Summary of Report 97-021

December 11, 1996

Report Number 97-021

No public funds are at risk in the System because it is financed by reinsurance premiums and carrier assessments, and the assessments do not qualify as offsets to premium taxes. As of September l, 1996, the System had 44 small-employer insurance carriers, with 18 group and 52 individual health plans reinsured (a total of 168 individuals).

Our recommendations concerning the System are as follows:

System Board of Directors
Amend the Plan of Operation to include System requirements for reinsured carriers to provide their own audits. This Plan of Operation provision will serve as notice and explanation to reinsured carriers. The Board may also wish to consider tracking loss ratios for the reinsured carriers to help evaluate System performance.

Department of Insurance
Consider asking the Legislature to change the two-year, non-staggered terms for the Board of Directors to two- or three-year staggered terms. Under current statute, unless a Board member agrees to serve another term, a new Board is created every two years.

Consider appointing a small carrier to the Board of Directors when a private-industry vacancy occurs. The five private-industry members currently serving the Board are from medium and large companies, but more small companies participate in the System.

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