§ 58-50-150. North Carolina Small Employer Health Reinsurance Pool.
§ 58‑50‑150. North Carolina Small Employer Health Reinsurance Pool.
(a) There is created anonprofit entity to be known as the North Carolina Small Employer HealthReinsurance Pool. All carriers issuing or providing health benefit plans inthis State from January 1, 1992, until the termination of the Pool, except anysmall employer carrier electing to be a risk‑assuming carrier, aremembers of the Pool.
(b) The members shallselect the initial Board, subject to the Commissioner's approval. The Boardshall consist of five members. There shall be no more than two members of theBoard representing any one carrier. In determining voting rights at theorganizational meeting, each member shall be entitled to vote in person or byproxy. Voting rights shall be based on net group health benefit plan premiumderived from small employer business. The Board shall at all times, to theextent possible, include at least one domestic insurance company licensed totransact accident and health insurance, one HMO, one nonprofit hospital ormedical service plan. Four of the members of the Board shall be small employercarriers. In approving selection of the Board, the Commissioner shall assurethat all members are fairly represented.
(c) If the initialBoard is not elected at the organizational meeting, the Commissioner shallappoint the initial Board within 30 days of the organizational meeting.
(d) As used in thissection, "plan of operation" includes articles, bylaws, and operatingrules of the Pool. Within 180 days after the appointment of the initial Board,the Board shall submit to the Commissioner a plan of operation and anyamendments necessary or suitable to assume the fair, reasonable, and equitableadministration of the Pool. The Commissioner shall approve the plan of operationif it assures the fair, reasonable, and equitable administration of the Pooland provides for the proportionate basis in accordance with the provisions ofsubsections (h) through (o) of this section. The plan of operation shall becomeeffective upon approval in writing by the Commissioner consistent with the dateon which the coverage under this section shall be made available. If the Boardfails to submit a suitable plan of operation within 180 days after itsappointment, or at any time thereafter fails to submit suitable amendments tothe plan of operation, the Commissioner shall adopt and promulgate a plan ofoperation or amendment, as appropriate. The Commissioner shall amend any planof operation he adopts, as necessary, after a plan of operation is submitted bythe Board and approved by the Commissioner.
(e) The plan ofoperation shall establish procedures for, among other things:
(1) Handling andaccounting of assets and moneys of the Pool, and for an annual financialreporting to the Commissioner.
(2) Filling vacancies onthe Board, subject to the Commissioner's approval.
(3) Selecting anadministering carrier and setting forth the powers and duties of theadministering carrier.
(4) Reinsuring risks inaccordance with the provisions of this Act.
(5) Collectingassessments from members subject to assessment to provide for claims reinsuredby the Pool and for administrative expenses incurred or estimated to beincurred during the period for which the assessment is made.
(6) Any additionalmatters in the Board's discretion.
(f) The Pool has thegeneral powers and authority granted under the laws of this State to insurancecompanies licensed to transact accident and health insurance except the powerto issue coverage directly to enrollees, and, in addition, the specificauthority to do all of the following:
(1) Enter into contractsthat are necessary or proper to carry out the provisions and purposes of thisAct, including the authority, with the Commissioner's approval, to enter intocontracts with similar pools of other states for the joint performance ofcommon administrative functions, or with persons or other organizations for theperformance of administrative functions.
(2) Sue or be sued,including taking any legal actions necessary or proper for recovery of anyassessments for, on behalf of, or against members.
(3) Take any legalaction necessary to avoid the payment of improper, incorrect, or fraudulentclaims against the Pool or the coverage reinsured by the Pool.
(4) Issue variousreinsurance policies in accordance with the requirements of this section.
(5) Establish rules,conditions, and procedures pertaining to the reinsurance of members' risks bythe Pool.
(6) Establishappropriate rates, rate schedules, rate adjustments, rate classifications, andany other actuarial functions appropriate to the Pool's operation.
(7) Assess members inaccordance with the provisions of subsections (h) through (o) of this section;and make advance interim assessments that are reasonable and necessary for organizationaland interim operating expenses. Any interim assessments shall be credited asoffsets against any regular assessments due following the close of the Pool'sfiscal year.
(8) Appoint from amongmembers appropriate legal, actuarial, and other committees that are necessaryto provide technical assistance in the operation of the Pool, policy, and othercontract design, and any other function within the Pool's authority.
(9) Borrow money toeffect the purposes of the Pool. Any notes or other evidence of indebtedness ofthe Pool not in default are legal investments for members and may be carried asadmitted assets.
(g) Any member thatelects to be a reinsuring carrier may cede, and the Pool shall reinsure thereinsuring carrier, subject to all of the following:
(1) The Pool shallreinsure any basic and standard health care plan originally issued or deliveredfor original issue by a reinsuring carrier on or after January 1, 1992, underthe requirements in G.S. 58‑50‑125(d). With respect to a basic orstandard health care plan, the Pool shall reinsure the level of coverageprovided and, with respect to other plans, the Pool shall reinsure the level ofcoverage provided in the basic or standard health care plan up to, but notexceeding, the level of coverage provided under either the basic or standardhealth care plans. Small group business of reinsuring carriers in force beforeJanuary 1, 1992, may not be ceded to the Pool until January 1, 1995, and thenonly if and when the Board determines that sufficient funding sources areavailable.
(2) The Pool shallreinsure eligible employees or their dependents or entire small employer groupsaccording to the following:
a. With respect toeligible employees and their dependents who either (i) are employed by a smallemployer as of the date such employer's coverage by the member begins or (ii)are hired after the beginning of the employer's coverage by the member: Thecoverage may be reinsured within 60 days after the beginning of the eligibleemployees' or dependents' coverage under the plan.
b. With respect toeligible employees and their dependents, when the entire employer group iseligible for reinsurance: A small employer carrier may reinsure the entireemployer group within 60 days after the beginning of the group's coverage underthe plan.
c. With respect to anyperson reinsured, no reinsurance may be provided for a reinsured employee ordependent until five thousand dollars ($5,000) in benefit payments have beenmade for services provided during a calendar year for that reinsured employeeor dependent, which payments would have been reimbursed through the reinsurancein the absence of the five thousand dollar ($5,000) deductible. The Boardsshall review periodically the amount of the deductible and adjust it for inflation.In addition, the member shall retain ten percent (10%) of the next fiftythousand dollars ($50,000) of benefit payments during a calendar year and thePool shall reinsure the remainder; provided that the members' liability underthis section shall not exceed ten thousand dollars ($10,000) in any onecalendar year with respect to any one person reinsured. The amount of themember's maximum liability shall be periodically reviewed by the Board andadjusted for inflation, as determined by the Board.
d. Reinsurance may beterminated for each reinsured employee or dependent on any plan anniversary.
e. Premium ratescharged for reinsurance by the program to an HMO that is approved by theSecretary of Health and Human Services as a federally qualified healthmaintenance organization under 42 U.S.C. § 300 et seq., shall be reduced toreflect the restrictions and requirements of 42 U.S.C. § 300 et seq.
f. Every carriersubject to G.S. 58‑50‑130 shall apply its case management andclaims handling techniques, including but not limited to utilization review,individual case management, preferred provider provisions, other managed careprovisions or methods of operation, consistently with both reinsured andnonreinsured business.
g. Except as otherwiseprovided in this section, premium rates charged by the Pool for coveragereinsured by the Pool for that classification or group with similar casecharacteristics and coverage shall be established as follows:
1. One and one‑halftimes the rate established by the Pool with respect to the eligible employeesand their dependents of a small employer, all of whose coverage is reinsuredwith the Pool and who are reinsured in accordance with this section.
2. Five times the rateestablished by the Pool with respect to an eligible employee or dependent whois reinsured in accordance with this section.
(3) The Pool shallreinsure no more than the level of benefits provided in either the basic orstandard health care plan established in accordance with G.S. 58‑50‑125.
(4) The Pool may issuedifferent types and levels of reinsurance coverage, including stop‑losscoverage; and the reinsurance premium shall be adjusted to reflect the type andlevel of reinsurance coverage issued.
(5) The reinsurancepremium shall also be adjusted to reflect cost containment features of the planof operation that have proven to be effective including, but not limited to:preferred provider provisions, utilization review of medical necessity ofhospital and physician services, case management benefit alternatives, andother managed care provisions or methods of operation.
(h) Following the closeof each fiscal year, the administering carrier shall determine the netpremiums, the Pool expenses of administration, and the incurred losses for theyear, taking into account investment income and other appropriate gains andlosses. Health benefit plan premiums and benefits paid by a member that areless than an amount determined by the Board to justify the cost of collectionshall not be considered for purposes of determining assessments. As used inthis section, "net premiums" means health benefit plan premiums forinsured plans but does not mean premiums or revenue received by a carrier forMedicare and Medicaid contracts.
(i) Any net losses forthe year shall be recouped by assessments of members as follows:
(1) The Board shalldetermine an equitable assessment formula to recoup assessments of members thattakes into consideration both overall market share of small employer carriersthat are members of the Pool and the share of new business of the smallemployer carriers assumed during the preceding calendar year. For the firstthree years of operation of the Pool, if an assessment is based on anadjustment made, the assessment shall not be less than fifty percent (50%) normore than one hundred fifty percent (150%) of the amount it would have been ifthe assessment were based on the proportional relationship of the smallemployer carrier's total premiums for small employer coverage written in theyear to the total premiums of small employer coverage written by all smallemployer carriers in this State in the year. The Board shall also determinewhether the assessment base used to determine assessments shall be made on atransitional basis or shall be permanent. In no event shall assessments exceedfour percent (4%) of the total health benefit plan premium earned in this Statefrom health benefit plans covering small employers of members during thecalendar year coinciding or ending during the fiscal year of the Pool. TheBoard may change the assessment formula, including an assessment adjustmentformula, if applicable, from time to time as appropriate.
(2) Health benefit planpremiums and benefits paid by a member that are less than an amount determinedby the Board to justify the cost of collection shall not be considered forpurposes of determining assessments. For the purposes of this section, healthbenefit plan premiums earned by MEWAs and other benefit arrangements, to theextent permitted by ERISA, shall be established by adding paid health lossesand administrative expenses.
(j) If the assessmentlevel is inadequate, the Board may adjust reinsurance thresholds, retentionlevels, or consider other forms of reinsurance. After the first three fullyears of operations the Board shall report to the Commissioner on itsexperience, the effect on reinsurance and small group rates of individualceding, and recommendations on additional funding sources, if needed. Iflegislative or other broader funding alternatives are not found, the Board mayenter into negotiations with representatives of health care providers toresolve any deficit through reductions in future years' payment levels forreinsured plans. Any such recommendations shall take into account the findingsof the actuarial study provided for in this subsection. An actuarial studyshall be undertaken within the first three years of the Pool's operation toevaluate and measure the relative risks being assumed by differing types ofsmall employer carriers as a result of this Act. The study shall be developedby three actuaries appointed by the Commissioner, with one representing riskassuming carriers, one representing reinsuring carriers, and one from withinthe Department.
(k) Subject to theapproval of the Commissioner, the Board may make an adjustment to theassessment formula for any reinsuring carrier that is an HMO approved as afederally qualified HMO by the Secretary of Health and Human Services under 42U.S.C. § 300 for restrictions placed on them other than those for which anadjustment has already been made in subsection (b)(2) or (b)(5) of this sectionthat are not imposed on other small group carriers.
(l) If assessmentsexceed actual losses and administrative expenses of the Pool, the excess shallbe held at interest and used by the Board to offset future losses or to reducePool premiums. As used in this subsection, "future losses" includesreserves for incurred but not reported claims.
(m) The Board shalldetermine annually each member's proportion of participation in the Pool basedon financial statements and other reports that the Board considers to benecessary and requires that the member files with the Board. All carriers shallreport, to the Board, claims payments made and administrative expenses incurredin this State on an annual basis and on a form prescribed by the Commissioner.
(n) The plan ofoperation shall provide for the imposition of an interest penalty for latepayment of assessments.
(o) The Board may abateor defer, in whole or in part, the assessment of a member if, in the Board'sopinion, payment of the assessment would endanger the member's ability tofulfill its contractual obligations. In the event an assessment against amember is abated or deferred in whole or in part, the amount by which theassessment is abated or deferred may be assessed against the other members in amanner consistent with the basis for assessments set forth in this section. Themember receiving the abatement or deferment shall remain liable to the Pool forthe deficiency.
(p) Neither theparticipation in the Pool as members, the establishment of rates, forms, orprocedures, nor any other joint or collective action required by this Act shallbe the basis of any legal action, criminal or civil liability, or penaltyagainst the Pool or any of its members.
(q) Any person ormember made a party to any action, suit, or proceeding because the person ormember serves or served on the Board or on a committee or is or was an officeror employee of the Pool shall be held harmless and be indemnified by the Poolagainst all liability and costs, including the amounts of judgments,settlements, fines, or penalties, and expenses and reasonable attorneys' feesincurred in connection with the action, suit, or proceeding. However, theindemnification shall not be provided on any matter in which the person ormember is finally adjudged in the action, suit, or proceeding to have committeda breach of duty involving gross negligence, dishonesty, willful misfeasance,or reckless disregard of the responsibilities of service or office. Costs andexpenses of the indemnification shall be prorated among and paid for by allmembers.
(r) The Pool is exemptfrom the taxes imposed by Article 8B of Chapter 105 of the General Statutes. (1991, c. 630, s. 1; 1993, c.408, s. 7; 2005‑223, s. 5; 2006‑154, s. 12.)