TNSIA News

All self insured employers should be made aware that Commissioner Flowers adopted the rule to regulate TPAs on November 26, 2005. It’s a fairly comprehensive rule which requires TPAs to do many of the things that insurance companies are required to do (i.e., obtain a certificate of authority, maintain proper books and records, hold monies in a fiduciary capacity, be subject to a state examination, submit TPA contracts for review, etc).

When the rule was first proposed, there was a question about whether the Commissioner had the authority to adopt rules governing TPAs. Commissioner Flowers relied for her authority on 3 different general self-insurance rulemaking statutes, all of which were ambiguous about TPAs that provide service for self-insured employers. At the time, there were those who expressed concern about whether Commissioner Flowers had the authority to adopt the rules regulating TPAs. In any event, the rules in their final form applied to TPAs acting on behalf of either a self-insured group or a self-insured employer. These rules were sent to the Attorney General, and the Attorney General reviewed and approved the rules for legality. Thus, the state’s lawyer (the Attorney General) reviewed the rules and gave an indication to Commissioner Flowers that she did have the authority to adopt the rules. This does not appear to have been challenged by any court to clarify whether the rules are valid or invalid. The Tennessee State House and Senate committees responsible for reviewing rules also permitted these TPA rules to go into effect.

Any TN self-insured employer ought to be utilizing the services of a TPA that is duly licensed by the Department of Commerce and Insurance. IT IS OUR UNDERSTANDING THAT A NUMBER OF TPAs, CURRENTLY OPERATING IN TN, ARE NOT PROPERLY LICENSED. A SELF-INSURED EMPLOYER USING THE SERVICES OF AN UNLICENSED TPA COULD BE SUBJECT TO AN AUDIT FINDING FROM THE DEPARTMENT OF COMMERCE AND INSURANCE. WE RECOMMEND YOU CONTACT YOUR TPA TO VERIFY THEY ARE LICENSED IN TN.