Introduced By: Senator Blais
Date Introduced : February 8, 1999
It is enacted by the General Assembly as follows:
SECTION 1. Sections 27-41-2 and 27-41-13 of the General Laws in Chapter 27-41 entitled "Health Maintenance Organizations" are hereby amended to read as follows:
27-41-2. Definitions. -- (a) "Covered health services" means the services that a health maintenance organization contracts with enrollees and enrolled groups to provide or otherwise make available to an enrolled participant.
(b) "Director" means the director of the department of business regulation or his or her duly appointed agents.
(c) "Employee" means any person who has entered into the employment of or works under a contract of service or apprenticeship with any employer. It shall not include a person who has been employed for less than thirty (30) days by his or her employer, nor shall it include a person who works less than an average of thirty (30) hours per week. For the purposes of this chapter, the term "employee" shall mean a person employed by an "employer" as defined in subsection (d). Except as otherwise provided herein the terms "employee" and "employer" are to be defined according to the rules and regulations of the department of labor and training.
(d) "Employer" means any person, partnership, association, trust, estate, or corporation, whether foreign or domestic, or the legal representative, trustee in bankruptcy, receiver, or trustee thereof, or the legal representative of a deceased person, including the state of Rhode Island and each city and town therein, which has in its employ one or more individuals during any calendar year after May 17, 1983. For the purposes of this section, the term "employer" refers only to an employer with persons employed within the state of Rhode Island.
(e) "Enrollee" means an individual who has been enrolled in a health maintenance organization.
(f) "Evidence of coverage" means any certificate, agreement, or contract issued to an enrollee setting out the coverage to which the enrollee is entitled.
(g) "Health care services" means any services included in the furnishing to any individual of medical, podiatric, or dental care, or hospitalization, or incident to the furnishing of that care or hospitalization, as well as the furnishing to any person of any and all other services for the purpose of preventing, alleviating, curing, or healing human illness, injury, or physical disability.
(h) "Health maintenance organization" means a single public or private organization which:
(1) Provides or otherwise makes available to enrolled participants health care services, including at least the following basic health care services: usual physician services, hospitalization, laboratory, x-ray, emergency, and preventive services, and out of area coverage, and the services of licensed midwives;
(2) Is compensated, except for copayments, for the provision of the basic health care services listed in subsection (h)(1) of this section to enrolled participants on a predetermined periodic rate basis; and
(3) (i) Provides physicians' services primarily:
(A) Directly through physicians who are either employees or partners of the organization; or
(B) Through arrangements with individual physicians or one or more groups of physicians organized on a group practice or individual practice basis;
(ii) "Health maintenance organization" does not include prepaid plans offered by entities regulated under chapter 1, 2, 19, or 20 of this title which do not meet the criteria above and do not purport to be health maintenance organizations;
(4) Provides the services of licensed midwives primarily:
(i) Directly through licensed midwives who are either employees or partners of the organization; or
(ii) Through arrangements with individual licensed midwives or one or more groups of licensed midwives organized on a group practice or individual practice basis.
(i) "Licensed midwife" means any midwife licensed pursuant to section 23-13-9.
(j) "Physician" shall include podiatrist as defined in chapter 29 of title 5.
(k) "Private organization" means a legal corporation with a policy making and governing body.
(l) "Provider" means any physician, hospital, licensed midwife, or other person which is licensed or otherwise authorized in this state to furnish health care services.
(m) "Public organization" means an instrumentality of government.
(n) "Uncovered expenditures" means the costs of health care services that are covered by a health maintenance organization, but that are not guaranteed, insured, or assumed by a person or organization other than the health maintenance organization. Expenditures to a provider that agrees not to bill enrollees under any circumstances are excluded from this definition.
(o) "Material modification" means only systemic changes to the information filed under section 27-41-3.
{ADD (p) "Net worth", for the purposes of this chapter, means the excess of total admitted assets over total liabilities. ADD}
{ADD (q) "Risk based capital ("RBC") instructions" means the risk based capital report including risk based capital instructions adopted by the National Association of Insurance Commissioners ("NAIC"), as these risk based capital instructions may be amended by the NAIC from time to time in accordance with the procedures adopted by the NAIC. ADD}
{ADD (r) "Total adjusted capital" means the sum of: ADD}
{ADD (1) A health maintenance organization's statutory capital and surplus (i.e. net worth) as determined in accordance with the statutory accounting applicable to the annual financial statements required to be filed under section 27-41-9; and ADD}
{ADD (2) Such other items, if any, as the RBC instructions may provide. ADD}
27-41-13. Protection against insolvency. -- (a) Unless otherwise provided, each health maintenance organization shall deposit with the general treasurer of the state of Rhode Island securities having a market value at all times of at least the amount set forth in this section, which are to be held for the benefit and protection of all the enrollees of the health maintenance organization.
(b) (1) The amount for an organization that is applying for initial licensure shall be the greater of:
(i) Five percent (5%) of its estimated expenditures for health care services for its first year of operation;
(ii) Twice its estimated average monthly uncovered expenditures for its first year of operation; or
(iii) One hundred thousand dollars ($100,000);
(2) At the beginning of each succeeding year, unless not applicable, that organization shall deposit with the general treasurer securities in an amount equal to four percent (4%) of its estimated annual uncovered expenditures for that year.
(c) (1) An organization that is licensed as a health maintenance organization on May 17, 1983, shall make a deposit equal to the larger of:
(i) One percent (1%) of the preceding twelve (12) months of uncovered expenditures; or
(ii) One hundred thousand dollars ($100,000), within six (6) months of May 17, 1983;
(2) On the first day of the organization's first fiscal year beginning six (6) months or more after May 17, 1983, the organization shall make an additional deposit equal to two percent (2%) of its estimated annual uncovered expenditures. In the second fiscal year, if applicable, the additional deposit shall be equal to three percent (3%) of its estimated annual uncovered expenditures for that year, and in the third fiscal year and subsequent years, if applicable, the additional deposit shall be equal to four percent (4%) of its estimated annual uncovered expenditures for each year. Each year's estimate, after the first year of operation, shall reasonably reflect the prior year's operating experience and delivery arrangements.
(d) The director may waive any of the deposit requirements as set forth in subsections (b) and (c), whenever satisfied that the organization has sufficient net worth and an adequate history of generating net income to assure its financial viability for the next year, or its performance and obligations are guaranteed by an organization with sufficient net worth and an adequate history of generating net income, or the assets of the organization or its contracts with insurers, hospital or medical service corporations, governments, or other organizations are sufficient to reasonably assure the performance of its obligations.
(e) (1) When an organization has achieved a net worth not including land, buildings, and equipment of at least one million dollars ($1,000,000) or has achieved a net worth including plan related land, buildings, and equipment of at least five million dollars ($5,000,000), the annual deposit requirement shall not apply;
(2) The annual deposit requirement shall not apply to an organization if the total amount of the deposit of securities is equal to twelve percent (12%) of the HMO's estimated annual uncovered expenditures for the next calendar year, or the capital and surplus requirements for the formation and admittance of an accident and health insurer in this state, whichever is less;
(3) If the organization has a guaranteeing organization which has been in operation for at least five (5) years and has a net worth not including land, buildings, and equipment of at least one million dollars ($1,000,000) or which has been in operation for at least ten (10) years and has a net worth including plan related land, buildings, and equipment of at least five million dollars ($5,000,000), the annual deposit requirement shall not apply; provided, however, that if the guaranteeing organization is sponsoring more than the one organization, the net worth requirement shall be increased by a multiple equal to the number of organizations. This requirement to maintain a deposit in excess of the deposit required of an accident and health insurer shall not apply during any time that the guaranteeing organization maintains a net worth at least equal to the capital and surplus requirements for an accident and health insurer.
(f) All income from the deposit with the general treasurer shall belong to the depositing organization and shall be paid to it as it becomes available. A health maintenance organization that has made a securities deposit with the general treasurer may, at its option, withdraw the securities deposit or any part thereof, first having deposited, in lieu thereof, a deposit of securities of equal amount and value to that withdrawn.
(g) In any year in which an annual deposit is not required of an organization, at its request, the director shall lower its required deposit by one hundred thousand dollars ($100,000) for each two hundred fifty thousand dollars ($250,000) of net worth not including land, buildings, and equipment, if it, or a guaranteeing organization on its behalf and not for another organization, has in excess of one million dollars ($1,000,000) or in excess of five million dollars ($5,000,000) of net worth, including only health maintenance organization related land, buildings, and equipment contributing to the delivery of health care services; provided, however, that the reductions never bring the required deposit below one hundred thousand dollars ($100,000). If the net worth of an organization or guaranteeing organization no longer supports a reduction of its required deposit, the organization shall immediately redeposit one hundred thousand dollars ($100,000) for each two hundred fifty thousand dollars ($250,000) of reduction, provided that its total deposit does not exceed the maximum required under this section.
(h) {DEL Each health maintenance organization applying for
initial licensure after May 17, 1983, shall have and maintain
a capital account of at least one hundred thousand dollars ($100,000)
in addition to any deposit requirements under this section. The
capital shall be net of any accrued liabilities and be in the
form of cash, securities, or any combination of those acceptable
to the director. DEL} {ADD (1) Before issuing any certificate
of authority, the director shall require that the health maintenance
organization have an initial net worth of one million five hundred
thousand dollars ($1,500,000) and shall thereafter maintain the
minimum net worth required under paragraph (2) of this subsection. ADD}
{ADD (2) Except as provided in paragraphs (3) and (4) of this subsection, every health maintenance organization must: ADD}
{ADD (a) Maintain a minimum net worth equal to the greater of: ADD}
{ADD (1) One million dollars ($1,000,000); or ADD}
{ADD (2) Two percent (2%) of annual premium revenues as reported on the most recent annual financial statement filed with the director on the first one hundred fifty million dollars ($150,000,000) of premium and one percent (1%) of annual premium of the premium in excess of one hundred fifty million dollars ($150,000,000). ADD}
{ADD (b) Maintain total adjusted capital at the amount of authorized control level risk based capital as determined under the risk based capital formula in accordance with the managed care organizations risk based capital instructions adopted by the National Association of Insurance Commissioners. ADD}
{ADD (3) A health maintenance organization licensed before the effective date of this act must maintain a minimum net worth and total adjusted capital of: ADD}
{ADD (A) Twenty-five percent (25%) of the amount required by paragraph (2) of this subsection by January 1, 2000; ADD}
{ADD (B) Fifty percent (50%) of the amount required by paragraph (2) of this subsection by January 1, 2001; ADD}
{ADD (C) Seventy-five percent (75%) of the amount required by paragraph (2) of this subsection by January 1, 2002; ADD}
{ADD (D) One hundred percent (100%) of the amount required by paragraph (2) of this subsection by January 1, 2003. ADD}
{ADD (4) The director may waive any of the net worth and/or total adjusted capital requirements as set forth in this subsection (h) whenever satisfied that the health maintenance organization has sufficient net worth and/or total adjusted capital and an adequate history of generating net income to assure its financial viability for the next year, or its performance and obligations are guaranteed by an organization with sufficient net worth and an adequate history of generating net income, or the assets of the health maintenance organization or its contracts with insurers, hospital or medical service corporations, governments, or other organizations are sufficient to reasonably assure the performance of its obligations; provided, however, that in no event shall the net worth requirement be less than one hundred thousand dollars ($100,000). ADD}
{ADD (5)(A) In determining net worth, no debt shall be considered fully subordinated unless the subordination clause is in a form acceptable to the director. Any interest obligation relating to the repayment of any subordinated debt must be similarly subordinated. ADD}
{ADD (B) The interest expenses relating to the repayment of any fully subordinated debt shall be considered covered expenses. ADD}
{ADD (C) Any debt incurred by a note meeting the requirements of this section, and otherwise acceptable to the director, shall not be considered a liability and shall be recorded as equity. ADD}
(i) Each health maintenance organization shall maintain written contracts or other arrangements satisfactory to the director with providers of services, insurers, hospital or medical service corporations, governments, or other organizations to satisfy the director that in the event of insolvency enrollees will not be liable for charges for covered health services received before the time of insolvency and those contracts and other arrangements shall assure that:
(1) Benefits, including professional services, for all enrollees who are confined at the time of insolvency in hospitals, skilled nursing facilities, intermediate care facilities, or home health agencies receiving services covered by the health maintenance organization shall continue to be paid without interruption until the earlier of discharge or ninety (90) days, or in the alternative, for federally qualified health maintenance organizations which are licensed pursuant to this chapter, confinement coverage shall be provided which meets federal standards for federally qualified health maintenance organization plans;
(2) All enrollees will be covered without interruption by the lesser of their current coverage or a fully qualified program as defined in section 42-62-10, or its equivalent as approved by the director, for a period of thirty (30) days following the insolvency, unless enrollees are afforded an opportunity to enroll in another insurance plan as defined in subsection (i)(3) without waiting periods or exclusions or limitations based on health status; and
(3) Enrollees and enrolled groups will be afforded the opportunity within thirty (30) days to purchase other health insurance equivalent to the lesser of their current coverage or a fully qualified program as defined in section 42-62-10 on a group basis if they are enrolled in the health maintenance organization on a group basis and on a direct pay basis otherwise, with full credit for all prepaid premiums without waiting periods or exclusions or limitations based on health status. In the event that a contract providing for coverage commensurate with the lesser of current coverage or a fully qualified program as defined in section 42-62-10 is not reasonably available, the health maintenance organization shall maintain the best insolvency conversion insurance reasonably available in the market place. The director, upon application of the health maintenance organization, must before approving any alternate coverage be satisfied that that alternate coverage reasonably protects enrollees and is in the public interest. The term "insurance" as used in this section means an insurance policy or a contract of insurance with an entity acceptable to the director other than the health maintenance organization, which other entity is available to cover the enrollees of the health maintenance organization in the event of its insolvency. If insolvency conversion protection commensurate with the lesser of current coverage or a fully qualified program as defined in section 42-62-10 becomes available, the lesser shall be obtained by the health maintenance organization within a reasonable time.
(j) All insurance contracts, and other arrangements to satisfy the conditions herein, shall be evidenced by copies of the insurance contracts and arrangements and by a certificate from the insurers and other parties to the contracts or arrangements submitted to the director, which certificate must contain provisions requiring the insurer, and all other parties to the contracts, to notify the director and the health maintenance organization ninety (90) days in advance of any revocation or cancellation or of any significant change in status giving the reason thereof. All insurance contracts shall remain in full force and effect for at least ninety (90) days following written notice by registered mail of cancellation by either party to the director. Each health maintenance organization must present the director with evidence of premium payment in a form and manner acceptable to the director for each premium payment for any insurance arrangement certifying that all premiums are prepaid ninety (90) days in advance and subsequently the health maintenance organization must follow up within a time period acceptable to the director with other evidence of premium payment satisfactory to the director.
SECTION 2. This act shall take effect upon passage.
