Third Party Administrator Certificate of Authority

The Office of Financial and Insurance Regulation issues

A. NAME OF PERMIT OR APPROVAL:

Third Party Administrator Certificate of Approval

B. STATUTORY AUTHORITY:

Third Party Administrator Act

C. APPLICABLE REGULATION:

N/A

D. SUMMARY OF PERMIT/APPROVAL PROCESS:

 1.  Applicability (activities that require the permit)

A person or entity who processes claims pursuant to a service contract and who may also provide 1 or more administrative services pursuant to a service contract, other than under a worker's compensation self-insurance program pursuant to Section 611 of the worker's disability compensation act of 1969, Act. No. 317 of the Public Acts of 1969, being Section 418.611 of the Michigan Compiled Laws. Third party administrator does not include a carrier or employer sponsoring a plan.

Per MCL 550.910(3), if the entity or individual fits this definition of a TPA, the entity or person must be certified as a TPA in the State of Michigan if one of the following is true:

• The TPA is domiciled in this state.
• The TPA has its principal administrative office or principal headquarters located in this state.
• The TPA solicits a plan or sponsor of a plan or provides administrative services to a plan or sponsor of a plan, which plan or sponsor is either domiciled in this state or has its principal headquarters or principal administrative office in this state. This subdivision shall not apply to a TPA who has been licensed or certified as a TPA in that TPA's state of domicile pursuant to a statute or regulation similar to this act.
• The TPA provides substantial administrative services to a carrier for the carrier's business in this state.

NOTE: Generally, substantial administrative services would mean premiums of $25,000 per year collected from Michigan residents insured under plans administered by the TPA.

The following require certification as a TPA:

• An entity that processes claims or subcontracts the processing of claims under a written service contract with an employer, client, insurance company, etc. Medical claims include surgical, dental, vision, pharmaceutical, disability, long-term care, cafeteria plans with a health component, non-self-funded worker's compensation medical plans, and credit disability.
• An insurance producer/agent who processes claims for health care benefits under a service contract with a carrier, as defined above.
• Subsidiaries of a TPA that are processing health claims need to be dually certified as TPAs. Divisions of the TPA that are processing claims do not need to be separately certified as TPAs.

The following DO NOT require certification as a TPA:

• An admitted licensed insurance company.
• Utilization review corporations and individuals only doing utilization review.

A Michigan licensed Health Maintenance Organization (HMO) cannot be a TPA.

Additionally, an Alternative Health Care Financing and Delivery System (AFDS) cannot be a TPA. A nonresident entity does not need to register as a foreign corporation in Michigan in order to apply for a TPA Certificate of Authority.

Adjusting

It is not necessary to employ an adjuster to be certified as a TPA if the TPA is processing only medical claims. However, if the TPA has a contract to process/adjust Property and Casualty claims (in addition to medical claims) and there is an individual who is adjusting Property and Casualty, that individual must be licensed as an insurance adjuster. Likewise, an individual who is adjusting Worker's Compensation losses must be licensed. Any insurance company staff adjusters do not need to be licensed.

 2.  Pre-Application Requirements

There are no pre-application requirements for Third Party Administrator Certificate of Approvals.

 3.  Application Submission Requirements

The entire application process should be completed within six months of the date it was originally received by our office.

The following forms comprise the entire application package:

• FIS 0849 Application Checklist. Please use to ensure all required application materials are submitted.
• FIS 0861 Application for Certificate of Authority.
• FIS 0860 Consent to Service. For entities domiciled in states other than Michigan.
• FIS 0862 Affiliation Statement. For all officers, directors, and stockholders of 10% or more stock.
• FIS 0863 Fee Processing Card.
• FIS 0850 Financial Statement.

Financial Viability in lieu of submitting the FIS 0850 Financial Statement, an audited financial statement for the period ending closest to the date of application may be submitted, accompanied by the notarized first page of the FIS 0850. Audited financial statements of an applicant's parent company are not relevant and will not be accepted.

A TPA will be considered financially viable under 550.912(1)(e) if (1) if it received an unqualified opinion from an independent public accountant showing it is solvent based upon generally accepted accounting principles, or (2) it remains solvent after adjusting for goodwill and intangible assets if no independent public accountant opinion is obtained. In the event an applicant or licensed TPA does not meet either of these criteria, they must submit other legitimate proof of financial viability to OFIS.

 4.  Procedures and Time-Frame for Obtaining Permit or Approval

Applications are reviewed within 60 days of receipt by our office.

 5.  Operational Requirements

Renewal - Proving Financial Viability

Per MCL 500.936, a TPA must prove financial viability each year. In January, an invoice is mailed for the financial statement review of $25.00. Either a FIS 0850 Financial Statement or independent financial form plus the FIS 0850 page 1 must be submitted. The FIS 0865 Jurat Page reporting pertinent demographic information and the company's current officers, directors and stockholders must also be submitted. The completed financial statement, invoice stub, payment and jurat page must be received by our office by the March 1 deadline. This deadline is mandated by law. An extension may be granted if requested in writing, but the extension can be made only until April 1. Note that failure to file, late filing, or incorrect payment will result in penalty, including termination of your certificate of authority as a TPA. If a concern results from the financial review, our office will contact the TPA with those concerns and how they can be eliminated. The certificate of authority is perpetual as long as the TPA is compliant with the TPA Act.

Amendments to the TPA

Our office should be notified in writing immediately within 30 days of any of the following changes:

• Change of mailing address/change of name. The TPA must report a change of mailing address in writing within 30 days. If the TPA changes its name, it must report this in writing and include Amended Articles of Incorporation (or other applicable documents). There is no charge. A new Certificate of Authority will be created automatically if a name change occurs.
• Change of person or address designated to receive service of process. Report on FIS 0860 Consent to Service.
• Adoption of any assumed name/DBA. Report on FIS 0865 Jurat Page, accompanied by a true copy of the DBA filing.
• Change in articles of incorporation or bylaws. Report on FIS 0865 Jurat Page, accompanied by a true copy of the filing.
• Change of the corporate entity or federal identification number. Change of the corporate entity, such as a merger or re-incorporation, is deemed to be significant. If new officers, directors, or stockholders of 10% or more result from a merger, each new individual or entity must complete a form FIS 0862. A change of FEIN requires a new FIS 0861 Third Party Administrator Application for Certificate of Authority, accompanied by new forms and fees for the new entity.
• Change in officers, directors, or shareholders holding 10% or more of the TPA's stock. A FIS 0862 Affiliation Statement will be required if one has not already been filed for the individual(s) or entities.
• Change in status of the business. For example, if you are going to cease acting as a TPA, you must inform this office in writing.

Letter of Certification

A duplicate Certificate of Authority may be requested by submitting an FIS 0261 Document Request. Write "Attn TPA Analyst" at the top. (There is no charge for this service.)

 6.  Fees

• Application fee for all applicants - $250.00($200.00 application fee, $25.00 certificate fee, $25.00 financial review fee)
• Renewal fee - $25.00 financial review fee

 7.  Appeal Process

Appeals may be made pursuant to PA 306 of 1969, the Administrative Procedures Act.

 8.  Public Input Opportunities

We encourage consumers to first attempt to resolve disputes directly with their financial service entity. If a resolution cannot be reached, our office can try to help resolve a dispute. A complaint form must be completed for for the type of financial service you are having difficulty with.

• Insurance Complaint Form and Guide to Resolving Problems
• Insurance Complaint Form (download to use typewriter feature, requires Acrobat Reader v7.0.9 or higher)
• Insurance Business-to-Business Complaint Guide

E. Contact Information:

Contact Us

Creation/Revision Date:

October 8, 2010