South Carolina Code of Regulations › Chapter 69 - DEPARTMENT OF INSURANCE › Section 69-41 - Prepaid Dental Service

Current through Register Vol. 48, No. 6, June 28, 2024
A.
		  Introduction.
In Act No. 40 of 1979, the South Carolina General Assembly
			 amended S.C. Code Section
			 38-5-20(b)
			 (1976) [recodified as Section
			 38-1-20(1)
			 ], so as to add "prepaid dental service" to the definition of "accident and
			 health insurance." The effect of this amendment was to require any person or
			 entity which offers, sells, delivers or issues for delivery prepaid dental
			 service contracts in this State to be licensed as an insurance company to
			 transact an accident and health insurance business. The Act further amended S.
			 C. Code Section 38-57-190(2) (1976), so as to permit the granting of
			 preferences or distinctions to particular groups under prepaid dental service
			 plans.
Unfortunately, the Act did not define the phrase "prepaid dental
			 service." Over the years, it has become increasingly clear that a definition of
			 what constitutes "prepaid dental service" must be established. Under the
			 broadest reading of the phrase, even the most informal retainer-type of
			 arrangement between an individual dentist and an individual patient could be
			 deemed to be "prepaid dental service," if there was any payment of fees prior
			 to the rendering of dental services. In such a case, the individual dentist
			 would be required to be licensed as an accident and health insurance company
			 and subjected to the full range of regulatory and tax laws applicable to
			 insurance companies. The Chief Insurance Commissioner simply does not believe
			 that this was the result intended by the General Assembly.
One of the primary purposes of the insurance regulatory laws is
			 the assurance of the solvency and soundness of insurance companies. To the
			 extent that a person or entity contractually promises to arrange for the
			 provision of, or reimbursement for, dental services to be performed by another
			 person who is a licensed dentist, and further collects money from the public in
			 consideration of such promises, the solvency concerns of the insurance
			 regulatory laws are implicated. Under this scenario, the person collecting the
			 money and making the promises (i.e., the promisor) is not the same person who
			 is performing the dental services. In order for the promisor to fulfill his
			 contractual obligations, it is imperative that he at all times have sufficient
			 funds available to compensate dentists performing the services and/or reimburse
			 contractholders for dental expenses they incur. The assurance that those funds
			 will be available to fulfill contractual obligations goes to the very heart of
			 solvency regulation under the insurance laws.
By contrast, where the promisor is the dentist performing the
			 services, the solvency concerns expressed above are not present. So long as the
			 dentist has the requisite knowledge, skill and competence to practice
			 dentistry, as well as a valid license to do so, the dentist can fulfill his
			 contractual obligations to his contractholder/patient, regardless of what his
			 financial condition is. Consequently, the State does not have the same interest
			 in solvency protection that it does in the circumstances previously
			 described.
It is therefore the purpose of this regulation to define the
			 phrase "prepaid dental service" as used in Section
			 38-1-20(1),
			 so as to clearly identify those plans and their sponsors which are subject to
			 licensing and regulation by the Chief Insurance Commissioner.
B. "Prepaid dental service" defined.
(1) Definition.
"Prepaid dental service" means a contract, plan or agreement
			 whereby one undertakes, in consideration of a specified payment, to provide for
			 the rendering of, or reimbursement for, dental services during a specified
			 interval of time, where such dental services are performed by a person duly
			 licensed to practice dentistry in the jurisdiction in which such services are
			 performed. "Prepaid dental service" specifically includes subscriber contracts
			 issued by dental service associations and dental service corporations as
			 contemplated in Subarticle 3, Article 3, Chapter 71 of Title 38 of the 1976
			 Code and Insurance Department Regulation
			 69-34.
(2) Exemption.
The phrase "prepaid dental service" does not include a direct
			 contractual agreement between an individual licensed dentist and an individual
			 patient, under which the individual dentist is personally obligated to perform
			 the dental services specified in the agreement. To qualify for the exemption
			 under the paragraph, the agreement cannot exist between the patient and some
			 third party, such as a marketing firm, a service corporation, or even the
			 dentist's own professional association (P.A.). Instead, the agreement must be
			 exclusively between the individual licensed dentist and the patient, such that
			 the dentist is at all times contractually bound under the agreement to
			 personally provide the promised dental services directly to the patient.
In addition, the phrase "prepaid dental service" shall not
			 include dental benefits provided by a health maintenance organization licensed
			 and regulated under Chapter 33 of Title 38 of the 1976 Code, nor does it
			 include dental benefits provided by a multiple employer self-insured health
			 plan licensed and regulated under Chapter 41 of Title 38 of the 1976
			 Code.