Michigan DIFS Bulletin 2010-09-INS

STATE OF MICHIGAN DEPARTMENT OF ENERGY, LABOR AND ECONOMIC GROWTH OFFICE OF FINANCIAL AND INSURANCE REGULATION Bulletin 2010-09-INS In the matter of Filing Alien Third Party Administrator Applications --------------'' .Jssued and entered this _&ff";_day of /Ju"Y 2010 By Ken Ross Commissioner The Office of Financial and Insurance Regulation (OFIR) is receiving an increasing number of alien Third Party Administrator (TPA) applications. An "alien TPA" is a TPA formed under the laws of any country other than the United States ofAmerica, its states, districts, commonwealths and possessions. This bulletin clarifies how OFIR processes alien TPA applications for a certificate ofauthority. A TP A cannot operate in Michigan· without obtaining and maintaining a certificate of authority pursuant to the Third Party Administrator Act (the Act), 1984 PA 218, as amended, MCL 550.901 et seq. Section 12(1) ofthe Act states, in pertinent part, that an application for a certificate ofauthority shall include all ofthe following: • Basic organizational documents ofthe TP A. • List ofall owners, partners, officers or directors, or managers or members ofa limited liability company or shareholders of 10% or more. • A description of the TPA, its services, facilities, and personnel. • A power of attorney duly executed by the TP A, ifnot domiciled in Michigan. • Recent financial statements substantiating financial viability. • Other information as the Commissioner may require. In accordance with Section 12(1)(f), the Commissioner may require additional information as needed in order to determine the applicant's ability to act as a TP A. The Commissioner has determined that alien TP A applicants must submit the following additional information with an application: V The TP A Plan of Operations (plan) with a notarized cover letter attesting to the accuracy ofthe information within the plan and a statement agreeing to submit to OFIR all changes made to the plan for review and approval. At a minimum the plan must include: • Fiduciary and claims processing account guidelines which require that all premiums collected and all premium collecting and claim processing accounts will be deposited into and held within a federally insured financial institution within the United States. • Guidelines for the maintenance and storage offiles which require that insured's files be maintained and stored in the United States with the alien TPA having "view only" access from a computer database without the authority to print. An insured' s social security number and other personal information must be safeguarded and access shall be limited to the staff necessary to fulfill the alien TPA's obligations. Additionally, regulators are to have access to all accounts, records, and files in the United States, as well as access to officers in order to obtain information regarding the affairs of the alien TP A and to ensure compliance. • Privacy standards which require the establishment and documentation of procedures and mechanisms to protect and safeguard an insured's medical and confidential information. • An explanation of how effective compliance monitoring will be accomplished including how the oversight ofthe alien TP A by compliance offices located in the United States will be performed. • A listing ofall job functions and work related activities to be conducted by the alien TP A. Alien TP A shall not perform underwriting, collect any type of charges or fees for claim processing and cannot bind contracts. • Employment qualification standards which include a list of qualifications that alien TPA employees must meet before they are hired and.documentation ofthe initial and ongoing training that alien TP A employees will receive during their employment. Any questions regarding this bulletin should be directed to: Office ofFinancial and Insurance Regulation Licensing and Product Review Division Insurance Licensing Section 611 West Ottawa Street P.O. Box 30220 Lansing, Michigan 48909-7720 Toll Free: (877) 999-6442 Ken Ross Commissioner of Financial and Insurance Regulation