South Carolina Code of Regulations › Chapter 69 - DEPARTMENT OF INSURANCE › Section 69-42 - Multiple Employer Self-Insured Health Plans

Current through Register Vol. 48, No. 6, June 28, 2024
A.
		  Establishment, Maintenance and Control by Employers.
In Public Law 97-473, Congress amended the Employee Retirement
			 Income Security Act of 1974, 29 U.S.C. Sections 1001 et. seq. (ERISA), so as to
			 provide that multiple employer welfare arrangements that are not fully insured
			 are subject to state insurance laws to the extent that such laws are not
			 inconsistent with specific provisions of ERISA. In response to the passage of
			 P.L. 97-473, the South Carolina General Assembly adopted Act No. 137 of 1985,
			 codified as S.C. Code Sections
			 38-41-10
			 through
			 38-41-110
			 (1976), as amended, (hereinafter "the Act"), to provide a statutory framework
			 by which uninsured or partially insured multiple employer welfare arrangements
			 could be regulated.
Act No. 137 was passed for the benefit and convenience of two or
			 more employers who jointly decide to pool their resources to provide health
			 benefits for their employees. As expressed in Sections
			 38-41-10
			 and
			 38-41-60(a),
			 it was the clear intent of the General Assembly that a multiple employer
			 self-insured health plan be created and maintained by and for the benefit of
			 participating employers and operated under their exclusive management and
			 control. The Act was not intended to permit third party administrators or other
			 entrepreneurial promoters to establish a trust or plan and then proceed to
			 solicit employers as participants. Instead, the impetus for the creation of the
			 plan must come from the employers themselves, and the employers must at all
			 times exercise absolute control over the management and conduct of the plan's
			 business and affairs.
This is not to say that a plan, once established, cannot contract
			 with a third party to provide management or administrative services to the
			 plan. However, any such management or administration agreement must be filed
			 with the Chief Insurance Commissioner at the time that the plan makes
			 application for a license. See, S.C. Code Sections
			 38-41-30
			 through
			 38-41-50
			 (1976), as amended. The Commissioner will not license any multiple employer
			 self-insured health plan if it appears that it has not been established and
			 maintained by and for the benefit of participating employers, or that such
			 employers, through their duly elected trustees, exercise anything less than
			 total and absolute control over the plan's business and affairs.
B. Quarterly Reports Required.
Under S. C. Code Section
			 38-41-60(d)
			  (1976), as amended, a multiple employer
			 self-insured health plan is required to file an annual report on its condition
			 and affairs with the Commissioner. Under S.C. Code Section
			 38-41-80
			 (1976), as amended, a plan is further required to furnish information
			 concerning its business and affairs to the Commissioner or his representatives
			 on demand.
So as to enable the Commissioner to timely monitor the financial
			 condition of multiple employer self-insured health plans, each plan shall,
			 under Section
			 38-41-80,
			 be required to file quarterly reports on its condition and affairs on forms
			 prescribed by the Commissioner. Such reports shall be filed with the
			 Commissioner not later than forty-five (45) days after the close of the
			 calendar quarters ending on March 31, June 30 and September 30. Since the
			 annual report required in Section
			 38-41-80(d)
			 will reflect a plan's condition and affairs at December 31, no separate
			 quarterly report for the quarter ending December 31 shall be required.
C. Hold Harmless Agreements.
Under S. C. Code Sections
			 38-41-100,
			 38-41-110
			 (1976), as amended, the Commissioner is authorized to promulgate regulations to
			 ensure the safe and efficient operation of multiple employer self-insured
			 health plans. One of the most effective ways of doing so is to give the
			 participating employers who, through their elected trustees, establish,
			 maintain and control the plan a direct and ongoing stake or interest in the
			 plan's continued safe and efficient operation.
Therefore, to promote continued safe and efficient operation, a
			 multiple employer self-insured health plan shall require each employer, as a
			 condition of participation in the plan, to execute an agreement by which the
			 employer agrees to personally pay all claims for benefits covered under the
			 plan which are incurred by his or its covered employees and their covered
			 dependents, but which the plan has failed to pay. Such agreements shall be made
			 on forms prescribed by the Commissioner and shall extend to all unpaid claims
			 for benefits incurred by the employer's employees and their dependents during
			 the time such employees and dependents were covered under the plan.
A clear and legible copy of each agreement executed by
			 participating employers shall be filed with the Commissioner by the plan as
			 part of its application for a license. No license will be issued unless copies
			 of such agreements are filed. With respect to an employer who joins the plan
			 after a license has been issued, the plan shall file a copy of the agreement
			 executed by the employer within ten (10) days after the employer joins the
			 plan.
Neither failure of an employer to execute an agreement, nor
			 failure of the plan to require such execution, shall excuse the employer from
			 liability for unpaid claims incurred by covered employees and dependents. An
			 employer shall be deemed to have notice of the requirements of this section,
			 and upon joining the plan, the employer shall be deemed to have agreed to
			 liability for unpaid claims of his covered employees and their dependents in
			 the same manner as if an agreement had been executed.
D. Stop-Loss Coverage Requirements.
The Act requires a multiple employer self-insured health plan to
			 obtain individual and aggregate excess stop-loss coverage from a licensed
			 insurance company. Such coverage must be noncancellable for a minimum term of
			 two years, and it must be submitted for approval by the Commissioner. See, S.C.
			 Code Sections
			 38-41-30,
			 38-41-40,
			 38-41-50
			 (1976), as amended.
Under Sections
			 38-41-30,
			 38-41-40,
			 38-41-50, plan
			 participants are required to fund benefits up to the point at which the excess
			 stop-loss insurer assumes one hundred percent of the liability to pay benefits.
			 In reviewing an excess stop-loss agreement for approval, the Commissioner will
			 closely scrutinize the agreement to determine whether the levels of individual
			 and aggregate risk retained by the plan are such as will put the plan in an
			 unsound condition or will render its proceedings hazardous to the public or to
			 persons covered under the plan. See, S.C. Code Sections
			 38-41-100,
			 38-41-110
			 (1976), as amended. In making his determination, the Commissioner will consider
			 all relevant factors including, but not limited to, reserving practices,
			 adequacy of employer/employee contributions, benefits provided under the plan,
			 administrative and other expenses, and management. If the Commissioner is of
			 the opinion that the excess stop-loss agreement will put the plan in an unsound
			 condition, will render the plan's proceedings hazardous to the public or
			 persons covered under the plan, or is otherwise not in compliance with the law,
			 the Commissioner will disapprove the agreement.
Statutory Authority: 1976 Code Sections
				38-3-110,
				38-41-100,
				38-41-110,
				1-23-10 et. seq.
				(1976), as amended