Section 420-B:25 Capital Requirements.
I. Before issuing a certificate of authority under this chapter, the commissioner shall require that the health maintenance organization have an initial net worth of $6,000,000 and that the minimum net worth required under paragraph II is maintained.
II. Every health maintenance organization shall maintain a minimum net worth equal to the greater of:
(a) $6,000,000; or
(b) Seven and one-half percent of annual premium revenues as reported on the most recent annual financial statement filed with the commissioner. The minimum net worth shall be met by the health maintenance organization upon expiration of the certificate of authority.
III. In addition to paragraphs I and II, if at any time uncovered expenditures exceed 15 percent of the total health care expenditures, a health maintenance organization shall increase the required minimum net worth by 120 percent of the health maintenance organization's outstanding liability for uncovered expenditures for enrollees including incurred but not reported claims which shall be calculated as of the first date of the month and retained for the remainder of the month. The increase to minimum net worth required by this paragraph shall not exceed $5,000,000. Health maintenance organizations shall file a report within 45 days after the end of the calendar quarter with information sufficient to demonstrate compliance with this section.
IV. In addition to paragraphs I, II and III, the commissioner shall require additional capital if he finds that the health maintenance organization does not have reasonable and adequate specific stop-loss reinsurance for its individual members.
V. Every health maintenance organization shall, when determining liabilities, include an amount estimated in the aggregate to provide for any unearned premium and for the payment of all claims for health care expenditures which have been incurred, whether reported or unreported, which are unpaid and for which such organization is or may be liable, and to provide for the expense of adjustment of settlement of such claims.
VI. Such liabilities shall be computed in accordance with rules adopted by the commissioner upon reasonable consideration of the ascertained experience and character of the health maintenance organization.
Source. 1989, 186:5. 1990, 114:4, eff. July 1, 1990.