742.20. The Legislature finds and declares the following:
(a) An alternative to insurance programs, health care maintenance
organizations, and panel provider organizations was established by
Congress in 1974 through the Employee Retirement Income Security Act
(ERISA). Among the various employee benefit programs established and
governed by ERISA are multiple employer welfare arrangements (MEWA),
which are subject as well to state regulatory and fiscal standards
not inconsistent with ERISA. MEWAs permit employer members of trade
associations to create trust funds for the purpose of offering and
providing health care benefits to their employees. MEWAs can be
created as fully insured or self-funded or partially self-funded
benefit programs.
(b) The Legislature recognizes that some MEWAs provide an
alternative mechanism to traditional health insurance for small
employers. It is the intent of the Legislature to ensure the
financial integrity of those MEWA programs that are already in
existence by requiring self-funded or partially self-funded MEWAs to
obtain a certificate of compliance from the Department of Insurance.
In order for the Department of Insurance to grant a certificate of
compliance, the MEWA must adhere to standards set forth in this act
which are not inconsistent with the provisions of ERISA. Further, it
is the intent of the Legislature to provide the Department of
Insurance with the authority to levy monetary penalties and to revoke
certificates of compliance from MEWAs that violate the provisions of
this act.
(c) The Legislature has passed significant reforms in the area of
small group health insurance. This article, in no manner, circumvents
these reforms nor is it intended to be a precedent to do so.
Therefore, the small group reform legislation applies to MEWAs to the
extent it is not inconsistent with ERISA.
(d) The provisions of this article are consistent with and
authorized by ERISA, which confers upon the states limited authority
to regulate MEWAs.
742.21. "Multiple employer welfare arrangement" as used in this
article has the same meaning as that contained in Section 1002(40)(A)
of Title 29 of the United States Code. "Employee welfare benefit
plan," as used in this article, has the same meaning as that
contained in Section 1002(1) of Title 29 of the United States Code. A
multiple employer welfare arrangement shall comply with the criteria
set forth for an employee welfare benefit plan in order to qualify
to obtain a certificate of compliance.
742.215. As used in this article, "self-funded" means a multiple
employer welfare arrangement that undertook at all times and for a
continuous period of five years to reimburse health benefit costs
incurred by covered persons pursuant to the benefits and coverages
provided by their plan exclusively from plan assets. "Partially
self-funded" means a multiple employer welfare arrangement that
undertook at all times and for a continuous period of five years to
reimburse health benefit costs incurred by covered persons pursuant
to the benefits and coverages provided by their plan exclusively from
plan assets, provided, however, that these benefits are reimbursable
to the multiple employer welfare arrangement by stop loss insurance
only to the extent that the benefits exceed fifty thousand dollars
($50,000) per claim.
742.22. It is the intent of the Legislature in enacting this
article to allow a self-funded or partially self-funded multiple
employer welfare arrangement to meet the requirements for a
certificate of compliance to do business in California. If the
self-funded or partially self-funded multiple employer welfare
arrangement obtains and maintains a certificate of compliance under
these sections, it shall not be considered an unauthorized insurer.
742.23. (a) After December 31, 1995, a self-funded or partially
self-funded multiple employer welfare arrangement shall not provide
any benefits for any resident of this state without first obtaining a
certificate of compliance pursuant to this article, provided,
however, that if the commissioner has not issued or denied an
application for a certificate of compliance within 180 calendar days
of the date of the filing of the completed application, the
commissioner shall not take any action against the applicant solely
on the basis that the department has not granted the certificate of
compliance.
(b) The department may take regulatory action against a MEWA
pursuant to all applicable provisions of this code during the period
beginning on the effective date of this act and ending on the date on
which the MEWA is certified under this article, at which time the
provisions of this article shall apply.
742.24. To be eligible for a certificate of compliance, a
self-funded or partially self-funded multiple employer welfare
arrangement shall meet all of the following requirements:
(a) Be nonprofit.
(b) Be established and maintained by a trade association, industry
association, professional association, or by any other business
group or association of any kind that has a constitution or bylaws
specifically stating its purpose, and have been organized and
maintained in good faith with at least 200 paid members and operated
actively for a continuous period of five years, for purposes other
than that of obtaining or providing health care coverage benefits to
its members. An association is a California mutual benefit
corporation comprised of a group of individuals or employers who
associate based solely on participation in a specified profession or
industry, accepting for membership any individual or employer meeting
its membership criteria, which do not condition membership directly
or indirectly on the health or claims history of any person, and
which uses membership dues solely for and in consideration of the
membership and membership benefits.
(c) Be organized and maintained in good faith with at least 2,000
employees and 50 paid employer members and operated actively for a
continuous period of five years.
(d) Have been operating in compliance with ERISA on a self-funded
or partially self-funded basis for a continuous period of five years
pursuant to a trust agreement by a board of trustees that shall have
complete fiscal control over the multiple employer welfare
arrangement, and that shall be responsible for all operations of the
multiple employer welfare arrangement. The trustees shall be selected
by vote of the participating employers and shall be owners,
partners, officers, directors, or employees of one or more employers
participating in the multiple employer welfare arrangement. A trustee
may not be an owner, officer, or employee of the insurer,
administrator, or service company providing insurance or
insurance-related services to the association. The trustees shall
have authority to approve applications of association members for
participation in the multiple employer welfare arrangement and to
contract with an authorized administrator or service company to
administer the day-to-day affairs of the multiple employer welfare
arrangement.
(e) Benefits shall be offered only to association members.
(f) Benefits may be offered only through life agents, as defined
in Section 1622, licensed in the state whose names, addresses, and
telephone numbers have been filed with the commissioner as licensed
life agents for the multiple employer welfare arrangement.
(g) Be operated in accordance with sound actuarial principles and
conform to the requirements of Section 742.31.
(h) File an application with the department for a certificate of
compliance no later than November 30, 1995.
(i) The multiple employer welfare arrangement shall at all times
maintain aggregate stop loss insurance providing the arrangement with
coverage with an attachment point which is not greater than 125
percent of annual expected claims. The commissioner may, by
regulation, define "expected claims" for purposes of this subdivision
and provide for adjustments in the amount of the percentage in
specified circumstances in which the arrangement specifically
provides for and maintains reserves in accordance with sound
actuarial principles as provided in Section 742.31.
(j) The multiple employer welfare arrangement shall establish and
maintain specific stop loss insurance providing the arrangement with
coverage with an attachment point that is not greater than 5 percent
of annual expected claims. The commissioner may, by regulation,
define "expected claims" for purposes of this subdivision and provide
for adjustments in the amount of that percentage as may be necessary
to carry out the purposes of this subdivision determined by sound
actuarial principles as provided in Section 742.31.
(k) The multiple employer welfare arrangement shall establish and
maintain appropriate loss and loss adjustment reserves determined by
sound actuarial principles as provided in Section 742.31.
(l) The association has within its own organization adequate
facilities and competent personnel to serve the multiple employer
welfare arrangement, or has contracted with a licensed third-party
administrator to provide those services.
(m) The association has established a procedure for handling
claims for benefits in the event of the dissolution of the multiple
employer welfare arrangement.
(n) On and after January 1, 2003, in addition to the requirements
of this article, maintain a surplus of not less than one million
dollars ($1,000,000), and that this amount be increased as follows:
one million seven hundred fifty thousand dollars ($1,750,000) by
January 1, 2004; two million five hundred thousand dollars
($2,500,000) by January 1, 2005; three million two hundred fifty
thousand dollars ($3,250,000) by January 1, 2006; and four million
dollars ($4,000,000) by January 1, 2007.
(o) Submit all proposed rate levels to the department for
informational purposes no later than 45 days prior to their
implementation. The proposed rates shall contain an aggregate benefit
structure which has a loss ratio experience of not less than 80
percent. The loss ratio experience shall be calculated as claims paid
during the contract period plus a reasonable estimate of claims
liability for the contract period at the end of the current year
divided by contributions paid or collected for the contract period
minus unearned contributions at the end of the current year.
(p) Comply with the investment requirements of Section 724.245.
742.245. (a) A self-funded or partially self-funded multiple
employer welfare arrangement shall maintain at least 25 percent of
the surplus required by subdivision (n) of Section 742.24 in
investments specified in Article 3 (commencing with Section 1170) of
Chapter 2 of Part 2 of Division 1 and in Section 1192.5.
(b) The balance of the assets of a self-funded or partially
self-funded multiple employer welfare arrangement may be invested in
the following:
(1) An open-ended diversified management company, as defined in
the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.),
that meets all of the following requirements:
(A) It is registered with, and reports to, the Securities and
Exchange Commission.
(B) It is domiciled in the United States.
(C) Substantially all of its investments consist of investment
grade debt instruments and cash.
(D) All of its assets are held in the United States by a bank,
trust company, or other custodian chartered by the United States, its
states, or territories.
(2) An amount not to exceed 75 percent of any excess of invested
assets over the sum of the reserves and related actuarial items held
in support of policies and contracts, plus the surplus required by
subdivision (n) of Section 742.24, may be invested in the following:
(A) An open-ended diversified management company, as defined in
the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.),
that meets all of the following requirements:
(i) It is registered with, and reports to, the Securities and
Exchange Commission.
(ii) It is domiciled in the United States.
(iii) Its investments consist of common and preferred stocks and
cash.
(iv) All of its assets are held in the United States by a bank,
trust company, or other custodian chartered by the United States, its
states, or territories.
(B) Corporate notes, bonds, and preferred stocks that meet all of
the following requirements:
(i) The issuer is domiciled in the United States or Canada.
(ii) The investments are rated investment grade or better by at
least two of the following rating agencies, or their successors:
(I) Standard & Poor's.
(II) Moody's.
(III) Fitch.
(iii) The investments are exchange-traded. "Exchange-traded" as
used in this clause means listed and traded on the National Market
System of the NASDAQ Stock Market or on a securities exchange subject
to regulation, supervision, or control under a statute of the United
States and acceptable to the commissioner.
(C) An investment in a single issuer made pursuant to subparagraph
(B) shall not exceed in the aggregate 10 percent of the multiple
employer welfare arrangement's funds described in this paragraph.
(3) An investment made pursuant to paragraph (1) or subparagraph
(A) of paragraph (2) shall be made in, at minimum, three of the
companies described in those provisions.
(4) An office building or buildings that will be used for the
multiple employer welfare arrangement's principal operations and
business if both of the following requirements are met:
(A) The multiple employer welfare arrangement obtains prior
written approval from the commissioner.
(B) The office building or buildings are treated on the financial
statements filed with the commissioner pursuant to Section 742.31 as
nonadmitted assets.
(c) The commissioner may, in his or her discretion and after a
hearing, require by written order disposal of an investment made
either in violation of, or no longer in compliance with, this
section. The commissioner may also, after a hearing, require the
disposal of any investment made pursuant to paragraph (2) of
subdivision (b) if the multiple employer welfare arrangement has
failed to maintain cash or liquid assets sufficient to meet its
claims and any other contractual obligations. The commissioner may
also for good cause and after a hearing, by written order require the
disposal of an investment described in subdivision (b).
742.25. In determining the qualification of a multiple employer
welfare arrangement, the commissioner will consider, among other
things:
(a) The history of the multiple employer welfare arrangement.
(b) The competency, character, integrity, responsibility, and
general fitness of the management and administration.
(c) Financial stability.
(d) Whether claims were promptly and fairly adjusted and are
promptly and fully paid in accordance with the law and the terms of
the plan.
(e) Fairness and honesty of methods of doing business.
(f) Hazard to covered employees or creditors.
742.26. The multiple employer welfare arrangement shall issue to
each covered employee a certificate evidencing coverage and a summary
plan description of benefits and coverages provided. This evidence
of the benefits and coverage provided shall contain the following
statement: "The benefits and coverages described herein are provided
through a trust fund established and funded by the ____ Plan,
sponsored by the ____ Association. The trust is a self-funded plan
established under ERISA (29 U.S.C. 1001 et seq.). This is not an
insurance contract and the plan and trust is not acting as, or deemed
to be an insurance company."
742.27. The department shall have the authority to revoke a
certificate of compliance to any self-funded or partially self-funded
multiple employer welfare arrangement if the department determines
any of the following:
(a) The multiple employer welfare arrangement has failed, after
written request by the commissioner, to remove or discharge any
officer, director, trustee, or other employee who has been convicted
of any crime involving fraud, dishonesty, or moral turpitude.
(b) The multiple employer welfare arrangement has unreasonably
failed or refused to furnish any report or statement or has
unreasonably refused the department access to its books or records as
required by this article.
(c) The multiple employer welfare arrangement has failed for an
unreasonable period to pay any judgment rendered against it by a
court or other applicable regulatory agency or body.
(d) The multiple employer welfare arrangement is conducting
business fraudulently or is not meeting its contractual obligations
in good faith.
(e) The multiple employer welfare arrangement fails to comply with
the provisions of Section 790.03.
(f) The multiple employer welfare arrangement fails to comply with
Chapter 14 (commencing with Section 10700) of Part 2 of Division 2.
(g) The multiple employer welfare arrangement fails to comply with
Article 3.1 (commencing with Section 1357) of Chapter 2.2 of
Division 2 of the Health and Safety Code.
(h) The multiple employer welfare arrangement fails to establish,
or at all times maintain, compliance with the requirements of this
article, or other laws made applicable to the multiple employer
welfare arrangement by this article.
742.28. A self-funded or partially self-funded multiple employer
welfare arrangement authorized by this article shall be limited to
providing the following benefits:
(a) Medical, dental, optical, surgical, or other hospital care
benefits.
(b) Benefits in the event of sickness, accident, or disability.
(c) Flexible benefits under Section 125 of the Internal Revenue
Code. These benefits shall not include loss from liability imposed by
law upon employers to compensate employees and their dependents for
injury sustained by the employees arising out of and in the course of
the employment, irrespective of negligence or the fault of either
party.
742.29. An association seeking to establish an employee welfare
benefit plan by the use of a self-funded or partially self-funded
multiple employer welfare arrangement shall apply for a certificate
of compliance on a form prescribed by the commissioner. The
application shall be completed and submitted to the commissioner
along with all of the following:
(a) Copies of all articles, bylaws, agreements, or other documents
or instruments describing the rights and obligations of the
employers, employees, and beneficiaries of the association with
respect to the multiple employer welfare arrangement.
(b) Current audited financial statements of the association and
the multiple employer welfare arrangement, and Internal Revenue
Service Form number 5500 for the last five years.
(c) Proof of a fidelity bond in an amount equal to 10 percent of
the funds handled annually by the multiple employer welfare
arrangement. In no case may the amount of the bond be less than fifty
thousand dollars ($50,000) nor more than five hundred thousand
dollars ($500,000).
(d) A fiduciary liability policy with limits of not less than five
hundred thousand dollars ($500,000).
(e) A statement showing in full detail the benefit plan upon which
the association has established and maintained the multiple employer
welfare arrangement.
(f) A copy of all contracts or other instruments that it makes
with or issues to the association members, together with a copy of
its plan description and the printed material which was used in
enrolling members during 1993 and 1994.
(g) Proof of aggregate and specific stop loss insurance with an
insurer licensed to do business in this state.
(h) A copy of all contracts or other instruments that were used
with administrators and producers during 1993 and 1994.
(i) Biographical affidavits for the trustees, plan administrators
of the multiple employer welfare arrangement, officers and directors
of the association, other persons acting in a fiduciary capacity and
any third-party administrators performing services on behalf of the
multiple employer welfare arrangement.
742.30. The commissioner shall not issue a certificate of
compliance to a self-funded or partially self-funded multiple
employer welfare arrangement unless the employers participating in
the multiple employer welfare arrangement are members of a bona fide
trade, industrial, or professional association as described in
subdivision (b) of Section 742.24.
742.31. Each self-funded or partially self-funded multiple employer
welfare arrangement transacting business in the state shall file all
of the following with the commissioner:
(a) No later than May 15th of each calendar year or four months
and 15 days after the end of each fiscal year not on a calendar year
basis, financial statements audited by a certified public accountant,
and no later than March 1 of each calendar year or 60 days after the
end of each fiscal year not on a calendar year basis, an actuarial
opinion rendered by a qualified actuary that satisfies the
requirements of Section 10489.15. The opinion shall be based on
standards adopted from time to time by the Actuarial Standards Board
and on any additional standards that the commissioner may, by
regulation, prescribe. For the purposes of this section, "qualified
actuary" means a member in good standing of the American Academy of
Actuaries who meets the requirements set forth in regulations of the
commissioner. The qualified actuary shall be liable for damages to
any person caused by his or her negligence or other tortious conduct.
(b) Within 60 days after the end of each fiscal quarter, unaudited
financial statements, affirmed by an appropriate officer or agent of
the multiple employer welfare arrangement.
(c) Within 60 days after the end of each fiscal quarter, a report
certifying that the multiple employer welfare arrangement maintains
cash or liquid assets in a claim reserve account sufficient to meet
its contractual obligations and that it maintains a policy of
aggregate and specific stop loss insurance.
742.32. The commissioner or any persons designated by the
commissioner shall have the power to examine the affairs of any
self-funded or partially self-funded multiple employer welfare
arrangement and the association which established and maintains it,
and for that purpose shall have access to all books, records, and
documents that relate to the business of the multiple employer
welfare arrangement, and may examine under oath its trustees,
officers, agents, and employees in relation to the affairs,
transactions, and condition of the multiple employer welfare
arrangement.
742.33. Books, records, and documents pertaining to the business of
the multiple employer welfare arrangement shall be maintained by the
administrator for a period of five years. "Administrator," as used
in this section, has the same meaning as that contained in Section
1002(16)(A) of Title 29 of the United States Code.
742.34. (a) The following notice shall be provided to employers and
employees who obtain coverage from a multiple employer welfare
arrangement:
NOTICE
(A) THE MULTIPLE EMPLOYER WELFARE ARRANGEMENT IS NOT AN INSURANCE
COMPANY AND DOES NOT PARTICIPATE IN ANY OF THE GUARANTEE FUNDS
CREATED BY CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL NOT PAY YOUR
CLAIMS OR PROTECT YOUR ASSETS IF A MULTIPLE EMPLOYER WELFARE
ARRANGEMENT BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS
PROMISED.
(B) THE HEALTH CARE BENEFITS THAT YOU HAVE PURCHASED OR ARE
APPLYING TO PURCHASE ARE BEING ISSUED BY A MULTIPLE EMPLOYER WELFARE
ARRANGEMENT THAT IS LICENSED BY THE STATE OF CALIFORNIA.
(C) FOR ADDITIONAL INFORMATION ABOUT THE MULTIPLE EMPLOYER WELFARE
ARRANGEMENT YOU SHOULD ASK QUESTIONS OF YOUR TRUST ADMINISTRATOR OR
YOU MAY CONTACT THE CALIFORNIA DEPARTMENT OF INSURANCE AT ________.
(b) Each multiple employer welfare arrangement should include the
department's current "800" consumer service telephone number in the
blank provided in paragraph (C) of this notice.
742.35. The department may conduct an examination of the financial
condition of a self-funded or partially self-funded multiple employer
welfare arrangement, and if it determines that the multiple employer
welfare arrangement's financial condition does not comply with the
requirements of this article, the department may apply any remedies
authorized by this code.
742.36. Subject to the annual fee provisions of Section 742.39,
every certificate of compliance shall be for an indefinite term and
shall expire with the expiration or termination of the existence of
the holder thereof. Notwithstanding the provisions of this section,
whenever the commissioner shall determine, after notice and hearing,
that any person to whom the certificate has been issued is in arrears
to the state or to any county or city in the state for fees,
licenses, taxes, assessments, fines, or penalties, accrued on
business transacted in the state, or is otherwise in default for
failure to comply with any of the laws of this state regarding the
governmental control of the person by the state, the commissioner may
order the certificate holder to comply with those requirements
within 30 days of that determination. If the certificate of
compliance holder fails to comply within that period, the certificate
of compliance may then be revoked, unless the commissioner's order
is stayed by a court of appropriate jurisdiction.
742.37. (a) The commissioner may suspend the certificate of
compliance of a holder thereof for not exceeding one year whenever he
or she finds, after proper hearing following notice, that the person
engages in any of the following practices:
(1) Conducting its business fraudulently.
(2) Not carrying out its contracts in good faith.
(3) Habitually and as a matter of ordinary practice and custom
compelling claimants under policies, or liability judgment creditors
of the certificate of compliance holder, to either accept less than
the amount due under the terms of its contracts or resort to
litigation against the certificate of compliance holder to secure the
payment of the amount due.
(b) The order of suspension shall prescribe the period of each
suspension.
(c) Proceedings under this section shall be conducted in
accordance with Chapter 5 (commencing with Section 11500) of Part 1
of Division 3 of Title 2 of the Government Code, except that the
hearings shall be conducted by administrative law judges chosen under
Section 11502 or appointed by the commissioner.
742.38. The commissioner, in any proceeding under Section 742.37
for any of the violations specified in that section, may by
alternative order permit the holder of that certificate of compliance
to elect in writing to pay a specified money penalty, within a
specified time, in lieu of the suspension of its certificate of
compliance. If the holder so elects, the sum of money specified shall
be paid to the commissioner for use of the state, and shall not
exceed fifty-five thousand dollars ($55,000). If the holder so
electing fails to pay the specified sum within the specified time,
the commissioner shall, unless his or her order is stayed, put in
effect the alternatives specified in his or her order.
All money received by the commissioner pursuant to this section
shall, when appropriated for that purpose by the Legislature, be
available for expenditure by the commissioner in accordance with law
in administration and enforcement of this code and other insurance
laws.
The authority vested in the commissioner by this section shall be
additional to and not in lieu of any other authority to enforce any
penalties, fines or forfeitures, denials, suspensions, restrictions,
or revocations of certificates of compliance unless otherwise
authorized by law.
742.39. The commissioner shall require the payment of three
thousand five hundred dollars ($3,500) in advance as a fee for filing
an application for each certificate of compliance. Notwithstanding
Section 742.36, each holder of a certificate of compliance of
indefinite term shall owe and pay an annual fee of two hundred
eighty-three dollars ($283) in advance on account of the certificate
until final expiration. In addition, each holder of a certificate of
compliance of indefinite term shall owe and pay an annual fee of two
hundred eighty-one dollars ($281) for filing of financial
information. These fees shall be for annual periods commencing on
July 1 of each year and ending on June 30 of each year, and shall be
due on each March 1 and be delinquent on and after April 1.
742.40. (a) A multiple employer welfare arrangement shall offer
health care coverage benefits to any new eligible person and his or
her dependents under terms and conditions no less favorable to those
offered to their employers' existing employees and their dependents,
if the newly eligible person had health care benefit coverage with
either the same or a different multiple employer welfare arrangement
within 31 days. The new coverage shall comply with existing
eligibility rules of the multiple employer welfare arrangement.
(b) A multiple employer welfare arrangement shall comply with the
requirements set forth in Sections 10198.7 and 10198.9.
742.405. (a) No multiple employer welfare arrangement shall refuse
to enroll any person or accept any person as a subscriber or renew
any person as a subscriber after appropriate application on the basis
of a person's genetic characteristics that may, under some
circumstances, be associated with disability in that person or that
person's offspring. No multiple employer welfare arrangement shall
require a higher rate or charge, or offer or provide different terms,
conditions, or benefits, on the basis of a person's genetic
characteristics that may, under some circumstances, be associated
with disability in that person or that person's offspring than is at
that time required of any other individual in an otherwise identical
classification, nor shall any multiple employer welfare arrangement
make or require any rebate, discrimination, or discount upon the
amount to be paid or the service to be rendered under the arrangement
because the person carries those traits.
(b) No multiple employer welfare arrangement shall seek
information about a person's genetic characteristics for any
nontherapeutic purpose.
(c) No discrimination shall be made in the fees or commissions of
a solicitor or solicitor firm for an enrollment or a subscription or
the renewal of an enrollment or subscription of any person on the
basis of a person's genetic characteristics that may, under some
circumstances, be associated with disability in that person or that
person's offspring.
(d) "Genetic characteristics" as used in this section shall have
the same meaning as defined in Section 10123.3.
742.407. (a) This section shall apply to the disclosure of genetic
test results contained in an applicant or enrollee's medical records
by a multiple employer welfare arrangement.
(b) Any person who negligently discloses results of a test for a
genetic characteristic to any third party in a manner that identifies
or provides identifying characteristics of the person to whom the
test results apply, except pursuant to a written authorization as
described in subdivision (g), shall be assessed a civil penalty in an
amount not to exceed one thousand dollars ($1,000) plus court costs,
as determined by the court, which penalty and costs shall be paid to
the subject of the test.
(c) Any person who willfully discloses the results of a test for a
genetic characteristic to any third party in a manner that
identifies or provides identifying characteristics of the person to
whom the test results apply, except pursuant to a written
authorization as described in subdivision (g), shall be assessed a
civil penalty in an amount not less than one thousand dollars
($1,000) and no more than five thousand dollars ($5,000) plus court
costs, as determined by the court, which penalty and costs shall be
paid to the subject of the test.
(d) Any person who willfully or negligently discloses the results
of a test for a genetic characteristic to a third party in a manner
that identifies or provides identifying characteristics of the person
to whom the test results apply, except pursuant to a written
authorization as described in subdivision (g), that results in
economic, bodily, or emotional harm to the subject of the test, is
guilty of a misdemeanor punishable by a fine not to exceed ten
thousand dollars ($10,000).
(e) In addition to the penalties listed in subdivisions (b) and
(c), any person who commits any act described in subdivision (b) or
(c) shall be liable to the subject for all actual damages, including
damages for economic, bodily, or emotional harm which is proximately
caused by the act.
(f) Each disclosure made in violation of this section is a
separate and actionable offense.
(g) The applicant's "written authorization," as used in this
section, shall satisfy the following requirements:
(1) Is written in plain language.
(2) Is dated and signed by the individual or a person authorized
to act on behalf of the individual.
(3) Specifies the types of persons authorized to disclose
information about the individual.
(4) Specifies the nature of the information authorized to be
disclosed.
(5) States the name or functions of the persons or entities
authorized to receive the information.
(6) Specifies the purposes for which the information is collected.
(7) Specifies the length of time the authorization shall remain
valid.
(8) Advises the person signing the authorization of the right to
receive a copy of the authorization. Written authorization is
required for each separate disclosure of the test results, and the
authorization shall set forth the person or entity to whom the
disclosure would be made.
(h) This section shall not apply to disclosures required by the
Department of Health Services necessary to monitor compliance with
Chapter 1 (commencing with Section 124975) of Part 5 of Division 106
of the Health and Safety Code, nor to disclosures required by the
Department of Managed Health Care necessary to administer and enforce
compliance with Section 1374.7 of the Health and Safety Code.
742.41. All employer groups who have health care coverage benefits
provided by a multiple employer welfare arrangement for their
employees and their dependents, regardless of individual condition or
history of that employee and their dependents, shall continue to
provide coverage thereunder pursuant to the terms and conditions of
their multiple employer welfare arrangement, subject to only
cancellation for nonpayment of contribution, or in the event of the
termination of the multiple employer welfare arrangement.
742.42. The provisions of this code governing domestic incorporated
insurers, their business, and their contracts shall, so far as
applicable and not inconsistent, govern multiple employer welfare
arrangements subject to this article and the business and contracts
of these multiple employer welfare arrangements, except that these
multiple employer welfare arrangements, their business, and their
contracts shall not be subject to Article 14.7 (commencing with
Section 1067) of Chapter 1 of Part 2 of Division 1. There shall be a
rebuttable presumption that any provision of this code is applicable
to multiple employer welfare arrangements.
742.425. The provisions of this article shall not apply to multiple
employer welfare arrangements as defined in Section 1144(b)(6)(D) of
Title 29 of the United States Code.
742.43. The commissioner may adopt reasonable rules and regulations
for the implementation and administration of this article.
742.20. The Legislature finds and declares the following:
(a) An alternative to insurance programs, health care maintenance
organizations, and panel provider organizations was established by
Congress in 1974 through the Employee Retirement Income Security Act
(ERISA). Among the various employee benefit programs established and
governed by ERISA are multiple employer welfare arrangements (MEWA),
which are subject as well to state regulatory and fiscal standards
not inconsistent with ERISA. MEWAs permit employer members of trade
associations to create trust funds for the purpose of offering and
providing health care benefits to their employees. MEWAs can be
created as fully insured or self-funded or partially self-funded
benefit programs.
(b) The Legislature recognizes that some MEWAs provide an
alternative mechanism to traditional health insurance for small
employers. It is the intent of the Legislature to ensure the
financial integrity of those MEWA programs that are already in
existence by requiring self-funded or partially self-funded MEWAs to
obtain a certificate of compliance from the Department of Insurance.
In order for the Department of Insurance to grant a certificate of
compliance, the MEWA must adhere to standards set forth in this act
which are not inconsistent with the provisions of ERISA. Further, it
is the intent of the Legislature to provide the Department of
Insurance with the authority to levy monetary penalties and to revoke
certificates of compliance from MEWAs that violate the provisions of
this act.
(c) The Legislature has passed significant reforms in the area of
small group health insurance. This article, in no manner, circumvents
these reforms nor is it intended to be a precedent to do so.
Therefore, the small group reform legislation applies to MEWAs to the
extent it is not inconsistent with ERISA.
(d) The provisions of this article are consistent with and
authorized by ERISA, which confers upon the states limited authority
to regulate MEWAs.
742.21. "Multiple employer welfare arrangement" as used in this
article has the same meaning as that contained in Section 1002(40)(A)
of Title 29 of the United States Code. "Employee welfare benefit
plan," as used in this article, has the same meaning as that
contained in Section 1002(1) of Title 29 of the United States Code. A
multiple employer welfare arrangement shall comply with the criteria
set forth for an employee welfare benefit plan in order to qualify
to obtain a certificate of compliance.
742.215. As used in this article, "self-funded" means a multiple
employer welfare arrangement that undertook at all times and for a
continuous period of five years to reimburse health benefit costs
incurred by covered persons pursuant to the benefits and coverages
provided by their plan exclusively from plan assets. "Partially
self-funded" means a multiple employer welfare arrangement that
undertook at all times and for a continuous period of five years to
reimburse health benefit costs incurred by covered persons pursuant
to the benefits and coverages provided by their plan exclusively from
plan assets, provided, however, that these benefits are reimbursable
to the multiple employer welfare arrangement by stop loss insurance
only to the extent that the benefits exceed fifty thousand dollars
($50,000) per claim.
742.22. It is the intent of the Legislature in enacting this
article to allow a self-funded or partially self-funded multiple
employer welfare arrangement to meet the requirements for a
certificate of compliance to do business in California. If the
self-funded or partially self-funded multiple employer welfare
arrangement obtains and maintains a certificate of compliance under
these sections, it shall not be considered an unauthorized insurer.
742.23. (a) After December 31, 1995, a self-funded or partially
self-funded multiple employer welfare arrangement shall not provide
any benefits for any resident of this state without first obtaining a
certificate of compliance pursuant to this article, provided,
however, that if the commissioner has not issued or denied an
application for a certificate of compliance within 180 calendar days
of the date of the filing of the completed application, the
commissioner shall not take any action against the applicant solely
on the basis that the department has not granted the certificate of
compliance.
(b) The department may take regulatory action against a MEWA
pursuant to all applicable provisions of this code during the period
beginning on the effective date of this act and ending on the date on
which the MEWA is certified under this article, at which time the
provisions of this article shall apply.
742.24. To be eligible for a certificate of compliance, a
self-funded or partially self-funded multiple employer welfare
arrangement shall meet all of the following requirements:
(a) Be nonprofit.
(b) Be established and maintained by a trade association, industry
association, professional association, or by any other business
group or association of any kind that has a constitution or bylaws
specifically stating its purpose, and have been organized and
maintained in good faith with at least 200 paid members and operated
actively for a continuous period of five years, for purposes other
than that of obtaining or providing health care coverage benefits to
its members. An association is a California mutual benefit
corporation comprised of a group of individuals or employers who
associate based solely on participation in a specified profession or
industry, accepting for membership any individual or employer meeting
its membership criteria, which do not condition membership directly
or indirectly on the health or claims history of any person, and
which uses membership dues solely for and in consideration of the
membership and membership benefits.
(c) Be organized and maintained in good faith with at least 2,000
employees and 50 paid employer members and operated actively for a
continuous period of five years.
(d) Have been operating in compliance with ERISA on a self-funded
or partially self-funded basis for a continuous period of five years
pursuant to a trust agreement by a board of trustees that shall have
complete fiscal control over the multiple employer welfare
arrangement, and that shall be responsible for all operations of the
multiple employer welfare arrangement. The trustees shall be selected
by vote of the participating employers and shall be owners,
partners, officers, directors, or employees of one or more employers
participating in the multiple employer welfare arrangement. A trustee
may not be an owner, officer, or employee of the insurer,
administrator, or service company providing insurance or
insurance-related services to the association. The trustees shall
have authority to approve applications of association members for
participation in the multiple employer welfare arrangement and to
contract with an authorized administrator or service company to
administer the day-to-day affairs of the multiple employer welfare
arrangement.
(e) Benefits shall be offered only to association members.
(f) Benefits may be offered only through life agents, as defined
in Section 1622, licensed in the state whose names, addresses, and
telephone numbers have been filed with the commissioner as licensed
life agents for the multiple employer welfare arrangement.
(g) Be operated in accordance with sound actuarial principles and
conform to the requirements of Section 742.31.
(h) File an application with the department for a certificate of
compliance no later than November 30, 1995.
(i) The multiple employer welfare arrangement shall at all times
maintain aggregate stop loss insurance providing the arrangement with
coverage with an attachment point which is not greater than 125
percent of annual expected claims. The commissioner may, by
regulation, define "expected claims" for purposes of this subdivision
and provide for adjustments in the amount of the percentage in
specified circumstances in which the arrangement specifically
provides for and maintains reserves in accordance with sound
actuarial principles as provided in Section 742.31.
(j) The multiple employer welfare arrangement shall establish and
maintain specific stop loss insurance providing the arrangement with
coverage with an attachment point that is not greater than 5 percent
of annual expected claims. The commissioner may, by regulation,
define "expected claims" for purposes of this subdivision and provide
for adjustments in the amount of that percentage as may be necessary
to carry out the purposes of this subdivision determined by sound
actuarial principles as provided in Section 742.31.
(k) The multiple employer welfare arrangement shall establish and
maintain appropriate loss and loss adjustment reserves determined by
sound actuarial principles as provided in Section 742.31.
(l) The association has within its own organization adequate
facilities and competent personnel to serve the multiple employer
welfare arrangement, or has contracted with a licensed third-party
administrator to provide those services.
(m) The association has established a procedure for handling
claims for benefits in the event of the dissolution of the multiple
employer welfare arrangement.
(n) On and after January 1, 2003, in addition to the requirements
of this article, maintain a surplus of not less than one million
dollars ($1,000,000), and that this amount be increased as follows:
one million seven hundred fifty thousand dollars ($1,750,000) by
January 1, 2004; two million five hundred thousand dollars
($2,500,000) by January 1, 2005; three million two hundred fifty
thousand dollars ($3,250,000) by January 1, 2006; and four million
dollars ($4,000,000) by January 1, 2007.
(o) Submit all proposed rate levels to the department for
informational purposes no later than 45 days prior to their
implementation. The proposed rates shall contain an aggregate benefit
structure which has a loss ratio experience of not less than 80
percent. The loss ratio experience shall be calculated as claims paid
during the contract period plus a reasonable estimate of claims
liability for the contract period at the end of the current year
divided by contributions paid or collected for the contract period
minus unearned contributions at the end of the current year.
(p) Comply with the investment requirements of Section 724.245.
742.245. (a) A self-funded or partially self-funded multiple
employer welfare arrangement shall maintain at least 25 percent of
the surplus required by subdivision (n) of Section 742.24 in
investments specified in Article 3 (commencing with Section 1170) of
Chapter 2 of Part 2 of Division 1 and in Section 1192.5.
(b) The balance of the assets of a self-funded or partially
self-funded multiple employer welfare arrangement may be invested in
the following:
(1) An open-ended diversified management company, as defined in
the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.),
that meets all of the following requirements:
(A) It is registered with, and reports to, the Securities and
Exchange Commission.
(B) It is domiciled in the United States.
(C) Substantially all of its investments consist of investment
grade debt instruments and cash.
(D) All of its assets are held in the United States by a bank,
trust company, or other custodian chartered by the United States, its
states, or territories.
(2) An amount not to exceed 75 percent of any excess of invested
assets over the sum of the reserves and related actuarial items held
in support of policies and contracts, plus the surplus required by
subdivision (n) of Section 742.24, may be invested in the following:
(A) An open-ended diversified management company, as defined in
the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.),
that meets all of the following requirements:
(i) It is registered with, and reports to, the Securities and
Exchange Commission.
(ii) It is domiciled in the United States.
(iii) Its investments consist of common and preferred stocks and
cash.
(iv) All of its assets are held in the United States by a bank,
trust company, or other custodian chartered by the United States, its
states, or territories.
(B) Corporate notes, bonds, and preferred stocks that meet all of
the following requirements:
(i) The issuer is domiciled in the United States or Canada.
(ii) The investments are rated investment grade or better by at
least two of the following rating agencies, or their successors:
(I) Standard & Poor's.
(II) Moody's.
(III) Fitch.
(iii) The investments are exchange-traded. "Exchange-traded" as
used in this clause means listed and traded on the National Market
System of the NASDAQ Stock Market or on a securities exchange subject
to regulation, supervision, or control under a statute of the United
States and acceptable to the commissioner.
(C) An investment in a single issuer made pursuant to subparagraph
(B) shall not exceed in the aggregate 10 percent of the multiple
employer welfare arrangement's funds described in this paragraph.
(3) An investment made pursuant to paragraph (1) or subparagraph
(A) of paragraph (2) shall be made in, at minimum, three of the
companies described in those provisions.
(4) An office building or buildings that will be used for the
multiple employer welfare arrangement's principal operations and
business if both of the following requirements are met:
(A) The multiple employer welfare arrangement obtains prior
written approval from the commissioner.
(B) The office building or buildings are treated on the financial
statements filed with the commissioner pursuant to Section 742.31 as
nonadmitted assets.
(c) The commissioner may, in his or her discretion and after a
hearing, require by written order disposal of an investment made
either in violation of, or no longer in compliance with, this
section. The commissioner may also, after a hearing, require the
disposal of any investment made pursuant to paragraph (2) of
subdivision (b) if the multiple employer welfare arrangement has
failed to maintain cash or liquid assets sufficient to meet its
claims and any other contractual obligations. The commissioner may
also for good cause and after a hearing, by written order require the
disposal of an investment described in subdivision (b).
742.25. In determining the qualification of a multiple employer
welfare arrangement, the commissioner will consider, among other
things:
(a) The history of the multiple employer welfare arrangement.
(b) The competency, character, integrity, responsibility, and
general fitness of the management and administration.
(c) Financial stability.
(d) Whether claims were promptly and fairly adjusted and are
promptly and fully paid in accordance with the law and the terms of
the plan.
(e) Fairness and honesty of methods of doing business.
(f) Hazard to covered employees or creditors.
742.26. The multiple employer welfare arrangement shall issue to
each covered employee a certificate evidencing coverage and a summary
plan description of benefits and coverages provided. This evidence
of the benefits and coverage provided shall contain the following
statement: "The benefits and coverages described herein are provided
through a trust fund established and funded by the ____ Plan,
sponsored by the ____ Association. The trust is a self-funded plan
established under ERISA (29 U.S.C. 1001 et seq.). This is not an
insurance contract and the plan and trust is not acting as, or deemed
to be an insurance company."
742.27. The department shall have the authority to revoke a
certificate of compliance to any self-funded or partially self-funded
multiple employer welfare arrangement if the department determines
any of the following:
(a) The multiple employer welfare arrangement has failed, after
written request by the commissioner, to remove or discharge any
officer, director, trustee, or other employee who has been convicted
of any crime involving fraud, dishonesty, or moral turpitude.
(b) The multiple employer welfare arrangement has unreasonably
failed or refused to furnish any report or statement or has
unreasonably refused the department access to its books or records as
required by this article.
(c) The multiple employer welfare arrangement has failed for an
unreasonable period to pay any judgment rendered against it by a
court or other applicable regulatory agency or body.
(d) The multiple employer welfare arrangement is conducting
business fraudulently or is not meeting its contractual obligations
in good faith.
(e) The multiple employer welfare arrangement fails to comply with
the provisions of Section 790.03.
(f) The multiple employer welfare arrangement fails to comply with
Chapter 14 (commencing with Section 10700) of Part 2 of Division 2.
(g) The multiple employer welfare arrangement fails to comply with
Article 3.1 (commencing with Section 1357) of Chapter 2.2 of
Division 2 of the Health and Safety Code.
(h) The multiple employer welfare arrangement fails to establish,
or at all times maintain, compliance with the requirements of this
article, or other laws made applicable to the multiple employer
welfare arrangement by this article.
742.28. A self-funded or partially self-funded multiple employer
welfare arrangement authorized by this article shall be limited to
providing the following benefits:
(a) Medical, dental, optical, surgical, or other hospital care
benefits.
(b) Benefits in the event of sickness, accident, or disability.
(c) Flexible benefits under Section 125 of the Internal Revenue
Code. These benefits shall not include loss from liability imposed by
law upon employers to compensate employees and their dependents for
injury sustained by the employees arising out of and in the course of
the employment, irrespective of negligence or the fault of either
party.
742.29. An association seeking to establish an employee welfare
benefit plan by the use of a self-funded or partially self-funded
multiple employer welfare arrangement shall apply for a certificate
of compliance on a form prescribed by the commissioner. The
application shall be completed and submitted to the commissioner
along with all of the following:
(a) Copies of all articles, bylaws, agreements, or other documents
or instruments describing the rights and obligations of the
employers, employees, and beneficiaries of the association with
respect to the multiple employer welfare arrangement.
(b) Current audited financial statements of the association and
the multiple employer welfare arrangement, and Internal Revenue
Service Form number 5500 for the last five years.
(c) Proof of a fidelity bond in an amount equal to 10 percent of
the funds handled annually by the multiple employer welfare
arrangement. In no case may the amount of the bond be less than fifty
thousand dollars ($50,000) nor more than five hundred thousand
dollars ($500,000).
(d) A fiduciary liability policy with limits of not less than five
hundred thousand dollars ($500,000).
(e) A statement showing in full detail the benefit plan upon which
the association has established and maintained the multiple employer
welfare arrangement.
(f) A copy of all contracts or other instruments that it makes
with or issues to the association members, together with a copy of
its plan description and the printed material which was used in
enrolling members during 1993 and 1994.
(g) Proof of aggregate and specific stop loss insurance with an
insurer licensed to do business in this state.
(h) A copy of all contracts or other instruments that were used
with administrators and producers during 1993 and 1994.
(i) Biographical affidavits for the trustees, plan administrators
of the multiple employer welfare arrangement, officers and directors
of the association, other persons acting in a fiduciary capacity and
any third-party administrators performing services on behalf of the
multiple employer welfare arrangement.
742.30. The commissioner shall not issue a certificate of
compliance to a self-funded or partially self-funded multiple
employer welfare arrangement unless the employers participating in
the multiple employer welfare arrangement are members of a bona fide
trade, industrial, or professional association as described in
subdivision (b) of Section 742.24.
742.31. Each self-funded or partially self-funded multiple employer
welfare arrangement transacting business in the state shall file all
of the following with the commissioner:
(a) No later than May 15th of each calendar year or four months
and 15 days after the end of each fiscal year not on a calendar year
basis, financial statements audited by a certified public accountant,
and no later than March 1 of each calendar year or 60 days after the
end of each fiscal year not on a calendar year basis, an actuarial
opinion rendered by a qualified actuary that satisfies the
requirements of Section 10489.15. The opinion shall be based on
standards adopted from time to time by the Actuarial Standards Board
and on any additional standards that the commissioner may, by
regulation, prescribe. For the purposes of this section, "qualified
actuary" means a member in good standing of the American Academy of
Actuaries who meets the requirements set forth in regulations of the
commissioner. The qualified actuary shall be liable for damages to
any person caused by his or her negligence or other tortious conduct.
(b) Within 60 days after the end of each fiscal quarter, unaudited
financial statements, affirmed by an appropriate officer or agent of
the multiple employer welfare arrangement.
(c) Within 60 days after the end of each fiscal quarter, a report
certifying that the multiple employer welfare arrangement maintains
cash or liquid assets in a claim reserve account sufficient to meet
its contractual obligations and that it maintains a policy of
aggregate and specific stop loss insurance.
742.32. The commissioner or any persons designated by the
commissioner shall have the power to examine the affairs of any
self-funded or partially self-funded multiple employer welfare
arrangement and the association which established and maintains it,
and for that purpose shall have access to all books, records, and
documents that relate to the business of the multiple employer
welfare arrangement, and may examine under oath its trustees,
officers, agents, and employees in relation to the affairs,
transactions, and condition of the multiple employer welfare
arrangement.
742.33. Books, records, and documents pertaining to the business of
the multiple employer welfare arrangement shall be maintained by the
administrator for a period of five years. "Administrator," as used
in this section, has the same meaning as that contained in Section
1002(16)(A) of Title 29 of the United States Code.
742.34. (a) The following notice shall be provided to employers and
employees who obtain coverage from a multiple employer welfare
arrangement:
NOTICE
(A) THE MULTIPLE EMPLOYER WELFARE ARRANGEMENT IS NOT AN INSURANCE
COMPANY AND DOES NOT PARTICIPATE IN ANY OF THE GUARANTEE FUNDS
CREATED BY CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL NOT PAY YOUR
CLAIMS OR PROTECT YOUR ASSETS IF A MULTIPLE EMPLOYER WELFARE
ARRANGEMENT BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS
PROMISED.
(B) THE HEALTH CARE BENEFITS THAT YOU HAVE PURCHASED OR ARE
APPLYING TO PURCHASE ARE BEING ISSUED BY A MULTIPLE EMPLOYER WELFARE
ARRANGEMENT THAT IS LICENSED BY THE STATE OF CALIFORNIA.
(C) FOR ADDITIONAL INFORMATION ABOUT THE MULTIPLE EMPLOYER WELFARE
ARRANGEMENT YOU SHOULD ASK QUESTIONS OF YOUR TRUST ADMINISTRATOR OR
YOU MAY CONTACT THE CALIFORNIA DEPARTMENT OF INSURANCE AT ________.
(b) Each multiple employer welfare arrangement should include the
department's current "800" consumer service telephone number in the
blank provided in paragraph (C) of this notice.
742.35. The department may conduct an examination of the financial
condition of a self-funded or partially self-funded multiple employer
welfare arrangement, and if it determines that the multiple employer
welfare arrangement's financial condition does not comply with the
requirements of this article, the department may apply any remedies
authorized by this code.
742.36. Subject to the annual fee provisions of Section 742.39,
every certificate of compliance shall be for an indefinite term and
shall expire with the expiration or termination of the existence of
the holder thereof. Notwithstanding the provisions of this section,
whenever the commissioner shall determine, after notice and hearing,
that any person to whom the certificate has been issued is in arrears
to the state or to any county or city in the state for fees,
licenses, taxes, assessments, fines, or penalties, accrued on
business transacted in the state, or is otherwise in default for
failure to comply with any of the laws of this state regarding the
governmental control of the person by the state, the commissioner may
order the certificate holder to comply with those requirements
within 30 days of that determination. If the certificate of
compliance holder fails to comply within that period, the certificate
of compliance may then be revoked, unless the commissioner's order
is stayed by a court of appropriate jurisdiction.
742.37. (a) The commissioner may suspend the certificate of
compliance of a holder thereof for not exceeding one year whenever he
or she finds, after proper hearing following notice, that the person
engages in any of the following practices:
(1) Conducting its business fraudulently.
(2) Not carrying out its contracts in good faith.
(3) Habitually and as a matter of ordinary practice and custom
compelling claimants under policies, or liability judgment creditors
of the certificate of compliance holder, to either accept less than
the amount due under the terms of its contracts or resort to
litigation against the certificate of compliance holder to secure the
payment of the amount due.
(b) The order of suspension shall prescribe the period of each
suspension.
(c) Proceedings under this section shall be conducted in
accordance with Chapter 5 (commencing with Section 11500) of Part 1
of Division 3 of Title 2 of the Government Code, except that the
hearings shall be conducted by administrative law judges chosen under
Section 11502 or appointed by the commissioner.
742.38. The commissioner, in any proceeding under Section 742.37
for any of the violations specified in that section, may by
alternative order permit the holder of that certificate of compliance
to elect in writing to pay a specified money penalty, within a
specified time, in lieu of the suspension of its certificate of
compliance. If the holder so elects, the sum of money specified shall
be paid to the commissioner for use of the state, and shall not
exceed fifty-five thousand dollars ($55,000). If the holder so
electing fails to pay the specified sum within the specified time,
the commissioner shall, unless his or her order is stayed, put in
effect the alternatives specified in his or her order.
All money received by the commissioner pursuant to this section
shall, when appropriated for that purpose by the Legislature, be
available for expenditure by the commissioner in accordance with law
in administration and enforcement of this code and other insurance
laws.
The authority vested in the commissioner by this section shall be
additional to and not in lieu of any other authority to enforce any
penalties, fines or forfeitures, denials, suspensions, restrictions,
or revocations of certificates of compliance unless otherwise
authorized by law.
742.39. The commissioner shall require the payment of three
thousand five hundred dollars ($3,500) in advance as a fee for filing
an application for each certificate of compliance. Notwithstanding
Section 742.36, each holder of a certificate of compliance of
indefinite term shall owe and pay an annual fee of two hundred
eighty-three dollars ($283) in advance on account of the certificate
until final expiration. In addition, each holder of a certificate of
compliance of indefinite term shall owe and pay an annual fee of two
hundred eighty-one dollars ($281) for filing of financial
information. These fees shall be for annual periods commencing on
July 1 of each year and ending on June 30 of each year, and shall be
due on each March 1 and be delinquent on and after April 1.
742.40. (a) A multiple employer welfare arrangement shall offer
health care coverage benefits to any new eligible person and his or
her dependents under terms and conditions no less favorable to those
offered to their employers' existing employees and their dependents,
if the newly eligible person had health care benefit coverage with
either the same or a different multiple employer welfare arrangement
within 31 days. The new coverage shall comply with existing
eligibility rules of the multiple employer welfare arrangement.
(b) A multiple employer welfare arrangement shall comply with the
requirements set forth in Sections 10198.7 and 10198.9.
742.405. (a) No multiple employer welfare arrangement shall refuse
to enroll any person or accept any person as a subscriber or renew
any person as a subscriber after appropriate application on the basis
of a person's genetic characteristics that may, under some
circumstances, be associated with disability in that person or that
person's offspring. No multiple employer welfare arrangement shall
require a higher rate or charge, or offer or provide different terms,
conditions, or benefits, on the basis of a person's genetic
characteristics that may, under some circumstances, be associated
with disability in that person or that person's offspring than is at
that time required of any other individual in an otherwise identical
classification, nor shall any multiple employer welfare arrangement
make or require any rebate, discrimination, or discount upon the
amount to be paid or the service to be rendered under the arrangement
because the person carries those traits.
(b) No multiple employer welfare arrangement shall seek
information about a person's genetic characteristics for any
nontherapeutic purpose.
(c) No discrimination shall be made in the fees or commissions of
a solicitor or solicitor firm for an enrollment or a subscription or
the renewal of an enrollment or subscription of any person on the
basis of a person's genetic characteristics that may, under some
circumstances, be associated with disability in that person or that
person's offspring.
(d) "Genetic characteristics" as used in this section shall have
the same meaning as defined in Section 10123.3.
742.407. (a) This section shall apply to the disclosure of genetic
test results contained in an applicant or enrollee's medical records
by a multiple employer welfare arrangement.
(b) Any person who negligently discloses results of a test for a
genetic characteristic to any third party in a manner that identifies
or provides identifying characteristics of the person to whom the
test results apply, except pursuant to a written authorization as
described in subdivision (g), shall be assessed a civil penalty in an
amount not to exceed one thousand dollars ($1,000) plus court costs,
as determined by the court, which penalty and costs shall be paid to
the subject of the test.
(c) Any person who willfully discloses the results of a test for a
genetic characteristic to any third party in a manner that
identifies or provides identifying characteristics of the person to
whom the test results apply, except pursuant to a written
authorization as described in subdivision (g), shall be assessed a
civil penalty in an amount not less than one thousand dollars
($1,000) and no more than five thousand dollars ($5,000) plus court
costs, as determined by the court, which penalty and costs shall be
paid to the subject of the test.
(d) Any person who willfully or negligently discloses the results
of a test for a genetic characteristic to a third party in a manner
that identifies or provides identifying characteristics of the person
to whom the test results apply, except pursuant to a written
authorization as described in subdivision (g), that results in
economic, bodily, or emotional harm to the subject of the test, is
guilty of a misdemeanor punishable by a fine not to exceed ten
thousand dollars ($10,000).
(e) In addition to the penalties listed in subdivisions (b) and
(c), any person who commits any act described in subdivision (b) or
(c) shall be liable to the subject for all actual damages, including
damages for economic, bodily, or emotional harm which is proximately
caused by the act.
(f) Each disclosure made in violation of this section is a
separate and actionable offense.
(g) The applicant's "written authorization," as used in this
section, shall satisfy the following requirements:
(1) Is written in plain language.
(2) Is dated and signed by the individual or a person authorized
to act on behalf of the individual.
(3) Specifies the types of persons authorized to disclose
information about the individual.
(4) Specifies the nature of the information authorized to be
disclosed.
(5) States the name or functions of the persons or entities
authorized to receive the information.
(6) Specifies the purposes for which the information is collected.
(7) Specifies the length of time the authorization shall remain
valid.
(8) Advises the person signing the authorization of the right to
receive a copy of the authorization. Written authorization is
required for each separate disclosure of the test results, and the
authorization shall set forth the person or entity to whom the
disclosure would be made.
(h) This section shall not apply to disclosures required by the
Department of Health Services necessary to monitor compliance with
Chapter 1 (commencing with Section 124975) of Part 5 of Division 106
of the Health and Safety Code, nor to disclosures required by the
Department of Managed Health Care necessary to administer and enforce
compliance with Section 1374.7 of the Health and Safety Code.
742.41. All employer groups who have health care coverage benefits
provided by a multiple employer welfare arrangement for their
employees and their dependents, regardless of individual condition or
history of that employee and their dependents, shall continue to
provide coverage thereunder pursuant to the terms and conditions of
their multiple employer welfare arrangement, subject to only
cancellation for nonpayment of contribution, or in the event of the
termination of the multiple employer welfare arrangement.
742.42. The provisions of this code governing domestic incorporated
insurers, their business, and their contracts shall, so far as
applicable and not inconsistent, govern multiple employer welfare
arrangements subject to this article and the business and contracts
of these multiple employer welfare arrangements, except that these
multiple employer welfare arrangements, their business, and their
contracts shall not be subject to Article 14.7 (commencing with
Section 1067) of Chapter 1 of Part 2 of Division 1. There shall be a
rebuttable presumption that any provision of this code is applicable
to multiple employer welfare arrangements.
742.425. The provisions of this article shall not apply to multiple
employer welfare arrangements as defined in Section 1144(b)(6)(D) of
Title 29 of the United States Code.
742.43. The commissioner may adopt reasonable rules and regulations
for the implementation and administration of this article.
742.20. The Legislature finds and declares the following:
(a) An alternative to insurance programs, health care maintenance
organizations, and panel provider organizations was established by
Congress in 1974 through the Employee Retirement Income Security Act
(ERISA). Among the various employee benefit programs established and
governed by ERISA are multiple employer welfare arrangements (MEWA),
which are subject as well to state regulatory and fiscal standards
not inconsistent with ERISA. MEWAs permit employer members of trade
associations to create trust funds for the purpose of offering and
providing health care benefits to their employees. MEWAs can be
created as fully insured or self-funded or partially self-funded
benefit programs.
(b) The Legislature recognizes that some MEWAs provide an
alternative mechanism to traditional health insurance for small
employers. It is the intent of the Legislature to ensure the
financial integrity of those MEWA programs that are already in
existence by requiring self-funded or partially self-funded MEWAs to
obtain a certificate of compliance from the Department of Insurance.
In order for the Department of Insurance to grant a certificate of
compliance, the MEWA must adhere to standards set forth in this act
which are not inconsistent with the provisions of ERISA. Further, it
is the intent of the Legislature to provide the Department of
Insurance with the authority to levy monetary penalties and to revoke
certificates of compliance from MEWAs that violate the provisions of
this act.
(c) The Legislature has passed significant reforms in the area of
small group health insurance. This article, in no manner, circumvents
these reforms nor is it intended to be a precedent to do so.
Therefore, the small group reform legislation applies to MEWAs to the
extent it is not inconsistent with ERISA.
(d) The provisions of this article are consistent with and
authorized by ERISA, which confers upon the states limited authority
to regulate MEWAs.
742.21. "Multiple employer welfare arrangement" as used in this
article has the same meaning as that contained in Section 1002(40)(A)
of Title 29 of the United States Code. "Employee welfare benefit
plan," as used in this article, has the same meaning as that
contained in Section 1002(1) of Title 29 of the United States Code. A
multiple employer welfare arrangement shall comply with the criteria
set forth for an employee welfare benefit plan in order to qualify
to obtain a certificate of compliance.
742.215. As used in this article, "self-funded" means a multiple
employer welfare arrangement that undertook at all times and for a
continuous period of five years to reimburse health benefit costs
incurred by covered persons pursuant to the benefits and coverages
provided by their plan exclusively from plan assets. "Partially
self-funded" means a multiple employer welfare arrangement that
undertook at all times and for a continuous period of five years to
reimburse health benefit costs incurred by covered persons pursuant
to the benefits and coverages provided by their plan exclusively from
plan assets, provided, however, that these benefits are reimbursable
to the multiple employer welfare arrangement by stop loss insurance
only to the extent that the benefits exceed fifty thousand dollars
($50,000) per claim.
742.22. It is the intent of the Legislature in enacting this
article to allow a self-funded or partially self-funded multiple
employer welfare arrangement to meet the requirements for a
certificate of compliance to do business in California. If the
self-funded or partially self-funded multiple employer welfare
arrangement obtains and maintains a certificate of compliance under
these sections, it shall not be considered an unauthorized insurer.
742.23. (a) After December 31, 1995, a self-funded or partially
self-funded multiple employer welfare arrangement shall not provide
any benefits for any resident of this state without first obtaining a
certificate of compliance pursuant to this article, provided,
however, that if the commissioner has not issued or denied an
application for a certificate of compliance within 180 calendar days
of the date of the filing of the completed application, the
commissioner shall not take any action against the applicant solely
on the basis that the department has not granted the certificate of
compliance.
(b) The department may take regulatory action against a MEWA
pursuant to all applicable provisions of this code during the period
beginning on the effective date of this act and ending on the date on
which the MEWA is certified under this article, at which time the
provisions of this article shall apply.
742.24. To be eligible for a certificate of compliance, a
self-funded or partially self-funded multiple employer welfare
arrangement shall meet all of the following requirements:
(a) Be nonprofit.
(b) Be established and maintained by a trade association, industry
association, professional association, or by any other business
group or association of any kind that has a constitution or bylaws
specifically stating its purpose, and have been organized and
maintained in good faith with at least 200 paid members and operated
actively for a continuous period of five years, for purposes other
than that of obtaining or providing health care coverage benefits to
its members. An association is a California mutual benefit
corporation comprised of a group of individuals or employers who
associate based solely on participation in a specified profession or
industry, accepting for membership any individual or employer meeting
its membership criteria, which do not condition membership directly
or indirectly on the health or claims history of any person, and
which uses membership dues solely for and in consideration of the
membership and membership benefits.
(c) Be organized and maintained in good faith with at least 2,000
employees and 50 paid employer members and operated actively for a
continuous period of five years.
(d) Have been operating in compliance with ERISA on a self-funded
or partially self-funded basis for a continuous period of five years
pursuant to a trust agreement by a board of trustees that shall have
complete fiscal control over the multiple employer welfare
arrangement, and that shall be responsible for all operations of the
multiple employer welfare arrangement. The trustees shall be selected
by vote of the participating employers and shall be owners,
partners, officers, directors, or employees of one or more employers
participating in the multiple employer welfare arrangement. A trustee
may not be an owner, officer, or employee of the insurer,
administrator, or service company providing insurance or
insurance-related services to the association. The trustees shall
have authority to approve applications of association members for
participation in the multiple employer welfare arrangement and to
contract with an authorized administrator or service company to
administer the day-to-day affairs of the multiple employer welfare
arrangement.
(e) Benefits shall be offered only to association members.
(f) Benefits may be offered only through life agents, as defined
in Section 1622, licensed in the state whose names, addresses, and
telephone numbers have been filed with the commissioner as licensed
life agents for the multiple employer welfare arrangement.
(g) Be operated in accordance with sound actuarial principles and
conform to the requirements of Section 742.31.
(h) File an application with the department for a certificate of
compliance no later than November 30, 1995.
(i) The multiple employer welfare arrangement shall at all times
maintain aggregate stop loss insurance providing the arrangement with
coverage with an attachment point which is not greater than 125
percent of annual expected claims. The commissioner may, by
regulation, define "expected claims" for purposes of this subdivision
and provide for adjustments in the amount of the percentage in
specified circumstances in which the arrangement specifically
provides for and maintains reserves in accordance with sound
actuarial principles as provided in Section 742.31.
(j) The multiple employer welfare arrangement shall establish and
maintain specific stop loss insurance providing the arrangement with
coverage with an attachment point that is not greater than 5 percent
of annual expected claims. The commissioner may, by regulation,
define "expected claims" for purposes of this subdivision and provide
for adjustments in the amount of that percentage as may be necessary
to carry out the purposes of this subdivision determined by sound
actuarial principles as provided in Section 742.31.
(k) The multiple employer welfare arrangement shall establish and
maintain appropriate loss and loss adjustment reserves determined by
sound actuarial principles as provided in Section 742.31.
(l) The association has within its own organization adequate
facilities and competent personnel to serve the multiple employer
welfare arrangement, or has contracted with a licensed third-party
administrator to provide those services.
(m) The association has established a procedure for handling
claims for benefits in the event of the dissolution of the multiple
employer welfare arrangement.
(n) On and after January 1, 2003, in addition to the requirements
of this article, maintain a surplus of not less than one million
dollars ($1,000,000), and that this amount be increased as follows:
one million seven hundred fifty thousand dollars ($1,750,000) by
January 1, 2004; two million five hundred thousand dollars
($2,500,000) by January 1, 2005; three million two hundred fifty
thousand dollars ($3,250,000) by January 1, 2006; and four million
dollars ($4,000,000) by January 1, 2007.
(o) Submit all proposed rate levels to the department for
informational purposes no later than 45 days prior to their
implementation. The proposed rates shall contain an aggregate benefit
structure which has a loss ratio experience of not less than 80
percent. The loss ratio experience shall be calculated as claims paid
during the contract period plus a reasonable estimate of claims
liability for the contract period at the end of the current year
divided by contributions paid or collected for the contract period
minus unearned contributions at the end of the current year.
(p) Comply with the investment requirements of Section 724.245.
742.245. (a) A self-funded or partially self-funded multiple
employer welfare arrangement shall maintain at least 25 percent of
the surplus required by subdivision (n) of Section 742.24 in
investments specified in Article 3 (commencing with Section 1170) of
Chapter 2 of Part 2 of Division 1 and in Section 1192.5.
(b) The balance of the assets of a self-funded or partially
self-funded multiple employer welfare arrangement may be invested in
the following:
(1) An open-ended diversified management company, as defined in
the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.),
that meets all of the following requirements:
(A) It is registered with, and reports to, the Securities and
Exchange Commission.
(B) It is domiciled in the United States.
(C) Substantially all of its investments consist of investment
grade debt instruments and cash.
(D) All of its assets are held in the United States by a bank,
trust company, or other custodian chartered by the United States, its
states, or territories.
(2) An amount not to exceed 75 percent of any excess of invested
assets over the sum of the reserves and related actuarial items held
in support of policies and contracts, plus the surplus required by
subdivision (n) of Section 742.24, may be invested in the following:
(A) An open-ended diversified management company, as defined in
the federal Investment Company Act of 1940 (15 U.S.C. 80a-1 et seq.),
that meets all of the following requirements:
(i) It is registered with, and reports to, the Securities and
Exchange Commission.
(ii) It is domiciled in the United States.
(iii) Its investments consist of common and preferred stocks and
cash.
(iv) All of its assets are held in the United States by a bank,
trust company, or other custodian chartered by the United States, its
states, or territories.
(B) Corporate notes, bonds, and preferred stocks that meet all of
the following requirements:
(i) The issuer is domiciled in the United States or Canada.
(ii) The investments are rated investment grade or better by at
least two of the following rating agencies, or their successors:
(I) Standard & Poor's.
(II) Moody's.
(III) Fitch.
(iii) The investments are exchange-traded. "Exchange-traded" as
used in this clause means listed and traded on the National Market
System of the NASDAQ Stock Market or on a securities exchange subject
to regulation, supervision, or control under a statute of the United
States and acceptable to the commissioner.
(C) An investment in a single issuer made pursuant to subparagraph
(B) shall not exceed in the aggregate 10 percent of the multiple
employer welfare arrangement's funds described in this paragraph.
(3) An investment made pursuant to paragraph (1) or subparagraph
(A) of paragraph (2) shall be made in, at minimum, three of the
companies described in those provisions.
(4) An office building or buildings that will be used for the
multiple employer welfare arrangement's principal operations and
business if both of the following requirements are met:
(A) The multiple employer welfare arrangement obtains prior
written approval from the commissioner.
(B) The office building or buildings are treated on the financial
statements filed with the commissioner pursuant to Section 742.31 as
nonadmitted assets.
(c) The commissioner may, in his or her discretion and after a
hearing, require by written order disposal of an investment made
either in violation of, or no longer in compliance with, this
section. The commissioner may also, after a hearing, require the
disposal of any investment made pursuant to paragraph (2) of
subdivision (b) if the multiple employer welfare arrangement has
failed to maintain cash or liquid assets sufficient to meet its
claims and any other contractual obligations. The commissioner may
also for good cause and after a hearing, by written order require the
disposal of an investment described in subdivision (b).
742.25. In determining the qualification of a multiple employer
welfare arrangement, the commissioner will consider, among other
things:
(a) The history of the multiple employer welfare arrangement.
(b) The competency, character, integrity, responsibility, and
general fitness of the management and administration.
(c) Financial stability.
(d) Whether claims were promptly and fairly adjusted and are
promptly and fully paid in accordance with the law and the terms of
the plan.
(e) Fairness and honesty of methods of doing business.
(f) Hazard to covered employees or creditors.
742.26. The multiple employer welfare arrangement shall issue to
each covered employee a certificate evidencing coverage and a summary
plan description of benefits and coverages provided. This evidence
of the benefits and coverage provided shall contain the following
statement: "The benefits and coverages described herein are provided
through a trust fund established and funded by the ____ Plan,
sponsored by the ____ Association. The trust is a self-funded plan
established under ERISA (29 U.S.C. 1001 et seq.). This is not an
insurance contract and the plan and trust is not acting as, or deemed
to be an insurance company."
742.27. The department shall have the authority to revoke a
certificate of compliance to any self-funded or partially self-funded
multiple employer welfare arrangement if the department determines
any of the following:
(a) The multiple employer welfare arrangement has failed, after
written request by the commissioner, to remove or discharge any
officer, director, trustee, or other employee who has been convicted
of any crime involving fraud, dishonesty, or moral turpitude.
(b) The multiple employer welfare arrangement has unreasonably
failed or refused to furnish any report or statement or has
unreasonably refused the department access to its books or records as
required by this article.
(c) The multiple employer welfare arrangement has failed for an
unreasonable period to pay any judgment rendered against it by a
court or other applicable regulatory agency or body.
(d) The multiple employer welfare arrangement is conducting
business fraudulently or is not meeting its contractual obligations
in good faith.
(e) The multiple employer welfare arrangement fails to comply with
the provisions of Section 790.03.
(f) The multiple employer welfare arrangement fails to comply with
Chapter 14 (commencing with Section 10700) of Part 2 of Division 2.
(g) The multiple employer welfare arrangement fails to comply with
Article 3.1 (commencing with Section 1357) of Chapter 2.2 of
Division 2 of the Health and Safety Code.
(h) The multiple employer welfare arrangement fails to establish,
or at all times maintain, compliance with the requirements of this
article, or other laws made applicable to the multiple employer
welfare arrangement by this article.
742.28. A self-funded or partially self-funded multiple employer
welfare arrangement authorized by this article shall be limited to
providing the following benefits:
(a) Medical, dental, optical, surgical, or other hospital care
benefits.
(b) Benefits in the event of sickness, accident, or disability.
(c) Flexible benefits under Section 125 of the Internal Revenue
Code. These benefits shall not include loss from liability imposed by
law upon employers to compensate employees and their dependents for
injury sustained by the employees arising out of and in the course of
the employment, irrespective of negligence or the fault of either
party.
742.29. An association seeking to establish an employee welfare
benefit plan by the use of a self-funded or partially self-funded
multiple employer welfare arrangement shall apply for a certificate
of compliance on a form prescribed by the commissioner. The
application shall be completed and submitted to the commissioner
along with all of the following:
(a) Copies of all articles, bylaws, agreements, or other documents
or instruments describing the rights and obligations of the
employers, employees, and beneficiaries of the association with
respect to the multiple employer welfare arrangement.
(b) Current audited financial statements of the association and
the multiple employer welfare arrangement, and Internal Revenue
Service Form number 5500 for the last five years.
(c) Proof of a fidelity bond in an amount equal to 10 percent of
the funds handled annually by the multiple employer welfare
arrangement. In no case may the amount of the bond be less than fifty
thousand dollars ($50,000) nor more than five hundred thousand
dollars ($500,000).
(d) A fiduciary liability policy with limits of not less than five
hundred thousand dollars ($500,000).
(e) A statement showing in full detail the benefit plan upon which
the association has established and maintained the multiple employer
welfare arrangement.
(f) A copy of all contracts or other instruments that it makes
with or issues to the association members, together with a copy of
its plan description and the printed material which was used in
enrolling members during 1993 and 1994.
(g) Proof of aggregate and specific stop loss insurance with an
insurer licensed to do business in this state.
(h) A copy of all contracts or other instruments that were used
with administrators and producers during 1993 and 1994.
(i) Biographical affidavits for the trustees, plan administrators
of the multiple employer welfare arrangement, officers and directors
of the association, other persons acting in a fiduciary capacity and
any third-party administrators performing services on behalf of the
multiple employer welfare arrangement.
742.30. The commissioner shall not issue a certificate of
compliance to a self-funded or partially self-funded multiple
employer welfare arrangement unless the employers participating in
the multiple employer welfare arrangement are members of a bona fide
trade, industrial, or professional association as described in
subdivision (b) of Section 742.24.
742.31. Each self-funded or partially self-funded multiple employer
welfare arrangement transacting business in the state shall file all
of the following with the commissioner:
(a) No later than May 15th of each calendar year or four months
and 15 days after the end of each fiscal year not on a calendar year
basis, financial statements audited by a certified public accountant,
and no later than March 1 of each calendar year or 60 days after the
end of each fiscal year not on a calendar year basis, an actuarial
opinion rendered by a qualified actuary that satisfies the
requirements of Section 10489.15. The opinion shall be based on
standards adopted from time to time by the Actuarial Standards Board
and on any additional standards that the commissioner may, by
regulation, prescribe. For the purposes of this section, "qualified
actuary" means a member in good standing of the American Academy of
Actuaries who meets the requirements set forth in regulations of the
commissioner. The qualified actuary shall be liable for damages to
any person caused by his or her negligence or other tortious conduct.
(b) Within 60 days after the end of each fiscal quarter, unaudited
financial statements, affirmed by an appropriate officer or agent of
the multiple employer welfare arrangement.
(c) Within 60 days after the end of each fiscal quarter, a report
certifying that the multiple employer welfare arrangement maintains
cash or liquid assets in a claim reserve account sufficient to meet
its contractual obligations and that it maintains a policy of
aggregate and specific stop loss insurance.
742.32. The commissioner or any persons designated by the
commissioner shall have the power to examine the affairs of any
self-funded or partially self-funded multiple employer welfare
arrangement and the association which established and maintains it,
and for that purpose shall have access to all books, records, and
documents that relate to the business of the multiple employer
welfare arrangement, and may examine under oath its trustees,
officers, agents, and employees in relation to the affairs,
transactions, and condition of the multiple employer welfare
arrangement.
742.33. Books, records, and documents pertaining to the business of
the multiple employer welfare arrangement shall be maintained by the
administrator for a period of five years. "Administrator," as used
in this section, has the same meaning as that contained in Section
1002(16)(A) of Title 29 of the United States Code.
742.34. (a) The following notice shall be provided to employers and
employees who obtain coverage from a multiple employer welfare
arrangement:
NOTICE
(A) THE MULTIPLE EMPLOYER WELFARE ARRANGEMENT IS NOT AN INSURANCE
COMPANY AND DOES NOT PARTICIPATE IN ANY OF THE GUARANTEE FUNDS
CREATED BY CALIFORNIA LAW. THEREFORE, THESE FUNDS WILL NOT PAY YOUR
CLAIMS OR PROTECT YOUR ASSETS IF A MULTIPLE EMPLOYER WELFARE
ARRANGEMENT BECOMES INSOLVENT AND IS UNABLE TO MAKE PAYMENTS AS
PROMISED.
(B) THE HEALTH CARE BENEFITS THAT YOU HAVE PURCHASED OR ARE
APPLYING TO PURCHASE ARE BEING ISSUED BY A MULTIPLE EMPLOYER WELFARE
ARRANGEMENT THAT IS LICENSED BY THE STATE OF CALIFORNIA.
(C) FOR ADDITIONAL INFORMATION ABOUT THE MULTIPLE EMPLOYER WELFARE
ARRANGEMENT YOU SHOULD ASK QUESTIONS OF YOUR TRUST ADMINISTRATOR OR
YOU MAY CONTACT THE CALIFORNIA DEPARTMENT OF INSURANCE AT ________.
(b) Each multiple employer welfare arrangement should include the
department's current "800" consumer service telephone number in the
blank provided in paragraph (C) of this notice.
742.35. The department may conduct an examination of the financial
condition of a self-funded or partially self-funded multiple employer
welfare arrangement, and if it determines that the multiple employer
welfare arrangement's financial condition does not comply with the
requirements of this article, the department may apply any remedies
authorized by this code.
742.36. Subject to the annual fee provisions of Section 742.39,
every certificate of compliance shall be for an indefinite term and
shall expire with the expiration or termination of the existence of
the holder thereof. Notwithstanding the provisions of this section,
whenever the commissioner shall determine, after notice and hearing,
that any person to whom the certificate has been issued is in arrears
to the state or to any county or city in the state for fees,
licenses, taxes, assessments, fines, or penalties, accrued on
business transacted in the state, or is otherwise in default for
failure to comply with any of the laws of this state regarding the
governmental control of the person by the state, the commissioner may
order the certificate holder to comply with those requirements
within 30 days of that determination. If the certificate of
compliance holder fails to comply within that period, the certificate
of compliance may then be revoked, unless the commissioner's order
is stayed by a court of appropriate jurisdiction.
742.37. (a) The commissioner may suspend the certificate of
compliance of a holder thereof for not exceeding one year whenever he
or she finds, after proper hearing following notice, that the person
engages in any of the following practices:
(1) Conducting its business fraudulently.
(2) Not carrying out its contracts in good faith.
(3) Habitually and as a matter of ordinary practice and custom
compelling claimants under policies, or liability judgment creditors
of the certificate of compliance holder, to either accept less than
the amount due under the terms of its contracts or resort to
litigation against the certificate of compliance holder to secure the
payment of the amount due.
(b) The order of suspension shall prescribe the period of each
suspension.
(c) Proceedings under this section shall be conducted in
accordance with Chapter 5 (commencing with Section 11500) of Part 1
of Division 3 of Title 2 of the Government Code, except that the
hearings shall be conducted by administrative law judges chosen under
Section 11502 or appointed by the commissioner.
742.38. The commissioner, in any proceeding under Section 742.37
for any of the violations specified in that section, may by
alternative order permit the holder of that certificate of compliance
to elect in writing to pay a specified money penalty, within a
specified time, in lieu of the suspension of its certificate of
compliance. If the holder so elects, the sum of money specified shall
be paid to the commissioner for use of the state, and shall not
exceed fifty-five thousand dollars ($55,000). If the holder so
electing fails to pay the specified sum within the specified time,
the commissioner shall, unless his or her order is stayed, put in
effect the alternatives specified in his or her order.
All money received by the commissioner pursuant to this section
shall, when appropriated for that purpose by the Legislature, be
available for expenditure by the commissioner in accordance with law
in administration and enforcement of this code and other insurance
laws.
The authority vested in the commissioner by this section shall be
additional to and not in lieu of any other authority to enforce any
penalties, fines or forfeitures, denials, suspensions, restrictions,
or revocations of certificates of compliance unless otherwise
authorized by law.
742.39. The commissioner shall require the payment of three
thousand five hundred dollars ($3,500) in advance as a fee for filing
an application for each certificate of compliance. Notwithstanding
Section 742.36, each holder of a certificate of compliance of
indefinite term shall owe and pay an annual fee of two hundred
eighty-three dollars ($283) in advance on account of the certificate
until final expiration. In addition, each holder of a certificate of
compliance of indefinite term shall owe and pay an annual fee of two
hundred eighty-one dollars ($281) for filing of financial
information. These fees shall be for annual periods commencing on
July 1 of each year and ending on June 30 of each year, and shall be
due on each March 1 and be delinquent on and after April 1.
742.40. (a) A multiple employer welfare arrangement shall offer
health care coverage benefits to any new eligible person and his or
her dependents under terms and conditions no less favorable to those
offered to their employers' existing employees and their dependents,
if the newly eligible person had health care benefit coverage with
either the same or a different multiple employer welfare arrangement
within 31 days. The new coverage shall comply with existing
eligibility rules of the multiple employer welfare arrangement.
(b) A multiple employer welfare arrangement shall comply with the
requirements set forth in Sections 10198.7 and 10198.9.
742.405. (a) No multiple employer welfare arrangement shall refuse
to enroll any person or accept any person as a subscriber or renew
any person as a subscriber after appropriate application on the basis
of a person's genetic characteristics that may, under some
circumstances, be associated with disability in that person or that
person's offspring. No multiple employer welfare arrangement shall
require a higher rate or charge, or offer or provide different terms,
conditions, or benefits, on the basis of a person's genetic
characteristics that may, under some circumstances, be associated
with disability in that person or that person's offspring than is at
that time required of any other individual in an otherwise identical
classification, nor shall any multiple employer welfare arrangement
make or require any rebate, discrimination, or discount upon the
amount to be paid or the service to be rendered under the arrangement
because the person carries those traits.
(b) No multiple employer welfare arrangement shall seek
information about a person's genetic characteristics for any
nontherapeutic purpose.
(c) No discrimination shall be made in the fees or commissions of
a solicitor or solicitor firm for an enrollment or a subscription or
the renewal of an enrollment or subscription of any person on the
basis of a person's genetic characteristics that may, under some
circumstances, be associated with disability in that person or that
person's offspring.
(d) "Genetic characteristics" as used in this section shall have
the same meaning as defined in Section 10123.3.
742.407. (a) This section shall apply to the disclosure of genetic
test results contained in an applicant or enrollee's medical records
by a multiple employer welfare arrangement.
(b) Any person who negligently discloses results of a test for a
genetic characteristic to any third party in a manner that identifies
or provides identifying characteristics of the person to whom the
test results apply, except pursuant to a written authorization as
described in subdivision (g), shall be assessed a civil penalty in an
amount not to exceed one thousand dollars ($1,000) plus court costs,
as determined by the court, which penalty and costs shall be paid to
the subject of the test.
(c) Any person who willfully discloses the results of a test for a
genetic characteristic to any third party in a manner that
identifies or provides identifying characteristics of the person to
whom the test results apply, except pursuant to a written
authorization as described in subdivision (g), shall be assessed a
civil penalty in an amount not less than one thousand dollars
($1,000) and no more than five thousand dollars ($5,000) plus court
costs, as determined by the court, which penalty and costs shall be
paid to the subject of the test.
(d) Any person who willfully or negligently discloses the results
of a test for a genetic characteristic to a third party in a manner
that identifies or provides identifying characteristics of the person
to whom the test results apply, except pursuant to a written
authorization as described in subdivision (g), that results in
economic, bodily, or emotional harm to the subject of the test, is
guilty of a misdemeanor punishable by a fine not to exceed ten
thousand dollars ($10,000).
(e) In addition to the penalties listed in subdivisions (b) and
(c), any person who commits any act described in subdivision (b) or
(c) shall be liable to the subject for all actual damages, including
damages for economic, bodily, or emotional harm which is proximately
caused by the act.
(f) Each disclosure made in violation of this section is a
separate and actionable offense.
(g) The applicant's "written authorization," as used in this
section, shall satisfy the following requirements:
(1) Is written in plain language.
(2) Is dated and signed by the individual or a person authorized
to act on behalf of the individual.
(3) Specifies the types of persons authorized to disclose
information about the individual.
(4) Specifies the nature of the information authorized to be
disclosed.
(5) States the name or functions of the persons or entities
authorized to receive the information.
(6) Specifies the purposes for which the information is collected.
(7) Specifies the length of time the authorization shall remain
valid.
(8) Advises the person signing the authorization of the right to
receive a copy of the authorization. Written authorization is
required for each separate disclosure of the test results, and the
authorization shall set forth the person or entity to whom the
disclosure would be made.
(h) This section shall not apply to disclosures required by the
Department of Health Services necessary to monitor compliance with
Chapter 1 (commencing with Section 124975) of Part 5 of Division 106
of the Health and Safety Code, nor to disclosures required by the
Department of Managed Health Care necessary to administer and enforce
compliance with Section 1374.7 of the Health and Safety Code.
742.41. All employer groups who have health care coverage benefits
provided by a multiple employer welfare arrangement for their
employees and their dependents, regardless of individual condition or
history of that employee and their dependents, shall continue to
provide coverage thereunder pursuant to the terms and conditions of
their multiple employer welfare arrangement, subject to only
cancellation for nonpayment of contribution, or in the event of the
termination of the multiple employer welfare arrangement.
742.42. The provisions of this code governing domestic incorporated
insurers, their business, and their contracts shall, so far as
applicable and not inconsistent, govern multiple employer welfare
arrangements subject to this article and the business and contracts
of these multiple employer welfare arrangements, except that these
multiple employer welfare arrangements, their business, and their
contracts shall not be subject to Article 14.7 (commencing with
Section 1067) of Chapter 1 of Part 2 of Division 1. There shall be a
rebuttable presumption that any provision of this code is applicable
to multiple employer welfare arrangements.
742.425. The provisions of this article shall not apply to multiple
employer welfare arrangements as defined in Section 1144(b)(6)(D) of
Title 29 of the United States Code.
742.43. The commissioner may adopt reasonable rules and regulations
for the implementation and administration of this article.
