Judges: ROBERT E. MEALE
Agency: Department of Financial Services
Latest Update: Jun. 01, 1988
Summary: $5000 fine and cease and desist order for failure of Multiple Employer Welfare Arrangement to hold certificate authority.
87-5429STATE OF FLORIDA
DIVISION OF ADMINISTRATIVE HEARINGS
DEPARTMENT OF INSURANCE )
AND TREASURER, )
)
Petitioner, )
)
vs. ) CASE NO. 87-5429
) ALARM ASSOCIATION OF FLORIDA, ) INC., HEALTH AND WELFARE )
BENEFIT PLAN, )
)
Respondent. )
)
RECOMMENDED ORDER
Pursuant to notice, final hearing in the above-styled case was held on April 11, 1988, in Orlando, Florida, before Robert E. Meale, Hearing Officer of the Division of Administrative Hearings.
The representatives of the parties were as follows: For Petitioner: R. Terry Butler, Esquire
Department of Insurance
413-B Larson Building Tallahassee, Florida 32399-8300
For Respondent: Geoffrey B. Dobson, Esquire
Meredith & Dobson, P.A.
77 Bridge Street
St. Augustine, Florida 32804-1957 BACKGROUND
On November 6, 1987, Petitioner filed an Immediate Final Order against Respondent alleging that, inter alia, it was operating in violation of the Florida Nonprofit Multiple Employer Welfare Arrangement Act, Sections 624.436- 624.44, Florida Statutes. Respondent was ordered to cease and desist and pay a
$10,000 administrative fine.
On November 30, 1987, Respondent served a Petition far Formal Proceedings Before the Division of Administrative Hearings. In it, Respondent requested a formal hearing on disputed questions of fact.
At the hearing, Petitioner presented one witness and 11 exhibits, and Respondent presented one witness and three exhibits. All exhibits have been admitted.
The transcript was filed on April 27, 1988. Both parties filed proposed findings of fact. Treatment accorded the proposed findings is set forth in the Appendix.
FINDINGS OF FACT
The Alarm Association of Florida, Inc. ("Association") is a trade association that was incorporated on July 12, 1976, as a Florida not-for-profit corporation.
The Association was organized to provide an opportunity for its members to exchange ideas and share information concerning trade practices, business conditions, technical developments, and related subjects concerning the electrical protection industry.
The Association has two primary types of membership. Regular Membership is open to any individual, partnership, firm, or corporation engaged in the business of installing or providing alarm service in the electrical protection field for one year preceding the application. Associate Membership is open to any individual, partnership, firm, or corporation that is not engaged directly in the electrical protection business, but may supply goods or services to Regular Members. Officers and directors of the Association are selected by the voting members, which are limited to Regular Members. About 25 percent of the Association membership consists of nonvoting members.
Sometime prior to November 1, 1985, a representative or representatives of the Association requested Dealers Association Plan ("DAP") to make a presentation concerning an employee benefit plan that the Association was considering establishing. The Association had previously formed a committee to investigate the feasibility of sponsoring such a plan, which its members could join.
DAP is licensed in Florida to administer self-insured and insured health insurance programs, including the type in which the Association was interested.
The Association thereafter decided to sponsor an employee benefit plan and use DAP as the plan administrator. DAP prepared or caused to be prepared the necessary documents. These documents included a trust agreement between Ronald D. LaFontaine, John Black, Robert Neely, Robert Adams, and Terry Akins, as trustees ("Trustees"), and the Association ("Trust," or "Trust Agreement"); the Alarm Association of Florida Health and Welfare Benefit Plan ("Plan"); and the Administrator Agreement between the Association and DAP. Each document was executed and delivered on November 1, 1985.
The Trust Agreement states that the Trust was to be funded by the contributions made by the members of the Plan and the Trust funds would be maintained as a reserve against claims by Plan participants. The Trust Agreement provides that the Association may remove a Trustee at anytime and replace a Trustee who has resigned or been removed.
The Trust Agreement states that the Plan Administrator, which was designated as DAP, shall administer the day-to-day operations of the Trust, including the payment of claims, providing of "consulting and actuarial services necessary for the continuing successful operation of the Plan," and establishment of procedures for "Employee Contributions." "Employees" are "all qualified members of the Association and their employees." The Administrator Agreement, which is authorized by the Trust Agreement, provides that DAP could use the Trust funds to review and pay claims and pay premiums on policies purchased by the Plan or Trustees. The Administrator Agreement authorizes DAP
to negotiate and purchase reinsurance contracts to provide stop-loss coverage or avoid catastrophic losses, as well as spread the risk of excessive claims. The Administrator Agreement states that DAP is to receive 20 percent of the monthly contributions as its administrative fee.
The Plan provides a detailed statement of the available benefits and various administrative matters, including claim procedures. In general, the Plan covers a wide range of medical, accident, and dental expenses.
In capital letters on the first page, the Plan states:
This is a self-funded, trade association member employee benefit plan established under Public Law 93-406 [Employee Retirement Income Security Act ("ERISA")], available only to qualified participating employers and their qualified employee participants. It is not available for individual coverage.
The Trust Agreement likewise states that it "shall be interpreted in a manner consistent with its being ... a Welfare Benefit Plan pursuant to ... ERISA..."
Each Association member enrolled in the Plan makes a monthly contribution, which is paid to DAP. The contribution is equal to the number of employees of the enrollee who have elected to participate in the Plan multiplied by the contribution rate. The Trustees set the contribution rate based upon the advice of DAP. On at least one occasion, the Trustees increased the rate upon the advice of DAP. At all times, the Trustees and DAP have intended to keep the Plan and Trust actuarially sound.
DAP uses the contributions to pay claims that it has received. As long as DAP has determined that the claims are valid, the Trustees do not review the claims. The Trustees consider a claim only when a participant appeals a rejected claim. DAP uses the contributions to pay itself its 20 percent administrative fee. DAP pays any remaining funds to the Trustees, who hold such funds in the Trust as reserves against future claims.
The Trust is liable for all claims. If the valid claims presented to DAP exceed the contributions received for that month, the Trust provides the difference. However, the Trustees have reinsurance under which third-party insurers are liable to pay any claim in excess of $25,000, but not more than
$1,000,000.
Since the Plan has been adopted, DAP and the Association have solicited enrollees. The most important source of solicitation has been by direct mail, for which DAP is responsible. In the case of new enrollees that are not already members of the Association, DAP may take a Plan application and Association membership application at the same time.
In April, 1988, the Association comprised 425-450 members. A couple of years ago, the Association had only about 65 members. About 85 members have enrolled in the Plan. These enrollees are all employers. About 300 employees participate in the Plan. All of these employees are employed by enrolled employers.
The record fails to disclose whether all of the enrollees are voting members of the Association. Petitioner's Exhibit Number 5 lists the names of the enrollees. It appears from the names of the businesses that all, or nearly all, of them qualify for voting membership in the Association.
The Plan has never obtained a certificate of authority from Petitioner, pursuant to the Act, to operate the Plan. The Plan, the Association, and DAP have never attempted to comply with any provision of the Act, based on the position that ERISA preempts all or part of the Act.
The Plan is not fully insured and has no exemption from the Secretary of Labor, as these terms are discussed below.
CONCLUSIONS OF LAW
I. State Law
The Division of Administrative Hearings has jurisdiction over the subject matter and the parties, subject to resolution of the ERISA preemption issue presented below. Section 120.57(1), Florida Statutes.
The Florida Nonprofit Multiple-Employer Welfare Arrangement Act (the "ACT") requires that a multiple-employer welfare arrangement" ("MEWA") obtain a certificate of approval from Petitioner before operating in Florida. Sections 624.436-624.44, Florida Statutes. A MEWA is an "employee welfare benefit plan or any other arrangement which is established or maintained for the purpose of offering or providing health insurance benefits ... to the employees of two or more employers ..." Section 624.437(1), Florida Statutes.
Numerous requirements must be met for a MEWA to obtain a certificate of approval. Section 624.438, Florida Statutes. One such requirement is that the MEWA be operated in accordance with sound actuarial principles. Section 624.438(1)(e), Florida Statutes. Additionally, each MEWA must establish and maintain appropriate loss reserves determined in accordance with sound actuarial principles. Section 624.438(4), Florida Statutes.
An ongoing requirement imposed upon each MEWA is that it must annually deposit with Petitioner cash, securities, or a surety bond in an amount equal to
25 percent of the preceding 12 months' health care claims expenditures or 5 percent of gross annual premiums for the succeeding year, whichever is greater, but in any event not more than $100,000. Section 624.441, Florida Statutes.
For each violation, Petitioner may impose an administrative fine of not less than $5000 or more than $10,000 against any person operating or maintaining a MEWA without a subsisting certificate of approval from Petitioner. Section 624.437(4)(a), Florida Statutes. Petitioner may also enter a cease and desist order against such persons. Section 624.437(4)(b), Florida Statutes.
The burden of proof is on the party with the affirmative of the issue. Florida Department of Transportation v. J. W. C. Company, Inc., 396 So.2d 778 (Fla. 1st DCA 1981).
The burden of proof as to an affirmative defense rests upon the party asserting it. Hough v. Menses, 95 So.2d 410 (Fla. 1957). However, the preemption defense raised by Respondent pertains to subject matter jurisdiction and is not merely an affirmative defense or statutory exception. The defense of subject matter jurisdiction may be raised aid any time, unlike an affirmative
defense, which may be waived if not timely made. See e.g., Wooten v. Collins,
327 So.2d 795 (Fla. 3rd DCA 1976). The burden rests on Petitioner to show that the jurisdiction exists for the present proceeding. Id. (defendant's claim that plaintiff failed to satisfy threshold requirements of Florida No Fault Insurance Act not an affirmative defense; plaintiff has burden of proving that he satisfies all jurisdictional requirements). Contra Matthew 25 Ministries, Inc.
v. Corcoran, 771 F.2d 21 (2d Cir. 1985) and Baucom v. Pilot Life Insurance Company, 674 F. Supp. 1175 (M.D.N.C. 1987)(burden of proof on party seeking ERISA jurisdiction).
Petitioner therefore has the burden of proving that enforcement of the Act against Respondent would not violate the preemption provisions of ERISA, which are discussed below.
FEDERAL LAW
The Plan Is An Employee Welfare Benefit Plan Within The Meaning Of ERISA
The first substantive issue is whether the Plan is covered by ERISA. If it is, it is necessary to consider the extent to which ERISA may preempt the Act in this case. If the Plan is not covered by ERISA, the Act applies to the Plan without question. For the reasons set forth below, Petitioner has failed to prove that the Plan is not covered by ERISA.
ERISA applies to "employee benefit plans." 29 U.S.C. Section 1003(1). Consequently, the general ERISA preemption provision reaches only "employee benefit plans." 29 U.S.C. Section 1144(a).
As relevant to this case, an employee benefit plan is an "employee welfare benefit plan" ("EWBP"). An EWBP is: a) any plan, fund, or program; b) established or maintained by an "employer," "employee organization" (e.g., trade union), or both, to provide for the plan "participants"; c) medical, surgical, or hospital care or benefits, or benefits in the event of sickness, accident, disability, death, or unemployment. 29 U.S.C. Section 1002(1).
The Plan is a plan, fund, or program providing benefits of the type described above. Its classification as an EWBP, and thus ERISA-covered "employee benefit plan," is dependent upon whether it has been established or maintained by an "employer" for its "participants." The Plan has not been established or maintained by a labor union or other employee organization.
An "employer" is not only "any person acting directly as an employer," but also any person acting "indirectly in the interest of an employer, in relation to an employee benefit plan, including a group or association of employers acting for an employer in such capacity." 29 U.S.C. Section 1002(5). A "participant" is any "employee or former employee of an employer, or any member or former member of an employee organization," who enjoys benefits from a plan covering employees of such employer or members of such employee organization. 29 U.S.C. Section 1002(7).
ERISA regulates the retirement income (and welfare benefits) of "employees." In the presence of an employer-employee or union-member relationship, ERISA governs because the welfare benefits bear a closer resemblance to compensation paid to an employee than to insurance provided to an insured. ERISA may preempt state law when the participant's status as an employee or union member, together with ERISA, will adequately protect the
participant's interest in his or her benefits. If there is little if any relationship between the participant and the plan sponsor, the benefits to which he or she may be entitled will not be protected by any employment or union member status. Such benefits no longer resemble compensation, but are really insurance benefits, which require the more comprehensive regulation provided by state laws.
In Wisconsin Education Association Insurance Trust v. Iowa State Board of Public Instruction, 804 F.2d 1059 (8th Cir. 1986), the Wisconsin Education Association Insurance Trust, which was a group insurance trust maintained by several labor unions, failed to qualify as an EWBP. The trust provided coverage to members of the sponsoring unions and nonmembers who were employees of school districts with collective bargaining agreements with one of the sponsors.
Thirty percent of the participants receiving benefits were nonmembers. The court held that ERISA did not preempt Iowa law because the trust was not an EWBP.
The definition of an EWBP is grounded on the premise that the entity that maintains the plan and the individuals that benefit from the plan are tied by a common economic or representation interest, unrelated to the provision of benefits.
(Emphasis supplied.) Id. at 1063.
Because the case involved sponsors that were unions, not employers, the court considered whether the union sponsors and participants had a common representation interest, unrelated to the provision of benefits. Finding none, the court stated:
The only relationship between the sponsoring labor union and these non-member recipients stems from the benefit plan itself. Such a relationship is similar to the relationship between a private insurance company, which is subject to myriad state insurance regu- lations, and the beneficiaries of a group insurance plan.
Id. Citing legislative history, the court concluded that "where a 'plan' is, in effect, an entrepreneurial venture, it is outside the policy of [ERISA preemption]." Id. citing H. R. Rep. No. 1785, 94th Cong., 2d Sess. 48 (1977).
Another court has noted similarly:
The gist of ERISA's definitions of employer, employee organization, participant, and beneficiary is that a plan ... falls within the ambit
of ERISA only if the plan ...
covers ERISA participants because of their employee status in an employment relationship, and an employer or employee organization is the person that establishes or maintains the
plan ...
Donovan v. Dillingham, 688 F.2d 1367, 1371 (11th Cir. 1982)(en banc).
In Bell v. Employee Security Benefit Association, 437 F.Supp. 382 (D. Kan. 1977), the court held that ERISA did not preempt state insurance laws. The employers sponsoring the plan had no voice in its management; thus, the plan was established and maintained by a third-party entrepreneur, not an employer or union. The court also noted that the plan involved solicitation and was commercial in nature. Marketing and administering the plan was profitable for the insurance agency and the plan administrator--the latter receiving 22 percent of all premiums. The plan was intended to be actuarially sound, which is uncharacteristic of most forms of mere compensation.
The Plan satisfies the requirement that it be sponsored by an "employer--i.e., the Association--for "participants" --i.e., the employees of the employers who have enrolled in the Plan.
The Plan documents limit enrollment in the Plan to employers who are members of the Association. The Plan is clear in this regard. The Trust Agreement is less clear, but may be interpreted consistent with the Plan. The Trust language pertaining to "Employee Contributions," when read together with the Plan, means contributions on behalf of employees and does not imply that employees may enroll. In practice, the Plan has been administered in a manner consistent with this interpretation because the only enrollees are employers.
It is not clear whether all of the enrollees are voting members of the Association. If they are not, the Plan is not an EWBP. Although all of the enrollees may have been qualified for membership, the requirement is that they are voting members, not that they could be. However, the burden of proving the existence of nonvoting enrollees is upon Petitioner, and this burden has not been met.
The employees who participate in the Plan satisfy the definition of "participants." The participating employees are employed by enrolled employers. It is irrelevant that they are not employed by the Association, which is the "employer" in fact sponsoring the Plan. There is no authority for giving an unnatural reading to the statute and limiting participants in a plan sponsored by a trade association to employees of the Association, and not its employer members.
Petitioner argues that the Association and Trustees have relinquished control over the Plan to DAP and thus the Plan is no longer sponsored by an employer for its employees. In theory, DAP could have de facto control of the Plan, even though the Plan documents vested ultimate control in the Association. However, evidence of de facto control must overcome the evidence that the Association has ultimate control of the Plan and all of the enrollees in the Plan are voting employer members of the Association.
Petitioner's evidence fails to establish a de facto transfer of control. DAP supplied the Plan documents and then administered the Plan for a fee while DAP and the Trustees sought to make the Plan actuarially sound. Although these facts are consistent with a transfer of control, they are more suggestive of the Trustees' prudence in discharging their fiduciary duties. As the Plan increased in size, the administrative complexity and claims exposure increased correspondingly.
The latitude extended DAP in soliciting enrollees in the Plan and members of the Association is evidence of the commercialization of the Plan so as to suggest the presence of insurance rather than an employee benefit plan. This evidence is outweighed by the above-cited factors, as well as the critical fact that, notwithstanding DAP's solicitation activities, the Association does not appear to be a subterfuge or mere vehicle to provide a group insurance program. The Association predated the Plan by nine years. The record does not permit an inference that the recent surge in Association membership was due solely to the availability of the Plan. In summary, Petitioner failed to produce sufficient evidence to overcome the most important facts--that all enrollees were employers which were voting members of the Association, and, thus, the Association controlled the Plan.
The Entire Act Is Not Preempted By ERISA
Because the Plan is an EWBP, Petitioner must, in establishing its jurisdiction to enforce the Act, show that the Act has not been preempted by ERISA. For the reasons set forth below, portions of the Act that Petitioner seeks to enforce have not been preempted.
As originally enacted, ERISA contained a complex series of preemption provisions. 29 U.S.C. Section 1144(a) and (b)(2)(A) and (B). In 1982, Congress enacted new preemption provisions as to MEWA's. The new provisions override the original broad preemption provisions and preempt less state law. 29 U.S.C. Section 1144(b)(6). The new provisions save the Act from preemption. It is thus unnecessary to consider whether the Act would have been preempted under the original preemption provisions.
The new law, which was part of Public Law 97-473, defines a MEWA in the same language as does the Act. The new law divided MEWA's into two types: MEWA's that are fully insured or granted exemptions from the Secretary of Labor ("Insured MEWA's") and all other MEWA's ("Noninsured MEWA's").
Insured MEWA's are subject to:
[a]ny law of any State which regulates insurance ... to the extent that such law provides ... standards, requiring the maintenance of specified levels of reserves and specified levels of contri- butions, which any such plan or ... trust ... must meet in order to be considered under such law able to pay benefits in full when due, and ... provisions to enforce such standards.
29 U.S.C. Section 1144(b)(6)(A)(i).
Noninsured MEWA's are subject to "any law of any State which regulates insurance ... to the extent not inconsistent with [29 U.S.C. Sections 1001- 1143]." 29 U.S.C. Section 1144(B)(6)(A)(ii).
The Plan is a MEWA. Respondent's argument that the Plan is not a MEWA is untimely and unpersuasive. In its Petition for Formal Proceedings Before the Division of Administrative Hearings filed on December 9, 1987, and Respondent's Response to Order Directing Prehearing Stipulation at paragraphs E and F filed
at the beginning of the final hearing, Respondent conceded that the Plan was a MEWA. It is too late to make a contrary argument.
In any event, Respondent's argument that a single trade association representing multiple employers fails to satisfy the MEWA requirement of "two or more employers" is not persuasive. Respondent argues that the employer members of the association be ignored when determining whether there are two or more "employers"--i.e., trade associations. However, the multiple-employer requirement is satisfied by the employer members of the Association. A contrary result would in any event mean that the Plan is not an EWBP because the participating employees are not employers of the sponsoring "employer"--i.e., the Association. For the same reasons that the participating employees may be employees of the employer enrollees, and are not limited to employees of the sponsoring association, so may the multiple-employer requirement be satisfied by the presence of two or more employer enrollees, which are members of the sponsoring association.
Because the Plan is neither fully insured nor exempted by the Secretary of Labor, it is a Noninsured MEWA. Two sources are useful in interpreting the preemption language of 29 U.S.C. Section 1144(b)(6)(A)(ii).
First, the scope of Section 1144(b)(6)(A)(ii) may be inferred from the scope of Section 1144(b)(6)(A)(i). The subsection applicable to Insured MEWA's preempts more state law because MEWA's in this category are either fully insured or have been reviewed and exempted by the Secretary. As such, they are less in need of state regulation because they pose less risk of insolvency than Noninsured MEWA's. Thus, the state insurance law remaining after the application of the preemption provision in Section 1144(b)(6)(A)(i) surely remains after the application of the preemption provision in Section 1144(b)(6)(A)(ii), which controls less-favored Noninsured MEWA's.
Also, Congress makes it clear in Section 1144(b)(6)(A)(i) that state law "regulating insurance" includes standards setting reserves and contribution rates, as well as provisions enforcing such standards. Moreover, the language of Section 1144(b)(6)(A)(i) referring to "contributions" instead of "premiums" means that state law "regulating insurance" reaches EWBP's, such as the Plan, and not just insurance contracts or policies. Insurance policies are funded by "premiums"; EWBP's are funded by "contributions."
Second, the scope of Section 1144((b)(6)(A)(ii) may be inferred from the legislative history of Public Law 97-473. Congress intended that the MEWA amendments to ERISA solve a serious problem confronting the private employee benefit plan industry. Respondent's restrictive interpretation of the statutory language would defeat the legislative intent, as expressed in the following passage:
... Many of you are aware of the serious problems caused by the failure of certain health insurance trusts
(also called multiple employer insurance trusts or MET's) to pay beneficiaries claims.
Although ... ERISA was enacted to protect workers, some individuals have used ERISA as a smoke screen to conceal fraudulent activities.
These individuals approach employers,
particularly small businesses, offering
a cheaper alternative to traditional group health insurance coverage.
They set up trusts which they administer themselves to provide health coverage. But unlike licensed insurance carriers, they often fail to comply with the basic solvency controls which each state establishes to protect health care consumers.
When the State tries to enforce these controls, the trusts claim to be beyond the reach of State law because they are "employee benefit plans" covered by Federal law.
But by the time the U.S. Department of Labor decides if Federal law applies,
the individuals who established the bogus insurance ventures have long since departed with the money and workers are left without any means of covering their unpaid legal bills.
[29 U.S.C. Section 1144(b)(6)(A)] clari- fies and strengthens the ability of the States to protect their citizens from
such unscrupulous individuals by giving the State clear authority to establish and enforce standards for MET's.
Health insurance is of critical importance to workers and their families. The average worker is clearly unable to meet spiraling medical costs without that protection.
Both of the premium payers (employers, as well as employees) are entitled to rely on the fact that the health insurance which they have purchased
will be there when it is needed.
If problems in delivery of health insurance arise, the States must be able to step in immediately to protect consumers.
128 Cong. Rec. H9609 (1982)(remarks of Rep. Burton).
Congress intended that the scope of permitted state regulation of MEWA's be broad, so as to permit timely elimination of perceived abuses.
[T]he amendment removes any potential obstacle that might exist under current law which could hinder the ability of the States to regulate [MEWA's] to assure the financial soundness and timely payment of benefits under such arrangements.
128 Cong. Rec. H9610 (1982)(remarks of Rep. Erlenborn).
The Supreme Court has twice considered the meaning of the phrase, "any law of any State which regulates insurance," in the context of one of the originally enacted preemption provisions, which is known as the "saving" clause. This clause establishes an exception to the general ERISA preemption provision, so that a state law within the saving clause is "saved" from preemption. In Metropolitan Life Insurance Company v. Massachusetts, 471 U.S. 724, 105 S.Ct. 2380, 85 L.Ed.2d 728 (1985), the Court held that the language of the saving clause reached a state statute mandating certain minimum benefits in insurance contracts. Thus, the state law could require the inclusion of such coverage in insurance policies sold to EWBP's, although not to the plans themselves. In Pilot Life Insurance Company v. Dedeaux, U.S. , 107 S.Ct. 1549, 95 L.Ed.2d 39 (1987), the Court held that the language of the saving clause did not reach a state law of bad faith or tortious breach of contract so as to "save" that remedy from ERISA preemption. Thus, the ERISA civil enforcement provisions were preserved as the exclusive means by which a claimant could enforce his or her rights to benefits.
Metropolitan Life and Pilot Life omit mention of Section 1144(b)(6)(A), which evidently did not govern the facts of either case.
Congress of course chose the language in Section 1144(b)(6)(A) before the Court interpreted the identical language of the saving clause. However, the reasoning of the Court in interpreting this language must be noted.
In both cases, the Court first took a "common-sense view" of the statutory language. In Pilot Life, the Court concluded that "regulates" means that the law "must not just have an impact on the insurance industry, but be specifically directed toward that industry." 107 S.Ct. at 1554. In both cases, the Court then interpreted the statutory language in light of decisions interpreting the phrase, "business of insurance," as used in the McCarron- Ferguson Act. 107 S.Ct. at 1553. The Court identified three McCarron-Ferguson criteria that the Act fails to satisfy because it is not directed toward the "business of insurance," but toward a certain class of EWBP's.
As the Court in Pilot Life acknowledged, however, legislative intent overshadows the common-sense view" and McCarron-Ferguson factors. 107 S.Ct. at 1558. In the case of public Law 97-473, the statutory language and legislative intent dictate a result contrary to that suggested by the reasoning in Metropolitan Life and Pilot Life.
Because the Plan is a MEWA and the Act is a state law "regulating insurance," the final issue is whether the Act is a law "not inconsistent" with 29 U.S.C. Section 1001-1143.
EWBP's, such as MEWA's, are not subject to ERISA funding requirements, which are imposed on other types of employee benefit plans. 29 U.S.C. Sections 1081(1). As a general principle, state law requiring minimum funding of EWBP's therefore is not inconsistent with ERISA. Such a conclusion is reinforced by congress expressly subjecting Insured MEWA's to state laws governing reserves and contributions. To allow less-favored Noninsured MEWA's freedom from such state laws would be illogical.
It is unnecessary to determine whether the entire Act satisfies the consistency requirement of Section 1144(b)(6)(a)(ii). It is sufficient if Petitioner shows that Respondent has violated any portion of the Act and such portion of the Act is "not inconsistent" with 29 U.S.C. Sections 1001-1143.
Section 624.438(4), Florida Statutes, requires that each plan must establish and maintain appropriate loss-reserves that are determined in accordance with sound actuarial principles. Section 624.439(7), Florida Statutes, requires that the plan sponsor file with Petitioner, inter alia, satisfactory evidence that the plan will be operated in accordance with sound actuarial principles. These provisions are contemplated by Section 1144(b)(6)(A)(i) and, for the reasons set forth above, are therefore within the scope of Section 1144(b)(6)(A)(ii).
Likewise, the requirement at Section 624.441 that the Plan annually deposit minimum security with Petitioner is also consistent with ERISA, at least as to EWBP's as to which ERISA funding standards are inapplicable. This is precisely the type of state law that Congress intended to remove from preemption in order to preserve the health benefits of participants and curb the abuses that were reported to it.
The above-cited portions of the Act are not preempted by ERISA. The Act's requirement that Respondent obtain a certificate of authority is therefore lawful, and Respondent's failure to obtain a certificate of authority is thus grounds for Petitioner's action in the Immediate Final Order.
RECOMMENDATION
Based on the foregoing, it is recommended that a Final Order be entered finding Respondent guilty of failing to hold a subsisting certificate of authority while operating or maintaining a multiple-employer welfare arrangement, ordering Respondent to cease and desist from writing any new or renewal business and accepting any contributions or premiums from current or prospective enrollees or participants, and imposing an administrative fine against Respondent in the amount of $5000.
ENTERED this 1st day of June, 1988, in Tallahassee, Florida.
ROBERT E. MEALE
Hearing Officer
Division of Administrative Hearings The Oakland Building
2009 Apalachee Parkway
Tallahassee, Florida 32399-1550
(904) 488-9675
Filed with the Clerk of the Division of Administrative Hearings this 1st day of June, 1988.
APPENDIX TO RECOMMENDED ORDER, CASE NO. 87-3046
Treatment Accorded Petitioner's Proposed Findings 1-4. Adopted.
Rejected as unsupported by the evidence. The exhibit
discloses the names of about 85 employers.
Rejected as unsupported by the greater weight of the
evidence. The Plan documents limit enrollees to employers.
Adopted.
Rejected as irrelevant and not a proper finding. The proposed finding goes to the weight of other testimony.
Adopted, except that the second to last sentence is rejected as unsupported by the greater weight of the evidence.
Adopted.
First two lines are rejected as unsupported by the
greater weight of the evidence. The remainder is adopted.
Adopted.
Adopted in substance. 14-18. Adopted.
19. Rejected as irrelevant.
20 and 23. Adopted in substance.
21-22, 24-25. Rejected as irrelevant and, in the case of paragraph 22, legal argument.
Treatment Accorded Respondent's Proposed Findings
All of Respondent's proposed findings are rejected as legal argument, except that paragraph 1 and the first sentence of paragraph 2 are adopted.
COPIES FURNISHED:
R. Terry Butler, Esquire Department of Insurance 413-B Larson Building
Tallahassee, Florida 32399-8300
Geoffrey B. Dobson, Esquire Meredith & Dobson
77 Bridge Street
St. Augustine, Florida 32804-1957
Honorable William Gunter State Treasurer and Insurance Commissioner The Capitol, Plaza Level
Tallahassee, Florida 32399-0300
Don Dowdell General Counsel
Department of Insurance and Treasurer
The Capitol, Plaza Level Tallahassee, Florida 32399-0300
Docket for Case No: 87-005429
Orders for Case No: 87-005429
| Issue Date |
Document |
Summary |
|
Aug. 30, 1988 |
Agency Final Order
|
|
|
Jun. 01, 1988 |
Recommended Order
|
$5000 fine and cease and desist order for failure of Multiple Employer Welfare Arrangement to hold certificate authority.
|
