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91_HB2722
LRB9101904JSpcA
1 AN ACT concerning risk-based capital regulation for
2 health insurers, amending named Acts.
3 Be it enacted by the People of the State of Illinois,
4 represented in the General Assembly:
5 Section 5. The Illinois Insurance Code is amended by
6 changing Sections 35A-5, 35A-10, 35A-15, 35A-20, 35A-30,
7 35A-55, and 35A-60 as follows:
8 (215 ILCS 5/35A-5)
9 Sec. 35A-5. Definitions. As used in this Article, the
10 terms listed in this Section have the meaning given herein.
11 "Adjusted RBC Report" means an RBC Report that has been
12 adjusted by the Director in accordance with subsection (f)
13 (e) of Section 35A-10.
14 "Authorized control level RBC" means the number
15 determined under the risk-based capital formula in accordance
16 with the RBC Instructions.
17 "Company action level RBC" means the product of 2.0 and
18 the insurer's authorized control level RBC.
19 "Corrective Order" means an order issued by the Director
20 in accordance with Article XII 1/2 specifying corrective
21 actions that the Director determines are required.
22 "Domestic insurer" means any insurance company domiciled
23 in this State under Article II, Article III, Article III 1/2,
24 or Article IV or a health organization as defined by this
25 Article, except this shall include only those health
26 maintenance organizations that are "domestic companies" in
27 accordance with Section 5-3 of the Health Maintenance
28 Organization Act and only those limited health service
29 organizations that are "domestic companies" in accordance
30 with Section 4003 of the Limited Health Service Organization
31 Act.
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1 "Foreign insurer" means any foreign or alien insurance
2 company licensed under Article VI that is not domiciled in
3 this State and any health maintenance organization that is
4 not a "domestic company" in accordance with Section 5-3 of
5 the Health Maintenance Organization Act and any limited
6 health service organization that is not a "domestic company"
7 in accordance with Section 4003 of the Limited Health Service
8 Organization Act.
9 "Health organization" means an entity operating under a
10 certificate of authority issued pursuant to the Health
11 Maintenance Organization Act, the Dental Service Plan Act,
12 the Limited Health Service Organization Act, or the Voluntary
13 Health Services Plans Act, unless the entity is otherwise
14 defined as a "life, health, or life and health insurer"
15 pursuant to this Act.
16 "Life, health, or life and health insurer" means an
17 insurance company that has authority to transact the kinds of
18 insurance described in either or both clause (a) or clause
19 (b) of Class 1 of Section 4 or a licensed property and
20 casualty insurer writing only accident and health insurance.
21 "Mandatory control level RBC" means the product of 0.70
22 and the insurer's authorized control level RBC.
23 "NAIC" means the National Association of Insurance
24 Commissioners.
25 "Negative trend" means, with respect to a life, health,
26 or life and health insurer, a negative trend over a period of
27 time, as determined in accordance with the trend test
28 calculation included in the RBC Instructions.
29 "Property and casualty insurer" means an insurance
30 company that has authority to transact the kinds of insurance
31 in either or both Class 2 or Class 3 of Section 4 or a
32 licensed insurer writing only insurance authorized under
33 clause (c) of Class 1, but does not include monoline mortgage
34 guaranty insurers, financial guaranty insurers, and title
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1 insurers.
2 "RBC" means risk-based capital.
3 "RBC Instructions" means the RBC Report including
4 risk-based capital instructions adopted by the NAIC as those
5 instructions may be amended by the NAIC from time to time in
6 accordance with the procedures adopted by the NAIC.
7 "RBC level" means an insurer's company action level RBC,
8 regulatory action level RBC, authorized control level RBC, or
9 mandatory control level RBC.
10 "RBC Plan" means a comprehensive financial plan
11 containing the elements specified in subsection (b) of
12 Section 35A-15.
13 "RBC Report" means the risk-based capital report required
14 under Section 35A-10.
15 "Receivership" means conservation, rehabilitation, or
16 liquidation under Article XIII.
17 "Regulatory action level RBC" means the product of 1.5
18 and the insurer's authorized control level RBC.
19 "Revised RBC Plan" means an RBC Plan rejected by the
20 Director and revised by the insurer with or without the
21 Director's recommendations.
22 "Total adjusted capital" means the sum of (1) an
23 insurer's statutory capital and surplus and (2) any other
24 items that the RBC Instructions may provide.
25 (Source: P.A. 89-97, eff. 7-7-95; 90-794, eff. 8-14-98.)
26 (215 ILCS 5/35A-10)
27 Sec. 35A-10. RBC Reports.
28 (a) On or before each March 1 (the "filing date"), every
29 domestic insurer shall prepare and submit to the Director a
30 report of its RBC levels as of the end of the previous
31 calendar year in the form and containing the information
32 required by the RBC Instructions. Every domestic insurer
33 shall also file its RBC Report with the NAIC in accordance
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1 with the RBC Instructions. In addition, if requested in
2 writing by the chief insurance regulatory official of any
3 state in which it is authorized to do business, every
4 domestic insurer shall file its RBC Report with that official
5 no later than the later of 15 days after the insurer receives
6 the written request or the filing date.
7 (b) A life, health, or life and health insurer's RBC
8 shall be determined under the formula set forth in the RBC
9 Instructions. The formula shall take into account (and may
10 adjust for the covariance between):
11 (1) the risk with respect to the insurer's assets;
12 (2) the risk of adverse insurance experience with
13 respect to the insurer's liabilities and obligations;
14 (3) the interest rate risk with respect to the
15 insurer's business; and
16 (4) all other business risks and other relevant
17 risks set forth in the RBC Instructions.
18 These risks shall be determined in each case by applying the
19 factors in the manner set forth in the RBC Instructions.
20 (c) A property and casualty insurer's RBC shall be
21 determined in accordance with the formula set forth in the
22 RBC Instructions. The formula shall take into account (and
23 may adjust for the covariance between):
24 (1) asset risk;
25 (2) credit risk;
26 (3) underwriting risk; and
27 (4) all other business risks and other relevant
28 risks set forth in the RBC Instructions.
29 These risks shall be determined in each case by applying the
30 factors in the manner set forth in the RBC Instructions.
31 (d) A health organization's RBC shall be determined in
32 accordance with the formula set forth in the RBC
33 Instructions. The formula shall take the following into
34 account (and may adjust for the covariance between):
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1 (1) asset risk;
2 (2) credit risk;
3 (3) underwriting risk; and
4 (4) all other business risks and other relevant
5 risks set forth in the RBC Instructions.
6 These risks shall be determined in each case by applying the
7 factors in the manner set forth in the RBC Instructions.
8 (e) (d) An excess of capital over the amount produced by
9 the risk-based capital requirements contained in this Code
10 and the formulas, schedules, and instructions referenced in
11 this Code is desirable in the business of insurance.
12 Accordingly, insurers should seek to maintain capital above
13 the RBC levels required by this Code. Additional capital is
14 used and useful in the insurance business and helps to secure
15 an insurer against various risks inherent in, or affecting,
16 the business of insurance and not accounted for or only
17 partially measured by the risk-based capital requirements
18 contained in this Code.
19 (f) (e) If a domestic insurer files an RBC Report that,
20 in the judgment of the Director, is inaccurate, the Director
21 shall adjust the RBC Report to correct the inaccuracy and
22 shall notify the insurer of the adjustment. The notice shall
23 contain a statement of the reason for the adjustment.
24 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
25 (215 ILCS 5/35A-15)
26 Sec. 35A-15. Company action level event.
27 (a) A company action level event means any of the
28 following events:
29 (1) The filing of an RBC Report by an insurer that
30 indicates that:
31 (A) the insurer's total adjusted capital is
32 greater than or equal to its regulatory action level
33 RBC, but less than its company action level RBC; or
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1 (B) The insurer, if a life, health, or life
2 and health insurer, has total adjusted capital that
3 is greater than or equal to its company action level
4 RBC, but less than the product of its authorized
5 control level RBC and 2.5 and has a negative trend.
6 (2) The notification by the Director to the insurer
7 of an Adjusted RBC Report that indicates an event
8 described in paragraph (1), provided the insurer does not
9 challenge the Adjusted RBC Report under Section 35A-35.
10 (3) The notification by the Director to the insurer
11 that the Director has, after a hearing, rejected the
12 insurer's challenge under Section 35A-35 to an Adjusted
13 RBC Report that indicates the event described in
14 paragraph (1).
15 (b) In the event of a company action level event, the
16 insurer shall prepare and submit to the Director an RBC Plan
17 that does all of the following:
18 (1) Identifies the conditions that contribute to
19 the company action level event.
20 (2) Contains proposed corrective actions that the
21 insurer intends to take and that are expected to result
22 in the elimination of the company action level event. A
23 health organization is not prohibited from proposing
24 recognition of a parental guarantee or a letter of credit
25 to eliminate the company action level event; however the
26 Director shall, at his discretion, determine whether or
27 the extent to which the proposed parental guarantee or
28 letter of credit is an acceptable part of a satisfactory
29 RBC Plan or Revised RBC Plan.
30 (3) Provides projections of the insurer's financial
31 results in the current year and at least the 4 succeeding
32 years, both in the absence of proposed corrective actions
33 and giving effect to the proposed corrective actions,
34 including projections of statutory operating income, net
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1 income, capital, and surplus. The projections for both
2 new and renewal business may include separate projections
3 for each major line of business and separately identify
4 each significant income, expense, and benefit component.
5 (4) Identifies the key assumptions affecting the
6 insurer's projections and the sensitivity of the
7 projections to the assumptions.
8 (5) Identifies the quality of, and problems
9 associated with, the insurer's business including, but
10 not limited to, its assets, anticipated business growth
11 and associated surplus strain, extraordinary exposure to
12 risk, mix of business, and use of reinsurance, if any, in
13 each case.
14 (c) The insurer shall submit the RBC Plan to the
15 Director within 45 days after the company action level event
16 occurs or within 45 days after the Director notifies the
17 insurer that the Director has, after a hearing, rejected its
18 challenge under Section 35A-35 to an Adjusted RBC Report.
19 (d) Within 60 days after an insurer submits an RBC Plan
20 to the Director, the Director shall notify the insurer
21 whether the RBC Plan shall be implemented or is, in the
22 judgment of the Director, unsatisfactory. If the Director
23 determines the RBC Plan is unsatisfactory, the notification
24 to the insurer shall set forth the reasons for the
25 determination and may set forth proposed revisions that will
26 render the RBC Plan satisfactory in the judgment of the
27 Director. Upon notification from the Director, the insurer
28 shall prepare a Revised RBC Plan, which may incorporate by
29 reference any revisions proposed by the Director. The
30 insurer shall submit the Revised RBC Plan to the Director
31 within 45 days after the Director notifies the insurer that
32 the RBC Plan is unsatisfactory or within 45 days after the
33 Director notifies the insurer that the Director has, after a
34 hearing, rejected its challenge under Section 35A-35 to the
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1 determination that the RBC Plan is unsatisfactory.
2 (e) In the event the Director notifies an insurer that
3 its RBC Plan or Revised RBC Plan is unsatisfactory, the
4 Director may, at the Director's discretion and subject to the
5 insurer's right to a hearing under Section 35A-35, specify in
6 the notification that the notification constitutes a
7 regulatory action level event.
8 (f) Every domestic insurer that files an RBC Plan or
9 Revised RBC Plan with the Director shall file a copy of the
10 RBC Plan or Revised RBC Plan with the chief insurance
11 regulatory official in any state in which the insurer is
12 authorized to do business if that state has a law
13 substantially similar to the confidentiality provisions in
14 subsection (a) of Section 35A-50 and if that official
15 requests in writing a copy of the plan. The insurer shall
16 file a copy of the RBC Plan or Revised RBC Plan in that state
17 no later than the later of 15 days after receiving the
18 written request for the copy or the date on which the RBC
19 Plan or Revised RBC Plan is filed under subsection (c) or (d)
20 of this Section.
21 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
22 (215 ILCS 5/35A-20)
23 Sec. 35A-20. Regulatory action level event.
24 (a) A regulatory action level event means any of the
25 following events:
26 (1) The filing of an RBC Report by the insurer that
27 indicates that the insurer's total adjusted capital is
28 greater than or equal to its authorized control level
29 RBC, but less than its regulatory action level RBC.
30 (2) The notification by the Director to an insurer
31 of an Adjusted RBC Report that indicates the event
32 described in paragraph (1), provided the insurer does not
33 challenge the Adjusted RBC Report under Section 35A-35.
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1 (3) The notification by the Director to the insurer
2 that the Director has, after a hearing, rejected the
3 insurer's challenge under Section 35A-35 to an Adjusted
4 RBC Report that indicates the event described in
5 paragraph (1).
6 (4) The failure of the insurer to file an RBC
7 Report by the filing date, unless the insurer has
8 provided an explanation for the failure that is
9 satisfactory to the Director and has cured the failure
10 within 10 days after the filing date.
11 (5) The failure of the insurer to submit an RBC
12 Plan to the Director within the time period set forth in
13 subsection (c) of Section 35A-15.
14 (6) The notification by the Director to the insurer
15 that the insurer's RBC Plan or revised RBC Plan is, in
16 the judgment of the Director, unsatisfactory and that the
17 notification constitutes a regulatory action level event
18 with respect to the insurer, provided the insurer does
19 not challenge the determination under Section 35A-35.
20 (7) The notification by the Director to the insurer
21 that the Director has, after a hearing, rejected the
22 insurer's challenge under Section 35A-35 to the
23 determination made by the Director under paragraph (6).
24 (8) The notification by the Director to the insurer
25 that the insurer has failed to adhere to its RBC Plan or
26 Revised RBC Plan, but only if that failure has a
27 substantial adverse effect on the ability of the insurer
28 to eliminate the company action level event in accordance
29 with its RBC Plan or Revised RBC Plan and the Director
30 has so stated in the notification, provided the insurer
31 does not challenge the determination under Section
32 35A-35.
33 (9) The notification by the Director to the insurer
34 that the Director has, after a hearing, rejected the
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1 insurer's challenge under Section 35A-35 to the
2 determination made by the Director under paragraph (8).
3 (b) In the event of a regulatory action level event, the
4 Director shall do all of the following:
5 (1) Require the insurer to prepare and submit an
6 RBC Plan or, if applicable, a Revised RBC Plan to the
7 Director within 45 days after the regulatory action level
8 event occurs or within 45 days after the Director
9 notifies the insurer that the Director has, after a
10 hearing, rejected its challenge under Section 35A-35 to
11 either an Adjusted RBC Report or a Revised RBC Plan.
12 However, if the insurer previously prepared and submitted
13 an RBC Plan or a Revised RBC Plan in accordance with any
14 provision of this Article, the Director may determine
15 that the previously prepared RBC Plan or Revised RBC Plan
16 satisfies the requirement of this subsection (b)(1).
17 (2) Perform any examination or analysis of the
18 assets, liabilities, and operations of the insurer,
19 including a review of its RBC Plan or Revised RBC Plan,
20 that the Director deems necessary.
21 (3) After the examination or analysis, issue a
22 Corrective Order specifying the corrective actions the
23 Director determines are required.
24 (c) In determining corrective actions, the Director may
25 take into account any factors the Director deems relevant
26 based upon the examination or analysis of the assets,
27 liabilities, and operations of the insurer including, but not
28 limited to, the results of any sensitivity tests undertaken
29 under the RBC Instructions. The regulatory action level event
30 shall be deemed sufficient grounds for the Director to issue
31 a Corrective Order in accordance with Article XII 1/2. The
32 Director shall have rights, powers, and duties with respect
33 to the insurer that are set forth in Article XII 1/2 and the
34 insurer shall be entitled to the protections afforded
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1 insurers under Article XII 1/2.
2 (d) The Director may retain actuaries, investment
3 experts, and other consultants necessary to review an
4 insurer's RBC Plan or Revised RBC Plan, examine or analyze
5 the assets, liabilities, and operations of the insurer, and
6 formulate the Corrective Order with respect to the insurer.
7 The fees, costs, and expenses related to the actuaries,
8 investment experts, and other consultants shall be reasonable
9 and customary for the nature of the services provided and
10 shall be borne by the affected insurer or the party
11 designated by the Director.
12 (Source: P.A. 89-97, eff. 7-7-95; 90-794, eff. 8-14-98.)
13 (215 ILCS 5/35A-30)
14 Sec. 35A-30. Mandatory control level event.
15 (a) A mandatory control level event means any of the
16 following events:
17 (1) The filing of an RBC Report that indicates that
18 the insurer's total adjusted capital is less than its
19 mandatory control level RBC.
20 (2) The notification by the Director to the insurer
21 of an Adjusted RBC Report that indicates the event
22 described in paragraph (1), provided the insurer does not
23 challenge the Adjusted RBC Report under Section 35A-35.
24 (3) The notification by the Director to the insurer
25 that the Director has, after a hearing, rejected the
26 insurer's challenge under Section 35A-35 to the Adjusted
27 RBC Report that indicates the event described in
28 paragraph (1).
29 (b) In the event of a mandatory control level event with
30 respect to a life, health, or life and health insurer, the
31 Director shall take actions necessary to place the insurer in
32 receivership under Article XIII. In that event, the
33 mandatory control level event shall be deemed sufficient
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1 grounds for the Director to take action under Article XIII,
2 and the Director shall have the rights, powers, and duties
3 with respect to the insurer that are set forth in Article
4 XIII. If the Director takes action under this subsection
5 regarding an Adjusted RBC Report, the insurer shall be
6 entitled to the protections of Article XIII. If the Director
7 finds that there is a reasonable expectation that the
8 mandatory control level event may be eliminated within 90
9 days after it occurs, the Director may delay action for not
10 more than 90 days after the mandatory control level event.
11 (c) In the case of a mandatory control level event with
12 respect to a property and casualty insurer, the Director
13 shall take the actions necessary to place the insurer in
14 receivership under Article XIII or, in the case of an insurer
15 that is writing no business and that is running-off its
16 existing business, may allow the insurer to continue its
17 run-off under the supervision of the Director. In either
18 case, the mandatory control level event is deemed sufficient
19 grounds for the Director to take action under Article XIII,
20 and the Director has the rights, powers, and duties with
21 respect to the insurer that are set forth in Article XIII.
22 If the Director takes action regarding an Adjusted RBC
23 Report, the insurer shall be entitled to the protections of
24 Article XIII. If the Director finds that there is a
25 reasonable expectation that the mandatory control level event
26 may be eliminated within 90 days after it occurs, the
27 Director may delay action for not more than 90 days after the
28 mandatory control level event.
29 (d) In the case of a mandatory control level event with
30 respect to a health organization, the Director shall take the
31 actions necessary to place the insurer in receivership under
32 Article XIII or, in the case of an insurer that is writing no
33 business and that is running-off its existing business, may
34 allow the insurer to continue its run-off under the
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1 supervision of the Director. In either case, the mandatory
2 control level event is deemed sufficient grounds for the
3 Director to take action under Article XIII, and the Director
4 has the rights, powers, and duties with respect to the
5 insurer that are set forth in Article XIII. If the Director
6 takes action regarding an Adjusted RBC Report, the insurer
7 shall be entitled to the protections of Article XIII. If the
8 Director finds that there is a reasonable expectation that
9 the mandatory control level event may be eliminated within 90
10 days after it occurs, the Director may delay action for not
11 more than 90 days after the mandatory control level event.
12 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
13 (215 ILCS 5/35A-55)
14 Sec. 35A-55. Provisions of Article supplemental;
15 exemptions.
16 (a) The provisions of this Article are supplemental to
17 the provisions of any other laws of this State and do not
18 preclude or limit other powers or duties of the Director
19 under any other laws.
20 (b) The Director may exempt from the application of this
21 Article any domestic property and casualty insurer that:
22 (1) writes direct business only in this State;
23 (2) writes direct annual premiums of $2,000,000 or
24 less; and
25 (3) assumes no reinsurance in excess of 5% of
26 direct premium written.
27 (c) The Director may exempt from the application of this
28 Article any company that is organized under Article IV of
29 this Code, that writes direct business only in this State,
30 and that assumes no reinsurance in excess of 5% of direct
31 written premiums.
32 (d) The Director may exempt from the application of this
33 Article any domestic health organization upon a showing by
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1 the health organization of the reasons for requesting the
2 exemption and a determination by the Director of good cause
3 for an exemption.
4 (e) (d) The Director may by rule impose upon any insurer
5 exempted from the application of this Article under
6 subsection (b), or (c), or (d) of this Section conditions to
7 the exemption that require maintenance of adequate capital.
8 These conditions shall not exceed the requirements of this
9 Article.
10 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
11 (215 ILCS 5/35A-60)
12 Sec. 35A-60. Phase-in of Article.
13 (a) For RBC Reports filed with respect to the December
14 31, 1993 annual statement, instead of the provisions of
15 Sections 35A-15, 35A-20, 35A-25, and 35A-30, the following
16 provisions apply:
17 (1) In the event of a company action level event,
18 the Director shall take no action under this Article.
19 (2) In the event of a regulatory action level event
20 under paragraph (1), (2), or (3) of subsection (a) of
21 Section 35A-20, the Director shall take the actions
22 required under Section 35A-15.
23 (3) In the event of a regulatory action level event
24 under paragraph (4), (5), (6), (7), (8), or (9) of
25 subsection (a) of Section 35A-20 or an authorized control
26 level event, the Director shall take the actions required
27 under Section 35A-20.
28 (4) In the event of a mandatory control level
29 event, the Director shall take the actions required under
30 Section 35A-25.
31 (b) For RBC Reports required to be filed by property and
32 casualty insurers with respect to the December 31, 1995
33 annual statement, instead of the provisions of Section
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1 35A-15, 35A-20, 35A-25, and 35A-30, the following provisions
2 apply:
3 (1) In the event of a company action level event
4 with respect to a domestic insurer, the Director shall
5 take no regulatory action under this Article.
6 (2) In the event of a an regulatory action level
7 event under paragraph (1), (2) or (3) of subsection (a)
8 of Section 35A-20, the Director shall take the actions
9 required under Section 35A-15.
10 (3) In the event of a an regulatory action level
11 event under paragraph (4), (5), (6), (7), (8), or (9) of
12 subsection (a) of Section 35A-20 or an authorized control
13 level event, the Director shall take the actions required
14 under Section 35A-20.
15 (4) In the event of a mandatory control level
16 event, the Director shall take the actions required under
17 Section 35A-25.
18 (c) For RBC Reports required to be filed by health
19 organizations with respect to the December 31, 1999 annual
20 statement and the December 31, 2000 annual statement, instead
21 of the provisions of Sections 35A-15, 35A-20, 35A-25, and
22 35A-30, the following provisions apply:
23 (1) In the event of a company action level event
24 with respect to a domestic insurer, the Director shall
25 take no regulatory action under this Article.
26 (2) In the event of a regulatory action level event
27 under paragraph (1), (2), or (3) of subsection (a) of
28 Section 35A-20, the Director shall take the actions
29 required under Section 35A-15.
30 (3) In the event of a regulatory action level event
31 under paragraph (4), (5), (6), (7), (8), or (9) of
32 subsection (a) of Section 35A-20 or an authorized control
33 level event, the Director shall take the actions required
34 under Section 35A-20.
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1 (4) In the event of a mandatory control level
2 event, the Director shall take the actions required under
3 Section 35A-25.
4 This subsection does not apply to a health organization
5 that provides or arranges for a health care plan under which
6 enrollees may access health care services from contracted
7 providers without a referral from their primary care
8 physician.
9 Nothing in this subsection shall preclude or limit other
10 powers or duties of the Director under any other laws.
11 (Source: P.A. 88-364; 89-97, eff. 7-7-95.)
12 Section 10. The Dental Service Plan Act is amended by
13 changing Section 25 as follows:
14 (215 ILCS 110/25) (from Ch. 32, par. 690.25)
15 Sec. 25. Application of Insurance Code provisions.
16 Dental service plan corporations and all persons interested
17 therein or dealing therewith shall be subject to the
18 provisions of Articles IIA and Article XII 1/2 and Sections
19 3.1, 133, 140, 143, 143c, 149, 355.2, 367.2, 401, 401.1, 402,
20 403, 403A, 408, 408.2, and 412, and subsection (15) of
21 Section 367 of the Illinois Insurance Code.
22 (Source: P.A. 86-600; 87-587; 87-1090.)
23 Section 15. The Health Maintenance Organization Act is
24 amended by changing Section 5-3 as follows:
25 (215 ILCS 125/5-3) (from Ch. 111 1/2, par. 1411.2)
26 Sec. 5-3. Insurance Code provisions.
27 (a) Health Maintenance Organizations shall be subject to
28 the provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
29 141.3, 143, 143c, 147, 148, 149, 151, 152, 153, 154, 154.5,
30 154.6, 154.7, 154.8, 155.04, 355.2, 356m, 356v, 356w, 356x,
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1 367i, 401, 401.1, 402, 403, 403A, 408, 408.2, 409, 412, 444,
2 and 444.1, paragraph (c) of subsection (2) of Section 367,
3 and Articles IIA, VIII 1/2, XII, XII 1/2, XIII, XIII 1/2,
4 XXV, and XXVI of the Illinois Insurance Code.
5 (b) For purposes of the Illinois Insurance Code, except
6 for Sections 444 and 444.1 and Articles XIII and XIII 1/2,
7 Health Maintenance Organizations in the following categories
8 are deemed to be "domestic companies":
9 (1) a corporation authorized under the Dental
10 Service Plan Act or the Voluntary Health Services Plans
11 Act;
12 (2) a corporation organized under the laws of this
13 State; or
14 (3) a corporation organized under the laws of
15 another state, 30% or more of the enrollees of which are
16 residents of this State, except a corporation subject to
17 substantially the same requirements in its state of
18 organization as is a "domestic company" under Article
19 VIII 1/2 of the Illinois Insurance Code.
20 (c) In considering the merger, consolidation, or other
21 acquisition of control of a Health Maintenance Organization
22 pursuant to Article VIII 1/2 of the Illinois Insurance Code,
23 (1) the Director shall give primary consideration
24 to the continuation of benefits to enrollees and the
25 financial conditions of the acquired Health Maintenance
26 Organization after the merger, consolidation, or other
27 acquisition of control takes effect;
28 (2)(i) the criteria specified in subsection (1)(b)
29 of Section 131.8 of the Illinois Insurance Code shall not
30 apply and (ii) the Director, in making his determination
31 with respect to the merger, consolidation, or other
32 acquisition of control, need not take into account the
33 effect on competition of the merger, consolidation, or
34 other acquisition of control;
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1 (3) the Director shall have the power to require
2 the following information:
3 (A) certification by an independent actuary of
4 the adequacy of the reserves of the Health
5 Maintenance Organization sought to be acquired;
6 (B) pro forma financial statements reflecting
7 the combined balance sheets of the acquiring company
8 and the Health Maintenance Organization sought to be
9 acquired as of the end of the preceding year and as
10 of a date 90 days prior to the acquisition, as well
11 as pro forma financial statements reflecting
12 projected combined operation for a period of 2
13 years;
14 (C) a pro forma business plan detailing an
15 acquiring party's plans with respect to the
16 operation of the Health Maintenance Organization
17 sought to be acquired for a period of not less than
18 3 years; and
19 (D) such other information as the Director
20 shall require.
21 (d) The provisions of Article VIII 1/2 of the Illinois
22 Insurance Code and this Section 5-3 shall apply to the sale
23 by any health maintenance organization of greater than 10% of
24 its enrollee population (including without limitation the
25 health maintenance organization's right, title, and interest
26 in and to its health care certificates).
27 (e) In considering any management contract or service
28 agreement subject to Section 141.1 of the Illinois Insurance
29 Code, the Director (i) shall, in addition to the criteria
30 specified in Section 141.2 of the Illinois Insurance Code,
31 take into account the effect of the management contract or
32 service agreement on the continuation of benefits to
33 enrollees and the financial condition of the health
34 maintenance organization to be managed or serviced, and (ii)
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1 need not take into account the effect of the management
2 contract or service agreement on competition.
3 (f) Except for small employer groups as defined in the
4 Small Employer Rating, Renewability and Portability Health
5 Insurance Act and except for medicare supplement policies as
6 defined in Section 363 of the Illinois Insurance Code, a
7 Health Maintenance Organization may by contract agree with a
8 group or other enrollment unit to effect refunds or charge
9 additional premiums under the following terms and conditions:
10 (i) the amount of, and other terms and conditions
11 with respect to, the refund or additional premium are set
12 forth in the group or enrollment unit contract agreed in
13 advance of the period for which a refund is to be paid or
14 additional premium is to be charged (which period shall
15 not be less than one year); and
16 (ii) the amount of the refund or additional premium
17 shall not exceed 20% of the Health Maintenance
18 Organization's profitable or unprofitable experience with
19 respect to the group or other enrollment unit for the
20 period (and, for purposes of a refund or additional
21 premium, the profitable or unprofitable experience shall
22 be calculated taking into account a pro rata share of the
23 Health Maintenance Organization's administrative and
24 marketing expenses, but shall not include any refund to
25 be made or additional premium to be paid pursuant to this
26 subsection (f)). The Health Maintenance Organization and
27 the group or enrollment unit may agree that the
28 profitable or unprofitable experience may be calculated
29 taking into account the refund period and the immediately
30 preceding 2 plan years.
31 The Health Maintenance Organization shall include a
32 statement in the evidence of coverage issued to each enrollee
33 describing the possibility of a refund or additional premium,
34 and upon request of any group or enrollment unit, provide to
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1 the group or enrollment unit a description of the method used
2 to calculate (1) the Health Maintenance Organization's
3 profitable experience with respect to the group or enrollment
4 unit and the resulting refund to the group or enrollment unit
5 or (2) the Health Maintenance Organization's unprofitable
6 experience with respect to the group or enrollment unit and
7 the resulting additional premium to be paid by the group or
8 enrollment unit.
9 In no event shall the Illinois Health Maintenance
10 Organization Guaranty Association be liable to pay any
11 contractual obligation of an insolvent organization to pay
12 any refund authorized under this Section.
13 (Source: P.A. 89-90, eff. 6-30-95; 90-25, eff. 1-1-98;
14 90-177, eff. 7-23-97; 90-372, eff. 7-1-98; 90-583, eff.
15 5-29-98; 90-655, eff. 7-30-98; 90-741, eff. 1-1-99; revised
16 9-8-98.)
17 Section 20. The Limited Health Service Organization Act
18 is amended by changing Section 4003 as follows:
19 (215 ILCS 130/4003) (from Ch. 73, par. 1504-3)
20 Sec. 4003. Illinois Insurance Code provisions. Limited
21 health service organizations shall be subject to the
22 provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
23 141.3, 143, 143c, 147, 148, 149, 151, 152, 153, 154, 154.5,
24 154.6, 154.7, 154.8, 155.04, 355.2, 356v, 401, 401.1, 402,
25 403, 403A, 408, 408.2, 409, 412, 444, and 444.1 and Articles
26 IIA, VIII 1/2, XII, XII 1/2, XIII, XIII 1/2, XXV, and XXVI of
27 the Illinois Insurance Code. For purposes of the Illinois
28 Insurance Code, except for Sections 444 and 444.1 and
29 Articles XIII and XIII 1/2, limited health service
30 organizations in the following categories are deemed to be
31 domestic companies:
32 (1) a corporation under the laws of this State; or
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1 (2) a corporation organized under the laws of
2 another state, 30% of more of the enrollees of which are
3 residents of this State, except a corporation subject to
4 substantially the same requirements in its state of
5 organization as is a domestic company under Article VIII
6 1/2 of the Illinois Insurance Code.
7 (Source: P.A. 90-25, eff. 1-1-98; 90-583, eff. 5-29-98;
8 90-655, eff. 7-30-98.)
9 Section 25. The Voluntary Health Services Plans Act is
10 amended by changing Section 10 as follows:
11 (215 ILCS 165/10) (from Ch. 32, par. 604)
12 Sec. 10. Application of Insurance Code provisions.
13 Health services plan corporations and all persons interested
14 therein or dealing therewith shall be subject to the
15 provisions of Articles IIA and Article XII 1/2 and Sections
16 3.1, 133, 140, 143, 143c, 149, 354, 355.2, 356r, 356t, 356u,
17 356v, 356w, 356x, 367.2, 401, 401.1, 402, 403, 403A, 408,
18 408.2, and 412, and paragraphs (7) and (15) of Section 367 of
19 the Illinois Insurance Code.
20 (Source: P.A. 89-514, eff. 7-17-96; 90-7, eff. 6-10-97;
21 90-25, eff. 1-1-98; 90-655, eff. 7-30-98; 90-741, eff.
22 1-1-99.)
23 Section 99. Effective date. This Act takes effect upon
24 becoming law.