N.J. Admin. Code § 11:4-56.8

Current through Register Vol. 56, No. 24, December 18, 2024

Section 11:4-56.8 - Financial requirements of self-funded MEWAs

(a) A self-funded MEWA shall establish and maintain a separate trust account with respect to that segment of its operations that provides for self-funded health benefits plans. The trust account shall reflect the income, disbursements, assets and liabilities associated with providing health benefits. At all times, the trust account shall contain assets in an amount at least equal to the sum of its liabilities, including the claim reserve account, plus the required RBC.

(b) The separate trust account described in (a) above shall maintain capital and surplus at the following minimum levels:

1. For the calendar year ending December 31, 2003, 90 percent of the regulatory action level RBC determined in accordance with the RBC instructions;

2. For the calendar year ending December 31, 2004, 95 percent of the regulatory action level RBC determined in accordance with the RBC instructions; and

3. For the calendar years ending on or after December 31, 2005, the regulatory action level RBC determined in accordance with the RBC instructions.

(c) If the total adjusted capital of the self-funded MEWA's separate trust account is less than its regulatory action level RBC, the self-funded MEWA shall implement and file with the Commissioner, no later than March 31 of each year, a plan to correct the inadequacy. Such plan shall:

1. Identify the conditions that contribute to the inadequacy;

2. Contain proposals of corrective actions that the MEWA intends to take and that would be expected to result in the elimination of the inadequacy;

3. Provide projections of the separate trust account's financial results for the current year and at least the two succeeding years, both in the absence of proposed corrective actions and giving effect to the proposed corrective actions, including projections of statutory balance sheets, operating income, net income, capital and surplus, and RBC levels; and

4. Identify the key assumptions impacting the projections, and the sensitivity of the projections to the assumptions, and identify the quality of, and problems associated with, the operations of the separate trust account.

(d) The self-funded MEWA shall correct the inadequacy described in (c) above within 90 days of implementation of the plan, or no later than June 30 of each year.

(e) The self-funded MEWA shall maintain a deposit in the amount of not less than $ 200,000 in cash or securities as defined in N.J.S.A. 17B:18-37.

(f) The self-funded MEWA shall maintain a cash reserve for loss in an amount established by a qualified actuary as being adequate to provide for all incurred losses, including unpaid claims.

(g) The self-funded MEWA shall maintain stop-loss coverage, which shall meet the following requirements:

1. Aggregate stop-loss coverage shall be maintained with a retention level of 125 percent of expected claims per year, including provisions to cover incurred, unpaid claims liability in the event of termination or liquidation of the self-funded MEWA;

2. Aggregate stop-loss coverage shall provide coverage for claims in excess of the retention limit in an amount of at least 25 percent of expected claims;

3. Specific stop-loss coverage shall be maintained with a retention level determined annually by a qualified actuary based on sound actuarial principles;

4. The stop-loss agreement shall provide a minimum run-out period for reporting claims of 12 months beyond the incurral period, except that the Commissioner shall permit a run-out period for reporting claims of six months beyond the incurral period if, upon written request of the self-funded MEWA, the Commissioner determines that it has been demonstrated that coverage with a 12-month run-out period is not commercially available or is unreasonably priced; and

5. The stop-loss agreement shall contain a provision that the stop-loss insurer shall give the self-funded MEWA and the Commissioner a minimum of 180 days notice of cancellation or nonrenewal.

N.J. Admin. Code § 11:4-56.8