Chapter 3959: THIRD-PARTY ADMINISTRATORS

3959.01 Third-party administrator definitions.

(A) "Administration fees" means any amount charged a covered person for services rendered. "Administration fees" includes commissions earned or paid by any person relative to services performed by an administrator.

(B) "Administrator" means any person who adjusts or settles claims on, residents of this state in connection with life, dental, health, or disability insurance or self-insurance programs. "Administrator" does not include any of the following:

(1) An insurance agent or solicitor licensed in this state whose activities are limited exclusively to the sale of insurance and who does not provide any administrative services;

(2) Any person who administers or operates the workers' compensation program of a self-insuring employer under Chapter 4123. of the Revised Code;

(3) Any person who administers pension plans for the benefit of the person's own members or employees or administers pension plans for the benefit of the members or employees of any other person;

(4) Any person that administers an insured plan or a self-insured plan that provides life, dental, health, or disability benefits exclusively for the person's own members or employees;

(5) Any health insuring corporation holding a certificate of authority under Chapter 1751. of the Revised Code or an insurance company that is authorized to write life or sickness and accident insurance in this state.

(C) "Aggregate excess insurance" means that type of coverage whereby the insurer agrees to reimburse the insured employer or trust for all benefits or claims paid during an agreement period on behalf of all covered persons under the plan or trust which exceed a stated deductible amount and subject to a stated maximum.

(D) "Contributions" means any amount collected from a covered person to fund the self-insured portion of any plan in accordance with the plan's provisions, summary plan descriptions, and contracts of insurance.

(E) "Fiduciary" has the meaning set forth in section 1002(21)(A) of the "Employee Retirement Income Security Act of 1974," 88 Stat. 829, 29 U.S.C. 1001 , as amended.

(F) "Fiscal year" means the twelve-month accounting period commencing on the date the plan is established and ending twelve months following that date, and each corresponding twelve-month accounting period thereafter as provided for in the summary plan description.

(G) "Plan" means any arrangement in written form for the payment of life, dental, health, or disability benefits to covered persons defined by the summary plan description.

(H) "Plan sponsor" means the person who establishes the plan.

(I) "Self-insurance program" means a program whereby an employer provides a plan of benefits for its employees without involving an intermediate insurance carrier to assume risk or pay claims. "Self-insurance program" includes but is not limited to employer programs that pay claims up to a prearranged limit beyond which they purchase insurance coverage to protect against unpredictable or catastrophic losses.

(J) "Specific excess insurance" means that type of coverage whereby the insurer agrees to reimburse the insured employer or trust for all benefits or claims paid during an agreement period on behalf of a covered person in excess of a stated deductible amount and subject to a stated maximum.

(K) "Summary plan description" means the written document adopted by the plan sponsor which outlines the plan of benefits, conditions, limitations, exclusions, and other pertinent details relative to the benefits provided to covered persons thereunder.

Cite as R.C. § 3959.01

Effective Date: 06-04-1997

3959.02, 3959.03 [Repealed].

Cite as R.C. § 3959.02, 3959.03

Effective Date: 12-02-1996

3959.04 Administrators tested and licensed by superintendent.

(A) Administrators may be tested and shall be licensed by the superintendent of insurance in accordance with rules adopted by the superintendent.

(B) An administrator who has been licensed or certified by the state of the administrator's domicile under a statute or rule similar to sections 3959.01 to 3959.16 of the Revised Code shall, upon application, be licensed without testing, provided the state of domicile recognizes and grants licenses to administrators of this state who have obtained licenses under such sections.

Cite as R.C. § 3959.04

Effective Date: 12-02-1996

3959.05 License requirement.

No person shall solicit a plan or sponsor of a plan to act as an administrator for, or provide administrative services to, a plan or sponsor of a plan that is either domiciled in this state or has its principal headquarters or principal administrative office in this state unless the person is duly licensed under sections 3959.01 to 3959.16 of the Revised Code.

Cite as R.C. § 3959.05

Effective Date: 05-18-1988

3959.06 Application for license - filing fee.

(A) An administrator shall file with the superintendent of insurance an application for a license on a form prescribed by the superintendent.

(B) All applications for a license shall be accompanied by a nonrefundable filing fee of two hundred dollars per application made payable to the department of insurance.

(C) All fees collected under this section and under section 3959.10 of the Revised Code shall be paid into the state treasury to the credit of the department of insurance operating fund created under section 3901.021 of the Revised Code.

Cite as R.C. § 3959.06

Effective Date: 12-02-1996

3959.07 Action on application by superintendent.

The superintendent of insurance shall act on all applications submitted for a license within thirty days after receipt.

Cite as R.C. § 3959.07

Effective Date: 12-02-1996

3959.08 Denying application for license.

If the superintendent of insurance denies the application for license, the superintendent shall promptly notify the applicant of the denial and the reasons for the denial within thirty days of the date the application is denied by the superintendent. The notice shall advise the applicant of the applicant's right to request a hearing within thirty days from the date of the mailing of the notice.

Cite as R.C. § 3959.08

Effective Date: 12-02-1996

3959.09 Issuing license and certificate of authority.

Upon approval of the application for an administrators license and payment of appropriate filing fees, the applicant shall be granted a license by the superintendent of insurance and an appropriate certificate of authority to operate as an administrator will be issued to the applicant. The license shall be issued, effective on the date the application is approved by the superintendent or board, or both, for a term expiring on the following June 30. The license may be renewed annually for a period of one year commencing July 1.

Cite as R.C. § 3959.09

Effective Date: 05-18-1988

3959.10 License renewal.

(A) The superintendent of insurance shall, at least sixty days before the expiration of the administrators license granted by the superintendent, provide a renewal notice on a form approved by the superintendent.

(B) The renewal application shall require the payment of a renewal fee of three hundred dollars and the payment shall be made prior to the expiration date of the license. Failure to make the renewal payment shall result in the cancellation of the license.

(C) In the event of nonpayment of renewal license fees within the time period prescribed by the superintendent, the license shall be canceled and subject to reinstatement on the basis of a new filing as provided in section 3959.04 of the Revised Code, except that the superintendent shall charge a pro rata renewal fee of twenty-five dollars for each month that the license is to be in effect.

Cite as R.C. § 3959.10

Effective Date: 12-02-1996

3959.11 Written agreement to act as administrator between the administrator and the plan sponsor.

(A) No person may act as an administrator without a written agreement between the administrator and the plan sponsor. Such written agreement shall be retained as part of the official records of the administrator for the duration of the agreement and for five years thereafter. Each such agreement shall contain, at a minimum, all of the following information:

(1) The term of the agreement;

(2) An explanation of the services to be performed by the administrator;

(3) The method and rate of compensation to be paid by the plan sponsor to the administrator for services rendered;

(4) Provisions for the renewal and termination of the agreement.

(B) Every administrator shall maintain in its principal office or branch office, if any, for the duration of the agreement with the plan sponsor, customary books and records of all transactions and information relative to covered persons or beneficiaries.

(C) Each administrator duly licensed under sections 3959.01 to 3959.16 of the Revised Code shall at all times maintain any required insurance coverage or bond as provided for and mandated by the "Employee Retirement and Income Security Act of 1974," 88 Stat. 829, 29 U.S.C. 1001 , as amended.

Cite as R.C. § 3959.11

Effective Date: 05-18-1988

3959.12 Suspension, revocation or nonrenewal of license.

(A) Any license issued under sections 3959.01 to 3959.16 of the Revised Code may be suspended for a period not to exceed two years, revoked, or not renewed by the superintendent of insurance after notice to the licensee and hearing in accordance with Chapter 119. of the Revised Code. The superintendent may suspend, revoke, or refuse to renew a license if upon investigation and proof the superintendent finds that the licensee has done any of the following:

(1) Knowingly violated any provision of sections 3959.01 to 3959.16 of the Revised Code or any rule promulgated by the superintendent;

(2) Knowingly made a material misstatement in the application for the license;

(3) Obtained or attempted to obtain a license through misrepresentation or fraud;

(4) Misappropriated or converted to the licensee's own use or improperly withheld insurance company premiums or contributions held in a fiduciary capacity, excluding, however, any interest earnings received by the administrator as disclosed in writing by the administrator to the plan sponsor;

(5) In the transaction of business under the license, used fraudulent, coercive, or dishonest practices;

(6) Failed to appear without reasonable cause or excuse in response to a subpoena, examination, warrant, or other order lawfully issued by the superintendent;

(7) Is affiliated with or under the same general management or interlocking directorate or ownership of another administrator that transacts business in this state and is not licensed under sections 3959.01 to 3959.16 of the Revised Code;

(8) Had a license suspended, revoked, or not renewed in any other state, district, territory, or province on grounds identical to those stated in sections 3959.01 to 3959.16 of the Revised Code;

(9) Been convicted of a financially related felony;

(10) Failed to report a felony conviction as required under section 3959.13 of the Revised Code.

(B) Upon receipt of notice of the order of suspension in accordance with section 119.07 of the Revised Code, the licensee shall promptly deliver the license to the superintendent, unless the order of suspension is appealed under section 119.12 of the Revised Code.

(C) Any person whose license is revoked or whose application is denied pursuant to sections 3959.01 to 3959.16 of the Revised Code is ineligible to apply for an administrators license for two years.

Cite as R.C. § 3959.12

Effective Date: 12-02-1996

3959.13 Report of felony conviction.

Any person who, while licensed as an administrator, is convicted of a felony, shall report the conviction to the superintendent of insurance within thirty days of the entry date of the judgment of conviction. Within that thirty-day period, the person shall also provide the superintendent with a copy of the judgment, the commitment order or the order imposing a community control sanction, and any other relevant documents.

As used in this section, "community control sanction" has the same meaning as in section 2929.01 of the Revised Code.

Cite as R.C. § 3959.13

Effective Date: 01-01-2004

3959.14 Administrator prohibitions.

No administrator shall do any of the following:

(A) Use plan sponsor funds for any purpose or purposes not specifically set forth in written form by the administrator;

(B) Fail to disclose in written solicitation material and on an on-going basis, at least once annually, to the plan sponsor all of the following:

(1) All fixed plan costs, identifying what each fixed cost includes;

(2) Levels of the specific excess insurance stop-loss deductible;

(3) The aggregate excess insurance stop-loss attachment point factors, including any minimum attachment point factors;

(4) The names of all insurance carriers providing protection for the plan sponsor's plans, and any ownership relationship of five per cent or more between the administrator and such insurance carriers.

(C) Fail to remit insurance company premiums within the policy period or within the time period agreed to in writing between the insurance company and the administrator;

(D) Fail to disclose in written form the method of collecting and holding any plan sponsor's funds.

Cite as R.C. § 3959.14

Effective Date: 05-18-1988

3959.15 Books and records.

(A) Administrators shall maintain detailed books and records that reflect all administered transactions specifically in regard to premiums or contributions received and deposited and claims and authorized expenses paid.

(B) The detailed preparation, journalizing, and posting of such books and records shall be made in accordance with the terms and conditions of the service agreement between the administrator and the insurer or plan sponsor and in accordance with the "Employee Retirement and Income Security Act of 1974," 88 Stat. 829, 29 U.S.C. 1001 , as amended.

(C) All books and records maintained by an administrator on behalf of an insurer or plan sponsor for a calendar or fiscal year shall be maintained for the period in which the administrator is providing service for the insurer or plan sponsor.

(D) Administrators shall maintain a cash receipts register of all premiums or contributions received. The minimum detail required in the register shall be date received and deposited.

(E) The description of a disbursement shall be in sufficient detail to identify the source document substantiating the purpose of the disbursement, and shall include all of the following:

(1) The check number;

(2) The date of disbursement;

(3) The person to whom the disbursement was made;

(4) The amount disbursed. If the amount disbursed does not agree with the amount billed or authorized, the administrator shall prepare a written record as to the application for the disbursement.

(F) If the disbursement is for the earned administrative fee or commission, the disbursement shall be supported by a written record reflecting the identifying deposit from which the fee was matched.

(G) All journal entries for receipts and disbursements shall be supported by evidential matter. The evidential matter must be referenced in the journal entry so that it may be traced for verification.

(H) The administrator shall prepare and maintain monthly financial institution account reconciliations if such service is requested by an insurer or plan sponsor as provided in the service agreement by and between the administrator and the insurer or plan sponsor.

(I) The administrator shall prepare a report to be filed with the insurer or plan sponsor within ninety days of the end of the fiscal year of the plan, which discloses at least all of the following:

(1) The total premiums or contributions received from the plan sponsor, covered persons, or beneficiaries;

(2) The total administration fees withdrawn by the administrator pursuant to the written service agreement;

(3) The total claim payments made during the reporting period.

(J) Return premiums or contributions shall be paid to the insurer or plan sponsor or credited to the account of the insurer or plan sponsor within thirty days after receipt by the administrator. If the return premium or contribution is credited to the insurer or plan sponsor, the credit must be shown and applied to the next billing statement sent to the insurer or plan sponsor.

(K) Upon written notification to an administrator by the superintendent of insurance that the administrator has violated any provision of sections 3959.01 to 3959.16 of the Revised Code, the administrator shall have sixty days within which to correct the violation specified in the notice, in compliance with such sections.

Cite as R.C. § 3959.15

Effective Date: 05-18-1988

3959.16 Preemption of federal law.

Sections 3959.01 to 3959.16 of the Revised Code do not apply to an employer's self-insurance plan to the extent that federal law supersedes, preempts, prohibits, or otherwise precludes the application of any provisions of those sections to such plan.

Cite as R.C. § 3959.16

Effective Date: 05-18-1988

3959.17 Effect of child support default on license.

On receipt of a notice pursuant to section 3123.43 of the Revised Code, the superintendent of insurance shall comply with sections 3123.41 to 3123.50 of the Revised Code and any applicable rules adopted under section 3123.63 of the Revised Code with respect to a license issued pursuant to this chapter.

Cite as R.C. § 3959.17

Effective Date: 03-22-2001

3959.99 Penalty.

A person who violates section 3959.05 of the Revised Code is guilty of a misdemeanor of the fourth degree.

Cite as R.C. § 3959.99

Effective Date: 05-18-1988