November 15, 2021

A life and health insurer recently reached a settlement agreement with thirty-nine (39) state insurance departments following a targeted multistate market conduct examination (“Multistate Examination”). The Multistate Examination focused on the insurer’s Life, Accident, Health and Disability business in several areas of operation, including its oversight of Third-Party Contractors and claims handling. The insurance departments of Delaware, Michigan, Pennsylvania, South Carolina, and Texas (the “Lead States”) led the Multistate Examination. 

The Multistate Examination resulted in a Regulatory Settlement Agreement (“Settlement Agreement”) in which the insurer was required to make a $5,000,000 penalty payment to be divided among all participating states. In addition to the Lead States, thirty-four (34) other state insurance departments agreed to participate in the Settlement Agreement. 

In addition to the $5,000,000 payment, the Settlement Agreement also required that the insurer take certain corrective actions as part of adopting a Compliance Plan. Some of the items in the Compliance Plan included the following: 

  • The insurer was required to make a Market Conduct Compliance Manual available to all Third-Party Contractors and to enforce compliance with its terms and procedures.
  • The insurer had to ensure that all contracts with its Third-Party Contractors complied with state insurance laws.
  • The insurer had to ensure that Third Party Contractors it is doing business with are properly licensed as required by state insurance laws.
  • The insurer had to provide documentation to the Lead States verifying that it has conducted compliance audits of its Third-Party Contractors.
  • The insurer had to review its claims payments for accuracy and timeliness and also ensure that its claims handling procedures and those of its Third-Party Contractors adhere to the claims handling requirements of state insurance laws.

While there were multiple issues involved in this multistate regulatory action, it resulted in a significant monetary penalty and action by thirty-nine (39) state insurance departments. The matter is a cautionary and costly reminder that insurers must only conduct business with Third Party Administrators (“TPAs”) that are properly licensed in all required jurisdictions and that insurers must also ensure their Third Party Administrator (“TPA”) business partners are in compliance with state insurance laws.

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Third Party Administrator Licensing and Compliance Services

Polsinelli’s Third Party Administrator Team has significant experience representing TPAs on a national basis regarding a variety of business and compliance issues. The group includes attorneys who were formerly in-house counsel for TPAs, as well attorneys who were formerly insurance regulators and members of the Federation of Regulatory Counsel. 

Polsinelli’s experience in the third party administrator industry is demonstrated by these representative examples:

  • National and multi-state TPA licensing projects.
  • Advise clients regarding business, regulatory and compliance matters associated with mergers, acquisitions and divestitures involving entities licensed as a TPA.
  • Assistance with investigations, market conduct examinations and formal regulatory actions brought by state insurance departments.
  • Negotiate and draft Administrative Services Agreements and subcontracts, including assistance with statutorily-mandated provisions and best practice business provisions.
  • Assistance in developing a TPA Regulatory Addendum designed to comply with the statutorily-mandated provisions applicable under the TPA laws on a national basis.
  • Monitor regulatory and legislative activity affecting our TPA clients and provide periodic reports regarding such activity.
  • Maintain licensure as a TPA, PBM, Adjuster, Insurance Producer, or Service Company through periodic renewal and annual report filings.
  • Assistance with ancillary state filing and registration requirements such as All-Payer Claims Databases and Vaccination Assessments.
  • Polsinelli’s TPA team provides TPA licensing services, TPA regulatory and compliance services, drafting and negotiation of administrative services agreements and a number of other TPA services.
  • By leveraging its extensive experience representing TPAs, our TPA team helps clients avoid the learning curve and related cost implications that can be experienced by working with companies or attorneys who are less familiar with the regulatory and compliance needs of TPAs.
For More Information

To learn more about Polsinelli’s Third Party Administrator Licensing and Compliance Services practice, or to contact a member of the Third Party Administrator Licensing and Compliance Services team, visit our Third Party Administrators page.