Current through Register Vol. 54, No. 44, November 2, 2024
For a plan of self-insurance to meet the standard of section
701(a)(4) of the act (40 P. S. § 1307.701(a)(4)) that it
"constitutes protection equivalent to the insurance requirements of a health
care provider", the plan shall do the following:
(1) Provide a fund, in a form approved by the
Commissioner, to be held by a trustee in a segregated and independent account
which shall be available only for the payment of claims covered by the basic
insurance provided by the act. A separate segregated and independent account
within the trust shall be used by the health care provider to pay for expenses
such as trustee fees or commissions, legal expenses or other claims for
liability other than the basic insurance provided in the act. The funding and
reporting requirements only apply to the trust account for the payment of
claims covered by the basic insurance provided by the act.
(2) Capitalize the fund for the payment of
claims covered by the basic insurance provided by the act using only the
following permissible assets:
(i) Direct
obligations of the United States Government-United States Treasury bonds, bills
or notes.
(ii) Obligations of
Federal government agencies-bonds, debentures or notes such as the following:
(A) Federal Home Loan Bank.
(B) Small Business Administration.
(C) Federal Land Bank.
(D) Federal National Mortgage
Association.
(E) Government
National Mortgage Association.
(iii) Direct obligations of the
Commonwealth-Commonwealth general obligation bonds, debentures or
notes.
(iv) Obligations of
Commonwealth agencies-bonds, debentures or notes for the following:
(A) General State Authority.
(B) Highway and Bridge Authority.
(C) Public School Building
Authority.
(D) Higher Education
Authority.
(E) State
universities.
(v) An
interest-bearing deposit or a certificate of deposit in a bank, bank and trust
company or savings bank chartered in this Commonwealth which is protected by
the Federal Deposit Insurance Corporation.
(vi) A savings account or certificate of
deposit of a savings association chartered in this Commonwealth which is
protected by the Federal Savings and Loan Insurance Corporation.
(vii) United States corporations' bonds or
debentures rated in one of the three highest categories by a nationally
recognized securities rating organization.
(viii) Corporate preferred or common stock or
shares of a corporation incorporated under the laws of the United States rated
in one of the three highest categories by a nationally recognized securities
rating organization.
(ix) Short
term investment funds managed by major commercial banks chartered in this
Commonwealth. A detailed description or listing of the components of the short
term investment fund shall be furnished upon application by the health care
provider and on a yearly basis thereafter. Submission of details concerning the
investment fund may coincide with the financial reporting requirements set
forth under §
243.4 (relating to reporting
requirements for self-insurance plans).
(x) Surety bonds issued by an insurance
company authorized to write surety bonds in this Commonwealth, for which the
policy holders' rating and financial rating for the company is not less than A
and IX, respectively, by Best's Insurance Reports. The total face amount of
surety bonds issued by the insurance company may not exceed 10% of the capital
and surplus of the insurance company.
(xi) Clear, irrevocable and unconditional
letters of credit which may only be utilized to fund asserted claims as defined
in paragraph (6).
(3)
Ensure that the total market value of assets comprising the account are
sufficient to meet the financial requirements applicable to
self-insurance.
(4) Secure the
prior approval of the Commissioner before adding an asset to the fund that is
not set forth in this section.
(5)
Provide that the fund contains the following amounts:
(i) In the case of a hospital plan:
(A) Upon the effective date of the
self-insurance plan approved by the Commissioner, the fund shall be capitalized
at a minimum of $200,000 or an amount equal to the current annual premium
charged by an insurer for an occurrence-based policy covering the employes of
the hospital except licensed physicians, whichever amount is greater.
(B) On the second anniversary of the
effective date of the plan, the capitalization of the fund shall be $325,000 or
an amount equal to the current annual premium charged by an insurer for an
occurrence-based policy covering the employes of the hospital except licensed
physicians, whichever amount is greater.
(C) On the third anniversary of the effective
date of the plan, the capitalization of the fund shall be $500,000 or an amount
equal to the current annual premium charged by an insurer for an
occurrence-based policy covering the employes of the hospital except licensed
physicians, whichever amount is greater.
(D) On the sixth anniversary of the effective
date of the plan, the capitalization of the fund shall be $1 million.
(ii) In the case of a hospital
plan which includes physicians, the Fund's capitalization requirements of
subparagraph (i)(A)-(D) shall be augmented by an amount equal to the total of
the annual basic coverage premiums for the physicians that would be charged by
a licensed, admitted insurance carrier. If no quote or certified quote
equivalent is obtainable from a licensed admitted insurance carrier, the
premiums set by the Pennsylvania Joint Underwriting Association may be
used.
(iii) In the case of a plan
for health care providers other than hospitals, $300,000 upon the effective
date of the plan; however, the amount shall be $600,000 for health care
providers who conduct 50% or less of their health care business or practice, as
defined in section 701(a)(2) of the act (40 P. S. §
1301.701(a)(2)), within this
Commonwealth.
(6) Provide
that there shall be added to the capitalization of the fund amounts equal to
the potential liability, within the limits of basic insurance coverage required
by the act, as estimated by procedures established by the self-insurance plan
for each asserted claim against the health care provider.
(7) Provide evidence of implementation of a
plan of risk management acceptable to the Commissioner, or evidence that the
health care provider has implemented a previously approved plan of risk
management, which may be offered on a consulting basis by an insurer or risk
management consulting firm.
(8)
Provide for appropriate coverage if a health care provider terminates a
self-insurance plan. After notification of termination to the Department by the
health care provider, the fund shall be maintained for 4 years under paragraphs
(5) and (6). At the end of the 4-year period, the trustee of the fund may
return to the health care provider the amounts deposited under paragraph (5).
Amounts deposited under paragraph (6) shall be maintained until final
disposition of those claims.
(9)
Provide for an agreement that books and records pertaining to a fund, as
defined in this section, shall be open for inspection by the Commissioner at
reasonable times.
(10) Confer upon
the Commissioner the right to require, by order of the Department, compliance
by the health care provider and trustee with the trust agreement, the act and
current regulations.
(11) Establish
a trustee reporting system as follows:
(i)
Prior to the initiation of a program year, the health care provider, based on
the funding strategy which it develops for that program year, shall provide the
trustee with a letter describing the amount of funding to be achieved during
that calendar year and the payment plan by which it will be achieved. This
subparagraph does not require the trustee to have responsibility for
establishing the correctness of the funding level to be used for a program
year.
(ii) If the health care
provider deviates from the plan funding strategies, it is the duty of the
trustee to notify the health care provider, whereupon the health care provider
will present the trustee with a reason for having deviated and a plan for
adherence to the established schedule. If a deficiency is not eliminated within
60 days of the deviation from adherence to the schedule, the trustee shall
promptly notify the Commissioner.
(iii) On a monthly basis, the health care
provider shall provide the trustee with a report from an authorized
representative of the health care provider stating the total of asserted claims
reserves that should be established. It is the trustee's duty to compare the
reserve levels with the corresponding amounts available in the fund for
asserted claims reserves. If a deficiency exists in the amounts available, the
trustee shall notify the health care provider promptly. Within 30 days, the
health care provider shall in turn notify the trustee of the manner in which it
intends to rectify the deficiency. If a deficiency is not eliminated within 60
days of the first notice, the trustee has the duty to notify the
Commissioner.
(12)
Establish a trustee investment policy to the effect that a trustee, in making
or retaining investments, recognizes that the primary objective of the fund is
to insure adequate liquidity of the fund for payment of professional liability
claims.
(13) Provide in the trust
agreement that the agreement may be amended only with the prior approval of the
Department.
(14) Provide in the
trust agreement that the trustee may resign only with the prior approval of the
Department. The current trustee shall continue to assume the trustee duties
under the trust agreement until the Department approves a successor trustee who
shall assume the duties of the trust agreement.
The provisions of this §243.3 amended under The Insurance
Department Act of 1921 (40 P. S. §§ 1-321); The Insurance Company Law of 1921
(40
P. S. §§ 341-991); and sections
206, 506, 1501 and 1502 of The Administrative Code of 1929 (71 P. S.
§§
66,
186,
411 and
412); and the Health Care
Services Malpractice Act (40 P. S. §§ 1301.101-1301.1006).
This section cited in 31 Pa. Code §
243.9 (relating to government plan
for self-insurance); and 31 Pa. Code §
243.11 (relating to compliance by
existing self-insured hospitals).
