April 19, 2021

Volume XI, Number 109


April 16, 2021

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Vermont Issues Proposed Regulation Adopting Licensing and Regulatory Requirements for TPAs

In the fall of 2019, we reported that Vermont enacted Senate Bill 41, which granted the Commissioner of the Vermont Department of Financial Regulation (the “Department”) jurisdiction over entities that administer one or more health reimbursement arrangements (“HRAs”), health savings accounts (“HSAs”), and flexible spending accounts (“FSAs”). Senate Bill 41 directed the Department to adopt rules regulating entities that administer HRAs, HSAs, and FSAs.

In response to Senate Bill 41, the Department recently issued proposed Regulation 1-2021-01 (the “Regulation”) entitled “The Third Party Administrator Rule,” which sets forth licensing and regulatory requirements for TPAs operating in Vermont. Many of the provisions in the Regulation are similar to provisions in the NAIC’s Model Third Party Administrator Act (the “Model Act”).

One notable provision in the Regulation is that while Senate Bill 41 granted the Department jurisdiction over entities that administer HRAs, HSAs, and FSAs, the Regulation defines the terms “Third Party Administrator” and “TPA” to include an individual or entity who directly or indirectly underwrites, collects charges, collateral or premiums or adjusts or settles claims on Vermont residents in connection with life, annuity, health or stop-loss coverage, including HRAs, HSAs, and FSAs, or similar tax advantaged accounts for health related expenses.

The Regulation also provides that an individual or entity seeking to operate as a TPA in Vermont must first obtain a resident or non-resident TPA license (as applicable) by filing the NAIC Uniform Application for Third Party Administrators with the Department and providing certain documents and information with the application. The required attachments for a resident TPA license application are:

  1. All basic organizational documents of the applicant.

  2. An NAIC Biographical Affidavit for each individual who is responsible for the conduct of the affairs of the applicant.

  3. Audited annual financial statements for the two (2) most recent fiscal years proving that the applicant has a positive net worth. Alternative rules apply for applicants that have been in existence for less than two (2) fiscal years. 

  4. A business plan including information on the applicant’s staffing levels, proposed business activities and capability to provide a sufficient number of experienced and qualified personnel in the areas of claims processing, record keeping and underwriting.

For non-resident TPA applications, the applicant must submit as an attachment to the application a letter of certification from the insurance regulatory agency in the applicant’s home state verifying that the applicant is licensed and in good standing as a TPA in its home state. The Regulation also states that, to be eligible for a non-resident TPA license, the applicant must hold a home state TPA license from a state that has adopted the Model Act or enacted TPA laws containing provisions that are substantially similar to those in the Regulation.

The Regulation grants the Department authority to issue cease and desist orders and impose fines on individuals or entities that act as a TPA in Vermont without a TPA license. 

The Department held a remote public hearing regarding the proposed Regulation on February 25, 2021, and the Department has invited interested parties to provide comments regarding the Regulation through March 25, 2021. The Regulation’s proposed effective date is July 1, 2021.


© Polsinelli PC, Polsinelli LLP in CaliforniaNational Law Review, Volume XI, Number 67



About this Author

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

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...


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.


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.

Jonathan Kyle  Lowder Associate Kansas City Insurance Business and Regulatory Law

Jonathan (Kyle) Lowder has devoted his career to assisting a wide range of insurers and related entities efficiently manage the regulatory system in pursuit of their goals. He relies on a broad experience base, built from several years’ experience with matters arising throughout the insurance business life cycle, to form a comprehensive view of each issue and develop long term solutions for clients. 

Kyle represents both traditional and nontraditional insurers, re-insurers, third-party administrators, producers, adjusters, and other insurance regulated entities. He guides clients on...