PA 10-174—HB 5424

Education Committee

Insurance and Real Estate Committee

AN ACT CONCERNING AGREEMENTS BETWEEN MUNICIPALITIES AND BOARDS OF EDUCATION FOR THE JOINT PURCHASE OF EMPLOYEE HEALTH INSURANCE AND THE DISCLOSURE OF CERTAIN INFORMATION REGARDING COMPENSATION FOR SERVICES PROVIDED BY INSURANCE PRODUCERS

SUMMARY: This act permits two or more municipalities or local or regional boards of education, or any combination of these, to enter into a written agreement to act as a single entity to provide employee medical or health care benefits under certain conditions. Existing law already permits municipalities to jointly perform any function that each has authority to perform separately.

The agreement is subject to the conditions of any union contract the municipality or board has with its employees. The act also requires the legislative body of a municipality to approve the agreement when certain conditions exist between the municipality and board of education.

The agreement must establish:

1. the group's membership,

2. the benefit plan duration,

3. payment requirements for the benefits,

4. procedures for a municipality or board of education to withdraw from the agreement, and

5. procedures for the group to terminate the benefit plan.

The act specifies that a group formed under its provisions is not (1) a multiple employer welfare arrangement (MEWA) as defined under the federal Employee Retirement Income Security Act of 1974 (ERISA) (see BACKGROUND) or (2) a “fictitious group. ” (Insurance law prohibits a fictitious group organized for insurance rating purposes where differences in rates are based solely on membership in the group. But the prohibition does not apply to health insurance. )

The act requires that any insurance producer who sells, solicits, or negotiates insurance, on an insurer's behalf, with a municipality or a board of education to, at the municipality's or board's request, fully disclose in writing any fees or compensation the producer receives from the insurer for services under (1) the written memorandum required by existing law or (2) the 1940 Federal Investment Advisors Act.

EFFECTIVE DATE: October 1, 2010

MUNICIPAL LEGISLATIVE BODY APPROVAL

Before a municipality or a local or regional board of education may enter into an agreement, the act requires the municipal legislative body to approve it if:

1. there is an existing arrangement between a municipality and the board of education serving the municipality to provide medical or health care benefits to the employees of both, or

2. a municipality and the board serving the municipality have separate medical or health care benefit plans for their respective employees and both benefit plans are paid for by the municipality's general fund.

BACKGROUND

Joint Municipal Activities

By law, municipalities may jointly perform any function that each can perform separately under any law or special act, charter, or home rule ordinance (CGS 7-148cc). Each participating municipality must approve a joint agreement in the same manner as it approves an ordinance or, if it does not approve ordinances, the budget. Any such agreement must establish a withdrawal process and require the body that approved it to review the agreement at least once every five years.

ERISA

ERISA is a federal law that sets standards, including fiduciary responsibilities, for most voluntary private-sector retirement plans and employer-sponsored health plans.

MEWA

An employer that self-insures a health benefit plan for its employees is generally not subject to state insurance laws because of federal preemption under ERISA. But a multiple employer plan may not have the same exemption.

ERISA defines “multiple employer welfare arrangement” as an employee welfare benefit plan, or any other arrangement that is established or maintained for the purpose of offering or providing benefits to the employees of two or more employers (including one or more self-employed individuals), or to their beneficiaries. It does not include a plan or arrangement established or maintained by a collective bargaining agreement, rural electrical cooperative, or rural telephone cooperative association (29 U. S. C. 1002(40)).

Congress amended ERISA in 1983 to provide an exception to ERISA's preemption provisions for the regulation of MEWAs under state insurance laws (P. L. 97-473). As a result, if an ERISA-covered employee welfare benefit plan is a MEWA, states may apply and enforce state insurance laws with respect to it.

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