Public entities self-insurance programs qualifying for exemption from the insurance code

Full Instructions

ORS 731.036 lists various "persons" that are completely exempt from application of the Insurance Code. Each subsection describes the type of entity and the specific activity that qualifies for exemption.

The Insurance Division requires the entity to file documentation BEFORE establishing the self-insurance program that proves it meets all the requirements for exemption.

The public entity should plan to file the documentation with the Insurance Division 3 to 6 months before implementation of the self-insurance program.

• ORS 731.036(4)return to top

  Person/Entity: Public bodies as defined in ORS 30.260

  Activity: Individually or jointly establishes a self-insurance program for tort liability in accordance with 30.282

  Before the public entity establishes a self-insurance program that is exempt from the Insurance Code, it must demonstrate to the Insurance Division that the program meets the requirements for exemption.

  The Insurance Division asks that the public entity provide a cover letter, along with relevant supporting documentation, that addresses each of the requirements listed in order for the self-insurance program to qualify for exemption.

  Requirements for Exemption:

  [Program established by 3 or more public bodies (ORS 30.282(6))]:

  1. Annual contributions to the program must total, in the aggregate, at least $1 million. See OAR 836-011-0253 for definition of "annual contributions." An actuarial study or program projections should be provided to support this requirement.
  2. The program must provide documentation that defines program benefits and administration. Please send a copy of the agreement between the parties that sets forth the benefits and administration of the program.
  3. Program contributions and reserves must be held in separate accounts and used for the exclusive benefit of the program. Please describe the fund that will be established to account for program contributions and costs. An independent audit of the fund will be required annually. See OAR 836-011-0253(2), 836-011-0260.
  4. The program must maintain adequate reserves, calculated annually on an actuarial basis. See OAR 836-011-0255 related to reserve adequacy. The cover letter should describe the actuarial services that will be employed by the program to meet this requirement. On an annual basis, to support the independently audited financial statement, the Insurance Division requests the actuarial report be filed with the audited financial statement.
  5. The program must maintain an unallocated reserve ("surplus") account equal to the greater of:
     • 25% of annual contributions, or
     • $250,000

     See OAR 836-011-0258 for provisions related to the unallocated reserve account. The cover letter should indicate the understanding of this requirement and confirmation that the program will maintain such reserves at all times.

  6. Annual audited financial statement.
     See OAR 836-011-0253 for definition of "annual financial statement" and 836-011-0260 for specification of due date.
  7. Maintain adequate excess of loss insurance. Please provide a copy of the excess of loss policy that the program plans to purchase.
  8. The program, a third party administrator or an owner of a third party administrator may not collect commissions or fees from an insurer. The cover letter should indicate the program will comply with this requirement.
  9. Please provide the federal employer identification number.

• ORS 731.036(5)return to top

  Person/Entity: Public bodies as defined in ORS 30.260

  Activity: Individually or jointly establishes a self-insurance program for property damage in accordance with 30.282

  Before the public entity establishes a self-insurance program that is exempt from the Insurance Code, it must demonstrate to the Insurance Division that the program meets the requirements for exemption.

  The Insurance Division asks that the public entity provide a cover letter, along with relevant supporting documentation, that addresses each of the requirements listed in order for the self-insurance program to qualify for exemption.

  Requirements for Exemption:

  [For 3 or more public bodies (ORS 30.282(6))]:

  1. Annual contributions to the program must total, in the aggregate, at least $1 million. See OAR 836-011-0253 for definition of "annual contributions." An actuarial study or program projections should be provided to support this requirement.
  2. The program must provide documentation that defines program benefits and administration. Please send a copy of the agreement between the parties that sets forth the benefits and administration of the program.
  3. Program contributions and reserves must be held in separate accounts and used for the exclusive benefit of the program. Please describe the fund that will be established to account for program contributions and costs. An independent audit of the fund will be required annually. See OAR 836-011-0253(2), 836-011-0260.
  4. The program must maintain adequate reserves, calculated annually on an actuarial basis. See OAR 836-011-0255 related to reserve adequacy. The cover letter should describe the actuarial services that will be employed by the program to meet this requirement. On an annual basis, to support the independently audited financial statement, the Insurance Division requests the actuarial report be filed with the audited financial statement.
  5. The program must maintain an unallocated reserve ("surplus") account equal to the greater of:
     • 25% of annual contributions, or
     • $250,000

     See OAR 836-011-0258 for provisions related to the unallocated reserve account. The cover letter should indicate the understanding of this requirement and confirmation that the program will maintain such reserves at all times.

  6. Annual audited financial statement.
     See OAR 836-011-0253 for definition of "annual financial statement" and 836-011-0260 for specification of due date.
  7. Maintain adequate excess of loss insurance. Please provide a copy of the excess of loss policy that the program plans to purchase.
  8. The program, a third party administrator or an owner of a third party administrator may not collect commissions or fees from an insurer. The cover letter should indicate the program will comply with this requirement.
  9. Please provide the federal employer identification number.

• ORS 731.036(6)return to top

  Person/Entity: Cities, counties, school districts … or districts defined in ORS 198.010 and 198.180

  Activity: Individually or jointly insure to provide health insurance to employees and dependents

  Before the public entity establishes a self-insurance program that is exempt from the Insurance Code, it must demonstrate to the Insurance Division that the program meets the requirements for exemption.

  The Insurance Division asks that the public entity provide a cover letter, along with relevant supporting documentation, that addresses each of the requirements listed in order for the self-insurance program to qualify for exemption.

  Requirements for Exemption:

  1. The program covers at least 500 members (employees and dependents, retired employees and dependents) (1,000 if entities jointly insure). Please provide copies of documents creating and governing the program, and that includes documentation of the number of covered members.
  2. The program must include all benefits required of group health insurance policies under ORS 743 and 743A. The program must have program documents that define benefits and administration and provides to enrollees written general information about services provided, access to services, charges and scheduling applicable to each enrollee's coverage; the program's grievance and appeal process; and other group health plan enrollee rights, disclosures, or written procedure requirements under ORS 743 and 743A.
  3. Copies of the forms used to communicate the coverage to members must be filed and confirmed compliant as required in (2) above. Please refer to the filing instructions and certification statement needed at the following link:
     http://www.cbs.state.or.us/ins/docs/serff/gp_health_majmed.html.
  4. The program must comply with the following financial administration requirements:
     • Program contributions and reserves are held in separate accounts and used for the exclusive benefit of the program;
     • The program maintains adequate reserves; and
     • The program obtains adequate reinsurance unless the Insurance Division approves and alternate arrangement.

     The cover letter should comment on how the program will comply with these requirements. An actuarial report or other study that includes a schedule of payments established to support the program should be provided.

  5. The program must have sufficient personnel to service enrollees or must contract with an Oregon-licensed third party administrator to provide enrollee services. The cover letter should indicate how the program will comply with this requirement.
  6. Provide an audited financial statement (or the annual audit required by ORS 297.425). The most recently available financial statement should be provided with the cover letter. Annually, a copy of the financial statement is required to be filed with the Insurance Division. The financial statement should include a schedule setting forth the costs incurred for the program.
  7. Please provide the federal employer identification number.

• ORS 731.036(10)return to top

  Person/Entity: Two or more affordable housing entities as defined in 731.036(10)(b)

  Activity: Self-insurance program for tort liability or property damage in accordance with 30.282(6).

  Before the public entity establishes a self-insurance program that is exempt from the Insurance Code, it must demonstrate to the Insurance Division that the program meets the requirements for exemption.

  The Insurance Division asks that the public entity provide a cover letter, along with relevant supporting documentation, that addresses each of the requirements listed in order for the self-insurance program to qualify for exemption.

  Requirements for Exemption:

  1. Annual contributions to the program must total, in the aggregate, at least $1 million. See OAR 836-011-0253 for definition of "annual contributions." An actuarial study or program projections should be provided to support this requirement.
  2. The program must provide documentation that defines program benefits and administration. Please send a copy of the agreement between the parties that sets forth the benefits and administration of the program.
  3. Program contributions and reserves must be held in separate accounts and used for the exclusive benefit of the program. Please describe the fund that will be established to account for program contributions and costs. An independent audit of the fund will be required annually. See OAR 836-011-0253(2), 836-011-0260.
  4. The program must maintain adequate reserves, calculated annually on an actuarial basis. See OAR 836-011-0255 related to reserve adequacy. The cover letter should describe the actuarial services that will be employed by the program to meet this requirement. On an annual basis, to support the independently audited financial statement, the Insurance Division requests the actuarial report be filed with the audited financial statement.
  5. The program must maintain an unallocated reserve ("surplus") account equal to the greater of:
     • (a) 25% of annual contributions, or
     • (b) $250,000

     See OAR 836-011-0258 for provisions related to the unallocated reserve account. The cover letter should indicate the understanding of this requirement and confirmation that the program will maintain such reserves at all times.

  6. Annual audited financial statement.
     See OAR 836-011-0253 for definition of "annual financial statement" and 836-011-0260 for specification of due date.
  7. Maintain adequate excess of loss insurance. Please provide a copy of the excess of loss policy that the program plans to purchase.
  8. The program, a third party administrator or an owner of a third party administrator may not collect commissions or fees from an insurer. The cover letter should indicate the program will comply with this requirement.
  9. Please provide the federal employer identification number.