1-1  By:  Shields (Senate Sponsor - Parker)                H.B. No. 1540
    1-2        (In the Senate - Received from the House May 13, 1993;
    1-3  May 14, 1993, read first time and referred to Committee on Economic
    1-4  Development; May 22, 1993, reported adversely, with favorable
    1-5  Committee Substitute by the following vote:  Yeas 11, Nays 0;
    1-6  May 22, 1993, sent to printer.)
    1-7                            COMMITTEE VOTE
    1-8                          Yea     Nay      PNV      Absent 
    1-9        Parker             x                               
   1-10        Lucio              x                               
   1-11        Ellis              x                               
   1-12        Haley              x                               
   1-13        Harris of Dallas   x                               
   1-14        Harris of Tarrant  x                               
   1-15        Leedom             x                               
   1-16        Madla              x                               
   1-17        Rosson             x                               
   1-18        Shapiro            x                               
   1-19        Wentworth          x                               
   1-20  COMMITTEE SUBSTITUTE FOR H.B. No. 1540                  By:  Parker
   1-21                         A BILL TO BE ENTITLED
   1-22                                AN ACT
   1-23  relating to the regulation of multiple employer welfare
   1-24  arrangements; creating offenses and providing civil and criminal
   1-25  penalties; providing for fees.
   1-26        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
   1-27        SECTION 1.  Chapter 3, Insurance Code, is amended by adding
   1-28  Subchapter H to read as follows:
   1-29         SUBCHAPTER H.  MULTIPLE EMPLOYER WELFARE ARRANGEMENTS
   1-30        Art. 3.80.  DEFINITIONS.  In this subchapter:
   1-31              (1)  "Board" means the State Board of Insurance.
   1-32              (2)  "Commissioner" means the commissioner of
   1-33  insurance.
   1-34              (3)  "Employee welfare benefit plan" has the meaning
   1-35  assigned by Section 3(1) of the Employee Retirement Income Security
   1-36  Act of 1974 (29 U.S.C. Section 1002(1)).
   1-37              (4)  "Fully insured multiple employer welfare
   1-38  arrangement" means a multiple employer welfare arrangement that
   1-39  provides benefits to its participating employees and beneficiaries
   1-40  for which 100 percent of the liability has been assumed by an
   1-41  insurance company authorized to do business in this state.
   1-42              (5)  "Multiple employer welfare arrangement" has the
   1-43  meaning assigned by Section 3(40) of the Employee Retirement Income
   1-44  Security Act of 1974 (29 U.S.C.  Section 1002(40)) to describe an
   1-45  entity which meets either or both of the following criteria:
   1-46                    (A)  one or more of the employer members in the
   1-47  multiple employer welfare arrangement is either domiciled in this
   1-48  state or has its principal headquarters or principal administrative
   1-49  office in this state; or
   1-50                    (B)  the multiple employer welfare arrangement
   1-51  solicits an employer that is domiciled in this state or has its
   1-52  principal headquarters or principal administrative office in this
   1-53  state.
   1-54        Art. 3.81.  CERTIFICATE OF AUTHORITY.  (a)  A person shall
   1-55  not establish or maintain an employee welfare benefit plan which is
   1-56  a multiple employer welfare arrangement in this state unless the
   1-57  multiple employer welfare arrangement obtains and maintains a
   1-58  certificate of authority pursuant to this subchapter.  This
   1-59  subchapter shall not apply to a fully insured multiple employer
   1-60  welfare arrangement for so long as such multiple employer welfare
   1-61  arrangement remains fully insured.  The commissioner may, from time
   1-62  to time, require proof that the multiple employer welfare
   1-63  arrangement is fully insured.
   1-64        (b)  A person wishing to establish an employee welfare
   1-65  benefit plan which is a multiple employer welfare arrangement shall
   1-66  apply for an initial certificate of authority on a form prescribed
   1-67  by the commissioner.  The application shall be completed and
   1-68  submitted along with all information required by the commissioner,
    2-1  including:
    2-2              (1)  copies of all articles, bylaws, agreements,
    2-3  trusts, or other documents or instruments describing the rights and
    2-4  obligations of employers, employees, and beneficiaries with respect
    2-5  to the multiple employer welfare arrangement;
    2-6              (2)  current financial statements of the multiple
    2-7  employer welfare arrangement;
    2-8              (3)  proof of a fidelity bond which shall protect
    2-9  against acts of fraud or dishonesty in servicing the multiple
   2-10  employer welfare arrangement, covering each person responsible for
   2-11  servicing the employee welfare benefit plan in an amount equal to
   2-12  the greater of 10 percent of the premiums and contributions
   2-13  received by the multiple employer welfare arrangement, or 10
   2-14  percent of the benefits paid, during the preceding calendar year,
   2-15  with a minimum of $10,000 and a maximum of $500,000; no additional
   2-16  bond shall be required of a third-party administrator licensed to
   2-17  engage in business in this state;
   2-18              (4)  a statement showing in full detail the plan on
   2-19  which the multiple employer welfare arrangement proposes to
   2-20  transact business;
   2-21              (5)  an initial actuarial opinion in compliance with
   2-22  the requirements of Article 3.87(a)(2) and subject to Article
   2-23  3.87(c) of this code; and
   2-24              (6)  a certification by the applicant that the multiple
   2-25  employer welfare arrangement is in compliance with all applicable
   2-26  provisions of the Employee Retirement Income Security Act of 1974
   2-27  (29 U.S.C. Section 1001 et seq.).
   2-28        (c)  The commissioner shall promptly examine the application
   2-29  and documents submitted by the applicant and shall have the power
   2-30  to conduct any investigation which the commissioner may deem
   2-31  necessary and to examine under oath any persons interested in or
   2-32  connected with the multiple employer welfare arrangement.
   2-33        (d)  Within 60 days of the filing of the application, the
   2-34  commissioner shall issue the initial certificate of authority,
   2-35  which shall be a temporary certificate for a term of one year, to a
   2-36  multiple employer welfare arrangement, provided all of the
   2-37  following conditions have been met:
   2-38              (1)  the employers in the multiple employer welfare
   2-39  arrangement are members of an association or group of five or more
   2-40  businesses which are in the same trade or industry, including
   2-41  closely related businesses which provide support, services, or
   2-42  supplies primarily to that trade or industry; a group of employee
   2-43  leasing companies or staff leasing service companies is not
   2-44  considered to be in the same trade or industry for purposes of this
   2-45  article;
   2-46              (2)  if an association, that the association in the
   2-47  multiple employer welfare arrangement is engaged in substantial
   2-48  activity for its members other than sponsorship of an employee
   2-49  welfare benefit plan;
   2-50              (3)  if an association, that the association in the
   2-51  multiple employer welfare arrangement has been in existence for a
   2-52  period of not less than two years prior to engaging in any
   2-53  activities relating to the provision of employee health benefits to
   2-54  its members;
   2-55              (4)  the employee welfare plan of the association or
   2-56  group in the multiple employer welfare arrangement is controlled
   2-57  and sponsored directly by participating employers, participating
   2-58  employees, or both;
   2-59              (5)  the association or group of employers in the
   2-60  multiple employer welfare arrangement is a not-for-profit
   2-61  organization;
   2-62              (6)  the multiple employer welfare arrangement has
   2-63  within its own organization adequate facilities and competent
   2-64  personnel, as determined by the commissioner, to service the
   2-65  employee benefit plan or has contracted with a third-party
   2-66  administrator licensed to engage in business in this state;
   2-67              (7)  the multiple employer welfare arrangement has
   2-68  applications from not less than five employers and will provide
   2-69  similar benefits for not less than 200 separate participating
   2-70  employees, and the annual gross premiums of or contributions to the
    3-1  plan will be not less than $20,000 for a plan that provides only
    3-2  vision benefits, $75,000 for a plan that provides only dental
    3-3  benefits, and $200,000 for all other plans;
    3-4              (8)  the multiple employer welfare arrangement
    3-5  possesses a written commitment, binder, or policy for stop-loss
    3-6  insurance issued by an insurer authorized to do business in this
    3-7  state providing not less than 30 days notice to the commissioner of
    3-8  any cancellation or nonrenewal of coverage and which provides both
    3-9  specific and aggregate coverage with an aggregate retention of no
   3-10  more than 125 percent of the amount of expected claims for the next
   3-11  plan year and a specific retention amount annually determined by
   3-12  the actuarial report required by Article 3.87 of this code;
   3-13              (9)  both the specific and aggregate coverage will
   3-14  require all claims to be submitted within 90 days after the claim
   3-15  is incurred and provide a 12-month claims incurred period and a
   3-16  15-month paid claims period for each policy year;
   3-17              (10)  the contributions shall be set to fund at least
   3-18  100 percent of the aggregate retention plus all other costs of the
   3-19  multiple employer welfare arrangements;
   3-20              (11)  if the reserves required by Article 3.87(a)(2)(B)
   3-21  of this code exceed the greater of 40 percent of the total
   3-22  contributions for the preceding plan year or 40 percent of the
   3-23  total contributions expected for the current plan year, the
   3-24  contributions may be reduced to fund less than 100 percent of the
   3-25  aggregate retention plus all other costs of the multiple employer
   3-26  welfare arrangement, but in no event less than the level of
   3-27  contributions necessary to fund the minimum reserves required under
   3-28  Article 3.87(a)(2)(B) of this code;
   3-29              (12)  the reserves described in Article 3.87(a)(2)(B)
   3-30  of this code have been established or will be established before
   3-31  the final certificate of authority is issued;
   3-32              (13)  the multiple employer welfare arrangement has
   3-33  established a procedure for handling claims for benefits in the
   3-34  event of dissolution of the multiple employer welfare arrangement;
   3-35  and
   3-36              (14)  the multiple employer welfare arrangement has
   3-37  obtained the required bond.
   3-38        (e)  On receipt of its initial certificate of authority, the
   3-39  multiple employer welfare arrangement shall commence business.
   3-40        (f)  The multiple employer welfare arrangement, each of its
   3-41  trustees or directors and officers, and any agent or other person
   3-42  associated with the multiple employer welfare arrangement, other
   3-43  than a participating employer in its capacity as such and its
   3-44  participating employees, shall be subject to disqualification if
   3-45  the person:
   3-46              (1)  made a material misstatement or omission in an
   3-47  application for a certificate of authority under this subchapter;
   3-48              (2)  obtained or attempted to obtain at any time a
   3-49  certificate of authority or license for an insurance entity through
   3-50  intentional misrepresentation or fraud;
   3-51              (3)  misappropriated or converted to the person's own
   3-52  use or improperly withheld money under an employee welfare benefit
   3-53  plan or multiple employer welfare arrangement;
   3-54              (4)  is prohibited from serving in any capacity with
   3-55  the multiple employer welfare arrangement under Section 411 of the
   3-56  Employee Retirement Income Security Act of 1974 (28 U.S.C. Section
   3-57  1111);
   3-58              (5)  without reasonable cause or excuse failed to
   3-59  appear in response to a subpoena, examination, warrant, or any
   3-60  other order lawfully issued by the commissioner; or
   3-61              (6)  has previously been subject to a determination by
   3-62  the commissioner resulting in the suspension or revocation of a
   3-63  certificate of authority or license or denial of a certificate of
   3-64  authority or license on grounds that would be sufficient for
   3-65  suspension or revocation.
   3-66        (g)  A multiple employer welfare arrangement in existence on
   3-67  June 1, 1993, shall file notice with the commissioner by
   3-68  December 31, 1993, of its intent to apply for an initial
   3-69  certificate of authority and shall file for its initial certificate
   3-70  of authority by June 1, 1994.  The multiple employer welfare
    4-1  arrangement may continue to conduct business until the initial
    4-2  certificate of authority is granted or finally denied by the
    4-3  commissioner.
    4-4        (h)  A multiple employer welfare arrangement possessing an
    4-5  initial certificate of authority must apply for a final certificate
    4-6  of authority no later than one year after issuance of its initial
    4-7  certificate of authority.  The multiple employer welfare
    4-8  arrangement shall file an application on a form prescribed by the
    4-9  commissioner and furnish such information as may be required by the
   4-10  commissioner.  The application shall include only:
   4-11              (1)  the names and addresses of:
   4-12                    (A)  the association or group of employers
   4-13  sponsoring the multiple employer welfare arrangement;
   4-14                    (B)  the members of the board of trustees or
   4-15  directors, as applicable, of the multiple employer welfare
   4-16  arrangement; and
   4-17                    (C)  if not an association, at least five
   4-18  employers, which information shall be retained by the commissioner
   4-19  as confidential;
   4-20              (2)  evidence that the bonding requirements have been
   4-21  met;
   4-22              (3)  copies of all plan documents and agreements with
   4-23  service providers, which shall be retained by the commissioner as
   4-24  confidential; and
   4-25              (4)  a funding report containing:
   4-26                    (A)  a statement certified by the board of
   4-27  trustees or directors, as applicable, and an actuarial opinion that
   4-28  all applicable requirements of Article 3.87 of this code have been
   4-29  met;
   4-30                    (B)  an actuarial opinion which sets forth a
   4-31  description of the extent to which contributions or premium rates:
   4-32                          (i)  are not excessive;
   4-33                          (ii)  are not unfairly discriminatory; and
   4-34                          (iii)  are adequate to provide for the
   4-35  payment of all obligations and the maintenance of required cash
   4-36  reserves and surplus by the multiple employer welfare arrangement;
   4-37                    (C)  a statement of the current value of the
   4-38  assets and liabilities accumulated by the multiple employer welfare
   4-39  arrangement and a projection of the assets, liabilities, income,
   4-40  and expenses of the multiple employer welfare arrangement for the
   4-41  next 12-month period; and
   4-42                    (D)  a statement of the costs of coverage to be
   4-43  charged, including an itemization of amounts for administration,
   4-44  reserves, and other expenses associated with operation of the
   4-45  multiple employer welfare arrangement.
   4-46        (i)  After examination and investigation, the commissioner
   4-47  shall issue a final certificate of authority to the multiple
   4-48  employer welfare arrangement if the commissioner is satisfied that
   4-49  the multiple employer welfare arrangement meets the requirements of
   4-50  this subchapter.  The commissioner shall refuse to grant a final
   4-51  certificate of authority to an applicant that fails to meet the
   4-52  requirements of this subchapter.  Notice of refusal shall be in
   4-53  writing, shall set forth the basis for the refusal, and shall also
   4-54  constitute 30 days' advance notice of revocation of the initial
   4-55  certificate of authority.  The initial certificate of authority may
   4-56  be extended for up to one year at the discretion of the
   4-57  commissioner on a determination that the multiple employer welfare
   4-58  arrangement is likely to meet the requirements of this subchapter
   4-59  within one year.  No more than one extension of the initial
   4-60  certificate of authority shall be granted regardless of the length
   4-61  of time for which an extension was granted.
   4-62        (j)  If the applicant submits a written request for hearing
   4-63  within 30 days after mailing of the notice of refusal, revocation
   4-64  of the initial certificate of authority shall be temporarily stayed
   4-65  and the commissioner shall promptly conduct a hearing in which the
   4-66  applicant shall be given an opportunity to show compliance with the
   4-67  requirements of this subchapter.
   4-68        Art. 3.82.  FEES.  (a)  The commissioner shall collect and
   4-69  the multiple employer welfare arrangement shall pay fees to the
   4-70  commissioner as set by the commissioner not to exceed the
    5-1  following:
    5-2              (1)  application   for    initial    certificate    of
    5-3  authority...................................................$1,000;
    5-4              (2)  application    for    final     certificate    of
    5-5  authority...................................................$1,000;
    5-6              (3)  filing fee for annual statement..............$250.
    5-7        (b)  Each multiple employer welfare arrangement shall appoint
    5-8  the commissioner as its resident agent for purposes of service of
    5-9  process.  The fee for such service shall be $50, payable at the
   5-10  time of appointment.
   5-11        (c)  Fees paid under this article shall be deposited in the
   5-12  state treasury to the credit of the State Board of Insurance
   5-13  operating fund.
   5-14        Art. 3.83.  BENEFITS ALLOWED.  (a)  A multiple employer
   5-15  welfare arrangement authorized under this subchapter shall be
   5-16  limited to providing any one or more of the following:
   5-17              (1)  medical, dental, optical, surgical, or hospital
   5-18  care;
   5-19              (2)  benefits in the event of sickness, accident,
   5-20  disability, or death;
   5-21              (3)  any other benefit authorized for health insurers
   5-22  in this state; and
   5-23              (4)  prepaid legal services.
   5-24        (b)  A multiple employer welfare arrangement may only provide
   5-25  benefits to active or retired owners, officers, directors, or
   5-26  employees of or partners in participating employers, or the
   5-27  beneficiaries of such persons, except as may otherwise be limited
   5-28  by provisions of the Employee Retirement Income Security Act of
   5-29  1974 (29 U.S.C. Section 1001 et seq.).
   5-30        Art. 3.84.  NAME; EVIDENCE OF EXISTENCE.  No multiple
   5-31  employer welfare arrangement authorized under this subchapter shall
   5-32  take any name which is the same as or closely resembles the name of
   5-33  any other multiple employer welfare arrangement possessing a
   5-34  certificate of authority and doing business in this state.  A
   5-35  multiple employer welfare arrangement shall transact its business
   5-36  under its own name and shall not adopt any assumed name, except
   5-37  that a multiple employer welfare arrangement by amending its
   5-38  articles may change its name or take a new name with the approval
   5-39  of the commissioner.  Whenever it shall be necessary in any legal
   5-40  proceeding to prove the existence of a multiple employer welfare
   5-41  arrangement, a certified copy of the multiple employer welfare
   5-42  arrangement's certificate of authority shall be prima facie
   5-43  evidence of the existence of the multiple employer welfare
   5-44  arrangement.
   5-45        Art. 3.85.  POWERS OF MULTIPLE EMPLOYER WELFARE ARRANGEMENTS.
   5-46  Every multiple employer welfare arrangement, unless otherwise
   5-47  provided in or inconsistent with this subchapter, shall have power:
   5-48              (1)  to have succession, by its name, for the term
   5-49  stated in its trust agreement;
   5-50              (2)  to sue and be sued, to complain and defend in any
   5-51  court of law or equity, or to be a party to any proceedings before
   5-52  any board or commission or other public body of this state or of
   5-53  any other state or government; suits at law may be maintained by
   5-54  the multiple employer welfare arrangement against any of its
   5-55  participating employers, employees, or beneficiaries for any cause
   5-56  relating to the business of the multiple employer welfare
   5-57  arrangement;
   5-58              (3)  to have a seal which may be altered at pleasure
   5-59  and to use the seal by causing it or a facsimile of it to be
   5-60  impressed, affixed, or otherwise reproduced;
   5-61              (4)  to appoint such officers and agents as the
   5-62  business of the multiple employer welfare arrangement shall require
   5-63  and to allow them suitable compensation;
   5-64              (5)  to make, alter, amend, and repeal bylaws for the
   5-65  regulation and government of its affairs; and
   5-66              (6)  to conduct its business in this state, other
   5-67  states, the District of Columbia, the territories and colonies of
   5-68  the United States, and foreign countries and their territories and
   5-69  colonies; to have one or more offices out of this state; and to
   5-70  acquire, purchase, hold, mortgage, pledge, assign, transfer, and
    6-1  convey real and personal property subject to the provisions of this
    6-2  subchapter.
    6-3        Art. 3.86.  FILING OF ARTICLES; NOTICE OF ELECTIONS; BOARD OF
    6-4  TRUSTEES OR DIRECTORS.  (a)  The articles or bylaws, or trust
    6-5  agreement, as applicable, of the multiple employer welfare
    6-6  arrangement and all appurtenant amendments shall be filed with the
    6-7  commissioner before becoming operative.
    6-8        (b)  At least 75 percent of the trustees or directors shall
    6-9  be elected by the member employers of the multiple employer welfare
   6-10  arrangement.  Each trustee or director shall be elected for at
   6-11  least a two-year term.  Each member employer of a multiple employer
   6-12  welfare arrangement shall be given notice of every election of
   6-13  trustees or directors and shall be entitled to an equal vote either
   6-14  in person or by proxy in writing signed by the member employer.  No
   6-15  owner, officer, or employee of a third-party administrator who
   6-16  provides services to the multiple employer welfare arrangement or
   6-17  of any other person who has received compensation from the multiple
   6-18  employer welfare arrangement may serve as proxy.
   6-19        (c)  The powers of a multiple employer welfare arrangement,
   6-20  except as otherwise provided, shall be exercised by the board of
   6-21  trustees or directors chosen to carry out the purposes of the
   6-22  organizational documents.  Not less than 75 percent of the trustees
   6-23  or directors shall be persons who are covered under the multiple
   6-24  employer welfare arrangement, and no trustee or director shall be
   6-25  an owner, officer, or employee of a third-party administrator who
   6-26  provides services to the multiple employer welfare arrangement or
   6-27  of any other person who has received compensation from the multiple
   6-28  employer welfare arrangement.
   6-29        Art. 3.87.  FILINGS BY MULTIPLE EMPLOYER WELFARE
   6-30  ARRANGEMENTS; REPORT OF CASH RESERVES; APPROVAL BY COMMISSIONER;
   6-31  ADDITIONAL ACTUARIAL REVIEW.  (a)  Each multiple employer welfare
   6-32  arrangement transacting business in this state shall file the
   6-33  following with the commissioner on forms approved by the
   6-34  commissioner:
   6-35              (1)  within 90 days of the end of the fiscal year,
   6-36  financial statements audited by a certified public accountant; and
   6-37              (2)  within 90 days of the end of the fiscal year, an
   6-38  actuarial opinion prepared and certified by an actuary who is not
   6-39  an employee of the multiple employer welfare arrangement and who is
   6-40  a fellow of the Society of Actuaries, a member of the American
   6-41  Academy of Actuaries, or an enrolled actuary under the Employee
   6-42  Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et
   6-43  seq.).  The actuarial opinion shall include:
   6-44                    (A)  a description of the actuarial soundness of
   6-45  the multiple employer welfare arrangement, including any
   6-46  recommended actions that the multiple employer welfare arrangement
   6-47  should take to improve its actuarial soundness;
   6-48                    (B)  the recommended amount of cash reserves the
   6-49  multiple employer welfare arrangement should maintain which shall
   6-50  not be less than the greater of 20 percent of the total
   6-51  contributions in the preceding plan year or 20 percent of the total
   6-52  estimated contributions for the current plan year; cash reserves
   6-53  shall be calculated with proper actuarial regard for known claims,
   6-54  paid and outstanding, a history of incurred but not reported
   6-55  claims, claims handling expenses, unearned premium, an estimate for
   6-56  bad debts, a trend factor, and a margin for error; cash reserves
   6-57  required by this article shall be maintained in cash or federally
   6-58  guaranteed obligations of less than five-year maturity that have a
   6-59  fixed or recoverable principal amount or such other investments as
   6-60  the commissioner or board may authorize by rule; and
   6-61                    (C)  the recommended level of specific and
   6-62  aggregate stop-loss insurance the multiple employer welfare
   6-63  arrangement should maintain.
   6-64        (b)  The commissioner shall review the forms required by
   6-65  Article 3.87(a) of this code.  The commissioner shall renew a
   6-66  multiple employer welfare arrangement's certificate of authority
   6-67  unless the commissioner finds that the multiple employer welfare
   6-68  arrangement does not meet the requirements of this subchapter.  The
   6-69  cash reserves required by this article shall be maintained in cash
   6-70  or federally guaranteed obligations of less than five-year maturity
    7-1  that have a fixed or recoverable principal amount or such other
    7-2  investments as the commissioner or board may authorize by rule.
    7-3        (c)  On a finding of good cause, the commissioner may order
    7-4  an actuarial review of a multiple employer welfare arrangement in
    7-5  addition to the actuarial opinion required by Article 3.87(a)(2) of
    7-6  this code.  The cost of any such additional actuarial review shall
    7-7  be paid by the multiple employer welfare arrangement.
    7-8        (d)  On application of a multiple employer welfare
    7-9  arrangement, the commissioner may waive or reduce the requirement
   7-10  for aggregate stop-loss coverage and the amount of reserves
   7-11  required by Article 3.87(a)(2)(B) of this code on a determination
   7-12  that the interests of the participating employers and employees are
   7-13  adequately protected.
   7-14        Art. 3.88.  EXAMINATION OF MULTIPLE EMPLOYER WELFARE
   7-15  ARRANGEMENTS.  The commissioner or any person appointed by the
   7-16  commissioner shall have the power to examine the affairs of any
   7-17  multiple employer welfare arrangement and for such purposes shall
   7-18  have free access to all the books, records, and documents that
   7-19  relate to the business of the plan and may examine under oath its
   7-20  trustees or directors, officers, agents, and employees in relation
   7-21  to the affairs, transactions, and conditions of the multiple
   7-22  employer welfare arrangement.  Expenses of examination shall be
   7-23  paid by each multiple employer welfare arrangement as provided in
   7-24  Article 1.16 of this code.
   7-25        Art. 3.89.  DUTIES OF TRUSTEES OR DIRECTORS; COMPENSATION OF
   7-26  TRUSTEES, DIRECTORS, OR OFFICERS.  (a)  The trustees or directors
   7-27  of a  multiple employer welfare arrangement shall give the
   7-28  attention and exercise the vigilance, diligence, care, and skill
   7-29  that prudent persons use in like or similar circumstances.
   7-30  Trustees or directors shall be responsible for all operations of
   7-31  the multiple employer welfare arrangement and shall take all
   7-32  necessary precautions to safeguard the assets of the multiple
   7-33  employer welfare arrangement.  No trustee or director shall be held
   7-34  liable in a private cause of action for any delinquency under this
   7-35  article after six years from the date of delinquency or after two
   7-36  years from the time when the delinquency is discovered by a person
   7-37  complaining of the delinquency, whichever occurs sooner.
   7-38        (b)  The board of trustees or directors shall select such
   7-39  officers as designated in the articles or bylaws or trust agreement
   7-40  and may appoint agents as deemed necessary for the transaction of
   7-41  the business of the multiple employer welfare arrangement.  All
   7-42  officers and agents shall respectively have such authority and
   7-43  perform such duties in the management of the property and affairs
   7-44  of the multiple employer welfare arrangement as may be delegated by
   7-45  the board of trustees or directors.  Any officer or agent may be
   7-46  removed by the board of trustees or directors whenever in their
   7-47  judgment the business interests of the multiple employer welfare
   7-48  arrangement will be served by the removal.  The board of trustees
   7-49  or directors shall secure the fidelity of any or of all such
   7-50  officers or agents who handle the funds of the multiple employer
   7-51  welfare arrangement by bond or otherwise.
   7-52        (c)  Trustees or directors shall serve without compensation
   7-53  from the multiple employer welfare arrangement except for actual
   7-54  and necessary expenses.   A multiple employer welfare arrangement
   7-55  shall not pay any salary, compensation, or emolument to any officer
   7-56  of the multiple employer welfare arrangement unless the payment is
   7-57  first authorized by a majority vote of the board of trustees or
   7-58  directors of the multiple employer welfare arrangement.
   7-59        (d)  An officer, employee, or agent of a multiple employer
   7-60  welfare arrangement shall not be compensated unreasonably.  The
   7-61  compensation of any officer or employee of a multiple employer
   7-62  welfare arrangement shall not be calculated directly or indirectly
   7-63  as a percentage of money or premium collected.  The compensation of
   7-64  any agent shall not exceed five percent of the money or premium
   7-65  collected.
   7-66        Art. 3.90.  RECEIPT OF THING OF VALUE BY OFFICER, TRUSTEE,
   7-67  DIRECTOR, OR EMPLOYEE; PENALTY.  (a)  An officer, trustee,
   7-68  director, or employee of a multiple employer welfare arrangement
   7-69  shall not knowingly and intentionally, directly or indirectly,
   7-70  receive any money or valuable thing for negotiating, procuring,
    8-1  recommending, or aiding in any purchase by or sale to the multiple
    8-2  employer welfare arrangement of any property or any loan from the
    8-3  multiple employer welfare arrangement or be pecuniarily interested
    8-4  either as principal, coprincipal, agent, or beneficiary in any such
    8-5  purchase, sale, or loan.
    8-6        (b)  A person who violates this article is guilty of an
    8-7  offense.  An offense under this section is a felony of the third
    8-8  degree.
    8-9        Art. 3.91.  WRITTEN NOTICE TO EMPLOYEES COVERED.  A multiple
   8-10  employer welfare arrangement, in connection with an employee
   8-11  welfare benefit plan, shall provide to each participating employee
   8-12  covered by the plan the following written notice at the time his or
   8-13  her coverage becomes effective:
   8-14              (1)  that individuals covered by the plan are only
   8-15  partially insured; and
   8-16              (2)  that in the event the plan or the multiple
   8-17  employer welfare arrangement does not ultimately pay medical
   8-18  expenses that are eligible for payment under the plan for any
   8-19  reason, the participating employer or its participating employee
   8-20  covered by the plan may be liable for those expenses.
   8-21        Art. 3.92.  APPLICABILITY OF OTHER STATUTES.  A multiple
   8-22  employer welfare arrangement shall be exempt from the operation of
   8-23  all insurance laws of this state, except such laws as are made
   8-24  applicable by their specific terms or as specified in this
   8-25  subchapter.  Multiple employer welfare arrangements shall be
   8-26  subject to Articles 1.04, 1.10A, 1.10B, 1.10C, 1.10D, 1.12, 1.13,
   8-27  1.14, 1.14A, 1.15, 1.16, 1.19, 1.19-1, 1.24, 1.28, 1.29, 1.31,
   8-28  1.35, 1.36, 3.55, 3.56, 3.56-1, 3.67, 21.21, 21.28, 21.28-A, and
   8-29  21.28-E and Section 7 of Article 1.10 of this code.  A multiple
   8-30  employer welfare arrangement will be considered an insurer for
   8-31  purposes of these sections only.
   8-32        Art. 3.93.  SUSPENSION, REVOCATION, OR LIMITATION OF
   8-33  CERTIFICATE OF AUTHORITY:  OTHER REMEDIES.  (a)  In addition to any
   8-34  requirements or remedies set out in Article 3.92 of this code, the
   8-35  commissioner may suspend, revoke, or limit the certificate of
   8-36  authority of a multiple employer welfare arrangement if the
   8-37  commissioner finds, after motion and hearing, that the multiple
   8-38  employer welfare agreement does not meet the requirements of this
   8-39  subchapter.
   8-40        (b)  The commissioner may notify the attorney general of a
   8-41  violation of this subchapter, and the attorney general may apply to
   8-42  a district court in Travis County for leave to file suit in the
   8-43  nature of quo warranto or for injunctive relief or both.  The
   8-44  attorney general may seek and the court may order restitution for
   8-45  victims of an act declared to be unlawful under this subchapter, a
   8-46  fine under this code, and recovery of reasonable attorney's fees.
   8-47        Art. 3.94.  PROCEEDINGS BEFORE THE BOARD OF INSURANCE.
   8-48  (a)  The board may, on notice and opportunity for all interested
   8-49  persons to be heard, issue such rules, regulations, and orders as
   8-50  are reasonably necessary to augment and carry out the provisions of
   8-51  this subchapter.
   8-52        (b)  A person affected by a final ruling or action of the
   8-53  commissioner under this subchapter is entitled to have that ruling
   8-54  or action reviewed by the board by submitting an application to the
   8-55  board as provided by Subsection (d) of Article 1.04 of this code.
   8-56  Appeal of the commissioner's ruling or action to the board does not
   8-57  operate as a stay of the ruling or action except as otherwise
   8-58  ordered by the board on application by the appellant.
   8-59        (c)  A person affected by the board's order may appeal that
   8-60  order by filing suit in a district court in Travis County pursuant
   8-61  to Subsection (f) of Article 1.04 of this code.
   8-62        SECTION 2.  This Act does not exempt a multiple employer
   8-63  welfare arrangement from any other license requirement imposed
   8-64  under local, state, or federal law.
   8-65        SECTION 3.  (a)  Except as provided by Subsection (b) of this
   8-66  section, this Act takes effect September 1, 1993.
   8-67        (b)  An entity in existence on June 1, 1993, that is required
   8-68  to hold a certificate of authority under this Act shall not be
   8-69  prosecuted for engaging in the unauthorized business of insurance
   8-70  if it timely files notice and applies for an initial and a final
    9-1  certificate of authority unless either is finally denied.  If an
    9-2  existing multiple employer welfare arrangement timely files notice
    9-3  and applies for an initial and a final certificate of authority,
    9-4  the fact that such multiple employer welfare arrangement engaged in
    9-5  the business of insurance in this state prior to the effective date
    9-6  of this Act shall not provide a basis for denial of a certificate
    9-7  of authority.
    9-8        SECTION 4.  The importance of this legislation and the
    9-9  crowded condition of the calendars in both houses create an
   9-10  emergency and an imperative public necessity that the
   9-11  constitutional rule requiring bills to be read on three several
   9-12  days in each house be suspended, and this rule is hereby suspended.
   9-13                               * * * * *
   9-14                                                         Austin,
   9-15  Texas
   9-16                                                         May 22, 1993
   9-17  Hon. Bob Bullock
   9-18  President of the Senate
   9-19  Sir:
   9-20  We, your Committee on Economic Development to which was referred
   9-21  H.B. No. 1540, have had the same under consideration, and I am
   9-22  instructed to report it back to the Senate with the recommendation
   9-23  that it do not pass, but that the Committee Substitute adopted in
   9-24  lieu thereof do pass and be printed.
   9-25                                                         Parker,
   9-26  Chairman
   9-27                               * * * * *
   9-28                               WITNESSES
   9-29                                                  FOR   AGAINST  ON
   9-30  ___________________________________________________________________
   9-31  Name:  Jim Warren                                x
   9-32  Representing:  Printing Industries Assn (TX)
   9-33  City:  Austin
   9-34  -------------------------------------------------------------------
   9-35  Name:  Jimmy Cathey                              x
   9-36  Representing:  Printing Industries Assn (TX)
   9-37  City:  Dallas
   9-38  -------------------------------------------------------------------
   9-39  Name:  Geoffrey Winzl                            x
   9-40  Representing:  Self
   9-41  City:  Austin
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   9-43  Name:  Everette Jobe                                           x
   9-44  Representing:  Attorney General's Office
   9-45  City:  Austin
   9-46  -------------------------------------------------------------------
   9-47  Name:  Burnie Burner                                     x
   9-48  Representing:  Various Clients
   9-49  City:  Austin
   9-50  -------------------------------------------------------------------