28 Tex. Admin. Code § 7.1904 - Application for Initial Certificate of Authority

(a) Any person seeking to establish a multiple employer welfare arrangement (MEWA) that is not fully insured, as that term is defined in Insurance Code § 846.002(a), concerning Applicability of Chapter, must submit a complete application for initial certificate of authority to the commissioner and may use the MEWA forms accessible on the department's website at www.tdi.texas.gov/forms as a resource to comply.

(b) In order to be considered complete, the application must contain the following items:

(1) a name application form signed and dated by an authorized representative of the applicant that includes:

(A) the name of the MEWA; the physical address where the MEWA is incorporated; contact information, including telephone number and email address; and title or relationship of each organizer to the proposed MEWA, along with the same information about any affiliated organizations;

(B) a statement that the applicant is seeking to reserve a name as a MEWA and whether the purpose of the application is to change the name of an existing MEWA, form a new MEWA, or seek to be admitted to the State of Texas as a foreign MEWA;

(C) a list of all the states where the MEWA holds a certificate of authority or license, whether the MEWA is fully insured or not; and

(D) a list of all the states where the MEWA holds a certificate of authority or license under an assumed name, whether the MEWA is fully insured or not;

(2) a notarized affidavit signed by the president, secretary, and treasurer, or all of the trustees, that contains:

(A) information about the MEWA, including:

(i) the MEWA's full name;

(ii) the physical address of the MEWA's home office;

(iii) the employer identification number;

(iv) the point of contact's name and contact information; and

(v) the association's seal, if applying as an association. If not applying as an association, a notation that the affiant is a group of employers;

(B) information about the officers, directors, and trustees, as applicable, including:

(i) the full name, social security number, and appointment or election date of the president, secretary, and treasurer; and

(ii) the full name, social security number, and appointment or election date of any other directors or trustees; and

(C) a statement that affirms the following: "We hereby apply for an initial Certificate of Authority authorizing {MEWA name} to act as a Multiple Employer Welfare Arrangement in the State of Texas for a period of twelve (12) months. We know of no reason under the provisions of the Texas Insurance Code why {MEWA name} is not entitled to such a Certificate of Authority";

(3) a biographical affidavit that is completed and filed for each trustee, officer, director, or administrator of the MEWA that includes the following information:

(A) the affiant's current legal name and any names the individual may have used in the past, social security number, date of birth, citizenship(s), and current mailing addresses, phone numbers, and email addresses;

(B) the name and address of the MEWA;

(C) the affiant's current or proposed position or title at the MEWA;

(D) information regarding the affiant's education, memberships in professional organizations, and any professional, occupational, or vocational licenses held (current and past), including a statement whether any were refused, suspended, or revoked in the last 10 years;

(E) the affiant's employment history for the previous 10 years; and

(F) the affiant's fidelity bond coverage history, criminal history, any bankruptcy history, lawsuit history in the past five years, and any previous or current ownership or control of entities involved in the business of insurance, including a statement whether any became insolvent or were placed under supervision or in receivership, rehabilitation, liquidation, or conservatorship, or had their certificate of authority suspended or revoked;

(4) a notarized service of process form signed by the president and secretary or the trustees that designates the commissioner as the MEWA's resident agent for purposes of service of process and includes the following:

(A) the mailing address of the MEWA;

(B) a statement substantially similar to the following: "{MEWA Name} hereby appoints the commissioner of insurance, located at 1601 Congress Ave., Austin, Texas 78701, as its resident agent for service of process under Texas Insurance Code Section 846.059. All process or pleadings in any civil suit or action against {MEWA Name} may be served on the commissioner as though served on {MEWA Name} directly. {MEWA Name} waives all claims of error by reason of this appointment and admits or agrees that this appointment of the commissioner of insurance as its resident agent for service of process will be taken and held as valid and sufficient as though served directly on {MEWA Name}. This appointment will continue for as long as any liability remains outstanding against {MEWA Name} pertaining to any such matters."; and

(C) the MEWA's seal, as applicable;

(5) a certified copy of the articles of incorporation, if applicable;

(6) a certified copy of the bylaws, constitution, or rules or regulations establishing and operating the MEWA;

(7) trust agreements created in connection with the MEWA, which must be signed by all trustees;

(8) a welfare benefit plan document, including documentation or instruments describing the rights and obligations of employers, employees, and beneficiaries with respect to the MEWA;

(9) a summary plan description, consistent with 29 United States Code § 1022, that:

(A) is written in a manner calculated to be understood by the average plan participant and is sufficiently accurate and comprehensive to reasonably apprise such participants and beneficiaries of their rights and obligations under the plan; and

(B) contains the following information:

(i) the name and type of administration of the plan;

(ii) the name and address of the administrator;

(iii) the names and addresses of any trustee or trustees if they are persons different from the administrator;

(iv) the plan requirements with respect to eligibility for participation and benefits;

(v) a description of provisions relating to nonforfeitable benefits if any are included in the plan;

(vi) a description of circumstances that may result in disqualification, ineligibility, or denial or loss of benefits;

(vii) the source of financing of the plan;

(viii) the identity of any organization through which benefits are provided;

(ix) the date of the end of the plan year and whether the records of the plan are kept on a calendar, policy, or fiscal year basis;

(x) the procedures to be followed in presenting claims for benefits under the plan;

(xi) remedies available under the plan for the redress of claims that are denied in whole or in part; and

(xii) a statement of guaranty fund nonparticipation, if applicable, in the same form as set out for insurers and health maintenance organizations in § 1.1001 of this title (relating to Disclosure of Guaranty Fund Nonparticipation);

(10) financial statements, including:

(A) a current financial statement. If the MEWA is already in business, the financial statement must include an annual balance sheet and income statement, developed on generally accepted accounting principles, for the past five years, or since the inception of the MEWA, whichever time period is shorter;

(B) a projected balance sheet for a minimum of three years on a quarterly basis, including assumptions used in producing projections. The projected balance sheet must be developed according to generally accepted accounting principles;

(C) a projected income statement, providing income forecasts for a minimum interval of three years, detailed on a quarterly basis. The projected income statement must be developed according to generally accepted accounting principles;

(D) a projected cash flow analysis on a quarterly basis, for a minimum of three years. Line by line documentation of anticipated cash inflow and outflow by specific account type must be submitted;

(E) a statement of the proposed initial cash and cash reserves summary. This statement must include all items of funding, including but not limited to loan receipts, loan repayments, and stock sales. The statement must include a description of the source and terms of the funding; and

(F) if an existing MEWA, a copy of its Federal Form 5500 for the past five years, or since the inception of the MEWA, whichever time period is shorter;

(11) a copy of the fidelity bond issued in the name of the MEWA protecting against acts of fraud and dishonesty by its trustees, directors, officers, employees, administrator, or other individuals responsible for servicing the employee welfare benefit plan, including, for MEWAs that are not bona fide associations or groups under ERISA, those individuals with access to funds held by the MEWA on behalf of separate employee welfare benefit plans established or maintained by the MEWA's employer-members. Such bond must be in an amount equal to the greater of 10% of the premiums and contributions received by the MEWA, or 10% of the benefits paid, during the preceding calendar year, with a minimum of $10,000 and a maximum of $500,000. No additional bond will be required of a third-party administrator licensed to engage in business in this state;

(12) a business plan that includes the following six major areas.

(A) Current or proposed operations must be outlined with information by the applicant identifying the number of employers in the group currently participating or proposed to participate in the MEWA. The outline must also include the number of participating units. To the extent such information is available, it also must include the number of dependents covered or to be covered by the MEWA. A specific list of the benefits being provided or proposed to be provided must also be included.

(B) Specific information about individuals providing or proposed to provide management services is required. The applicant must indicate whether each trustee is an owner, partner, officer, or director, and/or employee of a participating employer or is committed to participate in the MEWA. In addition, the applicant must provide the name and address of the employer represented by each trustee and by each officer and provide the association of the trustee or officer with such employer. The applicant must list the individuals responsible for managing or handling funds or assets of the MEWA.

(C) With respect to administration of the present or proposed plan, the applicant must give the names and qualifications of individuals or the third-party administrator responsible for or proposed to be responsible for servicing the program of the MEWA. If a third-party administrator is to service the plan, a copy of the third-party administrator's Texas license must be attached. In addition, a copy of the agreement between the MEWA and the third-party administrator must be submitted, signed by the third-party administrator and trustees or directors of the MEWA.

(D) The applicant must provide documentation that the MEWA has provided or will provide a sufficient number of competent persons to service its program in the areas of claims adjusting and underwriting. The applicant must also describe the present or proposed plan to service billings, claims, and underwriting. The criteria for underwriting must be actuarially justified.

(E) The applicant must provide a specific outline and description of the MEWA's marketing efforts. The applicant must list the names of all persons directly employed or proposed to be employed by the arrangement who solicit participants or adjust claims, indicating the qualifications and credentials of such individuals and whether such persons hold any license issued by the department. The applicant must specify any such licenses by type.

(F) The applicant must provide documentation showing that a procedure has been established for handling claims for benefits in the event of dissolution of the MEWA;

(13) subject to Insurance Code § 846.157(b), concerning Renewal of Certificate; Additional Actuarial Review, an actuarial opinion prepared by an actuary who is not an employee of the MEWA, an employee of the MEWA's employer-members, an affiliate of the MEWA, or an affiliate of the MEWA's employer-members, or an employee of an affiliate of the MEWA; and who is a fellow of the Society of Actuaries, a member of the American Academy of Actuaries, or an enrolled actuary under the Employee Retirement Income Security Act of 1974 (29 United States Code § 1241 and § 1242). The actuarial opinion must include the following:

(A) a description of the actuarial soundness of the MEWA, including any recommended actions that the MEWA should take to improve its actuarial soundness;

(B) the recommended amount of cash reserves the MEWA should maintain.

(i) For all MEWAs, the recommended amount may not be less than the greater of 20% of the total contributions in the preceding plan year or 20% of the total estimated contributions for the current plan year; cash reserves must be calculated with proper actuarial regard for known claims, paid and outstanding, a history of incurred but not reported claims, claims handling expenses, unearned premium, an estimate for bad debts, a trend factor, and a margin for error (cash reserves required by Insurance Code § 846.154, concerning Cash Reserve Requirements, must be maintained in cash or federally guaranteed obligations of less than five-year maturity that have a fixed or recoverable principal amount, or such other investments as the commissioner may authorize by rule); and

(ii) For a MEWA that provides a comprehensive health benefit plan under Insurance Code § 846.0035, concerning Applicability of Certain Laws to Associations Providing Health Benefits, the MEWA must also comply with Insurance Code Chapter 421, concerning Reserves in General.

(C) the recommended level of specific and aggregate stop-loss insurance the MEWA should maintain;

(14) if the MEWA is in existence at the time of its application, annual reports meeting the substantive requirements of 29 United States Code § 1023 and § 1024 must be filed. To the extent that such annual reporting requirements are not otherwise met by existing MEWAs when complying with other provisions of this subchapter, a filing under this paragraph must be made, and must include, at a minimum:

(A) the administrator's report of essential information for the most recent year ending, detailing the size and nature of the plan, and the number of participating employees in the plan;

(B) the statement from any insurance company, insurance service, or other similar organization that sells or guarantees plan benefits. The statement must detail:

(i) the premium rate or subscription charge and the total of such premiums or subscription charges in relation to the approximate number of persons covered by each class of benefits; and

(ii) the total amount of premiums received, approximate number of persons covered by each class of benefits, and total claims paid by such company, service, and other organization; and

(C) the published summary plan description and annual report to participants and beneficiaries of the plan;

(15) documentation indicating that the MEWA has applications from not less than five employers and will provide similar benefits for not less than 200 separate participating employees, and that the annual gross premiums of or contributions to the plan will be not less than $20,000 for a vision-benefit-only plan, $75,000 for a dental-benefits-only plan, and $200,000 for all other plans;

(16) for a MEWA that is formed according to Insurance Code § 846.053(b)(2), concerning Eligibility Requirements for Initial Certificate of Authority, documentation demonstrating that the employers in the MEWA applicant each have a principal place of business in the same region that does not exceed the boundaries of this state or the boundaries of a metropolitan statistical area designated by the United States Office of Management and Budget;

(17) documentation that the MEWA possesses a written commitment, binder, or policy for stop-loss insurance issued by an insurer authorized to do business in this state that provides:

(A) at least 30 days' notice to the commissioner of any cancellation or nonrenewal of coverage; and

(B) both specific and aggregate coverage with an aggregate retention of no more than 125% of the amount of expected claims for the subsequent plan year and the specific retention amount determined by the actuarial report required by Insurance Code § 846.153, concerning Required Filings, and paragraph (13) of this subsection;

(18) documentation demonstrating that the MEWA is in compliance with all applicable federal and state laws, including, at a minimum, the following:

(A) for all plans sponsored by the applicant, whether operating in Texas or in any other state, a list of and access to all reports for the last five years filed with the United States Department of Labor in compliance with the Employee Retirement Income Security Act of 1974, 29 United States Code §§ 1021(g), 1023, and 1024;

(B) if the MEWA is an employee welfare benefit plan for purposes of the Employee Retirement Income Security Act of 1974 (29 United States Code § 1001 et seq.), either:

(i) an advisory opinion from the United States Department of Labor that is no more than three years old recognizing the employer group or association as a bona fide employer association or group if the relevant MEWA structure addressed by the advisory opinion has not changed and will not change after licensure; or

(ii) an opinion from an attorney attesting that the employer group or association as it will be structured after licensure qualifies as a bona fide employer association or group for purposes of the Employee Retirement Income Security Act of 1974 (29 United States Code § 1001 et seq.). An attorney attestation must adequately explain how and why the employer group or association meets all of the factors to be a bona fide employer association or group, based on the facts and circumstances of the employer group's or association's governance and operations during the 12 months immediately preceding submission of the application, and on how the MEWA will be structured after licensure, with explicit references to relevant language drawn from the employer group's or association's bylaws, trust agreement, or other organizational documents, which must be submitted to the department with the attorney's attestation; and

(C) for each plan that will be provided by the applicant, an opinion from an attorney attesting to the fact that the plan is in compliance with all applicable federal and state laws. The opinion must adequately explain how each plan complies with the Employee Retirement Income Security Act of 1974 (29 United States Code § 1001 et seq.) and the Patient Protection and Affordable Care Act (42 United States Code § 18001 et seq.), including how each plan complies with federal requirements applicable to large group, small group, or individual markets, as applicable; and

(19) if the MEWA will provide a comprehensive health benefit plan, the MEWA must provide additional information in accordance with § 7.1917 of this title, concerning Comprehensive Health Benefit Plans.

(c) On finding of good cause, the commissioner may order an actuarial review of a MEWA in addition to the actuarial opinion required by Insurance Code § 846.153. The cost of any such additional actuarial review must be paid by the MEWA.

(d) Upon application of a MEWA, the commissioner may waive or reduce the requirement for aggregate stop-loss coverage and the amount of reserves required by Insurance Code § 846.154, if it is determined that the interests of the participating employers and employees are adequately protected.

Notes

28 Tex. Admin. Code § 7.1904

The provisions of this §7.1904 adopted to be effective May 27, 1994, 19 TexReg 3686; Amended by Texas Register, Volume 49, Number 44, November 1, 2024, TexReg 8730, eff. 11/6/2024