DEPARTMENT OF CONSUMER AND INDUSTRY SERVICES

INSURANCE BUREAU

EXCESS LOSS INSURANCE FOR MULTIPLE EMPLOYER WELFARE

ARRANGEMENTS (MEWAS)

(By authority conferred on the commissioner of insurance by section 210 of Act No. 218 of the

Public Acts of 1956, as amended, being S500.210 of the Michigan Compiled Laws)

R 500.821 Definitions.

Rule 1. As used in these rules:

(a) "Annual aggregate retention amount or attachment point" for any 1 policy year, or fraction

thereof if the policy terminates during the policy year, means the cumulative total of the number

of covered units each month for which premium has been accepted, multiplied by such covered

units' corresponding monthly aggregate retention amount factor, applied each month, or the

minimum annual aggregate retention amount, whichever is greater.

(b) "Code" means Act No. 218 of the Public Acts of 1956, as amended, being S500.100 et seq.

of the Michigan Compiled Laws.

authorized under chapter 70 of the code. Reference to actions of a plan includes actions by the

plan's designated agents.

(d) "Policy" is the excess insurance policy issued by the insurer to the MEWA which indemnifies

the MEWA for losses incurred under a plan in excess of a specified retention amount.

(e) "Policyholder" means the covered entity to which the policy is issued.

(f) "Policy year" means a 12-consecutive-month period, or fraction thereof, beginning on the

effective date of the policy and ending on the expiration date of the policy.

(g) "Specific retention amount" means the uninsured deductible amount or specific attachment

point specified in the policy; that is, the amount of risk retained by the contract holder per covered

individual in excess of which coverage applies.

History: 1990 AACS.

R 500.822 Maintenance of excess loss insurance policies with specific retention amount;

maintenance of aggregate excess loss insurance; expiration dates of multiple excess loss

insurance policies.

Rule 2. All of the following requirements are applicable to a MEWA which seeks authorization

in this state or which has authorization to operate in this state:

(a) A MEWA shall submit, for approval by the commissioner, a policy or policies of specific

excess loss insurance, as required by section 7011(c) of the code.

(b) Except as provided in subdivision (c) of this rule, a MEWA shall demonstrate to the

commissioner that the proposed specific retention amount would not be detrimental to the solvency

and stability of the MEWA, considering the plan's past and expected experience, size, reserves,

contribution rates, and proposed excess rates.

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not more than $25,000.00 shall not be required to meet the requirements set forth in subdivision

(b) of this rule.

(d) A MEWA shall not change the retention level for a specific excess policy without the prior

written approval of the insurance commissioner.

(e) A MEWA shall not be required to purchase an aggregate excess loss policy unless the

commissioner determines that coverage is necessary. The determination shall be based upon the

financial solvency and stability of the MEWA, considering the plan's past and expected experience,

size, reserves, expenses, and contribution rates. An aggregate excess loss policy purchased by a

MEWA shall provide for the insurer to assume all liability in excess of an annual aggregate

attachment point.

(f) If more than 1 excess loss insurance policy is obtained in fulfillment of the excess loss

requirements, the policy expiration dates shall be the same.

History: 1990 AACS.

R 500.823 Excess loss policy provisions; minimum requirements.

Rule 3. Excess loss policies issued to a MEWA in this state for the purposes of section 7040(1)(c)

of the code shall be in compliance with all of the following requirements:

(a) All specific excess loss policies shall provide for the insurer to indemnify the MEWA for all

losses in excess of a specified amount per covered person, per year, for all medical, surgical,

hospital care, accident, disability, or death benefits the MEWA offers.

(b) The specific excess loss insurance policy may be in the form of incurred basis stop-loss

insurance or paid basis stop-loss insurance. Plans using paid basis stop-loss insurance shall provide

for the liability in excess of the specified amount of losses incurred while the paid basis stop-loss

insurance was in force, but paid after its termination or nonrenewal. The reporting period under

paid basis insurance shall be not less than 3 months after the MEWA year conclusion. An expense

will be considered to be incurred by the policyholder at the time service has been rendered or the

service to which it relates is provided. Incurred losses include both reported and unreported losses.

"Paid losses" means the total amount of money actually paid for benefits for which eligible

employees and dependents who are covered under the employee benefit plan become entitled

under the plan.

any cause except nonpayment of premium, for which the MEWA shall be given a minimum grace

period of 31 days.

(d) The insurer shall have neither the right nor obligation under the excess loss policy to directly

pay any covered person or provider of professional services or supplies for any benefit which the

policyholder has agreed to provide under the terms of the employee benefit plan. The insurer's sole

liability shall be to the policyholder, subject to the terms, conditions, and limitations of the

agreement.

History: 1990 AACS.

R 500.824 Liability indemnified by insurer.

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