CHAPTER 20:06:57
SELF-FUNDED MULTIPLE EMPLOYER TRUSTS
Section
20:06:57:01 Definitions.
20:06:57:02 Authorization.
20:06:57:03 Application for authorization.
20:06:57:03.01 Waiver for out-of-state association plans.
20:06:57:03.02 Coverage eligibility.
20:06:57:04 Investigation of application.
20:06:57:05 Issuance of authorization.
20:06:57:06 Report to director of modification.
20:06:57:07 Surplus.
20:06:57:08 Reserves and stop-loss coverage.
20:06:57:08.01 Multiple employer trust minimum loss ratio.
20:06:57:08.02 Multiple employer trust dividends.
20:06:57:09 Annual report.
20:06:57:10 Contracts by multiple employer trusts.
20:06:57:11 Disclosure.
20:06:57:12 Agreements and management contracts.
20:06:57:13 Examination.
20:06:57:14 Independent audit.
20:06:57:15 Trade practices.
20:06:57:16 Insolvency.
20:06:57:17 Minimum coverage standards for health policies.
20:06:57:18 Applicability of chapter.
20:06:57:01. Definitions.
(1) "Multiple employer trust," a self-funded entity which obtains authorization pursuant to SDCL 58-18-88 and this chapter to operate in South Dakota.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-18-88, 58-18-89.
20:06:57:02. Authorization. No person may establish or maintain a self-insured employee benefit plan for the purpose of providing health insurance which is a multiple employer trust in this state unless the multiple employer trust first obtains and maintains authorization pursuant to SDCL 58-18-88 and this chapter.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-18-88, 58-18-89.
20:06:57:03. Application for authorization. A person applying for authorization pursuant to SDCL 58-18-88 shall submit a plan of operation with the director. The application and plan of operation shall include the following:
(1) A business plan including a copy of all contracts or other instruments which the multiple employer trust proposes to make with or sell to its members, a copy of the plan description, and the printed materials to be used in the solicitation of members;
(2) Copies of all articles, bylaws, agreements, trust documents, or other documents or instruments describing the rights and obligations of employers, employees, and beneficiaries;
(3) A current list of all members of the employer group or association sponsoring the multiple employer trust and a description of the relationship among the employers which serves as the basis for the formation of the association or employer group;
(4) A description of the activities of the association or group of employers on behalf of its members other than the sponsorship of the multiple employer trust;
(5) Current financial statements of the multiple employer trust which shall include, at a minimum, balance sheets, income statement, cash flow statement, and a detailed listing of assets;
(6) An actuarial opinion prepared, signed, and dated by a member of the American Academy of Actuaries which states that appropriate loss and loss adjustment reserves have been established, that adequate premiums are being charged, and that the association multiple employer trust is operating in accordance with sound actuarial principles;
(7) A statement from an authorized representative of the applicant which certifies all of the following:
(a) The multiple employer trust is administered by an authorized insurer or an authorized third-party administrator;
(b) The multiple employer trust is eligible for authorization pursuant to SDCL 58-18-88;
(c) The association or group of employers sponsoring the multiple employer trust is engaged in substantial activity for its members other than sponsorship of an employer benefit plan; and
(d) The association is a nonprofit entity organized and authorized to do business under applicable South Dakota law;
(8) A statement from an authorized representative of the applicant which certifies that the applicable provisions of SDCL chapter 58-18, ARSD chapter 20:06:42, and this chapter have been met;
(9) A statement from the applicant that, to the best of its knowledge and belief, the multiple employer trust is in compliance with all applicable provisions of the Employee Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.);
(10) A description of the mechanism approved by the director to ensure that claims will be paid in the event that a member of the multiple employer trust is unable to comply with the multiple employer trust's contribution requirements;
(11) A copy of the most recent Form M-1 filed by the multiple employer trust with the U.S. Department of Labor, Pension and Welfare Benefits Administration, if applicable; and
(12) Any additional information requested by the director.
Source: 40 SDR 102, effective December 3, 2013; 45 SDR 158, effective June 27, 2019.
General Authority: SDCL 58-18-79, 58-18-89.
Law Implemented: SDCL 58-18-88, 58-18-89.
20:06:57:03.01. Waiver for out-of-state association plans. In addition to the information required by § 20:06:57:03, an association not formed in South Dakota which is seeking a waiver must include the following information in its application:
(1) A narrative statement describing the association's activities and the reasons a waiver is in the best interests of the public and should be granted;
(2) A certification attesting that the association is in full compliance with the laws of all the states where the association does business, including, where applicable, copies of all licenses or other approvals to operate in those states;
(3) A certification attesting that the association and all health plans sponsored by the association are in full compliance with the laws of all states where the association does business; and
(4) Any further information requested by the director.
Source: 45 SDR 158, effective June 27, 2019.
General Authority: SDCL 58-18-79, 58-18-89.
Law Implemented: SDCL 58-18-3, 58-18-6, 58-18-88.
20:06:57:03.02. Coverage eligibility. Multiple employer trusts must be sponsored by associations meeting the requirements of § 20:06:42:01 to provide coverage to members.
Source: 45 SDR 158, effective June 27, 2019.
General Authority: SDCL 58-18-79, 58-18-89.
Law Implemented: SDCL 58-18-3, 58-18-6, 58-18-88.
20:06:57:04. Investigation of application. The director shall investigate the application and supporting documents submitted by the applicant pursuant to SDCL 58-18-88 and this chapter and may conduct any investigation which the director may deem necessary and to examine under oath any persons interested in or connected with the multiple employer trust.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-18-88, 58-18-89.
20:06:57:05. Issuance of authorization. The director may issue an authorization to the multiple employer trust upon finding that the applicant multiple employer trust has met all requirements of SDCL 58-18-88 and this chapter. The director shall notify denied applicants of the reasons for denial. An unsuccessful applicant may file a new application for an authorization at any time, but not within 60 days of a previous denial by the director.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-18-88, 58-18-89.
20:06:57:06. Report to director of modification. A multiple employer trust shall immediately notify the director of any material change in ownership, control, or other fact or circumstance that may affect qualification for an authorization in this state.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-18-89.
20:06:57:07. Surplus. Unless otherwise provided in this section, a multiple employer trust shall deposit with an organization or trustee meeting the requirements of SDCL chapter 58-7 cash, securities, or any combination of these that is acceptable in the same amount provided in SDCL 58-6-23 for insurers. The director may increase the amount required to be deposited based on the director's written determination that such an increase is necessary to adequately secure any potential liability of the multiple employer trust to its enrollees, subject to SDCL chapter 58-29B proceedings.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-6-23, ch 58-7, 58-18-88, 58-18-89, ch 58-29B.
20:06:57:08. Reserves and stop-loss coverage.
(1) A multiple employer trust shall have at all times aggregate excess stop-loss coverage providing the multiple employer trust with coverage for risks in this state with an attachment point which is not greater than:
(a) 120 percent of actuarially projected losses on a calendar-year basis; or
(b) Five percent of annual expected claims for purposes of this section and shall provide for adjustments in the amount of that percentage as may be necessary to carry out the purposes of this section as determined by sound actuarial principles;
(2) A multiple employer trust shall establish and maintain appropriate loss and loss adjustment reserves determined by sound actuarial principles;
(3) A multiple employer trust shall set premiums to fund at least 100 percent of the multiple employer trust's actuarially projected losses plus all other costs of the multiple employer trust;
(4) All coverage obtained pursuant to this section shall contain a provision allowing for at least 90 days' notice to the director upon cancellation or nonrenewal of the contract;
(5) No contract or policy of per occurrence or aggregate excess insurance may be recognized in considering the ability of an applicant to fulfill its financial obligations under this section, unless such contract or policy is issued by a company that is:
(a) Licensed to transact business in this state; or
(b) Authorized to do business in this state as a reinsurer in one of the permitted methods regarding credit for reinsurance as provided in SDCL chapter 58-14.
Source: 40 SDR 102, effective December 3, 2013; 45 SDR 158, effective June 27, 2019.
General Authority: SDCL 58-14-17, 58-18-79, 58-18-89.
Law Implemented: SDCL 58-18-88, 58-18-89.
20:06:57:08.01. Multiple employer trust minimum loss ratio. A multiple employer trust that does not utilize community rating for its membership must maintain a minimum loss ratio (MLR) of eighty-five percent. MLR shall be calculated as follows:
(Claims + Claims Adjustment Expenses) / (Contributions - Applicable Taxes & Fees)
Source: 45 SDR 158, effective June 27, 2019.
General Authority: SDCL 58-18-79, 58-18-89.
Law Implemented: SDCL 58-18-3, 58-18-6, 58-18-88.
20:06:57:08.02. Multiple employer trust dividends. A multiple employer trust may provide dividends to employer members in the same manner as domestic insurers.
Source: 45 SDR 158, effective June 27, 2019.
General Authority: SDCL 58-18-79, 58-18-89.
Law Implemented: SDCL 58-18-3, 58-18-6, 58-18-88.
20:06:57:09. Annual report. A multiple employer trust shall file an annual report on or before the first day of March. The annual reports must be submitted for the preceding calendar year and must be verified by at least two of the trust's principal officers. The annual report shall be on the form designated by the director. The annual report shall be completed using statutory accounting practices and shall include information required by the director. The director may request additional reports and information from a multiple employer trust as deemed necessary to supplement the annual report. The annual report shall include:
(1) An independent actuarial opinion prepared in conformance with SDCL chapter 58-26 and ARSD chapter 20:06:37. The director may conduct an independent actuarial review of a multiple employer trust in addition to the actuarial opinion required by this rule. The cost of any actuarial review shall be paid by the multiple employer trust;
(2) A certificate of compliance signed and dated by the appropriate official representing the multiple employer trust that certifies the following:
(a) That the plan meets the requirements of this rule and the applicable provisions of the South Dakota statutes and regulations;
(b) That an independent actuarial opinion is attached to the certificate which attests to the adequacy of reserves, rates, and the financial condition of the plan. The actuarial opinion must include a brief commentary about the adequacy of the reserves, rates, and other financial condition of the plan, a test of the prior year's claim reserve, a brief description of how the reserves were calculated, and whether the plan is able to cover all reasonably anticipated expenses. The actuarial opinion shall be prepared, signed, and dated by a member of the American Academy of Actuaries;
(c) That a written complaint procedure for reviewing and resolving grievances from covered persons in accordance with SDCL chapter 58-17I has been implemented. The certificate shall list the number of complaints filed by participants under the written complaint procedure and the percentage of participants filing written complaints in the prior calendar year; and
(d) That the multiple employer trust has contracted with an insurer authorized to do business in this state or with a third-party administrator who holds a current license or registration pursuant to SDCL chapter 58-29D.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-17I-16, 58-18-89, 58-29D-34.
Law Implemented: SDCL ch 58-17I, 58-18-89, ch 58-26, ch 58-29D.
20:06:57:10. Contracts by multiple employer trusts. All contracts issued by a multiple employer trust shall comply with the following:
(1) Each multiple employer trust application for insurance and each policy and certificate issued by a multiple employer trust shall contain in ten-point type on the front page the following notice prominently displayed:
NOTICE
This policy is issued by a multiple employer trust. Multiple employer trusts
are not subject to all of the insurance laws and regulations of South Dakota.
This policy is not covered by the South Dakota Life and Health Insurance
Guaranty Association in the event of plan failure. Your participation in this
plan makes you subject to assessments for health plan costs. By accepting
coverage, you must participate in this plan for a minimum of three years to
avoid penalties for early departure.
(2) A multiple employer trust must offer on a guarantee-issue basis health benefits to all individuals who qualify as members or enrollees of the association;
(3) A multiple employer trust may offer only medical, dental, optical, surgical, hospital, accident and sickness, prescription, or disability benefits;
(4) All contracts or policies issued by a multiple employer trust shall:
(a) Conform to all the provisions of P.L. 104-191, the Health Insurance Portability and Accountability Act of 1996, including guaranteed issue of all products, preexisting condition limitations, renewability, and portability provisions as well as the issuance of prior coverage certificates to enrollees no longer eligible for plan coverage; and
(b) Comply with all coverage mandates that are applicable to group health insurance under this title.
Source: 40 SDR 102, effective December 3, 2013; 45 SDR 158, effective June 27, 2019.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL ch 58-15, 58-18-88, 58-18-89.
20:06:57:11. Disclosure. A multiple employer trust shall make the following disclosure to each employer member of the multiple employer trust:
The benefits and coverages described herein are provided through a self-insured trust fund established and funded in full or in part by a group of employers. It is not a licensed insurance company.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-18-89.
20:06:57:12. Agreements and management contracts. Any agreement between a multiple employer trust and any administrator, service company, or other entity shall be filed with the director for approval.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-18-89.
20:06:57:13. Examination. Each multiple employer trust is subject to examination by the director in accordance with SDCL chapter 58-3. Chapter 58-3 governs all aspects of the examination. The director may make an examination of a multiple employer trust as often as the director considers it necessary, but not less frequently than once every five years. The expenses of the examination shall be assessed against the multiple employer trust being examined in a manner in which expenses of examinations are assessed against an insurance company under SDCL chapter 58-3. Multiple employer trusts are subject to the examination fund assessment pursuant to SDCL 58-3-3.1.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-3-26, 58-18-89.
Law Implemented: SDCL ch 58-3, 58-18-88, 58-18-89.
20:06:57:16. Insolvency. The provisions of SDCL chapter 58-29B apply to multiple employer trusts which are considered insurers for purposes of that chapter.
Source: 40 SDR 102, effective December 3, 2013; 45 SDR 158, effective June 27, 2019.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-18-88, 58-18-89, ch 58-29B.
20:06:57:17. Minimum coverage standards for health policies. The minimum coverage standards for health policies offered by multiple employer trusts are those of a bronze plan as delineated in ARSD 20:06:56:11.
Source: 40 SDR 102, effective December 3, 2013.
General Authority: SDCL 58-18-89.
Law Implemented: SDCL 58-18-88, 58-18-89.
