§ 5102b - Solvency protections
§ 5102b. Solvency protections
(a) Before issuing any certificate of authority, the commissioner shall require that the health maintenance organization have an initial net worth of $1,500,000.00 and shall thereafter maintain the minimum net worth required under subsection (b) of this section.
(b) Every health maintenance organization must maintain a minimum net worth equal to the greater of:
(1) $1,500,000.00;
(2) Two percent of annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first $150,000,000.00 of premium plus one percent of annual premium on the premium in excess of $150,000,000.00;
(3) An amount equal to the sum of three months uncovered expenditures as reported on the most recent financial statement filed with the commissioner; or
(4) An amount equal to the sum of ten percent of annual health care expenditures related to its Vermont business except those paid on a capitated basis or managed hospital payment basis as reported on the most recent financial statement filed with the commissioner plus four percent of annual hospital expenditures related to its Vermont business paid on a managed hospital payment basis as reported on the most recent financial statement filed with the commissioner.
(c)(1) Unless otherwise provided in subdivisions (2) through (6) of this subsection, each health maintenance organization shall deposit with the state treasurer for the benefit of all members of the health maintenance organization cash, securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners or clean, irrevocable, unconditional letters of credit, issued or confirmed by a qualified United States institution, approved by the commissioner, or other security or collateral acceptable to the commissioner which at all times shall have a value of not less than the greater of $300,000.00 or 50 percent of the amount provided for in subdivision (b)(4) of this section or such other amount as the commissioner may require. The health maintenance organization shall, on or before April 1 of each calendar year, calculate the amount of the deposit required under this section and shall deposit with the state treasurer any additional amount required to meet the minimum required under this subsection.
(2) A health maintenance organization that is in operation on May 21, 1993 shall make a deposit equal to one-half of the amount required by the commissioner under this subsection within 30 days of the effective date of this section. On or before the first day of the next full calendar year, the health maintenance organization shall make a deposit equal to one-half the amount required by the commissioner under this subsection.
(3) The deposit shall be an admitted asset of the health maintenance organization in the determination of net worth.
(4) All income from deposits shall be an asset of the organization. A health maintenance organization that has made a securities deposit may withdraw that deposit or any part thereof after making a substitute deposit of cash, securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, or any combination of these or other security of equal amount and value. Any securities deposited under this section shall be approved by the commissioner before being deposited or substituted.
(5) The commissioner may order the deposits of designated reserves to be used for the protection of the health maintenance organization's members and the continuation of health care services to members of a health maintenance organization in the event the commissioner takes any actions under chapter 145 of this title. The commissioner may use the deposit for administrative costs directly attributable to the proceeding. If the health maintenance organization is placed in receivership or liquidation, the deposit shall be an asset subject to the provisions of chapter 145 of this title.
(6) In lieu of any other requirement of this subsection, the commissioner may accept the segregation for use in this state of designated reserves established by the health maintenance organization under the laws of another jurisdiction provided that such reserves are found to be adequate by the commissioner to meet the purpose of this section and the domiciliary jurisdiction approves the commitment of such reserves for use by the commissioner.
(7) In lieu of any other requirement of this subsection, the commissioner may accept any instrument, surety, or other insurance policy found to be adequate to meet the purposes of this section.
(d) Every contract between a health maintenance organization and a participating provider of health care services shall be in writing and shall require that in the event the health maintenance organization fails to pay for health care services as set forth in the contract, the member shall not be liable to the provider for any sums owed by the health maintenance organization.
(e) If the commissioner determines that the premiums received by a health maintenance organization for its Vermont members exceed $2,000,000.00 for any calendar year or that the health maintenance organization was incorporated in a state without solvency protections that are substantially equivalent to those offered under this chapter, the commissioner may order that Vermont contracts be conducted through an affiliate or subsidiary corporation incorporated under Vermont law.
(f) The commissioner shall require that each health maintenance organization have a plan for handling its impairment or insolvency which allows for continuation of benefits for the duration of the contract period for which premiums have been paid and continuation of benefits to members who are confined on the date of impairment or insolvency in an inpatient facility until their discharge or expiration of benefits. In considering such a plan, the commissioner may require:
(1) the health maintenance organization to procure insurance to cover the expenses to be paid for continued benefits after an insolvency;
(2) provisions in provider contracts that obligate the provider to provide services for the duration of the period after the health maintenance organization's insolvency for which premium payment has been made or until the member has been discharged from inpatient facilities, whichever comes first;
(3) insolvency reserves;
(4) acceptable letters of credit; and
(5) any other arrangements to assure that benefits are continued in accordance with this subsection.
(g) If at any time uncovered expenditures exceed ten percent of total health care expenditures, the commissioner may grant emergency rate increases and require a health maintenance organization to build an uncovered expenditures insolvency deposit with the state treasurer in an amount not to exceed 120 percent of the health maintenance organization's outstanding liability for uncovered expenditures for members in this state, including incurred but not reported claims. The deposit under this section shall be calculated as of the first day of the month and maintained for the remainder of the month. The amounts deposited under this subsection shall be in addition to the deposit required under subsection (c) of this section.
(h) The deposit required under subsection (g) of this section may be used only as provided under this subsection. The commissioner may order the deposit to be used for administrative costs associated with administering the deposit and for the payment of claims for uncovered expenditures of members of the Vermont portion of its business. Claims for uncovered expenditures shall be paid from the deposit and other available assets on a pro rata basis. The commissioner may order partial distributions pending final distribution. Any amount of the deposit remaining after final distribution under this section shall be paid over to the liquidator or rehabilitator of the health maintenance organization and may be distributed in accordance with chapter 145 of this title.
(i)(1) In the event a health maintenance organization is declared insolvent under chapter 145 of this title, the commissioner may order all other entities licensed or authorized under this title that participated in the enrollment process with the insolvent health maintenance organization at a group's last regular enrollment period to offer such group's members a 30-day enrollment period commencing upon the date the insolvency is declared by a court of competent jurisdiction. Each such entity shall notify and offer such members of the insolvent health maintenance organization the same coverages and rates that it had offered to the members of the group at its last regular enrollment period.
(2) If no other such entity had been offered to some groups enrolled in the insolvent health maintenance organization, or if the commissioner determines that all other health maintenance organizations lack sufficient health care delivery resources to assure that health care services will be available and accessible to all of the group members of the insolvent health maintenance organization, the commissioner may allocate equitably the insolvent health maintenance organization's group contracts for such groups among all health maintenance organizations which operate within a portion of the insolvent health maintenance organization's service area, taking into consideration the health care delivery resources of each health maintenance organization. Each health maintenance organization to which a group or groups are so allocated shall notify and offer such group or groups the health maintenance organization's existing coverage which is most similar to each group's coverage with the insolvent health maintenance organization at rates determined in accordance with the successor health maintenance organization's existing rating methodology.
(3) The commissioner may also allocate equitably the insolvent health maintenance organization's nongroup members who are unable to obtain other coverage among all health maintenance organizations which operate within a portion of the insolvent health maintenance organization's service area, taking into consideration the health care delivery resources of each such health maintenance organization. Each health maintenance organization to which nongroup members are allocated shall notify and offer such nongroup members the health maintenance organization's existing coverage for individual or conversion coverage as determined by the type of coverage held in the insolvent health maintenance organization but at rates determined in accordance with the successor health maintenance organization's existing rating methodology. Successor health maintenance organizations which do not offer direct nongroup enrollment may aggregate all of the allocated nongroup members into one group for rating and coverage purposes. Coverage made available under this subsection shall be effective on the date the insolvency is declared.
(j) Any rehabilitation, liquidation or conservation of a health maintenance organization shall be deemed to be the rehabilitation, liquidation or conservation of an insurance company and shall be conducted under the supervision of the commissioner pursuant to chapter 145 of this title.
(k)(1) Whenever the commissioner determines that the financial condition of any health maintenance organization is such that its continued operation might be hazardous to its members, creditors, or the general public, or that it has violated any provision of this chapter, the commissioner may, after notice and hearing, order the health maintenance organization to take such action as may be reasonably necessary to rectify such condition or violation, including, but not limited to one or more of the following:
(A) reduce the total amount of present and potential liability for benefits through reinsurance or other method approved by the commissioner;
(B) reduce the volume of new business accepted;
(C) suspend or limit the writing of new business for a period of time;
(D) increase the health maintenance organization's capital and surplus by contribution; or
(E) take such other steps as the commissioner may deem appropriate under the circumstances.
(2) If the commissioner finds that member protection requires emergency action, the commissioner may summarily order the health maintenance organization to take any action described in subdivision (1) of this subsection, provided that notice and hearing is issued as soon as practicable after such action is taken.
(l) The commissioner shall adopt rules that establish solvency standards for provider-sponsored networks, including provider-sponsored organizations, for the Medicare Advantage program, as described in 42 U.S.C. § 1395w-21, in conformance with the solvency standards established by the Secretary of Health and Human Services under 42 U.S.C. § 1395w-26. Provider-sponsored networks shall be licensed under this chapter to offer a Medicare Advantage plan by complying with the solvency rules adopted under this subsection; except that a provider-sponsored network that offers any health plan other than or in addition to a Medicare Advantage plan shall comply with the solvency standards of this chapter instead of those adopted specifically for Medicare Advantage plans under this subsection. A provider-sponsored network licensed under this chapter shall not be required to offer any insurance product apart from Medicare Advantage. For purposes of this subsection, "provider-sponsored network" or "provider-sponsored organization" shall have the same definition as in 42 U.S.C. § 1395w-25(d).
(m) The commissioner may enter into contracts with the Secretary of Health and Human Services for the administration of the Medicare Advantage program. (Added 1993, No. 30, § 7, eff. May 21, 1993; amended 1997, No. 159 (Adj. Sess.), § 4, eff. April 29, 1998; 2005, No. 36, § 18, eff. June 1, 2005.)