By: Parker S.B. No. 1066
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the regulation of multiple employer welfare
1-2 arrangements; creating offenses and providing civil and criminal
1-3 penalties; providing for fees.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Chapter 3, Insurance Code, is amended by adding
1-6 Subchapter H to read as follows:
1-7 SUBCHAPTER H. MULTIPLE EMPLOYER WELFARE ARRANGEMENTS
1-8 Art. 3.80. DEFINITIONS. In this subchapter:
1-9 (1) "Association" means the Multiple Employer Welfare
1-10 Arrangement Guaranty Association.
1-11 (2) "Board" means the State Board of Insurance.
1-12 (3) "Cash reserves" means federally guaranteed or
1-13 insured obligations of less than five-year maturity that have a
1-14 fixed recoverable principal amount, an irrevocable and
1-15 unconditional letter of credit, or a combination thereof.
1-16 (4) "Commissioner" means the commissioner of
1-17 insurance.
1-18 (5) "Covered claim" means an obligation of an
1-19 insolvent multiple employer welfare arrangement to pay a claim that
1-20 is covered by the multiple employer welfare arrangement to a
1-21 covered employee or dependent who is a resident of this state.
1-22 (6) "Employee welfare benefit plan" has the meaning
1-23 assigned by Section 3(1) of the Employee Retirement Income Security
2-1 Act of 1974 (29 U.S.C. Section 1002(1)).
2-2 (7) "Fully insured multiple employer welfare
2-3 arrangement" means a multiple employer welfare arrangement that
2-4 solely provides benefits to its participants for which 100 percent
2-5 of the liability has been assumed by an insurance company
2-6 authorized to do business in this state and that has obtained a
2-7 written determination confirming that it is fully insured from
2-8 either the United States Secretary of Labor making a determination
2-9 as provided in Section 514(b)(6)(D) of the Employee Retirement
2-10 Income Security Act of 1974 (29 U.S.C. Section 1144(6)(D)) or the
2-11 commissioner pursuant to Article 3.81 of this code.
2-12 (8) "Letter of credit" means a letter of credit that
2-13 is issued by a federally insured financial institution in a form
2-14 and on terms approved by the commissioner that is subject to draw
2-15 by the commissioner on giving five business days' written notice to
2-16 the multiple employer welfare arrangement, or to draw by the
2-17 multiple employer welfare arrangement for the benefit of its
2-18 subscribers if the multiple employer welfare arrangement is unable
2-19 to pay claims as they come due.
2-20 (9) "Multiple employer welfare arrangement" has the
2-21 meaning assigned by Section 3(40) of the Employee Retirement Income
2-22 Security Act of 1974 (29 U.S.C. Section 1002(40)) to describe an
2-23 entity which meets either or both of the following criteria:
2-24 (A) one or more of the employer members in the
2-25 multiple employer welfare arrangement is either domiciled in this
3-1 state or has its principal headquarters or principal administrative
3-2 office in this state;
3-3 (B) the multiple employer welfare arrangement
3-4 solicits an employer that is domiciled in this state or has its
3-5 principal headquarters or principal administrative office in this
3-6 state.
3-7 Art. 3.81. CERTIFICATE OF AUTHORITY. (a) A person shall
3-8 not establish or maintain an employee welfare benefit plan which is
3-9 a multiple employer welfare arrangement in this state unless the
3-10 multiple employer welfare arrangement obtains and maintains a
3-11 certificate of authority pursuant to this subchapter. This
3-12 subchapter shall not apply to a fully insured multiple employer
3-13 welfare arrangement for so long as such multiple employer welfare
3-14 arrangement remains fully insured. On request of the commissioner,
3-15 a multiple employer welfare arrangement claiming to be fully
3-16 insured shall either furnish to the commissioner the written
3-17 determination of its status by the United States Secretary of Labor
3-18 or seek a written determination of its status by the commissioner
3-19 by providing to the commissioner information sufficient to
3-20 demonstrate its fully insured status and entitlement to the
3-21 exemption from application of this subchapter.
3-22 (b) A person wishing to establish an employee welfare
3-23 benefit plan which is a multiple employer welfare arrangement shall
3-24 apply for an initial certificate of authority on a form prescribed
3-25 by the commissioner. The application shall be completed and
4-1 submitted along with all information required by the commissioner,
4-2 including:
4-3 (1) copies of all articles, bylaws, agreements, or
4-4 other documents or instruments describing the rights and
4-5 obligations of employers, employees, and beneficiaries with respect
4-6 to the multiple employer welfare arrangement;
4-7 (2) current financial statements of the multiple
4-8 employer welfare arrangement;
4-9 (3) proof of a fidelity bond in a form and amount
4-10 approved by the commissioner; and
4-11 (4) a statement showing in full detail the plan upon
4-12 which the multiple employer welfare arrangement proposes to
4-13 transact business, a copy of all contracts or other instruments
4-14 which it proposes to make with or sell to its members, together
4-15 with a copy of its plan description and the proposed printed matter
4-16 to be used in the solicitation of members.
4-17 (c) The commissioner shall promptly examine the application
4-18 and documents submitted by the applicant and shall have the power
4-19 to conduct any investigation which the commissioner may deem
4-20 necessary and to examine under oath any persons interested in or
4-21 connected with the multiple employer welfare arrangement.
4-22 (d) The commissioner shall not issue the initial certificate
4-23 of authority, which shall be a temporary certificate for a term of
4-24 one year, to a multiple employer welfare arrangement unless all of
4-25 the following conditions have been met:
5-1 (1) the commissioner is satisfied that:
5-2 (A) the employers in the multiple employer
5-3 welfare arrangement are members of an association or group of five
5-4 or more businesses which are in the same trade or industry,
5-5 including closely related businesses which provide support,
5-6 services, or supplies primarily to that trade or industry; a group
5-7 of employee leasing companies is not considered to be in the same
5-8 trade or industry for purposes of this article;
5-9 (B) the association or group of employers in the
5-10 multiple employer welfare arrangement is engaged in substantial
5-11 activity for its members other than sponsorship of an employee
5-12 welfare benefit plan;
5-13 (C) the association or group of employers in the
5-14 multiple employer welfare arrangement has been in existence for a
5-15 period of not less than two years prior to engaging in any
5-16 activities relating to the provision of employee health benefits to
5-17 its members;
5-18 (D) the employee welfare plan of the association
5-19 or group in the multiple employer welfare arrangement is controlled
5-20 and sponsored directly by participating employers, employee
5-21 members, or both;
5-22 (E) the association or group of employers in the
5-23 multiple employer welfare arrangement is a not-for-profit
5-24 organization;
5-25 (F) the multiple employer welfare arrangement
6-1 has within its own organization adequate facilities and competent
6-2 personnel, as determined by the commissioner, to service the
6-3 employee benefit plan or has contracted with a third party
6-4 administrator licensed to engage in business in this state to
6-5 provide such services that has delivered a fidelity bond in an
6-6 amount approved by the commissioner to the multiple employer
6-7 welfare arrangement to protect against the misappropriation or
6-8 misuse of any money handled by the third party administrator;
6-9 (G) the multiple employer welfare arrangement
6-10 has applications from not less than five employers and will provide
6-11 similar benefits for not less than 200 separate participating
6-12 employees, and the annual gross premiums of or contributions to the
6-13 plan will be not less than $20,000 for a plan that provides only
6-14 vision benefits, $75,000 for a plan that provides only dental
6-15 benefits, and $200,000 for all other plans;
6-16 (H) the multiple employer welfare arrangement,
6-17 each of its trustees and officers, and any agent or other person
6-18 associated with the multiple employer welfare arrangement, other
6-19 than a participating employer in its capacity as such and its
6-20 participating employees, shall be subject to disqualification if
6-21 the person:
6-22 (i) made a material misstatement or
6-23 omission in an application for a certificate of authority under
6-24 this subchapter;
6-25 (ii) obtained or attempted to obtain at
7-1 anytime a certificate of authority or license for an insurance
7-2 entity through intentional misrepresentation or fraud;
7-3 (iii) misappropriated or converted to the
7-4 person's own use or improperly withheld money under an employee
7-5 welfare benefit plan or multiple employer welfare arrangement;
7-6 (iv) is prohibited from serving in any
7-7 capacity with the multiple employer welfare arrangement under
7-8 Section 411 of the Employee Retirement Income Security Act of 1974
7-9 (29 U.S.C. Section 1111);
7-10 (v) without reasonable cause or excuse
7-11 failed to appear in response to a subpoena, examination, warrant,
7-12 or any other order lawfully issued;
7-13 (vi) has previously been subject to a
7-14 determination by the commissioner resulting in the suspension or
7-15 revocation of a certificate of authority or license or denial of a
7-16 certificate of authority or license on grounds that would be
7-17 sufficient for suspension or revocation; or
7-18 (vii) has violated any rule or regulation
7-19 promulgated by the commissioner or the board that the commissioner
7-20 deems sufficient to merit disqualification or has violated any law
7-21 relating to insurance, banking, or securities fraud or has been
7-22 subjected in any state or under federal law to revocation of
7-23 license to engage in the business of insurance, banking, or
7-24 securities;
7-25 (2) the multiple employer welfare arrangement
8-1 possesses a written commitment, binder, or policy for excess loss
8-2 insurance issued by an insurer authorized to do business in this
8-3 state in an amount approved by the commissioner which provides not
8-4 less than 30 days' notice of cancellation to the commissioner;
8-5 (3) the multiple employer welfare arrangement has
8-6 established, to the satisfaction of the commissioner, a procedure
8-7 for handling claims for benefits in the event of dissolution of the
8-8 multiple employer welfare arrangement; and
8-9 (4) the multiple employer welfare arrangement has
8-10 delivered such bond, deposit, or security for the protection of
8-11 subscribers to the commissioner as the commissioner may reasonably
8-12 require.
8-13 (e) The multiple employer welfare arrangement, on receipt of
8-14 its initial certificate of authority, shall proceed to the
8-15 completion of its organization. A multiple employer welfare
8-16 arrangement shall open its books to the commissioner, and a final
8-17 certificate of authority shall not be issued by the commissioner to
8-18 any multiple employer welfare arrangement until it has collected
8-19 cash reserves and surplus as provided in Article 3.87 of this code.
8-20 (f) A multiple employer welfare arrangement in existence on
8-21 September 1, 1993, or possessing an initial certificate of
8-22 authority shall apply for a final certificate of authority when it
8-23 has collected cash reserves and surplus as provided in Article 3.87
8-24 of this code. A multiple employer welfare arrangement in existence
8-25 on September 1, 1993, may apply for a final certificate of
9-1 authority without applying for an initial certificate of authority
9-2 if it applies prior to March 1, 1994. A multiple employer welfare
9-3 arrangement possessing an initial certificate of authority must
9-4 apply for a final certificate of authority no later than one year
9-5 after issuance of its initial certificate of authority. The
9-6 multiple employer welfare arrangement shall file an application on
9-7 a form prescribed by the commissioner and furnish such information
9-8 as may be required by the commissioner. The application shall
9-9 include:
9-10 (1) the names and addresses of:
9-11 (A) the association or group of employers
9-12 sponsoring the multiple employer welfare arrangement;
9-13 (B) the members of the board of trustees of the
9-14 multiple employer welfare arrangement;
9-15 (C) the participating employers; and
9-16 (D) all participants and beneficiaries in the
9-17 multiple employer welfare arrangement;
9-18 (2) evidence that the bonding requirements of the
9-19 commissioner have been met;
9-20 (3) copies of all plan documents and agreements with
9-21 service providers not previously furnished to the commissioner
9-22 under Subsection (b) of this article; and
9-23 (4) a funding report containing:
9-24 (A) a statement certified by the board of
9-25 trustees and a statement of actuarial opinion signed by a qualified
10-1 actuary that all applicable requirements of Article 3.87 of this
10-2 code have been met;
10-3 (B) a statement of actuarial opinion signed by a
10-4 qualified actuary which sets forth a description of the extent to
10-5 which contribution or premium rates:
10-6 (i) are not excessive;
10-7 (ii) are not unfairly discriminatory; and
10-8 (iii) are adequate to provide for the
10-9 payment of all obligations and the maintenance of required cash
10-10 reserves and surplus by the multiple employer welfare arrangement;
10-11 (C) a statement of the current value of the
10-12 assets and liabilities accumulated by the multiple employer welfare
10-13 arrangement and a projection of the assets, liabilities, income,
10-14 and expenses of the multiple employer welfare arrangement for the
10-15 next 12-month period; and
10-16 (D) a statement of the costs of coverage to be
10-17 charged, including an itemization of amounts for administration,
10-18 reserves, and other expenses associated with operation of the
10-19 multiple employer welfare arrangement.
10-20 (g) After examination and investigation, the commissioner
10-21 shall issue a final certificate of authority to the multiple
10-22 employer welfare arrangement if the commissioner is satisfied that
10-23 the multiple employer welfare arrangement is in a stable and
10-24 unimpaired financial condition and is qualified to maintain an
10-25 employee welfare benefit plan in compliance with this subchapter.
11-1 The commissioner shall refuse to grant a final certificate of
11-2 authority to an applicant who fails to meet the requirements of
11-3 this subchapter. Notice of refusal shall be in writing, shall set
11-4 forth the basis for the refusal, and shall also constitute 30 days'
11-5 advance notice of revocation of the initial certificate of
11-6 authority. The initial certificate of authority may be extended
11-7 for up to one year at the discretion of the commissioner on a
11-8 determination that the multiple employer welfare arrangement is
11-9 likely to meet the requirements of this subchapter within one year.
11-10 No more than one extension of the initial certificate of authority
11-11 shall be granted regardless of the length of time for which an
11-12 extension was granted.
11-13 (h) If the applicant submits a written request for hearing
11-14 within 30 days after mailing of the notice of refusal, revocation
11-15 of the initial certificate of authority shall be temporarily stayed
11-16 and the commissioner shall promptly conduct a hearing in which the
11-17 applicant shall be given an opportunity to show compliance with the
11-18 requirements of this subchapter.
11-19 Art. 3.82. FEES. (a) The commissioner shall collect and
11-20 the multiple employer welfare arrangement shall pay fees to the
11-21 commissioner as set by the commissioner not to exceed the
11-22 following:
11-23 (1) application for initial certificate of
11-24 authority ................................................. $1,000
11-25 (2) application for final certificate of
12-1 authority ................................................. $1,000
12-2 (3) issuance of a certificate of authority ... $ 500
12-3 (4) filing fee for annual statement .......... $ 250
12-4 (b) To the extent not inconsistent with the provisions of
12-5 this subchapter, the board shall collect and the multiple employer
12-6 welfare arrangement shall pay fees to the board as set pursuant to
12-7 Articles 3.42 and 4.07 of this code.
12-8 (c) Each multiple employer welfare arrangement shall appoint
12-9 the commissioner as its resident agent for purposes of service of
12-10 process. The fee for such service shall be $50, payable at the
12-11 time of appointment.
12-12 (d) Fees paid under this article shall be deposited in the
12-13 state treasury to the credit of the State Board of Insurance
12-14 operating fund.
12-15 Art. 3.83. BENEFITS ALLOWED; POLICIES AND PREMIUMS;
12-16 MAINTENANCE OF SURPLUS AND CASH RESERVES. (a) A multiple employer
12-17 welfare arrangement authorized under this subchapter shall be
12-18 limited to providing the following:
12-19 (1) medical, dental, optical, surgical, or hospital
12-20 care;
12-21 (2) benefits in the event of sickness, accident,
12-22 disability, or death; and
12-23 (3) prepaid legal services.
12-24 (b) A multiple employer welfare arrangement may only provide
12-25 benefits to active or retired owners, officers, directors, or
13-1 employees of or partners in participating employers, or the
13-2 beneficiaries of such persons, except as may otherwise be limited
13-3 by provisions of the Employee Retirement Income Security Act of
13-4 1974 (29 U.S.C. Section 1001 et seq.).
13-5 (c) A multiple employer welfare arrangement may not provide
13-6 workers' compensation insurance under the laws of this state.
13-7 (d) The policies issued by the multiple employer welfare
13-8 arrangement shall provide for a premium or premium deposit payable
13-9 in cash by a participating employer and, except as herein provided,
13-10 for a contingent premium at least equal to one month's premium or
13-11 premium deposit, which may be refunded, and in no event shall a
13-12 member be liable for a greater amount than the premium or premium
13-13 deposit expressed in the policy.
13-14 (e) The multiple employer welfare arrangement may issue its
13-15 policy without a contingent premium when it has cash reserves and
13-16 surplus as provided in Article 3.87 of this code.
13-17 (f) If at any time its cash reserves and surplus are less
13-18 than the requirements of Article 3.87 of this code, the multiple
13-19 employer welfare arrangement shall immediately collect from
13-20 policies with a contingent premium a sufficient proportionate part
13-21 of the contingent premium to restore the cash reserves and surplus
13-22 to minimum balance, provided that no participating employer shall
13-23 be liable for any part of the contingent premium provided in its
13-24 policy in excess of the amount demanded after the expiration of one
13-25 year after the termination of the policy. The commissioner, in the
14-1 exercise of his or her discretion, may by written order direct that
14-2 proceedings to restore the reserves and surplus be deferred during
14-3 the time fixed in the order, if to do so would be in the best
14-4 interests of the participating employees and their beneficiaries.
14-5 Art. 3.84. NAME; EVIDENCE OF EXISTENCE. No multiple
14-6 employer welfare arrangement authorized under this subchapter shall
14-7 take any name which is the same as or closely resembles the name of
14-8 any other multiple employer welfare arrangement possessing a
14-9 certificate of authority and doing business in this state. A
14-10 multiple employer welfare arrangement shall transact its business
14-11 under its own name and shall not adopt any assumed name, except
14-12 that a multiple employer welfare arrangement by amending its
14-13 articles may change its name or take a new name with the approval
14-14 of the commissioner. Whenever it shall be necessary in any legal
14-15 proceedings to prove the existence of a multiple employer welfare
14-16 arrangement, a certified copy of the multiple employer welfare
14-17 arrangement's certificate of authority shall be prima facie
14-18 evidence of the existence of the multiple employer welfare
14-19 arrangement.
14-20 Art. 3.85. POWERS OF MULTIPLE EMPLOYER WELFARE ARRANGEMENTS.
14-21 Every multiple employer welfare arrangement, unless otherwise
14-22 provided in or inconsistent with this subchapter, shall have power:
14-23 (1) to have succession, by its name, for the term
14-24 stated in its trust agreement;
14-25 (2) to sue and be sued, complain and defend, in any
15-1 court of law or equity or to be a party to any proceedings before
15-2 any board or commission or other public body of this state or of
15-3 any other state or government; suits at law may be maintained by
15-4 the multiple employer welfare arrangement against any of its
15-5 members for any cause relating to the business of the multiple
15-6 employer welfare arrangement;
15-7 (3) to have a seal which may be altered at pleasure
15-8 and to use the seal by causing it or a facsimile of it to be
15-9 impressed, affixed, or otherwise reproduced;
15-10 (4) to appoint such officers and agents as the
15-11 business of the multiple employer welfare arrangement shall require
15-12 and to allow them suitable compensation;
15-13 (5) to make, alter, amend, and repeal bylaws for the
15-14 regulation and government of its affairs; and
15-15 (6) to conduct its business in this state, other
15-16 states, the District of Columbia, the territories and colonies of
15-17 the United States, and foreign countries and their territories and
15-18 colonies; to have one or more offices out of this state; and to
15-19 acquire, purchase, hold, mortgage, pledge, assign, transfer, and
15-20 convey real and personal property out of this state subject to the
15-21 provisions of this subchapter.
15-22 Art. 3.86. FILING OF ARTICLES; NOTICE OF MEETINGS, BOARD OF
15-23 TRUSTEES. (a) The articles, bylaws, and trust agreement of the
15-24 multiple employer welfare arrangement and all appurtenant
15-25 amendments shall be filed with and approved by the commissioner
16-1 before becoming operative. The trust agreement shall be filed on a
16-2 form prescribed by the commissioner.
16-3 (b) Each member employer of a multiple employer welfare
16-4 arrangement shall be given notice of every meeting of the members
16-5 and shall be entitled to an equal vote, either in person or by
16-6 proxy in writing by the member employer.
16-7 (c) The powers of a multiple employer welfare arrangement,
16-8 except as otherwise provided, shall be exercised by the board of
16-9 trustees chosen to carry out the purposes of the trust agreement.
16-10 Not less than 50 percent of the trustees shall be persons who are
16-11 covered under the multiple employer welfare arrangement, and no
16-12 trustee shall be an owner, officer, or employee of a third-party
16-13 administrator who provides services to the multiple employer
16-14 welfare arrangement or of any other person who has received
16-15 compensation from the multiple employer welfare arrangement.
16-16 Art. 3.87. FILINGS BY MULTIPLE EMPLOYER WELFARE
16-17 ARRANGEMENTS; REPORT OF CASH RESERVES AND SURPLUS; SEPARATE CASH
16-18 RESERVE ACCOUNTS. (a) Each multiple employer welfare arrangement
16-19 transacting business in this state shall file all of the following
16-20 with the commissioner on forms approved by the commissioner:
16-21 (1) within 90 days after the end of each fiscal year,
16-22 financial statements audited by a certified public accountant
16-23 including an actuarial opinion rendered by an actuary who is
16-24 approved by the commissioner or who has five or more years of
16-25 experience in the actuarial field regarding reserves for known
17-1 claims and associated expenses and incurred but not reported claims
17-2 and associated expenses, in accordance with the provisions of this
17-3 section;
17-4 (2) within 60 days after the end of each fiscal
17-5 quarter, unaudited financial statements affirmed by an appropriate
17-6 officer or agent of the multiple employer welfare arrangement;
17-7 (3) within 60 days after the end of each fiscal
17-8 quarter, a report certifying that the multiple employer welfare
17-9 arrangement maintains reserves that are sufficient to meet its
17-10 contractual obligations and that it maintains a policy for excess
17-11 loss insurance issued by an insurer authorized to do business in
17-12 this state; and
17-13 (4) within 90 days after the end of each fiscal year,
17-14 a schedule of premium contributions, rates, and renewal
17-15 projections.
17-16 (b) The commissioner after hearing shall establish general
17-17 standards for the manner and amount of the excess loss insurance
17-18 required by Subdivision (3) of Subsection (a) of this article. A
17-19 multiple employer welfare arrangement shall maintain minimum cash
17-20 reserves of not less than 25 percent of the aggregate contributions
17-21 in the current fiscal year or not less than 35 percent of the
17-22 claims paid in the preceding fiscal year, whichever is greater, and
17-23 surplus in an amount equal to the lesser of 300 percent of average
17-24 monthly contributions or premiums, calculated based on the
17-25 immediately preceding 12-month period or such shorter period as the
18-1 multiple employer welfare arrangement has been in existence, or 75
18-2 percent of the aggregate amount of capital and surplus required to
18-3 be maintained by a domestic insurance company authorized under
18-4 Chapter 3 of this code to transact business in this state writing
18-5 the same types of coverages offered by the multiple employer
18-6 welfare arrangement. Cash reserves shall be calculated with proper
18-7 actuarial regard for all of the following:
18-8 (1) known claims, paid and outstanding;
18-9 (2) a history of incurred but not reported claims;
18-10 (3) claims handling expenses;
18-11 (4) unearned premiums;
18-12 (5) an estimate for bad debts;
18-13 (6) a trend factor; and
18-14 (7) a margin for error.
18-15 (c) Cash reserves established pursuant to this article shall
18-16 be maintained in separate, identifiable accounts and shall not be
18-17 commingled with other funds of the multiple employer welfare
18-18 arrangement.
18-19 Art. 3.88. EXAMINATION OF MULTIPLE EMPLOYER WELFARE
18-20 ARRANGEMENTS. The commissioner, or any person appointed by the
18-21 commissioner, shall have the power to examine the affairs of any
18-22 multiple employer welfare arrangement, and for such purposes shall
18-23 have free access to all the books, records, and documents that
18-24 relate to the business of the plan and may examine under oath its
18-25 trustees, officers, agents, and employees in relation to the
19-1 affairs, transactions, and condition of the multiple employer
19-2 welfare arrangement. Expenses of examination shall be paid by each
19-3 multiple employer welfare arrangement as provided in Article 1.16
19-4 of this code.
19-5 Art. 3.89. DUTIES OF TRUSTEES; COMPENSATION OF TRUSTEES AND
19-6 OFFICERS. (a) The trustees of a multiple employer welfare
19-7 arrangement shall give the attention and exercise the vigilance,
19-8 diligence, care, and skill that prudent persons use in like or
19-9 similar circumstances. Trustees shall be responsible for all
19-10 operations of the multiple employer welfare arrangement and shall
19-11 take all necessary precautions to safeguard the assets of the
19-12 multiple employer welfare arrangement. No trustee shall be held
19-13 liable in a private cause of action for any delinquency under this
19-14 article after six years from the date of the delinquency or after
19-15 two years from the time when the delinquency is discovered by a
19-16 person complaining of the delinquency, whichever occurs sooner.
19-17 (b) The board of trustees shall select such officers as
19-18 designated in the articles or bylaws and may appoint agents as
19-19 deemed necessary for the transaction of the business of the
19-20 multiple employer welfare arrangement. All officers and agents
19-21 shall respectively have such authority and perform such duties in
19-22 the management of the property and affairs of the multiple employer
19-23 welfare arrangement as may be delegated by the board of trustees.
19-24 Any officer or agent may be removed by the board of trustees
19-25 whenever in their judgment the business interests of the multiple
20-1 employer welfare arrangement will be served by the removal. The
20-2 board of trustees shall secure the fidelity of any or of all such
20-3 officers or agents who handle the funds of the multiple employer
20-4 welfare arrangement by bond or otherwise.
20-5 (c) Trustees shall serve without compensation from the
20-6 multiple employer welfare arrangement except for actual and
20-7 necessary expenses. A multiple employer welfare arrangement shall
20-8 not pay any salary, compensation, or emolument to any officer of
20-9 the multiple employer welfare arrangement unless the payment is
20-10 first authorized by a majority vote of the board of trustees of the
20-11 multiple employer welfare arrangement.
20-12 (d) An officer, employee, or agent of a multiple employer
20-13 welfare arrangement shall not be compensated unreasonably. The
20-14 compensation of any officer, employee, or agent of a multiple
20-15 employer welfare arrangement shall not be calculated directly or
20-16 indirectly as a percentage of money or premiums collected without
20-17 the approval of the commissioner.
20-18 Art. 3.90. RECEIPT OF THING OF VALUE BY TRUSTEE OR OFFICER;
20-19 PENALTY. (a) A trustee or officer of a multiple employer welfare
20-20 arrangement shall not knowingly and intentionally, directly or
20-21 indirectly receive any money or valuable thing for negotiating,
20-22 procuring, recommending, or aiding in any purchase by or sale to
20-23 the multiple employer welfare arrangement of any property or any
20-24 loan from the multiple employer welfare arrangement or be
20-25 pecuniarily interested either as principal, coprincipal, agent, or
21-1 beneficiary in any such purchase, sale, or loan.
21-2 (b) A person who violates this article is guilty of an
21-3 offense. An offense under this section is a felony of the third
21-4 degree.
21-5 Art. 3.91. WRITTEN NOTICE TO INDIVIDUALS COVERED. A
21-6 multiple employer welfare arrangement, in connection with an
21-7 employee welfare benefit plan, shall provide to each individual
21-8 covered by the plan the following written notice:
21-9 (1) that individuals covered by the plan are only
21-10 partially insured; and
21-11 (2) that in the event the plan or the multiple
21-12 employer welfare arrangement does not ultimately pay medical
21-13 expenses that are eligible for payment under the plan for any
21-14 reason, the participating employer or its employee covered by the
21-15 plan may be liable for those expenses.
21-16 Art. 3.92. APPLICABILITY OF OTHER STATUTES. A multiple
21-17 employer welfare arrangement and its agents transacting business in
21-18 this state shall also be subject to other provisions of this code,
21-19 insofar as applicable and not inconsistent with the provisions of
21-20 this subchapter, in the same manner as an insurer authorized to
21-21 transact insurance in this state; provided, however, that the
21-22 following provisions of this code shall not apply to a multiple
21-23 employer welfare arrangement transacting business in this state
21-24 pursuant to a validly issued certificate of authority:
21-25 (1) Article 1.15A;
22-1 (2) Articles 2.02 and 2.20; and
22-2 (3) Articles 4.11 and 4.17.
22-3 Art. 3.93. SUSPENSION, REVOCATION, OR LIMITATION OF
22-4 CERTIFICATE OF AUTHORITY; OTHER REMEDIES. (a) The commissioner
22-5 may suspend, revoke, or limit the certificate of authority of a
22-6 multiple employer welfare arrangement if the commissioner
22-7 determines that any of the following conditions exists:
22-8 (1) the multiple employer welfare arrangement has
22-9 failed to maintain a policy for excess loss insurance as required
22-10 by Article 3.87 of this code;
22-11 (2) the multiple employer welfare arrangement is using
22-12 financial methods and practices in the conduct of its business
22-13 which render further transaction of business in this state
22-14 hazardous or injurious to its members, employees, or beneficiaries
22-15 or to the public;
22-16 (3) after written request by the commissioner, the
22-17 multiple employer welfare arrangement has failed to remove or
22-18 discharge an officer, director, trustee, or other employee who has
22-19 been convicted of any crime involving fraud, dishonesty, or moral
22-20 turpitude or who has otherwise become legally disqualified to serve
22-21 in that capacity;
22-22 (4) the multiple employer welfare arrangement has
22-23 failed or refused to furnish any report or statement or maintain
22-24 reserves and surplus required under Article 3.87 of this code;
22-25 (5) the multiple employer welfare arrangement has
23-1 failed for an unreasonable period to pay any final judgment
23-2 rendered against it in this state on any contractual obligation;
23-3 (6) the multiple employer welfare arrangement has
23-4 failed to notify promptly the commissioner of any material changes
23-5 in information required to be submitted with its application for an
23-6 initial certificate of authority or final certificate of authority;
23-7 or
23-8 (7) the commissioner, on investigation, determines
23-9 that the multiple employer welfare arrangement is conducting
23-10 business fraudulently or is not meeting its contractual obligations
23-11 in good faith.
23-12 (b) The commissioner may notify the attorney general of a
23-13 violation of this subchapter, and the attorney general may apply to
23-14 a district court in Travis County for leave to file suit in the
23-15 nature of quo warranto or for injunctive relief or both. The
23-16 attorney general may seek and the court may order restitution for
23-17 victims of an act declared to be unlawful under this subchapter, a
23-18 fine under Article 3.94 of this code, and recovery of reasonable
23-19 attorney fees.
23-20 (c) It shall be in the discretion of the commissioner to
23-21 determine at any time whether or not to seek suspension,
23-22 revocation, or limitation of a certificate of authority, issue a
23-23 cease and desist order under this subchapter or any other
23-24 applicable law, place a multiple employer welfare arrangement under
23-25 supervision or appoint a conservator for a multiple employer
24-1 welfare arrangement, or pursue any other available legal remedy
24-2 including but not limited to seeking appointment of a receiver
24-3 pursuant to Article 21.28 of this code.
24-4 Art. 3.94. VIOLATIONS; COMMISSIONER'S POWERS AND DUTIES.
24-5 (a) If, after a hearing, the commissioner determines that a
24-6 multiple employer welfare arrangement is violating or has violated
24-7 a provision of this subchapter, the commissioner shall reduce his
24-8 or her findings and decision to writing and shall issue and cause
24-9 to be served on the multiple employer welfare arrangement a copy of
24-10 the findings and an order requiring the multiple employer welfare
24-11 arrangement to cease and desist from engaging in the prohibited
24-12 activity. The commissioner may also order any of the following:
24-13 (1) payment of a monetary penalty in an amount not to
24-14 exceed $1,000 for each violation and not to exceed an aggregate
24-15 penalty of $10,000 unless the multiple employer welfare arrangement
24-16 knew or reasonably should have known it was in violation of this
24-17 subchapter, in which case the penalty shall not exceed $10,000 for
24-18 each violation and shall not exceed an aggregate penalty of $50,000
24-19 for all violations committed in a six-month period;
24-20 (2) suspension or revocation of the multiple employer
24-21 welfare arrangement's certificate of authority if the multiple
24-22 employer welfare arrangement knowingly violated a provision of this
24-23 subchapter; or
24-24 (3) restitution or refund to an aggrieved person.
24-25 (b) If the commissioner reasonably believes that a multiple
25-1 employer welfare arrangement has directly or indirectly violated a
25-2 cease and desist order, the commissioner in his or her discretion
25-3 may initiate administrative penalty proceedings under this article,
25-4 refer the matter to the attorney general for enforcement, initiate
25-5 proceedings to revoke the multiple employer welfare arrangement's
25-6 certificate of authority, or pursue any other action the
25-7 commissioner deems appropriate under applicable law.
25-8 (c) If a multiple employer welfare arrangement violates a
25-9 cease and desist order under this subchapter and has been given
25-10 notice and an opportunity for a hearing, the commissioner may order
25-11 a civil fine of not more than $10,000 for each violation,
25-12 suspension or revocation of the multiple employer welfare
25-13 arrangement's certificate of authority, or both the fine and
25-14 suspension or revocation.
25-15 (d) All proceedings or hearings before the commissioner
25-16 provided for under this subchapter shall be conducted pursuant to
25-17 the Administrative Procedure and Texas Register Act (Article
25-18 6252-13a, Vernon's Texas Civil Statutes).
25-19 Art. 3.95. PROCEEDINGS BEFORE THE BOARD OF INSURANCE.
25-20 (a) The board may, upon notice and opportunity for all interested
25-21 persons to be heard, issue such rules, regulations, and orders as
25-22 are reasonably necessary to augment and carry out the provisions of
25-23 this subchapter.
25-24 (b) A person affected by a final ruling or action of the
25-25 commissioner under this subchapter is entitled to have that ruling
26-1 or action reviewed by the board by submitting an application to
26-2 the board as provided by Subsection (d) of Article 1.04 of this
26-3 code. Appeal of the commissioner's ruling or action to the board
26-4 does not operate as a stay of the ruling or action except as
26-5 otherwise ordered by the board upon application by the appellant.
26-6 (c) A person affected by the board's order may appeal that
26-7 order by filing suit in a district court in Travis County pursuant
26-8 to Subsection (f) of Article 1.04 of this code. The commissioner
26-9 may recover attorney fees if judicial action is necessary for
26-10 enforcement of the commissioner's order after the order has been
26-11 upheld by the court or if the commissioner must initiate an
26-12 enforcement action.
26-13 Art. 3.96. MULTIPLE EMPLOYER WELFARE ARRANGEMENT GUARANTY
26-14 ASSOCIATION. (a) A Multiple Employer Welfare Arrangement Guaranty
26-15 Association is hereby created within the Texas Department of
26-16 Insurance. The association shall be administered by a board of
26-17 trustees and shall be used solely to pay and discharge covered
26-18 claims against insolvent multiple employer welfare arrangements
26-19 authorized to do business in this state. The association shall
26-20 secure legal advice and be represented by the office of the
26-21 attorney general in any matter involving the affairs of the
26-22 association.
26-23 (b) The board of trustees of the association shall consist
26-24 of five members. The attorney general and the public insurance
26-25 counsel or their designees shall be ex officio members and the
27-1 remaining three members shall be representatives of authorized
27-2 multiple employer welfare arrangements, who shall be appointed by
27-3 the governor with the advice and consent of the senate. The
27-4 appointive members shall serve terms of four years and shall serve
27-5 without compensation, except for actual and necessary expenses.
27-6 (c) If a multiple employer welfare arrangement becomes
27-7 insolvent and is placed in a state of supervision or under the
27-8 control of a conservator or receiver and if the commissioner by
27-9 written order declares such multiple employer welfare arrangement
27-10 to be impaired, the association shall appoint a person to act as
27-11 the association administrator, who may but is not required to be an
27-12 employee of the Texas Department of Insurance. The association
27-13 administrator, acting through majority vote of its board of
27-14 trustees, shall:
27-15 (1) supervise disbursements for covered claims of the
27-16 insolvent multiple employer welfare arrangement through cooperation
27-17 with the conservator or receiver of the insolvent multiple employer
27-18 welfare arrangement;
27-19 (2) request payments from the association for covered
27-20 claims; and
27-21 (3) perform such other duties as are designated by the
27-22 association.
27-23 (d)(1) The association, acting through majority vote of its
27-24 board of trustees, may authorize payments from the association for
27-25 covered claims upon request to the association administrator by the
28-1 conservator or receiver, acting in behalf of an employee or
28-2 dependent who is a Texas resident and who is receiving or is
28-3 entitled to receive benefits from an insolvent multiple employer
28-4 welfare arrangement that is unable to continue paying benefits.
28-5 (2) The association shall perform investigations of
28-6 alleged covered claims that it deems to be necessary, proper, and
28-7 cost-effective; promulgate rules it deems necessary to carry out
28-8 the purposes of the association; and maintain records, institute
28-9 systems and procedures, and take any other administrative action it
28-10 deems necessary to carry out the purposes of the association.
28-11 (e) All expenses authorized by the board for the proper
28-12 administration of the association including but not limited to the
28-13 salary and expenses of any association administrator, the
28-14 investigation, determination, and defense of claims against the
28-15 association, and the attorney fees of and court costs incurred by
28-16 the attorney general shall be borne by and paid from the assets of
28-17 the association. The association shall contract with the attorney
28-18 general under Chapter 771, Government Code (Interagency Cooperation
28-19 Act), to provide legal services. All expenses incurred and charged
28-20 to the association shall be accounted for on a fiscal year basis,
28-21 and the association shall be subject to audit by the state auditor.
28-22 (f) To the extent necessary for payment of covered claims
28-23 and for payments of reasonable costs of administering the
28-24 association, the commissioner shall assess upon and collect from
28-25 each multiple employer welfare arrangement an amount which is in
29-1 the proportion that the benefits the multiple employer welfare
29-2 arrangement paid to Texas employees and their dependents in the
29-3 preceding calendar year bears to the total benefits paid by all
29-4 authorized multiple employer welfare arrangements to Texas
29-5 employees and dependents in the preceding calendar year. The
29-6 commissioner, on the advice of the association may make additional
29-7 assessments as the association considers necessary to keep the
29-8 association solvent. The total assessment under this article shall
29-9 not exceed two percent of benefits the multiple employer welfare
29-10 arrangement paid on behalf of Texas employees and their dependents
29-11 in any calendar year. Except for initial, nominal assessments
29-12 sufficient to fund the administration of the association,
29-13 assessments shall not be collected until a multiple employer
29-14 welfare arrangement's insolvency necessitates a payment from the
29-15 association.
29-16 (g) Notice of the assessments shall be sent by the
29-17 commissioner by registered mail to each multiple employer welfare
29-18 arrangement. Payment of assessments shall be made so as to be
29-19 received in the office of the commissioner on or before a date
29-20 specified uniformly in the notice but not less than 90 days after
29-21 the date of mailing.
29-22 (h) Assessments under this article shall constitute elements
29-23 of loss for the purpose of establishing rates.
29-24 (i) If an employer ceases to participate in a multiple
29-25 employer welfare arrangement, the employer shall continue to be
30-1 liable to the multiple employer welfare arrangement for the
30-2 association assessment for any benefits paid by the multiple
30-3 employer welfare arrangement to Texas employees and their
30-4 dependents during the previous calendar year.
30-5 (j) The commissioner shall certify to the association the
30-6 collection and receipt of all money from assessments, noting any
30-7 delinquencies. The association shall take the action that in its
30-8 judgment is proper to effect collection of any delinquent
30-9 assessment. All money received from assessments pursuant to this
30-10 article shall be transferred to the state treasurer who shall be
30-11 the custodian of the association's funds. The treasurer may make
30-12 the investments that in the treasurer's judgment are in the best
30-13 interest of the association. The earnings from the investment of
30-14 the money from the association shall be credited to the
30-15 association.
30-16 (k) The association, after paying a covered claim to an
30-17 employee or dependent, shall have all the rights of a creditor of
30-18 an insolvent multiple employer welfare arrangement to the extent of
30-19 benefits it paid, and such reimbursable payments and association
30-20 expenses associated with the paid benefits shall be entitled to
30-21 classification as administrative expenses.
30-22 (l) Each trustee of the association shall have no liability,
30-23 and no cause of action shall arise against such trustee or his or
30-24 her employer, agents, or employees for any good faith action or
30-25 omission in the performance of powers and duties under this
31-1 subchapter.
31-2 (m) Venue in a suit against the association shall be in
31-3 Travis County. The association shall not be required to give an
31-4 appeal bond in an appeal of a cause of action to which the
31-5 association is a party.
31-6 SECTION 2. This Act does not exempt a multiple employer
31-7 welfare arrangement from any other license requirement imposed
31-8 under local, state, or federal law.
31-9 SECTION 3. (a) Except as provided by Subsection (b) of this
31-10 section, this Act takes effect September 1, 1993.
31-11 (b) An entity in existence on the effective date of this Act
31-12 that is required to hold a certificate of authority under this Act
31-13 shall not be prosecuted for engaging in the unauthorized business
31-14 of insurance prior to application for a final certificate of
31-15 authority if it applies for a final certificate of authority prior
31-16 to March 1, 1994, and ultimately is issued a final certificate of
31-17 authority. If an existing multiple employer welfare arrangement
31-18 applies for a certificate of authority by March 1, 1994, the fact
31-19 that such multiple employer welfare arrangement engaged in the
31-20 business of insurance in this state prior to the effective date of
31-21 this Act shall not provide a basis for denial of a certificate of
31-22 authority.
31-23 (c) For the period from September 1, 1993, to January 1,
31-24 1996, the Multiple Employer Welfare Arrangement Guaranty
31-25 Association shall be comprised of three members, of which the
32-1 attorney general and the public insurance counsel or their
32-2 designees shall be ex officio members and shall constitute a quorum
32-3 if any association business must be transacted prior to appointment
32-4 of the third member. The appointed member shall be appointed by
32-5 the governor to a term to expire January 1, 1996. All appointments
32-6 to the association thereafter shall be for four-year concurrent
32-7 terms.
32-8 SECTION 4. The importance of this legislation and the
32-9 crowded condition of the calendars in both houses create an
32-10 emergency and an imperative public necessity that the
32-11 constitutional rule requiring bills to be read on three several
32-12 days in each house be suspended, and this rule is hereby suspended.