1Preventing illegal multiple employer welfare arrangements;
2prohibiting other illegal health insurers; establishing
3duties of the Insurance Department; and imposing penalties.

4The General Assembly of the Commonwealth of Pennsylvania
5hereby enacts as follows:

6Section 1. Short title.

7This act shall be known as and may be cited as the Prevention
8of Illegal Multiple Employer Welfare Arrangements and Other
9Illegal Health Insurers Act.

10Section 2. Definitions.

11"Admitted insurer." An insurer licensed to do insurance
12business in this Commonwealth.

13"Arrangement." A fund, trust, plan, program or other
14mechanism by which a person provides, or attempts to provide,
15health care benefits.

16"Department." The Insurance Department of the Commonwealth.

17"Employee leasing arrangement." A labor leasing, staff
18leasing, employee leasing, professional employer organization,

1contract labor, extended employee staffing or supply, or other
2arrangement, under contract or otherwise, whereby one business
3or entity represents that it leases or provides workers to
4another business or entity.

5"Employee welfare benefit plan" or "health benefit plan." A
6plan, fund or program which was or is established or maintained
7by an employer or by an employee organization, or by both, to
8the extent that the plan, fund or program was established or is
9maintained for the purpose of providing for its participants or
10their beneficiaries, through the purchase of insurance or
11otherwise, medical, surgical or hospital care or benefits, or
12benefits in the event of sickness, accident, disability, death
13or unemployment.

14"Fully insured." For the health care benefits or coverage
15provided or offered by or through a health benefit plan or
16arrangement:

17(1) an admitted insurer is directly obligated by
18contract to each participant to provide all of the coverage
19under the plan or arrangement; and

20(2) the liability and responsibility of the admitted
21insurer to provide covered services or for payment of
22benefits is not contingent, and is directly to the individual
23employee, member or dependent.

24"Insurer." A company or health insurance entity licensed in
25this Commonwealth to issue any individual or group health,
26sickness or accident policy or subscriber contract or
27certificate or plan that provides medical or health care
28coverage by a health care facility or licensed health care
29provider that is offered or governed under or any of the
30following:

1(1) The act of December 29, 1972 (P.L.1701, No.364),
2known as the Health Maintenance Organization Act.

3(2) The act of May 18, 1976 (P.L.123, No.54), known as
4the Individual Accident and Sickness Insurance Minimum
5Standards Act.

6(3) 40 Pa.C.S. Ch. 61 (relating to hospital plan
7corporations) or 63 (relating to professional health services
8plan corporations).

9(4) Article XXIV of the act of May 17, 1921 (P.L.682,
10No.284), known as The Insurance Company Law of 1921.

11"Licensee." A person that is, or that is required to be,
12licensed or registered under the laws of this Commonwealth as a
13producer, third party administrator, insurer, employee leasing
14arrangement or preferred provider organization.

15"MEWA." Multiple Employer Welfare Arrangements.

16"MEWA contact." The individual or position designated by the
17Insurance Department to be the MEWA contact as identified on the
18Insurance Department's publicly accessible Internet website.

19"Nonadmitted insurer." An insurer not licensed to do
20insurance business in this Commonwealth.

21"Preferred provider organization." An entity that engages in
22the business of offering a network of health care providers,
23whether or not on a risk basis, to employers, insurers or any
24other person who provides a health benefit plan.

25"Producer." A person required to be licensed under the laws
26of this Commonwealth to sell, solicit or negotiate insurance.

27"Professional employer organization." An arrangement, under
28contract or otherwise, whereby one business or entity represents
29that it co-employs or leases workers to another business or
30entity for an ongoing and extended, rather than a temporary or

1project-specific, relationship.

2"Third party administrator" or "administrator." The term
3shall have the meaning provided under the act of May 17, 1921
4(P.L.789, No.285), known as The Insurance Department Act of
51921.

6"Transacting of insurance." The term includes:

7(1) issuing a stop loss policy covering an employer
8located in this Commonwealth. Stop loss policy coverage of an
9employer for claims incurred under the employer's self-funded
10health benefit plan is insurance, not reinsurance, regardless
11of whether the contract is described by the insurer as
12reinsurance;

13(2) issuing a stop loss policy to a trust or trustee,
14whether the trust or trustee is located in this Commonwealth
15or otherwise, with an employer located in this Commonwealth
16directly or indirectly the beneficiary of the trust;

17(3) agreeing to loan or advance funds to pay claims
18incurred under an employer's self-funded health benefit plan
19if the availability of funds to advance is significantly
20dependent on payment of contributions and the claims
21experience of two or more employers who have entered into
22similar loan or advance agreements; or

23(4) engaging in a risk distribution arrangement
24providing for compensation of loss through the provision of
25services, including an arrangement established through
26marketing or representations to consumers, without
27specification in a contract.

28"Unauthorized health insurance."

29(a) The term includes:

30(1) health insurance offered by a nonadmitted insurer

1except to the extent the laws of this Commonwealth allow the
2coverage to be offered by an nonadmitted insurer licensed in
3another state through an employer or group located out of
4State; and

5(2) health care benefits or coverage offered by a
6professional employer organization or an employee leasing
7arrangement that is not fully insured by an admitted insurer.

8(b) The term does not include:

9(1) Health care benefits or coverage under an employee
10welfare benefit plan of the employees of two or more
11employers, including one or more self-employed individuals,
12that is established or maintained under or pursuant to a
13collective bargaining agreement under the criteria provided
14under 29 CFR 2510.3-40 (relating to plans established or
15maintained under or pursuant to collective bargaining
16agreements under section 3(40)(A) of ERISA).

17(2) Health care benefits or coverage under an employee
18welfare benefit plan established or maintained by a rural
19electric cooperative or a rural telephone cooperative as
20defined under the Employee Retirement Income Security Act of
211974 (Public Law 93-406, 29 U.S.C. § 1002(40)(B)).

22(3) Health care benefits or coverage under an employee
23welfare benefit plan of the employees of two or more
24employers but only if the employers are within the same
25control group so the plan is deemed to be a single employer
26plan under the Employee Retirement Income Security Act of
271974.

28(4) Health care benefits or coverage under a church plan
29as defined under the Employee Retirement Income Security Act
30of 1974.

1Section 3. Licensee reporting requirement.

2(a) General rule.--A licensee shall file a written report
3with the department MEWA contact when a licensee knows a product
4is, or is about to be, offered to the public in this
5Commonwealth, and the licensee, based on the information known
6to the licensee, reasonably should know the product is
7unauthorized health insurance. Knowledge of a producer regarding
8an unrelated unauthorized health insurance arrangement is not
9imputed to licensed insurers represented by that producer.

10(b) Notice provisions.--Circumstances where a licensee knows
11that a product is, or is about to be, offered to the public in
12this Commonwealth, including when the licensee knows that any
13person is:

14(1) recruiting producers to solicit or offer, or is
15soliciting or offering, a health benefit plan generally to
16the public in this Commonwealth; or

17(2) seeking an administrator for, or is administering a
18health benefit plan that is intended to be offered generally
19to the public in this Commonwealth.

20(c) Reasonable notice.--Circumstances where a licensee
21reasonably should know that a product is unauthorized health
22insurance include, but are not limited to, the following:

23(1) The licensee knows that the product is represented
24to be a self-funded plan and that it is offered widely to the
25multiple employers or generally to individuals.

26(2) The licensee knows that the product is a
27professional employer organization self-funded plan and that
28it is offered widely to multiple client employers.

29(3) The licensee knows that the plan is represented to
30be a self-funded plan established or maintained pursuant to a

1collective bargaining agreement and that the plan is offered
2widely to multiple employers, or generally to individuals, or
3both, through agents who are compensated on a commission or
4similar basis.

5(d) Disclosure.--The following shall apply:

6(1) A report filed under this section is confidential
7and privileged from disclosure in response to a subpoena or
8otherwise under the act of February 14, 2008 (P.L.6, No.3),
9known as the Right-to-Know Law, and shall not be subject to
10discovery or admissible in evidence in any private action.
11Nothing in this act shall limit the commissioner's authority
12to use a report filed under this act in the furtherance of
13any legal or regulatory action that the commissioner, in the
14commissioner's sole discretion, determines to be necessary to
15further the purposes of this act.

16(2) Nothing in this act shall prevent or be construed as
17preventing the commissioner from disclosing the contents of a
18report filed under this section to the insurance department
19of any other state or agency of the Federal Government at any
20time, or any other regulatory or law enforcement agency
21provided the agency or office receiving the report or matters
22relating thereto agrees to hold it confidential and in a
23manner consistent with this regulation.

24(e) Immunity.--There is immunity from civil liability under
25section 349.1 of the act of May 17, 1921 (P.L.682, No.284),
26known as The Insurance Company Law of 1921.

27(f) Compliance.--A licensee complies with this section if
28the licensee files the required report within 30 days or a
29period reasonable under the circumstances, whichever is later.

30Section 4. Responsibility to exercise due diligence.

1(a) Soliciting producer.--

2(1) A producer, prior to engaging in or assisting any
3person to engage in offering a health benefit plan to an
4employer or person located in this Commonwealth, shall carry
5out appropriate due diligence to establish that the health
6benefit plan is not unauthorized health insurance, including
7those measures reasonably appropriate to establish for any
8insurance coverage that is represented as issued relating to
9the health benefit plan:

10(i) the insurer issued the policy;

11(ii) the coverage is as represented;

12(iii) the insurer is an admitted insurer in this
13Commonwealth; and

14(iv) the policy has been filed with, and approved
15by, the department or is exempt from filing requirements.

16(2) For any health benefit plan that is represented as
17established or maintained pursuant to a collective bargaining
18agreement, the health benefit plan is established or
19maintained under or pursuant to a collective bargaining
20agreement under the criteria provided under 29 CFR 2510.3-40
21(relating to plans established or maintained under or
22pursuant to collective bargaining agreements under section
233(40)(A) of ERISA).

24(3) For any health benefit plan that is represented as
25established or maintained by an employee leasing arrangement
26or professional employer organization, the health benefit
27plan is fully insured.

28(4) For any health benefit plan that is represented as
29established by a single employer, the health benefit plan is
30covering solely employees and their dependents, and the

1employer controls and directs the work of the employee.

2(b) Stop loss policy producer.--

3(1) A producer, prior to submitting an application for a
4stop loss policy to an insurer for a health benefit plan
5offered to employees, employee dependents or a person located
6in this Commonwealth, shall carry out appropriate due
7diligence to establish that the health benefit plan is not
8unauthorized health insurance, including measures reasonably
9appropriate to establish:

10(i) For any health benefit plan that is represented
11as established or maintained pursuant to a collective
12bargaining agreement, the health benefit plan is
13established or maintained under or pursuant to a
14collective bargaining agreement under the criteria
15provided under 29 CFR 2510.3-40.

16(ii) The health benefit plan that is not offered by
17an employee leasing arrangement or professional employer
18organization to client employers.

19(iii) For any health benefit plan that is
20represented as established by a single employer, that the
21health benefit plan is covering solely employees, and
22dependents of employees, of the employer and the employer
23controls and directs the work of the employee.

24(c) Third party administrator.--A third party administrator,
25prior to entering into any administrative contract for a health
26benefit plan, and prior to assisting any person with
27administration of a health benefit plan, covering employees of
28an employer or a person located in this Commonwealth, shall
29carry out appropriate due diligence to establish that the health
30benefit plan is not unauthorized health insurance, including

1those measures reasonably appropriate to establish:

2(1) Through initial inquiry, contract provisions and
3measures to monitor and enforce compliance with the contract
4provisions, that for any insurance coverage that is
5represented as issued relating to the health benefit plan:

6(i) the insurer issued the policy;

7(ii) the coverage is as represented;

8(iii) the insurer is an admitted insurer in this
9Commonwealth; and

10(iv) the policy has been filed with, and approved
11by, the department or is exempt from filing requirements.

12(2) For any health benefit plan that is represented as
13established or maintained pursuant to a collective bargaining
14agreement, the health benefit plan is established or
15maintained under or pursuant to a collective bargaining
16agreement under the criteria provided under 29 CFR 2510.3-40.

17(3) For any health benefit plan that is represented as
18established or maintained by an employee leasing arrangement
19or professional employer organization, the health benefit
20plan is fully insured.

21(4) For any health benefit plan that is represented as
22established by a single employer, that the health benefit
23plan is covering solely employees and their dependents, and
24the employer controls and directs the work of the employee.

25(d) Insurer.--

26(1) An insurer, prior to issuing a stop loss policy for
27a health benefit plan covering employees, employee dependents
28or individuals located in this Commonwealth, shall carry out
29appropriate due diligence to establish that the health
30benefit plan is not unauthorized health insurance, including

1those measures reasonably appropriate to establish:

2(i) For any health benefit plan that is represented
3as established or maintained pursuant to a collective
4bargaining agreement, the health benefit plan is
5established or maintained under or pursuant to a
6collective bargaining agreement under the criteria
7provided under 29 CFR 2510.3-40.

8(ii) The health benefit plan is not offered by an
9employee leasing arrangement or professional employer
10organization to client employers.

11(iii) For any health benefit plan that is
12represented as established by a single employer, the
13health benefit plan is covering solely employees, and
14dependents of employees, of the employer and the employer
15controls and directs the work of the employee.

16(2) An insurer shall not engage in the transacting of
17insurance by issuing a stop loss policy unless the insurer is
18an admitted insurer in this Commonwealth and the stop loss
19policy form has been filed and approved by the department, or
20the form is exempt from filing. The transacting of insurance
21includes, but is not limited to:

22(i) Issuing a stop loss policy covering an employer
23located in this Commonwealth. Coverage of an employer for
24claims incurred under the employer's self-funded health
25benefit plan with a stop loss policy is insurance, not
26reinsurance, regardless of whether the contract is
27described by the insurer as reinsurance.

28(ii) Issuing a stop loss policy to a trust or
29trustee, whether the trust or trustee is located in this
30Commonwealth or otherwise, when an employer located in

1this Commonwealth is directly or indirectly the
2beneficiary of the trust.

3(3) An insurer shall not engage in the transacting of
4insurance in this Commonwealth by issuing a stop loss policy
5unless, prior to issuing a contract for the stop loss policy,
6the insurer discloses clearly and conspicuously to the
7employer, in writing:

8(i) the employer is not covered for claims below the
9stop loss attachment point;

10(ii) a description of the attachment point,
11including the specific and aggregate attachment points;
12and

13(iii) the insurer provides no other coverage of the
14employer's retention.

15(e) Preferred provider organization.--

16(1) A preferred provider organization, prior to entering
17into any contract with a person offering or providing a
18health benefit plan in this Commonwealth, shall carry out
19appropriate due diligence to establish that the health
20benefit plan is not unauthorized health insurance, including
21those measures reasonably appropriate to establish, through
22initial inquiry, contract provisions and measures to monitor
23and enforce compliance with the contract provisions, that for
24any insurance coverage that is represented as issued relating
25to the health benefit plan:

26(i) the insurer issued the policy;

27(ii) the coverage is as represented;

28(iii) the insurer is an admitted insurer in this
29Commonwealth; and

30(iv) the policy has been filed with and approved by

1the department or is exempt from filing requirements.

2(2) For any health benefit plan that is represented as
3established or maintained pursuant to a collective bargaining
4agreement, the health benefit plan is established or
5maintained under or pursuant to a collective bargaining
6agreement under the criteria provided under 29 CFR 2510.3-40.

7(3) For any health benefit plan that is represented as
8established or maintained by an employee leasing arrangement
9or professional employer organization, the health benefit
10plan is fully insured.

11(4) For any health benefit plan that is represented as
12established by a single employer, the health benefit plan is
13covering solely employees and dependents of employees, of the
14employer and the employer controls and directs the work of
15the employee.

16(f) Defense.--

17(1) A licensee or other person who acts according to the
18written advice of the MEWA contact has a defense to any
19violation of this section if:

20(i) the information provided by the licensee or
21other person to the MEWA contact, to the extent material
22to the MEWA contact's advice, is accurate and complete;
23and

24(ii) the information is provided by the licensee or
25other person to the MEWA contact in writing.

26(2) For purposes of this act, the department's published
27list of admitted insurers on its publicly accessible Internet
28website is deemed to be accurate. A licensee or other person
29has a defense to any allegation that a listed insurer is not
30an admitted insurer. Nothing in this subsection relieves a

1licensee or other person from conducting due diligence to
2determine whether an entity is in fact the same entity as a
3listed admitted insurer.

4(3) A violation of this section is mitigated, and the
5department shall reduce or eliminate any sanction otherwise
6applicable, if a licensee or other person demonstrates all of
7the following:

8(i) It maintained supervisory procedures and
9controls that complied with section 5.

10(ii) The violation occurred despite the maintenance
11of those procedures and controls.

12(iii) It promptly reported the health benefit plan
13to the MEWA contact once the licensee or other person had
14actual knowledge that it was unauthorized health
15insurance.

16(iv) It took prompt corrective action.

17(g) Due diligence.--Nothing in this section requires a
18producer, third party administrator, insurer or preferred
19provider organization to conduct due diligence with respect to a
20health benefit plan that it is not assisting and with respect to
21which it does not engage in the transacting of insurance.

22Section 5. Supervisory procedures and controls.

23(a) General rule.--A producer, third party administrator,
24insurer, preferred provider organization or an agent of the same
25shall establish and maintain documented supervision procedures
26and controls that are reasonably designed to achieve compliance
27with this regulation.

28(b) Procedures.--The supervisory procedures shall include:

29(1) Training.

30(2) Internal controls.

1(3) Periodic audits.

2(4) Supervisory review.

3(5) Monitoring and enforcement of contractual provisions
4established under section 4(c) and (e).

5(c) Requirements.--The extent of the supervisory procedures
6and controls a producer is required to maintain under this
7section may appropriately reflect the size and complexity of the
8producer's operations and the scope and nature of the producer's
9insurance activities.

10Section 6. Licensing education requirements.

11(a) General rule.--A producer shall not be licensed in this
12Commonwealth to sell health insurance unless the producer, prior
13to licensing, receives not less than one hour of education in:

14(1) identification of unauthorized health insurance; and

15(2) the producer's responsibilities under this act.

16(b) Continuing education.--An insurer providing health
17insurance in this Commonwealth shall require its listed
18producers to obtain not less that one hour of continuing
19education every four years covering:

20(1) identification of unauthorized health insurance; and

21(2) the producer's responsibilities under this
22regulation.

23(c) Procedures and controls.--A third party administrator,
24preferred provider organization or insurer shall include in its
25application for a license a brief summary of its procedures and
26controls required under section 5. A license may be denied if
27the applicant fails to demonstrate that the applicant maintains
28the required procedures and controls.

29Section 7. Penalties and liability.

30(a) Violation.--A person that violates this act is subject

1to the act of July 22, 1974 (P.L.589, No.205), known as the
2Unfair Insurance Practices Act.

3(b) Penalty.--A person who violates section 3 is subject to
4a penalty of up to $1,000 for each violation.

5Section 8. Rules and regulations.

6The department may promulgate all necessary regulations to
7implement this act.

8Section 9. Effective date.

9This act shall take effect in 60 days.