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Subject 120-2-49 ADMINISTRATOR REGULATION

Rule 120-2-49-.01 Authority

This Regulation is promulgated by the Commissioner of Insurance pursuant to the authority set forth in O.C.G.A. §§ 33-2-9 and 33-23-100et seq.

Rule 120-2-49-.02 Scope and Purpose

(1) This Regulation applies to any administrator as defined in O.C.G.A. Section 33-23-100.
(2) The purposes of this Regulation include
(a) Providing disclosure of contracts between insurers and third party administrators, both to potential insureds and to the Commissioner;
(b) Promoting the financial responsibility of insurance administrators;
(c) Subjecting those business entities defined in O.C.G.A. § 33-23-100 to the jurisdiction of the Commissioner of Insurance; and
(d) Regulating insurance administrators' practices in conformity with the general purposes of the Georgia Insurance Code.

Rule 120-2-49-.03 License; Application; Issuance; Net Worth; Probationary License; Exemption

(1) It is unlawful for any business entity to act as or hold itself out to be an administrator in this State without a valid license issued by the Commissioner of Insurance. To qualify for and hold a license to act as an administrator in this State, an administrator must otherwise be in compliance with Article 2 of Chapter 23 of Title 33 of the Official Code of Georgia Annotated, this Regulation, and with its organizational agreement.
(2) The administrator shall file with the Commissioner an application for a license upon a form to be furnished by the Commissioner, which application shall include or have attached the following information and documents and any other materials the Commissioner deems necessary to adequately assess the merits of the application:
(a) All basic organizational documents of the administrator, the articles of incorporation, articles of association, partnership agreement, trade name certificate, trust agreement, shareholder agreement, and other applicable documents, and all amendments to those documents.
(b) The bylaws, rules and regulations or similar documents regulating the conduct or the internal affairs of the administrator.
(c) The names, addresses, official positions, and professional qualifications of the individuals who are responsible for the conduct of the affairs of the administrator, including all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal officers in the case of a corporation, the partners or members in the case of a partnership or association, and any other person who exercises control or influence over the affairs of the administrator.
(d) Financial statements certified by the President, Chief Financial Officer or Treasurer or audited reports for the two most recent years, or such other information as the Commissioner may require in order to review the current financial condition of the applicant.
(e) If the applicant is not currently acting as an administrator, a statement of the amounts and sources of the funds available for organizational expenses and the proposed arrangements for reimbursement and compensation of incorporators or other principals.
(f) Proof that the applicant possesses a minimum net worth of $200,000; however, the Commissioner may, in his or her discretion, require a higher net worth if he or she deems such higher net worth necessary for the protection of the public. Letters of credit, backstop guarantees and special corporate structures will not be taken into consideration by the Commissioner in determining the net worth requirement.
(g) An application for an administrator's license or an application for renewal of such license shall be accompanied by fees as provided in O.C.G.A. § 33-8-1.
(3) The applicant shall make available for inspection by the Commissioner or his or her authorized representative copies of all contracts with insurers, self-insurers, or other persons utilizing the services of the administrator.
(4) The Commissioner shall not issue a license if he determines that the administrator or any principal thereof is not competent, trustworthy, financially responsible, or has had an insurance license refused, revoked, or suspended by any state.
(5) A license issued under this section may be issued on a probationary basis in the discretion of the Commissioner. The probationary license may be issued for not longer than 12 months and not less than 3 months and is subject to revocation without a hearing. The Commissioner, at his/her discretion, shall prescribe the terms of probation, may extend the probationary period, or refuse to grant a license at the end of any probationary period.
(6) Nonresident applicants for licenses under this chapter shall execute in a form acceptable to the Commissioner an agreement to be subject to the jurisdiction of the Georgia Commissioner of Insurance and courts of this state on any matter related to their insurance activities in Georgia, on the basis of service of process under Title 33 of the Official Code of Georgia Annotated or other service authorized in the Georgia Rules of Civil Procedure.
(7) Any business entity acting as an administrator that claims an exemption from the licensure requirements as defined by O.C.G.A. § 33-23-100(b)(1 - 12) shall file an annual claim of exemption each December 31 on a form as prescribed by the Commissioner.

Rule 120-2-49-.04 Written Agreement Necessary

(1) No administrator shall act as such without a written agreement between the administrator and an insurer or self-insurer, and such written agreement shall be retained as part of the official records of an insurer or self-insurer and the administrator for the duration of the agreement and five years thereafter. Such written agreement shall contain provisions which meet the requirements of Rules 120-2-49-.05, 120-2-49-.08, 120-2-49-.09, 120-2-49-.10, 120-2-49-.12, 120-2-49-.13, 120-2-49-.14, and 120-2-49-.15, except insofar as those requirements do not apply to the functions performed by the administrator.
(2) Where a policy is issued to a trustee or trustees, a copy of the trust agreement and any amendments thereto shall be furnished to the insurer or self-insurer by the administrator and shall be retained as part of the official records of both the insurer and the administrator for the duration of the policy and five years thereafter.

Rule 120-2-49-.05 Maintenance of Information; Books and Records; Reporting Requirements; Return Credits; Correction o

(1) Every administrator shall maintain at its principal administrative office for the duration of the written agreement referred to in Rule 120-2-49-.04 and five years thereafter books and records of all transactions between it, insurers, self-insurers and insured persons. The Commissioner shall have access to such books and records for the purpose of examination, audit and inspection. Any trade secrets contained therein, including but not limited to the identity and addresses of policyholders and certificate holders, shall be confidential, except the Commissioner may use such information in any proceedings instituted against the administrator. The insurer shall retain the right to continuing access to such books and records of the administrator sufficient to permit the insurer to fulfill all of its contractual obligations to insured persons, subject to any restrictions in the written agreement between the insurer and administrator on the proprietary rights of the parties in such books and records.
(2) Administrators shall maintain detailed books and records that reflect all administered transactions specifically in regard to premiums, premium taxes, agent's commissions, administrator's fees, contributions received and deposited and claims and authorized expenses paid.
(3) 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, self-insurer, or plan sponsor, and in accordance with the "Employee Retirement and Income Security Act of 1974," 88 Stat. 829, 29 U.S.C. § 1001et seq., as amended and to enable the insurer to complete the National Association of Insurance Commissioners' annual financial statement.
(4) All books and records maintained by an administrator on behalf of an insurer, self-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, self-insurer or plan sponsor and for five years thereafter.
(5) Administrators shall maintain a cash receipts register of all premiums or contributions received. The minimum detail required in the register shall be:
(a) Date received and deposited;
(b) The mode of payment;
(c) The policy number;
(d) Name of group policyholder;
(e) Names of certificate-holders;
(f) Individual premium amounts; and
(g) Agent.
(6) 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:
(a) The check number;
(b) The date of disbursement;
(c) The person to whom the disbursement was made;
(d) 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; and
(e) Ledger account number.
(7) 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.
(8) All journal entries for receipts and disbursements shall be supported by evidential matter. The evidential matters must be referenced in the journal entry so that it may be traced for verification.
(9) 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.
(10) The administrator shall prepare a report to be filed with the insurer and plan sponsor within ninety days of the end of the fiscal year of the plan, which discloses at least all of the following:
(a) The total premiums or contributions received from the plan sponsor, covered persons, or beneficiaries;
(b) The total administration fees withdrawn by the administrator pursuant to the written service agreement;
(c) The total claim payments made during the reporting period;
(d) A copy of the annual report shall be retained as part of the official record of the third party administrator for at least five (5) years;
(e) Any additional information required by the written agreement; and
(f) The names of all insurers, reinsurance carriers or ultimate risk bearers providing any type of insurance coverage to the plan sponsor.
(11) Return premiums or contributions shall be paid to the insurer, or self-insurer or plan sponsor or credited to the account of the insurer, self-insurer or plan sponsor within thirty days after receipt by the administrator. If the return premium or contribution is credited to the insurer, self-insurer or plan sponsor, the credit must be shown and applied to the next billing statement sent to the insurer, self-insurer or plan sponsor.

Rule 120-2-49-.06 Payment to Administrator

Whenever an insurer utilizes the services of an administrator under the terms of a written contract as required in Rule 120-2-49-.04, the payment to the administrator of any premiums or charges for insurance by or on behalf of the insured shall be deemed to have been received by the insurer, and the payment of return premiums or claims by the insurer to the administrator shall not be deemed payment to the insured or claimant until such payments are received by the insured or claimant. Nothing herein shall limit any right of the insurer against the administrator resulting from its failure to make payments to the insurer, insureds or claimants.

Rule 120-2-49-.07 Administrator Bond; Errors and Omissions Coverage

(1) Every administrator shall file a bond with the Commissioner. The administrator shall file a certificate of such bond, in a form acceptable by a corporate surety insurer authorized to transact insurance in this state in favor of Commissioner of Insurance of the state of Georgia, continuous in form and in an amount equal to at least ten percent of the amount of the funds handled or managed annually by the administrator based on the preceding year, or if no funds were handled during the preceding year, ten percent of the amount of funds reasonably estimated to be handled during the current calendar year. In no event will the bond be less than $100,000.
(2) The bond shall inure to the benefit of any person damaged by any fraudulent act or conduct of the administrator and must be conditioned upon faithful accounting and application of all money coming into the administrator's possession in connection with its activities as an administrator.
(3) The bond remains in force until released by the Commissioner or canceled by the surety. Without prejudice to any liability previously incurred, the surety may cancel the bond upon 30 days' advance notice to the administrator and the Commissioner. An administrator's license shall be suspended if it does not file with the Commissioner a replacement bond before the date of cancellation of the previous bond. A replacement bond must meet all requirements of this section for the initial bond.
(4) Each administrator shall obtain errors and omissions coverage or other appropriate liability insurance, written by an insurer authorized to transact insurance in this state, in an amount of at least $100,000.
(5) Any policy written in accordance with paragraph (4) of this Rule shall be for a term of at least one year and shall contain provisions that:
(a) Cancellation or termination of the policy is not effective except upon sixty (60) days written notice by registered or certified mail to the other party to the policy and to the Commissioner; and
(b) The policy is automatically renewable at the expiration of the policy period except upon sixty (60) days written notice by registered or certified mail by the party not renewing the policy to the other party to the policy and to the Commissioner.
(6) Upon approval by the Commissioner, bonds or policies may be written by an eligible surplus lines insurer.
(7) Compliance by the administrator with paragraph (4) of this Rule is a prerequisite to approval of its application by the Commissioner.
(8) Any bond and errors and omissions coverage required for licensure and renewal purposes shall be maintained in place by the administrator for a period of at least one year immediately following the surrender, non-renewal or revocation of the license.

Rule 120-2-49-.08 Premium Collection

All insurance charges, fees, or premiums collected by an administrator on behalf of or for an insurer, insurers, or self-insurer, and return premiums received from such insurer, insurers, or self-insurer, shall be held by the administrator in a fiduciary capacity. Such funds shall be immediately remitted to the person or persons entitled thereto, or shall be deposited promptly in a fiduciary bank account established and maintained by the administrator. If charges or premiums so deposited have been collected on behalf of or for more than one insurer, or self-insurer, the administrator shall cause the bank in which such fiduciary account is maintained to keep records clearly recording the deposits in and withdrawals from such account on behalf of or for each insurer and for each self-insurer. The administrator shall promptly obtain and keep copies of all such records and, upon request of an insurer, or self-insurer, shall furnish such insurer or self-insurer with copies of such records pertaining to deposits and withdrawals on behalf of or for such insurer or self-insurer. The administrator shall not pay any claim by withdrawals from such fiduciary account. Withdrawals from such account shall be made, as provided in the written agreement between the administrator and the insurer, or self-insurer, for

(a) Remittance to an insurer, or self-insurer, entitled thereto;
(b) Deposit in an account maintained in the name of such insurer or self-insurer;
(c) Transfer to and deposit in a claims paying account, with claims to be paid as provided in 120-2-49-.09;
(d) Payment to a group policyholder for remittance to the insurer or self-insurer entitled thereto;
(e) Payment to the administrator of its fees or charges; or
(f) Remittance of return premiums to the person or persons entitled thereto.

Rule 120-2-49-.09 Payment of Claims

All claims paid by the administrator from funds collected on behalf of an insurer or self-insurer shall be paid by check, drafts, electronic funds transfer, or other method of electronic payment, as authorized by such insurer or self-insurer: provided, however, the payee may elect to receive payment by check.

Rule 120-2-49-.10 Compensation for Adjusting or Settling Claims

(1) Compensation to an administrator for any policies in which the administrator adjusts or settles claims shall in no way be contingent on claims experience. This section does not prevent the compensation of an administrator from being based on premiums or charges collected or the number of claims paid or processed.
(2) An administrator shall not receive from any plan sponsor, insurer, self-insurer, covered individual or beneficiary under a plan any compensation or other payments except as expressly set forth in the written agreement between the administrator and the plan sponsor, insurer, or self-insurer.

Rule 120-2-49-.11 Annual Renewal

(1) Each authorized administrator shall file with the Commissioner an annual renewal of its license on a form prescribed by the Commissioner which sets forth the administrator's transactions, and affairs. The statement shall be filed annually on or before March 1. The annual renewal shall be in such form and contain such matters as the Commissioner prescribes and shall be verified by at least one officer of the administrator. For good cause shown the Commissioner may extend the time for filing of the annual renewal of the license conditioned upon payment of a fee prescribed therefore.
(2) At the time of filing its annual renewal, the administrator shall pay a filing fee as provided in O.C.G.A. § 33-8-1.
(3) The annual renewal shall include the complete names, addresses, N.A.I.C. company and N.A.I.C. group number of all insurers with which the administrator had an agreement during the preceding fiscal year, and the complete names and addresses of all self-insurers where such agreement existed during the preceding fiscal year.
(4) The administrator shall at all times maintain a net worth of $200,000. If the administrator fails to maintain a net worth of $200,000 the Commissioner, in his/her discretion, may enter any disciplinary order as he/she deems appropriate pursuant to Title 33 of the Georgia Insurance Code.

Rule 120-2-49-.12 Underwriting Provisions

(1) The written agreement between the administrator and an insurer shall make provision with respect to the underwriting or other standards pertaining to the business underwritten by such insurer. The written agreement between the administrator and a self-insurer shall make provision with respect to any underwriting requirements or other standards pertaining to the benefit coverage to be provided.
(2) As to the administration of coverage insured by an insurance company, the insurance company, and not the administrator, shall be responsible for determining the benefits, rates, underwriting criteria, and claims payment procedures applicable to such coverage and for securing reinsurance, if any.
(3) No administrator shall place any insurance or reinsurance coverage on behalf of a plan sponsor with an insurer that is not authorized or approved to do business in Georgia.
(4) No administrator shall have the authority to move the coverage of a group or subgroup to a new insurer unless such action is at the request of the current insurer or the group policyholder following notice of termination of the group coverage by the insurer or group policyholder, and the new insurer must hold a Certificate of Authority to do business in Georgia.
(5) Any insured individual whose group insurance coverage terminates, regardless of the situs of the group policy, shall be entitled to conversion rights as required under O.C.G.A. §§ 33-24-21.1 and 120-2-10-.11 of the Rules and Regulations of the Office of Commissioner of Insurance, or as provided in the group insurance policy, if more favorable.
(6) Where group insurance coverage is discontinued and replaced, the individual insureds shall be entitled to all takeover rights provided under Rule 120-2-10-.10 of the Rules and Regulations of the Office of Commissioner of Insurance.

Rule 120-2-49-.13 Approval of Advertising

(1) An administrator may use only such advertising pertaining to the business underwritten by an insurer as has been approved by such insurer in advance of its use.
(2) Each administrator shall maintain at its principal administrative office a complete file of all advertisements, regardless of by whom written, created or designed, which are used in the course of the administrator's business in this state, with a notation indicating the manner and extent of distribution and the form number of any policy advertised. Such file shall be subject to inspection by the Office of Commissioner of Insurance. All such advertisements shall be maintained in said file for a period of not less than five (5) years.
(3) Each administrator shall file with the Commissioner of Insurance on or before March 1 in each year, a certification executed by an authorized officer of the administrator attesting that to the best of his or her knowledge, information and belief, the advertisements disseminated by the administrator during the preceding calendar year complied, or were made to comply in all respects, with the advertising regulations of this state.

Rule 120-2-49-.14 Delivery of Policies and Notices

Any policies, certificates, booklets, termination notices, or other written communications delivered by the insurer to the administrator for delivery to its policyholders shall be delivered by the administrator promptly after receipt of direction from the insurer to deliver them.

Rule 120-2-49-.15 Notification Required

(1) Where the services of an administrator are utilized, the administrator shall provide a written notice approved by the insurer, or self-insurer, to insured or self-insured individuals, advising them of the identity of and relationship among the administrator, the group policyholder and the insurer or self-insurer. Where an administrator collects funds, it must identify and state separately in writing to the person paying to the administrator any charge or premium for insurance coverage or self-funded benefits, the amount of any such charge or premium specified by the insurer or self-insurer for such insurance coverage or self-funded benefits.
(2) Each administrator shall identify to the Commissioner any ownership interest or affiliation of any kind with any insurance company responsible for providing benefits directly or through reinsurance to any plan for which the administrator provides administrative services.

Rule 120-2-49-.16 Examination by Commissioner; On-Site Examinations

(1) An administrator shall, at the request of the Commissioner, respond in writing within fifteen (15) working days to any complaint received by the Commissioner concerning the administrator. Complaints shall include those pertaining to improper adjudication of claims and any complaints or concerns, by any other state agency, relating to the administrator. If, in the Commissioner's discretion, the frequency or severity of such complaints or infractions justifies an examination of the administrator's practices and procedures, any such examination by the Commissioner, or any person designated by him or her, shall be at the expense of the administrator. The Commissioner may, in addition to any other remedy available, suspend, revoke or refuse to renew a license in the event that the administrator does not fully cooperate with the Commissioner's office relating to this rule.
(2) The Commissioner or his or her designated representative is authorized to make a complete on-site examination of the affairs of each administrator as often as is deemed necessary. Whenever the Commissioner shall deem it expedient, he or she shall examine by use of an examiner duly authorized by him or her the affairs, transactions, accounts, records, documents, assets, liabilities, of an administrator and any other facts relative to its business methods, management, and dealings with policyholders, certificate holders, and members.
(3) Any administrator being examined shall provide to the Commissioner or his or her designee convenient and free access, at all reasonable hours at their offices, to all books, records, documents and other papers relating to such administrator's business affairs.
(4) At the direction of the Commissioner the administrator shall pay the fees and expenses of the examination. A consolidated account for the examination shall be filed by the examiner with the Commissioner.
(5) Nothing in this rule shall limit or abridge any other investigatory powers of the Commissioner vested in him or her by Title 33 of the Official Code of Georgia Annotated.

Rule 120-2-49-.17 Unfair Practices; Marketing of Unapproved Products

(1) No administrator, nor their officers, directors, partners, trustees, agents or employees shall engage in any unfair trade practice defined in Chapter 6 of Title 33 of the Official Code of Georgia Annotated, or determined pursuant to this rule to be an unfair or deceptive act or practice. The provisions of Chapter 6 apply to administrators and their officers, directors, partners, trustees, agents or employees.
(2) In addition to the practices deemed unfair and deceptive in Chapter 6 of Title 33 of the Official Code of Georgia Annotated, it shall be deemed an unfair or deceptive practice for any administrator, officer, director, partner, trustee, agent or employee to commit or perform any of the following:
(a) Misrepresenting or withholding any data or information that has been provided by the plan sponsor and is pertinent to underwriting conditions for a contract of insurance between the plan sponsor and any insurer, reinsurer or ultimate risk bearer, or for a contract of self-insurance between the plan sponsor and the administrator.
(b) Misrepresenting the existence or the terms of any actual or proposed insurance or reinsurance policy, or self-insurance contract.
(c) Failing to make an appropriate reply within fifteen working days to any inquiries of the Office of Commissioner of Insurance as they pertain to this regulation or O.C.G.A. §§ 33-23-100 to 33-23-104.
(d) Failing to submit requested documentation to the Office of Commissioner of Insurance as it applies to any complaints or inquiries regarding the business practices of an administrator.
(3) A licensed administrator is not permitted to market or administer any insurance product not approved in this state or that is issued by a non-admitted insurer or unauthorized multiple employer self-insured health plan.

Rule 120-2-49-.18 Change of Management; Acquisition; Affiliation; Relationships with Third Parties

(1) The administrator shall, within 30 days after the event, notify the Commissioner of any material change in its management.
(2) An administrator's license shall not be sold or transferred to a non-affiliated or otherwise unrelated party.
(3) An administrator may not contract or sub-contract any of its negotiated services to any unlicensed business entity unless specifically approved by the Commissioner.

Rule 120-2-49-.19 Forms

Standard administrator forms are required and will be supplied upon request by the Commissioner's office either in paper form or electronically over the internet. Applicants and licensed administrators shall utilize all applicable forms in preparing applications, statements, notices of required information, and other submissions required under Article 2 of Chapter 23 of Title 33 of the Official Code of Georgia Annotated.

Rule 120-2-49-.20 Penalties

Any business entity or affiliated party failing to comply with the requirements of this Regulation Chapter shall be subject to such penalties as may be appropriate under the insurance laws of this State.

Rule 120-2-49-.21 Severability

If any provision of this Regulation Chapter, or the application thereof to any business entity or affiliated party or circumstance, is held invalid by a court of competent jurisdiction, the remainder of the Regulation Chapter or the applicability of such provision to other persons or circumstances shall not be affected.