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Montana Administrative Register Notice 24-29-263 No. 7   04/12/2012    
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BEFORE THE DEPARTMENT OF LABOR AND INDUSTRY

STATE OF MONTANA

 

In the matter of the amendment of ARM 24.29.601, 24.29.604, 24.29.607, 24.29.608, 24.29.610, 24.29.611, 24.29.616, 24.29.617, 24.29.618, 24.29.623, 24.29.908,

24.29.954, and 24.29.956, and the

adoption of NEW RULES I and II, related to workers' compensation insurance coverage under compensation plan No. 1 and plan No. 2

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NOTICE OF PUBLIC HEARING ON PROPOSED AMENDMENT AND ADOPTION

 

TO:  All Concerned Persons

 

            1.  On May 4, 2012, at 10:00 a.m., a public hearing will be held in the first floor conference room, room 104, Walt Sullivan Building, 1315 E. Lockey Avenue, Helena, Montana, to consider the proposed amendment and adoption of the above-stated rules.

 

            2.  The Department of Labor and Industry (department) will make reasonable accommodations for persons with disabilities who wish to participate in this public hearing or need an alternative accessible format of this notice.  If you require an accommodation, contact the department no later than 5:00 p.m., on April 30, 2012, to advise us of the nature of the accommodation that you need.  Please contact the Employment Relations Division, Workers' Compensation Regulations Bureau, Attention:  Bill Wheeler, P.O. Box 8011, Helena, Montana 59624-8011; telephone (406) 444-6541; fax (406) 444-3465; TDD (406) 444-5549; or e-mail bwheeler@mt.gov.

 

            3.  The rules proposed to be amended provide as follows, stricken matter interlined, new matter underlined:

 

           24.29.601  DEFINITIONS  For the purposes of ARM Title 24, chapter 29, subchapter 6, the following definitions apply:

            (1) and (a) remain the same.

            (b)  pay compensation benefits and all liabilities which are likely to be incurred under the Workers' Compensation Act, and the Occupational Disease Acts Act for occupational diseases that occurred prior to July 1, 2005; and

            (c)  have sufficient cash or cash equivalents, security deposit, and excess insurance to make benefit and compensation payments pay benefits as they come due.

            (2) and (3) remain the same.

            (4) (5)  "Claims summary" means a compilation of information relating to prior and existing claims made under the Workers' Compensation Act and the Occupational Disease Acts of Montana Act for occupational diseases that occurred prior to July 1, 2005, by showing by policy year, the total number of medical and indemnity claims, total compensation benefits paid, and the total amount reserved for future liabilities.

            (5) (4)  "Compensation benefits Benefits" means wage loss, legal, medical, rehabilitation, and all other benefits that are payable under the Montana Workers' Compensation Act and the Occupational Disease Acts Act (Title 39, chapter 72, MCA) for occupational diseases that occurred prior to July 1, 2005, including assessments or financial obligations.

            (6) through (9) remain the same.

            (10)  "Occupational Disease Act" means Title 39, chapter 72, MCA, as it existed prior to July 1, 2005.

            (10) remains the same, but is renumbered (11).

            (11) (12)  "Reviewed financial statements" means a set of documents that includes the applicant's:

            (a)  income statement,;

            (b)  balance sheet,;

            (c)  statement of cash flow,;

            (d)  notes to the financial statements,; and

            (e)  a signed, dated statement from an independent certified public accountant expressing limited assurance that there are no material modifications that should be made to the statements, in order for them to be in conformity with generally accepted accounting principles.

            (13)  "Workers' Compensation Act" means Title 39, chapter 71, MCA.

 

            AUTH:  39-71-203, MCA

            IMP:     39-71-403, 39-71-2101 through 39-71-2108, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.601 to define various terms used in the substantive rules, which are proposed for amendment or adoption by this notice.  In addition, there is reasonable necessity to make various technical corrections in language, punctuation, and earmarking to improve the readability of the rule, while the rule is otherwise being amended.

 

            24.29.604  MONTANA SELF-INSURERS GUARANTY FUND--ACCEPTANCE REQUIRED FOR PRIVATE EMPLOYERS OR PRIVATE GROUPS  (1) The department's approval of requests from private applicants to self-insure is contingent upon the acceptance of membership in the guaranty fund in accordance with 39-71-2609, MCA.  Public employers and groups of public employers are not eligible for membership in the guaranty fund, and the guaranty fund has no role in the approval of decisions regarding the eligibility of public employers or groups of employers to self-insure, or in the amount of security required.

            (2)  remains the same.

            (3)  The guaranty fund shall demonstrate its concurrence/ or nonconcurrence with department approval of a private plan no. 1 applicant by submitting in writing to the department, a formal acceptance or denial of the plan no. 1 applicant.

            (4) remains the same.

 

            AUTH:  39-71-203, MCA

            IMP:     39-71-403, 39-71-2101, 39-71-2103 through 39-71-2106, 39-71-2608, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.604 and 24.29.607 to improve clarity and conform the rules to current usage guidelines, while related rules are otherwise being amended.  The department concludes that there is reasonable necessity to add language to ARM 24.29.604 to further clarify that the guaranty fund does not have a role in self-insurance decisions regarding public employers or groups of public employers.

 

            24.29.607  PUBLIC EMPLOYERS OTHER THAN STATE AGENCIES

            (1)  The provisions of ARM Title 24, chapter 29, subchapter 6 apply to public employers and public employer groups, other than state agencies as defined in 39-71-403, MCA, except that the guaranty fund has no involvement in department decisions regarding public employers or public employer groups.

 

            AUTH:  39-71-203, MCA

            IMP:     39-71-403, 39-71-2101 through 39-71-2108, 39-71-2603, 39-71-2609, MCA

 

            24.29.608  ELECTION TO BE BOUND BY COMPENSATION PLAN NO. 1­-­ELIGIBILITY  (1)  Any employer or employer group, except state agencies specified in 39-71-403, MCA, may elect to apply to be bound as a self-insurer under plan no. 1, if in accordance with 39-71-2102, MCA, and ARM 24.29.609, the employer or employer group submits, on forms provided by the department, satisfactory proof of ability to pay the compensation benefits which are reasonably likely to be incurred under the Workers' Compensation Act, and the Occupational Disease Acts Act for occupational diseases that occurred before July 1, 2005, during the year or the portion of the year for which election under this plan is effective.  Approval to be bound as a self-insurer under plan no. 1 will be granted by the department with the concurrence of the guaranty fund.

 

            AUTH:  39-71-203, 39-71-2102, MCA

            IMP:     39-71-403, 39-71-2101 through 39-71-2103, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.608 and 24.29.610 to clarify the applicability of the former Occupational Disease Act to a self-insurer's liability, despite the repeal of the Occupational Disease Act in 2005 and the incorporation of those provisions into the Workers' Compensation Act, while rules on the same general subject matter are otherwise being amended.  In addition, there is reasonable necessity to delete an inappropriate AUTH citation.

 

            24.29.610  WHEN SECURITY REQUIRED  (1) remains the same.

            (2)  The security deposit requirement may be waived in whole or in part by the department, with the concurrence of the guaranty fund, for applicants who provide substantive evidence that the statutory amount of the security deposit is not needed.  This evidence must reflect the applicant's ability to pay the compensation benefits provided for in Title 39, chapter 71, of the Montana Code Annotated the Workers' Compensation Act, and the Occupational Disease Act for occupational diseases that occurred before July 1, 2005.

            (3)  The A self-insurer who that does not have sufficient securities on deposit with the department, with which to pay the compensation benefits, shall be required to furnish additional security.

 

            AUTH:  39-71-203, 39-71-2106, MCA

            IMP:     39-71-403, 39-71-2106, MCA

 

            24.29.611  SECURITY DEPOSIT -- CRITERIA  (1) remains the same.

            (a)  The department shall accept a surety bond only from companies certified by the United States department Department of treasury Treasury as "Companies Holding Certificates of Authority as Acceptable Sureties on Federal Bonds and as Acceptable Reinsuring Companies," as published in the most recent Federal Register.

            (i)  A surety bond issued by a company that has a Best's rating of "A" or better and a financial size rating of X or greater will be approved.

            (ii)  A surety bond issued by a company that is rated by Best's, but does not meet the criteria specified in (1)(a)(i) will be considered for approval at the discretion of the department, with the concurrence of the guaranty fund.

            (iii)  A surety bond issued by a company not rated by Best's will be considered for approval at the discretion of the department, with the concurrence of the guaranty fund.

            (b)  The security deposit must name the department as obligee and must be held by the department as security for payment of all workers' compensation and occupational disease liabilities likely to be incurred under the Workers' Compensation Act, or the Occupational Disease Act for occupational diseases that occurred before July 1, 2005.  The department, with the concurrence of the guaranty fund, shall retain a security deposit until all liabilities have been paid.  In the event liabilities have not been met by the self-insurer, the department shall proceed pursuant to 39-71-2108, MCA.  If the self-insurer has placed multiple forms of security deposits, the department shall, at its discretion, convert the deposits needed to pay claims.

            (c) and (d) remain the same.

            (e)  Certificates of deposits must be issued by financial institutions insured by the FDIC or FSLIC and may not exceed the limits of the FDIC or FSLIC insurance coverage.  A security deposit in the form of a certificate of deposit must be issued by a financial institution located within the United States and must be fully insured by a federally chartered insurance corporation.

            (f)  Letters of credit must be issued by a financial institution located within the United States with a Sheshunoff percentile ranking of 50 or greater investment grade ratings issued by Moody's Investors Service, Standard & Poor's, or Fitch Ratings.  If ratings from those rating entities are not available, the approval of the financial institution will be made at the discretion of the department, with the concurrence of the guaranty fund.

 

            AUTH:  39-71-203, 39-71-2106, MCA

            IMP:     39-71-403, 39-71-2106, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.611 to update references to various technical terms and standards now used within the bond rating industry in response to recent developments in the rating industry.  In addition, there is reasonable necessity to remove references to specific federal insurance programs, and to make other technical language changes which are consistent with the usage in related rules.  There also is reasonable necessity to clarify the effect of certain ratings on the approval of a selected surety, in line with prudent financial standards applicable to surety providers.  In addition, there is reasonable necessity to delete an inappropriate AUTH citation.

 

            24.29.616  EXCESS INSURANCE -- WHEN REQUIRED  (1) through (3) remain the same.

            (a)  It is issued by a carrier admitted and licensed in Montana with a Best's Rating of A- or better and a financial size rating of VI or greater.  Excess coverage issued by a carrier not rated by Best's will be considered for approval at the discretion of the department, with the concurrence of the guaranty fund.

            (b)  Its provisions or coverage may be altered only upon the prior approval of the department, with the concurrence of the guaranty fund.  Proposed changes to provisions or coverage of the excess insurance policy must be submitted to the department at least 60 days in advance of the proposed effective date of the changes.

            (b)  through (e) remain the same, but are renumbered (c) through (f).

            (f)(g)  Copies of the certificates and policies of the excess insurance must be filed with the department for a determination that such certificates and policies fully comply with the provisions of the Workers' Compensation and Act, the Occupational Disease Acts Act, and ARM Title 24, chapter 29, subchapter 6.

 

            AUTH:  39-71-203, 39-71-2103, MCA

            IMP:     39-71-403, 39-71-2101, 39-71-2103, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.616 in order to specify that excess insurers be admitted carriers in Montana, and not merely licensed in Montana.  The distinction is that admitted carriers are required to participate in an insurance guaranty association, while nonadmitted carriers are not.  The participation in an insurance guaranty association provides an additional layer of financial stability and security in the event the excess insurer becomes insolvent.  The department notes that there has been an increase in the number of insurers, including excess insurers, which have become insolvent in the recent past.  The department concludes that because the excess layer of insurance applies only when there has been a significant loss on a given claim, the financial protection of the significantly injured worker is very important.  As such, the department concludes that it is reasonably prudent to ensure that only admitted excess carriers be allowed to provide the vital "back up" protection in the event of a catastrophic claim.  There also is reasonable necessity to clarify that changes to a self-insurer's excess policy only take place upon the prior approval of the department (and as appropriate, with the concurrence of the guaranty fund), in order to make sure that proposed changes do not adversely affect the ability of the self-insurer to pay claims.  The department has concluded, upon study of the matter, that changes to the coverage amounts or thresholds of excess coverage, or a change in excess carriers, poses a financial potential risk to claimants and the guaranty fund, and that such potential risks need to be evaluated and that appropriate additional security may be required, prior to a self-insurer's change of coverage.  Finally, there is reasonable necessity to amend ARM 24.29.616 to clarify the applicability of the former Occupational Disease Act to a self-insurer's liability, despite the repeal of the Occupational Disease Act in 2005, and the incorporation of those provisions into the Workers' Compensation Act, while rules on the same general subject matter are otherwise being amended.  In addition, there is reasonable necessity to delete an inappropriate AUTH citation.

 

            24.29.617  INITIAL ELECTION -- INDIVIDUAL EMPLOYERS  (1) through (1)(d) remain the same.

            (e)  evidence that it had a minimum of 50 employees per year over the preceding 2 years; however, an employer with a minimum of less than 50 employees per year over the preceding 2 years may be considered if its liability is guaranteed by a parent corporation as provided in ARM 24.29.617(1)(c)(iii).  The department, with the concurrence of the guaranty fund, may accept a guarantee from an employer in lieu of a parental guarantee.  [This paragraph will sunset January 1, 1998];

            (f) through (1)(l)  remain the same, but are renumbered (e) through (1)(k).

 

            AUTH:  39-71-203, MCA

            IMP:     39-71-403, 39-71-2101 through 39-71-2103, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.617 and 24.29.618 to delete obsolete language from the rules, while the rules are otherwise being amended.  Finally, there is reasonable necessity to make clarifications and technical language changes to ARM 24.29.618, regarding the applicability of various provisions to the individual members or to the group as a whole, while the rule is otherwise being amended.

 

            24.29.618  INITIAL ELECTION -- EMPLOYER GROUPS  (1) through (1)(d) remain the same.

            (e)  a copy of at least the most recent year's audited financial statements, or reviewed financial statements, if audited statements are not prepared as part of the employer's normal business practice, from each member of the employer group.  The total premiums payable to the group from employers having reviewed financial statements shall not constitute more than 10% percent of the group's total premium.  The department or the guaranty fund may require copies of additional years' audited or reviewed financial statements from the applicant.  Upon request of the applicant, and when approved by the department and the guaranty fund, the submission of these financial statements may be to an independent certified public accountant (CPA).  The department will advise the CPA of the nature and format of the information to be provided to the department.  The applicant shall pay the cost of such a submission and review;

            (f)  evidence that each private employer in the group has been in business for a period of not less than 3 three years;

            (g)  evidence the employer group had a combined minimum of 100 employees per year over the preceding 2 years.  [This paragraph will sunset January 1, 1998];

            (h) (g)  a claims summary from insurance carriers who provided coverage for claims incurred in Montana for each member of the employer group for the preceding 3 three years;

            (i) through (1)(t) remain the same, but are renumbered (h) through (1)(s).

            (t)  a business plan for the employer group;

            (u)  a general plan of operation;

            (v)  pro forma financial statements for each of the first 2 five years of the employer group's operation, to include any assumptions made; and

            (w) (v)  copies of any contracts including, but not limited to, contracts with an administrative service company, claims adjuster examiner, and fiscal agent.

 

            AUTH:  39-71-203, MCA

            IMP:     39-71-403, 39-71-2101 through 39-71-2103, 39-71-2106, MCA

 

            24.29.623  RENEWAL REQUIRED  (1)  An employer who has been self-insured may renew the election each ensuing year, by meeting all the requirements of these rules, except that the claims summary required in ARM 24.29.617(1)(f)(e) must be a claims summary for the preceding year(s) for claims incurred as a self-insurer in Montana.  Application for renewal must be made 60 days prior to the renewal date, or on such other date as determined by the department and the guaranty fund.

            (a)  In addition to the other information required in ARM 24.29.617, except as provided by (1)(b), the employer shall submit an independent actuarial analysis for the preceding year, completed by a qualified actuary as defined by the American Academy of Actuaries.  The analysis must include, but is not limited to, a reserve analysis that includes all self-insured periods in Montana, through the most recent calendar year.  The results of the analysis must be summarized at the low level, middle (or expected) level, and high level, with the corresponding confidence level expressly stated for each.

            (b)  The department may waive the requirement of (1)(a) with the concurrence of the guaranty fund.

            (2)  An employer group which has elected to be bound by plan no. 1 may renew the election for each ensuing year by meeting all the requirements of these rules, except ARM 24.29.618(1)(c), (1)(d), (1)(e), (1)(f), (1)(h)(g), (1)(l), (1)(m), (1)(n)(q), (1)(r), (1)(s), (1)(t), (1)(u), and (1)(v), and (1)(w).  Application for renewal must be made at least 90 60 days prior to the renewal date, or on such other date as determined by the department and the guaranty fund.  In addition to the information required in ARM 24.29.618, the employer group shall submit:

            (a)  a copy of the preceding year's audited financial statements for the self-insured group;

            (b)  an actuarial report for the preceding year which includes recommended premium levels considered adequate to fund losses; and

            (c)  a claims summary for the preceding 3 years for claims incurred as a self-insurer in Montana; and

            (c)  an independent actuarial analysis for the preceding year, completed by a qualified actuary, as defined by the American Academy of Actuaries.  The results of the analysis must be summarized at the low level, middle (or expected) level, and high level, with the corresponding confidence level expressly stated for each.  The analysis must include, but is not limited to:

            (i)  a reserve analysis that includes all self-insured periods in Montana, through the most recent calendar year; and

            (ii)  a premium/rate analysis that projects the total premium need and average rate for the upcoming year which is adequate to cover:

            (A)  all expected workers' compensation liability costs, whether past, present, or future, with respect to claims previously incurred or claims expected to be incurred in the upcoming year; and

            (B)  administrative expenses.

            (3)  remains the same.

 

            AUTH:  39-71-203, MCA

            IMP:     39-71-403, 39-71-2104, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.623 in order to better describe the expected standard features of actuarial reports, and to make explicit who is considered by the department to be a qualified actuary.  The department notes that although most of the actuarial reports it receives are of good quality, from time to time it receives actuary reports that fail to address elements that are important to the department's renewal analysis, or come from authors of uncertain background.  The department concludes that there is reasonable necessity to provide clarifications while this rule is otherwise being amended.

            The department concludes, based upon its recent experience in processing group renewals, that there is reasonable necessity to shorten the lead time from a minimum of 90 days to minimum of 60 days in advance of the expiration date for self-insurance.  The department notes that the switch to 60 days for groups brings the renewal lead time into line with that for individual self-insured employers.

            There is reasonable necessity to amend ARM 24.29.623 to make it conform to existing practices for renewals.  As an example, summary claims information has been historically provided by self-insurers for all of the years of self-insurance in Montana, with greater summary detail provided for the most recent years.  The number of years for which the greater summary detail is requested typically varies with the length of the self-insurer's experience.  Rather than specify a certain number of years of claims summary information (which may not be available for a newer self-insurer), the department will work with the self-insurer during the renewal process to obtain appropriate data.

            There also is reasonable necessity to amend ARM 24.29.623 to update internal citations to rules that are being proposed for amendment or renumbering.

 

            24.29.908  PENALTIES, ADMINISTRATIVE FINES AND INTEREST  (1)  Any assessment payment, surcharge remittance, summary report, or quarterly expenditure report received by the department more than five days past the due date is considered to be late.

 

            AUTH:  39-71-203, MCA

            IMP:     39-71-201, 39-71-306, 39-71-915, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.908 to clarify that an insurer's failure to timely provide required summary reports subjects the insurer to potential liability for penalties, fines, and interest.  The department has recently noticed that some insurers have become lax in the timeliness of providing summary reports, and appear unwilling to address the department's repeated request for timely reports.

 

            24.29.954  CALCULATION OF AMOUNT OF ADMINISTRATION FUND ASSESSMENT  (1)  through (2)(d)  remain the same.

            (e)  loss of hearing, whether under the Workers' Compensation or Occupational Disease Acts Act for occupational diseases that occurred prior to July 1, 2005;

            (f)  through (3)(h) remain the same.

            (i)  hearing loss treatment, whether under the Workers' Compensation or Occupational Disease Acts Act for occupational diseases that occurred prior to July 1, 2005.

            (4)  through (9)(c)  remain the same.

            (d)  independent medical examinations requested by the insurer, where the purpose of the examination(s) is not for the diagnosis or treatment of the claimant's condition; and

            (e)  matching payments to a catastrophically injured worker's family; and

            (e)  remains the same, but is renumbered (f).

            (10)  through (12)  remain the same.

 

            AUTH:  39‑71-203, MCA

            IMP:     39-71-201, 39-71-203, 39-71-209, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.954 to provide for technical changes and updates to the rule's language while otherwise amending related rules.

 

            24.29.956  COMPUTATION AND COLLECTION OF THE ADMINISTRATION FUND ASSESSMENT PREMIUM SURCHARGE RATE FOR PLAN NO. 2 AND NO. 3  (1)  and (2)  remain the same.

            (a)  If the amount actually collected in premium surcharge is greater than 3% of the calculated assessment on paid losses from the prior assessment preceding year, the department shall subtract the excess amount from the 3% of paid losses for the next assessment.  If the amount actually collected in premium surcharge is less than the 3% of calculated assessment on paid losses from the prior assessment preceding year, the department shall add the underfunded amount to the 3% of paid losses for the next assessment.

            (b)  through (8)  remain the same.

 

            AUTH:  39-71-203, MCA

            IMP:     39‑71‑201, 39-71-203, 39-71-2352, MCA

 

REASON:  There is reasonable necessity to amend ARM 24.29.956 to make the provisions of the rule match up with changes to the underlying statutory provisions.

 

            4.  The proposed new rules provide as follows:

 

            NEW RULE I  SELF-INSURED EMPLOYERS AND GROUPS -- TRANSFER OF CLAIM LIABILITIES  (1)  Any current or former self-insurer or group may transfer existing workers' compensation liabilities to another entity upon authorization from the department and concurrence of the guaranty fund.  The self-insurer or group shall:

            (a)  make application for the transfer of the claims; and

            (b)  provide an actuarial analysis of the claims to be transferred.

            (2)  The transfer application and approval process and guidelines will be consistent with the application and approval process for all new or proposed self-insured entities as provided by part 21 of the Workers' Compensation Act and ARM Title 24, chapter 29, subchapter 6.

            (3)  The independent actuarial analysis of the employer's or group's claim liabilities must be made using the preceding year's data, including all years of self-insurance liabilities.  The actuarial report must be completed by a qualified actuary as defined by the American Academy of Actuaries.

            (4)  After the transfer of claims liabilities is complete, the new owner of the claims liabilities will have the same reporting requirements as all other prior self-insureds in Montana.

 

            AUTH:  39-71-203, MCA

            IMP:     39-71-2115, MCA

 

REASON:  There is reasonable necessity to adopt NEW RULE I in order to implement the provisions of section 2, Chapter 112, Laws of 2009 (House Bill 119), which requires rulemaking on the subject.  There is reasonable necessity to describe a process which will allow the department (and guaranty fund, when appropriate) to evaluate whether the proposed claims transfer increases, decreases, or does not affect the financial ability to pay claims, and how it affects the risk of default in payment.  In addition, it is reasonably necessary to specify that the entity assuming liability for the claims will have reporting responsibilities, so that the dissolution of the original self-insurer or self-insured group does not adversely affect the proper handling and reporting related to the claims.

 

            NEW RULE II  SECURITY DEPOSITS FOR PLAN NUMBER TWO INSURERS -- REPORTS  (1)  All insurers authorized by the Montana insurance commissioner's office to write workers' compensation must place a deposit with the department.  The deposit amount is determined by calculating the sum of the medical and indemnity payments from the most recently closed calendar year and multiplying that total by 40 percent, subject to the minimums and maximums required by the department.

            (a)  Periodic review by the department of an insurer's future claims liabilities may result in an increase in deposit requirements pursuant to 39-71-2215, MCA.

            (b)  Upon proof from the insurer that its liabilities have been reduced, a reduction of the amount held on deposit by the department may be granted at the department's discretion.  Requests for reduction in deposit may be submitted in writing to the department no more frequently than once every 12 months.

            (c)  The department may require 30 days advance written notice by the insurer of the insurer's intent to exchange one form of securities for another.

            (d)  Securities must remain on deposit until the department is satisfied all liabilities of the insurer arising under Title 39, chapter 71, MCA, have been met.

            (2)  A plan number two insurer may deposit one or more of the following securities to meet its obligation to make a security deposit as required by 39-71-2215, MCA:

            (a)  a United States Treasury note;

            (b)  a certificate of deposit; or

            (c)  an irrevocable letter of credit.

            (3)  The security deposit must be issued in the form prescribed by the department and must include a statement that the grantor of the security deposit is required to give the department 60 days advance notice of its intent to terminate future liability.  The grantor of the security deposit is not relieved of the liability for claims arising under Title 39, chapter 71, MCA, prior to the effective date of the termination.  Notice must be sent to the department via certified or registered mail.

            (a)  A security deposit in the form of a certificate of deposit must be issued by a financial institution located within the United States and must be fully insured by a federally chartered insurance corporation.

            (b)  A security deposit in the form of an irrevocable letter of credit must be issued by a financial institution located within the United States that is acceptable to the department, based on its financial ratings.

            (4)  The security deposit must name the department as obligee and must be held by the department.

            (a)  A safekeeping or custodial arrangement with a bank or trust company located in the city of Helena, Montana, may be authorized if:

            (i)  the department is satisfied such securities are held under the same conditions of security as if the securities had been deposited with the department; and

            (ii)  the department is satisfied the hours of business do not hinder department access to or ability to sell and/or collect on the securities.

            (b)  If the deposit of securities with the department will result in the need to handle the securities for exchange or remittance of coupons for collection of interest then the department, at its discretion, may require the securities be held in the safekeeping or custodial arrangement described above at the insurer's direct expense.

            (5)  The insurer is required to submit the following reports:

            (a)  a copy of the "Exhibit of Premium and Losses-Business in the State of Montana During the Year," from the insurer's annual statement of the preceding calendar year, as filed with the Montana insurance commissioner;

            (b)  a total summary of experience claim losses including, but not limited to, compensation and medical benefits and reserves for future liability as of May 1 of each year; and

            (c)  other reports and information as required by the department.

            (6)  The reports required by (5) must be filed with the department:

            (a)  upon the insurer's initial authorization by the Montana insurance commissioner's office to write workers' compensation insurance;

            (b)  by May 1 of each following year; and

            (c)  upon request of the department.

 

            AUTH:  39-71-203, MCA

            IMP:     39-71-2215, MCA

 

REASON:  There is reasonable necessity to adopt proposed NEW RULE II to clarify the financial conditions required by the type of security deposit placed by plan number two insurers with the department, and to implement 39-71-2215, MCA (enacted as Chap. 117, L. of 2007).  The purpose of the deposit is to provide a ready source of funds to pay claims arising under Title 39, chapter 71, MCA, in the event the plan number two insurer becomes insolvent, is placed in receivership, declares bankruptcy, seeks protection from its creditors, or is otherwise unwilling or unable to pay its liabilities.

 

            5.  Concerned persons may present their data, views, or arguments either orally or in writing at the hearing.  Written data, views, or arguments may also be submitted to: Bill Wheeler, Bureau Chief, Workers' Compensation Regulations Bureau, Employment Relations Division, Department of Labor and Industry, P.O. Box 8011, Helena, Montana 59624-8011; telephone (406) 444-6541; fax (406) 444-3465; TDD (406) 444-5549; or e-mail bwheeler@mt.gov, and must be received no later than 5:00 p.m., May 11, 2012.

 

            6.  An electronic copy of this Notice of Public Hearing is available through the department's web site on the World Wide Web at http://dli.mt.gov/events/calendar.asp.  The department strives to make the electronic copy of this notice conform to the official version of the notice, as printed in the Montana Administrative Register, but advises all concerned persons that in the event of a discrepancy between the official printed text of the notice and the electronic version of the notice, only the official printed text will be considered.  In addition, although the department strives to keep its web site accessible at all times, concerned persons should be aware that the web site may be unavailable during some periods, due to system maintenance or technical problems, and that technical difficulties in accessing or posting to the e-mail address do not excuse late submission of comments.

 

            7.  The department maintains a list of interested persons who wish to receive notices of rulemaking actions proposed by the department.  Persons who wish to have their name added to the list shall make a written request that includes the name, e-mail, and mailing address of the person to receive notices and specifies the person wishes to receive notices regarding all department administrative rulemaking proceedings or other administrative proceedings.  The request must indicate whether e-mail or standard mail is preferred.  Such written request may be sent or delivered to the Department of Labor and Industry, Office of Legal Services, attn: Mark Cadwallader, 1315 E. Lockey Ave., P.O. Box 1728, Helena, Montana 59624-1728; faxed to the office at (406) 444-1394; e-mailed to mcadwallader@mt.gov; or made by completing a request form at any rules hearing held by the agency.

 

            8.  The bill sponsor contact requirements of 2-4-302, MCA, apply to portions of this rulemaking notice, and have been fulfilled.  The primary bill sponsor of Chap. 117, Laws of 2007 (Senate Bill 108), was contacted on June 14, 2007, by mail.  Bill sponsor notification concerning the 2005 repeal of the Occupational Disease Act, and consolidation of occupational disease into the Workers' Compensation Act, was given to the primary bill sponsor on October 17, 2005, via mail.  The primary bill sponsor of Chapter 112, Laws of 2009 (House Bill 119) was contacted on or about May 14, 2009, via an in-person conversation.

 

            9.  The department's hearings bureau has been designated to preside over and conduct this hearing.

 

/s/  MARK CADWALLADER                   /s/  KEITH KELLY

Mark Cadwallader                                     Keith Kelly, Commissioner

Alternate Rule Reviewer                         DEPARTMENT OF LABOR AND INDUSTRY

 

 

 

            Certified to the Secretary of State April 2, 2012

 

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