply with the law or any applicable regulations or orders issued by the commissioner, or is in such condition as to render its proceedings hazardous to the public or to persons covered under the plan, the commissioner may, after a hearing, revoke or suspend the license of the plan or, in lieu thereof, impose a monetary penalty not to exceed five thousand dollars for each violation or ground.

If the commissioner is of the opinion that any of the grounds set forth in the second paragraph of this section exist, he may commence delinquency proceedings against the plan and supervise, rehabilitate, or liquidate the plan in accordance with the procedures set forth in the Insurers Supervision, Rehabilitation andLiquidation Act, Sections 38-5-1810 et seq. of the 1976 Code.

Time effective

SECTION 10. This act shall take effect ninety days after approval by the Governor.