73R9357 DLF-F By Shields H.B. No. 1540 A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to regulation of multiple employer welfare arrangements. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subchapter E, Chapter 21, Insurance Code, is 1-5 amended by adding Article 21.58C to read as follows: 1-6 Art. 21.58C. MULTIPLE EMPLOYER WELFARE ARRANGEMENTS 1-7 Sec. 1. DEFINITIONS. In this article: 1-8 (1) "Board" means the State Board of Insurance. 1-9 (2) "Certificate" means a certificate issued under 1-10 this article to act as a multiple employer welfare arrangement. 1-11 (3) "Department" means the Texas Department of 1-12 Insurance. 1-13 (4) "Multiple employer welfare arrangement" means an 1-14 arrangement that: 1-15 (A) is established or maintained to offer or 1-16 provide to the employees of two or more employers, or the 1-17 beneficiaries of those employees, any benefit that may be provided 1-18 by a multiple employer welfare arrangement under 29 U.S.C. 1-19 Section 1002, including medical, surgical, or hospital benefits; 1-20 and 1-21 (B) qualifies as a multiple employer welfare 1-22 arrangement under 29 U.S.C. Section 1002. 1-23 Sec. 2. CERTIFICATE TO ACT AS MULTIPLE EMPLOYER WELFARE 1-24 ARRANGEMENT REQUIRED. A person may not act as a multiple employer 2-1 welfare arrangement unless the department has issued a certificate 2-2 to act as a multiple employer welfare arrangement to that person 2-3 under this article. 2-4 Sec. 3. POWERS AND DUTIES OF BOARD. (a) The board shall: 2-5 (1) prescribe application forms for issuance and 2-6 renewal of a certificate; 2-7 (2) adopt rules necessary for the administration of 2-8 this article; and 2-9 (3) take other action necessary for the enforcement of 2-10 this article. 2-11 (b) The board may prescribe forms for actuarial reports 2-12 submitted under this article. 2-13 (c) The board shall set application and renewal fees in 2-14 amounts that are reasonable and necessary to defray the cost of 2-15 administering this article. 2-16 Sec. 4. APPLICATION FOR CERTIFICATE. (a) An applicant for 2-17 issuance of a certificate must submit an application accompanied by 2-18 an actuarial report and the required fee. 2-19 (b) The department shall issue a certificate to an applicant 2-20 who satisfies the requirements of this section and Section 5 of 2-21 this article. 2-22 Sec. 5. REQUIREMENTS FOR CERTIFICATE. (a) To be eligible 2-23 for a certificate, the applicant must: 2-24 (1) be actuarially sound, as determined by the board 2-25 from the most recent actuarial report submitted by the applicant; 2-26 (2) hold a cash reserve in the amount recommended in 2-27 the most recent actuarial report submitted by the applicant; and 3-1 (3) maintain aggregate stop-loss insurance, in a form 3-2 approved by the board, providing coverage in an amount equal to at 3-3 least 125 percent of projected annual claims and maintain specific 3-4 stop-loss insurance, in a form approved by the board, providing 3-5 coverage in an amount equal to not more than five percent of 3-6 projected annual claims. 3-7 (b) Each member of the governing body of a multiple employer 3-8 welfare arrangement must be a representative of an employer 3-9 participating in that multiple employer welfare arrangement and may 3-10 not receive remuneration, other than reimbursement for actual 3-11 expenses incurred, for serving as a member of the governing body. 3-12 (c) An employer participating in a multiple employer welfare 3-13 arrangement must be a bona fide business, as determined by the 3-14 board, and may not have been formed for the sole purpose of 3-15 providing employee benefits. 3-16 Sec. 6. RENEWAL. (a) A certificate is valid for one year. 3-17 (b) A multiple employer welfare arrangement may apply to 3-18 renew the certificate by filing a renewal application accompanied 3-19 by an actuarial report and the required fee. 3-20 (c) The department shall renew the certificate if the 3-21 multiple employer welfare arrangement complies with this section 3-22 and Section 5 of this article. 3-23 Sec. 7. ACTUARIAL REPORTS. An actuarial report submitted 3-24 under this article must: 3-25 (1) be prepared and certified by an actuary who is not 3-26 an employee of the multiple employer welfare arrangement and who is 3-27 a fellow of the Society of Actuaries, a member of the American 4-1 Academy of Actuaries, or an enrolled actuary under the Employee 4-2 Retirement Income Security Act of 1979 (29 U.S.C. Section 1001 et 4-3 seq.); 4-4 (2) reflect the actuarial condition of the multiple 4-5 employer welfare arrangement as of a date that is not more than 30 4-6 days before the date on which the report is filed with the 4-7 department; and 4-8 (3) include a recommended cash reserve to be 4-9 maintained by the multiple employer welfare arrangement during the 4-10 following reporting year. 4-11 Sec. 8. FULLY INSURED MULTIPLE EMPLOYER WELFARE ARRANGEMENT 4-12 EXEMPT. (a) This article does not apply to a multiple employer 4-13 welfare arrangement that is fully insured for purposes of 29 U.S.C. 4-14 Section 1144(b)(6). 4-15 (b) A multiple employer welfare arrangement shall be 4-16 presumed fully insured for purposes of this article and Section 4-17 2(a)7(ii), Article 1.14-1, of this code, if a group master policy 4-18 of insurance is issued to the multiple employer welfare arrangement 4-19 funding the benefits offered by the multiple employer welfare 4-20 arrangement by a company licensed to act as an insurer in this 4-21 state and authorized to write the line or lines of insurance 4-22 contained within the group master policy of insurance issued to the 4-23 multiple employer welfare arrangement and certificates of insurance 4-24 evidencing coverage under the group master policy of insurance are 4-25 issued by the company to the individual participants in the 4-26 multiple employer welfare arrangement or if the multiple employer 4-27 welfare arrangement enters into a reinsurance treaty, contract, or 5-1 agreement with a company licensed to act as an insurer in this 5-2 state. The company entering into a reinsurance treaty, contract, 5-3 or agreement with a multiple employer welfare arrangement is 5-4 required (1) to be rated B+ or better by Best's Insurance Reports, 5-5 (2) to be possessed of at least ten million and no/100 dollars 5-6 ($10,000,000.00) of surplus in excess of required statutory 5-7 capital, (3) to have been authorized to act as an insurer by the 5-8 Texas Department of Insurance in this state for at least ten (10) 5-9 years, (4) to be possessed of assets at least equal to reserves 5-10 necessary to pay claims arising under the reinsurance treaty, 5-11 contract, or agreement issued to the multiple employer welfare 5-12 arrangement, (5) to act as the administrator of claims arising 5-13 under the benefit plan sponsored by the multiple employer welfare 5-14 arrangement to which the reinsurance treaty, contract, or agreement 5-15 is issued, (6) to pay premium tax in accordance with Article 4.11 5-16 of this code on the total monetary consideration received from the 5-17 multiple employer welfare arrangement by the company for the 5-18 issuance of the reinsurance treaty, contract, or agreement, and (7) 5-19 to include a provision in the reinsurance treaty, contract, or 5-20 agreement providing that in the event the multiple employer welfare 5-21 arrangement is unable to fund a portion of any claim retained by 5-22 the multiple employer welfare arrangement, the company will provide 5-23 the multiple employer welfare arrangement the funds necessary to 5-24 pay the portion of the claim retained by the multiple employer 5-25 welfare arrangement which is unfunded by the multiple employer 5-26 welfare arrangement. Further, the multiple employer welfare 5-27 arrangement reinsured by a reinsurance treaty, contract, or 6-1 agreement issued in accordance with this subsection may only 6-2 solicit participation in this state in the benefit plan offered by 6-3 the multiple employer welfare arrangement through insurance agents 6-4 licensed in this state and appointed to act as an agent in this 6-5 state by the company issuing the reinsurance treaty, contract, or 6-6 agreement to the multiple employer welfare arrangement. A multiple 6-7 employer welfare arrangement having a group master policy of 6-8 insurance issued to it or entering into a reinsurance treaty, 6-9 contract, or agreement in accordance with this subsection shall be 6-10 considered able to pay benefits in full when due. 6-11 SECTION 2. (a) This Act takes effect September 1, 1993, 6-12 and, except as provided by Subsection (b) of this section, applies 6-13 only to a multiple employer welfare arrangement operating on or 6-14 after January 1, 1994. The operation of a multiple employer 6-15 welfare arrangement before January 1, 1994, is subject to the law 6-16 as it existed immediately before the effective date of this Act, 6-17 and that law is continued in effect for that purpose. 6-18 (b) A multiple employer welfare arrangement that was 6-19 operating before January 1, 1994, and that continues to operate 6-20 after that date shall comply with the requirements of this Act not 6-21 later than January 1, 1996. 6-22 SECTION 3. The importance of this legislation and the 6-23 crowded condition of the calendars in both houses create an 6-24 emergency and an imperative public necessity that the 6-25 constitutional rule requiring bills to be read on three several 6-26 days in each house be suspended, and this rule is hereby suspended.