State Of Rhode Island and Providence Plantations DEPARTMENT OF BUSINESS REGULATION Insurance Division 1511 Pontiac Avenue, Bldg, 69-2 Cranston, Rhode Island 02920 INTHE MATTER OF: : HMA ADMINISTRATORS, LLC DBR No. 09-1-0115 RESPONDENT. ORDER TO SHOW CAUSE, NOTICE OF HEARING AND APPOINTMENT OF HEARING OFFICER Pursuant to R.L Gen. Laws §§ 27-20.7-1 et seq., 42-14-16 and 42-35-9, the Director of the Department of Business Regulation (“Department”) hereby issues this Order to Show Cause, Notice of Hearing and Appointment of Hearing Officer (“Order”) to HMA. Administrators, LLC (“HMA”) requiring HMA to appear before the Department and to answer why the Director of the Department should not issue an order revoking HMA’s registration as a Third Party Administrator pursuant to 27-20.7-12(g); requiring HMA to Cease and Desist all activities for which a Third Party Administrator registration or certificate is required including but not limited to the marketing and sale of health benefit plans and/or issue whatever penalty is determined to be appropriate pursuant to RL. Gen. Laws § 42-14-16, ‘The Director issues this Order for the following reasons: 1. HMAholds a Rhode Island Third Party Administrator (“TPA”) license number 1003196 pursuant to R.L. Gen Laws § 27-20.7-12(e). 2. RI Gen. Laws § 27-20.7-1 ef seg. requires that anyone administering health benefit plans must obtain a TPA license fiom the Rhode Island insurance division,unless it falls within an exemption, such as holding an insurance producers license ora license as an insurer. HMA does not fall within any of the exemptions RL Gen Laws § 27-20.7-1 et seq establishes two types TPA licenses. The first type, ag TPA certificate of authority, covers TPAs that provide services such as soliciting or effecting coverage, underwriting, collecting premiums or charges, and adjusting or settling claims. The second type, a TPA registration, only allows a TPA to provide TPA services exclusively to self-funded employee welfare benefit plans that are not insured and are exempt from state law under the Employee Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq (ERISA). This second TPA license is established by R.. Gen Laws § 27-20.7- 12(g). On April 1, 2007 HMA was granted the limited TPA license as a registered TPA pursuant to RI. Gen Laws § 27-20.7-12(g) on the representation that its, administration was limited to self-funded employee welfare benefit plans that are not insured and are exempt from state law under the Employee Retirement Income Security Act of 1974, 29 U. 1001 et seq. (ERISA). The plans sold by HMA in Rhode Island were not exempt from state law under ERISA. In fact, HMA marketed plans which included a self funded retention with a stop loss insurance policy issued by HM Life Insurance Company. In order to market the products HMA was marketing in Rhode Island it would have had to hold a the more general TPA license—a full certificate of authority— asa Third Party Administrator under R1. Gen. Laws § 27-20.7-12.10. n 12, 13 In June of 2008 HMA marketed and sold a self funded plan with an insured stop loss policy to C. B. Utility Company, Inc. (“C. B. Utility”) in Bristol, Rhode Island. In the sale of this health benefit plan, HMA violated Rhode Island law by considering the health status of the employees in the group and requiring that one employee, with a poor health status, obtain an individual health insurance policy from Rhode Island’s individual market of last resort. ‘The Department is informed and believes that HMA arranged for this individual to obtain a health insurance policy form Blue Cross by misrepresenting the true facts as to the status of this individual. ‘The Department is informed and believes that although C.B. Utilities paid the full “premium” agreed upon every month, HMA did not pay and/or delayed payment of claims. The Department is informed and believes that the terms and costs of the health benefit plan were misrepresented by HMA employees to C.B. Utilities. formed and believes that HMA altered a “rate sheet” which ‘The Department i set forth the terms of the agreement between C.B. Utilities and HMA making it look like C.B. Utilities agreed to terms which it had not. ‘The Department is informed and believes that HMA is not timely paying claims under the health benefit plan. Therefore, the Director orders HMA to appear before a hearing officer at the Department on June 5, 2009 at 10:00 a.m. at the Department's offices located at 1511 Pontiac Avenue, Bldg. 69-2 Cranston, RI 02920. On June 5, 2008 the Department will