(215 ILCS 125/2-4) (from Ch. 111 1/2, par. 1406)

Sec. 2-4. Required minimum net worth; special contingent reserve; deficiency; impairment.

(a) A health maintenance organization issued a certificate of authority on or after the effective date of this amendatory Act of 1987 shall have and at all times maintain net worth of not less than $1,500,000. As an allocation of net worth, organizations certified prior to the effective date of this amendatory Act of 1987 shall maintain a special contingent reserve. The special contingent reserve for an organization certified between January 1, 1986 and the effective date of this amendatory Act of 1987 shall be equal to 5% of its net earned subscription revenue for health care services through December 31st of the year in which certified. In subsequent years such organization shall accumulate additions to the contingent reserve in an amount which is equal to 2% of its net earned subscription revenue for each calendar year. For purposes of this Section, net earned subscription revenue means premium minus reinsurance expenses. Maintenance of the contingent reserve requires that net worth equals or exceeds the contingent reserve at any balance sheet date.

(b) Additional accumulations under subsection (a) will no longer be required at such time that the total special contingent reserve required by subsection (a) is equal to $1,500,000.

(c) A deficiency in meeting amounts required in subsections (a), (b), and (d) will require (1) filing with the Director a plan for correction of the deficiency, acceptable to the Director and (2) correction of the deficiency within a reasonable time, not to exceed 60 days unless an extension of time, not to exceed 60 additional days, is granted by the Director. Such a deficiency will be deemed an impairment, and failure to correct the deficiency in the prescribed time shall be grounds for suspension or revocation pursuant to subsection (h) of Section 5-5.

(d) All health maintenance organizations issued a certificate of authority on or prior to December 31, 1985 and regulated under this Act must have and at all times maintain, prior to December 31, 1988, the net worth and special contingent reserve that was required for that particular organization at the time it was certified. All such organizations must have by December 31, 1988 and thereafter maintain at all times, net worth of not less than $300,000 and a special contingent reserve calculated and accumulated in the same manner as required of a health maintenance organization issued a certificate of authority on or between January 1, 1986 and the effective date of this amendatory Act of 1987. Such calculation shall commence with the financial reporting period first following certification.

All organizations issued a certificate of authority between January 1, 1986 and the effective date of this amendatory Act of 1987 must have and at all times maintain the net worth and special contingent reserve that was required for that particular organization at the time it was certified.

(d-5) A health maintenance organization that offers a point-of-service product must maintain minimum net worth of not less than:

(1) the greater of 300% of the "authorized control level" as defined by Article IIA of the Illinois Insurance Code; or

(2) $3,500,000 if the health maintenance organization's annual projected out-of-plan claims are less than $500,000; or

(3) $4,500,000 if the health maintenance organization's annual projected out-of-plan claims are equal to or greater than $500,000 but less than $1,000,000; or

(4) $6,000,000 if the health maintenance organization's annual projected out-of-plan claims are $1,000,000 or greater.

(e) Unless allowed by the Director, no health maintenance organization, officer, director, trustee, producer, or employee of such organization may renew, issue, or deliver, or cause to be renewed, issued or delivered, any certificate, agreement, or contract of coverage in this State, for which a premium is charged or collected, when the organization writing such coverage is insolvent or impaired, and the fact of such insolvency or impairment is known to the organization, officer, director, trustee, producer, or employee of such organization. An organization is impaired when a deficiency exists in meeting the amounts required in subsections (a), (b), and (d) of Section 2-4.

However, the existence of an impairment does not prevent the issuance or renewal of a certificate, agreement or contract when the enrollee exercises an option granted under the plan to obtain new, renewed or converted coverage.

Any organization, officer, director, trustee, producer, or employee of such organization violating this subsection shall be guilty of a Class A misdemeanor.

(Source: P.A. 92-135, eff. 1-1-02.)