CHAPTER 846. MULTIPLE EMPLOYER WELFARE ARRANGEMENTS - Texas Statutes

INSURANCE CODE

TITLE 6. ORGANIZATION OF INSURERS AND RELATED ENTITIES

SUBTITLE C. LIFE, HEALTH, AND ACCIDENT INSURERS AND RELATED

ENTITIES

CHAPTER 846. MULTIPLE EMPLOYER WELFARE ARRANGEMENTS

SUBCHAPTER A. GENERAL PROVISIONS

Sec. 846.001. DEFINITIONS. In this chapter:

(1) "Board" means the board of trustees or directors, as

applicable, of a multiple employer welfare arrangement.

(2) "Employee welfare benefit plan" has the meaning assigned by

Section 3(1) of the Employee Retirement Income Security Act of

1974 (29 U.S.C. Section 1002(1)).

(3) "Health benefit plan" includes any plan that provides

benefits for health care services. The term does not include:

(A) accident-only or disability income insurance coverage, or a

combination of accident-only and disability income insurance

coverage;

(B) credit-only insurance coverage;

(C) disability insurance;

(D) coverage for a specified disease or illness;

(E) Medicare services under a federal contract;

(F) Medicare supplement and Medicare Select policies regulated

in accordance with federal law;

(G) long-term care coverage or benefits, nursing home care

coverage or benefits, home health care coverage or benefits,

community-based care coverage or benefits, or any combination of

those coverages or benefits;

(H) coverage that provides limited-scope dental or vision

benefits;

(I) coverage provided by a single service health maintenance

organization;

(J) workers' compensation insurance coverage or similar

insurance coverage;

(K) coverage provided through a jointly managed trust authorized

under 29 U.S.C. Section 141 et seq. that contains a plan of

benefits for employees that is negotiated in a collective

bargaining agreement governing wages, hours, and working

conditions of the employees that is authorized under 29 U. S.C.

Section 157;

(L) hospital indemnity or other fixed indemnity insurance

coverage;

(M) reinsurance contracts issued on a stop-loss, quota-share, or

similar basis;

(N) short-term major medical contracts;

(O) liability insurance coverage, including general liability

insurance coverage and automobile liability insurance coverage;

(P) coverage issued as a supplement to liability insurance

coverage;

(Q) automobile medical payment insurance coverage;

(R) coverage for on-site medical clinics;

(S) coverage that provides other limited benefits specified by

federal regulations; or

(T) other coverage that is:

(i) similar to the coverage described by this subdivision under

which benefits for medical care are secondary or incidental to

other coverage benefits; and

(ii) specified in federal regulations.

(4) "Health status related factor" means:

(A) health status;

(B) medical condition, including both physical and mental

illness;

(C) claims experience;

(D) receipt of health care;

(E) medical history;

(F) genetic information;

(G) evidence of insurability, including conditions arising out

of acts of family violence; and

(H) disability.

(5) "Multiple employer welfare arrangement" has the meaning

assigned by Section 3(40) of the Employee Retirement Income

Security Act of 1974 (29 U.S.C. Section 1002(40)).

(6) "Organizational document" means the articles, bylaws,

agreements, trusts, or other documents or instruments describing

the rights and obligations of employers, employees, and

beneficiaries with respect to a multiple employer welfare

arrangement.

(7) "Participation criteria" means any criteria or rules

established by an employer to determine the employees who are

eligible for enrollment or continued enrollment under the terms

of a health benefit plan.

(8) "Preexisting condition provision" means a provision that

excludes or limits coverage for a disease or condition for a

specified period after the effective date of coverage.

(9) "Waiting period" means a period established by a multiple

employer welfare arrangement that must elapse before an

individual who is a potential participating employee in a health

benefit plan is eligible to be covered for benefits.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.002. APPLICABILITY OF CHAPTER. (a) In this section,

"fully insured multiple employer welfare arrangement" means an

arrangement that provides to its participating employees and

beneficiaries benefits for which 100 percent of the liability has

been assumed by an insurance company authorized to do business in

this state.

(b) This chapter applies only to a multiple employer welfare

arrangement that meets either or both of the following criteria:

(1) one or more of the employer members in the arrangement:

(A) is domiciled in this state; or

(B) has its principal headquarters or principal administrative

office in this state; or

(2) the arrangement solicits an employer that:

(A) is domiciled in this state; or

(B) has its principal headquarters or principal administrative

office in this state.

(c) This chapter does not apply to a fully insured multiple

employer welfare arrangement during the period in which the

arrangement is fully insured. The commissioner periodically may

require proof that the arrangement is fully insured.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.003. LIMITED EXEMPTION FROM INSURANCE LAWS;

APPLICABILITY OF CERTAIN LAWS. (a) A multiple employer welfare

arrangement is exempt from the operation of all insurance laws of

this state, except laws that are made applicable by their

specific terms or as specified in this section or chapter.

(b) A multiple employer welfare arrangement is subject to the

following laws:

(1) Subchapters C and D, Chapter 36;

(2) Section 38.001;

(3) Section 81.002;

(4) Chapter 82;

(5) Chapter 83;

(6) Chapter 86;

(7) Section 201.003;

(8) Sections 401.051, 401.052, 401.054-401.062, 401.151,

401.152, 401.155, and 401.156;

(9) Chapter 441;

(10) Chapter 443;

(11) Chapter 461;

(12) Section 521.005;

(13) Chapter 541;

(14) Chapter 701;

(15) Chapter 801;

(16) Chapter 803;

(17) Chapter 804;

(18) Subchapter A, Chapter 805; and

(19) Sections 841.259, 841.701-841.702, and 841.704-841.705.

(c) A multiple employer welfare arrangement is only considered

an insurer for purposes of the laws described by this section.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.056, eff. April 1, 2009.

Sec. 846.004. LATE-PARTICIPATING EMPLOYEE OR DEPENDENT. (a)

For purposes of this chapter, an employee or dependent eligible

for enrollment in a participating employer's health benefit plan

is a late-participating employee or dependent if the individual

requests enrollment after the expiration of:

(1) the initial enrollment period established under the terms of

the first health benefit plan for which that employee or

dependent was eligible through the participating employer; or

(2) an open enrollment period under Section 846.257.

(b) An employee or dependent is not a late-participating

employee or dependent if the individual:

(1) was covered under another health benefit plan or self-funded

employer health benefit plan at the time the individual was

eligible to enroll;

(2) declined enrollment in writing, at the time of the initial

eligibility for enrollment, stating that coverage under another

health benefit plan or self-funded employer health benefit plan

was the reason for declining enrollment;

(3) has lost coverage under the other health benefit plan or

self-funded employer health benefit plan as a result of:

(A) the termination of employment;

(B) a reduction in the number of hours of employment;

(C) the termination of the other plan's coverage;

(D) the termination of contributions toward the premium made by

the employer; or

(E) the death of a spouse or divorce; and

(4) requests enrollment not later than the 31st day after the

date coverage under the other health benefit plan or self-funded

employer health benefit plan terminates.

(c) An employee or dependent is also not a late-participating

employee or dependent if the individual is:

(1) employed by an employer that offers multiple health benefit

plans and the individual elects a different health benefit plan

during an open enrollment period under Section 846.257;

(2) a spouse for whom a court has ordered coverage under a

covered employee's plan and the request for enrollment of the

spouse is made not later than the 31st day after the date the

court order is issued; or

(3) a child for whom a court has ordered coverage under a

covered employee's plan and the request for enrollment is made

not later than the 31st day after the date the employer receives

the court order.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.005. RULES; ORDERS. (a) The commissioner may, on

notice and opportunity for all interested persons to be heard,

adopt rules and issue orders reasonably necessary to augment and

implement this chapter.

(b) The commissioner shall adopt rules necessary to meet the

minimum requirements of federal law and regulations.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.006. APPEAL OF ORDERS. A person affected by an order

of the commissioner issued under this chapter may appeal that

order by filing suit in a district court in Travis County under

Subchapter D, Chapter 36.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.007. PREMIUM RATES; ADJUSTMENTS. (a) A multiple

employer welfare arrangement may charge premiums in accordance

with this section to the group of employees or dependents who

meet the participation criteria and who do not decline coverage.

(b) A multiple employer welfare arrangement may not charge an

adjustment to premium rates for individual employees or

dependents for health status related factors or duration of

coverage. Any adjustment must be applied uniformly to the rates

charged for all participating employees and dependents of

participating employees of the employer.

(c) Subsection (b) does not restrict the amount that an employer

may be charged for coverage.

(d) A multiple employer welfare arrangement may establish

premium discounts, rebates, or a reduction in otherwise

applicable copayments or deductibles in return for adherence to

programs of health promotion and disease prevention. A discount,

rebate, or reduction established under this subsection does not

violate Section 541.056(a).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.057, eff. April 1, 2009.

SUBCHAPTER B. FORMATION AND STRUCTURE OF MULTIPLE EMPLOYER

WELFARE ARRANGEMENTS

Sec. 846.051. CERTIFICATE OF AUTHORITY REQUIRED. A person may

not establish or maintain an employee welfare benefit plan that

is a multiple employer welfare arrangement in this state unless

the arrangement obtains and maintains a certificate of authority

issued under this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.052. APPLICATION FOR INITIAL CERTIFICATE OF AUTHORITY.

(a) A person who wants to establish an employee welfare benefit

plan that is a multiple employer welfare arrangement must apply

for an initial certificate of authority on an application form

prescribed by the commissioner.

(b) The application form must be completed and submitted along

with all information required by the commissioner, including:

(1) a copy of each organizational document;

(2) current financial statements of the arrangement;

(3) a fully detailed statement indicating the plan under which

the arrangement proposes to transact business;

(4) an initial actuarial opinion in compliance with the

requirements of Section 846.153(a)(2) and subject to Section

846.157(b); and

(5) a statement by the applicant certifying that the arrangement

is in compliance with all applicable provisions of the Employee

Retirement Income Security Act of 1974 (29 U.S.C. Section 1001 et

seq.).

(c) The application must be accompanied by proof of a fidelity

bond that:

(1) protects against acts of fraud or dishonesty in servicing

the multiple employer welfare arrangement;

(2) covers each person responsible for servicing the employee

welfare benefit plan; and

(3) is in an amount equal to the greater of 10 percent of the

premiums and contributions received by the arrangement or 10

percent of the benefits paid, during the preceding calendar year,

with a minimum of $10,000 and a maximum of $500,000.

(d) A third-party administrator licensed to engage in business

in this state is not required to submit a fidelity bond under

Subsection (c).

(e) The commissioner shall promptly examine the application and

documents submitted by the applicant and may:

(1) conduct any investigation that the commissioner considers

necessary; and

(2) examine under oath any person interested in or connected

with the multiple employer welfare arrangement.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.053. ELIGIBILITY REQUIREMENTS FOR INITIAL CERTIFICATE

OF AUTHORITY. (a) An applicant for an initial certificate of

authority as a multiple employer welfare arrangement must meet

the requirements of this section.

(b) The employers in the multiple employer welfare arrangement

must be members of an association or group of five or more

businesses that are in the same trade or industry, including

closely related businesses that provide support, services, or

supplies primarily to that trade or industry.

(c) If the employers in the multiple employer welfare

arrangement are members of an association, the association must:

(1) be engaged in substantial activity for its members other

than sponsorship of an employee welfare benefit plan; and

(2) have been in existence for at least two years before

engaging in any activities relating to providing employee health

benefits to its members.

(d) The employee welfare plan of the association or group in the

multiple employer welfare arrangement must be controlled and

sponsored directly by participating employers, participating

employees, or both.

(e) The association or group of employers in the multiple

employer welfare arrangement must be a not-for-profit

organization.

(f) The multiple employer welfare arrangement must:

(1) have within its own organization adequate facilities and

competent personnel, as determined by the commissioner, to

administer the employee benefit plan; or

(2) have contracted with a third-party administrator licensed to

engage in business in this state.

(g) The multiple employer welfare arrangement:

(1) must have applications from not fewer than five employers

and must provide similar benefits for not fewer than 200 separate

participating employees; and

(2) will have annual gross premiums of or contributions to the

plan of not less than:

(A) $20,000 for a plan that provides only vision benefits;

(B) $75,000 for a plan that provides only dental benefits; and

(C) $200,000 for all other plans.

(h) The multiple employer welfare arrangement must possess a

written commitment, binder, or policy for stop-loss insurance

issued by an insurer authorized to do business in this state that

provides:

(1) at least 30 days' notice to the commissioner of any

cancellation or nonrenewal of coverage; and

(2) both specific and aggregate coverage with an aggregate

retention of not more than 125 percent of the amount of expected

claims for the next plan year and a specific retention amount

annually determined by the actuarial opinion required by Section

846.153(a)(2).

(i) Both the specific and aggregate coverage required by

Subsection (h)(2) must require all claims to be submitted within

90 days after the claim is incurred and provide a 12-month claims

incurred period and a 15-month paid claims period for each policy

year.

(j) The contributions must be established to fund at least 100

percent of the aggregate retention plus all other costs of the

multiple employer welfare arrangements.

(k) The multiple employer welfare arrangement must establish a

procedure for handling claims for benefits on dissolution of the

arrangement.

(l) The multiple employer welfare arrangement must obtain the

required bond.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.054. ISSUANCE OF INITIAL CERTIFICATE OF AUTHORITY. (a)

The commissioner shall approve, deny, or disapprove an

application for an initial certificate of authority that meets

the requirements of Section 846.053 not later than the 60th day

after the date on which the application is filed.

(a-1) On the applicant's request, the commissioner shall hold a

hearing on a denial. Not later than the 30th day after the date

of the applicant's request for a hearing, the commissioner shall

request a hearing date.

(b) An initial certificate of authority is a temporary

certificate issued for a one-year term.

(c) On receipt of the initial certificate of authority, the

multiple employer welfare arrangement shall begin business.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2009, 81st Leg., R.S., Ch.

1022, Sec. 11, eff. June 19, 2009.

Sec. 846.055. EXTENSION OF TERM OF INITIAL CERTIFICATE OF

AUTHORITY. The commissioner may extend the term of an initial

certificate of authority for a period not to exceed one year if

the commissioner determines that the multiple employer welfare

arrangement is likely to meet the requirements of this chapter

for a final certificate of authority within that period. The

commissioner may not grant more than one extension of the initial

certificate of authority regardless of the length of time for

which an extension was granted.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.056. FINAL CERTIFICATE OF AUTHORITY. (a) A multiple

employer welfare arrangement that holds an initial certificate of

authority must apply for a final certificate of authority not

later than the first anniversary of the date of issuance of the

initial certificate.

(b) The multiple employer welfare arrangement must file an

application for a final certificate of authority on a form

prescribed by the commissioner and furnish the information

required by the commissioner. The application for a final

certificate of authority must include only:

(1) the names and addresses of:

(A) the association or group of employers sponsoring the

arrangement;

(B) the board members of the arrangement; and

(C) if the employers in the arrangement are not an association,

at least five employers;

(2) proof of compliance with the bonding requirements;

(3) a copy of each plan document and each agreement with service

providers; and

(4) a funding report containing:

(A) a statement certified by the board and an actuarial opinion

that all applicable requirements of Section 846.153 have been

met;

(B) an actuarial opinion describing the extent to which

contributions or premium rates:

(i) are not excessive;

(ii) are not unfairly discriminatory; and

(iii) are adequate to provide for the payment of all obligations

and the maintenance of required cash reserves and surplus by the

arrangement;

(C) a statement of the current value of the assets and

liabilities accumulated by the arrangement and a projection of

the assets, liabilities, income, and expenses of the arrangement

for the next 12-month period; and

(D) a statement of the costs to be charged for coverage,

including an itemization of amounts for:

(i) administrative expenses;

(ii) reserves; and

(iii) other expenses associated with operation of the

arrangement.

(c) The reserves described in Section 846.154(a) must have been

established or be established before the final certificate of

authority is issued.

(d) If, after examination and investigation, the commissioner is

satisfied that the multiple employer welfare arrangement meets

the requirements of this chapter, the commissioner shall issue a

final certificate of authority to the arrangement.

(e) The commissioner shall maintain the information required

under Subsection (b)(1)(C) and Subsection (b)(3) as confidential

information.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.057. DENIAL OF FINAL CERTIFICATE OF AUTHORITY. (a)

The commissioner shall deny a final certificate of authority to

an applicant that does not comply with this chapter.

(b) If the commissioner denies a final certificate of authority,

the commissioner shall issue a written notice of refusal to the

applicant. The notice of refusal must state the basis for the

denial. The notice of refusal constitutes 30 days' advance notice

of the revocation of the initial certificate of authority.

(c) If the applicant submits a written request for a hearing not

later than the 30th day after the date of mailing of the notice

of refusal, revocation of the initial certificate of authority is

temporarily stayed, and the commissioner shall promptly conduct a

hearing at which the applicant is given an opportunity to show

compliance with this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.058. DISQUALIFICATION. (a) A multiple employer

welfare arrangement, each board member and officer of the

arrangement, and any agent or other person associated with the

arrangement shall be subject to disqualification for eligibility

for a certificate of authority if the person:

(1) makes a material misstatement or omission in an application

for a certificate of authority under this chapter;

(2) obtains or attempts to obtain at any time a certificate of

authority or license for an insurance entity through intentional

misrepresentation or fraud;

(3) misappropriates or converts to the person's own use or

improperly withholds money under an employee welfare benefit plan

or multiple employer welfare arrangement;

(4) is prohibited from serving in any capacity with the

arrangement under Section 411, Employee Retirement Income

Security Act of 1974 (29 U.S.C. Section 1111);

(5) without reasonable cause or excuse, fails to appear in

response to a subpoena, examination, warrant, or any other order

lawfully issued by the commissioner; or

(6) has previously been subject to a determination by the

commissioner resulting in:

(A) suspension or revocation of a certificate of authority or

license; or

(B) denial of a certificate of authority or license on grounds

that would be sufficient for suspension or revocation.

(b) This section does not apply to a participating employer in

its capacity as a participating employer and the employer's

participating employees.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.059. FEES; SERVICE OF PROCESS. (a) Each multiple

employer welfare arrangement shall pay to the department in the

amount set by the commissioner:

(1) an application fee for an initial certificate of authority;

(2) an application fee for a final certificate of authority; and

(3) a filing fee for submission of the arrangement's annual

statement.

(b) The commissioner shall set the fees described by Subsection

(a) in amounts reasonable and necessary to defray the costs of

administering this chapter.

(c) Each multiple employer welfare arrangement shall appoint the

commissioner as its resident agent for purposes of service of

process. The fee for that service is $50, payable at the time of

appointment.

(d) Fees paid under this section shall be deposited to the

credit of the Texas Department of Insurance operating fund.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.060. SUSPENSION, REVOCATION, OR LIMITATION OF

CERTIFICATE OF AUTHORITY. In addition to any requirement or

remedy under a law cited under Section 846.003, the commissioner

may suspend, revoke, or limit the certificate of authority of a

multiple employer welfare arrangement if the commissioner

determines, after notice and hearing, that the agreement does not

comply with this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.061. ACTION BY ATTORNEY GENERAL. (a) The commissioner

may notify the attorney general of a violation of this chapter,

and the attorney general may apply to a district court in Travis

County for leave to file suit in the nature of quo warranto or

for injunctive relief or both.

(b) The attorney general may seek and the court may order:

(1) restitution for victims of an act declared to be unlawful

under this chapter;

(2) assessment of a fine under this code; and

(3) recovery of reasonable attorney's fees.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER C. BOARD MEMBERS; OTHER OFFICERS AND PERSONNEL

Sec. 846.101. BOARD MEMBERS; NOTICE OF ELECTIONS. (a) Except

as otherwise provided, the powers of a multiple employer welfare

arrangement shall be exercised by a board elected to carry out

the purposes established by the organizational documents of the

arrangement.

(b) The member employers shall elect at least 75 percent of the

board members. At least 75 percent of the board members must be

individuals who are covered under the arrangement.

(c) An owner, officer, or employee of a third-party

administrator who provides services to the multiple employer

welfare arrangement or any other person who has received

compensation from the arrangement may not serve as a board

member.

(d) Each board member shall be elected for a term of at least

two years.

(e) Each member employer of a multiple employer welfare

arrangement shall be given notice of each election of board

members and is entitled to an equal vote, either in person or by

a written proxy signed by the member employer. An owner, officer,

or employee of a third-party administrator who provides services

to the arrangement or any other person who has received

compensation from the arrangement may not serve as proxy.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.102. DUTIES OF BOARD MEMBERS. (a) The board members

of a multiple employer welfare arrangement are responsible for

all operations of the arrangement and shall take all necessary

precautions to safeguard the assets of the arrangement.

(b) A board member shall give the attention and exercise the

vigilance, diligence, care, and skill that a prudent person would

use in like or similar circumstances.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.103. LIMITATION ON ACTION AGAINST BOARD MEMBER. A

board member may not be held liable in a private cause of action

for any delinquency under Section 846.102 after the expiration of

the earlier of:

(1) six years from the date of delinquency; or

(2) two years from the time when the delinquency is discovered

by a person complaining of the delinquency.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.104. COMPENSATION OF BOARD MEMBERS. A board member

serves without compensation from the multiple employer welfare

arrangement except for actual and necessary expenses.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.105. OFFICERS; AGENTS. (a) The board shall select

officers for the multiple employer welfare arrangement as

designated in the organizational documents and may appoint agents

as necessary for the arrangement to engage in business. Each

officer and agent may exercise the authority and perform the

duties required in the management of the property and affairs of

the arrangement as delegated by the board.

(b) The board may remove an officer or agent if the board

determines that the business interests of the multiple employer

welfare arrangement are served by the removal.

(c) The board shall secure the fidelity of any or all of the

officers or agents who handle the funds of the multiple employer

welfare arrangement by bond or otherwise.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.106. COMPENSATION OF OFFICERS, AGENTS, AND EMPLOYEES.

(a) A multiple employer welfare arrangement may pay the officers

and agents of the arrangement suitable compensation. An officer,

employee, or agent of an arrangement may not be compensated

unreasonably.

(b) The compensation of any officer or employee of a multiple

employer welfare arrangement may not be computed directly or

indirectly as a percentage of money or premium collected.

(c) The compensation of an agent may not exceed five percent of

the money or premium collected.

(d) A multiple employer welfare arrangement may pay compensation

or make an emolument to an officer of the arrangement only if the

compensation or emolument is first authorized by a majority vote

of the board of the arrangement.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.107. RECEIPT OF THING OF VALUE; CRIMINAL PENALTY. (a)

A board member, officer, or employee of a multiple employer

welfare arrangement may not, knowingly and intentionally,

directly or indirectly:

(1) receive money or another valuable thing for negotiating,

procuring, recommending, or aiding in:

(A) a purchase by or sale to the arrangement of property; or

(B) a loan from the arrangement; or

(2) be pecuniarily interested as a principal, coprincipal,

agent, or beneficiary in a purchase, sale, or loan described by

Subdivision (1).

(b) A person commits an offense if the person violates this

section. An offense under this subsection is a felony of the

third degree.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER D. POWERS AND DUTIES OF MULTIPLE EMPLOYER WELFARE

ARRANGEMENTS

Sec. 846.151. GENERAL POWERS. (a) Unless otherwise provided by

or inconsistent with this chapter, each multiple employer welfare

arrangement may exercise the powers provided by this section.

(b) A multiple employer welfare arrangement may have succession,

by its name, for the term stated in its trust agreement.

(c) A multiple employer welfare arrangement may sue and be sued.

An arrangement may:

(1) complain and defend in any court;

(2) be a party to any proceedings before a public body of this

state or of any other state or government; and

(3) sue a participating employer, an employee, or a beneficiary

for any cause relating to the business of the arrangement.

(d) A multiple employer welfare arrangement may have a seal that

may be used by having the seal or a facsimile of the seal

impressed, affixed, or otherwise reproduced. The arrangement may

alter the seal at will.

(e) A multiple employer welfare arrangement may appoint officers

and agents as the business of the arrangement requires.

(f) A multiple employer welfare arrangement may adopt, amend,

and repeal bylaws as necessary for the government of its affairs.

(g) A multiple employer welfare arrangement may conduct its

business in this state, other states, and foreign countries and

their territories and colonies.

(h) A multiple employer welfare arrangement may have offices

outside this state.

(i) A multiple employer welfare arrangement may acquire, hold,

mortgage, pledge, assign, and transfer real and personal property

subject to this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.152. FILING OF ORGANIZATIONAL DOCUMENTS. A multiple

employer welfare arrangement shall file with the commissioner its

organizational documents and all appurtenant amendments before

those documents take effect.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.153. REQUIRED FILINGS. (a) A multiple employer

welfare arrangement engaging in business in this state shall file

the following with the commissioner on forms approved by the

commissioner:

(1) a financial statement audited by a certified public

accountant;

(2) an actuarial opinion prepared and certified by an actuary

who is:

(A) not an employee of the arrangement; and

(B) 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 U.S.C.

Section 1001 et seq.); and

(3) any modified terms of a plan document together with a

certification from the trustees that the changes are in

compliance with the minimum requirements of this chapter.

(b) A multiple employer welfare arrangement shall file the

financial statement and the actuarial opinion required by

Subsection (a) within 90 days of the end of the fiscal year.

(c) The actuarial opinion required under Subsection (a) must

include:

(1) a description of the actuarial soundness of the multiple

employer welfare arrangement, including any actions recommended

to improve the actuarial soundness of the arrangement;

(2) the amount of cash reserves recommended to be maintained by

the arrangement; and

(3) the level of specific and aggregate stop-loss insurance

recommended to be maintained by the arrangement.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.154. CASH RESERVE REQUIREMENTS. (a) The amount of

cash reserves recommended under Section 846.153(c)(2) may not be

less than the greater of:

(1) 20 percent of the total contributions in the preceding plan

year; or

(2) 20 percent of the total estimated contributions for the

current plan year.

(b) Cash reserves required by this section must be:

(1) computed with proper actuarial regard for:

(A) known claims, paid and outstanding;

(B) a history of incurred but not reported claims;

(C) claims handling expenses;

(D) unearned premium;

(E) an estimate for bad debts;

(F) a trend factor; and

(G) a margin for error; and

(2) maintained in cash or federally guaranteed obligations of

less than five-year maturity that have a fixed or recoverable

principal amount or in other investments as the commissioner may

authorize by rule.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.155. ADJUSTMENT OF CONTRIBUTIONS. If the recommended

cash reserves required by Section 846.154(a) exceed the greater

of 40 percent of the total contributions for the preceding plan

year or 40 percent of the total contributions expected for the

current plan year, the contributions may be reduced to fund less

than 100 percent of the aggregate retention plus all other costs

of the multiple employer welfare arrangement, but not less than

the level of contributions necessary to fund the minimum reserves

required under Section 846.154(a).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.156. WAIVER OR REDUCTION OF REQUIRED STOP-LOSS

INSURANCE OR CASH RESERVES. On the application of a multiple

employer welfare arrangement, the commissioner may waive or

reduce the requirement for aggregate stop-loss insurance coverage

and the amount of recommended cash reserves required by Section

846.154(a) on a determination that the interests of the

participating employers and employees are adequately protected.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.157. RENEWAL OF CERTIFICATE; ADDITIONAL ACTUARIAL

REVIEW. (a) The commissioner shall review the forms required by

Section 846.153 and shall renew a multiple employer welfare

arrangement's certificate of authority unless the commissioner

determines that the arrangement does not comply with this

chapter.

(b) On a finding of good cause, the commissioner may order an

actuarial review of a multiple employer welfare arrangement in

addition to the actuarial opinion required by Section 846.153(a).

The arrangement shall pay the cost of the additional actuarial

review.

(c) If the commissioner determines that a multiple employer

welfare arrangement does not comply with this chapter, the

commissioner may order the arrangement to correct the

deficiencies. The commissioner may take any action against the

multiple employer welfare arrangement authorized by this code if

the arrangement does not initiate immediate corrective action.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.158. EXAMINATION OF MULTIPLE EMPLOYER WELFARE

ARRANGEMENTS. (a) The commissioner or the commissioner's

appointee may examine the affairs of any multiple employer

welfare arrangement.

(b) For the purposes of this section the commissioner:

(1) shall have free access to all the books, records, and

documents that relate to the business of the plan; and

(2) may examine under oath a board member, officer, agent, or

employee of the multiple employer welfare arrangement in relation

to the affairs, transactions, and conditions of the arrangement.

(c) Each multiple employer welfare arrangement shall pay the

expenses of the examination as provided by Sections 401.151,

401.152, 401.155, and 401.156.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.058, eff. April 1, 2009.

Sec. 846.159. NAME OF MULTIPLE EMPLOYER WELFARE ARRANGEMENT.

(a) A multiple employer welfare arrangement shall transact

business under the arrangement's own name and may not adopt any

assumed name. An arrangement may not use a name that is the same

as or closely resembles the name of any other arrangement that:

(1) possesses a certificate of authority; and

(2) is engaged in business in this state.

(b) A multiple employer welfare arrangement may change its name

by:

(1) amending the articles of the arrangement; or

(2) taking a new name with the approval of the commissioner.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.160. EVIDENCE OF EXISTENCE. A certified copy of the

multiple employer welfare arrangement's certificate of authority

is prima facie evidence of the existence of the arrangement in a

legal proceeding.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER E. PROVISION OF COVERAGE

Sec. 846.201. BENEFITS ALLOWED. (a) A multiple employer

welfare arrangement may only provide one or more of the

following:

(1) medical, dental, vision, surgical, or hospital care;

(2) benefits in the event of sickness, accident, disability, or

death;

(3) another benefit authorized to be provided by health insurers

in this state; and

(4) prepaid legal services.

(b) Except as otherwise limited by the Employee Retirement

Income Security Act of 1974 (29 U.S.C. Section 1001 et seq.), a

multiple employer welfare arrangement may only provide benefits

to:

(1) active or retired owners, officers, directors, or employees

of or partners in participating employers; and

(2) the beneficiaries of a person described by Subdivision (1).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.202. PREEXISTING CONDITION PROVISION. (a) In this

section, "creditable coverage" has the meaning assigned by

Section 1205.004.

(b) A preexisting condition provision in a multiple employer

welfare arrangement's plan document may apply only to coverage

for a disease or condition for which medical advice, diagnosis,

care, or treatment was recommended or received during the six

months before the earlier of:

(1) the effective date of coverage; or

(2) the first day of the waiting period.

(c) A preexisting condition provision in a multiple employer

welfare arrangement's plan document may not apply to expenses

incurred on or after the expiration of the 12 months following

the initial effective date of coverage of the participating

employee, dependent, or late-participating employee or dependent.

(d) A preexisting condition provision in a multiple employer

welfare arrangement's plan document may not apply to an

individual who was continuously covered for an aggregate period

of 12 months under creditable coverage that was in effect until a

date not more than 63 days before the effective date of coverage

under the health benefit plan, excluding any waiting period.

(e) In determining whether a preexisting condition provision

applies to an individual covered by a multiple employer welfare

arrangement's plan document, the arrangement shall credit the

time the individual was covered under previous creditable

coverage if the previous coverage was in effect at any time

during the 12 months preceding the effective date of coverage

under the arrangement. If the previous coverage was issued under

a health benefit plan, any waiting period that applied before

that coverage became effective must also be credited against the

preexisting condition provision period.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Amended by:

Acts 2007, 80th Leg., R.S., Ch.

730, Sec. 2E.059, eff. April 1, 2009.

Sec. 846.203. TREATMENT OF CERTAIN CONDITIONS AS PREEXISTING

PROHIBITED. (a) A multiple employer welfare arrangement may not

treat genetic information as a preexisting condition described by

Section 846.202 in the absence of a diagnosis of the condition

related to the information.

(b) A multiple employer welfare arrangement may not treat

pregnancy as a preexisting condition described by Section

846.202.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.204. WAITING PERIOD PERMITTED. Sections 846.202 and

846.203 do not preclude application of a waiting period that

applies to all new participating employees under the health

benefit plan in accordance with the terms of the multiple

employer welfare arrangement's plan document.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.205. CERTAIN LIMITATIONS OR EXCLUSIONS OF COVERAGE

PROHIBITED. (a) A multiple employer welfare arrangement's plan

document may not limit or exclude, by use of a rider or amendment

applicable to a specific individual, coverage by type of illness,

treatment, medical condition, or accident.

(b) This section does not preclude a multiple employer welfare

arrangement from limiting or excluding coverage for a preexisting

condition in accordance with Section 846.202.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.206. RENEWABILITY OF COVERAGE; CANCELLATION. (a)

Except as provided by Section 846.207, a multiple employer

welfare arrangement shall renew the health benefit plan, at the

employer's option, unless:

(1) a contribution has not been paid as required by the terms of

the plan;

(2) the employer has committed fraud or has intentionally

misrepresented a material fact;

(3) the employer has not complied with the terms of the health

benefit plan document;

(4) the health benefit plan is ceasing to offer any coverage in

a geographic area; or

(5) there has been a failure to meet the terms of an applicable

collective bargaining agreement or other agreement requiring or

authorizing contributions to the health benefit plan, including a

failure to renew the agreement or to employ employees covered by

the agreement.

(b) A multiple employer welfare arrangement may refuse to renew

the coverage of a participating employee or dependent for fraud

or intentional misrepresentation of a material fact by that

person.

(c) A multiple employer welfare arrangement may not cancel a

health benefit plan except for a reason specified for refusal to

renew under Subsection (a). An arrangement may not cancel the

coverage of a participating employee or dependent except for a

reason specified for refusal to renew under Subsection (b).

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.207. REFUSAL TO RENEW. (a) A multiple employer

welfare arrangement may elect to refuse to renew all health

benefit plans delivered or issued for delivery by the arrangement

in this state. The arrangement shall notify:

(1) the commissioner of the election not later than the 180th

day before the date coverage under the first health benefit plan

terminates under this subsection; and

(2) each affected employer not later than the 180th day before

the date on which coverage terminates for that employer.

(b) A multiple employer welfare arrangement that elects under

this section to refuse to renew all health benefit plans may not

write a health benefit plan in this state before the fifth

anniversary of the date notice is delivered to the commissioner

under Subsection (a).

(c) A multiple employer welfare arrangement may elect to

discontinue a health benefit plan only if the arrangement:

(1) provides notice to each employer of the discontinuation

before the 90th day preceding the date of the discontinuation of

the plan;

(2) offers to each employer the option to purchase coverage

under another health benefit plan offered by the arrangement; and

(3) acts uniformly without regard to the claims experience of

the employer or any health status related factor of participating

employees or dependents or new employees or dependents who may

become eligible for the coverage.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.208. NOTICE TO COVERED PERSONS. (a) A multiple

employer welfare arrangement that cancels or refuses to renew

coverage under a health benefit plan under Section 846.206 or

Section 846.207 shall notify the employer of the cancellation of

or refusal to renew coverage not later than the 30th day before

the date termination of coverage is effective. The employer is

responsible for notifying participating employees of the

cancellation of or refusal to renew coverage.

(b) The notice provided under this section is in addition to any

other notice required by Section 846.206 or Section 846.207.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.209. WRITTEN STATEMENT OF DENIAL, CANCELLATION, OR

REFUSAL TO RENEW. Denial by a multiple employer welfare

arrangement of an application for coverage from an employer or

cancellation of or refusal to renew must:

(1) be in writing; and

(2) state the reason or reasons for the denial, cancellation, or

refusal to renew.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

SUBCHAPTER F. PARTICIPATION IN COVERAGE

Sec. 846.251. PARTICIPATION CRITERIA. Participation criteria

may not be based on health status related factors.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.252. COVERAGE REQUIREMENTS. (a) A multiple employer

welfare arrangement:

(1) may refuse to provide coverage to an employer in accordance

with the arrangement's underwriting standards and criteria;

(2) shall accept or reject the entire group of individuals who

meet the participation criteria and who choose coverage; and

(3) may exclude only those employees or dependents who have

declined coverage.

(b) On issuance of coverage to an employer, each multiple

employer welfare arrangement shall provide coverage to the

employees who meet the participation criteria without regard to

an individual's health status related factors.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.253. PROHIBITION ON EXCLUSION OF ELIGIBLE EMPLOYEE OR

DEPENDENT. A multiple employer welfare arrangement may not

exclude an employee who meets the participation criteria or an

eligible dependent, including a late-participating employee or

dependent, who would otherwise be covered.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.254. WRITTEN NOTICE TO EMPLOYEES COVERED. A multiple

employer welfare arrangement, in connection with an employee

welfare benefit plan, shall provide to each participating

employee covered by the plan a written notice at the time the

employee's coverage becomes effective that states that:

(1) individuals covered by the plan are only partially insured;

and

(2) if the plan or the arrangement does not ultimately pay

medical expenses that are eligible for payment under the plan for

any reason, the participating employer or its participating

employee covered by the plan may be liable for those expenses.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.255. DECLINING COVERAGE. (a) A multiple employer

welfare arrangement shall obtain a written waiver from each

employee who meets the participation criteria and declines

coverage under a health plan offered to an employer. The waiver

must ensure that the employee was not induced or pressured to

decline coverage because of the employee's health status related

factors.

(b) A multiple employer welfare arrangement may not provide

coverage to an employer or the employees of an employer if the

arrangement or an agent for the arrangement knows that the

employer has induced or pressured an employee who meets the

participation criteria or a dependent of the employee to decline

coverage because of that individual's health status related

factors.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.256. MINIMUM CONTRIBUTION OR PARTICIPATION

REQUIREMENTS. (a) A multiple employer welfare arrangement may

require an employer to meet minimum contribution or participation

requirements as a condition of issuance and renewal of coverage

in accordance with the terms of the arrangement's plan document.

(b) The minimum contribution and participation requirements must

be stated in the plan document and must be applied uniformly to

each employer offered or issued coverage by the multiple employer

welfare arrangement in this state.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.257. ENROLLMENT; WAITING PERIOD. (a) The initial

enrollment period for employees meeting the participation

criteria must be at least 31 days, with a 31-day annual open

enrollment period. The enrollment period must consist of an

entire calendar month, beginning on the first day of the month

and ending on the last day of the month. If the month is

February, the period must last through March 2.

(b) A multiple employer welfare arrangement may establish a

waiting period.

(c) A new employee who meets the participation criteria may not

be denied coverage if the application for coverage is received by

the multiple employer welfare arrangement not later than the 31st

day after the later of:

(1) the date on which the employment begins; or

(2) the date on which the waiting period established under

Subsection (b) expires.

(d) If dependent coverage is offered to participating employees

under the terms of a multiple employer welfare arrangement's plan

document:

(1) the initial enrollment period for the dependents must be at

least 31 days, with a 31-day annual open enrollment period; and

(2) a dependent of a new employee meeting the participation

criteria established by the arrangement may not be denied

coverage if the application for coverage is received by the

arrangement not later than the 31st day after the later of:

(A) the date on which the employment begins;

(B) the date on which the waiting period established under

Subsection (b) expires; or

(C) the date on which the dependent becomes eligible for

enrollment.

(e) A late-participating employee or dependent may be excluded

from coverage until the next annual open enrollment period and

may be subject to a one-year preexisting condition provision as

described by Section 846.202. The period during which a

preexisting condition provision applies may not exceed 18 months

after the date of the initial application.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.258. COVERAGE FOR NEWBORN CHILDREN. (a) A multiple

employer welfare arrangement's plan document may not limit or

exclude initial coverage of a newborn child of a participating

employee.

(b) Coverage of a newborn child of a participating employee

under this section ends on the 32nd day after the date of the

child's birth unless:

(1) children are eligible for coverage under the multiple

employer welfare arrangement's plan document; and

(2) not later than the 31st day after the date of birth, the

arrangement receives:

(A) notice of the birth; and

(B) any required additional premium.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.219(a),

eff. Sept. 1, 2003.

Sec. 846.259. COVERAGE FOR ADOPTED CHILDREN. (a) This section

applies only if children are eligible for coverage under the

terms of a multiple employer welfare arrangement's plan document.

(b) A multiple employer welfare arrangement plan document may

not limit or exclude initial coverage of an adopted child of a

participating employee. A child is considered to be the child of

a participating employee if the participating employee is a party

to a suit in which the employee seeks to adopt the child.

(c) An adopted child of a participating employee may be

enrolled, at the employee's option, not later than the 31st day

after:

(1) the date the employee becomes a party to a suit in which the

employee seeks to adopt the child; or

(2) the date the adoption becomes final.

(d) Coverage of an adopted child of a participating employee

under this section ends unless the multiple employer welfare

arrangement receives notice of the adoption and any required

additional premiums not later than the 31st day after:

(1) the date the participating employee becomes a party to a

suit in which the employee seeks to adopt the child; or

(2) the date the adoption becomes final.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003. Amended by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.219(b),

eff. Sept. 1, 2003.

Sec. 846.260. LIMITING AGE APPLICABLE TO UNMARRIED CHILD. If

children are eligible for coverage under the terms of a multiple

employer welfare arrangement's plan document, any limiting age

applicable to an unmarried child of an enrollee is 25 years of

age.

Added by Acts 2003, 78th Leg., ch. 1276, Sec. 10A.219(c), eff.

Sept. 1, 2003.

SUBCHAPTER G. MARKETING

Sec. 846.301. MARKETING REQUIREMENTS. On request, each employer

purchasing a health benefit plan shall be given a summary of the

plans for which the employer is eligible.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.302. ADDITIONAL REPORTING REQUIREMENTS. The department

may require periodic reports by multiple employer welfare

arrangements and agents regarding the health benefit plans issued

by the arrangements. The reporting requirements must comply with

federal law and regulations.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.

Sec. 846.303. APPLICABILITY TO THIRD-PARTY ADMINISTRATOR. If a

multiple employer welfare arrangement enters into an agreement

with a third-party administrator to provide administrative,

marketing, or other services related to offering health benefit

plans to employers in this state, the third-party administrator

is subject to this chapter.

Added by Acts 2001, 77th Leg., ch. 1419, Sec. 1, eff. June 1,

2003.