ASSEMBLY, No. 3667







Sponsored by:

Assemblyman  ROY FREIMAN

District 16 (Hunterdon, Mercer, Middlesex and Somerset)

Assemblywoman  ELLEN J. PARK

District 37 (Bergen)


Co-Sponsored by:

Assemblyman Tully, Assemblywomen Bagolie and Speight






     Permits dental service corporations to be subsidiaries of nonprofit parent companies.



     As introduced.


An Act concerning dental service corporations and amending P.L.1968, c.305.


     Be It Enacted by the Senate and General Assembly of the State of New Jersey:


     1.    Section 4 of P.L.1968, c.305 (C.17:48C-4) is amended to read as follows:

     4.    A nonprofit corporation organized under Title 15 of the Revised Statutes for the purpose of establishing, maintaining and operating a nonprofit dental service plan, as described in section 2 (a) of [this act] P.L.1968, c.305 (C.17:48C-2), intending to do so as a dental service corporation certified under and thereby subject to the provisions of [this act] P.L.1968, c.305 (C.17:48C-1 et seq.), shall seek certification therefor by application to the commissioner.  The application of such a corporation shall include a certified copy of its certificate of incorporation, a copy of its by-laws certified by the lawful custodian of the original, and a statement in such form and detail as the commissioner shall prescribe, showing its financial condition, its proposed methods and places of operation, and such other matters as the commissioner shall prescribe, signed and sworn to by its president and secretary or other proper officers.  If the commissioner is satisfied, on the  basis of examination or otherwise that such corporation is organized without capital stock and not for pecuniary profit and has complied with the  requirements of [this act] P.L.1968, c.305 (C.17:48C-1 et seq.) and that its condition or methods of operation are not such as would render its operations hazardous to the public or its subscribers, the commissioner shall issue a certificate of authority to such corporation as a dental service corporation of this State.  A corporation to which a certificate of authority has been issued under [this act] P.L.1968, c.305 (C.17:48C-1 et seq.) thenceforth shall be subject in all its activities to the provisions of [this act] P.L.1968, c.305
(C.17:48C-1 et seq.)
as long as the certificate of authority as issued or thereafter amended remains in effect.  No  change in, or amendment to, or alteration in, addition to, or substitution of  any document, instrument or other papers so filed with the commissioner shall become operative or effective until the same shall also have been filed with the commissioner in a similar manner. No certificate of authority shall be issued to any corporation not incorporated as a corporation without capital stock and not for pecuniary profit under the laws of this State, or to any corporation which, prior to or pending its application for such certificate, has solicited a subscriber or issued a subscription certificate.  No dental service corporation shall solicit a subscriber or issue a subscription certificate until its board of trustees has been fully constituted as provided in [this act] P.L.1968, c.305 (C.17:48C-1 et seq.).

     Nothing in P.L.1968, c.305 (C.17:48C-1 et seq.) shall preclude a dental service corporation from being or becoming a subsidiary of a nonprofit holding company or other nonprofit parent that is not a dental service corporation, provided, that the dental service corporation shall otherwise remain subject to the provisions of P.L.1968, c.305 (C.17:48C-1 et seq.).

(cf: P.L.1968, c.305, s.4)


     2.    This act shall take effect on the first day of the sixth month next following its enactment.





     This bill amends the current law to permit dental service corporations to be or become subsidiaries of nonprofit parents.  Under the current law, a dental service corporation is prohibited from spending more than 10 percent of its assets or more than 50 percent of its surplus, whichever is less, on investments.  This puts dental service corporations at a disadvantage compared to other health insurance companies, despite the fact that dental service corporations have more predictable risks of loss and thus have less need for limiting the use of company funds. 

     Allowing dental service corporations to be or become subsidiaries of nonprofit parent companies, while still imposing all statutory requirements on the dental service corporations themselves, would give a nonprofit parent freedom to invest funds and be better able to help its dental service corporation subsidiary compete with larger health insurance companies that offer dental services.  At the same time, the dental service corporation subsidiary would still have to comply with the "Dental Service Corporation Act of 1968," including the limitation on investing company funds.  By amending the current law, this bill promotes competition in the dental service market and ensures that patients are still adequately protected.