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 9-42 ------------------------------------------------------------------- 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 -------------------------------------------------------------------