AN ACT TO AMEND THE SOUTH CAROLINA CODE OF LAWS BY ADDING CHAPTER 105 TO TITLE 38 ENTITLED "WELLNESS REIMBURSEMENT PROGRAMS" SO AS TO DEFINE TERMS, PROHIBIT CERTAIN ACTS BY WELLNESS REIMBURSEMENT PROGRAMS, REQUIRE REGISTRATION INCLUDING AN APPLICATION AND FEES, EXEMPT BROKERS FROM REGISTERING, AND TO PROVIDE FINES FOR VIOLATIONS OF THE CHAPTER, AMONG OTHER THINGS.
H4305 creates a new regulatory framework in the South Carolina insurance code for “wellness reimbursement programs,” which are defined as certain self-insured medical reimbursement or wellness-integrated expense reimbursement arrangements sold as ancillary products alongside individual or group health coverage. The bill requires administrators of these programs to be licensed by the Department of Insurance, to submit an application, pay fees, provide financial statements, maintain a surety bond, and demonstrate competence, trustworthiness, and financial responsibility. It also requires administrators to comply with federal ERISA-related requirements or provide federal approval documentation, and it authorizes the director to inspect records, suspend or revoke licenses, and impose penalties for violations.
The bill also imposes conduct and disclosure requirements. Administrators must attest that the program complies with federal and state law, avoid deceptive marketing, and provide plain-language disclosures to employers and employees about federal approval status, the evolving tax treatment of these arrangements, indemnification obligations, and the need for independent tax or legal advice. If a program creates a taxable event, the administrator must defend and indemnify the employer and employees against resulting claims or suits. Brokers are expressly exempted from registering as administrators solely to receive commissions, but they remain subject to anti-deception and good-faith standards.
In terms of state-law impact, the bill adds a new chapter to Title 38 governing these products and gives the Department of Insurance enforcement authority, rulemaking power, and a reporting obligation every three years to legislative committees and the General Assembly. It also establishes criminal and civil penalties for operating without a license or otherwise violating the chapter, while carving out traditional health and wellness programs offered directly by health plans from the new requirements. The bill would therefore expand state oversight of a niche insurance-related product and create new compliance obligations for program operators and, to a lesser extent, brokers.
The overall sentiment reflected in the voting history appears strongly favorable. The House initially passed the bill 87-14, the Senate later approved it on second reading 43-0, and the House then concurred in Senate amendments 103-0. That pattern suggests broad bipartisan support for regulating these programs and clarifying consumer protections and market rules.
The main points of contention appear to center on the degree of regulation, the licensing burden, and the bill’s treatment of tax and legal risk. The law requires substantial documentation, fees, bonding, and ongoing oversight, which could be viewed as burdensome by program administrators. At the same time, the bill’s indemnification requirement and disclosure language reflect concern that these products may have uncertain federal tax consequences or could be marketed in a misleading way. The broker exemption also suggests an effort to avoid overregulating independent agents while still holding them to anti-fraud standards.
The bill adds a new chapter to Title 38 regulating wellness reimbursement programs and places their administrators under Department of Insurance licensing, reporting, examination, bonding, and enforcement requirements. It creates penalties for unlicensed operation and other violations, authorizes rulemaking, requires periodic legislative reporting, and excludes ordinary health-plan wellness offerings from the new chapter. Brokers are exempt from administrator registration when merely earning commissions, but remain subject to marketing and fairness rules.
The bill appears to have enjoyed broad support across both chambers. The House passed it 87-14, the Senate approved it unanimously on second reading, and the House later concurred in Senate amendments 103-0. The vote pattern suggests lawmakers generally agreed on the need for oversight and consumer protections in this market.
The likely areas of concern are the regulatory and compliance burdens imposed on wellness reimbursement program administrators, including licensing fees, financial reporting, bonding, record inspections, and potential criminal penalties. Another point of sensitivity is the bill’s acknowledgment that federal tax treatment in this area is still evolving, which may raise concerns about program legality and consumer exposure. The broker exemption indicates a compromise: brokers are not treated as administrators, but they are still constrained by anti-deception and good-faith obligations.