(B)

1. (1) The program shall operate subject to the supervision and control of the board. Subject to the provisions of paragraph (2), the board shall consist of eight members appointed by the commissioner plus the commissioner or his designated representative, who shall serve as an ex officio member of the board.
2. (2) In selecting the members of the board, the commissioner shall include representatives of small employers and small employer insurers and such other individuals determined to be qualified by the commissioner. At least five members of the board shall be representatives of insurers, one of whom shall be a licensed independent insurance agent who represents multiple health and accident insurance carriers, and shall be selected from individuals nominated in this State pursuant to procedures and guidelines developed by the commissioner.
3. (3) The initial board members shall be appointed as follows: two of the members to serve a term of two years; three of the members to serve a term of four years; and three of the members to serve a term of six years. Subsequent board members shall serve for a term of three years. A board member's term shall continue until his successor is appointed.
4. (4) A vacancy in the board shall be filled by the commissioner. A board member may be removed by the commissioner for cause.

(F) The plan of operation shall:

1. (1) establish procedures for handling and accounting of program assets and monies and for an annual fiscal reporting to the commissioner;
2. (2) establish procedures for selecting an administering insurer and setting forth the powers and duties of the administering insurer;
3. (3) establish procedures for reinsuring risks in accordance with the provisions of this section;
4. (4) establish procedures for collecting assessments from reinsuring insurers to fund claims and administrative expenses incurred or estimated to be incurred by the program;
5. (5) establish a methodology for applying the dollar thresholds contained in this section in the case of insurers that pay or reimburse health care providers though capitation or salary; and
6. (6) provide for any additional matters necessary for the implementation and administration of the program.

(G) The program shall have the general powers and authority granted under the laws of this State to insurance companies and health maintenance organizations licensed to transact business, except the power to issue health insurance plans directly to either groups or individuals. In addition, the program shall have the specific authority to:

1. (1) enter into contracts as are necessary or proper to carry out the provisions and purposes of this article, including the authority, with the approval of the commissioner, to enter into contracts with similar programs of other states for the joint performance of common functions or with persons or other organizations for the performance of administrative functions;
2. (2) sue or be sued, including taking any legal actions necessary or proper to recover any assessments and penalties for, on behalf of, or against the program or any reinsuring insurers;
3. (3) take any legal action necessary to avoid the payment of improper claims against the program;
4. (4) define the health insurance plans for which reinsurance will be provided, and to issue reinsurance policies, in accordance with the requirements of this article;
5. (5) establish rules, conditions, and procedures for reinsuring risks under the program;
6. (6) establish actuarial functions as appropriate for the operation of the program;
7. (7) assess reinsuring insurers in accordance with the provisions of subsection (K), and make advance interim assessments as may be reasonable and necessary for organizational and interim operating expenses. Any interim assessments shall be credited as offsets against any regular assessments due following the close of the fiscal year;
8. (8) appoint appropriate legal, actuarial, and other committees as necessary to provide technical assistance in the operation of the program, policy and other contract design, and any other function within the authority of the program;
9. (9) borrow money to effect the purposes of the program. Any notes or other evidence of indebtedness of the program not in default shall be legal investments for insurers and may be carried as admitted assets;

(H) A reinsuring insurer may reinsure with the program as provided for in this subsection:

1. (1) with respect to any health insurance plan offered by the small employer insurer to small employers, the program shall reinsure the level of coverage as defined in the plan of operation;
2. (2) a small employer insurer may reinsure an entire employer group within sixty days of the commencement of the group's coverage under a health insurance plan;
3. (3) a reinsuring insurer may reinsure an eligible employee or dependent within a period of sixty days following the commencement of the coverage with the small employer. A newly-eligible employee or dependent of the reinsured small employer may be reinsured within sixty days of the commencement of his coverage;

4. (4)

   1. (a) the program shall not reimburse a reinsuring insurer with respect to the claims of a reinsured employee or dependent until the insurer has incurred an initial level of claims for such employee or dependent of five thousand dollars in a calendar year for benefits covered by the program. In addition, the reinsuring insurer shall be responsible for ten percent of the next fifty thousand dollars of benefit payments during a calendar year and the program shall reinsure the remainder. A reinsuring insurers' liability under this subparagraph shall not exceed a maximum limit of ten thousand dollars in any one calendar year with respect to any reinsured individual;
   2. (b) the board annually may adjust the initial level of claims, the coinsurance percentage, and the maximum limit to be retained by the insurer with the approval of the commissioner.
5. (5) a small employer insurer may terminate reinsurance with the program for one or more of the reinsured employees or dependents of a small employer on any anniversary of the health insurance plan;
6. (6) a reinsuring insurer shall apply all managed care and claims handling techniques, including utilization review, individual case management, preferred provider provisions, and other managed care provisions or methods of operation consistently with respect to reinsured and nonreinsured business.

(I)

1. (1) The board, as part of the plan of operation, shall establish a methodology for determining premium rates to be charged by the program for reinsuring small employers and individuals pursuant to this section. The methodology must contain a provision surcharging the reinsurance premium rate of a small employer insurer which does not employ effective cost containment and managed care arrangements including, but not limited to:

   1. (a) preferred provider organizations;
   2. (b) utilization review;
   3. (c) case management;

   4. (d) other.

      The methodology shall include a system for classification of small employers that reflects the types of case characteristics commonly used by small employer insurers in the State. The methodology shall provide for the development of base reinsurance premium rates which shall be multiplied by the factors set forth in paragraph (2) to determine the premium rates for the program. The base reinsurance premium rates shall be established by the board, subject to the approval of the commissioner, and shall be set at levels which reasonably approximate gross premiums charged to small employers by small employer insurers for health insurance plans with benefits similar to the standard health insurance plan.

2. (2) Premiums for the program shall be as follows:

   1. (a) An entire small employer group may be reinsured for a rate that is one and one-half times the base reinsurance premium rate for the group established pursuant to this paragraph.
   2. (b) An eligible employee or dependent may be reinsured for a rate that is five times the base reinsurance premium rate for the individual established pursuant to this paragraph.
3. (3) The board periodically shall review the methodology established under paragraph (1), including the system of classification and any rating factors, to assure that it reasonably reflects the claims experience of the program. The board may propose changes to the methodology which shall be subject to the approval of the commissioner.

(K)

1. (1) Before March first of each year, the board shall determine and report to the commissioner the program net loss for the previous calendar year, including administrative expenses and incurred losses for the year, taking into account investment income and other appropriate gains and losses.

2. (2) Any net loss for the year shall be recouped by assessments of reinsuring insurers.

   1. (a) The board shall establish, as part of the plan of operation, a formula by which to make assessments against reinsuring insurers. The assessment formula shall be based on:

      1. (i) each reinsuring insurer's share of the total premiums earned in the preceding calendar year from health insurance plans delivered or issued for delivery to small employers in this State by reinsuring insurers; and
      2. (ii) each reinsuring insurer's share of the premiums earned in the preceding calendar year from newly-issued health insurance plans delivered or issued for delivery during the calendar year to small employers in this State by reinsuring insurers.
   2. (b) The formula established pursuant to subparagraph (a) shall not result in any reinsuring insurer having an assessment share that is less than fifty percent nor more than one hundred fifty percent of an amount which is based on the proportion of the reinsuring insurer's total premiums earned in the preceding calendar year from health insurance plans delivered or issued for delivery to small employers in this State by reinsuring insurers to the total premiums earned in the preceding calendar year from health insurance plans delivered or issued for delivery to small employers in this State by all reinsuring insurers.
   3. (c) The board may, with approval of the commissioner, change the assessment formula established pursuant to subparagraph (a) from time to time as appropriate. The board may provide for the shares of the assessment base attributable to total premium and to the previous year's premium to vary during a transition period.
   4. (d) Subject to the approval of the commissioner, the board shall make an adjustment to the assessment formula for reinsuring insurers that are approved health maintenance organizations which are federally qualified under 42 U.S.C. Sec. 300, et seq., to the extent, if any, that restrictions are placed on them that are not imposed on other small employer insurers.

3. (3)

   1. (a) Before March first of each year, the board shall determine and file with the commissioner an estimate of the assessments needed to fund the losses incurred by the program in the previous calendar year.
   2. (b) If the board determines that the assessments needed to fund the losses incurred by the program in the previous calendar year will exceed the amount specified in subparagraph (c), the board shall evaluate the operation of the program and report its findings, including any recommendations for changes to the plan of operation, to the commissioner within ninety days following the end of the calendar year in which the losses were incurred. The evaluation shall include an estimate of future assessments and consideration of the administrative costs of the program, the appropriateness of the premiums charged, the level of insurer retention under the program, and the costs of coverage for small employers. If the board fails to file a report with the commissioner within ninety days following the end of the applicable calendar year, the commissioner may evaluate the operations of the program and implement such amendments to the plan of operation the commissioner considers necessary to reduce future losses and assessments.
   3. (c) For any calendar year, the amount specified in this subparagraph is five percent of total premiums earned in the previous calendar year from health insurance plans delivered or issued for delivery to small employers in this State by reinsuring insurers.
4. (4) If assessments exceed net losses of the program, the excess shall be held at interest and used by the board to offset future losses or to reduce program premiums. As used in this paragraph, "future losses" includes reserves for incurred but not reported claims.
5. (5) Each reinsuring insurer's proportion of the assessment shall be determined annually by the board based on annual statements and other reports considered necessary by the board and filed by the reinsuring insurers with the board.
6. (6) The plan of operation shall provide for the imposition of an interest penalty for late payment of assessments.
7. (7) A reinsuring insurer may seek from the commissioner a deferment from all or part of an assessment imposed by the board. The commissioner may defer all or part of the assessment of a reinsuring insurer if the commissioner determines that the payment of the assessment would place the reinsuring insurer in a financially impaired condition. If all or part of an assessment against a reinsuring insurer is deferred, the amount deferred shall be assessed against the other participating insurers in a manner consistent with the basis for assessment set forth in this subsection. The reinsuring insurer receiving the deferment shall remain liable to the program for the amount deferred and shall be prohibited from reinsuring any individuals or groups with the program until such time as it pays the assessments.