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Texas Regulatory Action a Reminder that Insurers Cannot Outsource their Regulatory Responsibilities

The Texas Insurance Department ("TDI") took regulatory action recently against an insurer which allegedly violated Texas insurance laws related to claims adjudication, claims payment reporting, and prompt payment penalties. The insurer had contracted with several third party administrators ("TPAs") to administer its medical claims. Per the TDI, the insurer violated Tex. Ins. Code § 4151.1042(b) and 28 Tex. Admin. Code § 7.1611 because it did not ensure competent administration of its programs by its TPAs, including its TPAs' compliance with the Texas Insurance Code, related rules, and the provisions of the written administrative services agreements between the insurer and the TPAs, including the performance of claim adjudication and payment. To settle the above alleged violations, the insurer recently entered into a Consent Order with the TDI, in which it was ordered to pay $527,971 in prompt payment penalties and to pay an administrative penalty of $250,000 for failure to report claims correctly to the TDI and the Texas Health Insurance Pool.

South Dakota Regulatory Action

Recently, the South Dakota Division of Insurance ("Division") took regulatory action against a company operating in South Dakota based on its failure to be properly licensed as a Third Party Administrator (TPA).

According to the Division, after reviewing the company's application for a TPA license, the Division discovered the Company had been acting as a TPA in South Dakota for a number of years without a valid license or registration in violation of SDCL § 58-29D-21.

As a result, the company entered into a Consent Order with the Division and agreed to pay a $15,000 monetary penalty. The Division agreed to issue a license to the company pursuant to the company's compliance with the Consent Order.

TPAs not wishing to enter into a Consent to Fine with the Division for failing to timely submit their written agreements with the Division may submit a written application requesting a hearing to the Division's Legal Department.

© Polsinelli PC, Polsinelli LLP in California

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About this Author

Steven L. Imber, Polsinelli PC, Insurance Regulatory Attorney, Enforcement Actions Lawyer,
Shareholder

Steve Imber chairs Polsinelli's Insurance Business and Regulatory group.  As a former General Counsel at a state insurance department, Steve Imber has the knowledge and experience to provide quality counsel to insurers, third party administrators, insurance agencies, medical discount plans and other insurance regulated entities. His practice includes representing and assisting clients on multi-state and national licensing projects, research projects, enforcement actions, market conduct examinations, audits and compliance programs and various other regulatory and...

913.234.7469
Shareholder

Justin Liby has a talent for organizing and managing large national and multi-state licensure and research projects. This knack provides him with a solid foundation for crafting and implementing sound, efficient strategies that achieve success for his clients. Justin concentrates his efforts on helping the insurance industry navigate the formidable federal and state regulatory maze to achieve the industry’s business needs. He stays current in the insurance industry's evolution, as well as the legislation and regulatory activity impacting the industry.

Justin is a former regulator for the Kansas Insurance Department and in-house counsel for a national third-party administrator.

913-234-7427
Counsel

Jennifer Osborn Nix works diligently for insurance companies, third-party administrators, and other regulated entities to further their goals and help them remain compliant within the 50-state regulatory scheme. She focuses on insurance regulatory and compliance issues, with a primary emphasis on life and health insurance matters.

Jennifer works with many regulated entities, including many in the health care sector, who rely on her for research, advice, strategic counsel, and licensing.

913.234.7472