Connecticut Medical Discount Plan Bond: A Comprehensive Guide
This guide provides information for insurance agents to help their customers obtain a Connecticut Medical Discount Plan Bond
At a Glance:
- Lowest Cost: $1,000 per year or $100 per month based on the applicant’s credit
- Bond Amount: $100,000
- Who Needs it: Connecticut medical discount plan (MDP) organizations that do not have a minimum net worth of $250,000
- Purpose: To ensure consumers will receive compensation for any damages should the MDP organization violate licensing law
- Who Regulates MDP Organizations in Connecticut: The Connecticut Insurance Department
Background
Connecticut statute 38a-479rr requires all MDP organizations operating in the state to obtain a license with the Insurance Department. The Connecticut legislature enacted the licensing laws and regulations to ensure that MDP organizations engage in ethical business practices. To provide financial security for the enforcement of the licensing law, MDP organizations must either amass a company net worth of at least $250,000 or purchase and maintain a $100,00 surety bond to be eligible for licensure.
What is the Purpose of the Connecticut Medical Discount Plan Bond?
Connecticut requires all MDP organizations who do not have a company net worth of at least $250,000 to purchase a surety bond as part of the application process to obtain a business license. The bond ensures that the public will receive compensation for financial harm if the MDP organization fails to comply with the regulations set forth in Connecticut statute 38a-479rr. Specifically, the bond protects the public in the event the MDP organization engages in any acts of fraud or breaches any contracts made with consumers. In short, the bond is a type of insurance that protects the public if the MDP organization violates licensing law.
How Can an Insurance Agent Obtain a Connecticut Medical Discount Plan Surety Bond?
BondExchange makes obtaining a Connecticut Medical Discount Plan surety bond easy. Simply log in to your account and use our keyword search to find the “medical” bond in our database. Don’t have a login? Gain access now and let us help you satisfy your customers’ needs. Our friendly underwriting staff is available by phone at (800) 438-1162, email, or chat from 7:30 AM to 7:00 PM EST to assist you.
At BondExchange, our 40 years of experience, leading technology, and access to markets ensures that we have the knowledge and resources to provide your clients with fast and friendly service whether obtaining quotes or issuing bonds.
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Is a Credit Check Required for the Connecticut Medical Discount Plan Bond?
Surety companies will run a credit check on the owners of the MDP organization to determine eligibility and pricing for the Connecticut Medical Discount Plan bond. Owners with excellent credit and work experience can expect to receive the best rates. Owners with poor credit may be declined by some surety companies or pay higher rates. The credit check is a “soft hit”, meaning that the credit check will not affect the owner’s credit.
How Much Does the Connecticut Medical Discount Plan Bond Cost?
The Connecticut Medical Discount Plan Bond can cost anywhere between $1,000 to $7,500 per year or $100 to $750 per month. Insurance companies determine the rate based on a number of factors including your customer’s credit score and experience. The chart below offers a quick reference for the bond cost on the $100,000 bond requirement.
$100,000 Medical Discount Plan Bond Cost
| Credit Score | Bond Cost (1 year) | Bond Cost (1 month) |
|---|---|---|
| 800+ | $1,000 | $100 |
| 625 – 799 | $1,500 | $150 |
| 575 – 624 | $3,750 | $375 |
| 550 – 574 | $5,000 | $500 |
| 500 – 549 | $7,500 | $750 |
*The credit score ranges do not include other factors that may result in a change to the annual premium offered to your customers, including but not limited to, years of experience and underlying credit factors contained within the business owner’s credit report.
How Does Connecticut Define “Medical Discount Plan Organization”?
To paraphrase Connecticut statute 38a-479qq, an MDP organization is a business entity that provides its members access to receive health care services, from participating providers, at discounted rates.
Exemptions to this definition include:
- Health insurers
- Health care centers
- Hospital service corporations
- Medical service corporation
- Fraternal benefit society
BondExchange now offers monthly pay-as-you-go subscriptions for surety bonds. Your customers are able to purchase their bonds on a monthly basis and cancel them anytime. Learn more here.
How Do MDP Organizations Apply For a License in Connecticut?
MDP organizations in Connecticut must navigate several steps to secure their licenses. Below are the general guidelines, but applicants should refer to the application form for details on the process.
License Period – All Connecticut MDP Licenses expire on December 31 of each year and must be renewed before the expiration date
Step 1 – Purchase a Surety Bond
MDP organizations that do not have a company net worth of at least $250,000 must purchase and maintain a $100,000 surety bond
Step 2 – Complete the Initial Application
All MDP organizations must complete an initial license application through the National Insurance Producer Registry (NIPR)
Step 3 – Complete the Application
After completing the initial application with the NIPR, MDP organizations must complete a second license application and submit it electronically through the NIPR Warehouse. Applicants must email all required attachments to [email protected].
MDP organizations must complete the application in its entirety, and submit the following items:
-
- Company formation documents
- Company bylaws
- Certificate of Good Standing
- Biographical affidavits for all company executive officers and board members
- Statement generally describing the discounted health care services the company offers
- Sample contract used with providers
- Sample contract the company uses when authorizing individuals/entities to act on their behalf
- Description of the company’s proposed marketing efforts
- Detailed description of the of company’s subscriber complaint procedures
- Copies of and descriptions for all marketing materials to be used in Connecticut
- Copies of all discount cards the company issues
- Copies of application forms used to sign up members
- Names, addresses, and telephone numbers of the marketers the company utilizes who are operating under a different name
- Connecticut PPN license or certification the company does not meet the definition of a PPN
Step 4 – Pay the Application Fee
After the MDP organization submits their completed application, the Insurance Department will send them a bill for $625 which must be paid in full prior to the MDP organization receiving their license
How Do Connecticut MDP Organizations Renew Their License?
To renew their license, MDPs in Connecticut must submit an initial application through the NIPR, and attach a subsequent application to the NIPR Warehouse. All Connecticut MDP Licenses expire on December 31 of each year and must be renewed before the expiration date.
What are the Insurance Requirements for the Connecticut MDP License?
Connecticut does not require MDP organizations to purchase any form of liability insurance as a prerequisite to obtaining a business license. All Connecticut MDP Licenses expire on December 31 of each year and must be renewed before the expiration date.
How Do Connecticut MDP Organizations File Their Bond?
MDP organizations should submit their completed bond form, including the power of attorney, electronically here. The surety bond requires signatures from both the surety company that issues the bond and from an owner/officer of the MDP organization. The surety company should include the following information on the bond form:
- Legal name and location of entity/individual(s) buying the bond
- Surety company’s name and location
- Bond amount
- Date the bond is signed
What Can Connecticut MDP Organizations Do to Avoid Claims Against Their Bonds?
To avoid claims on their bond, MDP organizations in Connecticut must follow all license regulations in the state, including some of the most important issues below that tend to cause claims:
- Do not engage in any acts of fraud
- Do not breach any contracts made with consumers
What Other Insurance Products Can Agents Offer MDP Organizations in Connecticut?
Connecticut does not require MDP organizations to obtain any form of liability insurance as a prerequisite to obtaining a business license. However, most reputable businesses will seek to obtain insurance coverage anyway. Bonds are our only business at BondExchange, so we do not issue any other types of insurance, but our agents often utilize brokers for this specific line of business. A list of brokers in this space can be found here.
How Can Insurance Agents Prospect for Connecticut MDP Organization Customers?
Connecticut conveniently provides a public database to search for licensed MDP organizations in the state. The database can be accessed here. Contact BondExchange for additional marketing resources. Agents can also leverage our print-mail relationships for discounted mailing services.