FAQs: Health Group Cooperatives

1. Where can I obtain a copy of Act 180?
    
   Please click the link below that will take you to the South Carolina Legislature's website where you can view Act 180.
    
   Act 180 - Health Group Cooperatives
      
2. What is the approximate date that small businesses will be able to join a health group cooperative?
    
   The Act became effective on February 19, 2008. Once the health group cooperative has met the requirements set forth in Act 180 small businesses will be able to join.
    
3. Do you have other small businesses contacting you interested in joining existing or currently-forming cooperatives?
    
   Yes.  While there has been a great deal of interest in health group cooperatives, no cooperatives have been formed as of May 2008.
    
4. We are a company with two employees. We are interested in obtaining health insurance under Act 180 recently signed into law. How do we need to do to apply for this insurance?
    
   Section 38-71-1345 provides that small employers must join a health group cooperative established pursuant to the requirements of Act 180. No health group cooperatives have been formed at this time.
    
5. Can ten sole proprietors form a health group cooperative? 
    
   Yes. Health group cooperatives are permitted to attempt to obtain coverage for small employer groups that contain fewer than two eligible employees; however, such attempt to obtain coverage is subject to the medical underwriting requirements and policies of the small employer insurer.
    
6. Can a company that already has coverage elsewhere join a health group cooperative?
    
   Yes.  Section 38-71-1345(A)(2) provides that a small employer's participation in a cooperative is voluntary, but an employer electing to participate in a cooperative shall commit to purchasing coverage through the cooperative for five years.  There is nothing in the law that would preclude an employer from purchasing from an insurer and a properly formed health group cooperative.
    
7. The 5 year commitment for members. It states that a member can get out based on financial hardships. Can the association set up other rules for the member getting out of the plan other than financial hardships? 
    
   No. See Section 38-71-1345(A)(2).  An association may not set up other rules for the member getting out of the plan other than financial hardships.
    
8. How do you define financial hardship?
    
   Financial hardship will be determined on a case by case basis.  The Department will consider the following objective factors in determining whether a financial hardship exists:  1) bankruptcy petition; 2) a statement or report from a certified public accountant indicating that the employer’s business is no longer a going concern; and 3) whether the increase in premium charged (if more than 50%) for the coverage renders the business unable to meet its payroll or other financial obligations.
    
9. Does the insurance company determine when new employers can enroll in the plan or will the rules of Act 180 determine it?
    
   See Section 38-71-1345(A)(3). The provisions of Act 180 are controlling. Section 38-71-1345(3) states that the health group cooperative shall hold an open enrollment period at least once a year during which new members may join the health group cooperative.
    
10. If a new member wishes to join the Health Group Cooperative other than during the open enrollment, can the Health Group Cooperative and carrier allow it?
     
    Yes.  See Section 38-71-1345(A)(3). The health group cooperative shall hold an open enrollment period at least once a year during which new members may join the health group cooperative. The health group cooperative must follow the rules of the insurer’s program.  The health group cooperative and the insurer may decide to allow a new member to join the health group cooperative other than during open enrollment.
     
11. Will the cooperative be underwritten by a carrier as a "large" group or will each employer with 2 to 50 employees be underwritten separately? 
     
    See Section 38-71-1345(A)(5). This Act applies to small employer groups.  A small group is defined as a group of 2 to 50.  Accordingly, an insurer must follow the underwriting guidelines applicable to small groups.
     
12. Section 38-71-1345(A)(7) states that the health group cooperative can use any type of rating arrangement with the health insurance plans. It further states in item 7 (a) each member small employer separately is subject to the laws governing small employer health insurance;  and (b) the entire group as a whole shall charge each insured person based on a community rate within the health group cooperative, adjusted for case characteristics as permitted by Section 38-71-940 and plan selection, and is subject to the laws governing group accident and health insurance. Section 38-71-940 states that each  group can be rated up.
    
    Does this mean that each new member/employer can be rated up by the guidelines in section 38-71-940?
       
    Yes.  Each new member/employer can be rated up if the health insurance plan offered through the health group cooperative rates each member/small employer separately as permitted by 38-71-1345(a).
     
13. If agreed by the health group cooperative, can the carrier bill each member rather than the health group cooperative collecting premiums?
     
    Generally, insurance premiums are collected through payroll deduction and remitted by the employer to the insurer.  Section 38-71-1355(2) states a health group cooperative shall collect the premiums to cover the cost of group health insurance plan coverage purchased through the cooperative; and the cooperative's administrative expenses.
     
14. How will premiums be established?
     
    Section 38-71-1345(A)(7) states that the health group cooperative can use any type of rating arrangement with the health insurance plans. It further states that health insurance plan offered through the health group cooperative that rates:
     
    (a)    each member small employer separately is subject to the laws governing small employer health insurance; and
     
    (b)    the entire group as a whole shall charge each insured person based on a community rate within the health group cooperative, adjusted for case characteristics as permitted by Section 38-71-940 and plan selection, and is subject to the laws governing group accident and health insurance.
     
    Thus, if the health insurance plan offered through the health group cooperative, rates each member small employer separately, then the rates are subject to the laws governing small employer health insurance. If the health insurance plan offered through the health group cooperative rates the entire group as a whole, then each insured person is charged a community rate which may be adjusted for case characteristics as permitted by Section 38-71-940 and plan selection.
     
15. How long does it take to form a health group cooperative? For instance, how long will it take for the paperwork to be processed?
     
    See Section 38-71-1345(B)(2)(a) and Bulletin 2008-02. The health group cooperative must be organized as a nonprofit corporation and have the rights and duties pursuant to the provisions of Chapter 31, Title 33 (South Carolina Nonprofit Corporations Act). On receipt of a certificate of incorporation from the South Carolina Secretary of State, the cooperative shall file written notification of the receipt of the certificate and a copy of the cooperative's organizational documents with the director.  Once the health group cooperative is formed, it must complete the application process as outlined in Bulletin 2008-02 Section II B. Once the application is received by the Department every effort will be made to review in a timely manner.
     
16. Who will be the plan sponsor?
     
    Section 38-71-1345(C) states that the plan sponsor may be a sponsoring entity, such as a business association, chamber of commerce, or other organization representing employers or serving an analogous function.
     
17. Can an insurance agency sponsor a health group cooperative and an agent become its executive director (assuming a board of health group cooperative member employers is elected for the governance)?
     
    No.  An insurance agency or an agent may not form a health group cooperative.  This would constitute a conflict of interest.  Health insurance agents are appointed and generally represent the interests of the insurer.
     
    A small employer insurer may not form, or be a member of, a health group cooperative.  An insurer may associate with a sponsoring entity, such as a business association, chamber of commerce, or other organization representing employers or serving an analogous function, to assist the sponsoring entity in forming a health group cooperative.
     
18. Can the Chamber of Commerce be the nonprofit organization? If not, does the health group cooperative have to be a nonprofit organization formed for the purpose of obtaining insurance?
     
    Nothing in the statute precludes a chamber of commerce from forming as a nonprofit organization.  The chamber would have to comply with state law governing the organization and formation of nonprofit entities.  This law does require health group cooperatives to be organized as a nonprofit.  Section 38-71-1345(A) provides that a health group cooperative of small employers may be formed only for the purpose of obtaining insurance.
     
19. Will a list of insurance companies that offer coverage to health group cooperatives be provided?
     
    Currently, the Department does not have a list of insurers that offer coverage to health group cooperatives. You may access a list of insurers that provide health insurance for small employers by clicking the link below.
     
    Health Insurers for Small Employers
      
20. Are there any restrictions on plan design?
     
    No.  Th statute does not contain any restrictions on plan design other than those in existing law applicable to small employer insurers.  Additionally, section 38-71-1355(1) limits health insurance plan coverage to small employers who are members of the cooperative.  Insurers must also follow the other guidelines for coverage outlined in the Act and those applicable to small group health insurance coverage.
     
21. Are the plans a health group cooperative offers considered to be the offerings of a single carrier, or does "plans" imply multiple insurers within a single health group cooperative?
     
    Section 38-71-1355(1) provides that the health group cooperative shall arrange for group health insurance plan coverage for small employers who are members of the cooperative by contracting with small employer insurers who meet the criteria established by this chapter for coverage under group health insurance plans. An insurer may offer different plans to the employer.  Also, the health group cooperative may have more than one carrier. The health group cooperative determines if coverage will be offered by multiple insurers.
     
22. Do the responsibilities of Section 38-71-1365 fall upon the executive director and board of the health group cooperative?
     
    Yes. It is the responsibility of the executive director and board of the health group cooperative to contract with an insurer that meets the requirements set forth in Section 38-71-1365.
     
23. Can the health group cooperative be set up to serve a specific industry?
     
    Bulletin 2008-02 provides that a health group cooperative shall accept for membership in the cooperative any eligible employer which agrees to pay the membership fee and a premium for coverage through the cooperative and which abides by the bylaws and rules of the cooperative. Each cooperative shall serve a particular geographic area of the state that consists of either one entire county or more than one contiguous entire county.  
     
24. Can the Department of Insurance provide any additional information as to the requirements for the health group  cooperative?
     
    Please refer to Bulletin 2008-02.
     
25. Will a regular plan of medical insurance be offered to the cooperative or will it just be a “Standard or Basic” plan?
     
    The level of coverage and the plan design is something that will be negotiated by the health group cooperative and the insurer.  Bulletin 2008-02 states that the health group cooperative annually must offer to all cooperative members all health plans and other insurance offered by insurers which meet the requirements of 38-71-1365. 
     
26. Can an Association that does business in South Carolina form a "cooperative" and then require companies to be a member of the Association in order to participate in the “cooperative”?
     
    No. A cooperative shall accept for membership in the cooperative any eligible employer which agrees to pay the membership fee and a premium for coverage through the cooperative and which abides by the bylaws and rules of the cooperative.
     
27. Has the DOI developed any guidelines for provisions in the bylaws? 
     
    Bulletin 2008-02 Section V outlines the general powers of the cooperative.  Please consult the attorney of your choice for any assistance required in the formation and operation of the cooperative.