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Delaware General AssemblyDelaware RegulationsMonthly Register of RegulationsDecember 2018

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Statutory Authority: 18 Del.C. §§314, 2101 & 505; 29 Del.C. Ch. 101; 29 USC §1144(b)(6)(A)(i); and in response to 29 CFR 2510.3-5
18 DE Admin. Code 1405
A. Background
In the September 1, 2018 edition of the Register of Regulations, at 22 DE Reg. 180 (September 1, 2018), the Commissioner of the Delaware Department of Insurance (Commissioner) published an order making Emergency Regulation 1405, Filing Requirements for Multiple Employer Welfare Arrangements, immediately effective. Emergency Regulation 1405 became effective on publication and remains in effect for 120 days unless the Commissioner orders a one-time 60-day extension of the effective time period.
Elsewhere in the September 1, 2018 edition of the Register of Regulations (see 22 DE Reg. 202 (September 1, 2018)), the Commissioner published a notice of intent to codify proposed new Regulation 1405, the text of which is identical to the text of Emergency Regulation 1405, and solicited written comments from the public for thirty (30) days as mandated by the Administrative Procedures Act at 29 Del.C. §10118(a).
In the concurrent proposal, the Commissioner proposed to repeal then-existing Regulation 1405 and replace it with new Regulation 1405, Requirements for Fully Insured Multiple Employer Welfare Arrangements and Association Health Plans. The authority for the proposed new regulation is 18 Del.C. §§311, 505, and 2101, 29 Del.C. Ch. 101, and 29 USC §1144(b)(6)(A)(i), and in response to 29 CFR 2510.3-5. The Emergency Regulation currently in effect has temporarily accomplished the repeal and replacement of then-existing Regulation 1405. However, to ensure that the repeal and replacement can be permanently codified, the Commissioner determined to provide the public the opportunity to review and comment on the proposed new rule pursuant to Administrative Procedures Act requirements.
B. Summary of Comments Received
Highmark, Inc. submitted questions about the implementation of the proposed regulation, suggested that the Department propose definitions of "member," "certificate holder," "association," and "plan intermediary," and suggested that the Department consistently refer to an "association or MEWA" as a "fully insured association or MEWA" throughout the regulatory text. Highmark also pointed out that the term "fully insured" references plan coverage by a foreign or domestic insurer licensed to do business in Delaware "under 18 Del.C. Ch.5," which can be interpreted to mean that the regulation does not apply to entities such as, for example, health services corporations (HSCs) who are subject to 18 Del.C. Ch. 63, since those entities are not licensed under Chapter 5. Highmark also pointed out that subsection 5.5 is inconsistent with the remaining portions of the regulation, because subsection 5.5 appears to regulate only self-insured associations or MEWAs, while, by its title, the regulation states that it contains "Requirements for Fully Insured Multiple Employer Welfare Arrangements and Association Health Plans" (emphasis added). Finally, Highmark suggested changing "contract" to "health insurance contract" in subsection 16.2 to clarify that this provision applies to health insurance contracts rather than administrative-services-only contracts.
The Commissioner finds that it is appropriate to adopt 18 DE Admin. Code 1405 as proposed in the September 1, 2018 Register of Regulations, for the reasons set forth above and in the proposal, with the following amendments that the Commissioner has determined do not require further public notice or comment under the APA because the amendments are non-substantive pursuant to 29 Del.C. §10118(c):
For the foregoing reasons, the Commissioner concludes that it is appropriate to adopt 18 DE Admin. Code 1405 with the non-substantive amendments discussed in the above Findings of Fact. The Commissioner concludes that it is also appropriate to repeal Emergency Regulation 1405 as of the effective date of the newly adopted Regulation 1405 that is the subject of this order.
The actions hereinabove referred to were taken by the Commissioner pursuant to 18 Del.C. §§311, 505, and 2101, 29 Del.C. Ch. 101, and 29 USC §1144(b)(6)(A)(i) and in response to 29 CFR 2510.3-5 on the date indicated below. This Order shall effective on the date signed. The effective date of the Regulation shall be ten (10) days from the date this Order is published in the Delaware Register of Regulations, pursuant to 29 Del.C. §10118 and 29 DE Admin. Code 101 - 5.4.
IT IS SO ORDERED.
The 14th day of November, 2018.
2.1 This regulation is issued pursuant to the authority vested in the Commissioner under 18 Del.C. §314, 18 Del.C. §2101, 18 Del.C. §505 and 29 Del.C. Ch. 101.
"Intermediary" shall mean an agent, brother, or other person who negotiates, solicits, or effectuates an agreement or contract to provide health care and/or medical coverage or benefits for any employer or employee in the state.
"Multiple Employer Welfare Arrangement" shall mean an arrangement which is established or maintained or offers to provide health care benefits or coverage to employees of two of more employers. Except, however, this regulation does not apply to multiple employer welfare arrangements which are exempt from state regulation under ERISA or which offers or provides benefits which are fully insured.
7.1 A violation of this regulation shall be considered an unfair and deceptive trade practice under 18 Del.C. §2304. Failure to file the information required in this regulation shall be prima facie evidence of a deceptive practice which endangers the legitimate interest of customers and public. If the MEWA does not qualify for an exemption under ERISA, after hearing, the MEWA or intermediary may be found in violation of 18 Del.C. §505 and 18 Del.C. Ch. 21 of the Delaware Insurance Code in accordance with 18 Del.C. §334 of the Delaware Insurance Code.
This regulation is issued pursuant to the authority vested in the Commissioner under 18 Del.C. §[314311], 18 Del.C. §2101, 18 Del.C. §505, 29 Del.C. Ch. 101, and 29 USC §1144(b)(6)(A)(i) and in response to 29 CFR 2510.3-5.
The following words and terms, when used in this regulation, have the following meaning unless the context clearly indicates otherwise:
"Association" means any foreign or domestic association that complies with 18 Del.C. §3506(a)(1)-(6) and provides a health benefit plan that covers the employees of at least one employer that is either domiciled in Delaware or has its principal headquarters or principal administrative office in Delaware or covers a Delaware resident of a non-Delaware employer.
"Commissioner" means the Commissioner of the Delaware Department of Insurance.
"Department" means the Delaware Department of Insurance.
"Employee welfare benefit plan" or "welfare plan" means an employee welfare benefit plan or welfare plan as defined in 29 USC §1002(1).
"Employee Retirement Income Security Act" or "ERISA" means the federal statute 29 USC [Chapter Ch.] 18.
"Fully Insured" means any association or MEWA health benefit plan coverage provided by a foreign or domestic insurer licensed to do business in Delaware [under the provisions of 18 Del.C. Ch. 5 and] in compliance with 18 Del.C. §3506 and 29 USC §1144(b)(6)(D).
"Health Benefit Plan" means a policy, contract, certificate, or agreement offered or issued by a health insurer to provide, deliver, arrange for, pay for, or reimburse any of the costs of health services, as defined in 18 Del.C. §903. The health benefit plan is issued to an association, to a trust, or to one or more trustees of a fund established, created, or maintained for the benefit of the members of one or more associations or a contract or plan issued by an association or trust or by a MEWA as defined in the Employee Retirement Income Security Act of 1974, 29 USC [§1001 et seq Ch. 18].
"Insurer" means any insurer, health service corporation, a health maintenance organization, or a managed care organization offering health insurance as defined in 18 Del.C. §903. An insurer shall not offer a health benefit plan to an association or MEWA with covered lives in Delaware unless it possesses a certificate of authority from the Commissioner or unless the nature of its business in Delaware is such that it is exempt from this requirement under the provisions of 18 Del.C. §506.
"Intermediary" shall mean an agent, broker, or other person who negotiates, solicits, or effectuates an agreement or contract to provide health care and/or medical coverage or benefits for any employer or employee in the state.
"Multiple employer welfare arrangement" or "MEWA" shall mean an arrangement which is established or maintained and offers to provide health care benefits or coverage to employees of two or more employers. Except, however, this regulation does not apply to multiple employer welfare arrangements which are exempt from state regulation under ERISA.
4.4 The Commissioner shall conduct a completeness review of a filing submitted under this Section and shall notify the applicant in writing of any deficiencies found during the completeness review [in] within 30 business days of receipt. An applicant shall address any deficiencies in its application within 15 business days of notice thereof. Upon written request from the applicant and for good cause shown, the Commissioner may extend this 15-business day [time frame timeframe] to correct any deficiencies in the application or renewal for an additional 30 business days. The Department shall notify the applicant in writing of its response to any such request.
5.5 [Any intermediary licensed by the Department who solicits, markets, advertises or administers health care coverage in this state for any association or MEWA, and where such coverage does not meet all pertinent requirements specified in this regulation and which is not provided or completely underwritten, insured, or otherwise fully covered by a Delaware-admitted insurer, shall advise and disclose to any purchaser, prospective purchaser, covered person or entity, all financial and operational information relative to the content and scope and, specifically, as to the lack of insurance or other coverage. Notwithstanding the above, an intermediary must comply with the filing requirements contained in Sections 4.0 and 5.0 of this regulation.
5.6] Until such time as the Department issues regulations specific to self-insured MEWAs and associations, self-insured MEWAs and associations shall be subject to all provisions of Title 18 of the Delaware Code and all regulations promulgated thereunder to the extent not inconsistent with the provisions of ERISA, including but not limited to:
6.2 [An A fully insured] association or MEWA shall continue to maintain the required minimum surplus indicated in subsection 6.1 so long as it continues to provide a health benefit plan in Delaware.
6.4 Surplus funds required under this Section are not to be used to fund the [fully insured] association or MEWA's normal operations, including providing a health benefit plan to its members. This unimpaired free surplus shall be in the form of cash or marketable securities.
6.6 If the level of surplus falls below the amounts specified in subsection 6.1, the [fully insured] association or MEWA shall notify the Commissioner within five days and shall file with the Commissioner within 45 days a plan to return the surplus to the required level. This plan shall include a report of the causes of the association's or MEWA's insufficiency, the assessments necessary to replenish the minimum surplus and the steps taken to prevent a recurrence of such circumstances.
6.7 In addition to the minimum surplus required in subsection 6.1, the [fully insured] association or MEWA shall obtain a surety bond sufficient to cover 20% of its annual premium for Delaware members, and shall comply with the following:
6.7.1 For the first year of operation, the [fully insured] association or MEWA shall obtain a surety bond in the amount of $500,000.00 to ensure the association's or MEWA's contractual obligations to its health benefit plan members:
6.7.2 Every surety bond obtained by [an a fully insured] association or MEWA shall be:
6.7.3 [An A fully insured] association or MEWA shall notify the Department within five days of any cancellation or termination of its surety bond.
7.1 An insurer offering a health benefit plan to an association or MEWA shall obtain rate approval from the Commissioner through the rate review process provided in 18 Del.C. Ch. 25. An insurer may use its existing group rates, without making an association or MEWA-specific rate filing, so long as its group rates have been filed with and approved by the Commissioner and meet the requirements of this Section.
8.1.1 Essential Health Benefits as defined in 42 USC §18022(b)(1) [(see Pub. L. 111–148, Title I, §1302, Title X, §10104(b), Mar. 23, 2010, 124 Stat. 163, 896, incorporated herein by reference)], except that pediatric dental and vision coverage as required in this subsection may be offered to the association in either a stand-alone dental or vision plan or as a benefit embedded in the health benefit plan;
8.1.2 Cost sharing requirements of 42 USC §18022(c)(1), (c)(3) [(see Pub. L. 111–148, Title I, §1302, Title X, §10104(b), Mar. 23, 2010, 124 Stat. 163, 896, incorporated herein by reference)];
8.1.3 Lifetime and annual limits as prescribed in 29 CFR 2590.715-2711 [(see 80 FR 72261, Nov. 18, 2015, as amended at 81 FR 75325, Oct. 31, 2016, incorporated herein by reference)];
8.1.5 All other insurance requirements and benefit mandates for health insurers as provided in 18 Del.C. Chs. 35 and 72, as applicable and as may be amended, any regulations promulgated pursuant thereto, and as specified by regulation by the Commissioner; and
8.4 Regardless of the collective size of the [fully insured] association or MEWA, health benefit plans issued to small employers shall comply with all insurance laws applicable to small employer groups as required by 18 DE Admin. Code 1308-3.3
9.1 Prior to issuing a health benefit plan to [an a fully insured] association or MEWA, an insurer shall confirm that the [fully insured] association or MEWA:
THE {Insert the name of the [FULLY INSURED] ASSOCIATION OR MULTIPLE EMPLOYER WELFARE ARRANGEMENT in all capital letters} IS NOT AN INSURANCE COMPANY. FOR ADDITIONAL INFORMATION ABOUT THE {Insert the name of the ASSOCIATION OR MULTIPLE EMPLOYER WELFARE ARRANGEMENT in all capital letters} YOU SHOULD ASK QUESTIONS OF THE ADMINISTRATOR OF THE {Insert the name of the ASSOCIATION OR MULTIPLE EMPLOYER WELFARE ARRANGEMENT in all capital letters}, OR YOU MAY CONTACT THE DELAWARE DEPARTMENT OF INSURANCE AT__________."
10.3 Each [fully insured] association or MEWA-related notice shall include the Department's current consumer service telephone number and website in the blank provided in this notice.
10.4 The insurer of a [fully-insured fully insured] plan shall include in its policy documents the following disclosures:
10.4.2 Purchasing [an a fully insured] association or MEWA health benefit plan may prevent the employer or individual from accessing premium subsidies and cost sharing reductions that may otherwise be available under the Patient Protection and Affordable Care Act; and
10.4.3 Purchasing [an a fully insured] association or MEWA health benefit plan may be more expensive than purchasing a plan on the Delaware Health Exchange.
At a minimum, an insurer enrolling employers or individuals in [an a fully insured] association or MEWA health benefit plan shall comply with all open enrollment and special enrollment periods as provided in 18 Del.C. §3571J.
12.1 Each [fully insured] association or MEWA shall file annually with the Commissioner, and with the members of the [fully insured] association or MEWA, an audited financial statement for the most recently completed fiscal year that is certified by an independent certified public accountant. If the [fully insured] association or MEWA fails to file such audited financial statement, the Commissioner may perform the audit and the [fully insured] association or MEWA shall reimburse the Commissioner for the cost thereof.
12.3.1 Loss reserves shall not be discounted. However, the Commissioner may approve discounting of loss reserves if the [fully insured] association's or MEWA's actuary certifies that said discounting is in accordance with the customary practice of the traditional insurance industry, and that said discounting will not adversely affect the fiscal integrity of the [fully insured] association or MEWA; and
12.4 Each [fully insured] association or MEWA shall include with the financial statement a statement of opinion as to the loss and loss expense reserves certified by an actuary.
12.5 Each [fully insured] association or MEWA shall file a copy of the fidelity bond, or evidence acceptable to the Commissioner, covering the administrator, the [fully insured] association or MEWA employees and service agents with the audited financial statement.
12.6 In addition to the annual audited financial statement, the Commissioner may require any [fully insured] association or MEWA to file additional financial information, including, but not limited to, interim financial reports, additional financial reports or exhibits, or statements considered necessary to secure complete information concerning the condition, solvency, experience, transactions, or affairs of the [fully insured] association or MEWA. The Commissioner shall establish reasonable deadlines for filing these additional reports, exhibits, or statements. The Commissioner may require verification of any additional required information.
12.7 Each [fully insured] association or MEWA shall file annually with the Commissioner the methodology for establishing the annual contributions of its members. Such contributions shall be based on reasonable assumptions and certified by an actuary.
12.8 An insurer offering a health benefit plan to [an a fully insured] association or MEWA with covered lives in Delaware shall comply with all financial reporting requirements applicable to traditional insurance companies doing business in Delaware. Instructions for annual filings by traditional insurance companies doing business in Delaware are set forth on the Department's website.
[Associations, MEWAs A fully insured association or MEWA], and insurance agents or brokers acting on behalf of [an a fully insured] association or MEWA may only use marketing materials that have been submitted to and approved by the Commissioner pursuant to Section 4.0 of this regulation. [Associations, MEWAs A fully insured association or MEWA], and insurance agents or brokers acting on behalf of [an a fully insured] association or MEWA are subject to 18 Del.C. Ch. 23 and all other applicable provisions of law regarding advertising practices.
[An A fully insured] association or MEWA doing business in Delaware shall maintain its books and records for a minimum period of seven years following termination of coverage under a fully-insured policy and a minimum of seven years for all [fully insured] association or MEWA-related documentation unrelated to insurance coverage.
15.1 A violation of this regulation shall be considered an unfair and deceptive trade practice under 18 Del.C. §2304. Failure to file the information required in this regulation shall be prima facie evidence of a deceptive practice which endangers the legitimate interest of customers and public. If the [fully insured] MEWA or association does not qualify for an exemption under ERISA, after hearing, the MEWA or association may be found in violation of 18 Del.C. §505 and 18 Del.C. Ch. 21.
15.2 To ensure compliance with the provisions of this regulation and protect Delaware health care consumers, the Commissioner may, in his or her discretion, examine the business and financial affairs of [an a fully insured] association or MEWA doing business in this state utilizing the powers granted by 18 Del.C. §320, and other provisions of Title 18 as may be applicable.
15.3 The Commissioner may decline to issue or renew a license issued pursuant to this regulation if the Commissioner finds that [an a fully insured] association or MEWA does not satisfy any standard or requirement of this regulation or any provision of other applicable state or federal law or regulation.
15.6 When the Commissioner believes that [an a fully insured] association, MEWA, or any other person is operating in this state without being duly registered or has violated the law, an administrative regulation of the Department, or an Order of the Commissioner, the Commissioner may issue an order to cease and desist such violation or take any other action set forth in 18 Del.C. §2307.
16.1 An insurer shall notify the Department by December 31st of each year of all health insurance contracts and administrative-services-only contracts it issued, renewed, or had in force at any time during the 12-month period of that calendar year, that covered [an a fully insured] association or MEWA with members having employees or dependents in Delaware.
16.2 The [health insurance] contract between the insurer and the [fully insured] association or MEWA shall contain a provision whereby the insurer shall maintain, for the benefit of certificate holders, a deposit account covering 30 days of claims should the contract be cancelled or terminated. The insurer shall notify the Department within 5 days of any cancellation or termination of a contract that covered [an a fully insured] association or MEWA with members having employees or dependents in Delaware.
16.3 Reporting Requirement for Fraudulent [Fully Insured] Association or MEWA Activity
16.3.1 An insurer having knowledge or a reasonable suspicion that [an a fully insured] association, MEWA, or entity holding itself out to be [an a fully insured] association or MEWA in this state is not in compliance with the requirements of this rule shall immediately report to the Commissioner, in writing, regarding the identity of the entity, any known contact information or other materials, and the nature of the entity's practices that triggered this reporting. This reporting obligation also requires an insurer report to the Commissioner any person, including a licensed or unlicensed agent, a broker, or other individual, soliciting, offering, or selling a health benefit plan on behalf of [an a fully insured] association, MEWA, or entity holding itself out to be such [an a fully insured] association or MEWA in this state without complying with the requirements of this regulation.
17.1 Any person, including a licensed or unlicensed agent, a broker, or other individual, soliciting, offering, or selling a health benefit plan on behalf of [an a fully insured] association or MEWA to a Delaware employer or a Delaware resident shall comply with the following requirements:
17.1.1.2 The name of the [fully insured] association or MEWA; and
17.1.3 Provide the employer or resident with a crosswalk of benefits comparing the [fully insured] association or MEWA health benefit plan with plans offered on the Delaware Health Insurance Marketplace; and
17.1.4 Prior to engaging in or assisting any person to engage in offering [an a fully insured] association or MEWA health benefit plan, carry out and document appropriate due diligence to establish, at a minimum, the following:
17.2 Any person, including a licensed or unlicensed agent, a broker, or other individual, soliciting, offering, or selling a health benefit plan on behalf of [an a fully insured] association, MEWA, or entity holding itself out to be such [an a fully insured] association or MEWA, having knowledge or a reasonable suspicion that [an a fully insured] association, MEWA, or entity holding itself out to be [an a fully insured] association or MEWA in this State is not in compliance with the requirements of this regulation shall immediately report to the Commissioner in writing regarding the identity of the entity, any known contact information or other materials, and the nature of the entity's practices triggering this reporting. This reporting obligation also requires such person to report to the Commissioner any person, including a licensed or unlicensed agent, a broker, or other individual, soliciting, offering, or selling a health benefit plan on behalf of [an a fully insured] association, MEWA, or entity holding itself out to be such [an a fully insured] association or MEWA in this State without complying with the requirements of this rule. The confidentiality provisions of subsection 16.3.2 shall apply to this subsection.
Last Updated: December 31 1969 19:00:00.
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