§ 27-41-13 - Protection against insolvency.
SECTION 27-41-13
§ 27-41-13 Protection against insolvency.– (a) Unless otherwise provided, each health maintenance organization shalldeposit with the general treasurer of the state of Rhode Island securitieshaving a market value at all times of at least the amount set forth in thissection, which are to be held for the benefit and protection of all theenrollees of the health maintenance organization.
(b) The amount for an organization that is applying forinitial licensure shall be the greater of:
(i) Five percent (5%) of its estimated expenditures forhealth care services for its first year of operation;
(ii) Twice its estimated average monthly uncoveredexpenditures for its first year of operation; or
(iii) One hundred thousand dollars ($100,000);
(2) At the beginning of each succeeding year, unless notapplicable, that organization shall deposit with the general treasurersecurities in an amount equal to four percent (4%) of its estimated annualuncovered expenditures for that year.
(c) An organization that is licensed as a health maintenanceorganization on May 17, 1983, shall make a deposit equal to the larger of:
(i) One percent (1%) of the preceding twelve (12) months ofuncovered 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 yearbeginning six (6) months or more after May 17, 1983, the organization shallmake an additional deposit equal to two percent (2%) of its estimated annualuncovered expenditures. In the second fiscal year, if applicable, theadditional deposit shall be equal to three percent (3%) of its estimated annualuncovered expenditures for that year, and in the third fiscal year andsubsequent years, if applicable, the additional deposit shall be equal to fourpercent (4%) of its estimated annual uncovered expenditures for each year. Eachyear's estimate, after the first year of operation, shall reasonably reflectthe prior year's operating experience and delivery arrangements.
(d) The director may waive any of the deposit requirements asset forth in subsections (b) and (c) of this section whenever satisfied thatthe organization has sufficient net worth and an adequate history of generatingnet income to assure its financial viability for the next year, or itsperformance and obligations are guaranteed by an organization with sufficientnet worth and an adequate history of generating net income, or the assets ofthe organization or its contracts with insurers, hospital or medical servicecorporations, governments, or other organizations are sufficient to reasonablyassure the performance of its obligations.
(e) When an organization has achieved a net worth notincluding 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), theannual deposit requirement shall not apply;
(2) The annual deposit requirement shall not apply to anorganization if the total amount of the deposit of securities is equal totwelve percent (12%) of the HMO's estimated annual uncovered expenditures forthe next calendar year, or the capital and surplus requirements for theformation and admittance of an accident and health insurer in this state,whichever is less;
(3) If the organization has a guaranteeing organization whichhas been in operation for at least five (5) years and has a net worth notincluding 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 andhas a net worth including plan related land, buildings, and equipment of atleast five million dollars ($5,000,000), the annual deposit requirement shallnot apply; provided, that if the guaranteeing organization is sponsoring morethan the one organization, the net worth requirement shall be increased by amultiple equal to the number of organizations. This requirement to maintain adeposit in excess of the deposit required of an accident and health insurershall not apply during any time that the guaranteeing organization maintains anet worth at least equal to the capital and surplus requirements for anaccident and health insurer.
(f) All income from the deposit with the general treasurershall belong to the depositing organization and shall be paid to it as itbecomes available. A health maintenance organization that has made a securitiesdeposit with the general treasurer may, at its option, withdraw the securitiesdeposit or any part of the deposit, first having deposited, in lieu of it, adeposit of securities of equal amount and value to that withdrawn.
(g) In any year in which an annual deposit is not required ofan organization, at its request, the director shall lower its required depositby one hundred thousand dollars ($100,000) for each two hundred fifty thousanddollars ($250,000) of net worth not including land, buildings, and equipment,if it, or a guaranteeing organization on its behalf and not for anotherorganization, has in excess of one million dollars ($1,000,000) or in excess offive million dollars ($5,000,000) of net worth, including only healthmaintenance organization related land, buildings, and equipment contributing tothe delivery of health care services; provided, that the reductions never bringthe required deposit below one hundred thousand dollars ($100,000). If the networth of an organization or guaranteeing organization no longer supports areduction of its required deposit, the organization shall immediately redepositone hundred thousand dollars ($100,000) for each two hundred fifty thousanddollars ($250,000) of reduction, provided that its total deposit does notexceed the maximum required under this section.
(h) Each health maintenance organization shall maintainwritten contracts or other arrangements satisfactory to the director withproviders of services, insurers, hospital or medical service corporations,governments, or other organizations to satisfy the director that in the eventof insolvency enrollees will not be liable for charges for covered healthservices received before the time of insolvency and those contracts and otherarrangements shall assure that:
(1) Benefits, including professional services, for allenrollees who are confined at the time of insolvency in hospitals, skillednursing facilities, intermediate care facilities, or home health agenciesreceiving services covered by the health maintenance organization shallcontinue to be paid without interruption until the earlier of discharge orninety (90) days, or in the alternative, for federally qualified healthmaintenance organizations which are licensed pursuant to this chapter,confinement coverage shall be provided which meets federal standards forfederally qualified health maintenance organization plans;
(2) All enrollees will be covered without interruption by thelesser of their current coverage or a fully qualified program as defined in§ 42-62-10, or its equivalent as approved by the director, for a period ofthirty (30) days following the insolvency, unless enrollees are afforded anopportunity to enroll in another insurance plan as defined in subdivision (3)of this subsection without waiting periods or exclusions or limitations basedon health status; and
(3) Enrollees and enrolled groups will be afforded theopportunity within thirty (30) days to purchase other health insuranceequivalent to the lesser of their current coverage or a fully qualified programas defined in § 42-62-10 on a group basis if they are enrolled in thehealth maintenance organization on a group basis and on a direct pay basisotherwise, with full credit for all prepaid premiums without waiting periods orexclusions or limitations based on health status. In the event that a contractproviding for coverage commensurate with the lesser of current coverage or afully qualified program as defined in § 42-62-10 is not reasonablyavailable, the health maintenance organization shall maintain the bestinsolvency conversion insurance reasonably available in the market place. Thedirector, upon application of the health maintenance organization, must besatisfied before approving any alternate coverage that that alternate coveragereasonably protects enrollees and is in the public interest. The term"insurance" as used in this section means an insurance policy or a contract ofinsurance with an entity acceptable to the director other than the healthmaintenance organization, which other entity is available to cover theenrollees of the health maintenance organization in the event of itsinsolvency. If insolvency conversion protection commensurate with the lesser ofcurrent coverage or a fully qualified program as defined in § 42-62-10becomes available, the lesser shall be obtained by the health maintenanceorganization within a reasonable time.
(i) All insurance contracts, and other arrangements tosatisfy the conditions in this section, shall be evidenced by copies of theinsurance contracts and arrangements and by a certificate from the insurers andother parties to the contracts or arrangements submitted to the director, whichcertificate must contain provisions requiring the insurer, and all otherparties to the contracts, to notify the director and the health maintenanceorganization ninety (90) days in advance of any revocation or cancellation orof any significant change in status giving the reason of the action. Allinsurance contracts shall remain in full force and effect for at least ninety(90) days following written notice by registered mail of cancellation by eitherparty to the director. Each health maintenance organization must present thedirector with evidence of premium payment in a form and manner acceptable tothe director for each premium payment for any insurance arrangement certifyingthat all premiums are prepaid ninety (90) days in advance and subsequently thehealth maintenance organization must follow up within a time period acceptableto the director with other evidence of premium payment satisfactory to thedirector.