Subchapter H. STATEMENTS OF POLICY

§ 89.451. Insurance coverage.

 The act of December 23, 1981 (P. L. 583, No. 168) (40 P. S. § §  3001—3003) requires that the services of licensed midwives be covered on the same basis as the services of licensed physicians or osteopaths for those areas of practice for which midwives may be licensed. Effective February 6, 1982, no policy form, subscriber agreement or certificate will be approved by the Insurance Department unless it complies with the act of December 23, 1981 (P. L. 583, No. 168) (40 P. S. § §  3001—3003).

 Section 3101(d) of 20 Pa.C.S. (relating to payments to family and funeral directors) was amended to allow for direct payment to certain statutorily determined recipients of an insurance contract for an amount of $11,000 or less where an appointed personal representative of the decedent has failed to make written demand for payment within 60 days following the death of the insured. The Department construes the insurance contracts specified in 20 Pa.C.S. §  3101(d) to include insurance contracts offered by fraternal benefit societies which are regulated by the Department under the Fraternal Benefit Societies Code (40 P. S. § §  1141-101—1141-1001).

   The provisions of this §  89.461 adopted January 13, 1983, effective January 15, 1983, 13 Pa.B. 464.

STOP-LOSS POLICIES

§ 89.471. Licensed accident and health insurers may write stop-loss coverage.

 (a)  Section 202 of the act (40 P. S. §  382), defines group accident and health coverages that may be written by licensed accident and health companies. In an effort to increase health insurance options available to employers, stop-loss; that is, excess loss, coverage may be written by Pennsylvania licensed accident and health companies, if, before doing so, the Department has determined that the policy serves the interests of the public, and has approved the policy.

 (b)  This coverage may still be written by property and casualty insurers, if they also have the authority to write accident and health insurance. Current, approved policies written by property and casualty insurers may continue in force.

 (a)  Section 354 of the act (40 P. S. §  477b), authorizes the Department to review and approve accident and health policies filed by companies. A stop-loss policy submitted to the Department for approval shall satisfy the following conditions:

   (1)  The stop-loss policy shall be issued to, and insure, the sponsor of the plan, or the plan itself, not the employes, members or participants.

   (2)  Payments by the insurer shall be made to the sponsor of the plan or the plan itself, not the employes, members, participants or providers.

   (3)  The individual stop-loss amount; that is, retention or attachment point per claimant, shall be at least $10,000; the aggregate stop-loss amount for the plan shall be, at a minimum, $100,000 per calendar year.

   (4)  The stop-loss policy shall contain a provision that the plan’s or the plan sponsor’s bankruptcy or insolvency will not relieve the stop-loss carrier from its obligation to pay claims under the stop-loss policy.

   (5)  In addition to the stop-loss policy filed with the Department for approval, filings shall contain a separate document certifying that each of the four requirements listed in paragraphs (1)—(4) have been met.

 (b)  Stop-loss is not equivalent to reinsurance; reinsurance only relates to transactions between commercial insurers. An entity purporting to cover self-insured plans will be treated as a stop-loss insurer and will be subject to insurance laws and regulations of the Commonwealth relating thereto and penalties for violations thereof.

 (c)  If the original self-funded employe benefit plan is exempt from providing State mandated health benefits; that is, if the underlying plan is ERISA exempt, the stop-loss policy should not provide more benefits than the original policy, absent an agreement to the contrary between the employer and the stop-loss insurer. If the stop-loss policy covers excess benefits on an underlying policy or plan which is not ERISA exempt and thus provides State mandated benefits, the stop-loss policy shall include State mandated benefits.

 (a)  Legitimacy of underlying plan. Insurance companies writing stop-loss coverage shall exercise due diligence in ascertaining the legitimacy of the underlying plan before issuing coverage. This includes ensuring that:

   (1)  The underlying plan is a legitimate self-funded plan and not a self-insured or partially insured multiple employer welfare arrangement.

   (2)  The plan is not structured in a manner that is prohibited by this subsection.

 (b)  Pooling of risk prohibited.

   (1)  An underlying plan that aggregates multiple employers’ funds into an account, trust or other funding vehicle shall be capable of demonstrating that there is no pooling of risk between employers in any manner, including one or more of the following:

     (i)   Paying one employer’s claims from another employer or multiple employers’ contributions or premiums.

     (ii)   Aggregating two or more employers’ claims to trigger stop-loss coverage.

   (2)  In any case, an entity that commingles multiple employers’ funds into one account will be subject to scrutiny by the Department and shall be able to demonstrate that each participating employer’s claims and contributions are severable.

 An individual or entity, including third-party administrators, that places stop-loss coverage through an insurer or other entity not licensed to issue stop-loss coverage in this Commonwealth may be found to be in violation of provisions of The Insurance Department Act of one thousand nine hundred and twenty-one (40 P. S. § §  1—297.4) that prohibit unlicensed agent activity. Stop-loss coverage may only be issued by licensed Pennsylvania insurers through their licensed agents or brokers. Other entities who receive, or attempt to receive, a fee, commission or other compensation in connection with the issuance of stop-loss coverage may be found to be in violation of provisions of The Insurance Department Act of one thousand nine hundred and twenty-one that prohibit unlicensed insurance activity. Further, stop-loss coverage may only be issued to valid single employer self-funded ERISA qualified plans, unless the Commissioner determines that other plans may be eligible for the coverage.

   The provisions of this §  89.474 adopted September 25, 1992, effective September 26, 1992, 22 Pa.B. 4785.