States continue to adopt the National Association of Insurance Commissioners (NAIC) model act (#305) and regulation (#306) on Corporate Governance Annual Disclosure (CGAD) reporting requirements. Putting the Board and committee evaluation protocols in place now will better position your company to submit a robust report when it comes due.

Download Corporate Governance - Board of Director Evaluations

TPA Licensing - Drafting a Plan of Operations

Jason Robbins, J.D.

Consultant

A core component to any quality TPA Licensing submission is the development of a clear Plan of Operations. The majority of states will require that a Plan of Operations accompany the TPA license application. The more detailed the Plan of Operation, the less likely it will need to be expanded and/or revised for other states.  The Plan of Operations is often what introduces a TPA to the regulator so it’s important to provide a thorough discussion on your qualifications to hold a TPA license in the state in which you are applying in.

To make sure that the Plan of Operations will be acceptable for most states, we recommend you cover the following topics:

• TPA’s mission statement or reason for seeking licensure
• Company history
• Types of services you intend to offer
• Competitive advantages or what makes your TPA unique
• Description of TPA’s staff and their competency as well as information on facilities
• Strategic marketing plan
• Insurers or plan sponsors that will utilize the TPA’s services in their state
• Up to date list of jurisdictions in which the TPA is currently licensed (if any)

We’ve also found it beneficial to include certain items as exhibits or attachments to the Plan of Operations. An organizational chart of related entities is a convenient reference for regulators as they review your company structure. Similarly, an organizational chart of key employees or divisions of your TPA gives the regulator a quick snapshot of how your company functions and who is responsible for certain activities.

While the items above are what we consider to be the core elements of a Plan of Operations, there are certainly additional topics that some states will ask you to address.  It’s important to review your Plan of Operations to verify that any state-specific information is updated prior to submitting to a new jurisdiction.  Additional information or documentation required by some states include:

• Description of internal control procedures
• Complaint and appeal procedures
• Financial projections for future years
• Statement regarding sources of working capital
• Fraud prevention plan
• Description of claims payment process and expected processing times
• Training and hiring requirements

A well-drafted Plan of Operations can help a TPA make a great first impression with the regulator and get the licensing process started on the right foot.

Please contact one of First Consulting’s experienced licensing consultants to discuss drafting your Plan of Operations and state-specific requirements.

TPA Licensing - Do’s & Don’ts of Completing the NAIC Biographical Affidavit

Jason Robbins, J.D.

Consultant

The NAIC Biographical Affidavit is a key element of TPA applications in several states.  While some states have developed their own affidavit, the majority will accept the form published by the NAIC.  Generally, biographical affidavits need to be completed by all officers, directors, key management personnel, or any shareholder of 10% or more of the Applicant entity. These individuals are busy, and this is a lengthy form to complete. However, providing these individuals with some guidance and stressing the importance these forms in their entirety is crucial.  Here are a few tips to share with the individuals who will be completing these forms so you can get to market faster.

Do’s

• Verify that the affidavit being completed is on the newest edition of the NAIC Biographical Affidavit.
• Make sure the affidavit is executed within the last 6 months. The affidavits expire 6 months after they are executed.
  • Best Practice Tip: Ask these individuals to update their information at regular intervals, such as quarterly meetings. This will ensure updated information is available when it is time to apply for additional states.
• It might sound obvious, but CAREFULLY read the instructions for each section. The questions are very specific about what must be provided and when this information is required. Do yourself a favor and read the question all the way through before starting to respond.
• Include months, not just years with dates when requested.
• Provide contact information for association memberships as well as for verification of work history where required.
• Review the affidavit in its entirety prior to executing. This includes properly adding the date and location of where the affidavit is executed.

Don’ts

• Guess on dates. I know the residency and work history sections can test your memory but take the time to verify this information prior to executing.
• Leave an answer blank. Doing this will assuredly result in a request for additional information from the regulator.  The instructions explicitly state, “IF ANSWER IS “NO” OR “NONE,” SO STATE”.
  • Best Practice Tip: “No” or “None” means just that.  “Not Applicable”, “N/A” or similar answers will not be accepted.
• Forget to attach supporting documentation. If you answer “Yes” to certain questions, you will be required to supplement your answer with an explanation and supporting documentation. Failure to include this will result in delays.
• Fail to answer a question as instructed because you ran out of space.  Some questions ask for 10 to 20 years of information and an addendum or additional pages can be added to respond in full.

If your management team is in a hurry to get a licensed approved, make sure they understand the importance of giving these affidavits the necessary attention to facilitate the fastest review possible.

For more information on how First Consulting can simplify and accelerate your TPA application process, click here or contact one of our experienced consultants.

Jason Robbins, J.D.

Consultant

Nearly every week, we at First Consulting & Administration hear from a third party administrator (TPA) exploring a new business opportunity, but they often have the same problem:  they aren’t licensed in that jurisdiction yet.  That realization is immediately followed by the following question - “What can we do to get our application approved as quickly as possible?”  While the simple answer is to make sure you provide complete answers and all required documentation in the initial submission, our experience has found several items that often lead to delays in the licensing process.

Paying close attention to the following items can help TPAs avoid objections and get through the licensing process as quickly as possible.

1. Plan of Operations - This is a very common requirement in TPA licensing that sometimes gets overlooked.  This document should be state-specific where applicable, and it’s your opportunity to explain to regulators the specific products/services you wish to offer in a state, while demonstrating your qualifications to serve its residents.  The more information you can provide to the regulator initially, the less questions they will have for you after reviewing your application.  Please review our article regarding "Plan of Operations" for more tips on drafting yours.
2. NAIC Biographical Affidavits – The leading cause of objections in the licensing process are inaccuracies or incomplete answers in biographical affidavits.  Generally, biographical affidavits need to be completed by all officers, directors, key management personnel, or any shareholder of 10% or more of the Applicant entity.  These are lengthy forms but completing them properly is imperative in order for the regulator to complete their review. We highly recommend that the importance of these forms is made clear to those required to complete them and recommend they receive detailed instructions on completing these forms.  For example, if the answer to a question is “None” you must state it as such. By skipping the question or stating “Not Applicable”, you’re likely to receive a follow-up request from the regulator asking for more information, and some states require that the biographical affidavit be redone entirely, or submission of a notarized affidavit that addresses each incorrect answer. Finally, NAIC biographical affidavits are only valid for 6 months from date of execution and must be completed on the most recent form. See our "Do's and Don'ts of Completing the Biographical Affidavit" for more advice.
3. Administrative Service Agreements (ASA) – Many states require applicants to submit copies of their executed ASAs or a sample of the agreement prior to receiving a license.  It’s important to make sure the agreement accurately reflects the activities the TPA is to perform in the state so it can be reviewed for compliance with the state’s administrator laws.  While some states publish checklists of provisions they expect to see in the agreements,  we recommend that you work with your legal counsel prior to filing your application to ensure all required provisions are included to avoid further delay in the licensing process.  Publicly available checklists from states can be found here.
4. Bond and Insurance Requirements – Another common question we receive is if evidence of bonds and certain insurance coverage must be provided with the initial submission or if this can be submitted after a preliminary review has been completed. These items must be included with the initial submission and be in compliance with state requirements. While some states have very straightforward requirements, others require calculations and specific language  in the bonds.  Working closely with your bond carrier and an experienced consultant can help you provide the state with the correct documentation the first time.
5. Financial Requirements – Many states do request information about the financial strength of TPAs in order to verify compliance with net worth requirements and confirm that a TPA has the financial means to meet its obligations to residents of the state.  While some states only require financial statements that are certified by an officer(s), others do require audited financial statements. Making sure you provide the required documentation that shows your compliance with each state’s net worth requirements will allow for a timely review of your application.

While we certainly understand the desire to get an application filed as soon as possible, the best practice is to spend some additional time making sure all required documentation is available prior to submitting it for review.  The regulator will appreciate receiving a complete and comprehensive submission as will your business partners as you’re likely to get to market much sooner.

For more information on how First Consulting can simplify and accelerate your TP