Is It Legal?

Does anyone know for sure if the Texas Department of Insurance has any jurisdiction over Reference Based Pricing vendors who for a fee indemnify plan members against the risk of lawsuits and balance billing? Is the act of indemnification for a fee through transfer of risk the business of insurance?

By Bill Rusteberg

In a recent case that issue was an alleged fact in one of the pleadings (see below). The case was settled so we don’t know what the outcome would have been but we are sure it will come up again in future lawsuits. 

Could agents, brokers and consultants who recommend and place Reference Based Pricing plans (where fees are charged in return for a transfer of risk) and who (including the vendor) are not properly licensed, be liable for practicing unauthorized insurance?

Who is going to be the first to ask for clarification from the Texas Department of Insurance?

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA )

Mayo Clinic, Case No.: 17-cv-4181  Plaintiff,  v.  Chantelle Zack,  ELAP Services, LLC,  Group & Pension Administrators,  Defendants.

CLAIM VII UNLICENSED PRACTICE OF INSURANCE

Minn. Stat. § 60A.07 104. Plaintiff incorporates each and every allegation contained in Paragraphs 1-103, inclusive, with the same force and effect as if fully set forth herein.

  1. Under Minnesota Law, “insurance” means “any agreement whereby one party, for a consideration, undertakes to indemnify another to a specified amount against loss or damage from specified causes, or to do some act or value to the assured in case of loss or damage.” Minn. Stat. § 60A.02 subd. 3(a).
  2. Furthermore, a “company” or “insurance company” means “every insurer, corporation, business trust, or association engaged in insurance as principal.” Minn. Stat. § 60A.02 subd. 4.
  3. Under Minnesota Law, “no insurance company or association, or fraternal benefit society, not specifically exempted therefrom by law, shall transact the business of insurance in this state unless it shall hold a license therefor from the commissioner.” Minn. Stat. § 60A.07.
  4. ELAP undertakes to indemnify its members and/or partners and is therefore an insurance company under Minnesota law. Not only does ELAP, per its website, provide “member advocacy and defense” by “standing in the shoes” of members and beneficiaries CASE 0:17-cv-04181-PJS-BRT Document 53-1 Filed 05/01/18 Page 21 of 25 22 “in a balance bill situation”, it was written publicly in the Article that “ELAP agrees to handle all hospitals bills for an employer and defend workers from collections in return for a percentage fee tied to total hospital charges.”
  5. ELAP, either on its own or through its various agents, encourages plan members and beneficiaries to receive health care goods and services from Mayo by informing said members and beneficiaries that they have in-network access to Mayo, as such; ELAP is transacting business in the state of Minnesota.
  6. ELAP is in violation of Minnesota law for failing to apply for and receive an insurer license from the Minnesota Commissioner of Insurance.

CLAIM VIII UNLICENSED PRACTICE OF INSURANCE

Minn. Stat. §60A.23 111. Plaintiff incorporates each and every allegation contained in Paragraphs 1-110, inclusive, with the same force and effect as if fully set forth herein.

  1. Under Minnesota law, a third-party administrator is “any vendor of risk management services… and any entity which administers, for compensation, a selfinsurance or insurance plan.” Minn. Stat. § 60A.23 subd. 8(1).
  2. Administering a self-insurance or insurance plan means “processing, reviewing or paying claims, establishing or operating funds and accounts, or otherwise providing necessary administrative services in connection with the operation of a self-insurance or insurance plan.” Minn. Stat. § 60A.23 subd. 8(2)(a). CASE 0:17-cv-04181-PJS-BRT Document 53-1 Filed 05/01/18 Page 22 of 25 23
  3. A “‘vendor of risk management services’ means an entity providing for compensation, actuarial, financial management, accounting, legal or other services for the purpose of designing and establishing a self-insurance or insurance plan for an employer.” Minn. Stat. § 60A.23 subd. 8(2)(e).
  4. Under Minnesota law, “No vendor of risk management services or entity administering a self-insurance or insurance plan may transact business in this state unless it is licensed to do so by the commissioner.” Minn. Stat. § 60A.23 subd. 3.
  5. ELAP, by auditing, reviewing and directing payment for claims as part of its role as DDM of the Plan, classifies as a third-party administrator and/or a vendor of risk management under Minnesota law.
  6. ELAP, either on its own or through its various agents, encourages plan members and beneficiaries to receive health care goods and services from Mayo by informing said members and beneficiaries that they have in-network access to Mayo; as such, ELAP is transacting business in the state of Minnesota.
  7. ELAP is in violation of Minnesota law for failing to apply for and receive a third party administrator and/or vendor of risk management license from the Minnesota Commissioner of Insurance.

 

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