An Act To Allow School Administrative Units To Seek Less Expensive Health Insurance Alternatives
Maine Legislature, Session 125, LD 1326
Committee: Education and Cultural Affairs
Sponsors: SARTY, McKANE, WHITTEMORE, CHASE, COTTA, CURTIS, JOHNSON, KESCHL, SANDERSON, WEAVER, COURTNEY
Amends: 20-A MRSA §1001, 24 MRSA §2307-C, 24-A MRSA §2803-B, 24-A MRSA §4224-B

Legislative Document 
No. 1326 
H.P. 972 
House of Representatives, March 28, 2011 
An Act To Allow School Administrative Units To Seek Less 
Expensive Health Insurance Alternatives 
Reference to the Committee on Education and Cultural Affairs suggested and ordered 
printed. 
HEATHER J.R. PRIEST 
Clerk 
Presented by Representative SARTY of Denmark. 
Cosponsored by Representative McKANE of Newcastle, Senator WHITTEMORE of Somerset 
and Representatives: CHASE of Wells, COTTA of China, CURTIS of Madison, JOHNSON of 
Greenville, KESCHL of Belgrade, SANDERSON of Chelsea, WEAVER of York, Senator: 
COURTNEY of York. 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1.  20-A MRSA §1001, sub-§5, as repealed and replaced by PL 1989, c. 425, 
§1, is amended to read: 
5.  Insurance premiums and employee benefits.  They may: 
A.  Pay the premiums on life, health, dental, disability, accident, hospitalization, 
major medical and such other types of insurance as may be provided to employees 
and their families from time to time; 
B.  Provide direct reimbursement of the costs incurred by employees and their family 
members pursuant to a direct reimbursement plan for dental costs, including 
endodontic, periodontic and orthodontic costs, provided except that reimbursement of 
orthodontic costs shall be is limited to 60% of the plan participant's costs. 
(1)  Prior to the commencement of operation of any such direct reimbursement 
plan or program, the school board shall adopt guidelines which that embody a 
funding mechanism adequate to the financial needs of the plan or program and 
shall provide for the fixed costs of operations of the plan for the first prospective 
fund year.  A reasonable amount sufficient to satisfy immediate claims costs shall 
must be held in a segregated account to be used solely for this purpose. 
(2)  The school board or other legal entity establishing a plan or program for the 
purpose of direct reimbursement pursuant to this paragraph, whether or not a 
body corporate, may with respect to the plan or program sue or be sued; make 
contracts; hold and dispose of real property; borrow money, contract debts and 
pledge assets in the name of the plan; and perform such other actions incidental 
to this subparagraph as necessary. 
(3)  The plan or program may be established as a separate legal or administrative 
entity. 
(4)  The legal entity which that establishes a plan or program which that provides 
coverage for more than one school administrative unit with respect to the benefits 
authorized in this paragraph shall adopt a plan of management which that, at a 
minimum, provides the following: 
(a)  The means of establishing and maintaining a governing authority of the 
program, including the selection of a governing authority, which shall must 
be a board of directors or trustees for the plan, a majority of whom shall must 
be from the participating school administrative unit or units; 
(b)  That the governing authority has the responsibility with regard to fixing 
contributions to the plan, maintaining reserves, levying and collecting 
assessments for deficiencies, disposing of surplus and administering the plan 
in the event of its termination, liquidation or insolvency; 
(c)  The identification of funds and reserves by the type of benefit provided 
and exposure area; 
(d)  The basis upon which new members may be admitted to and existing 
members may leave the plan; 
(e)  That any member of a group plan or pool established for more than one 
school administrative unit shall prepay to the plan administrator an initial 
deposit equal to 25% of the annual contribution before coverage is effective; 
(f)  Other provisions as necessary or desirable for the operation of the plan; 
(g)  A provision that if the assets set aside in any group plan for more than 
one school administrative unit are at any time determined to be insufficient to 
enable the plan to discharge its legal liabilities and other obligations and to 
maintain sound reserves for the provision of the employee benefits provided 
by the plan, the governing authority shall within 90 days satisfy the 
deficiency or levy a prorated assessment upon the participating school 
administrative unit or units for the amount needed to satisfy the deficiency.  
The agreement among school administrative units in the group plan shall 
must provide sanctions for failure to comply with a mandatory assessment 
under this subparagraph; 
(5)  Prior to the operation of any group or pool plan for more than one school 
administrative unit, the governing authority shall adopt underwriting guidelines 
which that embody rate charges to prospective members at a level adequate to its 
financial needs and shall provide for the fixed costs of operations for the first 
prospective fund year.  An amount sufficient to reasonably meet immediate 
claims costs shall must be held in a segregated account to be used solely for this 
purpose.  Funds determined to be necessary to fund the program on an ongoing 
basis shall must also be held in a segregated account; 
(6)  Each group plan or pool established for more than one school administrative 
unit shall file with its members, by the last day of the 6th month following the 
end of the fiscal year, audited financial statements certified by an independent 
certified public accountant.  The financial statement shall must include, but is not 
limited to: 
(a)  Appropriate reserves for known claims and expenses associated with 
those claims; 
(b)  Claims incurred but not reported and expenses associated with those 
claims; 
(c)  Unearned contributions; and 
(d)  Reserve for bad debts. 
The audited financial statement shall must include information concerning the 
adequacy of the plan.  This report shall must result from a charge by the directors 
to the plan's actuary and auditor and shall must address excess insurance, charges 
for coverage to members, service agents' costs and costs of administration of the 
program. 
Two additional copies of the audited financial statements shall must be filed with 
the Superintendent of Insurance. 
If a group plan or pool established for more than one school administrative unit 
fails to provide for the audited financial statements required, the Superintendent 
of Insurance shall perform or cause to be performed the audit.  The group plan or 
pool shall reimburse the Superintendent of Insurance for the cost of the audit; and 
(7)  Any reimbursement plan or program for the provision of the employee 
benefits established and operated pursuant to this paragraph is not an insurance 
company, reciprocal insurer or insurer under the laws of this State and the 
development, administration and provision of such plans and programs does not 
constitute doing an insurance business; 
C.  Pay premiums on liability insurance for employees and school officials; and 
D.  Provide such other employee benefits, directly or indirectly, to their employees as 
any school board determines from time to time, upon such terms and conditions and 
in such manner as the school board determines, subject to the requirements of all 
applicable laws. 
Nothing in this subsection or subsection 14 prohibits a school board from arranging for 
and offering a choice of optional health or dental insurance plans to employees and their 
families that may vary in benefits provided and costs. 
Sec. 2.  20-A MRSA §1001, sub-§5-D is enacted to read: 
5-D.  Group self-insured options.  Notwithstanding any other provision of this 
section, they may arrange for a group self-insurance program to provide health or dental 
insurance for employees and their families, including a group self-insurance program 
established through an interlocal agreement with other school administrative units or 
municipalities established pursuant to Title 30-A, chapter 115.  The following restrictions 
apply to self-insured group health or dental programs. 
A.  For purposes of this subsection, unless the context otherwise indicates, the 
following terms have the following meanings. 
(1)  "Program" means a group self-insurance health or dental program. 
(2)  "Program provider" means a school administrative unit that has arranged for 
a program under this subsection or collectively those school administrative units 
or municipalities that have entered an interlocal agreement to arrange for a 
program under this subsection. 
(3)  "Qualified actuary" means an actuary who is a member of the American 
Academy of Actuaries qualified as to health reserving methodologies. 
B.  To the extent the program provider assumes the risk with respect to any program 
provided under this subsection, the program provider shall maintain a reserve at least 
equal to the sum of: 
(1)  An amount estimated to be necessary to pay claims and administrative costs 
for the assumed risk for 2 1/2 months; and 
(2)  The amount determined annually by a qualified actuary to be necessary to 
fund the unpaid portion of ultimate expected losses, including incurred but not 
reported claims, and related expenses incurred in the provision of benefits for 
eligible participants, less any credit, as determined by a qualified actuary, for 
excess or stop-loss insurance. 
If the program provider self-insures for more than one program, a reserve meeting the 
requirements of this paragraph must be maintained for each program. 
C.  The program provider may purchase excess or stop-loss insurance for any 
program, with attachment levels and limits as recommended by a qualified actuary. 
D.  Paragraph B does not apply to a program in the first 2 years after the program is 
changed from a fully insured program to a fully or partially self-insured program.  
Before a program may begin its first year of operation: 
(1)  The reserve fund must contain a reserve at least equal to the amount 
estimated to be necessary to pay the claims and administrative costs with respect 
to the assumed risk for one full month; and 
(2)  The rate structure of the program, as certified by a qualified actuary, must be 
designed to enable the fund to attain the following reserve levels: 
(a)  By the end of the first year of the program, the reserve required by 
paragraph B, subparagraph (2) and an amount estimated to be necessary to 
pay claims and administrative costs for the assumed risk for 2 full months; 
and 
(b)  By the end of the 2nd year of the program, the reserve required by 
paragraph B, subparagraph (2) and an amount estimated to be necessary to 
pay claims and administrative costs for the assumed risk for 2 1/2 full 
months. 
If the program provider purchases stop-loss or excess insurance with respect to the 
risk, the required reserve is reduced by the credit specified in paragraph B. A 
self-insurance program may not continue if the reserve fund with respect to that 
program does not contain the amounts set forth in subparagraph (2) by the time limits 
established. 
E.  The program provider may not enter into a contract with a 3rd-party administrator 
that has not demonstrated compliance with all applicable state laws and that is not, at 
the time of entering into the contract, administering a health plan or providing health 
care coverage for a total number of lives equal to the number that would be covered 
by the program provider contract. 
F.  Every applicant to provide service as a 3rd-party administrator for the program 
shall file a fidelity bond in favor of the program provider executed by a surety 
company for the benefit of the program provider or beneficiaries of the program and 
shall maintain the fidelity bond in force while representing the program.  The bond 
must be continuous in form and in one of the following amounts, up to $1,000,000: 
(1)  For an administrator that collects contributions and premiums for a program 
but does not administer or pay claims, the greater of $50,000 and 5% of 
contributions and premiums projected to be received or collected for the 
following plan year from the program provider or from persons covered by the 
program; 
(2)  For an administrator that administers and pays claims but does not collect 
premiums and contributions, the greater of $50,000 and 5% of the claims and 
claim expenses projected to be held for the following year to pay claims and 
claim expenses for persons covered by the program; or 
(3)  For an administrator that collects premiums and contributions and 
administers and pays claims, the greater of the amounts determined under 
subparagraphs (1) and (2). 
This paragraph applies only if no other applicable state law requires bonding of 
3rd-party administrators. 
G.  Any contract entered into by the program provider must provide for coverage that 
meets the same level of benefits as those that would be required by state law if the 
coverage were provided by a health insurance plan governed by Title 24 or Title 
24-A. 
Sec. 3.  24 MRSA §2307-C is enacted to read: 
§2307-C.  Information concerning school administrative unit's experience rating 
Notwithstanding any provisions of law governing confidentiality to the contrary, a 
nonprofit hospital or medical service organization shall provide information concerning a 
school administrative unit's own experience and claims history as a member covered 
under a group policy or contract to that school administrative unit at that school 
administrative unit's own request and to a municipality that is part of the school 
administrative unit if the municipality so requests. 
Sec. 4.  24-A MRSA §2803-B is enacted to read: 
§2803-B.  Information concerning school administrative unit's experience rating 
Notwithstanding any provisions of law governing confidentiality to the contrary, an 
insurer shall provide information concerning a school administrative unit's own 
experience and claims history as a member covered under a group policy or contract to 
that school administrative unit at that school administrative unit's own request and to a 
municipality that is part of the school administrative unit if the municipality so requests. 
Sec. 5.  24-A MRSA §4224-B is enacted to read: 
§4224-B.  Information concerning school administrative unit's experience rating 
Notwithstanding any provisions of law governing confidentiality to the contrary, a 
health maintenance organization shall provide information concerning a school 
administrative unit's own experience and claims history as a member covered under a 
group policy or contract to that school administrative unit at that school administrative 
unit's own request and to a municipality that is part of the school administrative unit if the 
municipality so requests. 
SUMMARY 
This bill allows school administrative units to offer group self-insurance health and 
dental programs and to enter into cooperative agreements with other school 
administrative units or municipalities to provide such programs. 
The bill provides that school administrative units may arrange for and offer a choice 
of optional health or dental insurance plans to employees and their families that may vary 
in benefits provided and costs. 
The bill also requires insurers, health maintenance organizations and nonprofit 
hospital or medical service organizations to provide information concerning a school 
administrative unit's own experience and claims history as a member covered under a 
group policy or contract to that school administrative unit at that unit's own request and to 
a municipality that is part of the school administrative unit if the municipality so requests.