2006 Legislation
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HOUSE BILL NO. 822 – Self-funded health care plans

HOUSE BILL NO. 822

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Bill Status



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

Bill Text


                                                                        
                                                                        
  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                                                                        
                                                                        
                              IN 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 this act  chap-
  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, and
  6    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 this act chapter 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 to administer provide 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  this
 27    state "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    for any disability income benefits not otherwise provided for under title  72,
 47    Idaho  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
                                                                        
  1    health  maintenance organization, or similar other third party prepayment plan
  2    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 established under in 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) No self-funded plan person 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 this
 22    act 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  and
 42        maintained  solely for its members and their immediate families, or to any
 43        self-insured health plan or service established, maintained,  and  insured
 44        jointly  by  any  employer  and any labor organization or organizations if
 45        such health plan or service has been in existence and operation  for  fif-
 46        teen (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 this act chapter. 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  REGISTRATION  PLAN  REQUIREMENTS.  No  self-
  9    funded  plan shall register, and the director shall not register a self-funded
 10    plan, which is does not qualified  therefor  as  follows  meet  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 that all such employers must contribute 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 fund must be 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.
 32    In determining actuarial soundness the director shall also give due  consider-
 33    ation to:
 34        (a)  Applicable stop-loss insurance provided or to be provided the plan by
 35        an insurer duly authorized to transact disability insurance in this state;
 36        (b)  Contracts with health care service corporations or health maintenance
 37        organizations  authorized  to  conduct  such operations in this state, and
 38        covering certain of the promised benefits;
 39        (c)  Other applicable insurance or guarantys; and
 40        (d)  Plan factors or provisions for prevention  or  reduction  of  adverse
 41        selection  against  the plan by those otherwise eligible to become benefi-
 42        ciaries.
 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        operating on the effective date of this act, as of a date  not  more  than
  9        forty-five  (45)  days  prior  to  the date of filing the application. The
 10        statement shall be at the time of application, certified by an independent
 11        certified public accountant., or by an accountant whose  certification  is
 12        acceptable  to  the  director If 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-
 24        sultant  for  the  information or guidance of employer or employees; and A
 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 by regulation rule.
 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
 50    act chapter, 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 institution shall not may 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)  above  of
 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) above of this section, but subject  to  subdivisions  para-
 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
                                                                        
  1        Aacademy  of  Aactuaries  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)  Within  sixty  ninety  (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 this act chapter 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) years to for review by any beneficiary.
 43        (3)  On or before expiration of such sixty ninety  (690)  day  period  the
 44    trustee  shall  cause an original of the annual statement to be filed with the
 45    director. The trust fund trustee shall pay a filing fee  as  provided  for  by
 46    regulation  rule.  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 of  imposing  imposition
 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 this act chapter.
 17        (3)  The tax herein levied, together with the fees provided  for  in  this
 18    act  chapter,  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 have two four (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  cause  all individuals handling receipts and disbursements for
 11    the trust fund to be bonded at all times under to be issued a  fidelity  bond,
 12    issued  by  a  surety  insurer  authorized  to transact such insurance in this
 13    state. The bond shall be in favor of the trust fund  and  for  such  aggregate
 14    penalty  amount,  not less than twenty-five thousand dollars ($25,000), as the
 15    director may deem reasonably advisable in relation to amount of funds to be so
 16    handled. The bond shall be noncancellable except upon  not  less  than  thirty
 17    (30)  days advance notice in writing to the trustee and the director. The cost
 18    of the bond shall be borne by the trust fund or 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 this act chapter, 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  of  administra-
 37    tion registration 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)  The  plan  of liquidation of an insolvent trust fund, after such plan
 50    has been approved by the director, shall be binding upon all  persons  pecuni-
 51    arily  interested  in  the trust fund. Pending the effectuation of the plan of
                                                                        
                                           12
                                                                        
  1    liquidation of an insolvent trust fund the director may impose  such  prohibi-
  2    tions  or  restrictions  upon  disbursement  or use of trust fund moneys as he
  3    deems advisable for the protection of all interested persons.
  4        (4)  If the trust fund is then insolvent and a plan of liquidation thereof
  5    satisfactory to the director as being fair and equitable is not filed with him
  6    within sixty (60) days after the effective date of termination of  the  plan's
  7    registration,  or  if  liquidation  of a solvent trust fund is not being self-
  8    funded plan shall be carried out by the director in accordance with  the  plan
  9    of  liquidation  theretofore approved by him, the director shall liquidate the
 10    trust fund under the applicable provisions of chapter 33, title 41, Idaho Code
 11    (rehabilitation and liquidation), and for the  this  purpose  the  trust  fund
 12    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    rules and regulations necessary for or as an aid to effectuation of any provi-
 17    sion  of this act chapter. No such rule or regulation shall extend, modify, or
 18    conflict with any provision of this act chapter and  the  reasonable  implica-
 19    tions thereof.
 20        (2)  Such  rules, and regulations, or any amendment thereof, shall be made
 21    by the director only after a public hearing thereon of which the director  has
 22    given  written notice not less than thirty (30) days in advance to the trustee
 23    of each plan then registered with him. If  reasonably  possible  the  director
 24    shall  include with the notice a copy of the proposed rules and regulations or
 25    amendment, or a condensed summary of material proposed  provisions  in  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), and sections 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 this act chapter, 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  who wilfully willfully violates or
 40    causes or induces violation of any provision of this act chapter or any lawful
 41    rule or regulation of the director issued thereunder, shall be subject  to  an
 42    administrative penalty as  provided in subsection (4) of this section for 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
 48    act chapter or by lawful rule or regulation of 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 this act chapter or lawful rule or regulation of 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
  5    any  one  anyone  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 than one fifteen  thousand dollars ($15,000) and to
 11    imprisonment for not more than one fifteen  (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 shall not
 48    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.  This  subdivision  subsection
 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 this subdivision subsection, 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 this  subdivision  subsection  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 / Fiscal Impact


                       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