Substitute Senate Bill No. 1337

Public Act No. 99-9

An Act Concerning Health Care Centers.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 38a-8 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) The commissioner shall see that all laws respecting insurance companies and health care centers are faithfully executed and shall administer and enforce the provisions of this title. The commissioner has all powers specifically granted, and all further powers that are reasonable and necessary to enable the commissioner to protect the public interest in accordance with the duties imposed by this title. The commissioner shall pay to the Treasurer all the fees which he receives. The commissioner may administer oaths in the discharge of his duties.

(b) The commissioner shall recommend to the General Assembly changes which, in his opinion, should be made in the laws relating to insurance.

(c) In addition to the specific regulations which the commissioner is required to adopt, the commissioner may adopt such further regulations as are reasonable and necessary to implement the provisions of this title. Regulations shall be adopted in accordance with the provisions of chapter 54.

(d) The commissioner shall develop a program of periodic review to ensure compliance by the Insurance Department with the minimum standards established by the National Association of Insurance Commissioners for effective financial surveillance and regulation of insurance companies operating in this state. The commissioner shall adopt regulations, in accordance with the provisions of chapter 54, pertaining to the financial surveillance and solvency regulation of insurance companies and health care centers as are reasonable and necessary to obtain or maintain the accreditation of the Insurance Department by the National Association of Insurance Commissioners. The commissioner shall maintain, as confidential, any confidential documents or information received from the National Association of Insurance Commissioners, or the International Association of Insurance Supervisors, or any documents or information received from state or federal insurance, banking or securities regulators or similar regulators in a foreign country which are confidential in such jurisdictions. The commissioner may share any information, including confidential information, with the National Association of Insurance Commissioners, the International Association of Insurance Supervisors, or state or federal insurance, banking or securities regulators or similar regulators in a foreign country so long as the commissioner determines that such entities agree to maintain the same level of confidentiality in their jurisdiction as is available in this state.

(e) The Insurance Commissioner shall establish a program to reduce costs and increase efficiency through the use of electronic methods to transmit documents, including policy form and rate filings, to and from insurers and the Insurance Department. The commissioner may sit as a member of the board of a consortium organized by or in association with the National Association of Insurance Commissioners for the purpose of coordinating a system for electronic rate and form filing among state insurance departments and insurers.

Sec. 2. Subsections (a), (b) and (c) of section 38a-41 of the general statutes are repealed and the following is substituted in lieu thereof:

(a) No insurance company or health care center shall do any insurance business or health care center business within this state until and except while it is permitted to do so under the terms of a license issued by the commissioner. Any such company desiring to obtain such a license shall make application to the commissioner, setting forth the line or lines of [insurance] business which it [desires] is seeking authorization to write. It shall file with the commissioner a certified copy of its charter or articles of association and evidence satisfactory to the commissioner that it has complied with the laws of the jurisdiction under which it is organized, a statement of its financial condition in such form as is required by the commissioner, together with such evidence of its correctness as the commissioner requires and evidence of good management in such form as is required by the commissioner. Applicant companies licensed in and operated from administrative offices in one state but domiciled in another state, as permitted by the applicable state law, shall provide justification of such arrangement, satisfactory to the commissioner, which shall demonstrate that regulatory influence of the domiciliary supervisory official has not been diminished as a result of such arrangement. An applicant shall demonstrate an orderly pattern of growth in its marketing territories in the geographic region, with the exception of a newly formed health care center, and an expertise in marketing and servicing the lines of insurance or the health care center business it desires to write. It shall submit evidence of its ability to provide continuant and timely claims settlement. If the information furnished is satisfactory to the commissioner and if all other requirements of law have been complied with, he may issue to such company a license permitting it to do business in this state. Each such license shall expire on the first day of May succeeding the date of its issuance, but may be renewed without any formalities except as required by the commissioner. Failure of a licensed company to exercise its authority to write a particular line or lines of business in this state for two consecutive calendar years may constitute sufficient cause for revocation of the company's authority to write those lines of [insurance] business.

(b) The commissioner shall adopt regulations in accordance with the provisions of chapter 54 specifying the information and evidence that an insurance company or health care center desiring to obtain or renew a license to do an insurance business or health care center business shall submit and the requirements with which it shall comply.

(c) The commissioner may, at any time, for cause, suspend, revoke or reissue any such license or in lieu of or in addition to suspension or revocation of such license the commissioner, after reasonable notice to and hearing of any holder of such license, may impose a fine not to exceed ten thousand dollars. Such hearings may be held by the commissioner or any person designated by the commissioner. Whenever a person other than the commissioner acts as the hearing officer, he shall submit to the commissioner a memorandum of his findings and recommendations upon which the commissioner may base his decision. The commissioner may, if [he] the commissioner deems it [for] in the interest of the public, publish in one or more newspapers of the state a statement that, under the provisions of this section, [he] the commissioner has suspended or revoked the license of any insurance company or health care center to do business in this state.

Sec. 3. Subsection (a) of section 38a-41a of the general statutes is repealed and the following is substituted in lieu thereof:

(a) A certificate authorizing the formation of a corporation to transact the business of an insurance company or a health care center shall be issued by the [Insurance Commissioner] commissioner if the following is submitted to [him] the commissioner by the incorporators and is deemed to be satisfactory: (1) The proposed articles of incorporation, which shall state that the corporation has, as a purpose, the doing of an insurance business or health care center business; (2) the proposed bylaws of the corporation; and (3) such information as the commissioner shall require to evaluate the objectives, management and control of the proposed corporation, pursuant to the provisions of chapter 54.

Sec. 4. Section 38a-193 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) (1) Before issuing any certificate of authority to any health care center on or after July 1, 1990, the commissioner shall require that a health care center have: (A) An initial net worth of one million five hundred thousand dollars and (B) agree to thereafter maintain the minimum net worth required under subdivision [(2)] (4) of this subsection.

(2) No health care center shall be licensed to transact business in this state or remain so licensed unless, (A) its net worth bears a reasonable relationship to its liabilities based upon the type, volume and nature of business transacted, and (B) its risk-based capital related to its total adjusted capital is adequate for the type of business transacted. As used in this subsection, "total adjusted capital" means the sum of a health care center's net worth and any other item in the nature of capital as deemed appropriate by the commissioner; and "risk-based capital" means the net worth of the health care center adjusted to recognize the level of risk inherent in its business, including (i) risk with respect to the health care center's assets, (ii) the risk of adverse underwriting experience with respect to the health care center's liabilities and obligations, (iii) the credit risk with respect to the health care center's business, and (iv) all other business risks and such other relevant risks as the commissioner may determine.

(3) (A) In determining net worth, no debt shall be considered fully subordinated unless the subordination clause is in a form acceptable to the commissioner. Any interest obligation relating to the repayment of any subordinated debt must be similarly subordinated. (B) The interest expenses relating to the repayment of any fully subordinated debt shall not be considered uncovered expenditures. (C) Any debt incurred by a note meeting the requirements of this section, and otherwise acceptable to the commissioner, shall not be considered a liability and shall be recorded as equity.

[(2)] (4) Except as provided in subdivision (3) and subdivisions (5) to (7), inclusive, of this subsection, [every] each health care center shall maintain a minimum net worth equal to the greater of: (A) One million dollars; or (B) two per cent of its annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first one hundred fifty million dollars of premium revenues plus one per cent of annual premium revenues in excess of one hundred fifty million dollars. No health care center authorized by the commissioner to do business in this state, on July 1, 1990, shall be required to comply with the provisions of subparagraph [(b)] (B) of this subdivision until January 1, 1995.

(5) Each health care center that offers or proposes to offer out-of-network benefits shall either:

(A) Enter into an agreement with a duly licensed insurance company to provide coverage to subscribers and enrollees outside of the health care center's established network, subject to approval by the commissioner, or

(B) Implement an out-of-network benefit system to be operated by the health care center, subject to approval by the commissioner, provided the health care center establishes and maintains its net worth at an amount equal to the greater of (i) three million dollars, (ii) two per cent of its annual premium revenues as reported on the most recent annual financial statement filed with the commissioner on the first one hundred fifty million dollars of premium revenues plus one per cent of annual premium revenues in excess of one hundred fifty million dollars, or (iii) two months of its cost of uncovered expenditures. For purposes of this subsection, "annual premium revenues" does not include revenue earned as a result of an arrangement between a health care center and the federal Health Care Financing Administration, on a cost or risk basis, for services to a Medicare beneficiary, or revenue earned as a result of an arrangement between a health care center and a Medicaid state agency, for services to a Medicaid beneficiary. For the purposes of this subsection, the uncovered expenditures of the health care center for the requisite two-month period shall be calculated as follows:

UE = ( X + Y - Z ) / 6

Where:

UE = Uncovered expenditures of the health care center for the requisite two-month period.

X = Total year-to-date uncovered expenditures reported in the health care center's most recent statutory quarterly or annual statement.

Y = Total year-to-date uncovered expenditures reported in the health care center's annual statement for the prior calendar year.

Z = Total year-to-date uncovered expenditures reported in the health care center's statutory quarterly or annual statement for the current calendar quarter of the prior calendar year.

(6) The total cost of the out-of-network benefits of a health care center shall not exceed ten per cent of the total cost of the health care center's claims and expenses on a quarterly basis.

(7) Any health care center that provides out-of-network benefits pursuant to this subsection shall provide a quarterly report concurrent with filing of the required quarterly and annual financial statements which shall demonstrate compliance with the provisions of this subsection.

(8) The commissioner may adopt regulations, in accordance with chapter 54, to implement the purposes of this subsection, including, but not limited to, provisions concerning: (A) The preparation and filing of reports by health care centers relating to risk-based capital levels and the calculation thereof; (B) the preparation and filing of comprehensive financial plans when such capital levels are reduced below minimum threshold levels; (C) the confidentiality of such reports and plans; and (D) the regulatory corrective actions the commissioner may take in the event minimum risk-based capital levels are not maintained, or the health care center's financial plans filed with the commissioner are deficient, or the health care center fails to otherwise comply with the provisions of the regulations.

(b) Every health care center 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 or settlement of such claims. Such liabilities shall be computed in accordance with [regulations promulgated by the commissioner upon reasonable consideration of the ascertained experience and character of the health care center] those accounting procedures and practices prescribed by the National Association of Insurance Commissioners Accounting Practices and Procedures Manual and the National Association of Insurance Commissioners Annual Statement Instructions, subject to any deviations prescribed by the commissioner.

(c) (1) Every contract between a health care center and a participating provider of health care services shall be in writing and shall set forth that in the event the health care center fails to pay for health care services as set forth in the contract, the subscriber or enrollee shall not be liable to the provider for any sums owed by the health care center. (2) In the event that the participating provider contract has not been reduced to writing as required by this subsection or that the contract fails to contain the required prohibition, the participating provider shall not collect or attempt to collect from the subscriber or enrollee sums owed by the health care center. (3) No participating provider, or agent, trustee or assignee thereof, may: (A) Maintain any action at law against a subscriber or enrollee to collect sums owed by the health care center; or (B) request payment from a subscriber or enrollee for such sums. For purposes of this subdivision "request payment" includes, but is not limited to, submitting a bill for services not actually owed or submitting for such services an invoice or other communication detailing the cost of the services that is not clearly marked with the phrase "THIS IS NOT A BILL".

(d) The commissioner shall require that each health care center have a plan for handling 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 to inpatient facilities on the date of insolvency until their discharge or expiration of benefits. In considering such a plan, the commissioner may approve one or more of the following: (1) 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 after the health care center's insolvency for the duration of the period for which premium payment has been made and until the enrollees' discharge from inpatient facilities; (3) insolvency reserves; (4) acceptable letters of credit; or (5) any other arrangements to assure that benefits are continued as specified above.

(e) Every agreement to provide health care services between a provider and a health care center shall require the provider to provide at least sixty days' advance notice to the health care center to terminate the agreement.

Sec. 5. Section 38a-194 of the general statutes is repealed and the following is substituted in lieu thereof:

(a) In the event of an insolvency of a health care center, upon order of the commissioner, all other carriers that participated in the enrolment process with the insolvent health care center at a group's last regular enrolment period shall offer such group's [enrollees] subscribers of the insolvent health care center a thirty-day enrolment period commencing upon the date of insolvency. Each carrier shall offer such [enrollees] subscribers of the insolvent health care center the same coverages and rates that such carrier had offered to the [enrollees] subscribers of the group at its last regular enrolment period for the remainder of the term of the original group contract. An open enrolment shall not be required where the group contract holder participates in a self-insured, self-funded or other health plan exempt from the regulation of the commissioner, unless the plan administrator and group contract holder voluntarily agree to offer a simultaneous open enrolment and extend coverage under the same enrolment terms and conditions as are applicable to carriers under sections 38a-175 to 38a-178, inclusive, subsection (a) of section 38a-179, sections 38a-182 to 38a-185, inclusive, 38a-187, 38a-188 and 38a-192 to 38a-194, inclusive, and the regulations adopted hereunder.

(b) If no other carrier has been offered to one or more groups enrolled in the insolvent health care center, or if the commissioner determines that the other carrier or carriers lack sufficient health care delivery resources to assure that health care services will be available and accessible to all of the group enrollees of the insolvent health care center, then the commissioner shall allocate equitably the insolvent health care center's group contracts for such groups among all health care centers which operate within a portion of the insolvent health care center's service area, taking into consideration the health care delivery resources of each health care center. Each health care center, to which a group or groups are so allocated, shall offer such group or groups the health care center's existing coverage which is most similar to the group's coverage with the insolvent health care center at rates determined in accordance with the successor health care center's existing rating methodology. No offering by a carrier shall be required where the group contract holder participates in a self-insured, self-funded or other health plan exempt from regulation by the commissioner. The commissioner shall also allocate equitably the insolvent health care center's nongroup enrollees who are unable to obtain other coverage among all health care centers which operate within a portion of the insolvent health care center's service area, taking into consideration the health care delivery resources of each such health care center. Each health care center to which nongroup enrollees are allocated, shall offer each such nongroup enrollee, the health care center's existing coverage for individual or conversion coverage as determined by his type of coverage in the insolvent health care center at rates determined in accordance with the successor health care center's existing rating methodology. Successor health care centers which do not offer direct nongroup enrolment may aggregate all of the allocated nongroup enrollees into one group for rating and coverage purposes.

(c) (1) "Discontinuance" shall mean the termination of the contract between the group contract holder and a health care center due to the insolvency of the health care center, and does not refer to the termination of any agreement between any individual enrollee and the health care center.

(2) Any carrier providing replacement coverage with respect to group hospital, medical or surgical expense or service benefits within a period of sixty days from the date of discontinuance of a prior health care center contract or policy providing such hospital, medical or surgical expense or service benefits shall immediately cover all [enrollees] subscribers and subscribers' beneficiaries who were validly covered under the previous health care center contract or policy at the date of discontinuance and who would otherwise be eligible for coverage under the succeeding carrier's contract, regardless of any provisions of the contract relating to active employment or hospital confinement or pregnancy.

(3) Except to the extent benefits for the condition would have been reduced or excluded under the prior carrier's contract or policy, no provision in a succeeding carrier's contract of replacement coverage which would operate to reduce or exclude benefits on the basis that the condition giving rise to benefits, preexisted the effective date of the succeeding carrier's contract, shall be applied with respect to those [enrollees] subscribers and subscribers' beneficiaries validly covered under the prior carrier's contract or policy on the date of discontinuance.

(d) In the event of the insolvency of a health care center, for purposes of determining the priority of distribution of the general assets of the health care center, claims of enrollees, enrollees' beneficiaries, subscribers and subscribers' beneficiaries shall have the same priority as established by section 38a-944 for policyholders and beneficiaries of insureds of insurance companies described in subdivision (3) of subsection (a) of section 38a-944. If an enrollee or subscriber is liable to any provider for services provided pursuant to and covered by the health care center, that liability shall have the status of an enrollee or subscriber claim for distribution of assets. Any provider who is obligated by statute or agreement to hold enrollees or subscribers harmless from liability for services provided pursuant to and covered by a health care center shall have a priority of distribution of the general assets immediately following that of enrollees, enrollees' beneficiaries, subscribers and subscribers' beneficiaries as described in this subsection, and immediately preceding the priority of distribution described in subdivision (4) of subsection (a) of section 38a-944.

Sec. 6. This act shall take effect from its passage.

Approved May 12, 1999

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