South Dakota Discount Medical Plan Bond: A Comprehensive Guide
February 11, 2022
This guide provides information for insurance agents to help their customers obtain a South Dakota Discount Medical Plan bond
At a Glance:
- Average Cost: Between 1% to 5% of the bond amount per year based on the applicant’s credit
- Bond Amount: Minimum of $20,000
- Who Needs it: All discount medical plan organizations (DMPOs) operating in South Dakota
- Purpose: To ensure the public will receive compensation for financial harm if the DMPO violates registration law
- Who Regulates Discount Medical Plan Organizations in South Dakota: The South Dakota Department of Labor and Regulation
Background
South Dakota statute 58-17E-9 requires all DMPOs operating in the state to register with the Department of Labor and Regulation. The South Dakota legislature enacted the registration laws and regulations to ensure that DMPOs engage in ethical business practices. To provide financial security for the enforcement of the registration law, DMPOs must purchase and maintain a surety bond to be eligible for registration.
What is the Purpose of the South Dakota Discount Medical Plan Bond?
South Dakota requires DMPOs to purchase a surety bond as part of the application process to obtain a business registration. The bond ensures that the public will receive compensation for financial harm if the DMPO fails to abide by the regulations set forth in South Dakota statute 58-17E. Specifically, the bond protects consumers if the DMPO engages in any acts of fraud or fails to provide services that have been paid for. In short, the bond is a type of insurance that protects the public if the DMPO violates registration law.
How Can an Insurance Agent Obtain a South Dakota Discount Medical Plan Bond?
BondExchange makes obtaining a South Dakota Discount Medical Plan bond easy. Simply log in to your account and use our keyword search to find the “discount” bond in our database. Don’t have a login? Enroll 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.
How is the Bond Amount Determined?
South Dakota statute 58-17E-20 dictates that the bond amount must be a minimum of $20,000. The Department of Labor and Regulation may increase the bond amount on a case-by-case basis and will inform the DMPO of their required amount after receiving their registration application.
Is a Credit Check Required for the South Dakota Discount Medical Plan Bond?
Surety companies will run a credit check on the owners of the DMPO to determine eligibility and pricing for the South Dakota Discount Medical 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 South Dakota Discount Medical Plan Bond Cost?
The South Dakota Discount Medical Plan Bond can cost anywhere between 1% to 5% of the bond amount per year. 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 a $20,000 bond requirement.
$20,000 Discount Medical Plan Bond Cost
| Credit Score | Bond Cost (1 year) |
|---|---|
| 800+ | $200 |
| 625 – 799 | $300 |
| 575 – 624 | $750 |
| 450 – 574 | $1,000 |
*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.
Who is Required to Purchase the Bond?
South Dakota requires all discount medical plan organizations, excluding those offered directly by health carriers, to purchase a surety bond as a prerequisite to obtaining a business registration.
To paraphrase South Dakota statute 58-17E-4, a discount medical plan organization is a business that provides members with discounts to medical or ancillary services through providers that the organization contracts with.
How Do South Dakota Discount Medical Plan Organizations Apply for a Registration?
DMPOs in South Dakota must navigate several steps to obtain a registration. Below are the general guidelines, but applicants should refer to the registration statutes for details on the process.
Registration Period – All South Dakota DMPO Registrations are valid for one year from the date of issuance and must be renewed before the expiration date
Step 1 – Create a Website
South Dakota requires DMPOs to maintain a website with up-to-date lists of the names and addresses of all providers the organization contracts with
Step 2 – Complete the Application
All South Dakota Discount Medical Plan Organization registration applications should be completed online here. DMPOs must complete the application in its entirety, and submit all required documents and fees.
Step 3 – Purchase a Surety Bond
DMPOs must purchase and maintain a surety bond with a minimum limit of $20,000
How do South Dakota Discount Medical Plan Organizations Renew Their Registration?
The Department of Labor and Regulation will send the DMPO instructions on how to renew their registration prior to its expiration date. All South Dakota DMPO Registrations are valid for one year from the date of issuance and must be renewed before the expiration date.
What are the Insurance Requirements for Discount Medical Plan Organizations in South Dakota?
South Dakota does not require DMPOs to purchase any form of liability insurance as a prerequisite to obtaining a business license. DMPOs must purchase and maintain a surety bond with a minimum limit of $20,000.
How Do South Dakota Discount Medical Plan Organizations File Their Bond?
DMPOs should mail their completed bond form, including the power of attorney, to the following address:
South Dakota Department of Labor and Regulation
Division of Insurance
P445 East Capitol Avenue
Pierre, SD 57501
The surety bond requires signatures from both the surety company that issues the bond, a representative of the DMPO, and a licensed notary. The surety company should include the following information on the bond form:
- Legal name and address of entity/individual(s) buying the bond
- Surety company’s name, address, NAIC number, and phone number
- Bond amount
- Bond number
- Date the bond is signed
What Can South Dakota Discount Medical Plan Organizations Do to Avoid Claims Against Their Bonds?
To avoid claims made against their bonds, DMPOs in South Dakota must follow all registration 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
- Provide all services that have been paid for
- Refund consumers for services that have been paid for but not received
What Other Insurance Products Can Agents Offer Discount Medical Plan Organizations in South Dakota?
South Dakota does not require DMPOs to obtain any form of liability insurance as a prerequisite to obtaining a business registration. 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 South Dakota Discount Medical Plan Organization Customers?
South Dakota conveniently provides a public database to search for active DMPOs 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.