SB1590 - 501R

Be it enacted by the Legislature of the State of Arizona:

Section 1. Title 20, Arizona Revised Statutes, is amended by adding chapter 22, to read:

CHAPTER 22

EMPLOYER HEALTH INSURANCE POOLS

ARTICLE 1. GENERAL PROVISIONS

START_STATUTE20-4001. Employer health insurance pools; definition

A. Two or more employers may enter into contracts or agreements in order to establish a health benefits plan or may pool retention of their risks of loss for health claims. Employers may establish a pool either:

1. On a cooperative or contract basis.

2. By the formation of a nonprofit corporation.

B. An Employer pool is subject to 29 United States Code chapter 18. An Employer pool is not deemed to be conducting insurance related business except that the department may conduct:

1. Audits and reviews related to plan design.

2. Audits and reviews related to claims denials.

C. A board of trustees shall operate the pool. The board of trustees shall consist of at least three persons who have fiduciary or ownership responsibilities in the member employers' business that is participating in the pool and shall have representatives from at least two member employers. The board of trustees shall notify the director of the department of the existence of the pool. The board of trustees shall do all of the following:

1. Establish terms and conditions of coverage within the pool, including exclusions of coverage.

2. Ensure that all claims are processed promptly.

3. Take all necessary precautions to safeguard the assets of the group.

4. Maintain minutes of its meetings.

5. Designate an administrator to carry out the policies established by the board of trustees and to provide day-to-day management of the group and delineate in the written minutes of its meetings the areas of authority it delegates to the administrator.

D. The board of trustees shall not:

1. Extend credit to individual members for payment of a premium, except pursuant to payment plans established by the board.

2. Borrow any monies from the group or in the name of the group except in the ordinary course of business.

E. A contract or agreement made pursuant to this section shall contain the following:

1. A provision for a system or program of loss control.

2. A provision for termination of membership, including either:

(a) Cancellation of individual members of the pool by the pool.

(b) Election by an individual member of the pool to terminate its participation.

3. A provision requiring the pool to process all claims for which each member incurs liability during each member's period of membership.

4. A provision for the maintenance of claim reserves equal to known incurred losses and an estimate of incurred but not reported claims.

5. A provision for a final accounting and settlement of the obligations of or refunds to a terminating member to occur when all incurred claims are concluded, settled or paid.

6. A provision that the pool may establish offices where necessary in this state and employ necessary staff to carry out the purposes of the pool.

7. A provision that the pool may retain legal counsel, actuaries, auditors, engineers, private consultants and advisors.

8. A provision that the pool may make and alter bylaws and rules pertaining to the exercise of its purpose and powers.

9. A provision that the pool may purchase, lease or rent real and personal property it deems necessary.

10. A provision that the pool may enter into financial services agreements with banks and other financial institutions, that it may issue checks in its own name and that it may invest its monies in equity securities, mutual funds and investment funds registered with the United States securities and exchange commission, debt obligations and any eligible investment.

F. The pool or a member shall not terminate its agreement or contract until the current contract year is completed and shall provide at least sixty days' written notice of the termination or cancellation.

G. A member of a pool shall commit to participating in the pool for a period of at least twenty‑four months.

H. A member of a pool that is in good standing with regard to the member's financial responsibility as part of the pool may not be removed from the pool for reasons that relate to the medical loss risk of the employer.

I. The pool shall be audited annually at the expense of the pool by a certified public accountant, with a copy of the report submitted to each employer and to the director. The board of trustees of the pool shall obtain an appropriate actuarial evaluation of the claim reserves of the pool, including an estimate of the incurred but not reported claims. The department shall examine the pool once every five years. The director may examine the pool sooner than five years from the preceding examination if the director has reason to believe that the pool is insolvent. The pool subject to the examination shall pay the cost of any examination.

J. If, as a result of the annual audit or an examination by the director, it appears that the assets of the pool are insufficient to enable the pool to discharge its legal liabilities and other obligations, the director shall notify the administrator and the board of trustees of the pool of the deficiency and the director's list of recommendations to abate the deficiency, including a recommendation not to add any new members until the deficiency is abated. If the pool fails to comply with the recommendations within sixty days after the date of the notice, the director shall notify each employer that is a member of the pool that the pool has failed to comply with the director's recommendations.

K. If a pool is determined to be insolvent or is otherwise found to be unable to discharge its legal liabilities and other obligations, each agreement or contract shall provide that the members of the pool shall be assessed on a pro rata basis as calculated by the amount of each member's annual contribution in order to satisfy the amount of deficiency. The assessment shall not exceed the amount of each member's annual contribution to the pool.

L. The pool shall file with the department the following information:

1. The names and addresses of the pool's trustees, officers or directors or members of the pool's governing body.

2. The names, addresses and qualifications of individuals responsible for the conduct of the pool's affairs, including any third‑party administrators.

3. The names and addresses of the employers participating in the pool.

M. The pool shall have excess loss insurance for a specific retention level of no more than fifty thousand dollars. The pool shall have excess loss insurance for an aggregate level of no more than two hundred fifty thousand dollars. Excess loss insurance may be for no less than two hundred fifty thousand dollars for specific coverage and no less than one million dollars for aggregate coverage.

N. For the purposes of this section, "employer" means an employer that employs at least two employees on the first day of the plan year. END_STATUTE