South Carolina Code of Regulations
Chapter 69 - DEPARTMENT OF INSURANCE
69-42 - Multiple Employer Self-Insured Health Plans.
69-42. Multiple Employer Self-Insured Health Plans.
(Statutory Authority: 1976 Code §§ 38-3-110, 38-41-100, 38-41-110, 1-23-10 et. seq. (1976), as amended)
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. §§ 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 §§ 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 §§ 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 §§ 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 § 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 § 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 § 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 § 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 §§ 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 §§ 38-41-30, 38-41-40, 38-41-50 (1976), as amended.
Under §§ 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 §§ 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.
HISTORY: Amended by State Register Volume 11, Issue No. 5, eff May 22, 1987.