ENTITLED, An Act to revise certain requirements for third party administrators and pharmacy
benefits managers.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF SOUTH DAKOTA:
Section 1. That § 58-29D-18 be amended to read as follows:
58-29D-18. An administrator may not enter into any agreement or understanding with an insurer
in which the effect is to make the amount of the administrator's commissions, fees, or charges
contingent upon savings effected in the adjustment, settlement, and payment of losses covered by
the insurer's obligations. This section may not prevent the compensation of an administrator from
being based on premiums or charges collected or the number of claims paid or processed. This
section does not prohibit an administrator from receiving performance-based compensation for
providing hospital and other auditing services.
Section 2. That § 58-29D-22 be amended to read as follows:
58-29D-22. An administrator shall apply to the director upon a form to be furnished by the
director. The application shall include or be accompanied by the following information and
documents:
(1) All basic organizational documents of the administrator, including any articles of
incorporation, articles of association, partnership agreement, trade name certificate, trust
agreement, shareholder agreement, and other applicable documents, and all amendments
to such documents;
(2) The bylaws, rules, regulations, or similar documents regulating the internal affairs of the
administrator;
(3) The names, addresses, official positions, and professional qualifications of the individuals
who are responsible for the conduct of affairs of the administrator; including all members
of the board of directors, board of trustees, executive committee, or other governing board
or committee; the principal officers in the case of a corporation or the partners or
members in the case of a partnership or association; shareholders holding directly or
indirectly ten percent or more of the voting securities of the administrator; and any other
person who exercises control or influence over the affairs of the administrator;
(4) Annual financial statements or reports for the two most recent years which prove that the
applicant is solvent and such information as the director may require in order to review
the current financial condition of the applicant;
(5) A statement describing the business plan including information on staffing levels and
activities proposed in this state and nationwide. The plan shall provide details setting forth
the administrator's capability for providing a sufficient number of experienced and
qualified personnel in the areas of claims processing, record keeping, and underwriting;
(6) If the applicant will be managing the solicitation of new or renewal business, proof that
it employs or has contracted with an insurance producer licensed by this state for
solicitation and taking of applications. Any applicant shall provide proof that it has a
license as a life and health insurance producer in this state; and
(7) Information regarding administrative actions, criminal convictions, or guilty pleas.
The director may request additional information if the information provided pursuant to this
section is inaccurate, incomplete, or unclear. If an applicant fails to provide the requested
information within thirty days of the receipt of the any written request pursuant to subdivisions (1)
to (7), inclusive, it is grounds for denial of an application.
Any material change in the above information shall be filed with the director within thirty days.
A filing fee of five hundred dollars shall accompany the application.
Section 3. That § 58-29D-31 be amended to read as follows:
58-29D-31. The application or annual renewal shall be denied and the license or registration of
an administrator shall be suspended or revoked if the director finds that the administrator or
applicant:
(1) Is in an unsound financial condition;
(2) Is using such methods or practices in the conduct of its business so as to render its further
transaction of business in this state hazardous or injurious to insured persons or the
public;
(3) Has failed to pay any judgment rendered against it in this state within sixty days after the
judgment has become final;
(4) Has violated any lawful rule or order of the director or any provision of the insurance laws
of this state;
(5) Has refused to be examined or to produce its accounts, records, and files for examination,
or if any of its officers has refused to give information with respect to its affairs or has
refused to perform any other legal obligation as to such examination, if required by the
director;
(6) Has, without just cause, refused to pay proper claims or perform services arising under
its contracts or has, without just cause, caused covered individuals to accept less than the
amount due them or caused covered individuals to employ attorneys or bring suit against
the administrator to secure full payment or settlement of such claims;
(7) Is affiliated with or under the same general management or interlocking directorate or
ownership as another administrator or insurer which unlawfully transacts business in this
state without having a license;
(8) At any time fails to meet any qualification for which issuance of the certificate could have
been refused had such failure then existed and been known to the Division of Insurance;
(9) Has been convicted of, or has entered a plea of guilty or nolo contendere to, a felony
without regard to whether adjudication was withheld;
(10) Is under suspension or revocation in another state; or
(11) Has supplied false information to the director.
Section 4. That chapter 58-29D be amended by adding thereto a NEW SECTION to read as
follows:
If the director denies an application or annual renewal for a license or registration, the director
shall notify the applicant or licensee and advise, in writing, the applicant or licensee of the reason
for the denial. The applicant or licensee may make a written request to the director within thirty days
of the date of the denial for a hearing to determine the reasonableness of the director's action. A
notice of hearing shall be issued within thirty days of receipt of a written request.
The director shall suspend for not more than twelve months, or may revoke or refuse to continue,
any license or registration issued under this chapter after a hearing. Notice of such hearing and of
the charges against the licensee or registrant pursuant to § 58-29D-31 shall be given at least twenty
days before a hearing. Notice of hearing shall be issued within twenty days of the director's
suspension under § 58-29D-32 which shall include the reasons for suspension and may include
grounds for revocation under § 58-29D-31. Any hearing under § 58-29D-32 shall be held within
thirty days of the date of the director's suspension.
Any hearing under the provisions of this section shall be held pursuant to chapter 1-26. Nothing
in this section or § 58-29D-31 applies to a renewal which is lapsed pursuant to § 58-29D-30.
Section 5. That § 58-29E-2 be amended to read as follows:
58-29E-2. No person or entity may perform or act as a pharmacy benefits manager in this state
without a valid license to operate as a third party administrator pursuant to chapter 58-29D. Sections
58-29D-26 and 58-29D-29 do not apply to pharmacy benefits managers.
An Act to revise certain requirements for third party administrators and pharmacy benefits
managers.
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I certify that the attached Act
originated in the
HOUSE as Bill No. 1052
____________________________
Chief Clerk
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____________________________
Speaker of the House
____________________________
Chief Clerk
____________________________
President of the Senate
____________________________
Secretary of the Senate
House Bill No. 1052
File No. ____
Chapter No. ______
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Received at this Executive Office
this _____ day of _____________ ,
20____ at ____________ M.
By _________________________
for the Governor
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The attached Act is hereby
approved this ________ day of
______________ , A.D., 20___
____________________________
Governor
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STATE OF SOUTH DAKOTA,
ss.
Office of the Secretary of State
Filed ____________ , 20___
at _________ o'clock __ M.
____________________________
Secretary of State
By _________________________
Asst. Secretary of State
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