N.J. Admin. Code § 11:15-5.6

Current through Register Vol. 56, No. 21, November 4, 2024

Section 11:15-5.6 - Bylaws and risk management program; contents

(a) The prospective trustees of a joint insurance fund shall prepare and, after the approval by resolution of the governing body of each participating member, adopt bylaws for the joint insurance fund. The bylaws shall:

1. Set forth a statement of purpose of the group;

2. Set forth provisions for organization of the group, including governance by a board of trustees;

3. Provide for the delivery of a risk management program in conjunction with any joint self-insurance fund or funds which the board of trustees shall establish;

4. Set forth procedures to enforce the collection of any contributions or payments in default;

5. Set forth membership standards as required in 18A:18B-3;

6. Require that, for each joint self-insurance fund, a contract or contracts of specific and aggregate excess insurance or reinsurance is maintained;

7. Set forth procedures for:

i. Withdrawal from the group and a fund by a member, including any requirement that a terminated or withdrawing member provide security in a form and amount acceptable to the Commissioner or trustees, as applicable, as a guarantee for the continued payment of the member's obligations pursuant to 11:15-5.1 0(d);

ii. Termination of the group or fund and disposition of assets; and

iii. Determining the obligations, if any, of a member in the event that the group is unable to pay indemnification obligations and expenses payable from a fund administered by it;

8. Require an annual certified audit and an actuarial opinion statement on loss reserves to be prepared and filed with the Commissioner;

9. Require an annual, supplemental semi-annual, and quarterly financial reporting schedule, as applicable, to be filed on a form prescribed by the Commissioner;

10. Require that any joint self-insurance fund or funds be developed and operated in accordance with accepted and sound actuarial practices;

11. Provide that any expenditure of moneys in a fund be in furtherance of the purpose of the fund;

12. Provide for expulsion of a member;

13. Provide procedures governing trust fund accounts, including transfers, withdrawals and distribution of surplus therefrom and supplemental assessments; and

14. Set forth other provisions as desired for operation and governance of the group.

(b) The bylaws of a joint insurance fund shall provide for governance of the fund by a board of trustees selected in accordance with the provisions of the bylaws. The bylaws shall provide for trustee powers and duties and shall include, but not be limited to, the following powers of the board of trustees:

1. To determine and establish contributions and rates, loss reserves, surplus, limits of coverage, limits of excess (stop-loss) insurance or reinsurance, coverage documents, refunds and other financial and operating policies of the group or fund;

2. To invest moneys held in trust under any fund in investments which are approved for investment by regulation of the State Investment Council for surplus public moneys of the State or, at the discretion of the board, to transfer moneys held in trust under any fund to the Director of the Division of Investment in the Department of the Treasury for investment on behalf of the board in accordance with the standards governing the investment of other funds which are managed under the rules and regulations of the State Investment Council. However, any moneys transferred to the Director for investment may not thereafter be withdrawn except upon withdrawal of a member from the group or a fund or termination of the group or a fund or in specific amounts in payment of specific claims, administrative expenses or member dividends upon affidavit of the director or other chief executive officer of the group;

3. To purchase, acquire, hold, lease, sell and convey real and personal property, all of which property shall be exempt from taxation under 54:4-1 et seq.;

4. To collect and disburse all money due to or payable by the fund, or authorize such collection and disbursement;

5. To enter into contracts with other persons or with public bodies of this State for any professional, administrative or other services as may be necessary to carry out the purposes of the fund;

6. To purchase and serve as the master policyholders, if desired, for any insurance, including excess (stop-loss) insurance or reinsurance;

7. To prepare, or cause to be prepared, a risk management program for the joint insurance fund;

8. As the need arises, from time to time, to amend the bylaws and risk management program of the fund pursuant to 18A:18B-4 and this subchapter; and

9. To do all other things necessary and proper to carry out the purposes for which the fund is established.

(c) In addition, the bylaws shall:

1. Include the fund's name;

2. Provide that upon each fiscal year renewal of the fund, coverages and benefit levels as may be determined and specified by the fund and its members; provided the affected persons receive written notice of any changes in coverage or benefit levels at least 30 days prior to taking effect and that a copy of the written notice and the relevant rate changes shall be filed with the Department 30 days prior to taking effect;

3. Specify the subrogation rights of the fund;

4. Describe the responsibilities and obligations of the participants, the terms and conditions of continued participation and discontinuance of participation in the fund;

5. Be accompanied by a sample copy of the resolution and written agreement adopted by each participating member as specified at 11:15-5.3. Within 30 days of approval, the fund shall send certified copies of the resolution and written agreement from each participant to the Commissioner;

6. Be accompanied by a sample copy of its indemnity and trust agreement as defined in 11:15-5.2, and in a form satisfactory to the Commissioner.

i. The agreement shall create a trust and govern the operation thereof under which monies shall be held by the trustees as fiduciaries for the benefit of fund claimants;

ii. Where the fund shall provide for the retention on a self-insured basis of any or all of the risks or liabilities specified below, the agreement shall require and provide for the establishment of separate trust accounts by fund year for each of the following from which monies shall be disbursed solely for the payment of claims, allocated claim expenses and stop-loss insurance or reinsurance premiums for each risk or liability:

(1) Employer contributions to group health insurance;

(2) Employee contributions to contributory group health insurance;

(3) Employer contributions to group term life insurance;

(4) Employee contributions to contributory group term life insurance;

(5) Employer contributions to contingency accounts;

(6) Employee contributions to contingency accounts; and

(7) Other trust accounts as required by the Commissioner.

iii. Notwithstanding (b)6ii above to the contrary, a fund shall not be required to establish separate trust accounts for employee contributions, provided the fund provides a plan in its bylaws as required by (b)7 below which provides for the recording and accounting of the employee contributions of each member;

iv. A fund shall not otherwise be required to establish separate trust accounts as required by (b)6ii above for each fund year, provided the fund provides a plan in its bylaws which provides for the recording and accounting of all transactions by fund year;

v. Within 30 days of approval, the fund shall send certified copies of the indemnity and trust agreement from each participant to the Commissioner;

7. If applicable pursuant to (c)6iii or iv above, be accompanied by a plan which provides for the recording and accounting of the employee contributions of each member, including, but not limited to, the collection and distribution of such employee contributions, and/or a plan for the recording and accounting of all transactions by fund year;

8. Be accompanied by a copy of a resolution of intent to form the fund from at least two school boards;

9. Be accompanied by a feasibility study which shall include, but not be limited to:

i. The proposed date that the fund intends to begin providing coverage;

ii. The proposed location of the fund's principal office;

iii. The name and address of the fund's prospective charter members;

iv. The pro forma budget and assessments for the fund's first fiscal year;

v. A certification by an actuary that the pro forma budget is actuarially sound; and

vi. The minimum number of employees to be covered before the fund begins to provide coverage. Funds providing health or life insurance on a self-insured basis shall have membership resolutions from school boards representing at least 1,000 covered employees before beginning to provide coverage; and

10. Be accompanied by a non-refundable filing fee in the amount of $ 1,500.

(d) Each joint insurance fund shall, concurrently with the filing of its bylaws as provided in (a) above, file its risk management program and any amendments thereto with the Department as provided in 18A:18B-4 containing the information as specified in (e) below.

(e) The trustees shall prepare, or cause to be prepared, a risk management program for the joint insurance fund. The plan description shall include, but not be limited to:

1. The lines of coverage to be provided and the minimum participation required of any member which, for the initial fiscal year of the fund, shall be the coverages and benefit levels of the member school boards immediately prior to joining the fund unless changes in the coverages or benefit levels are approved by the Commissioner pursuant to 11:15-5.7;

2. The limits of coverage, whether self-insurance, insurance purchased from an insurer, or reinsurance;

3. The amount of risk to be retained by the fund on a self-insured basis, which for group term life insurance shall not exceed a face amount of $ 5,000 per covered employee;

4. The assumptions and methodology to be used to calculate the policy and claims reserves;

5. The proposed method of assessing contributions to be paid by each member of the fund;

6. Coverage to be purchased from an insurer if any;

7. Stop-loss insurance or reinsurance to be purchased, as required pursuant to 11:15-5.2 3, and the amount of premium therefor;

8. The initial and renewal assessment methodologies, including rating methodologies, for the plan and individual members including actuarial principles, assumptions and methods of calculations in sufficient detail to enable the Commissioner to determine that the charges are not excessive, inadequate or unfairly discriminatory;

9. The rating periods for initial members and for members joining the fund during the fund's fiscal year;

10. The adjusted assessments and the underlying factors considered in the development of the adjusted rates, if the rates for members joining the fund during the fund's fiscal year are to be adjusted;

11. Provision of preferred provider, managed care and health maintenance organization networks and copies of any proposed and executed contracts or agreements for such services;

12. Procedures for open enrollment for all covered individuals not later than the first month of the fund's initial fiscal year, and annually thereafter for each subsequent fiscal year;

13. Options for the conversion of benefits, if any, and a detailed description of procedures for continuation of coverage for former employees of a member which terminates its membership in the fund;

14. The disclosure of all benefit limits for all covered benefits in plan booklets, certificates or other documents made available to covered participants;

15. The participation rules when all or part of the premium is to be derived from funds contributed by covered employees;

16. Retirees coverage including the assessment and rating plan for such coverage;

17. The limits of coverage for newborn or adopted children, which shall be automatic from birth or adoption for 31 days and which may include an additional assessment for coverage beyond 31 days;

18. Provision for plan documents, benefit plan booklets and specimens of such which must contain at least the following information and be provided to all fund participants within 30 days of membership or renewal:

i. General information, including the following:

(1) Enrollment procedures and eligibility;

(2) Dependent eligibility;

(3) The time coverage begins;

(4) Timeframes within which coverage may be changed;

(5) The time coverage ends;

(6) Provisions for continuation of coverage;

(7) Conversion privileges; and

(8) The forms and instructions for enrollment;

ii. A description of benefits, including the following:

(1) Definitions;

(2) A description of each benefit, including the following:

(A) Eligible services and supplies;

(B) Deductibles and co-payments; and

(C) Examples of the above as needed; and

(3) Exclusions;

iii. Claim procedures, including the following:

(1) Submission of claims;

(2) Proof of loss;

(3) Complaint and internal appeal procedures; and

iv. Cost containment programs, including the following:

(1) Pre-admission programs;

(2) Second surgical opinion programs;

(3) Other cost containment programs; and

(4) Application and level of employee penalties (if any);

19. A summary statement which describes the benefits currently provided to covered employees by each prospective member of the fund, and the benefits proposed to be provided by the fund;

20. The procedures for the closure of fund years including the maintenance of all relevant accounting records;

21. The maximum amount a certifying and approving officer may approve for payment pursuant to 11:15-5.2 1;

22. Whether the fund will be responsible for the "run-in" or "run-out" liability of each member;

i. If the fund is responsible for the "run-in" or "run-out" liability of a member, or both, the fund shall demonstrate that it has so notified all prospective members of this obligation, and the fund shall demonstrate that it has made adequate provision for the funding of those obligations, which shall not be on a cash flow basis, and which shall be certified by an actuary; and

ii. If the fund does not assume either the "run-in" or "run-out" liability of a member, the fund shall indicate the manner by which these obligations will be satisfied; and

23. Provision for a claim audit to be performed by an individual or corporation with experience in auditing self-insured health plans.

i. Such claims audit shall be performed upon completion of the first fund year after the fund's inception, and at least once every three years thereafter, or at such time as may be required by the Commissioner.

(f) The Commissioner shall notify the fund in writing whether the initial information submitted pursuant to (a) through (e) above meets the requirements of 18A:18B-1 et seq. and this subchapter and whether the initial information has been accepted. If the Commissioner does not reject the initial information within 30 working days, the initial information shall be deemed accepted. Within 90 calendar days of the Commissioner's acceptance of the information submitted pursuant to (a), (b), (c), (d) and (e) above, the fund shall complete the application process by submitting the following additional information and documentation:

1. The location of the fund's principal office, date of organization, and name and address of each initial member;

2. Designation of the trustees, administrator and custodian of the fund's assets;

3. Copies of the fund's prospective and executed agreements or contracts, and any renewal or new agreements or contracts with any administrator, servicing organization or program manager. Such agreements or contracts shall specify the duties of, and the compensation to be paid to, each such entity. Copies of the above shall be accompanied by a list of all parties having or deriving any interest, right or benefit in the servicing organization, program manager or administrator; as well as any services to be performed which are sub-contracted.

i. To the extent the terms and conditions of any renewal agreement or contract and the parties thereto remain unchanged from the prior year, a copy of the renewal agreement or contract shall not be required. In lieu of filing a copy of the renewal agreement, the fund shall file a notice with the Department in the format set forth in Exhibit A in the Appendix incorporated herein by reference, that the agreement has been renewed, and that the terms and conditions of the agreement or contract and parties thereto remain unchanged from the prior year;

ii. Copies of any changes to the agreements or contracts shall be filed with the Department within 10 days after such changes are approved by the fund;

4. A cash management plan, which shall include the designation of depository institution(s) for the holding of fund monies and the fund's investment policy;

5. A fidelity bond for all persons handling fund assets in a form and amount acceptable to the Commissioner;

6. A surety bond for the claims administrator or any other servicing organization deemed necessary by the Commissioner in a form and amount acceptable to the Commissioner; and a surety bond for any other servicing organization as deemed appropriate by the trustees in a form and amount acceptable to the trustees;

7. Errors and omissions coverage for the servicing organization, program manager, administrator, and producer who negotiates stop-loss or reinsurance on behalf of the fund;

8. A designation and appointment of an agent in New Jersey to receive service of process on behalf of the fund as well as the address in this State where the books and records of the fund will be maintained at all times;

9. A list of the board of trustees, officers, and servicing organizations, updated annually;

10. Data forms, in the format set forth in Exhibit B in the Appendix incorporated herein by reference, incorporating the appropriate and necessary professional qualifications for senior officers and directors of the administrator and servicing organizations providing services to the fund, updated and submitted to the Commissioner annually. An entity providing services to more than one fund may submit one data form for all funds formed pursuant to this subchapter which the entity services;

i. To the extent the information contained in the data forms remains unchanged from the prior year, the fund need not file the above-referenced data forms provided that the fund files a notice with the Department, in the format set forth in Exhibit C in the Appendix incorporated herein by reference, that the same individuals are utilized and that the information in the data forms remains unchanged from the prior year;

11. Copies of each insurance and reinsurance policy purchased by the fund, including a copy of the cover note or binder;

12. A pro forma financial statement based on the fund's actual membership on a form acceptable to the Commissioner showing the financial strength and liquidity of the fund to assure that all obligations will be met promptly;

13. Where self-insured, a plan for specific and aggregate stop-loss insurance or reinsurance and/or retention in accordance with sound actuarial principles and the plan of risk management;

14. Proof of competent personnel and ample facilities within the fund organization with respect to claims administration, including a claims processing manual, and underwriting matters, or present a contract with a qualified servicing organization(s) for the provision of such services specifying compensation schedules and standards of performance;

15. A description of any producer arrangement plan by which producers, who shall be licensed pursuant to N.J.S.A. 17:22A-1 et seq., represent members in their dealings with the fund. The description shall include, but not be limited to, copies of all producer contracts, which shall include a description of the producers' obligations, responsibilities and compensation; the duration of such contracts; and an indication whether the contracts are subject to renewal. Copies of renewal contracts or a notice of renewal shall also be provided consistent with the requirements set forth in (f)3 above.

i. The compensation paid to producers shall be reasonable. The Commissioner may disapprove any arrangement if he or she determines that the terms of the arrangement are unreasonable;

16. The claims handling procedure to be utilized by the fund which shall provide for the prompt, fair, equitable and confidential settlement of claims and which shall be administered in compliance with 17B:30-13.1 and 13.2, and N.J.A.C. 11:2-17 and 11:15-5.2 2;

17. The complaint handling procedure to be utilized by the fund which shall provide for the confidentiality of the claimant's identity in compliance with 11:15-5.2 2 and including, but not limited to, procedures for the resolution of disputed claims operated and adjudicated by an independent organization or arbitrator, which shall be at no cost to the claimant; and

18. A copy of the application form to be utilized by the fund for prospective new members applying for membership in the fund.

(g) The Commissioner may, at the time of filing of the bylaws and risk management program and whenever thereafter he or she deems it expedient, make or cause to be made, an examination of the assets and liabilities, financial condition, method of conducting business and all other affairs of any fund. For the purpose of the examination, the Commissioner may retain attorneys, appraisers, independent actuaries, independent certified public accountants or other professionals or specialists as examiners, or may request the trustees to authorize and employ such person or persons to conduct the same or to assist therein as he or she deems advisable. The reasonable expenses of the examination shall be fixed and determined by the Commissioner, and such expenses shall be paid by the fund examined to the appropriate entity or person upon presentation of a detailed account.

1. For purposes of completing an examination of any fund pursuant to 18A:18B-1 et seq. and this subchapter, the Commissioner may examine or investigate any person, or the business of any person, insofar as such examination or investigation is, in the sole discretion of the Commissioner, necessary or material to the examination of the fund.

2. Every fund or person from whom information is sought, including its officers, directors and agents, shall provide the Commissioner or other person appointed as an examiner pursuant to this subsection, timely, convenient, and free access at all reasonable hours at its offices to all books, records, accounts, papers, documents and any or all computer or other recordings relating to the property, assets, business and affairs of the fund being examined.

3. The administrator and servicing organization(s), and their officers, directors, employees and agents, or other person, shall facilitate the examination and aid in the examination so far as it is in their power to do so. The Commissioner may, in accordance with the procedures set forth in 11:15-5.8, suspend or terminate the authority of any fund, if the fund, by its administrator, servicing organizations, or officers, directors, employees, or agents thereof, refuses to submit to an examination or to comply with any reasonable request of the examiners.

N.J. Admin. Code § 11:15-5.6

Amended by R.2003 d.366, effective 9/15/2003.
See: 35 New Jersey Register 1487(a), 35 New Jersey Register 4285(b).
In (g), deleted "but at a minimum not less frequently than once every five years," following "deems it expedient" in the introductory paragraph.