Sections 44-5801 to 44-5816 shall be known and may be cited as the Third-Party Administrator Act.

For purposes of the Third-Party Administrator Act:

(1) Affiliate or affiliated shall mean any entity or person who, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with a specified entity or person;

(2) Control shall have the same meaning as in section 44-2121;

(3) Director shall mean the Director of Insurance;

(4) Insurance or insurance coverage shall mean any coverage offered or provided by an insurer;

(5) Insurer shall mean any person undertaking to provide life insurance, sickness and accident insurance, workers' compensation insurance coverage, or annuities in this state. Insurer shall include an authorized insurance company, a prepaid hospital or medical care plan, a health maintenance organization, or any other person providing a plan of insurance subject to state insurance regulation. Insurer shall include an employer who is approved by the Nebraska Workers' Compensation Court as a self-insurer. Insurer shall not include a bona fide employee benefit plan established by an employer or an employee organization, or both, for which the insurance laws of this state are preempted pursuant to the Employee Retirement Income Security Act of 1974, as the act existed on September 1, 2001;

(6) Third-party administrator shall mean a person who directly or indirectly solicits or effects coverage of, underwrites, collects charges or premiums from, or adjusts or settles claims on residents of this state or residents of another state from offices in this state, in connection with life insurance, sickness and accident insurance, workers' compensation insurance coverage, or annuities, except any of the following:

(a) An employer on behalf of its employees or the employees of one or more subsidiaries or affiliated corporations of such employer;

(b) A union on behalf of its members;

(c) An insurer which is authorized to transact the business of insurance in this state with respect to a policy lawfully issued and delivered in and pursuant to the laws of this state or another state;

(d) An insurance producer licensed to sell life insurance, sickness and accident insurance, workers' compensation insurance coverage, or annuities in this state whose activities are limited exclusively to the sale of insurance;

(e) A creditor on behalf of its debtors with respect to insurance covering a debt between the creditor and its debtors;

(f) A trust and its trustees, agents, and employees acting pursuant to such trust established in conformity with 29 U.S.C. 186, as such section existed on September 1, 2001;

(g) A trust exempt from taxation under section 501(a) of the Internal Revenue Code as defined in section 49-801.01, its trustees and employees acting pursuant to such trust, or a custodian and the custodian's agents or employees acting pursuant to a custodian account which meets the requirements of section 401(f) of the Internal Revenue Code as defined in section 49-801.01;

(h) A credit union or a financial institution which is subject to supervision or examination by federal or state banking authorities or a mortgage lender, to the extent it collects and remits premiums to licensed insurance agents or authorized insurers in connection with loan payments;

(i) A credit card issuing company which advances for and collects premiums or charges from its credit card holders who have authorized collection if the company does not adjust or settle claims;

(j) A person who adjusts or settles claims in the normal course of that person's practice or employment as an attorney at law and who does not collect charges or premiums in connection with life insurance, sickness and accident insurance, workers' compensation insurance coverage, or annuities;

(k) A person who acts solely as a third-party administrator of one or more bona fide employee benefit plans established by an employer or an employee organization, or both, for which the insurance laws of this state are preempted pursuant to the Employee Retirement Income Security Act of 1974, as the act existed on September 1, 2001; or

(l) A person licensed as a managing general agent in this state whose activities are limited exclusively to the scope of activities allowed under such license; and

(7) Underwrite or underwriting shall include, but not be limited to, the acceptance of employer or individual applications for insurance coverage of individuals in accordance with the written rules of the insurer, the overall planning and coordinating of an insurance program, and the ability to procure bonds and excess insurance.

(1) No third-party administrator shall act as such without a written agreement between the third-party administrator and the insurer, and such written agreement shall be retained as part of the official records of both the insurer and the third-party administrator for the duration of the agreement and for five years thereafter. The agreement shall contain all provisions required by the Third-Party Administrator Act except insofar as those provisions do not apply to the functions performed by the third-party administrator.

(2) The written agreement shall include a statement of duties which the third-party administrator is expected to perform on behalf of the insurer and the lines, classes, or types of insurance for which the third-party administrator is to be authorized to administer. The written agreement shall make provision with respect to underwriting or other standards pertaining to the insurance business underwritten by such insurer.

(3) The insurer or third-party administrator may, with written notice, terminate the written agreement for cause as provided in the written agreement. The insurer may suspend the underwriting authority of the third-party administrator during the pendency of any dispute regarding the cause for termination of the written agreement. The insurer shall fulfill any lawful obligations with respect to policies affected by the written agreement, regardless of any dispute between the insurer and the third-party administrator.

If an insurer utilizes the services of a third-party administrator, the payment to the third-party administrator of any charges and premiums by or on behalf of any policyholder, contract holder, certificate holder, or subscriber shall be deemed to have been received by the insurer, and the payment of return of premiums or claim payments forwarded by the insurer to the third-party administrator shall not be deemed to have been paid to the policyholder, contract holder, certificate holder, subscriber, or claimant until the payment is received by the policyholder, contract holder, certificate holder, subscriber, or claimant. Nothing in this section shall limit any right of the insurer against the third-party administrator resulting from the failure of the third-party administrator to make payments to the insurer, policyholders, contract holders, certificate holders, subscribers, or claimants.

(1) Every third-party administrator shall maintain and make available to the insurer complete records of all transactions performed on behalf of the insurer. The records shall be maintained in accordance with prudent standards of insurance record keeping and shall be maintained for a period of not less than five years from the date of their creation. In the event the insurer and the third-party administrator cancel their written agreement, the third-party administrator may, by written agreement with the insurer, transfer all records to a new third-party administrator rather than retain them for five years. In such cases, the new third-party administrator shall acknowledge, in writing, that it is responsible for retaining the records of the prior third-party administrator as required in this subsection.

(2)(a) The director shall have access to records maintained by a third-party administrator for the purposes of examination, audit, and inspection. Any trade secrets contained in such records, including the identity and addresses of policyholders, contract holders, certificate holders, and subscribers, shall be kept confidential, except that the director may use such information in any proceeding instituted against the third-party administrator and as set forth in subdivisions (2)(b) and (c) of this section.

(b) Records relating to a third-party administrator maintained by the director may be provided to other state, federal, foreign, and international regulatory and law enforcement agencies and the National Association of Insurance Commissioners and its affiliates and subsidiaries if the recipient agrees in writing to maintain the confidentiality of the records.

(c) The director may receive records maintained by a third-party administrator from other state, federal, foreign, or international regulatory and law enforcement agencies and from the National Association of Insurance Commissioners and its affiliates and subsidiaries. The director shall maintain as confidential or privileged records received pursuant to this subdivision with notice or the understanding that they are confidential or privileged under the laws of the jurisdiction that is the source of the information. Such information shall not be a public record subject to disclosure by the director pursuant to sections 84-712 to 84-712.09, subject to subpoena, subject to discovery, or admissible in evidence in any private civil action, except that the director may use such information in any regulatory or legal action brought by the director. The director, and any other person while acting under the authority of the director who has received information pursuant to this subdivision, may not, and shall not be required to, testify in any private civil action concerning any information subject to this section. Nothing in this section shall constitute a waiver of any applicable privilege or claim of confidentiality in the information received pursuant to this subdivision as a result of information sharing authorized by this section.

(3) The insurer shall own the records generated by the third-party administrator pertaining to the insurer; however, the third-party administrator shall retain the right to continuing access to records to permit the third-party administrator to fulfill all of its contractual obligations to policyholders, contract holders, certificate holders, subscribers, claimants, and the insurer.

A third-party administrator shall use only such advertising pertaining to the insurance business underwritten by an insurer as has been approved in writing by the insurer in advance of its use.

(1) If an insurer utilizes the services of a third-party administrator, the insurer shall be responsible for determining the benefits, premium rates, underwriting criteria, and claims-payment procedures and for securing reinsurance, if any. The rules pertaining to these matters shall be provided, in writing, by the insurer to the third-party administrator. The responsibilities of the third-party administrator as to any of these matters shall be set forth in the written agreement between the third-party administrator and the insurer.

(2) It shall be the sole responsibility of the insurer to provide for competent administration of its programs.

(3) In cases when a third-party administrator administers benefits for more than one hundred certificate holders or subscribers on behalf of an insurer, the insurer shall, at least semiannually, conduct a review of the operations of the third-party administrator. The director may require the insurer to conduct an onsite audit of the operations of the third-party administrator.

(1) All charges and premiums collected by a third-party administrator on behalf of or for an insurer or insurers and the return of premiums received from that insurer or insurers shall be held by the third-party administrator in a fiduciary capacity. Such funds shall be immediately remitted to the person or persons entitled to them or shall be deposited promptly in a fiduciary account established and maintained by the third-party administrator in a federally insured or state-insured financial institution. The written agreement between the third-party administrator and the insurer shall provide for the third-party administrator to periodically render an accounting to the insurer detailing all transactions performed by the third-party administrator pertaining to the insurance business underwritten by the insurer.

(2) If charges and premiums deposited in a fiduciary account have been collected on behalf of or for one or more insurers, the third-party administrator shall keep records clearly recording the deposits in and withdrawals from the fiduciary account on behalf of each insurer. The third-party administrator shall keep copies of all the records pertaining to such deposits and withdrawals and, upon request of an insurer, shall furnish the insurer with copies of the records.

(3) The third-party administrator shall not pay any claim by withdrawals from a fiduciary account in which charges and premiums are deposited. Withdrawals from such account shall be made as provided in the written agreement between the third-party administrator and the insurer. The written agreement shall address, but not be limited to, the following:

(a) Remittance to an insurer entitled to remittance;

(b) Deposit in an account maintained in the name of the insurer;

(c) Transfer to and deposit in a claims-paying account, with claims to be paid as provided for in subsection (4) of this section;

(d) Payment to a group policyholder or group contract holder for remittance to the insurer entitled to such remittance;

(e) Payment to the third-party administrator of its commissions, fees, or charges; and

(f) Remittance of return of premium to the person or persons entitled to such return of premium.

(4) All claims paid by the third-party administrator from funds collected on behalf of or for an insurer shall be paid only on drafts or checks of and as authorized by the insurer.

A third-party administrator shall not enter into any agreement or understanding with an insurer in which the effect is to make the amount of the third-party administrator's commissions, fees, or charges contingent upon savings effected in the adjustment, settlement, and payment of losses covered by the insurer's obligations. This section shall not prohibit a third-party administrator from receiving performance-based compensation for providing hospital or other auditing services. This section shall not prohibit a third-party administrator from receiving compensation based on premiums or charges collected or the number of claims paid or processed.

(1) If an insurer utilizes the services of a third-party administrator, the third-party administrator shall provide a written notice approved by the insurer to certificate holders or subscribers advising them of the identity of and relationship among the third-party administrator, the policyholder or contract holder, and the insurer.

(2) When a third-party administrator collects charges, the reason for collection of each item shall be identified to the policyholder or contract holder and each item shall be shown separately from any premium. Additional charges shall not be made for services to the extent the services have been paid for by the insurer.

(3) The third-party administrator shall disclose to the insurer all charges, fees, and commissions received in connection with the providing of administrative services for the insurer, including any fees or commissions paid by insurers providing reinsurance.

Any policies, contracts, certificates, booklets, termination notices, or other written communications delivered by the insurer to the third-party administrator for delivery to policyholders, contract holders, certificate holders, or subscribers shall be delivered by the third-party administrator promptly after receipt of instructions from the insurer to deliver them.

(1) No person shall act as, offer to act as, or hold himself or herself out to be a third-party administrator in this state without a valid certificate of authority as a third-party administrator issued by the director.

(2) An applicant for a certificate of authority as a third-party administrator shall make application to the director upon a form to be furnished by the director. The application shall include or be accompanied by an application fee of two hundred dollars and by the following information and documents:

(a) All basic organizational documents of the applicant, including any articles of incorporation, articles of association, articles of organization, partnership agreement, trade name certificate, trust agreement, shareholder agreement, and other applicable documents and all amendments to such documents;

(b) The bylaws, rules, regulations, or similar documents regulating the internal affairs of the applicant;

(c) The names, addresses, official positions, and professional qualifications of the individuals who are responsible for the conduct of affairs of the applicant, including all members of the board of directors, board of trustees, executive committee, or other governing board or committee, the principal officers in the case of a corporation or the partners or members in the case of a partnership, limited liability company, or association, shareholders holding directly or indirectly ten percent or more of the voting securities of the applicant, and any other person who exercises control or influence over the affairs of the applicant;

(d) Annual financial statements or reports for the two most recent years which prove that the applicant is solvent and such information as the director may require in order to review the current financial condition of the applicant;

(e) A statement describing the business plan including information on staffing levels and activities proposed in this state and nationwide. The business plan shall provide details setting forth the applicant's capability for providing a sufficient number of experienced and qualified personnel in the areas of claims processing, record keeping, and underwriting;

(f) If the applicant will be managing the solicitation of new or renewal business, proof that it employs or has contracted with an agent licensed in this state for solicitation and taking of applications. Any applicant which intends to directly solicit insurance contracts or to otherwise act as an insurance agent shall provide proof that it has a license as an insurance agent in this state; and

(g) Such other pertinent information as may be required by the director.

(3) The applicant shall make available for inspection by the director copies of all written agreements with insurers and contracts with other persons utilizing the services of the applicant.

(4) The director may refuse to issue a certificate of authority as a third-party administrator if the director determines that the applicant or any individual responsible for the conduct of affairs of the applicant as described in subdivision (2)(c) of this section is not competent, trustworthy, financially responsible, or of good personal and business reputation or has had an insurance license or certificate of authority or a third-party administrator license or certificate of authority denied or revoked for cause by any state.

(5) A certificate of authority as a third-party administrator issued under this section shall remain valid, unless surrendered to or suspended or revoked by the director, for so long as the third-party administrator continues in business in this state and remains in compliance with the Third-Party Administrator Act.

(6) A third-party administrator shall not be required to hold a certificate of authority as a third-party administrator in this state if all of the following conditions are met:

(a) The third-party administrator has its principal place of business in another state;

(b) The third-party administrator is not soliciting business as a third-party administrator in this state; and

(c) In the case of any group policy, group contract, or plan of insurance serviced by the third-party administrator, the lesser of five percent or one hundred certificate holders or subscribers reside in this state.

(7) A person shall not be required to hold a certificate of authority as a third-party administrator in this state if the person exclusively provides services to one or more bona fide employee benefit plans each of which is established by an employer or an employee organization, or both, and for which the insurance laws of this state are preempted pursuant to the Employee Retirement Income Security Act of 1974. Such person shall register with the director annually and verify his or her status as described in this section.

(8) A third-party administrator shall immediately notify the director of any material change in its ownership or control or other fact or circumstance affecting its qualification for a certificate of authority as a third-party administrator in this state.

Upon request from a third-party administrator, the director may waive the application requirements of subsection (2) of section 44-5812 if the third-party administrator has a valid certificate of authority as a third-party administrator issued in a state which has requirements for third-party administrators that are at least as stringent as those contained in the Third-Party Administrator Act.

(1) Each third-party administrator shall file an annual report for the preceding calendar year with the director on or before March 1 of each year or within such extension of time therefor as the director for good cause may grant. The annual report shall be in the form and contain such matters as the director prescribes and shall be verified by at least two officers of the third-party administrator.

(2) The annual report shall include the complete names and addresses of all insurers with which the third-party administrator had a written agreement during the preceding fiscal year.

(3) At the time of filing its annual report, the third-party administrator shall pay to the director a filing fee of two hundred dollars.

(4)(a) Within seven business days after the failure of a third-party administrator to comply with the requirements of this section, the director shall notify the third-party administrator of such failure.

(b) Subject to subdivision (4)(c) of this section, if a third-party administrator fails to comply with the requirements of this section and any rules and regulations adopted and promulgated under this section and any orders issued under this section:

(i) Such third-party administrator shall pay a fine of fifty dollars for each day thereafter such failure continues and the third-party administrator continues to transact any business of insurance; and

(ii) In addition to the fine required under subdivision (4)(b)(i) of this section, the director may suspend the certificate of authority of the third-party administrator until it has complied with the requirements of this section, any rules and regulations adopted and promulgated under this section, and any orders issued under this section. The director shall remit all such fines to the State Treasurer for distribution in accordance with Article VII, section 5, of the Constitution of Nebraska.

(c) For good and sufficient cause shown, the director may grant a reasonable extension of time not to exceed thirty days within which the annual report may be filed as required under this section without the fine required under subdivision (4)(b)(i) of this section and without any suspension authorized under subdivision (4)(b)(ii) of this section.

(1) The director shall suspend or revoke the certificate of authority as a third-party administrator if the director finds that the third-party administrator:

(a) Is in an unsound financial condition;

(b) Is using such methods or practices in the conduct of its business so as to render its further transaction of business in this state hazardous or injurious to certificate holders, subscribers, or the public; or

(c) Has failed to pay any judgment rendered against it in this state within sixty days after the judgment has become final.

(2) The director may, in his or her discretion, suspend or revoke the certificate of authority as a third-party administrator if the director finds that the third-party administrator:

(a) Has violated any lawful rule or regulation or order of the director or any provision of the insurance laws of this state;

(b) Has refused to be examined or to produce its accounts, records, and files for examination or if any of its officers has refused to give information with respect to its affairs or has refused to perform any other legal obligation as to such examination, when required by the director;

(c) Has, without just cause, refused to pay proper claims or perform services arising under its contracts or has, without just cause, caused certificate holders, subscribers, or claimants to accept less than the amount due them or caused certificate holders, subscribers, or claimants to retain attorneys or bring actions against the third-party administrator to secure full payment or settlement of such claims;

(d) Is affiliated with or under the same general management or interlocking directorate or ownership as another third-party administrator or insurer which unlawfully transacts business in this state without having a certificate of authority as a third-party administrator;

(e) At any time fails to meet any qualification for which issuance of the certificate of authority as a third-party administrator could have been refused had such failure then existed and been known to the director;

(f) Has been convicted of or has entered a plea of guilty or nolo contendere to a felony without regard to whether adjudication was withheld; or

(g) Is under suspension or revocation in another state.

(3) The director may, in his or her discretion and without advance notice or hearing thereon, immediately suspend the certificate of authority as a third-party administrator if the director finds that one or more of the following circumstances exist:

(a) The third-party administrator is insolvent or impaired;

(b) A proceeding for supervision, rehabilitation, conservation, receivership, or other delinquency proceeding regarding the third-party administrator has been commenced in any state; or

(c) The financial condition or business practices of the third-party administrator otherwise pose an imminent threat to the public health, safety, or welfare of the residents of this state.

(4) Except as provided in subsection (4) of section 44-5814, if the director finds that one or more grounds exist for the suspension or revocation of a certificate of authority as a third-party administrator, the director may, in lieu of such suspension or revocation and after notice and hearing, impose an administrative penalty upon the third-party administrator in an amount not less than one thousand dollars nor more than ten thousand dollars.

The director may adopt and promulgate rules and regulations to carry out the Third-Party Administrator Act.