Vol. 42 - September 2024 | ©2024 by Vidal, Nieves & Bauzá, LLC. All rights reserved.
An amendment to the Insurance Code of Puerto Rico was recently approved by the Legislature and signed into law by the Governor of Puerto Rico, which requires companies acting and providing third party administration or TPA services in respect to certain benefit plans offered by insurance companies and employers to register with the Office of the Commissioner of Insurance and hold a license.
The law, which was officially approved on August 26, 2024, as Act No. 169 (“Act No. 169”), adds a new Chapter 54 to the Insurance Code of Puerto Rico covering third party administrators. The new statute is based on the model law adopted by the National Association of Insurance Commissioners (NAIC) which has, similarly, been adopted by many of the states in the U.S and requires third party administrators (“TPAs”) to be licensed in such states in order to offer their services. Generally, TPAs are companies that provide a number of services such as premium collection, claim administration and processing services, and other related services centered on the management of covered benefits offered under a plan written by an insurance company or benefits offered to employees of a self-funded private employer health and other benefit plan.
In the case of self-funded or self-insured private employer plans for employees, these plans are subject to the Employment Retirement Income Security Act of 1974 or “ERISA”, and generally not subject to state insurance laws covering health insurance under the broad preemption approved by Congress under ERISA. Because even under ERISA’s broad preemption provision, states may continue regulating the “business of insurance”, ERISA’s provisions have been generally found to not extend to the regulation of employee health coverage offered by an ERISA self-insured private employer benefit plan offered through an insurance policy issued by a regulated insurance company ERISA. Similarly, the U.S. Department of Labor has held that stop-loss insurance coverage purchased by self-insured private employers fall under the regulatory authority of state insurance departments.
Consistent with this regulatory framework, the new TPA licensing statute defines a “Third Party Administrator” as someone that directly or indirectly underwrites, collects, charges, collateral or premiums from, or adjusts or settles claims on residents of the Commonwealth of Puerto Rico, in connection with life, annuity, health or stop-loss [Insurance].
In a similar manner as the NAIC model law it closely follows, Act No. 169 includes a list of activities which, if conducted by certain persons, are not considered activities subject to the licensing and other requirements of the new law.
Among other key provisions, the new TPA licensing statute in Puerto Rico imposes an annual licensing fee for TPAs of $2,500.00. Moreover, it requires that all TPAs maintain a written agreement with the “payor” (i.e., Insurance company or private employer) on behalf of whom TPA services will be provided. The TPAs compensation may not be contingent on the savings arising from covered losses under the benefit plan. TPAs are also required to file an annual report with the Insurance Commissioner on or before June 30 of each year.
Should you or your company have any questions regarding the above case or any other commercial area of the law on which you may have an inquiry or require advice, you may contact the attorneys at Vidal, Nieves & Bauzá, LLC, at info@vnblegal.com a corporate law firm with special emphasis on energy and environmental matters, corporate, tax, transactional, real estate and insurance practices. Feel free to browse our webpage at www.vnblegal.com.
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