Equitable distribution of losses; reinsurance pools; necessity of membership; plan of operation; cost containment programs
Section 65C. (1) All losses incurred under policies issued to employers under section sixty-five A shall be equitably distributed among all insurers authorized to transact and transacting workers' compensation insurance in the commonwealth. Such distribution of losses shall be effected through a reinsurance pool constituted by and comprised of all insurers writing workers' compensation insurance in the commonwealth. No insurer, as defined in subparagraph (7) of section one, and including any insurance company, reciprocal or interinsurance exchange which has contracted with an employer to pay the compensation provided for by this chapter, shall be authorized to write or to continue to write workers' compensation insurance in this commonwealth unless such insurer is a member of the reinsurance pool established herein.
The commissioner of insurance shall designate a rating organization, duly qualified under section fifty-two C, to administer the reinsurance pool in such manner as shall be approved by the commissioner. Such rating organization shall adopt a plan of operation, which shall be submitted for approval to the commissioner of insurance and, upon approval by the commissioner, shall be binding upon all members of the reinsurance pool. If a rating organization fails to adopt a plan of operation within a reasonable period of time of its designation by the commissioner, the commissioner may promulgate a plan of operation for the administration of the reinsurance pool. Such plan of operation shall contain rules and procedures for the allocation of losses of the reinsurance pool among its members consistent with this section, and shall otherwise be consistent with law. Amendments to such plan of operation may be made by the rating organization designated by the commissioner or may be made at the direction of the commissioner upon reasonable notice to such rating organization and after a hearing. All amendments to the plan of operation proposed by the rating organization designated to administer the reinsurance pool shall be submitted for approval to the commissioner of insurance.
(2) Notwithstanding the provisions of subsection (1), in order to reduce the number of risks in and the volume of premium in the reinsurance pool the commissioner shall establish and maintain cost containment programs in the reinsurance pool, including a program requiring service carriers to establish and maintain a comprehensive employer safety assistance program, and may take any or all of the following actions:
(a) require all insurers that write workers' compensation insurance to participate as service carriers, but allow any such carrier to contract with another insurer or third party administrator approved by the commissioner to service the claims;
(b) in conjunction with paragraph (a), require insurers to assume a percentage of losses for an individual risk for which the insurer is designated as the servicing carrier, such percentage to be as the commissioner shall reasonably determine;
(c) consider, in allocating the losses of the pool, the number of risks and the volume of premium rejected, non-renewed, cancelled, or terminated by an insurer;
(d) prohibit a service carrier, in its handling and servicing of claims, from differentiating claims originating from insureds in the pool and claims originating from insureds written voluntarily by the insurer;
(e) establish credits, discounts or other incentives to encourage insurers to voluntarily write coverage;
(f) impose an assessment on insurers to pay for the pool's cost containment and anti-fraud programs; and
(g) establish rates or rating plans which reasonably estimate the additional risk of business in the reinsurance pool.
(3) On or before January fifteen, nineteen hundred and ninety-two, the commissioner shall hold a hearing regarding the development of a plan, based on the powers authorized under this section, designed to reduce the number of risks and amount of premium in the pool. The commissioner may issue regulations designed to implement the plan. These regulations shall be effective no later than April first, nineteen hundred and ninety-two.
(4) In developing the plan required to be submitted under this section, the insurance commissioner shall attempt to reduce the number of risks, at a minimum, in the pool as percentage of all risks in the state to sixty percent by September first, nineteen hundred and ninety-two, fifty percent by February first, nineteen hundred and ninety-three; forty-five percent by September first, nineteen hundred and ninety-three; and thereafter, such reductions as the commissioner may determine are reasonable and appropriate.