Bill Text: HI SB2773 | 2018 | Regular Session | Introduced
Bill Title: Relating To Third Party Administrators.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Engrossed - Dead) 2018-04-27 - Conference committee meeting to reconvene on 04-27-18 4:30pm in conference room 229. [SB2773 Detail]
Download: Hawaii-2018-SB2773-Introduced.html
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THE SENATE |
S.B. NO. |
2773 |
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TWENTY-NINTH LEGISLATURE, 2018 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
RELATING TO THIRD PARTY ADMINISTRATORS.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The purposes of this Act are to: (1) encourage disclosure of contracts between insurers and third party administrators ("administrators"), both to potential insureds and the insurance commissioner; (2) promote the financial responsibility of administrators; (3) regulate administrators' practices in conformity with the general purposes of this Act; and (4) govern the qualifications and procedures for the licensing of administrators.
SECTION 2. Chapter 431, Hawaii Revised Statutes, is amended by adding a new article to be appropriately designated and to read as follows:
"ARTICLE
THIRD PARTY
ADMINISTRATORS
§431- Definitions. For purposes of this article:
"Administrator" or "third party administrator" means a person who collects charges or premiums from, or who adjusts or settles claims on, residents of this State in connection with life insurance coverage, accident and health or sickness insurance coverage, or article 1 of chapter 432, except the following:
(1) An employer on behalf of its employees or the employees of a subsidiary or an affiliated corporation of the employer;
(2) A union on behalf of
its members;
(3) An insurer authorized to transact insurance in this State with respect to a policy lawfully issued and delivered in and pursuant to the laws of this State or another state;
(4) A producer licensed
to sell life insurance coverage or accident and health or sickness insurance coverage
in this State, whose activities are limited exclusively to the sale of insurance;
(5) A managing general agent licensed in this State whose activities are limited exclusively to the scope of activities conveyed under that license;
(6) An individual adjuster licensed in this State whose activities are limited to adjustment of claims;
(7) An individual who adjusts or settles claims in the normal course of practice or employment as an attorney at law and who does not collect charges or premiums in connection with life insurance coverage or accident and health or sickness insurance coverage;
(8) A creditor on behalf of its debtors with respect to insurance covering a debt between the creditor and its debtors;
(9) A trust established in conformity with 29 U.S.C. section 186 and trustees, agents, and employees acting under that trust;
(10) A trust exempt from taxation under 26 U.S.C. section 501(a) and trustees and employees acting under that trust, or a custodian and the custodian's agents and employees acting under a custodian account that meets the requirements of 26 U.S.C. section 401(f);
(11) A financial institution subject to supervision or examination by federal or state banking authorities, or a mortgage lender that collects and remits premiums to licensed producers or authorized insurers in connection with loan payments;
(12) A credit card issuing company advancing for and collecting premiums or charges from its credit card holders who have authorized collection, provided the company does not adjust or settle claims; and
(13) A person who acts solely as an administrator of one or more employee benefit plans established by an employer or an employee organization.
"Commissioner" means the insurance commissioner.
"Insurance producer" or "producer" is defined in section 431:9A-102.
"Insurer" is defined in section 431:1-202.
"Person" is defined in section 431:1-212.
§431- License required; application. (a) No person shall act as or hold out to be an administrator in this State without a license as an administrator issued by the commissioner.
(b) An administrator shall apply to the commissioner on a form prescribed by the commissioner and shall include the following:
(1) A nonrefundable fee as set forth in section 431:7-101;
(2) All basic organizational documents of the administrator, including any articles of incorporation, articles of association, partnership agreement, trade name certificate, trust agreement, shareholder agreement, and other applicable documents and all amendments to the documents;
(3) The bylaws, rules, regulations, or similar documents regulating the internal affairs of the administrator;
(4) The names, addresses, official positions, and professional qualifications of the individuals responsible for the conduct of affairs of the administrator, including, but not limited to, all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal officers in the case of a corporation, or the partners in the case of a partnership;
(5) Annual audited financial statements for the two most recent years that prove the applicant is solvent and information the commissioner may require to review the current financial condition of the applicant; and
(6) Any other pertinent information the commissioner may require.
(c) An administrator licensed or applying for licensure shall notify the commissioner within thirty days of any material change in its ownership, control, contact person for the administrator, or any other fact or circumstance affecting its qualification for licensure.
(d) If an administrator employs or has contracted individuals to adjust claims for the administrator, the employees or contracted individuals shall first be licensed as individual adjusters.
(e) If an administrator employs or has contracted individuals to sell, solicit, or negotiate insurance business, the employees or contracted individuals shall first be licensed as producers. An administrator who intends to directly solicit insurance contracts or otherwise act as a producer shall first be licensed as an insurance producer.
(f) The commissioner may refuse to issue a license if the commissioner determines, after notice and hearing pursuant to section 431:2-308 and chapter 91, that the administrator is not competent, trustworthy, financially responsible, or of good personal and business reputation, or has had an application for an insurance license denied or revoked for cause within the past five years.
(g) The license is renewable or extendable biennially. The renewal or extension date for a license issued to a natural person shall be the sixteenth day of the licensee's birth month. The renewal or extension date for a license issued to an artificial person shall be the sixteenth day of April for a nonresident licensee, and the sixteenth day of July for a resident licensee. The license shall remain in effect so long as the fees set forth in section 431:7-101 are paid.
(h) The commissioner may contract with nongovernmental entities, including the National Association of Insurance Commissioners or any affiliations or subsidiaries that the National Association of Insurance Commissioners oversees, to perform any ministerial functions relating to the licensure of administrators.
§431- Surety bond required. Prior to the issuance or renewal of the administrator license, the administrator shall file and maintain with the commissioner a surety bond in the form and penal sum acceptable to the commissioner, but in no event shall be less than $300,000, and shall provide that the bond may not be canceled or otherwise terminated until two years have elapsed from the last day the applicant was an administrator, unless the commissioner has given prior written consent. The surety bond shall be undertaken and may be enforced in the name of "Commissioner of Insurance, State of Hawaii."
§431- Written agreement required. (a) An administrator shall have a written agreement between the administrator and insurer that contains all requirements of this article, except those that do not apply to administrator functions.
(b) The written agreement shall make provision with respect to underwriting or other standards pertaining to the business underwritten by the insurer.
(c) The written agreement shall be retained as part of the official records of the administrator and the insurer for the duration of their agreement and five years thereafter.
(d) When an insurance policy is issued to a trustee, the administrator shall furnish the insurer a copy of the trust agreement and any amendments to it. The trust agreement shall be retained as part of the official records of the administrator and the insurer for the duration of the insurance policy and five years thereafter.
§431- Effect of payments to administrator. (a) Payment to the administrator of any insurance premiums or charges by or on behalf of the insured shall be deemed received by the insurer.
(b) Payment of return premiums or claims by the insurer to the administrator shall not be deemed payment to the insured until the insured receives the payment.
(c) This section does not limit any right of the insurer against the administrator resulting from failure of the administrator to make payments to the insurer or insured.
§431- Recordkeeping required; commissioner's access to records. (a) An administrator shall maintain and make available to the insurer complete books and records of all transactions between the administrator, insurers, and insureds. The books and records shall be maintained in accordance with prudent standards of insurance recordkeeping and for the duration of the written agreement and five years thereafter.
(b) The commissioner shall have access to the books and records for examination, audit, and inspection. Trade secrets in the books and records, including the identity and addresses of insureds, shall be confidential and privileged. However, the commissioner may use the information in proceedings brought against the administrator.
(c) An administrator shall retain the right to continuing access to the books and records to fulfill its contractual obligations to the insurer and insureds, subject to any restrictions in the written agreement.
§431- Advertising by administrator. An administrator shall use only the advertising pertaining to the business an insurer has underwritten and approved in advance of its use.
§431- Fiduciary duties of administrator; payment of claims by administrator. (a) The administrator shall hold in a fiduciary capacity all charges or premiums it collects for or on behalf of an insurer and all return premiums it receives from the insurer. These funds shall be immediately remitted to the person entitled to them or shall be deposited promptly in a fiduciary account established and maintained by the administrator in a federally insured financial institution.
(b) If charges or premiums deposited in a fiduciary account have been collected for or on behalf of more than one insurer, the administrator shall keep records clearly recording the deposits in and withdrawals from the account for or on behalf of each insurer. The administrator shall keep copies of the records and, upon request of an insurer, shall furnish the insurer with copies of records pertaining to the deposits and withdrawals.
(c) An administrator shall not pay claims by withdrawals from the fiduciary account in which premiums or charges are deposited.
(d) The written agreement shall provide that withdrawals from the fiduciary account shall be made only for:
(1) Remittance to an insurer entitled to remittance;
(2) Deposit in an account maintained in the name of the insurer;
(3) Transfer to and deposit in a claims-paying account, with claims to be paid as provided in subsection (e);
(4) Payment to a group policyholder for remittance to the insurer entitled to remittance;
(5) Payment to the administrator of its commission, fees, or charges; and
(6) Remittance of return premiums to the person entitled to return premiums.
(e) All claims the administrator pays from funds collected for or on behalf of an insurer shall be paid only as authorized by the insurer.
§431- Compensation of administrator. Compensation to an administrator for adjusting or settling claims shall not be contingent on claim experience. This section shall not prevent the compensation of an administrator from being based on premiums or charges collected or number of claims paid or processed.
§431- Written notice to insureds required. (a) When the services of an administrator are used, the administrator shall provide written notice approved by the insurer to insureds, advising them of the identity of and relationship between the administrator, insurer, and insured.
(b) When an administrator collects funds, the administrator must identify the reason for collecting each item and show each item separately from the premium. Additional charges shall not be made for services to the extent the insurer has already paid for those services.
(c) The administrator shall disclose to the insurer all charges, fees, and commissions the administrator receives from services the administrator provides the insurer, including any fees or commissions paid by insurers providing reinsurance.
§431- Delivery of written information to insured. An administrator shall deliver promptly to the insured all policies, certificates, booklets, termination notices, or other written communications after receiving instructions from the insurer for delivery.
§431- Annual report required. (a) An administrator shall file an annual report for the preceding calendar year with the commissioner on or before March 1 of each year, in a form and manner prescribed by the commissioner.
(b) The annual report shall include the names and addresses of all insurers with which the administrator had an agreement during the preceding calendar year.
§431- License denial, nonrenewal, suspension, or revocation;
fines. (a) After notice and hearing, the commissioner shall
impose a fine pursuant to section 431:2-203 and issue a cease and desist order against
any person who acts or holds out as an administrator without a license.
(b) After notice and hearing, the commissioner shall deny, refuse to renew, suspend, or revoke the license of an administrator if the commissioner finds the administrator:
(1) Is in an unsound financial condition;
(2) Is using methods or practices in the conduct of business that renders the administrator's further transaction of business in this State hazardous or injurious to insureds or the public; or
(3) Has failed to pay a judgment rendered against the administrator in this State within sixty days after the judgment has become final.
(c) The commissioner may deny, refuse to renew, suspend, or revoke the license of an administrator if the commissioner finds the administrator:
(1) Has violated any lawful rule or order of the commissioner or this code;
(2) Has refused examination or production of the administrator's accounts, records, and files for examination, or if any individual responsible for or who exercises control or influence over the affairs of the administrator has refused to give information about the administrator's affairs, or has refused to perform any other legal obligation as to an examination, when required by the commissioner;
(3) Has, without just cause, refused to pay proper claims or perform services arising under the administrator's contracts or has, without just cause, caused insureds to accept less than the amount due them or caused insureds to employ attorneys or bring suit against the administrator to secure full payment or settlement of claims;
(4) Fails at any time to meet any qualification for which issuance of the license could have been refused, had the failure then existed and been known to the commissioner;
(5) Has been convicted of, or has entered a plea of guilty or nolo contendere to, a felony without regard to whether adjudication was withheld;
(6) Is under suspension or revocation in another state; or
(7) Has failed to timely file the annual report pursuant to section 431- .
(d) Without advance notice or hearing, the commissioner may immediately suspend the license of an administrator if the commissioner finds the following:
(1) The administrator is insolvent or impaired;
(2) A proceeding for receivership, conservatorship, rehabilitation, or other delinquency proceeding regarding the administrator has been commenced in any state; or
(3) The financial condition or business practices of the administrator otherwise pose an imminent threat to the public health, safety, or welfare of the residents of this State.
(e) If the commissioner finds one or more grounds exist for the denial, nonrenewal, suspension, or revocation of the license, the commissioner may additionally impose a fine upon the administrator pursuant to section 431:2-203.
§431- Rules. The commissioner may adopt rules to implement and enforce this article."
SECTION 3. Section 431:7-101, Hawaii Revised Statutes, is
amended by amending subsections (a) and (b) to read as follows:
"(a) The commissioner shall
collect, in advance, the following fees:
(1) Certificate of authority:
(A) Application for certificate of authority..... $900
(B) Issuance of certificate
of authority......... $600
(C) Application for motor
vehicle self-insurance. $300
(2) Organization of domestic insurers and affiliated corporations:
(A) Application for solicitation permit........ $1,500
(B) Issuance of solicitation
permit............. $150
(3) Producer's license:
(A) Issuance of regular license.................. $50
(B) Issuance of temporary license................ $50
(4) Nonresident producer's
license: Issuance........... $75
(5) Independent adjuster's
license: Issuance........... $75
(6) Public adjuster's
license: Issuance............... $75
(7) Claims adjuster's limited license: Issuance........ $75
(8) Administrator's license: Issuance ............... $150
[(8)] (9) Independent bill reviewer's license: Issuance. $80
[(9)] (10)
Limited producer's license: Issuance......... $60
[(10)] (11)
Managing general agent's license: Issuance... $75
[(11)] (12)
Reinsurance intermediary's license: Issuance. $75
[(12)] (13)
Surplus lines broker's license: Issuance.... $150
[(13)] (14) Service contract provider's registration:
Issuance......................................... $75
[(14)] (15) Approved course provider certificate:
Issuance........................................ $100
[(15)] (16) Approved continuing education course certificate:
Issuance......................................... $30
[(16)] (17)
Vehicle protection product warrantor's registration: Issuance......................................... $75
[(17)] (18) Criminal history record check; fingerprinting:
For each criminal history record check and fingerprinting check, a fee to be established by the commissioner.
[(18)] (19)
Limited line motor vehicle rental company producer's license: Issuance.............................. $1,000
[(19)] (20) Legal
service plan certificate of authority:
Issuance before July
1, 2014................... $1,000
Issuance on or after
July 1, 2014................ $500
[(20)] (21) Life settlement provider's license:
Issuance before July
1, 2014..................... $150
Issuance on or after
July 1, 2014................. $75
[(21)] (22) Life settlement broker's license:
Issuance before July
1, 2014..................... $150
Issuance on or after
July 1, 2014................. $75
[(22)] (23) Examination for license: For each examination, a fee to be established by the commissioner.
(b) The fees for services
of the department of commerce and consumer affairs subsequent to the issuance of
a certificate of authority, license, or other certificate are as follows:
(1) $600 per year for all
services (including extension of the certificate of authority) for an authorized
insurer;
(2) $50 per year for all services
(including extension of the license) for a regularly licensed producer;
(3) $75 per year for all services
(including extension of the license) for a regularly licensed nonresident producer;
(4) $45 per year for all services
(including extension of the license) for a regularly licensed independent adjuster;
(5) $45 per year for all services
(including extension of the license) for a regularly licensed public adjuster;
(6) $45 per year for all services
(including extension of the license) for a claims adjuster's limited license;
(7) $150 per year
for all services (including extension of the license) for an administrator's license;
[(7)] (8) $60 per year for all services (including extension
of the license) for a regularly licensed independent bill reviewer;
[(8)] (9) $45 per year for all services (including extension
of the license) for a producer's limited license;
[(9)] (10) $75 per year for all services (including extension
of the license) for a regularly licensed managing general agent;
[(10)] (11) $75 per year
for all services (including extension of the license) for a regularly licensed reinsurance intermediary;
[(11)] (12) $45 per year for all services (including extension
of the license) for a licensed surplus lines broker;
[(12)] (13) $75 per year for all services (including renewal
of registration) for a service contract provider;
[(13)] (14) $65 per year for all services (including extension of the certificate) for an
approved course provider;
[(14)] (15) $20 per year for all services (including extension
of the certificate) for an approved continuing education course;
[(15)] (16) $75 per year for all services (including renewal
of registration) for a vehicle protection product warrantor;
[(16)] (17) A fee to be established by the commissioner for
each criminal history record check and fingerprinting;
[(17)] (18) $600 per year for all services (including extension
of the license) for a regularly licensed limited line motor vehicle rental company
producer;
[(18)] (19) $1,000 per year for all services provided before
July 1, 2014, (including extension of the certificate) for an authorized legal service
plan;
[(19)] (20) $500 per year for all services provided on or
after July 1, 2014, (including extension of the certificate) for an authorized legal
service plan;
[(20)] (21) $1,200 per year for all services (including extension
of the license) for a regularly licensed life settlement provider; and
[(21)] (22) $150 per year for all services (including extension of the license) for a
regularly licensed life settlement broker.
The services referred to
in paragraphs (1) to [(21)] (22) shall not include services in connection
with examinations, investigations, hearings, appeals, and deposits with a depository
other than the department of commerce and consumer affairs."
SECTION 4. Section
432:1-102, Hawaii Revised Statutes, is amended to read as follows:
"§432:1-102 Applicability of other laws. (a) Part III of article 10A, and article 10H of chapter
431 shall apply to nonprofit medical indemnity or hospital service associations.
Such associations shall be exempt from the
provisions of part I of article 10A; provided that such exemption is in compliance
with applicable federal statutes and regulations.
(b) Article 2, article 2D,
parts II and IV of article 3, article 6, part III of article 7, article 9A, article
13, article 14G, and article 15 of chapter 431, sections 431:3-301, 431:3-302, 431:3-303,
431:3-304, 431:3-305, 431:10-102, 431:10-225, 431:10-226.5, and 431:10A-116(1) and
(2), and the powers granted by those provisions to the commissioner, shall apply
to managed care plans, health maintenance organizations, or medical indemnity or
hospital service associations that are owned or controlled by mutual benefit societies
so long as the application in any particular case is in compliance with and is not
preempted by applicable federal statutes and regulations.
(c) Article of chapter 431 shall apply to mutual benefit
societies.
[(c)] (d) The
commissioner may adopt rules pursuant to chapter 91 to implement and administer
this chapter."
SECTION
5. Statutory material to be repealed is bracketed
and stricken. New statutory material is underscored.
SECTION 6. This Act, upon its approval, shall take effect
on January 1, 2019.
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INTRODUCED BY: |
_____________________________ |
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BY REQUEST |
Report Title:
Administrator; Third party administrator; License
Description:
Encourages disclosure of contracts between insurers and third party administrators (administrators), both to potential insureds and the insurance commissioner. Promotes the financial responsibility of administrators. Regulates administrators' practices in conformity with the general purposes of this article. Governs the qualifications and procedures for the licensing of administrators.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
