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H0822......................................................by STATE AFFAIRS SELF-FUNDED HEALTH CARE PLANS - Amends existing law relating to self-funded health care plans to revise the declaration of purpose; to revise definitions; to revise provisions applicable to registration requirements; to require written notice; to set forth plan requirements; to revise provisions applicable to applications for registration; to require contracts of the trust fund to be in writing; to revise provisions applicable to investments of trust funds; to revise provisions applicable to reserves; to provide for extensions of filing times applicable to annual statements; to require the filing of quarterly supplemental financial reports; to exempt self-funded plans from certain provisions relating to taxes, licenses and fees; to revise provisions applicable to the examination of certain records; to revise provisions applicable to administrators and the issuance of bonds or other coverage; to reference plans for purposes of prohibited pecuniary interests; to revise provisions applicable to termination of registration; to revise provisions applicable to liquidation of a trust fund; to revise provisions applicable to rules; to revise provisions applicable to penalties; and to prohibit specific benefits restrictions. 03/15 House intro - 1st rdg - to printing 03/16 Rpt prt - to Bus 03/20 Rpt out - rec d/p - to 2nd rdg 03/21 2nd rdg - to 3rd rdg 03/22 3rd rdg - PASSED - 67-0-3 AYES -- Anderson, Andrus, Barraclough, Barrett, Bastian, Bayer, Bedke, Bell, Bilbao, Black, Block, Boe, Bolz, Brackett, Cannon, Chadderdon, Clark, Collins, Deal, Denney, Edmunson, Ellsworth, Eskridge, Field(18), Field(23), Garrett, Hart, Harwood, Henbest, Henderson, Jaquet, Kemp, Lake, LeFavour, Loertscher, Martinez, Mathews, McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen, Nonini, Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche, Rydalch, Sali, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley, Skippen, Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Trail, Wills, Wood NAYS -- None Absent and excused -- Bradford, Crow, Mr. Speaker Floor Sponsor - Deal Title apvd - to Senate 03/23 Senate intro - 1st rdg - to Com/HuRes 03/30 Rpt out - rec d/p - to 2nd rdg 03/31 2nd rdg - to 3rd rdg Rls susp - PASSED - 33-0-2 AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett, Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis, Fulcher, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough, Langhorst, Little, Lodge, Malepeai, McGee, McKenzie, Pearce, Richardson, Schroeder, Stegner, Stennett, Werk, Williams NAYS -- None Absent and excused -- Marley, Sweet Floor Sponsor - Goedde Title apvd - to House 04/03 To enrol 04/04 Rpt enrol - Sp/Pres signed - To Governor 04/10 Governor signed Session Law Chapter 414 Effective: 07/01/06
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]] Fifty-eighth Legislature Second Regular Session - 2006IN THE HOUSE OF REPRESENTATIVES HOUSE BILL NO. 822 BY STATE AFFAIRS COMMITTEE 1 AN ACT 2 RELATING TO SELF-FUNDED HEALTH CARE PLANS; AMENDING SECTION 41-4001, IDAHO 3 CODE, TO REVISE THE DECLARATION OF PURPOSE; AMENDING SECTION 41-4002, 4 IDAHO CODE, TO REVISE DEFINITIONS; AMENDING SECTION 41-4003, IDAHO CODE, 5 TO REVISE PROVISIONS APPLICABLE TO REGISTRATION REQUIREMENTS AND TO 6 REQUIRE WRITTEN NOTICE TO CURRENT AND PROSPECTIVE EMPLOYER PARTICIPANTS; 7 AMENDING SECTION 41-4004, IDAHO CODE, TO REVISE DESCRIPTIVE LANGUAGE AND 8 TO SET FORTH PLAN REQUIREMENTS; AMENDING SECTION 41-4005, IDAHO CODE, TO 9 REVISE PROVISIONS APPLICABLE TO APPLICATIONS FOR REGISTRATION; AMENDING 10 SECTION 41-4006, IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO THE GRANT 11 OR DENIAL OF REGISTRATION AND TO MAKE A TECHNICAL CORRECTION; AMENDING 12 SECTION 41-4007, IDAHO CODE, TO REQUIRE CONTRACTS OF THE TRUST FUND TO BE 13 IN WRITING AND TO MAKE A TECHNICAL CORRECTION; AMENDING SECTION 41-4009, 14 IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO INVESTMENTS OF TRUST FUNDS 15 AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 41-4010, IDAHO CODE, 16 TO REVISE PROVISIONS APPLICABLE TO RESERVES AND TO MAKE TECHNICAL CORREC- 17 TIONS; AMENDING SECTION 41-4011, IDAHO CODE, TO PROVIDE FOR EXTENSIONS OF 18 FILING TIMES APPLICABLE TO ANNUAL STATEMENTS, TO REQUIRE THE FILING OF 19 QUARTERLY SUPPLEMENTAL FINANCIAL REPORTS, TO MAKE A GRAMMATICAL CORRECTION 20 AND TO REVISE TERMINOLOGY; AMENDING SECTION 41-4012, IDAHO CODE, TO EXEMPT 21 SELF-FUNDED PLANS FROM CERTAIN PROVISIONS RELATING TO TAXES, LICENSES AND 22 FEES, TO MAKE A GRAMMATICAL CHANGE AND TO PROVIDE CORRECT TERMINOLOGY; 23 AMENDING SECTION 41-4013, IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO 24 THE EXAMINATION OF BOOKS, RECORDS AND ACCOUNTS; AMENDING SECTION 41-4014, 25 IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO ADMINISTRATORS AND THE 26 ISSUANCE OF BONDS OR OTHER COVERAGE; AMENDING SECTION 41-4015, IDAHO CODE, 27 TO REFERENCE PLANS FOR PURPOSES OF PROHIBITED PECUNIARY INTERESTS; AMEND- 28 ING SECTION 41-4018, IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO TERMI- 29 NATION OF REGISTRATION AND TO MAKE TECHNICAL CORRECTIONS; AMENDING SECTION 30 41-4019, IDAHO CODE, TO REVISE PROVISIONS APPLICABLE TO THE LIQUIDATION OF 31 A TRUST FUND; AMENDING SECTION 41-4020, IDAHO CODE, TO REVISE PROVISIONS 32 APPLICABLE TO RULES AND TO PROVIDE CORRECT TERMINOLOGY; AMENDING SECTION 33 41-4021, IDAHO CODE, TO PROVIDE CODE REFERENCES FOR APPLICABLE PROVISIONS 34 AND TO PROVIDE CORRECT TERMINOLOGY; AMENDING SECTION 41-4022, IDAHO CODE, 35 TO REVISE PROVISIONS APPLICABLE TO PENALTIES; AND AMENDING SECTION 36 41-4023, IDAHO CODE, TO PROVIDE CLARIFYING LANGUAGE, TO REFERENCE THE PLAN 37 TRUSTEE OR EMPLOYER FOR PURPOSES OF PROHIBITING THE RESTRICTION OF SPECI- 38 FIED COVERAGE AND TO PROHIBIT SPECIFIC BENEFITS RESTRICTIONS RELATED TO 39 THE NEWBORNS' AND MOTHERS' HEALTH PROTECTION ACT OF 1996 AND TO MAKE TECH- 40 NICAL CORRECTIONS. 41 Be It Enacted by the Legislature of the State of Idaho: 42 SECTION 1. That Section 41-4001, Idaho Code, be, and the same is hereby 43 amended to read as follows: 2 1 41-4001. DECLARATION OF PURPOSE. (1) It is the purpose of thisactchap- 2 ter to recognize and provide reasonable public supervision of self-funded or 3 partially self-funded plans for provision of health care service benefits to 4 employees in connection with or as an alternative to insurance and other pre- 5 payment plans, to provide standards for financial soundness of such plans,and6 to protect the interests of employees covered thereby and to provide for 7 financially viable alternatives to traditional health care arrangements. The 8 legislature of the state of Idaho declares that the existence and operation of 9 such self-funded plans are matters of legislative concern, vitally affecting 10 the rights and interests of the citizens of this state. 11 (2) The provisions of this chapter shall apply to any single employer or 12 multiple employer arrangement to fully or partially self-fund a health benefit 13 plan for beneficiaries residing in this state to the extent that state regula- 14 tion of the arrangement or plan is not preempted by the employee retirement 15 income security act of 1974. 16 SECTION 2. That Section 41-4002, Idaho Code, be, and the same is hereby 17 amended to read as follows: 18 41-4002. DEFINITIONS. For the purposes of thisactchapter unless context 19 otherwise requires: 20 (1) "Administrator" is a person, if other than the trustee, appointed by 21 the plan sponsor or employed by the trustee toadministerprovide administra- 22 tive services to a self-funded plan. 23 (2) "Beneficiary" is any individual entitled, under the self-funded plan, 24 to payment by the trust fund of any part of all of the cost of any health care 25 service rendered him. 26 (3)"Director" is the director of the department of insurance of this27state"Claims liability" or "reserves" is the total of all incurred and unpaid 28 claims, including incurred but not reported claims, for allowable benefits 29 under a self-funded plan that are not reimbursed or reimbursable by stop-loss 30 insurance provided by a carrier authorized to transact insurance in this 31 state. 32 (4) "Contribution" is the amount paid or payable by the employer or 33 employee into the trust fund. 34 (5) "Director" is the director of the department of insurance of this 35 state. 36 (6) "Multiple employer welfare arrangement" shall have the same meaning 37 as that given to such term by the employee retirement income security act of 38 1974. 39 (7) "Person" is any individual, corporation, association, firm, syndi- 40 cate, organization, or other entity. 41 (8) "Plan sponsor" is any person who creates a plan for the benefit of 42 any person. 43 (69) "Self-funded plan" or "plan" is any single or multiple employer wel- 44 fare arrangement, or any other single or multiple employer plan, other than a 45 plan providing only benefits under title 72, Idaho Code, under which payment 46 forany disability income benefits not otherwise provided for under title 72,47Idaho Code, (workmen's compensation and related laws--industrial commission),48 medical, surgical, hospital, and other services for prevention, diagnosis, or 49 treatment of any disease, injury, or bodily condition of an employee is, or is 50 to be, regularly provided for or promised from funds created or maintained in 51 whole or in part by contributions or payments thereto by the employer or 52 employers, or by the employer or employers and the employees, and not other- 53 wise covered by insurance or contract with a health care service corporation,3 1health maintenance organization,orsimilar other third party prepayment plan2 managed care organization authorized to transact business in this state. 3 (10) "Single employer" is any individual, sole proprietorship, business, 4 partnership, corporation, limited liability company, firm or any other form of 5 legally recognized entity or a group of two (2) or more employers under 6 "common control" as defined in section 3(40)(B)(iii) of the employee retire- 7 ment system act of 1974. 8 (11) "Surplus" is the excess of the assets of a self-funded plan minus the 9 liabilities of the plan, provided the liabilities of a self-funded plan shall 10 include the claims liability of the plan. 11 (712) "Trust fund" is a trust fund establishedunderin conjunction with a 12 self-funded plan for receipt of contributions of employer and employees and 13 payment of or with respect to health care service costs of beneficiaries. 14 (813) "Trustee" is the trustee, whether a single or multiple trustee, of 15 the trust fund. 16 SECTION 3. That Section 41-4003, Idaho Code, be, and the same is hereby 17 amended to read as follows: 18 41-4003. REGISTRATION REQUIRED -- EXEMPTIONS -- NOT SUBJECT TO INSURANCE 19 CODE. (1) Noself-funded planperson shall offer or operate a self-funded plan 20 in this state except while registered with the director as hereinafter pro- 21 vided.Self-funded plans already in operation at the effective date of this22act shall so register within ninety (90) days after such effective date.23 (2) No registration shall be required of: 24 (a) Any self-funded plan established for the sole purpose of funding the 25 dollar amount of a deductible clause contained in the provisions of an 26 insurance contract issued by an insurer duly authorized to transact dis- 27 ability insurance in this state if the deductible does not exceed an 28 amount applicable to each beneficiary of two thousand dollars ($2,000) per 29 annum and the total of all obligations to all beneficiaries insured under 30 the plan arising out of the application of such a deductible does not 31 exceed the aggregate amount of two hundred thousand dollars ($200,000) in 32 any one (1) year. 33 (b) Any plan established and maintained for the purpose of complying with 34 any worker's compensation law or unemployment compensation disability 35 insurance law. 36 (c) Any plan administered by or for the federal government or agency 37 thereof or any county of this state. 38 (d) Any plan which is primarily for the purpose of providing first aid 39 care and treatment, at a dispensary of an employer, for injury or sickness 40 of employees while engaged in their employment. 41(e) Any employer's self-insured health plan or service established and42maintained solely for its members and their immediate families, or to any43self-insured health plan or service established, maintained, and insured44jointly by any employer and any labor organization or organizations if45such health plan or service has been in existence and operation for fif-46teen (15) years immediately preceding the effective date of this act.47 (3) Plans while so registered shall not be deemed to be engaged in the 48 business of insurance and shall not be subject to provisions of the Idaho 49 insurance code except as expressly provided in thisactchapter. A plan that 50 operates in this state without registering under this chapter shall be deemed 51 to be engaged in the business of insurance and any person offering or operat- 52 ing an unregistered plan shall be deemed to be transacting insurance without 53 proper licensing. 4 1 (4) Any self-funded plan providing benefits to more than one (1) employer 2 shall provide to each employer participant and to each prospective employer 3 participant written notice that the plan is not insurance and does not partic- 4 ipate in the state guaranty association. The notice shall also be included as 5 part of all marketing materials used by or on behalf of the plan. 6 SECTION 4. That Section 41-4004, Idaho Code, be, and the same is hereby 7 amended to read as follows: 8 41-4004.QUALIFICATIONS FOR REGISTRATIONPLAN REQUIREMENTS. No self- 9 funded plan shall register, and the director shall not register a self-funded 10 plan, whichisdoes notqualified therefor as followsmeet the following 11 requirements: 12 (1) The plan mMust require all contributions to be paid in advance and to 13 be deposited in and disbursed from a trust fund duly created and existing 14 under an adequate written irrevocable trust agreement between the employer or 15 employers and the trustee that meets the terms of this chapter. 16 (2) The plan mMust have, or provide for, a trustworthy and responsible 17 trustee, and for competent administration of the trust fund and plan. 18 (3) The plan mMust require thatall suchemployersmustcontribute to the 19 trust fund, and that all contributions, if any, by employees shall be by regu- 20 lar periodic payroll deductions, except as to contributions made by an 21 employee during his absence from such employment for such period as the plan 22 may reasonably provide. 23 (4) The plan mMust provide that the administrator or trustee on behalf of 24 the trust fund, as the case may be, shall furnish to each employee-beneficiary 25 of the plan a written statement or schedule adequately and clearly stating all 26 benefits currently allowable under the plan, together with all applicable 27 restrictions, limitations, and exclusions, and the procedure for filing a 28 claim for benefits. 29 (5) The plan must require that the trust fundmustbe actuarially sound; 30 that is, assets and income of the trust fund must be adequate under reasonable 31 estimates for payment of all benefits promised to beneficiaries by the plan. 32In determining actuarial soundness the director shall also give due consider-33ation to:34(a) Applicable stop-loss insurance provided or to be provided the plan by35an insurer duly authorized to transact disability insurance in this state;36(b) Contracts with health care service corporations or health maintenance37organizations authorized to conduct such operations in this state, and38covering certain of the promised benefits;39(c) Other applicable insurance or guarantys; and40(d) Plan factors or provisions for prevention or reduction of adverse41selection against the plan by those otherwise eligible to become benefi-42ciaries.43(6) Must otherwise be in compliance with this act.44 SECTION 5. That Section 41-4005, Idaho Code, be, and the same is hereby 45 amended to read as follows: 46 41-4005. APPLICATION FOR REGISTRATION -- FEE. (1) Application for regis- 47 tration of a self-funded plan shall be made to the director, on forms fur- 48 nished and designed by him for the purpose of eliciting information as to 49 whether the plan is qualified for registration. The application shall be 50 signed and verified by at least one (1) of the employers and one (1) of the 51 trustees. If the employer or trustee is a corporation, the verification shall 5 1 be by a duly authorized corporate officer. 2 (2) The application shall be accompanied by all plan documents including: 3 (a) A copy of the trust agreement under which the trust fund is to exist 4 and operate; 5 (b) A copy of the proposed written statement of benefits referred to in 6 section 41-4004(54), Idaho Code; 7 (c) A financial statement of the trust fund, if already in existence and 8 operatingon the effective date of this act, as of a date not more than9forty-five (45) days prior to the date of filing the application. The10statement shall beat the time of application, certified by an independent 11 certified public accountant., or by an accountant whose certification is12acceptable to the directorIf the trust fund is not in existence at the 13 time of application, a pro forma balance sheet for the start of operation 14 of the plan and a pro forma balance sheet for the end of the first twelve 15 (12) months of operation of the plan shall accompany the application, pro- 16 vided the balance sheets shall include actuarially determined claims lia- 17 bilities; 18 (d) A written statement of reasonably projected income and disbursements 19 of the trust fund for the twelve (12) month period commencing with date of 20 application and showing also the amount reserved as of the end of such 21 period for claims incurred and not paid or incurred and not reported, cer- 22 tified by a qualified actuary; 23 (e)A copy of any study made of the proposed self-funded plan by any con-24sultant for the information or guidance of employer or employees; andA 25 copy of an actuarial study prepared by a qualified actuary determining 26 adequate rates for the plan. The rates shall not be less than the sum of 27 projected incurred claims for the year plus costs of operation, plus any 28 prior year deficiency, less any excess surplus; 29 (f) If the plan is domiciled outside this state, a letter or other writ- 30 ten evidence of good standing from the plan's regulator in the state of 31 domicile; 32 (g) A copy of every contract between the plan and any administrator or 33 service company; 34 (h) A copy of a stop-loss insurance agreement issued by an insurer autho- 35 rized to do business in this state providing both specific and aggregate 36 coverage in an amount as annually indicated in the actuarial opinion for 37 the plan, provided the director may waive the requirements for aggregate 38 stop-loss coverage if such coverage is not reasonably available or other- 39 wise deemed appropriate; 40 (i) A copy of the policy, contract, certificate, summary plan description 41 or other evidence of the benefits and coverages provided to beneficiaries, 42 including a table of the rates charged or proposed to be charged for each 43 form of such contract accompanied by a certification of a qualified actu- 44 ary that: 45 (i) The rates are neither inadequate nor excessive nor unfairly 46 discriminatory; 47 (ii) The rates are appropriate for the classes of risks for which 48 they have been computed; and 49 (iii) An adequate description of the rating methodology has been 50 filed with the director and the methodology follows consistent and 51 equitable actuarial principles; and 52 (fj) Such other relevant documentation and information as the director 53 may reasonably require. 54 (3) If the applicant is a multiple employer welfare arrangement, the 55 application shall be signed under oath by the plan sponsor or the trustee of 6 1 the plan, and the application shall also include: 2 (a) A copy of any articles of incorporation and bylaws of any entity act- 3 ing as a plan sponsor; 4 (b) A list of the names, addresses and official capacities with the plan 5 of the individuals who will be responsible for the management and conduct 6 of the affairs of the plan, including all trustees, officers and direc- 7 tors. Such individuals shall fully disclose the extent and nature of any 8 contracts or arrangements between them and the plan, including any possi- 9 ble conflicts of interest; and 10 (c) A copy of the articles of incorporation, bylaws or trust agreement 11 that governs the operation of the plan. 12 (4) At the time of filing the application the applicant shall pay to the 13 director a nonrefundable filing fee as provided for byregulationrule. 14 (45) The director shall transmit and account for all fees received by him 15 hereunder as provided in section 41-406, Idaho Code. 16 (6) For purposes of this section, a qualified actuary is an actuary hav- 17 ing experience in establishing rates for a self-funded plan and the health 18 services being provided, and who is also a fellow of the society of actuaries, 19 a member of the American academy of actuaries, or an enrolled actuary under 20 the employee retirement income security act of 1974. 21 SECTION 6. That Section 41-4006, Idaho Code, be, and the same is hereby 22 amended to read as follows: 23 41-4006. GRANT OR DENIAL OF REGISTRATION. The director shall act upon an 24 application for registration of a self-funded plan with all reasonable prompt- 25 ness, but not less than ninety (90) days from the date of submission of a com- 26 plete application to the director. Failure to act within the ninety (90) day 27 time period shall be deemed to be the registration of such self-funded plan by 28 the director. In the event the director refuses to register the plan, the 29 applicant shall be entitled to challenge such refusal pursuant to chapter 2, 30 title 41, Idaho Code, and to the contested case and judicial review provisions 31 of chapter 52, title 67, Idaho Code. He may make such investigation of the 32 proposal as he deems advisable. If the director finds that the application is 33 complete and that the plan meets the qualifications stated in section 41-4004, 34 Idaho Code, he shall issue and deliver a certificate of registration in appro- 35 priate form to the applicant; otherwise, the director shall refuse to register 36 the plan and shall give written notice of such refusal to the applicant, stat- 37 ing the reasons therefor. 38 SECTION 7. That Section 41-4007, Idaho Code, be, and the same is hereby 39 amended to read as follows: 40 41-4007. TRUST FUND -- POWERS. The trust fund of a self-funded plan shall 41 have power: 42 (1) To have and use an appropriate descriptive name; 43 (2) To sue and be sued in its own name; 44 (3) To contract in its own name. All such contracts shall be in writing 45 and shall be signed by the trustee of the fund, and if there is more than one 46 (1) trustee, the contract may be so executed by one (1) trustee if so autho- 47 rized by all trustees; 48 (4) To borrow money and give security therefor; and 49 (5) To engage exclusively in transactions authorized or required by this 50actchapter, or reasonably incidental thereto. 7 1 SECTION 8. That Section 41-4009, Idaho Code, be, and the same is hereby 2 amended to read as follows: 3 41-4009. INVESTMENT OF TRUST FUND. (1) The trustee may invest reserves 4 and other funds available for the purpose in the trust fund of a self-funded 5 plan in the following kinds of investments only: 6 (a) General obligations of the United States government, or of any state, 7 district, commonwealth, or territory of the United States, or of any 8 municipality, county, or other political subdivision or agency thereof. 9 (b) Obligations the payment of principal and interest of which is guaran- 10 teed by any such government or agency. 11 (c) Corporate bonds and similar obligations meeting the requirements 12 specified for investment of funds of insurers under section 41-711, Idaho 13 Code. 14 (d) Collateral loans payment of principal and interest of which is ade- 15 quately secured by securities in which the trust fund could lawfully 16 invest direct. 17 (e) Deposits, savings accounts, and share accounts in established banks 18 and savings and loan associations located in the United States. Such 19 investment as to any one (1) such institutionshall notmay be in excess 20 of the amount covered by applicable deposit, savings, and share account 21 insurance at the discretion of the director. 22 (f) Investments as permitted by sections 41-714 and 41-716, Idaho Code, 23 provided the combined amount of such investments shall not exceed ten per- 24 cent (10%) of the total assets of the trust fund. 25 (2) In addition to investments excluded under subsection (1)aboveof 26 this section, the trustee is expressly prohibited from investing trust fund 27 moneys in: 28 (a) Any loan to or security of any employer participating in the plan, or 29 to or of any officer, director, subsidiary or affiliate of any such 30 employer. 31 (b) The security of any person in which the trustee, administrator, or 32 any consultant of the plan has a direct or indirect material pecuniary 33 interest. 34 (c) Real estate or loans thereon. 35 (d) Any personal loan, other than a collateral loan referred to in sub- 36 section (1)(d)aboveof this section, but subject tosubdivisionspara- 37 graphs (a) and (b) of this subsection (2). 38 (3) All such investments shall be made and held in the name of the trust 39 fund, and the interest and yield thereon shall inure to the account of the 40 trust fund. 41 (4) No investment shall be made unless authorized in writing by the 42 trustee and so shown in the records of the trust fund. 43 (5) Any person who authorizes any investment of trust fund moneys in 44 violation of this section shall, in addition to other penalty therefor, be 45 liable for all loss suffered by the trust fund on account of the investment. 46 (6) No investment made in violation of this section shall constitute an 47 "asset" in any determination of the financial condition of the trust fund. 48 SECTION 9. That Section 41-4010, Idaho Code, be, and the same is hereby 49 amended to read as follows: 50 41-4010. RESERVES AND SURPLUS. (1) A self-funded plan shall establish and 51 maintain in the trust fund the following reserves: 52 (a) A reserve in an amount as certified by a member of the American 8 1Aacademy ofAactuaries as being necessary for payment of claims against 2 the trust fund for benefits, including both claims reported and not yet 3 paid and claims incurred but not yet reported. 4 (b) If under the plan periodic contributions of either the employer(s) or 5 employees to the trust fund are payable less frequently than monthly, 6 there shall be a reserve for unearned contributions as computed pro rata 7 on the basis of the unexpired portion of the period for which the contri- 8 bution has been paid. 9 (2) In any determination of the financial condition of the trust fund the 10 claims reserve and reserve for unearned contributions shall constitute liabil- 11 ities. 12 (3) In addition to reserves required by this section, a self-funded plan 13 shall establish and maintain in its trust fund surplus equal to at least 14 thirty percent (30%) of the unpaid claims liability of the plan. A newly 15 formed plan with no prior operating history shall maintain surplus of not less 16 than ten percent (10%) of unpaid claims liability during its first year of 17 operation, not less than twenty percent (20%) of unpaid claims liability dur- 18 ing its second year of operation and not less than thirty percent (30%) of 19 unpaid claims liability at all times thereafter. 20 (4) Up to one-third (1/3) of the surplus required by this section may be 21 funded by a clean, irrevocable letter of credit, in a form acceptable to the 22 director, issued in favor of the trust fund by a federally or state chartered 23 bank having a branch office in Idaho. Such irrevocable letter of credit cannot 24 be guaranteed by pledge of any of the plan assets. 25 SECTION 10. That Section 41-4011, Idaho Code, be, and the same is hereby 26 amended to read as follows: 27 41-4011. RECORDS AND ACCOUNTS -- ANNUAL STATEMENT. (1) The trustees of a 28 self-funded plan shall cause full and accurate records and accounts to be 29 entered and maintained covering all financial transactions and affairs of the 30 trust fund. 31 (2) Withinsixtyninety (690) days after close of a fiscal year of the 32 plan, the trustee shall make an annual statement in writing summarizing the 33 financial transactions of the trust fund for such fiscal year and its finan- 34 cial condition at the end of such year in accordance with thisactchapter and 35 generally accepted and applicable accounting principles. The statement shall 36 otherwise be in form and require information as prescribed by the director, 37 and the financial information therein shall be certified by the accountant by 38 whom such information was prepared or audited. The trustee shall promptly 39 deliver a copy of the statement to each employer participating in the plan, 40 and keep a copy thereof on file in the business office of the plan where it 41 shall be available at all reasonable times for a period of not less than three 42 (3) yearstofor review by any beneficiary. 43 (3) On or before expiration of suchsixtyninety (690) day period the 44 trustee shall cause an original of the annual statement to be filed with the 45 director. Thetrust fundtrustee shall pay a filing fee as provided for by 46regulationrule. The director may grant a thirty (30) day extension of the 47 time for filing the annual statement. 48 (4) The trustee shall also file quarterly supplemental unaudited finan- 49 cial reports in a form and at the times prescribed by the director. 50 (5) The director shall transmit and account for all fees received by him 51 hereunder as provided in section 41-406, Idaho Code. 52 SECTION 11. That Section 41-4012, Idaho Code, be, and the same is hereby 9 1 amended to read as follows: 2 41-4012. TAXES. (1) There is hereby levied upon self-funded plans the tax 3 provided for in this section. Each registered self-funded plan and each for- 4 merly registered plan with respect to beneficiaries in this state while so 5 registered, shall coincidentally with the filing of its annual statement with 6 the director pay to the director a tax computed at the rate of four cents (4¢) 7 per month per beneficiary covered by the plan during the fiscal year of the 8 annual statement with respect to beneficiaries working or resident in this 9 state. 10 (2) The state of Idaho hereby preempts the field ofimposingimposition 11 of excise, privilege, franchise, income, license and similar taxes, licenses 12 and fees upon self-funded plans and on the intangible property of their trust 13 funds; and no county, city, municipality, district, school district, or other 14 political subdivision or agency of Idaho shall levy upon such plans or trust 15 funds any such tax, license or fee additional to such as are levied by the 16 legislature of Idaho in thisactchapter. 17 (3) The tax herein levied, together with the fees provided for in this 18actchapter, shall be in lieu of any and all income taxes and other excise 19 taxes, licenses and fees payable to the state of Idaho and no self-funded plan 20 shall be required to file any tax returns or comply with any provisions gov- 21 erning such income taxes and other excise taxes, licenses and fees payable to 22 the state of Idaho. 23 (4) The director shall promptly remit all such tax payments received by 24 him to the state treasurer for credit to the general fund of the state. 25 SECTION 12. That Section 41-4013, Idaho Code, be, and the same is hereby 26 amended to read as follows: 27 41-4013. EXAMINATION OF BOOKS, RECORDS AND ACCOUNTS. (1) The books, 28 records, accounts and affairs of a self-funded plan shall be subject to exami- 29 nation by the director, by competent examiners duly authorized by him in writ- 30 ing, at such times or intervals as the director deems advisable. The purposes 31 of the examination shall be to determine compliance of the plan with applica- 32 ble laws, financial condition and actuarial adequacy of its trust fund, treat- 33 ment accorded beneficiaries, and as to other factors materially related to the 34 plan's management and operation. 35 (2) The trustee shall promptly make the books, records and accounts of 36 the plan and trust fund available in Idaho to the examiner and otherwise 37 facilitate the examination. 38 (3) The examiner shall conduct the examination expeditiously, make his 39 report of the examination in writing, and deliver a copy thereof to the 40 trustee and the director. The trustee shall havetwofour (24) weeks after 41 receipt of the report within which to recommend to the director such correc- 42 tions or changes therein as the trustee may deem appropriate. After making 43 such corrections or changes, if any, as he deems proper, the director shall 44 file the report in his office as a document open to public inspection, and 45 deliver to the trustee a copy of the report as so corrected or changed. 46 (4) At the direction of the director, the costs of the examination shall 47 be borne by the trust fund of the plan, and shall be paid by the trustee in 48 accordance with section 41-228, Idaho Code. 49 SECTION 13. That Section 41-4014, Idaho Code, be, and the same is hereby 50 amended to read as follows: 10 1 41-4014. TRUSTEES -- ADMINISTRATORS -- BONDING. (1) Either an individual 2 or a corporation may be a trustee of the trust fund. Either an individual, 3 firm, or corporation may be an administrator of a plan. 4 (2) An employer participant in the plan shall be neither a trustee nor 5 the administrator, but this provision shall not be deemed to prohibit an indi- 6 vidual who is otherwise an employee of such an employer from being trustee or 7 administrator. 8 (3) Any administrator that is retained by a self-funded plan must be 9 licensed as an administrator pursuant to chapter 9, title 41, Idaho Code. The 10 trustee shall causeall individuals handling receipts and disbursements for11the trust fund to be bonded at all times underto be issued a fidelity bond, 12issued by a surety insurer authorized to transact such insurance in this13state. The bond shall be in favor of the trust fund and for such aggregate14penalty amount, not less than twenty-five thousand dollars ($25,000), as the15director may deem reasonably advisable in relation to amount of funds to be so16handled. The bond shall be noncancellable except upon not less than thirty17(30) days advance notice in writing to the trustee and the director. The cost18of the bond shall be borne by the trust fundor coverage deemed by the direc- 19 tor to be equivalent to a fidelity bond, in the name of the self-funded plan 20 protecting against acts of fraud and dishonesty by its trustees, directors, 21 officers and employees responsible for servicing the plan. Such bond shall be 22 in an amount equal to the greater of ten percent (10%) of the contributions 23 received by the plan or ten percent (10%) of the benefits paid during the pre- 24 ceding calendar year. If the plan was not in operation during the preceding 25 calendar year, the bond shall be in an amount equal to ten percent (10%) of 26 the contributions projected to be received by the plan during its first year 27 of operation. The amount of any bond required under this section shall be not 28 less than twenty-five thousand dollars ($25,000) or more than five hundred 29 thousand dollars ($500,000). 30 SECTION 14. That Section 41-4015, Idaho Code, be, and the same is hereby 31 amended to read as follows: 32 41-4015. PROHIBITED PECUNIARY INTERESTS IN PLAN MANAGEMENT. (1) No 33 trustee, administrator, or other person having responsibility for the manage- 34 ment of a self-funded plan or the investment or other handling of trust funds 35 shall: 36 (a) Receive directly or indirectly or be pecuniarily interested in any 37 fee, commission, compensation, or emolument, other than salary or other 38 similar compensation regularly fixed and allowed for services regularly 39 rendered to the plan, arising out of any transaction to which the trust 40 fund is or is to be a party. 41 (b) Receive compensation as a consultant to the plan while also acting as 42 a trustee or administrator, or as an employee of either. 43 (c) Have any direct or indirect material pecuniary interest in any loan 44 or investment of the trust fund. 45 (2) No consultant to the plan or trust fund shall directly or indirectly 46 receive or be pecuniarily interested in any commission or other compensation 47 arising out of any contract or transaction between the plan or trust fund and 48 any insurer, health care service corporation, health maintenance organization 49 or other provider of health care services or of drugs or other health care 50 needs and supplies. 51 (3) The director may, after reasonable notice and a hearing, require 52 removal of a trustee or prohibit the trustee from employing or retaining or 53 continuing to employ or retain any person in the administration of the trust 11 1 fund or plan upon finding that continuation of the trustee or such employment 2 or retention involves a conflict of interest not in the best interests of the 3 plan or adversely affecting interests of beneficiaries. 4 SECTION 15. That Section 41-4018, Idaho Code, be, and the same is hereby 5 amended to read as follows: 6 41-4018. TERMINATION OF REGISTRATION. (1) The director shall terminate 7 the registration of a self-funded plan upon written request of the trustee, or 8 if he finds, after an examination, that the trust fund is insolvent. For the 9 purposes of this section, "insolvent" means the plan is unable to pay its 10 obligations when they are due or that its assets do not exceed its liabili- 11 ties. As used in this section, "assets" means all investments held in the name 12 of the trust as permitted by section 41-4009, Idaho Code. 13 (2) The director may terminate the registration of a plan for violation 14 of thisactchapter, or failure of the trustee to file the annual statement 15 with the director and pay the tax within the time required under sections 16 41-4011 and 41-4012, Idaho Code, or if he finds, after an examination of the 17 trust fund and the plan: 18 (a) That the plan no longer meets the qualifications required by section 19 41-4004, Idaho Code, and that the deficiency will not or cannot be reme- 20 died within a reasonable time; 21 (b) That as a matter of frequent practice the benefits promised by the 22 plan are not being fairly and promptly paid; 23 (c) That the cost of administering the plan is excessive in relation to 24 the character and volume of service being rendered in the administration; 25 or 26 (d) That the trust fund has been subject to fraudulent or dishonest prac- 27 tices on the part of the trustee, administrator, consultant, any partici- 28 pating employer, or beneficiaries. 29 (3) The director shall so terminate the registration by his written order 30 given to the trustee last of record and to each employer last of record a par- 31 ticipant in the plan. The order shall state the grounds upon which made and 32 its effective date. The order shall be subject to judicial review in the same 33 manner as applies to official orders of the director in general. 34 SECTION 16. That Section 41-4019, Idaho Code, be, and the same is hereby 35 amended to read as follows: 36 41-4019. LIQUIDATION OF TRUST FUND. (1) Upon termination ofadministra-37tionregistration the trust fund of a self-funded plan shall be liquidated. 38 (2) Liquidation of a solvent self-funded plan shall be conducted by its 39 trustee under a plan of liquidation in writing filed with the director, found 40 by the director to be fair and equitable to all persons having a pecuniary 41 interest in the trust fund, and approved by him. Any balance remaining after 42 payment or adequate provision for all claims and charges against the trust 43 fund shall be disposed of in such manner as is provided for in the plan of 44 liquidation. Unless under the plan of liquidation, liability for all unpaid 45 claims and obligations of the trust fund has been assumed by other financially 46 responsible person or persons, the existence of surplus funds for such dispo- 47 sition shall not be determined prior to expiration of two (2) years after ter- 48 mination of the registration. 49 (3) Theplan ofliquidation of an insolventtrust fund, after such plan50has been approved by the director, shall be binding upon all persons pecuni-51arily interested in the trust fund. Pending the effectuation of the plan of12 1liquidation of an insolvent trust fund the director may impose such prohibi-2tions or restrictions upon disbursement or use of trust fund moneys as he3deems advisable for the protection of all interested persons.4(4) If the trust fund is then insolvent and a plan of liquidation thereof5satisfactory to the director as being fair and equitable is not filed with him6within sixty (60) days after the effective date of termination of the plan's7registration, or if liquidation of a solvent trust fund is not beingself- 8 funded plan shall be carried out by the director in accordance withthe plan9of liquidation theretofore approved by him, the director shall liquidate the10trust fund under the applicable provisions ofchapter 33, title 41, Idaho Code 11 (rehabilitation and liquidation), and forthethis purpose thetrust fund12 self-funded plan shall be deemed to be an insolvent domestic insurer. 13 SECTION 17. That Section 41-4020, Idaho Code, be, and the same is hereby 14 amended to read as follows: 15 41-4020. RULES.AND REGULATIONS.(1) The director may make reasonable 16 rulesand regulationsnecessary for or as an aid to effectuation of any provi- 17 sion of thisactchapter. No such ruleor regulationshall extend, modify, or 18 conflict with any provision of thisactchapter and the reasonable implica- 19 tions thereof. 20 (2) Such rules,and regulations,or any amendment thereof, shall be made 21 by the directoronly after a public hearing thereon of which the director has22given written notice not less than thirty (30) days in advance to the trustee23of each plan then registered with him. If reasonably possible the director24shall include with the notice a copy of the proposed rules and regulations or25amendment, or a condensed summary of material proposed provisionsin accor- 26 dance with chapter 52, title 67, Idaho Code. 27 SECTION 18. That Section 41-4021, Idaho Code, be, and the same is hereby 28 amended to read as follows: 29 41-4021. OTHER PROVISIONS APPLICABLE. Chapter 2, title 41, Idaho Code, 30 (the director of the department of insurance), chapter 13, title 41, Idaho 31 Code, (trade practices and frauds),andsections 41-2141 and 41-2216, Idaho 32 Code, (coordination with social security benefits), and section 41-2841, Idaho 33 Code, (borrowed surplus), to the extent applicable and not in conflict with 34 the express provisions of thisactchapter, shall also apply with respect to 35 self-funded plans, and for the purpose such plans shall be deemed to be 36 "insurers." 37 SECTION 19. That Section 41-4022, Idaho Code, be, and the same is hereby 38 amended to read as follows: 39 41-4022. PENALTIES. (1) Any person whowilfullywillfully violates or 40 causes or induces violation of any provision of thisactchapter or any lawful 41 ruleor regulationof the director issued thereunder, shall be subject to an 42 administrative penaltyas provided in subsection (4) of this sectionfor each 43 violation of not more than one thousand dollars ($1,000) for an individual and 44 not more than five thousand dollars ($5,000) for any entity. 45 (2) Any person who makes a false statement or representation of a mate- 46 rial fact, knowing it to be false, or who knowingly fails to disclose a mate- 47 rial fact in any application, examination, or statement required under this 48actchapter or by lawful ruleor regulationof the director thereunder, shall 49 be subject to penalty as provided in subsection (4) of this section. 13 1 (3) Any person who makes a false entry in any book, record, statement, or 2 report required by thisactchapter or lawful ruleor regulationof the direc- 3 tor thereunder to be kept by him for any self-funded plan, with intent to 4 injure or defraud the trust fund or any beneficiary thereunder, or to deceive 5any oneanyone authorized or entitled to examine the affairs of the plan, 6 shall be subject to penalty as provided in subsection (4) of this section. 7 (4) For each such violation, act or omission referred to in subsections 8 (2) and (3) of this section, unless greater penalty is provided therefor under 9 any other applicable law, the offender shall upon conviction thereof be sub- 10 ject to a fine of not more thanonefifteen thousand dollars ($15,000) and to 11 imprisonment for not more thanonefifteen (15) years, or to both such fine 12 and imprisonment. 13 SECTION 20. That Section 41-4023, Idaho Code, be, and the same is hereby 14 amended to read as follows: 15 41-4023. COVERAGE FROM MOMENT OF BIRTH -- COMPLICATIONS OF PREGNANCY. (1) 16 Every self-funded plan issued in this state or providing coverage to any cov- 17 ered family residing within this state, shall contain a provision granting 18 immediate accident and sickness coverage, from and after the moment of birth, 19 to each newborn child or infant of any covered family covered, including a 20 newborn child placed with the adoptive covered family within sixty (60) days 21 of the adopted child's date of birth. Coverage under the self-funded plan for 22 an adopted newborn child placed with the adoptive covered family more than 23 sixty (60) days after the birth of the adopted child shall be from and after 24 the date the child is so placed. Coverage provided in accordance with this 25 section shall include, but not be limited to, coverage for congenital anoma- 26 lies. For the purposes of this section, "child" means an individual who has 27 not reached eighteen (18) years of age as of the date of the adoption or 28 placement for adoption. For the purposes of this section, "placed" shall mean 29 physical placement in the care of the adoptive covered family, or in those 30 circumstances in which such physical placement is prevented due to the medical 31 needs of the child requiring placement in a medical facility, it shall mean 32 when the adoptive covered family signs an agreement for adoption of such child 33 and signs an agreement assuming financial responsibility for such child. Prior 34 to legal finalization of adoption, the coverage required under the provisions 35 of this subsection (1) as to a child placed for adoption with a covered family 36 continues in the same manner as it would with respect to a naturally born 37 child of the covered family until the first to occur of the following events: 38 (a) Date the child is removed permanently from that placement and the 39 legal obligation terminates; or 40 (b) The date the covered family rescinds, in writing, the agreement of 41 adoption or agreement assuming financial responsibility. No such plan may 42 be issued or amended if it contains any disclaimer, waiver, or other limi- 43 tation of coverage relative to the coverage or insurability of newborn or 44 adopted children or infants of a covered family covered from and after 45 the moment of birth that is inconsistent with the provisions of this sec- 46 tion. 47 (2) Neither the plan trustee or employer nor aAn insurer shallnot48 restrict coverage under a self-funded plan of any dependent child adopted by a 49 participant or beneficiary, or placed with a participant or beneficiary for 50 adoption, solely on the basis of a preexisting condition of the child at the 51 time the child would otherwise become eligible for coverage under the plan, if 52 the adoption or placement for adoption occurs while the participant or benefi- 53 ciary is eligible for coverage under the plan. 14 1 (3) No self-funded plan which provides maternity benefits for a person 2 covered continuously from conception shall be issued, amended, delivered, or 3 renewed in this state on or after January 1, 1977, if it contains any exclu- 4 sion, reduction, or other limitations as to coverage, deductibles, or coinsur- 5 ance provisions as to involuntary complications of pregnancy, unless such pro- 6 visions apply generally to all benefits paid under the plan. If a fixed amount 7 is specified in such plan for surgery, the fixed amounts for surgical proce- 8 dures involving involuntary complications of pregnancy shall be commensurate 9 with other fixed amounts payable for procedures of comparable difficulty and 10 severity. In a case where a fixed amount is payable for maternity benefits, 11 involuntary complications of pregnancy shall be deemed an illness and entitled 12 to benefits otherwise provided by the plan. Where the plan contains a mater- 13 nity deductible, the maternity deductible shall apply only to expenses result- 14 ing from normal delivery and cesarean section delivery; however, expenses for 15 cesarean section delivery in excess of the deductible shall be treated as 16 expenses for any other illness under the plan. Thissubdivisionsubsection 17 shall apply to all self-funded plans except any such plan made subject to an 18 applicable collective-bargaining agreement in effect before January 1, 1977. 19 For purposes of thissubdivisionsubsection, involuntary complications of 20 pregnancy shall include, but not be limited to, puerperal infection, 21 eclampsia, cesarean section delivery, ectopic pregnancy, and toxemia. 22 All plans subject to thissubdivisionsubsection and issued, amended, 23 delivered, or renewed in this state on or after January 1, 1977, shall be con- 24 strued to be in compliance with this section, and any provision in any such 25 plan which is in conflict with this section shall be of no force or effect. 26 (4) From and after January 1, 1998, no self-funded plan that provides 27 maternity benefits shall restrict benefits for any hospital length of stay in 28 connection with childbirth for the mother or newborn child in a manner that 29 would be in conflict with the newborns' and mothers' health protection act of 30 1996.
STATEMENT OF PURPOSE RS 16239 This legislation amends Chapter 40 of Title 41, Idaho Code, to update and add to requirements imposed upon self funded employer health plans. Because federal law preempts the state from regulating self funded single employer plans offered by private employers, Chapter 40 applies almost exclusively to self funded plans offered by multiple employers and to single employer plans offered by governmental entities. As currently written, Chapter 40 does not contain any provisions specifically addressing the handling of self funded health plans made up of multiple employers, which are often referred to as multiple employer welfare arrangements or MEWAs. This has sometimes led to confusion regarding how and to what extent the requirements of chapter 40 apply to multiple employer plans. Multiple employer plans are much different than single employer plans and are often marketed to employers in much the same way as insurance. Multiple employer plans are able to grow rapidly and may operate in multiple states. As a result, multiple employer plans often result in large amounts of money being handled by third parties that manage the plans, sometimes from outside the state, and they present much greater risks to the public than single employer plans. According to a 2004 report by the U.S. General Accounting Office, for example, unlicensed entities offering health benefit plans left Americans with $252 million in unpaid health claims between 2000 and 2002. Many of these entities were multiple employer health plans marketed primarily to small businesses and claiming to be exempt from state oversight. In Idaho, the failure of a multiple employer health plan based in Coeur d'Alene left Idaho residents and health providers with more than $300,000 in unpaid health claims, and a total of over $3 million in unpaid claims in all the states in which it operated. The proposed legislation adds significant public protections to the existing law governing self- funded plans, but imposes fewer regulatory requirements on self funded plans than are imposed on insurance companies. The proposed amendments add a definition for multiple employer plans and require that self funded plans maintain adequate reserves to cover anticipated health claims of the employees covered by the plan, maintain some additional surplus to cover losses in the event claims are underestimated, maintain stop loss coverage to protect against catastrophic losses, use a qualified actuary in establishing rates and reserve requirements, provide quarterly financial summaries to the Department of Insurance, use a properly licensed third party administrator, provide notice to prospective participants that the plan is not insurance and not entitled to guaranty association protection, and provide detailed information when applying to the Department for registration. FISCAL NOTE None. The Department currently regulates plans subject to this chapter and will continue to do so using existing resources. Contact Name: Representative Max Black Name: Representative Bill Deal Phone: (208) 332-1000 STATEMENT OF PURPOSE/FISCAL NOTE H 822