Code of Massachusetts Regulations
211 CMR - DIVISION OF INSURANCE
Title 211 CMR 90.00 - Legal Services Plans
Section 90.05 - Plan of Operation
Current through Register 1531, September 27, 2024
(1) Internal Operations. Membership plan sponsors are not subject to the insurance company licensing process contained in M.G.L. c. 175. Instead, the internal operations of these sponsors will be reviewed under 211 CMR 90.05.
Membership plan sponsors must present a complete overview of their organization in their plan of operation, including a description of the organizational framework, the qualifications of management and key personnel, the proposed method of operation, and the financial resources of the enterprise. There shall be four sections of the plan of operation devoted to these internal matters. Each section shall contain the information described below plus any additional information that the membership plan sponsor considers relevant.
The first section shall consist of a copy of the articles or organization and bylaws.
The second section shall provide information on the organization's management and personnel. It shall include biographical sketches of the officers and directors, details of any agreements relating to the corporation to which any officer or director is a party, and the officers' salaries and details of their employment status (full-time or part-time), compensation, and employment history of key management personnel and consultants or contractors involved in administration, marketing, enrollment, benefit procedures, grievance procedures, and financial matters. In addition, the section shall list the names and addresses of the organization's legal, accounting, and actuarial representatives. Finally, the section shall describe any financial relationships among any of the persons mentioned in the section.
The third section shall described the proposed method of operation in all the functional areas, including marketing, enrollment, benefit procedures, and grievance procedures. The section shall also contain the outline of a training program and related materials prepared for new members of the organization's board of directors. The program shall be relevant to the duties of a director and shall include information on policy issues relating to legal services plans and the costs of legal service delivery.
The fourth section shall describe the financial resources of the membership plan sponsor and other pertinent financial and contractual information. The section shall include:
The four sections of the plan of operation submitted under 211 CMR 90.05 may not contain any provisions that are unfair or inequitable in the judgment of the Commissioner. The articles of organization and by-laws shall provide that no more than 1/2 of the directors may be participating attorneys and that at least 1/3 of the directors will be subscribers who are not attorneys. For purposes of the preceding sentence, "subscribers" shall also include signatories of group contracts and "attorneys" shall include members of an attorney's immediate family and employees of an attorney.
The plan of operation must demonstrate to the satisfaction of the Commissioner that the membership plan sponsor possesses the ability to assure that promised benefits will be provided. In order to establish this ability, a membership plan sponsor must show, among other things, that it can establish and maintain a surplus of at least $300,000. The Commissioner may reduce the $300,000 minimum requirement if he or she is satisfied that existing contracts with participating attorneys provide a sufficient source of capital through direct capital contribution and by withholding a portion of the attorneys' fees. The Commissioner may also reduce the surplus amount if he or she is satisfied that reinsurance or other arrangements exist which adequately protect the rights of subscribers.
(2) Bona Fide Members. Membership plan sponsors must have a fifth section in their plan of operation which identifies the primary purpose of the corporation and describes the purposes for which the corporation was formed and its present and proposed activities. If the Commissioner determines that the primary purpose of the corporation is other than the establishment and operation of a membership legal services plan, then the membership plan sponsor shall observe the following standards relating to bona fide members of the corporation. First, contracts may be issued only to individuals who have been members of the corporation for at least three months. Second, enrollment in the legal services plan ma y not be made a condition of membership in the corporation. Finally, separate fees reflecting allocable expenses must be charged for corporate membership and legal services plan membership.
(3) Attorney Availability. Legal services plan benefits will be meaningful to subscribers only if they have no difficulty finding attorneys willing to furnish the covered legal services. Free access to attorneys can be assumed for insured indemnity legal services plans since M.G.L. c. 176H provides that subscribers may use any attorney in the United States. In insured service legal services plans and membership legal services plans, subscribers will be seeking the services of a limited number of participating attorneys. The insurers and membership plan sponsors associated with these plans must demonstrate to the Commissioner that a sufficient number of participating attorneys will be available at all times. This presentation in the plan of operation shall include the ratio of full-time equivalent participating attorneys to subscribers which will be maintained during the period of actual operations. The ratio shall be accompanied by a detailed explanation of how it was developed, including the use of projections of utilization of covered legal services by subscribers and covered dependents and projections of the amount of attorney-time required to furnish the covered legal services.
Even the most careful projections cannot guarantee that the panel of participating attorneys will in fact be of sufficient size. The subscribers of insured service legal services plans and membership legal services plans need further protection against an insufficient supply of attorneys. Specifically, a subscriber of an insure d service legal services plan must be permitted to use any nonparticipating attorney so long as the subscriber mails the insurer a written notice before receiving any legal services. In addition, the non-participating attorney must be paid the same benefits as a participating attorney. A subscriber of a membership legal services plan must be allowed to use a non-plan attorney at the membership plan sponsor's expense if the subscriber is unable to find a participating attorney willing and able to handle a non-frivolous matter that is a covered service. The sponsor may deny access to the non-plan attorney if the subscriber's problem does not require prompt attention and a qualified participating attorney will be available within a reasonable time. The sponsor must, however, have an impartial procedure for settling disagreements about the grounds for demanding a non-plan attorney.
Each insurer and membership plan sponsor shall demonstrate to the satisfaction of the Commissioner that the requirements presented above have been met. The plan of operation of insurers shall include the relevant language of the benefit contracts and a description of the manner in which payments to non-participating attorneys will be computed. The plan of operation of membership plan sponsors shall include the relevant language of the benefit contracts, a description of the procedure that will be used for settling disagreements, and the identity of the party selecting the attorney (membership plan sponsor or subscriber).
(4) Participating Attorney Contracts and Performance. The plan of operation for insured service legal services plans and membership legal services plans must contain a copy of all participating attorney contract forms and any documents referred to in the contracts. The Commissioner will disapprove the plan of operation if he or she determines that use of the contract forms will tend to increase the cost of legal services through anti- competitive practices illegal under M. G. L . c . 9 3 , 8 3 A, or 176D. The Commissioner will also disapprove the plan of operation if the contracts do not effectively encourage participating attorneys to utilize all feasible cost saving approaches. Finally, the Commissioner will disapprove the plan of operation if the contracts do not comply with the rules of the Supreme Judicial Court relating to the practice of law or the contracts do not require participating attorneys to carry malpractice liability insurance.
The plan of operation for insured service legal services plans and membership legal services plans shall also contain a copy of a subscriber satisfaction form and a plan for its distribution. The form must be distributed to all subscribers after they have received a covered legal service. The form must elicit information on the quality of the services received, including the promptness, openness, courteousness, and ability of the participating attorney and his or her clerical and paralegal support personnel. The form shall clearly indicate that the subscriber need not furnish his or her name.
