Missouri Code of State Regulations › Title 20 - DEPARTMENT OF COMMERCE AND INSURANCE › Division 500 - Property and Casualty › Chapter 6 - Workers' Compensation and Employers' Liability › Section 20 CSR 500-6.960 - Plan of Operation for the Workers' Compensation Residual Market

Current through Register Vol. 49, No. 14, July 15, 2024
PURPOSE: The purpose of this proposed rule is to
				  modify Missouri's Alternative Residual Market (ARM) Plan to allow the Director
				  of Insurance greater flexibility in selecting an entity to administer the
				  state's residual market for worker's compensation insurance. In addition to the
				  current arrangement, which requires the selection of a "contract carrier" to be
				  on the risk for a loss ratio of one hundred fifteen percent ( 115%) of
				  collected premium, the proposal allows for loss ratios down to one hundred
				  percent (100%), it allows for "plan administrators" who would not be on the
				  risk, and it allows for an appointment process if a bid process is not
				  feasible. The current rule is extensively reorganized to accommodate these
				  additional options.
PUBLISHER'S NOTE: The secretary of state has
				  determined that the publication of the entire text of the material which is
				  incorporated by reference as a portion of this rule would be unduly cumbersome
				  or expensive. Therefore, the material which is so incorporated is on file with
				  the agency who filed this rule, and with the Office of the Secretary of State.
				  Any interested person may view this material at either agency's headquarters or
				  the same will be made available at the Office of the Secretary of State at a
				  cost not to exceed actual cost of copy reproduction. The entire text of the
				  rule is printed here. This note refers only to the incorporated by reference
				  material.
(1) Definitions.
				For purposes of this rule, unless the context clearly requires otherwise, the
				terms below are defined as follows:
(A)
				Allocated Loss Adjustment Expense (ALAE) shall mean ALAE as that term is
				defined in the National Council on Compensation Insurance, Inc. (NCCI)'s
URE Workers Compensation Statistical Plan
, as approved by the
				department for use in Missouri, in effect on January 1, 2002, and any
				subsequently approved amendments thereto;
(B) Alternative Residual Market Plan (ARM
				Plan) means the Missouri workers' compensation residual market plan set forth
				in this rule, and its predecessor rule, established under section
				287.896,
				RSMo and in effect since July 1, 1995;
(C) Assessment means the amount owed by and
				assessed against reinsurers under the ARM Plan because the amount of losses and
				allocated loss adjustment expense paid by the plan administrator and any
				servicing carriers, plus the plan administrator's percentage of the premium,
				exceed the amount of premium collected by the plan administrator and any
				servicing carriers, for the period in question;
(D) Collected premium or premium collected
				means premiums for workers' compensation insurance actually received by a
				contract carrier, plan administrator or servicing carrier for policies issued
				during the period of the contract under the request for proposal (RFP) for the
				ARM Plan;
(E) Contract carrier
				means an insurer selected by the department to administer the ARM Plan under
				the "contract carrier option" or "emergency option" of the ARM Plan, and to
				thereby be at risk for the losses of the plan up to the retention level set by
				the director, for the term of the contract carrier agreement and any extensions
				thereof;
(F) Contract carrier
				agreement means the terms of the RFP issued by the department, the proposed
				response to that RFP submitted by the insurer ultimately selected to be the
				contract carrier by the department, and the performance standards and any
				modifications thereto agreed to by the contract carrier and the department to
				implement the RFP under the ARM Plan;
(G) Contract carrier option means that
				alternative under the ARM Plan whereby the director selects a contract carrier
				to administer the Missouri residual market for workers' compensation insurance,
				after a formal public bidding process, under which always the contract carrier
				will be at risk for the losses of the Missouri residual market up to the
				retention level set by the director. Losses in excess of that retention level
				shall be reimbursed to the contract carrier by Missouri's voluntary workers'
				compensation market insurance companies, which are participating as reinsurers
				under this rule;
(H) Day means
				calendar day as opposed to business day;
(I) Deficit means the determination made
				under the ARM Plan that the amount of losses and allocated loss adjustment
				expense paid by the contract carrier which, when divided by the amount of
				premium collected by the contract carrier, is greater than or equal to the
				retention level selected for the contract carrier for the policies issued
				during the one (1)-year period of the contract carrier agreement and any
				extensions thereof;
(J) Department
				(or regulator) means the Missouri Department of Insurance;
(K) Direct assignment carrier means an
				insurer, other than a servicing carrier, that has elected and been authorized
				by the department to receive direct assignments pursuant to the servicing
				carrier option under the ARM Plan. Whether or not to allow insurers the option
				of functioning as a direct assignment carrier as opposed to functioning as a
				servicing carrier is up to the director;
(L) Direct assignment means the act of a plan
				administrator of assigning a particular employer seeking coverage under the ARM
				Plan to an insurer authorized by the director to function as a direct
				assignment carrier. The direct assignment carrier will be at risk for all of
				the insured losses of an employer so assigned, for period of the policy. The
				direct assignment carrier shall be entitled to all of the premium generated by
				an employer so assigned, but in return it shall forego the benefit of the
				reinsurance normally afforded servicing carriers for losses under the servicing
				carrier option of the ARM Plan;
(M)
				Director means the director of the Missouri Department of Insurance;
(N) Emergency option means that alternative
				under the ARM Plan whereby the director selects either a contract carrier or a
				plan administrator to administer the Missouri residual market for workers'
				compensation insurance without using a formal public bidding process;
(O) Employer means any business organization
				or enterprise that is required under Chapter 287 of the
Revised
				Statutes of Missouri
to maintain workers' compensation insurance in
				Missouri, or which has voluntarily decided to elect to be covered by such laws.
				The term shall include any business organizations or enterprises that are
				affiliated as a result of common management or common ownership;
(P) Losses means losses and allocated loss
				adjustment expenses as those terms are defined in the
URE Workers
				Compensation Statistical Plan
of the NCCI, and any other losses in
				excess of policy limits or extra-contractual obligations authorized under this
				rule;
(Q) National Council on
				Compensation Insurance, Inc., (NCCI) means a particular advisory organization
				licensed in this state to make and file classifications, loss costs and rating
				plans for workers' compensation insurance. The NCCI functions as the
				administrator of the Workers' Compensation Insurance Plan (WCIP) plan residual
				market mechanism. The NCCI is also the organization named in the Missouri
				Aggregate Excess of Loss Reinsurance Mechanism to administer insurance carrier
				participation, deficit assessments and other components of that mechanism under
				the ARM Plan from July 1, 1995 until the effective date of this rule, and to
				function as a reinsurance administrator as defined under this rule;
(R) Performance standards are the standards
				to be met by a contract carrier or plan administrator in administering the ARM
				Plan;
(S) Plan administrator means
				an entity selected by the department to administer the ARM Plan under the
				"servicing carrier option" or "emergency option" of the ARM Plan, for the term
				of the plan administrator agreement and any extensions thereof;
(T) Plan administrator agreement means the
				terms of the RFP issued by the department, the proposed response to that RFP
				submitted by the entity ultimately selected to be the plan administrator by the
				department, and the performance standards and any modifications thereto agreed
				to by the plan administrator and the department to implement the RFP under the
				ARM Plan;
(U) Plan administrator's
				percentage of premium means that percentage of the premium collected under the
				servicing carrier option of the ARM Plan which, per the plan administrator
				agreement, the plan administrator is allowed to retain to cover the expenses of
				the plan administrator and any servicing carriers used by the plan
				administrator. The plan administrator's percentage of premium shall be an
				amount sufficient to cover the expenses of the plan administrator in
				administering the ARM Plan, plus an additional amount for profit and
				contingencies;
(V) Policy or
				policies means a policy or policies of workers' compensation insurance as
				defined under this rule issued to risks insured under the ARM Plan;
(W) Producer means an insurance producer as
				defined in section
				375.012, RSMo, whose
				privileges under either the WCIP or the ARM Plan have not been suspended or
				revoked, provided, however, that such producer shall, for purposes of this
				rule, be considered to be acting on behalf of the employer when placing
				coverage through the ARM Plan and not as an agent of the contract carrier, the
				plan administrator, or any other insurer;
(X) Reinsurance administrator means the
				organization identified under this rule to administer the reinsurance
				provisions of this rule. The reinsurance administrator shall be the NCCI unless
				another entity is appointed by the director;
(Y) Reinsurer means a Missouri voluntary
				market workers' compensation insurer in its capacity as a reinsurer for any
				deficits under the contract carrier option of this rule or for any losses under
				the servicing carrier option of this rule. The term does not include any direct
				assignment carriers authorized under the servicing carrier option of this
				rule;
(Z) Retention level means the
				level of losses, specified by the director as part of a contract carrier
				agreement, for which the contract carrier will be responsible, prior to any
				responsibility of the reinsurers;
(AA) Request for proposal (RFP) means an RFP
				issued by the department setting forth the specifications for the ARM Plan and
				inviting potential respondents to submit proposals by which the department can
				select a contract carrier under the contract carrier option, or plan
				administrator under the servicing carrier option, to administer the ARM Plan.
				The department may specify in a single RFP specifications for both a contract
				carrier option and a servicing carrier option, and may decide as part of its
				bid evaluation process which option to select;
(BB) Servicing carrier means an insurer,
				other than a direct assignment carrier, selected by the plan administrator
				under the servicing carrier option of the ARM Plan to provide insurance
				services to insured employers and injured employees covered under the ARM
				Plan;
(CC) Servicing carrier option
				means that alternative under the ARM Plan whereby the director selects a plan
				administrator to administer the Missouri residual market for workers'
				compensation insurance, after a formal public bidding process. The plan
				administrator will provide any necessary insurance services itself, if it is a
				licensed and admitted Missouri workers' compensation insurer, or through other
				insurers functioning as servicing carriers or direct assignment carriers.
				Losses paid under the servicing carrier option by or on behalf of the plan
				administrator shall be reimbursed to the plan administrator by Missouri's
				voluntary workers' compensation market insurance companies, which are
				participating as reinsurers under this rule;
(DD) Standard premium means the state premium
				determined on the basis of authorized rates, any experience modification, any
				applicable schedule rating modification, loss constants and minimum premiums.
				The expense constant shall be excluded from determination of the standard
				premium;
(EE) Workers' compensation
				insurance means:
1. Statutory workers'
				compensation and occupational disease including liability under the Longshore
				and Harbor Workers' Compensation Act, as amended, and the Federal Coal Mine
				Health and Safety Act of 1969, as amended;
2. Employers liability insurance written in
				connection with a workers' compensation policy;
3. Such other coverages as are approved by
				the director, including those approved after being recommended by the advisory
				board authorized under section (3) of this rule;
(FF) Workers' Compensation Insurance Plan
				(WCIP) means the NCCI's plan of operation for administering workers'
				compensation residual markets. The WCIP was the plan used to administer
				Missouri's residual market prior to the commencement of the ARM Plan on July 1,
				1995, and may be used in the future if selected by the director under the
				servicing carrier option or emergency option of the ARM Plan.