Public Act 096-1509
 
HB5018 EnrolledLRB096 18816 RPM 34202 b


  
    AN ACT concerning insurance.
  
 
    Be it enacted by the People of the State of Illinois,
 
represented in the General Assembly:
  



 
 
    Section 5. The Health Maintenance Organization Act is 
amended  by changing Section 6-8 as follows:
 



    (215 ILCS 125/6-8)  (from Ch. 111 1/2, par. 1418.8)



    Sec. 6-8. Powers and duties of the Association. In addition 
to
the powers and duties enumerated in other Sections of this 
Article, the
Association shall have the powers set forth in 
this Section.

    (1) If a domestic organization is an impaired organization, 
the Association
may, subject to any conditions imposed by the 
Association other than
those which impair the contractual 
obligations of the impaired organization,
and approved by the 
impaired organization and the Director:


        (a) guarantee, assume, or reinsure, or cause to be 
    guaranteed, assumed or
reinsured, any or all of the covered 
    health care plan certificates of
covered persons of the 
    impaired organization;


        (b) provide such monies, pledges, notes, guarantees, 
    or other means
as are proper to effectuate paragraph (a), 
    and assure payment of the
contractual obligations of the 
    impaired organization pending action under
paragraph (a); 
    and


        (c) loan money to the impaired organization.

    (2) If a domestic, foreign, or alien organization is an 
insolvent
organization, the Association shall, subject to the 
approval of the Director:


        (a) guarantee, assume, indemnify or reinsure or cause 
    to be guaranteed,
assumed, indemnified or reinsured the 
    covered health care plan benefits
of covered persons of the 
    insolvent organization; however, in the event
that the 
    Director of Healthcare and Family Services (formerly

    Director of the Department of Public Aid)
assigns 
    individuals that are recipients of public aid from an 
    insolvent
organization to another organization, the 
    Director of Healthcare and Family Services shall, before 
    fixing the rates to be paid by the Department of
Healthcare 
    and Family Services

to the transferee organization on 
    account of such individuals,
consult with the Director of 
    the Department of Insurance as to the
reasonableness of 
    such rates in light of the health care needs of such

    individuals and the costs of providing health care services 
    to such
individuals;


        (b) assure payment of the contractual obligations of 
    the insolvent
organization to covered persons;


        (c) make payments to providers of health care, or 
    indemnity payments
to covered persons, so as to assure the 
    continued payment of benefits
substantially similar to 
    those provided for under covered health care plan

    certificate issued by the insolvent organization to 
    covered persons; and


        (d) provide such monies, pledges, notes, guaranties, 
    or other means
as are reasonably necessary to discharge 
    such duties.

    This subsection (2) shall not apply when the
Director has 
determined that the foreign or alien organization's

domiciliary jurisdiction or state of entry provides, by 
statute, protection
substantially similar to that provided by 
this Article for residents of
this State and such protection 
will be provided in a timely manner.

    (3) There shall be no liability on the part of and no cause 
of action
shall arise against the Association or against any 
transferee from the
Association in connection with the transfer 
by reinsurance or otherwise of
all or any part of an impaired 
or insolvent organization's business by
reason of any action 
taken or any failure to take any action by the
impaired or 
insolvent organization at any time.

    (4) If the Association fails to act within a reasonable 
period of
time as provided in subsection (2) of this Section 
with respect to an
insolvent organization, the Director shall 
have the powers and duties of
the Association under this 
Article with regard to such insolvent organization.

    (5) The Association or its designated representatives may 
render
assistance and advice to the Director, upon his request, 
concerning
rehabilitation, payment of claims, continuations of 
coverage, or the
performance of other contractual obligations 
of any impaired or insolvent
organization.

    (6) The Association has standing to appear before any court 
concerning
all matters germane to the powers and duties of
the 
Association, including, but not limited to, proposals for 
reinsuring
or guaranteeing the covered health care plan 
certificates of the impaired
or insolvent organization and the 
determination of the covered health care plan
certificates and 
contractual obligations.

    (7) (a) Any person receiving benefits under this Article is 
deemed
to have assigned the rights under the covered health 
care  plan
certificates to the Association to the extent of the 
benefits received
because of this Article whether the benefits 
are payments of contractual
obligations or continuation of 
coverage.  The Association may require an
assignment to it of 
such rights by any payee, enrollee or beneficiary as a

condition precedent to the receipt of any rights or benefits 
conferred by
this Article upon such person.  The Association is 
subrogated to these
rights against the assets of any insolvent 
organization and against any
other party who may be liable to 
such payee, enrollee or beneficiary.

    (b) The subrogation rights of the Association under this 
subsection
have the same priority against the assets of the 
insolvent organization as
that possessed by the person entitled 
to receive benefits under this
Article.

    (8) (a) The contractual obligations of the insolvent 
organization for
which the Association becomes or may become 
liable are as great as but no
greater than the contractual 
obligations of the insolvent organization would
have been in 
the absence of an insolvency unless such obligations are

reduced as permitted  by subsection (3), but the aggregate 
liability of the
Association shall not exceed $500,000 $300,000 
with respect to any one natural person.

    (b) Furthermore, the Association shall not be required to 
pay, and shall
have no liability to, any provider of health 
care services to an enrollee:


        (i) if such provider, or his or its affiliates or 
    members of his
immediate family, at any time within the one 
    year prior to the date of the
issuance of the first order, 
    by a court of competent jurisdiction, of
conservation, 
    rehabilitation or liquidation pertaining to the health

    maintenance organization:


            (A) was a securityholder of such organization (but 
        excluding any
securityholder holding an equity 
        interest of 5% or less);


            (B) exercised control over the organization by 
        means such as serving as
an officer or director, 
        through a management agreement or as a principal
member 
        of a not-for-profit organization;


            (C) had a representative serving by virtue of or 
        his or her official
position as a representative of 
        such provider on the board of any entity
which 
        exercised control over the organization;


            (D) received provider payments made by such 
        organization pursuant to a
contract which was not a 
        product of arms-length bargaining; or


            (E) received distributions other than for 
        physician services from a
not-for-profit organization 
        on account of such provider's status as a
member of 
        such organization.

        For purposes of this subparagraph (i), the terms 
    "affiliate," "person,"
"control" and "securityholder" 
    shall have the meanings ascribed to such
terms in Section 
    131.1 of the Illinois Insurance Code; or


        (ii) if and to the extent such a provider has agreed by 
    contract not
to seek payment from the enrollee for services 
    provided to such enrollee
or if, and to the extent, as a 
    matter of law such provider may not seek
payment from the 
    enrollee for services provided to such enrollee; or .

        (iii) related to any policy, contract, or certificate 
    providing any hospital, medical, prescription drug, or 
    other health care benefits pursuant to Part C or Part D of 
    Subchapter XVIII, Chapter 7 of Title 42 of the United 
    States Code (commonly known as Medicare Part C & D) or any 
    regulations issued pursuant thereto; or
        (iv) for any portion of a policy, contract, or 
    certificate to the extent that the assessments required by 
    this Article with respect to the policy or contract are 
    preempted or otherwise not permitted by federal or State 
    law; or
        (v) for any obligation that does not arise under the 
    express written terms of the policy or contract issued by 
    the organization to the contract owner or policy owner, 
    including without limitation:
            (A) claims based on marketing materials;
            (B) claims based on side letters, riders, or other 
        documents that were issued by the insurer without 
        meeting applicable policy form filing or approval 
        requirements;
            (C) misrepresentations of or regarding policy 
        benefits;
            (D) extra-contractual claims; or
            (E) claims for penalties or consequential or 
        incidental damages. 
    (c) In no event shall the Association be required to pay 
any provider
participating in the insolvent organization
any 
amount for in-plan services rendered by such provider prior to 
the
insolvency of the organization in excess of (1) the amount

provided by  a capitation contract between a physician provider 
and the
insolvent organization for such services; or (2) the

amounts provided by contract between a hospital provider and 
the Department of Healthcare and Family Services (formerly

Department of
Public Aid) for similar services to recipients of 
public aid; or (3) in the
event neither (1) nor (2) above is 
applicable, then the amounts paid under
the Medicare area 
prevailing rate for the area where the services were
provided, 
or if no such rate exists with respect to such services, then 
80%
of the usual and customary rates established by the Health 
Insurance
Association of America. The payments required to be 
made by the Association
under this Section shall constitute 
full and complete payment for such
provider services to the 
enrollee.

    (d) The Association shall not be required to pay more than 
an
aggregate of $300,000 for any organization which is declared 
to be
insolvent prior to July 1, 1987, and such funds shall be 
distributed first
to enrollees who are not public aid 
recipients pursuant to a plan
recommended by the Association 
and approved by the Director and the court
having jurisdiction 
over the liquidation.

    (9) The Association may:


        (a) Enter into such contracts as are necessary or 
    proper to carry
out the provisions and purposes of this 
    Article.


        (b) Sue or be sued, including taking any legal actions 
    necessary or
proper for recovery of any unpaid assessments 
    under Section 6-9.  The
Association shall not be liable for 
    punitive or exemplary damages.


        (c) Borrow money to effect the purposes of this 
    Article.  Any notes
or other evidence of indebtedness of the 
    Association not in default are
legal investments for 
    domestic organizations and may be carried as admitted

    assets.


        (d) Employ or retain such persons as are necessary to 
    handle the
financial transactions of the Association, and 
    to perform such other
functions as become necessary or 
    proper under this Article.


        (e) Negotiate and contract with any liquidator, 
    rehabilitator,
conservator, or ancillary receiver to carry 
    out the powers and duties of
the Association.


        (f) Take such legal action as may be necessary to avoid 
    payment of
improper claims.


        (g) Exercise, for the purposes of this Article and to 
    the extent
approved by the Director, the powers of a 
    domestic
organization, but in no case may the Association 
    issue evidence of coverage
other than that issued to 
    perform the contractual
obligations of the impaired or 
    insolvent organization.


        (h) Exercise all the rights of the Director under 
    Section 193(4) of
the Illinois Insurance Code with respect 
    to covered health care plan
certificates after the 
    association becomes obligated by statute.

        (i) Request information from a person seeking coverage 
    from the Association in order to aid the Association in 
    determining its obligations under this Article with 
    respect to the person and the person shall promptly comply 
    with the request.
        (j) Take other necessary or appropriate action to 
    discharge its duties and obligations under this Article or 
    to exercise its powers under this Article. 
    (10) The obligations of the Association under this Article 
shall not
relieve any reinsurer, insurer or other person of its 
obligations to the
insolvent organization (or its conservator, 
rehabilitator, liquidator or
similar official) or its 
enrollees, including without limitation any
reinsurer, insurer 
or other person liable to the insolvent insurer (or its

conservator, rehabilitator, liquidator or similar official) or 
its
enrollees under any contract of reinsurance, any contract 
providing stop
loss coverage or similar coverage or any health 
care contract. With
respect to covered health care plan 
certificates for which the
Association becomes obligated after 
an entry of an order of liquidation
or rehabilitation, the 
Association may elect to succeed to the rights of
the insolvent 
organization arising after the date of the order of
liquidation 
or rehabilitation under any contract of reinsurance, any

contract providing stop loss coverage or similar coverages or 
any health
care service contract to which the insolvent 
organization was a party, on
the terms set forth under such 
contract, to the extent that such contract
provides coverage 
for health care services provided after the date of the
order 
of liquidation or rehabilitation.  As a condition to making this

election, the Association must pay premiums for coverage 
relating to
periods after the date of the order of liquidation 
or rehabilitation.

    (11) The Association shall be entitled to collect premiums 
due under or with
respect to covered health care certificates 
for a period from the date on which
the domestic, foreign, or 
alien organization became an insolvent organization
until the 
Association no longer has obligations under subsection (2) of

this Section with respect to such certificates.  The 
Association's
obligations under subsection (2) of this Section 
with respect to
any covered health care plan certificates shall 
terminate in the event that
all such premiums due under or with 
respect to such covered health care plan
certificates are not 
paid to the Association (i) within 30 days of the
Association's 
demand therefor, or (ii) in the event that such certificates

provide for a longer grace period for payment of premiums after 
notice of
non-payment or demand therefor, within the lesser of 
(A) the period provided
for in such certificates or (B) 60 
days.

    (12) The Board of Directors of the Association shall have 
discretion and may exercise reasonable business judgment to 
determine the means by which the Association is to provide the 
benefits of this Article in an economical and efficient manner.
    (13) Where the Association has arranged or offered to 
provide the benefits of this Article to a covered person under 
a plan or arrangement that fulfills the Association's 
obligations under this Article, the person shall not be 
entitled to benefits from the Association in addition to or 
other than those provided under the plan or arrangement.
    (14) Venue in a suit against the Association arising under 
the Article shall be in Cook County. The Association shall not 
be required to give any appeal bond in an appeal that relates 
to a cause of action arising under this Article. 
(Source: P.A. 95-331, eff. 8-21-07; 96-1450, eff. 8-20-10; 
revised 9-16-10.)

 
 
    Section 99. Effective date. This Act takes effect upon 
becoming law.