Chapter 05-039

2005 -- H 5884

06/13/05

A N A C T

RELATING TO INSURANCE -- NONPROFIT HOSPITAL AND MEDICAL SERVICE CORPORATIONS

Introduced By: Representatives Costantino, Kennedy, Corvese, McNamara, and Story

Date Introduced: March 01, 2005

It is enacted by the General Assembly as follows:

     SECTION 1. Section 27-19.2-4 of the General Laws in Chapter 27-19.2 entitled

"Nonprofit Hospital and Medical Service Corporations" is hereby amended to read as follows:

27-19.2-4. Board of directors -- Duties and functions of the board of directors. -- (a)

The board of a nonprofit hospital and/or medical service corporation and its individual members

are fiduciaries and shall act at all times:

      (1) In utmost good faith;

      (2) In a manner reasonably believed to be in the best interest of fulfilling the

corporation's mission or the mission of affiliates or subsidiaries;

      (3) In a manner reflecting undivided loyalty to the furtherance of the corporation's

charitable mission;

      (4) At the highest standard of fiduciary care and prudence; and

      (5) In accordance with a conflict of interest policy adopted by the board of directors that

will be consistent with guidelines recommended and published by the U.S. Internal Revenue

Service for nonprofit entities.; and

(6) Physicians who receive compensation from the nonprofit hospital and/or medical

service corporation, for services rendered in their professional capacity, directly or indirectly,

may serve on board committees that address compensation matters; provided, however, that no

such physician member may participate in a vote or deliberate on matters relating to physician

compensation.

     (b) The proper and principal functions of the board shall include:

     (1) Ensuring that the corporation effectively carries out the charitable mission for which

it was incorporated under section 27-19-2 of this title;

      (2) Selecting corporate management and evaluating its performance in light of the

corporation's charitable purpose;

      (3) Recognizing that in the event of a conversion as defined in section 27-66-4(3), the

reserves and assets with which they are entrusted are charitable assets, and treating them with

according stewardship;

      (4) Establishing a system of board governance including an annual evaluation of board

performance measured against the charitable purpose of the corporation; and

      (5) Holding an annual public meeting with proper notice open to providers and

subscribers at which comments shall be heard from the floor.

     SECTION 2. This act shall take effect upon passage.     

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LC02250

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