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92_SB0452eng
SB452 Engrossed LRB9206172JSpc
1 AN ACT relating to insurance.
2 Be it enacted by the People of the State of Illinois,
3 represented in the General Assembly:
4 Section 5. The Health Maintenance Organization Act is
5 amended by changing Sections 2-3, 2-4, and 2-6 and adding
6 Article 4.5 as follows:
7 (215 ILCS 125/2-3) (from Ch. 111 1/2, par. 1405)
8 Sec. 2-3. Powers of health maintenance organizations.
9 The powers of a health maintenance organization include, but
10 are not limited to the following:
11 (a) The purchase, lease, construction, renovation,
12 operation, or maintenance of hospitals, medical facilities or
13 both, and their ancillary equipment, and such property as may
14 reasonably be required for its principal office or for such
15 other purposes as may be necessary in the transaction of the
16 business of the organization.
17 (b) The making of loans to a medical group under
18 contract with it and in furtherance of its program or the
19 making of loans to a corporation or corporations under its
20 control for the purpose of acquiring or constructing medical
21 facilities at hospitals or in furtherance of a program
22 providing health care services for enrollees.
23 (c) The furnishing of health care services through
24 providers which are under contract with or employed by the
25 health maintenance organization.
26 (d) The contracting with any person for the performance
27 on its behalf of certain functions such as marketing,
28 enrollment and administration.
29 (e) The contracting with an insurance company licensed
30 in this State, or with a hospital, medical, dental, vision or
31 pharmaceutical service corporation authorized to do business
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1 in this State, for the provision of insurance, indemnity, or
2 reimbursement against the cost of health care service
3 provided by the health maintenance organization.
4 (f) The offering, in addition to basic health care
5 services, of (1) health care services, (2) indemnity benefits
6 covering out of area or emergency services, and (3) indemnity
7 benefits provided through insurers or hospital, medical,
8 dental, vision, or pharmaceutical service corporations, and
9 (4) health maintenance organization point-of-service benefits
10 as authorized under Article 4.5.
11 (g) Rendering services related to the functions involved
12 in the operating of its health maintenance organization
13 business including but not limited to providing health
14 services, data processing, accounting, or claims.
15 (g-5) Indemnification for services provided to a child
16 as required under subdivision (e)(3) of Section 4-2.
17 (h) Any other business activity reasonably complementary
18 or supplementary to its health maintenance organization
19 business to the extent approved by the Director.
20 (Source: P.A. 89-183, eff. 1-1-96.)
21 (215 ILCS 125/2-4) (from Ch. 111 1/2, par. 1406)
22 Sec. 2-4. Required minimum net worth; special contingent
23 reserve; deficiency; impairment.
24 (a) A health maintenance organization issued a
25 certificate of authority on or after the effective date of
26 this amendatory Act of 1987 shall have and at all times
27 maintain net worth of not less than $1,500,000. As an
28 allocation of net worth, organizations certified prior to the
29 effective date of this amendatory Act of 1987 shall maintain
30 a special contingent reserve. The special contingent reserve
31 for an organization certified between January 1, 1986 and the
32 effective date of this amendatory Act of 1987 shall be equal
33 to 5% of its net earned subscription revenue for health care
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1 services through December 31st of the year in which
2 certified. In subsequent years such organization shall
3 accumulate additions to the contingent reserve in an amount
4 which is equal to 2% of its net earned subscription revenue
5 for each calendar year. For purposes of this Section, net
6 earned subscription revenue means premium minus reinsurance
7 expenses. Maintenance of the contingent reserve requires
8 that net worth equals or exceeds the contingent reserve at
9 any balance sheet date.
10 (b) Additional accumulations under subsection (a) will
11 no longer be required at such time that the total special
12 contingent reserve required by subsection (a) is equal to
13 $1,500,000.
14 (c) A deficiency in meeting amounts required in
15 subsections (a), (b), and (d) will require (1) filing with
16 the Director a plan for correction of the deficiency,
17 acceptable to the Director and (2) correction of the
18 deficiency within a reasonable time, not to exceed 60 days
19 unless an extension of time, not to exceed 60 additional
20 days, is granted by the Director. Such a deficiency will be
21 deemed an impairment, and failure to correct the deficiency
22 in the prescribed time shall be grounds for suspension or
23 revocation pursuant to subsection (h) of Section 5-5.
24 (d) All health maintenance organizations issued a
25 certificate of authority on or prior to December 31, 1985 and
26 regulated under this Act must have and at all times maintain,
27 prior to December 31, 1988, the net worth and special
28 contingent reserve that was required for that particular
29 organization at the time it was certified. All such
30 organizations must have by December 31, 1988 and thereafter
31 maintain at all times, net worth of not less than $300,000
32 and a special contingent reserve calculated and accumulated
33 in the same manner as required of a health maintenance
34 organization issued a certificate of authority on or between
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1 January 1, 1986 and the effective date of this amendatory Act
2 of 1987. Such calculation shall commence with the financial
3 reporting period first following certification.
4 All organizations issued a certificate of authority
5 between January 1, 1986 and the effective date of this
6 amendatory Act of 1987 must have and at all times maintain
7 the net worth and special contingent reserve that was
8 required for that particular organization at the time it was
9 certified.
10 (d-5) A health maintenance organization that offers a
11 point-of-service product must maintain minimum net worth of
12 not less than:
13 (1) the greater of 300% of the "authorized control
14 level" as defined by Article IIA of the Illinois
15 Insurance Code; or
16 (2) $3,500,000 if the health maintenance
17 organization's annual projected out-of-plan claims are
18 less than $500,000; or
19 (3) $4,500,000 if the health maintenance
20 organization's annual projected out-of-plan claims are
21 equal to or greater than $500,000 but less than
22 $1,000,000; or
23 (4) $6,000,000 if the health maintenance
24 organization's annual projected out-of-plan claims are
25 $1,000,000 or greater.
26 (e) Unless allowed by the Director, no health
27 maintenance organization, officer, director, trustee,
28 producer, or employee of such organization may renew, issue,
29 or deliver, or cause to be renewed, issued or delivered, any
30 certificate, agreement, or contract of coverage in this
31 State, for which a premium is charged or collected, when the
32 organization writing such coverage is insolvent or impaired,
33 and the fact of such insolvency or impairment is known to the
34 organization, officer, director, trustee, producer, or
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1 employee of such organization. An organization is impaired
2 when a deficiency exists in meeting the amounts required in
3 subsections(a), (b), and (d) of Section 2-4.
4 However, the existence of an impairment does not prevent
5 the issuance or renewal of a certificate, agreement or
6 contract when the enrollee exercises an option granted under
7 the plan to obtain new, renewed or converted coverage.
8 Any organization, officer, director, trustee, producer,
9 or employee of such organization violating this subsection
10 shall be guilty of a Class A misdemeanor.
11 (Source: P.A. 85-20.)
12 (215 ILCS 125/2-6) (from Ch. 111 1/2, par. 1406.2)
13 Sec. 2-6. Statutory deposits.
14 (a) Every organization subject to the provisions of this
15 Act shall make and maintain with the Director through
16 December 30, 1993, for the protection of enrollees of the
17 organization, a deposit of securities which are authorized
18 investments under paragraphs (1) and (2) of subsection (h) of
19 Section 3-1 having a fair market value equal to at least
20 $100,000. Effective December 31, 1993 and through December
21 30, 1994, the deposit shall have a fair market value at least
22 equal to $200,000. Effective December 31, 1994 and
23 thereafter, the deposit shall have a fair market value at
24 least equal to $300,000. An organization issued a
25 certificate of authority on or after the effective date of
26 this Amendatory Act of 1993, shall make and maintain with the
27 Director; for the protection of enrollees of the
28 organization, a deposit of securities which are authorized
29 investments under paragraphs (1) and (2) of subsection (h) of
30 Section 3-1 having a fair market value equal to at least
31 $300,000. The amount on deposit shall remain as an admitted
32 asset of the organization in the determination of its net
33 worth.
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1 (b) An organization that offers a point-of-service
2 product, as permitted by Article 4.5, must maintain an
3 additional deposit in an amount that is not less than the
4 greater of 125% of the organization's annual projected
5 point-of-service claims or $300,000.
6 (Source: P.A. 88-364.)
7 (215 ILCS 125/Art. 4.5, heading new)
8 ARTICLE 4.5. POINT-OF-SERVICE
9 PRODUCTS
10 (215 ILCS 125/4.5-1 new)
11 Sec. 4.5-1. Point-of-service health service contracts.
12 (a) A health maintenance organization that offers a
13 point-of-service contract:
14 (1) must include as in-plan covered services all
15 services required by law to be provided by a health
16 maintenance organization;
17 (2) must provide incentives, which shall include
18 financial incentives, for enrollees to use in-plan
19 covered services;
20 (3) may not offer services out-of-plan without
21 providing those services on an in-plan basis;
22 (4) may include annual out-of-pocket limits and
23 lifetime maximum benefits allowances for out-of-plan
24 services that are separate from any limits or allowances
25 applied to in-plan services;
26 (5) may not consider emergency services, authorized
27 referral services, or non-routine services obtained out
28 of the service area to be point-of-service services; and
29 (6) may treat as out-of-plan services those
30 services that an enrollee obtains from a participating
31 provider, but for which the proper authorization was not
32 given by the health maintenance organization.
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1 (b) A health maintenance organization offering a
2 point-of-service contract is subject to all of the following
3 limitations:
4 (1) The health maintenance organization may not
5 expend in any calendar quarter more than 20% of its total
6 expenditures for all its members for out-of-plan covered
7 services.
8 (2) If the amount specified in item (1) of this
9 subsection is exceeded by 2% in a quarter, the health
10 maintenance organization must effect compliance with item
11 (1) of this subsection by the end of the following
12 quarter.
13 (3) If compliance with the amount specified in item
14 (1) of this subsection is not demonstrated in the health
15 maintenance organization's next quarterly report, the
16 health maintenance organization may not offer the
17 point-of-service contract to new groups or include the
18 point-of-service option in the renewal of an existing
19 group until compliance with the amount specified in item
20 (1) of this subsection is demonstrated or until otherwise
21 allowed by the Director.
22 (4) A health maintenance organization failing,
23 without just cause, to comply with the provisions of this
24 subsection shall be required, after notice and hearing,
25 to pay a penalty of $250 for each day out of compliance,
26 to be recovered by the Director. Any penalty recovered
27 shall be paid into the General Revenue Fund. The Director
28 may reduce the penalty if the health maintenance
29 organization demonstrates to the Director that the
30 imposition of the penalty would constitute a financial
31 hardship to the health maintenance organization.
32 (c) A health maintenance organization that offers a
33 point-of-service product must do all of the following:
34 (1) File a quarterly financial statement detailing
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1 compliance with the requirements of subsection (b).
2 (2) Track out-of-plan, point-of-service utilization
3 separately from in-plan or non-point-of-service,
4 out-of-plan emergency care, referral care, and urgent
5 care out of the service area utilization.
6 (3) Record out-of-plan utilization in a manner that
7 will permit such utilization and cost reporting as the
8 Director may, by rule, require.
9 (4) Demonstrate to the Director's satisfaction that
10 the health maintenance organization has the fiscal,
11 administrative, and marketing capacity to control its
12 point-of-service enrollment, utilization, and costs so as
13 not to jeopardize the financial security of the health
14 maintenance organization.
15 (5) Maintain, in addition to any other deposit
16 required under this Act, the deposit required by Section
17 2-6.
18 (6) Maintain cash and cash equivalents of
19 sufficient amount to fully liquidate 10 days' average
20 claim payments, subject to review by the Director.
21 (7) Maintain and file with the Director,
22 reinsurance coverage protecting against catastrophic
23 losses on out of network point-of-service services.
24 Deductibles may not exceed $100,000 per covered life per
25 year, and the portion of risk retained by the health
26 maintenance organization once deductibles have been
27 satisfied may not exceed 20%. Reinsurance must be placed
28 with licensed authorized reinsurers qualified to do
29 business in this State.
30 (d) A health maintenance organization may not issue a
31 point-of-service contract until it has filed and had approved
32 by the Director a plan to comply with the provisions of this
33 Section. The compliance plan must, at a minimum, include
34 provisions demonstrating that the health maintenance
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1 organization will do all of the following:
2 (1) Design the benefit levels and conditions of
3 coverage for in-plan covered services and out-of-plan
4 covered services as required by this Article.
5 (2) Provide or arrange for the provision of
6 adequate systems to:
7 (A) process and pay claims for all out-of-plan
8 covered services;
9 (B) meet the requirements for point-of-service
10 contracts set forth in this Section and any
11 additional requirements that may be set forth by the
12 Director; and
13 (C) generate accurate data and financial and
14 regulatory reports on a timely basis so that the
15 Department of Insurance can evaluate the health
16 maintenance organization's experience with the
17 point-of-service contract and monitor compliance
18 with point-of-service contract provisions.
19 (3) Comply with the requirements of subsections (b)
20 and (c).
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