SECTION 7.1905. Commissioner Review of Application; Issuance of Temporary Certificate of Authority

(a) The commissioner shall promptly review the documentation submitted by the applicant and shall have the power to conduct any investigation which may be necessary and to examine under oath any persons interested or connected with the multiple-employer welfare arrangement. An existing multiple-employer welfare arrangement which timely files notice for an initial and a final certificate of authority will not be denied such certificate based on the fact that it engaged in the business of insurance in this state on an unauthorized basis prior to September 1, 1993. Within 60 days of the filing of the completed application, the commissioner shall issue an initial certificate of authority, which shall be a temporary certificate of authority for a term of one year, to the multiple-employer welfare arrangement, provided that all of the conditions in paragraphs (1)-(16) of this subsection have been met, as follows:

(1) the employers in the multiple-employer welfare arrangement are members of an association or group of five or more businesses which are the same trade or industry, including closely related businesses which provide support, services, or supplies primarily to that trade or industry;

(2) if the applicant is an association, that the association in the multiple-employer welfare arrangement is engaged in substantial activity for its members other than sponsorship of an employee welfare benefit plan;

(3) if the applicant is an association, that the association in the multiple-employer welfare arrangement has been in existence for a period of not less than two years prior to engaging in any activities relating to the provision of employer health benefits to its members;

(4) the employee welfare plan of the association or group in the multiple-employer welfare arrangement is controlled and sponsored directly by participating employers, participating employees, or both;

(5) the association or group of employers in the multiple-employer welfare arrangement is a not-for-profit organization;

(6) the multiple-employer welfare arrangement has within its own organization adequate facilities and competent personnel, as determined by the commissioner, to service the employee benefit plan or has contracted with a third party administrator that holds a current certificate of authority to engage in business in the State of Texas;

(7) the multiple-welfare arrangement has applications from not less than five employers and will provide similar benefits for not less than 200 separate participating employees, and the annual gross premiums or contributions to the plan will be not less than $20,000 for a plan that provides only vision benefits, $75,000 for a plan that provides only dental benefits, and $200,000 for all other plans;

(8) the multiple-employer welfare arrangement possesses a written commitment, binder, or policy for stop-loss insurance issued by an insurer that has a certificate of authority to transact business in the State of Texas, providing not less than 30 days notice to the commissioner of any cancellation or non-renewal of coverage (this instrument shall provide both specific and aggregate coverage with an aggregate retention of no more than 125% of the amount of expected claims for the next plan year and a specific retention amount annually determined by the actuarial report required by Article 3.95-8(a)(2), and verified by the signature of the actuary who prepared the report);

(9) both the specific and aggregate coverage will require all claims to be submitted within 90 days after the claim is incurred and provide a 12-month claims incurred period and a 15-month paid claims period for each policy year;

(10) the contributions shall be set to fund at least 100% of the aggregate retention plus all other costs of the multiple-employer welfare arrangement;

(11) if the reserves required by Article 3.95-8(a)(2)(B) exceed the greater of 40% of the total contributions for the current plan year, or 40% of the total contributions expected for the current plan year, the contributions may be reduced to fund less than 100% of the aggregate retention plus all other costs of the multiple-employer welfare arrangement, but in no event less than the level of contributions necessary to fund the minimum reserves required under Article 3.95-8(a)(2)(B);

(12) the reserves described in Article 3.95-8(a)(2)(B) have been established or will be established before the final certificate of authority is issued;

(13) the multiple-employer welfare arrangement has established a procedure for handling claims for benefits in the event of dissolution of the multiple-employer welfare arrangement;

(14) the multiple-employer welfare arrangement has obtained the required fidelity bond;

(15) the multiple-employer welfare arrangement has submitted its plan document or any instrument describing the rights and obligations of the employers, employees, and beneficiaries with respect to the multiple-employer welfare arrangement; and

(16) the multiple-employer welfare arrangement has submitted a summary plan description and has filed for review any notifications such as an identification card, policy or contract, in connection with the employee welfare benefit plan, which notifications include any of the disclosures set out in subparagraphs (A)-(D) of this paragraph, as follow:

(A) that individuals covered by the plan are only partially insured;

(B) that in the event the plan or the multiple-employer welfare arrangement does not ultimately pay medical expenses that are eligible for payment under the plan for any reason, the participating employer or its participating employee covered by the plan may be liable for those expenses;

(C) that, if applicable, the plan does not participate in the guaranty fund; such disclosure being provided in the same notice format required of insurers and health maintenance organizations in §1.1001 of this title (relating to Disclosure of Guaranty Fund Nonparticipation); and

(D) the toll-free number for the complaints section of the Texas Department of Insurance consumer services division.

(b) Unless excepted by statute, a multiple-employer welfare arrangement may commence doing business in this state only after it receives its initial certificate of authority.

(c) The multiple-employer welfare arrangement shall appoint the commissioner of insurance as its registered agent for service of process, by filing same on the prescribed form.

Source Note: The provisions of this §7.1905 adopted to be effective May 27, 1994, 19 TexReg 3686.