Page 1 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
Regular Session, 2012 ENROLLED
SENATE BILL NO. 644
BY SENATOR DONAHUE
AN ACT1
To amend and reenact R.S. 22:453(B), 454(A), 458, 459, 461(B),(C), (D), (E), (F), (G), and2
(H), and 463, to enact R.S. 22:462(H), and to repeal R.S. 22:454(C) and (D) and3
461(I), relative to group self-insurers; to provide for application for certificates of4
authority; to provide for fidelity bonds and insolvency of deposits; to provide for5
self-insured trusts; to provide for excess stop-loss coverage; to provide for annual6
audits, examinations by the commissioner, and issuance of annual reports; and to7
provide for related matters.8
Be it enacted by the Legislature of Louisiana:9
Section 1. R.S. 22:453(B), 454(A), 458, 459, 461(B), (C), (D), (E), (F), (G),and (H),10
and 463 are hereby amended and reenacted and R.S. 22:462(H) is hereby enacted to read as11
follows:12
§453. Certificate of authority 13
* * *14
B. Each application for a certificate of authority shall be made on forms15
prescribed by the commissioner, shall be verified by the self-insurer or its authorized16
representative, and shall set forth or be accompanied by all of the following items:17
(1) A copy of the plan's self-insurer's bylaws and all management,18
administration, or trust agreements which the plan has made or proposes to make for19
the conduct of its business and affairs. Any proposed change or amendment to the20
foregoing shall also be filed with the commissioner within sixty days of its21
implementation.22
(2) A list of names, permanent addresses, and official positions, if any, of the23
persons responsible for the formation of the self-insurer and for the organization,24
establishment, administration, and maintenance of the self-insurance plan.25
(3) Biographical background information, on a form prescribed by the26
commissioner for each person who controls, directly or indirectly, ten percent27
ACT No. 680 SB NO. 644 ENROLLED
Page 2 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
or more of the self-insurer and for each director and officer of the self-insurer.1
(4) A plan of operation which clearly indicates the method of operation2
of the self-insurer including all of the following items:3
(a) The types and limits of insurance to be provided.4
(b) Pro forma financial statements for a period covering three years,5
which shall include a balance sheet, income statement, and cash flow statement.6
(c) The amount and liquidity of its assets relative to the risks to be7
assumed by the self-insurer.8
(d) The expertise, experience, and character of the persons or entities9
which will manage the self-insurer.10
(e) A description of the self-insurer's stop-loss or excess program.11
(f) A description of the self-insurer's underwriting policy, including the12
person or entity which will perform these functions.13
(g) A description of the self-insurer's claims handling procedures,14
including the person or entity that will perform these functions.15
(h) A description of the self-insurer's investment policy.16
(i) The overall soundness of the plan of operation of the self-insurer.17
(j) A description of the self-insurer's rate-making policies and18
procedures.19
(5) A feasibility study or other analysis involving the self-insurance plan20
prepared by a qualified actuary.21
(3) (6)A copy of the application for coverage, contract, certificate, or policy22
of insurance or schedules of benefits to be issued or provided to persons covered23
under the self-insurance plan.24
(4) (7) A current financial statement verified by the applicant or its25
authorized representative showing the applicant's assets, liabilities, and sources of26
financial means and support.27
(8) A copy of a fidelity bond which bond shall comply with all of the28
following:29
(a) Provides protection to the self-insurer against acts of fraud or30 SB NO. 644 ENROLLED
Page 3 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
dishonesty by persons servicing the self-insurer.1
(b) Provides coverage for each person responsible for servicing the2
self-insurer.3
(c) Is in an amount equal to the greater of ten percent of the premiums4
and contributions received by the self-insurer or ten percent of the benefits5
paid, during the preceding calendar year, with a minimum amount of ten6
thousand dollars and a maximum amount of five hundred thousand dollars.7
(5) (9) A copy of all advertising and marketing materials, including the8
marketing plan.9
(10) A statement by the self-insurer certifying that the self-insurance10
plan is in compliance with all applicable provisions of the Employee Retirement11
Income Security Act of 1974 (29 U.S.C. §1001 et seq.).12
* * *13
§454. Insolvency deposit14
A. Prior to the issuance of any All self-insurers shall, before receiving a15
certificate of authority, under this Subpart, each applicant shall deposit with the16
commissioner safekeeping receipts or trust receipts from insured banking or other17
financial institutions a safekeeping or trust receipt from a bank doing business18
within the state or from a savings and loan association chartered to do business19
in this state indicating that the self-insurer has deposited cash, or bonds of the20
United States, the state of Louisiana, evidencing that the applicant has deposited21
with said institutions one million dollars, or such other amount as may be authorized22
by Subsection E of this Section, in cash to guarantee its financial responsibility. No23
single deposit shall exceed the insured deposit limit of any such banking or financial24
institution. or any political subdivision of the state, of the par value of not less25
than the greater of either one of the following items:26
(1) One hundred thousand dollars.27
(2) Thirty percent of the self-insurers outstanding Louisiana-related28
reserve liabilities. For the purposes of this Subsection, reserve liabilities shall29
be computed with proper regard for the following items:30 SB NO. 644 ENROLLED
Page 4 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
(a) Known claims paid and outstanding.1
(b) A history of incurred but not reported claims.2
(c) Claims handling expenses.3
(d) Unearned premium.4
(e) An estimate for bad debts.5
(f) A trend factor.6
(g) A margin for error.7
All securities deposited pursuant to this Subsection shall be held in trust8
for the benefit and protection of and as security for all policyholders of the9
self-insurer making such deposit.10
* * *11
§458. Self-insured trusts12
The following requirements shall be met in addition to all other provisions13
of this Subpart where any self-insurance plan is effected, maintained, and operated14
under a trust agreement:15
(1) A self-insurer shall maintain at all times unimpaired net assets of not16
less than one million dollars. The net assets required to be maintained pursuant17
to this Section shall be in the form of cash, cash equivalents, or bonds or18
evidences of indebtedness which are direct general obligations or which are19
secured or guaranteed as to principal and interest by the government of the20
United States, or any state of the United States.21
(2) The employers in the self-insurance plan shall be members of an22
association or group of five or more businesses that are in the same trade or23
industry, including closely related businesses that provide support, services, or24
supplies primarily to that trade or industry.25
(1) (3) A board of trustees elected by participating employers shall serve as26
fund managers on behalf of participants. Trustees shall be plan participants. No27
participating employer may be represented by more than one trustee. A minimum of28
three and a maximum of seven trustees may be elected. Trustees may not receive29
compensation but may be reimbursed for actual expenses incurred in connection with30 SB NO. 644 ENROLLED
Page 5 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
duties as trustee.1
(2) (4) Trustees shall be bonded in an amount not less than one hundred fifty2
thousand dollars from a licensed surety company.3
(3) (5) Investment of plan funds is subject to the same restrictions which are4
applicable to insurers under this Title. All investments shall be managed by a bank5
or other financial institution chartered in the state of Louisiana.6
§459. Excess stop-loss coverage7
A. Each self-insurance plan shall include aggregate excess stop loss stop-loss8
coverage and specific excess stop-loss coverage provided by an insurer licensed by9
the state of Louisiana. Aggregate excess stop-loss coverage shall include provisions10
to cover incurred, unpaid claims liability in the event of plan termination. The excess11
or stop loss insurer shall bear the risk of coverage for any employer participating in12
the self insurance plan that becomes insolvent with outstanding contributions due.13
The plan shall have a participating employer's fund in an amount at least equal to the14
point at which the excess or stop loss insurer shall assume one hundred percent of15
additional liability. A plan shall submit its proposed excess or stop loss stop-loss16
insurance contract to the commissioner at least thirty days prior to the proposed self-17
insurance plan's effective date and at least thirty days subsequent to any renewal18
date. The commissioner shall review the contract to determine whether it meets the19
standards established by this Section and shall respond within thirty days of its20
submission to him. Any excess or stop loss stop-loss insurance plan must provide21
coverage with rates not subject to adjustment by the insurer during the first twelve22
months.23
B. The self-insurer shall possess a written commitment, binder, or policy24
for stop-loss insurance issued by an insurer authorized to do business in this25
state and that the commitment, binder, or policy provides all of the following26
items:27
(1) At least thirty days' notice to the commissioner of any cancellation or28
nonrenewal of coverage.29
(2) Both specific and aggregate coverage with an aggregate retention of30 SB NO. 644 ENROLLED
Page 6 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
not more than one-hundred twenty-five percent of the amount of expected1
claims for the next plan year and a specific retention amount annually2
determined by the actuarial opinion required by R.S. 22:463(B).3
(3) Both the specific and aggregate coverage required in Paragraph (2)4
of this Subsection shall require all claims to be submitted within ninety days5
after the claim is incurred and provide a twelve-month claims incurred period6
and at least a fifteen-month paid claims period for each policy year.7
C. On the application of a self-insurer, the commissioner may waive or8
reduce the requirement for aggregate stop-loss insurance coverage required by9
this Section on a determination that the interests of the participating employers10
and employees are adequately protected based on the level of aggregate stop-11
loss insurance recommended by the actuary as required by R.S. 22:463(B).12
* * *13
§461. Annual audit; rate review14
* * *15
B. This Section shall apply to all self-insurers .; however, a self-insurer having16
direct premiums in this state of less than two hundred fifty thousand dollars in any17
year and having less than five hundred policyholders in this state at the end of any18
year shall be exempt from this Section for such year unless the commissioner makes19
a specific finding that compliance is necessary for the commissioner to carry out20
statutory responsibilities.21
C. The audit report required in this Section shall be filed with the22
commissioner on or before the thirtieth day of the sixth month following the year end23
of the self-insurer. Up to two thirty-day extensions may be granted by the24
commissioner upon showing by the self-insurer and its independent certified public25
accountant of the reasons for requesting such extension and upon determination by26
the commissioner of good cause for an extension. The request for extension shall be27
submitted in writing not less than ten days prior to the due date in sufficient detail28
to permit the commissioner to make an informed decision with respect to the29
requested extension.30 SB NO. 644 ENROLLED
Page 7 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
D. The annual audited financial statement shall report the financial condition1
of the self-insurer as of the end of the most recent fiscal or calendar year and the2
results of its operations, changes in financial position, and changes in capital and3
surplus for the year then ended in conformity with statutory generally accepted4
accounting practices prescribed, or otherwise permitted, by the Department of5
Insurance of the state of domicile of the self-insurer.6
E. The annual audited financial report shall include the following items:7
(1) Report The report of the independent certified public accountant.8
(2) Balance A balance sheet reporting admitted assets, liabilities, capital, and9
surplus net assets.10
(3) Statement A statement of gain or loss from operations.11
(4) State A statement of cash flows.12
(5) Statement A statement of changes in capital and surplus net assets.13
(6) Notes to financial statements. These notes shall be those required by14
generally accepted accounting principles and shall include the following items:15
(a) A reconciliation of difference, if any, between the audited statutory16
financial statements and the annual statement filed pursuant to this Subpart with a17
written description of the nature of these differences.18
(b) A narrative explanation of all significant intercompany transactions and19
balances.20
(7) The financial statements included in the audited financial report shall be21
prepared in a form and using language and groupings substantially the same as the22
relevant sections of the annual statement of the self-insurer filed with the23
commissioner, and:24
(a) The financial statement shall be comparative.25
(b) Amounts may be rounded to the nearest thousand dollars.26
(c) Insignificant amounts may be combined.27
F. Financial statements furnished pursuant to this Section shall be audited by28
an independent certified public accountant. The audit of the self-insurer's financial29
statements shall be conducted in accordance with generally accepted auditing30 SB NO. 644 ENROLLED
Page 8 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
standards.1
G. Every self-insurer required to file an audited financial report pursuant to2
this Subpart shall require the accountant to make available for review by the3
commissioner, the work papers workpapers prepared in the conduct of his audit.4
The self-insurer shall require that the accountant retain the audit work papers5
workpapers or a period of not less than five years after the period reported thereon.6
H. In the conduct of the aforementioned review by the commissioner,7
photocopies of pertinent audit work papers workpapers may be made and retained8
by the department. Such working papers workpapers or copies thereof obtained by9
the commissioner shall be confidential and shall not constitute a public record. The10
work papers workpapers of a certified public accountant subject to maintenance and11
audit pursuant to this Section shall nonetheless remain the property of the certified12
public accountant.13
* * *14
§462. Examination by commissioner15
* * *16
H. In lieu of an examination under this Section of any foreign17
self-insurer licensed in this state, the commissioner may accept an examination18
report on the self-insurer as prepared by the department for the self-insurer's19
state of domicile if the insurance department was, at the time of the20
examination, accredited under the National Association of Insurance21
Commissioners' Financial Regulation Standards and Accreditation Program22
and the examination is performed under the supervision of an accredited state23
insurance department, or with the participation of one or more examiners who24
are employed by that accredited state insurance department, and who, after a25
review of the examination workpapers and report, state under oath that the26
examination was performed in a manner consistent with the standards and27
procedures required by their state insurance department.28
§463. Annual reports; actuarial opinions29
A. Each self-insurer shall file on or before the first day of March of each year30 SB NO. 644 ENROLLED
Page 9 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
an annual auditor's statement and an annual report signed by the person in charge of1
the self-insurance plan which shall certify the amount of gross annual premiums or2
contributions of the participating employers and their employees for the preceding3
year, the financial condition of the plan, an itemization of plan expenditures, and any4
other information as may be required by the commissioner.5
B. A. Any plan established or maintained in the state to offer or provide6
health care services, indemnification, or payment for health care services, or health7
and accident benefits to employees under the provisions of the Employee Retirement8
Income Security Act of 1974 (29 U.S.C. §1001 et seq.) shall file, through the9
administrator or his designee, within two hundred ten days after the close of such10
year a certified copy of the annual report required pursuant to 29 U.S.C. §1023 with11
the commissioner. The filing required herein shall in no way purport to regulate or12
affect the plan or its benefits.13
B.(1) Each self-insurer shall file, within ninety days of the end of the14
fiscal year, an actuarial opinion prepared and certified by an actuary who meets15
the following requirements:16
(a) The actuary is not an employee of the self-insurer.17
(b) The actuary is a fellow of the Society of Actuaries, a member of the18
American Academy of Actuaries, or an enrolled actuary under the Employee19
Retirement Income Security Act of 1974 (29 U.S.C. §1001 et seq.).20
(2) The actuarial opinion required under this Subsection shall include21
the following items:22
(a) A description of the actuarial soundness of the self-insurer, including23
any actions recommended to improve the actuarial soundness of the24
arrangement.25
(b) The amount of reserves recommended to be maintained by the26
arrangement.27
(c) The level of specific and aggregate stop-loss insurance recommended28
to be maintained by the arrangement.29
C. (1) Reserves required by this Section shall be computed with proper30 SB NO. 644 ENROLLED
Page 10 of 10
Coding: Words which are struck through are deletions from existing law;
words in boldface type and underscored are additions.
actuarial regard for the following items:1
(a) Known claims, paid and outstanding.2
(b) A history of incurred but not reported claims.3
(c) Claims handling expenses.4
(d) Unearned premium.5
(e) An estimate for bad debts.6
(f) A trend factor.7
(g) A margin for error.8
(2) Reserves required by this Section shall be maintained in cash, cash9
equivalents, or bonds or evidences of indebtedness which are direct general10
obligations or which are secured or guaranteed as to principal and interest by11
the government of the United States, or any state of the United States.12
* * *13
Section 2. R.S. 22:454(C) and (D) and 461(I) are hereby repealed.14
Section 3. This Act shall become effective upon signature by the governor or, if not15
signed by the governor, upon expiration of the time for bills to become law without signature16
by the governor, as provided by Article III, Section 18 of the Constitution of Louisiana. If17
vetoed by the governor and subsequently approved by the legislature, this Act shall become18
effective on the day following such approval.19
PRESIDENT OF THE SENATE
SPEAKER OF THE HOUSE OF REPRESENTATIVES
GOVERNOR OF THE STATE OF LOUISIANA
APPROVED: