NAPEO: National Association of Professional Employer Organizations

Government Affairs
What We Advocate

National Association of Insurance Commissioners (NAIC)

The mission of the NAIC is to assist state insurance regulators, individually and collectively, in serving the public interest and achieving the following fundamental insurance regulatory goals in a responsive, efficient and cost effective manner, consistent with the wishes of its members:
  • Protect the public interest;
  • Promote competitive markets;
  • Facilitate the fair and equitable treatment of insurance consumers;
  • Promote the reliability, solvency and financial solidity of insurance institutions; and
  • Support and improve state regulation of insurance.

NAIC Guidelines for Workers' Compensation in PEO Arrangements — In 2008, the NAIC adopted model guidelines for the regulation of workers' compensation in PEO arrangements. The guidelines are available by clicking on PEO Model Guidelines. Upon adoption, these guidelines became the national recommended basis for insurance regulations concerning workers' compensation in PEO arrangements. In 2009, the NAIC released an exposure of an implementation paper to accompany the Guideline and to assist states in understanding various issues related to adopting any or all of the guidelines. NAPEO has participated in developing that paper which in now in the final stages of being formalized. The present Chairman's Draft has been discussed once by the NAIC group working on this issue and final adoption is expected in December of 2009.

While neither the guidelines nor the implementation commentary have the force and effect of law, they can be expected to be the starting point for state insurance departments in considering rules and regulations for PEOs. NAPEO members with comments or questions about the Guidelines or the Chairman's Draft should contact NAPEO General Counsel, Bill Schilling.

The NAIC PEO Guidelines mandate the use of multiple coordinated policies for PEOs in the residual market and contemplate three types of coverage in the voluntary market — master policy, multiple coordinated policy, and client-based policy. The Guidelines address many of the thorny issues of experience rating and proof of coverage that have arisen in PEO arrangements. In that regard, the guidelines are lengthy, detailed, and suggest a number of notice requirements for PEOs. The guidance proposes two types of coverage situations — a "full workforce" and a "partial workforce" PEO arrangement. In the former, the PEO and its carrier would assume full workers' compensation liability for all workers at a client company. In a "partial workforce" PEO arrangement (where only co-employees are covered), the PEO and its carrier must confirm the existence of client coverage for employees not co-employed by the PEO and may not continue the PEO arrangement in the absence of such coverage. The primary focus of discussion currently revolves around how to handle proof of coverage and experience rating for clients in a master policy.
NAPEO Comments on Rule for Self-Funded MEWAs — NAPEO has filed comments with the NAIC ERISA working group on a draft regulation that would allow fully-insured plans but classify self-funded plans as "unauthorized insurance" under state law. NAPEO has suggested significant modifications to the regulation and will testify at a hearing on the regulation in Salt Lake City in March. NAPEO's transmittal letter and redline changes to the proposal are available at NAPEO Transmittal and NAPEO Changes to Proposal.
Workers' Compensation Large Deductible Study — After significant effort by NAPEO, the IAIABC-NAIC Working Group Study of Large Deductible Workers' Compensation Policies has dropped a recommendation that PEOs not be allowed to use large deductible workers' compensation policies. The language that relates to PEOs in the final document can be reviewed at PEO Sections of Large Deductible Study.
ERISA Guidelines — The ERISA Working Group of the NAIC has produced an ERISA Guide for state insurance regulators. Initial drafts of the Guide indiscriminately identified PEOs as "illegal operations" and challenged their employer status. Efforts by NAPEO and a number of meetings with the working group and its chairman narrowed the focus of the section of the Guide concerning PEOs to state regulation of MEWAs - in particular, self-insured programs that are operating in violation of state law. The ERISA Guide was adopted by the NAIC Health and Managed Care Committee in San Francisco on June 14, 2004.


State-by-State Expansion of Legal & Operational Certainty

PEO or Employee Leasing-specific registration or licensing requirement was enacted.

State law recognition generally as an employer without a registration or licensing requirement.

Pending licensing or registration legislation.






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