HF 1410

as introduced - 87th Legislature (2011 - 2012) Posted on 04/07/2011 11:49am

A bill for an act
relating to insurance; permitting workers compensation self-insurance groups
to substitute an insurance policy for a security deposit to ensure payment of
claims; amending Minnesota Statutes 2010, sections 79A.06, subdivision 5;
79A.24, by adding subdivisions.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA:

Section 1.

Minnesota Statutes 2010, section 79A.06, subdivision 5, is amended to read:

Subd. 5.

Private employers who have ceased to be self-insured.

(a) Private
employers who have ceased to be private self-insurers shall discharge their continuing
obligations to secure the payment of compensation which is accrued during the period of
self-insurance, for purposes of Laws 1988, chapter 674, sections 1 to 21, by compliance
with all of the following obligations of current certificate holders:

(1) Filing reports with the commissioner to carry out the requirements of this chapter;

(2) Depositing and maintaining a security deposit for accrued liability for the
payment of any compensation which may become due, pursuant to chapter 176. However,
if a private employer who has ceased to be a private self-insurer purchases an insurance
policy from an insurer authorized to transact workers' compensation insurance in this state
which provides coverage of all claims for compensation arising out of injuries occurring
during the entire period the employer was self-insured, whether or not reported during
that period, the policy will:

(i) discharge the obligation of the employer to maintain a security deposit for the
payment of the claims covered under the policy;

(ii) discharge any obligation which the self-insurers' security fund has or may have
for payment of all claims for compensation arising out of injuries occurring during the
period the employer was self-insured, whether or not reported during that period; and

(iii) discharge the obligations of the employer to pay any future assessments to
the self-insurers' security fund; provided, however, that a member that terminates its
self-insurance authority on or after August 1, 2010, shall be liable for an assessment under
paragraph (b). The actuarial opinion shall not take into consideration any transfer of the
member's liabilities to an insurance policy if the member obtains a replacement policy as
described in this subdivision within one year of the date of terminating its self-insurance.

A private employer who has ceased to be a private self-insurer may instead buy an
insurance policy described above, except that it covers only a portion of the period of time
during which the private employer was self-insured; purchase of such a policy discharges
any obligation that the self-insurers' security fund has or may have for payment of all
claims for compensation arising out of injuries occurring during the period for which the
policy provides coverage, whether or not reported during that period.

A policy described in this clause may not be issued by an insurer unless it has
previously been approved as to new text begin the insurer, new text end form new text begin , new text end and substance by the commissioner; and

(3) Paying within 30 days all assessments of which notice is sent by the security
fund, for a period of seven years from the last day its certificate of self-insurance was in
effect. Thereafter, the private employer who has ceased to be a private self-insurer may
either: (i) continue to pay within 30 days all assessments of which notice is sent by the
security fund until it has no incurred liabilities for the payment of compensation arising
out of injuries during the period of self-insurance; or (ii) pay the security fund a cash
payment equal to four percent of the net present value of all remaining incurred liabilities
for the payment of compensation under sections 176.101 and 176.111 as certified by a
member of the casualty actuarial society. Assessments shall be based on the benefits paid
by the employer during the calendar year immediately preceding the calendar year in
which the employer's right to self-insure is terminated or withdrawn.

(b) With respect to a self-insurer who terminates its self-insurance authority after
April 1, 1998, that member shall obtain and file with the commissioner an actuarial
opinion of its outstanding liabilities as determined by an associate or fellow of the
Casualty Actuarial Society within 120 days of the date of its termination. If the actuarial
opinion is not timely filed, the self-insurers' security fund may, at its discretion, engage
the services of an actuary for this purpose. The expense of this actuarial opinion must be
assessed against and be the obligation of the self-insurer. The commissioner may issue
a certificate of default against the self-insurer for failure to pay this assessment to the
self-insurers' security fund as provided by section 79A.04, subdivision 9. The opinion
may discount liabilities up to four percent per annum to net present value. Within 60 days
after notification of approval of the actuarial opinion by the commissioner, the exiting
member shall pay to the security fund an amount determined as follows: a percentage will
be determined by dividing the security fund's members' deficit as determined by the most
recent audited financial statement of the security fund by the total actuarial liability of all
members of the security fund as calculated by the commissioner within 30 days of the
exit date of the member. This quotient will then be multiplied by that exiting member's
total future liability as contained in the exiting member's actuarial opinion. If the payment
is not made within 30 days of the notification, interest on it at the rate prescribed by
section 549.09 must be paid by the former member to the security fund until the principal
amount is paid in full.

(c) A former member who terminated its self-insurance authority before April 1,
1998, who has paid assessments to the self-insurers' security fund for seven years, and
whose annualized assessment is $15,000 or less, may buy out of its outstanding liabilities
to the self-insurers' security fund by an amount calculated as follows: 1.35 multiplied by
the indemnity case reserves at the time of the calculation, multiplied by the then current
self-insurers' security fund annualized assessment rate.

(d) A former member who terminated its self-insurance authority before April 1,
1998, and who is paying assessments within the first seven years after ceasing to be
self-insured under paragraph (a), clause (3), may elect to buy out its outstanding liabilities
to the self-insurers' security fund by obtaining and filing with the commissioner an
actuarial opinion of its outstanding liabilities as determined by an associate or fellow of
the Casualty Actuarial Society. The opinion must separate liability for indemnity benefits
from liability for medical benefits, and must discount each up to four percent per annum to
net present value. Within 30 days after notification of approval of the actuarial opinion
by the commissioner, the member shall pay to the security fund an amount equal to 120
percent of that discounted outstanding indemnity liability, multiplied by the greater of the
average annualized assessment rate since inception of the security fund or the annual rate
at the time of the most recent assessment.

(e) A former member who has paid the security fund according to paragraphs (b) to
(d) and subsequently receives authority from the commissioner to again self-insure shall be
assessed under section 79A.12, subdivision 2, only on indemnity benefits paid on injuries
that occurred after the former member received authority to self-insure again; provided
that the member furnishes verified data regarding those benefits to the security fund.

(f) In addition to proceedings to establish liabilities and penalties otherwise
provided, a failure to comply may be the subject of a proceeding before the commissioner.
An appeal from the commissioner's determination may be taken pursuant to the contested
case procedures of chapter 14 within 30 days of the commissioner's written determination.

Any current or past member of the self-insurers' security fund is subject to service of
process on any claim arising out of chapter 176 or this chapter in the manner provided by
section 5.25, or as otherwise provided by law. The issuance of a certificate to self-insure
to the private self-insured employer shall be deemed to be the agreement that any process
which is served in accordance with this section shall be of the same legal force and effect
as if served personally within this state.

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 2.

Minnesota Statutes 2010, section 79A.24, is amended by adding a subdivision
to read:

new text begin Subd. 5. new text end

new text begin Purchase of insurance policy from an authorized insurer. new text end

new text begin A commercial
self-insurance group may purchase an insurance policy from an insurer authorized to
transact workers' compensation insurance in this state which provides coverage of all
claims for compensation arising out of injuries occurring during the entire period or during
a portion of the period of time in which the commercial self-insurance group has been
in existence. While the insurance policy remains in effect, it discharges the obligation
of the commercial self-insurance group to maintain a security deposit for the claims
covered under the policy. A policy described in this subdivision may not be issued by an
insurer unless it has previously been approved as to the insurer, form, and substance by
the commissioner.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end

Sec. 3.

Minnesota Statutes 2010, section 79A.24, is amended by adding a subdivision
to read:

new text begin Subd. 6. new text end

new text begin Insolvency of a commercial self-insurance group insurer. new text end

new text begin In the event
of the insolvency of the insurer that issued a policy under subdivision 5 to a commercial
self-insurance group, eligibility for chapter 60C coverage under the policy is determined
by applying the requirements of section 60C.09, subdivision 2, clause (3), to each
commercial self-insurance group member separately, rather than to the net worth of the
commercial self-insurance group entity or aggregate net worth of all members of the
commercial self-insurance group.
new text end

new text begin EFFECTIVE DATE. new text end

new text begin This section is effective the day following final enactment.
new text end