§ 15473. Homogeneity of Group Members.

(a) Each private group self insurer shall demonstrate and maintain homogeneity of its group members by one of the following methods:

(1) Each group member shall share the same, predominant three-digit North American Industry Classification System (NAICS) Code; or

(2) Each group member shall share the same governing class code as established by the Workers' Compensation Insurance Rating Bureau (WCIRB) definition.

(b) In addition to the methods for demonstrating homogeneity indicated in subsections (a)(1) and (a)(2), applicants may demonstrate homogeneity for the purposes of eligibility for group self insurance if one of the following occurs:

(1) The group self insurer demonstrates to the Manager's satisfaction that the risk exposures of an affiliate group member or applicant affiliate group member are comparable to those contemplated in the feasibility study of the group self insurer.

(2) A group member shall be deemed as meeting homogeneity requirements if it is a wholly owned or majority owned subsidiary of a current group member that meets homogeneity requirements, its total payroll does not exceed the total payroll of that current member, and no more than 25% of the combined payroll of the existing member and the proposed group members' payroll fails to meet homogeneity requirements as set forth in subsection (a).

(3) The group self insurer demonstrates to the Manager's satisfaction that no less than 75% of payroll for each affiliate group self insurer or applicant affiliate group self insure is distributed among two shared industry-specific workers' compensation payroll classifications as established by the California Workers' Compensation Insurance Rating Bureau, and WCIRB insurance rates for those classifications are within 10% of each other.

(c) The Manager may require the group applicant or group self insurer to present additional information or documentation to verify that any or all group members or prospective group members meet the requirements of subsections (a) or (b).

(d) A group self insurer shall not modify its homogeneity underwriting requirements in any way unless it first obtains written approval from the Manager. In order to obtain approval from the Manager, the group self insurer must submit a written feasibility study and a draft of amended group self insurer's bylaws to the Manager no less than 30 days before the date of the change requested, addressing the following:

(1) The feasibility study must include:

(A) The reasons for the group self insurer's proposed modification of its homogeneity requirements;

(B) The proposed underwriting requirements for group self insurer membership;

(C) A demonstration that the risk exposures contemplated in the proposed modification are comparable, can reasonably be expected to develop comparable loss experience, and meet the requirements of subsections (a) or (b) of this section;

(D) A statement that the excess insurance carrier or carriers for the group self insurer approve of the modification;

(E) A statement by the Board of Trustees of the group self insurer in support of the modification;

(F) A plan for communication to all group members of the group self insurer describing the proposed modification of homogeneity requirements.

(2) The group self insurer's amended bylaws shall ensure that:

(A) No member of the group self insurer shall be penalized in any way for terminating membership in the group self insurer because of the change in homogeneity requirements;

(B) The modification to homogeneity requirements shall not disqualify any existing group member of the group self insurer that qualifies for membership before the modification of homogeneity requirements.

HISTORY

1. New section filed 6-30-94; operative 6-30-94 (Register 94, No. 26).

2. Amendment filed 3-2-2009; operative 3-2-2009 pursuant to Government Code section 11343.4 (Register 2009, No. 10).

Note

Note: Authority cited: Sections 54, 55 and 3702.10, Labor Code. Reference: Sections 3700 and 3702.10, Labor Code.