Washington Discount Plan Organization Bond: A Comprehensive Guide

February 28, 2022

Washington Discount Plan Organization Bond

This guide provides information for insurance agents to help their customers obtain a Washington Discount Plan Organization bond

At a Glance:

  • Average Cost: Between 1% to 7.5% of the bond amount per year based on the applicant’s credit
  • Bond Amount: Minimum of $35,000 (more on this later)
  • Who Needs it: All discount plan organizations (DPOs) operating in Washington
  • Purpose: To ensure that Washington consumers will receive be compensated if the DPO does not provide any services that have been paid for
  • Who Regulates Discount Plan Organizations in Washington: The Washington Insurance Commissioner

Background

Washington statute 48.115.020 requires all DPOs operating in the state to obtain a license with the Office of the Insurance Commissioner. The Washington legislature enacted the licensing laws and regulations to ensure that DPOs engage in ethical business practices. To provide financial security for the enforcement of the licensing law, DPOs must purchase and maintain a surety bond to be eligible for licensure.

What is the Purpose of the Washington Discount Plan Organization Bond?

Washington requires DPOs 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 DPO fails to abide by the regulations set forth in Washington statute 48-155.040. Specifically, the bond protects Washington consumers if the DPO fails to provide any services that have been paid for. In short, the bond is a type of insurance that protects the public if the DPO violates licensing law.

Washington Discount Plan Organization Bond Form

Washington Discount Plan Organization Bond Form

How Can an Insurance Agent Obtain a Washington Discount Plan Organization Surety Bond?

BondExchange makes obtaining a Washington Discount Plan Organization 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?

Washington statute 48.155.040 dictates that the bond amount must be a minimum of $35,000. However, the statute also grants the Insurance Commissioner the authority to require an increased amount, on a case by case basis, if needed.

Is a Credit Check Required for the Washington Discount Plan Organization Bond?

Surety companies will run a credit check on the owners of the DPO to determine eligibility and pricing for the Washington Discount Plan Organization 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 Washington Discount Plan Organization Bond Cost?

The Washington Discount Plan Organization bond can cost anywhere between 1% to 7.5% 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 $35,000 bond requirement.

$35,000 Discount Plan Organization Bond Cost

Credit Score Bond Cost (1 year)
800+ $350
625 – 799 $525
575 – 624 $1,313
550 – 574 $1,750
500 – 549 $2,625

Who is Required to Purchase the Bond?

Washington requires discount plan organizations to purchase a surety bond as a prerequisite to obtaining a business license. To paraphrase Washington statute 48.155.010, a discount plan organization is an individual or business entity that provides discounts to health care services through providers that the organization contracts with.

Exemptions to this definition include:

  • Pharmacy benefit managers
  • Health care provider networks that contract with discount plans
  • Marketers promoting the discount plan
  • Health carriers

How Do Washington Discount Plan Organizations Apply for a License?

DPOs in Washington must navigate several steps to obtain a license. Below are the general guidelines, but applicants should refer to the application form for details on the process.

License Period – All Washington Discount Plan Organization Licenses expire on July 1 of each year and must be renewed before the expiration date

Step 1 – Meet the Net Worth Requirement

Washington requires DPOs to at all times maintain a company net worth (assets – liabilities) of at least $150,000. DPOs must submit audited business financial statements, verifying their net worth, with their license application.

Step 2 – Establish a Website

All DPOs must establish a website that, at a minimum, includes a list of all providers the DPO contracts with

Step 3 – Purchase a Surety Bond

DPOs must purchase and maintain a surety bond with a minimum limit of $35,000

Step 4 – Complete the Application

All Washington DPO license applications should be emailed to [email protected], DPOs must complete the application in its entirety, and submit the following items:

    • Service of Process Designation form
    • Company formation documents
    • Certificate of Good Standing from the organization’s state of incorporation
    • Certificate of Registration from the Washington Secretary of State
    • Company organization chart
    • Names, addresses, phone numbers, official positions, occupations and biographical affidavits (form 11 on the NAIC website) of all company directors and officers
    • List of all company owners and shareholders, including all persons that own or have a right to acquire at least a 10% interest in the company’s voting securities
    • Discolusres of all contracts between the DPO and persons responsible for conducting the organization’s affairs
    • Name, address, and direct contact information of the organization’s compliance officer
    • Summary description of the organization, its facilities, personnel, and all health care services offered at a discount
    • Copies of all current contracts between the DPO and providers
    • Names, addresses, phone numbers, and email addresses of all marketers promoting the DPOs services
    • Copies of all contracts between the DPO and any third party providing marketing, administration, enrollment, or any other services
    • Description of all proposed marketing methods
    • Full description of the DPOs established and maintained complaint procedures
    • Disclosure of all periodic charges and/or processing fees associated with the applicant’s discount plan
    • Names, addresses, phone numbers, and web addresses of all providers and provider networks for all plans offered
    • List of all states that the applicant at any time operated as a DPO in
    • List of all licenses held or applied for

DPOs must mail an application fee of $250 to the following address:

Attn: Company Supervision Division
Office of the Insurance Commissioner
P.O. Box 40255
Olympia, WA 98504-0255

How do Washington Discount Plan Organizations Renew Their Licenses?

DPOs should mail their completed renewal application, including a $250 renewal fee, to the following address:

State of Washington
Office of the Insurance Commissioner
PO Box 40255
Olympia, WA 98504-0255

All Washington Discount Plan Organization Licenses expire on July 1 of each year and must be renewed before the expiration date.

What are the Insurance Requirements for Discount Plan Organizations in Washington?

Washington does not require DPO to purchase any form of liability insurance as a prerequisite to obtaining a business license. DPOs must purchase and maintain a surety bond with a minimum limit of $35,000.

How Do Washington Discount Plan Organizations File Their Bonds?

DPOs should email their completed bond forms, including the power of attorney, to [email protected]. The surety bond requires signatures from both the surety company that issues the bond and from a representative of the DPO. 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
  • Bond amount
  • Date the bond goes into effect
  • Date the bond is signed

What Can Washington Discount Plan Organizations Do to Avoid Claims Against Their Bonds?

To avoid claims made against their bonds, discount plan organizations 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 Discount Plan Organizations in Washington?

Washington does not require discount plan organizations to purchase any form of liability insurance as a prerequisite to obtaining a business license. However, most reputable businesses will seek to obtain this insurance 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 Washington Discount Plan Organization Customers?

Washington conveniently provides a public database to search for active DPOs 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.

2022-03-24T09:18:59-04:00