95TH GENERAL ASSEMBLY
State of Illinois
2007 and 2008
HB6338


 
Introduced , by Rep. Mary E. Flowers
 
SYNOPSIS AS INTRODUCED:
 		



















215 ILCS 5/354.1 new





215 ILCS 125/5-3
  from Ch. 111 1/2, par. 1411.2


215 ILCS 130/4003
  from Ch. 73, par. 1504-3


215 ILCS 165/10
  from Ch. 32, par. 604







    Amends the Illinois Insurance Code, the Health Maintenance
Organization Act, the Limited Health Service Organization Act, and the Voluntary Health Services Plan Act to require policies of health insurance and health plans issued by insurers that have been licensed for 5 years or more to expend no less than 85% of the aggregate dues, fees, and other periodic payments received by the policy or plan for providing health care services to its subscribers or enrollees. Provides that policies or plans issued by insurers that have been licensed for less than 5 years may spend no less than 75% for providing health care services to its subscribers or enrollees. Extends the statutory authority of the Director to disapprove group health insurance policies that fail to comply with the provisions concerning health insurance administrative costs.
Effective January 1, 2009.
















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A BILL FOR









 











HB6338

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    AN ACT concerning regulation.

 
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    Be it enacted by the People of the State of Illinois,
 
3
represented in the General Assembly:


 
4
    Section 5. The Illinois Insurance Code is amended  by adding 
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Section 354.1 as follows:
 
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    (215 ILCS 5/354.1  new)
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    Sec. 354.1. Health insurance administrative costs. 
8
    (a) Notwithstanding any other provision of law, a policy of 
9
health insurance or a managed care plan amended, delivered, 
10
issued, or renewed on or after the effective date of this 
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amendatory Act of the 95th General Assembly by an insurer 
12
licensed for 5 years or more  in this State shall expend no less 
13
than 85%
of the aggregate dues, fees, premiums, and other 
14
periodic payments
received by the policy or plan on health care 
15
benefits. A policy of health insurance or a managed care plan 
16
amended, delivered, issued, or renewed on or after the 
17
effective date of this amendatory Act of the 95th General 
18
Assembly by an insurer licensed less than 5 years in this State 
19
shall expend no less than 75%
of the aggregate dues, fees, 
20
premiums, and other periodic payments
received by the policy on 
21
health care benefits.
22
    (b) For purposes of this Section, "health care benefits" 
23
shall
include, but shall not be limited to, all of the 
 


 






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following:
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        (1) health care services that are either provided or 
3
    reimbursed by
the plan or its contracted providers as 
4
    covered benefits;
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        (2) disease management expenses using cost-effective

6
    evidence-based guidelines;
7
        (3) payments to providers;
8
        (4) plan medical advice by telephone; and
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        (5) prescription drug management programs.
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    For purposes of this Section, "health care benefits" shall 
11
not
include administrative costs,
agent and broker commission 
12
and solicitation costs associated with
the issuance of 
13
individual and group health care service plan
contracts, 
14
dividends, profits, stock options, income tax or any other
tax 
15
the policy or plan expenses, assessments or fines levied by the 
16
Division of Insurance, or  administrative  costs
associated with 
17
existing or new regulatory requirements.
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    (c) An insurer or health care service plan provider 
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licensed to operate in this State
shall provide written 
20
affirmation to the Division of Insurance that it meets the

21
requirements of this Section.
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    (d) The Director may disapprove an insurer or health care 
23
service plan provider's use
of a plan contract, issue a fine or 
24
assessment against an insurer or health care
service plan 
25
provider, suspend or revoke the license issued to an insurer or 
26
health care
service plan provider, or take any other action the

 


 






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Director deems appropriate if the Director determines that the 
2
policy or plan
has failed to comply with this Section.
 
3
    Section 10. The Health Maintenance Organization Act is 
4
amended  by changing Section 5-3 as follows:
 


5
    (215 ILCS 125/5-3)  (from Ch. 111 1/2, par. 1411.2)



6
    Sec. 5-3. Insurance Code provisions. 

7
    (a) Health Maintenance Organizations
shall be subject to 
8
the provisions of Sections 133, 134, 137, 140, 141.1,
141.2, 
9
141.3, 143, 143c, 147, 148, 149, 151,
152, 153, 154, 154.5, 
10
154.6,
154.7, 154.8, 155.04, 354.1, 355.2, 356m, 356v, 356w, 
11
356x, 356y,
356z.2, 356z.4, 356z.5, 356z.6, 356z.8, 356z.9, 
12
356z.10
356z.9, 364.01, 367.2, 367.2-5, 367i, 368a, 368b, 368c, 
13
368d, 368e, 370c,
401, 401.1, 402, 403, 403A,
408, 408.2, 409, 
14
412, 444,
and
444.1,
paragraph (c) of subsection (2) of Section 
15
367, and Articles IIA, VIII 1/2,
XII,
XII 1/2, XIII, XIII 1/2, 
16
XXV, and XXVI of the Illinois Insurance Code.

17
    (b) For purposes of the Illinois Insurance Code, except for 
18
Sections 444
and 444.1 and Articles XIII and XIII 1/2, Health 
19
Maintenance Organizations in
the following categories are 
20
deemed to be "domestic companies":


21
        (1) a corporation authorized under the
Dental Service 
22
    Plan Act or the Voluntary Health Services Plans Act;


23
        (2) a corporation organized under the laws of this 
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    State; or


 


 






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        (3) a corporation organized under the laws of another 
2
    state, 30% or more
of the enrollees of which are residents 
3
    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
    (c) In considering the merger, consolidation, or other 
8
acquisition of
control of a Health Maintenance Organization 
9
pursuant to Article VIII 1/2
of the Illinois Insurance Code,


10
        (1) the Director shall give primary consideration to 
11
    the continuation of
benefits to enrollees and the financial 
12
    conditions of the acquired Health
Maintenance Organization 
13
    after the merger, consolidation, or other
acquisition of 
14
    control takes effect;


15
        (2)(i) the criteria specified in subsection (1)(b) of 
16
    Section 131.8 of
the Illinois Insurance Code shall not 
17
    apply and (ii) the Director, in making
his determination 
18
    with respect to the merger, consolidation, or other

19
    acquisition of control, need not take into account the 
20
    effect on
competition of the merger, consolidation, or 
21
    other acquisition of control;


22
        (3) the Director shall have the power to require the 
23
    following
information:


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            (A) certification by an independent actuary of the 
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        adequacy
of the reserves of the Health Maintenance 
26
        Organization sought to be acquired;


 


 






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            (B) pro forma financial statements reflecting the 
2
        combined balance
sheets of the acquiring company and 
3
        the Health Maintenance Organization sought
to be 
4
        acquired as of the end of the preceding year and as of 
5
        a date 90 days
prior to the acquisition, as well as pro 
6
        forma financial statements
reflecting projected 
7
        combined operation for a period of 2 years;


8
            (C) a pro forma business plan detailing an 
9
        acquiring party's plans with
respect to the operation 
10
        of the Health Maintenance Organization sought to
be 
11
        acquired for a period of not less than 3 years; and


12
            (D) such other information as the Director shall 
13
        require.

14
    (d) The provisions of Article VIII 1/2 of the Illinois 
15
Insurance Code
and this Section 5-3 shall apply to the sale by 
16
any health maintenance
organization of greater than 10% of its

17
enrollee population (including without limitation the health 
18
maintenance
organization's right, title, and interest in and to 
19
its health care
certificates).

20
    (e) In considering any management contract or service 
21
agreement subject
to Section 141.1 of the Illinois Insurance 
22
Code, the Director (i) shall, in
addition to the criteria 
23
specified in Section 141.2 of the Illinois
Insurance Code, take 
24
into account the effect of the management contract or
service 
25
agreement on the continuation of benefits to enrollees and the

26
financial condition of the health maintenance organization to 
 


 






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be managed or
serviced, and (ii) need not take into account the 
2
effect of the management
contract or service agreement on 
3
competition.

4
    (f) Except for small employer groups as defined in the 
5
Small Employer
Rating, Renewability and Portability Health 
6
Insurance Act and except for
medicare supplement policies as 
7
defined in Section 363 of the Illinois
Insurance Code, a Health 
8
Maintenance Organization may by contract agree with a
group or 
9
other enrollment unit to effect refunds or charge additional 
10
premiums
under the following terms and conditions:


11
        (i) the amount of, and other terms and conditions with 
12
    respect to, the
refund or additional premium are set forth 
13
    in the group or enrollment unit
contract agreed in advance 
14
    of the period for which a refund is to be paid or

15
    additional premium is to be charged (which period shall not 
16
    be less than one
year); and


17
        (ii) the amount of the refund or additional premium 
18
    shall not exceed 20%
of the Health Maintenance 
19
    Organization's profitable or unprofitable experience
with 
20
    respect to the group or other enrollment unit for the 
21
    period (and, for
purposes of a refund or additional 
22
    premium, the profitable or unprofitable
experience shall 
23
    be calculated taking into account a pro rata share of the

24
    Health Maintenance Organization's administrative and 
25
    marketing expenses, but
shall not include any refund to be 
26
    made or additional premium to be paid
pursuant to this 
 


 






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    subsection (f)).  The Health Maintenance Organization and 
2
    the
group or enrollment unit may agree that the profitable 
3
    or unprofitable
experience may be calculated taking into 
4
    account the refund period and the
immediately preceding 2 
5
    plan years.

6
    The Health Maintenance Organization shall include a 
7
statement in the
evidence of coverage issued to each enrollee 
8
describing the possibility of a
refund or additional premium, 
9
and upon request of any group or enrollment unit,
provide to 
10
the group or enrollment unit a description of the method used 
11
to
calculate (1) the Health Maintenance Organization's 
12
profitable experience with
respect to the group or enrollment 
13
unit and the resulting refund to the group
or enrollment unit 
14
or (2) the Health Maintenance Organization's unprofitable

15
experience with respect to the group or enrollment unit and the 
16
resulting
additional premium to be paid by the group or 
17
enrollment unit.

18
    In no event shall the Illinois Health Maintenance 
19
Organization
Guaranty Association be liable to pay any 
20
contractual obligation of an
insolvent organization to pay any 
21
refund authorized under this Section.

22
(Source: P.A. 94-906, eff. 1-1-07; 94-1076, eff. 12-29-06; 
23
95-422, eff. 8-24-07; 95-520, eff. 8-28-07; revised 12-4-07.)

 
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    Section 15. The Limited Health Service Organization Act is 
25
amended  by changing Section 4003 as follows:
 



 


 






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    (215 ILCS 130/4003)  (from Ch. 73, par. 1504-3)



2
    Sec. 4003. Illinois Insurance Code provisions. Limited 
3
health service
organizations shall be subject to the provisions 
4
of Sections 133, 134, 137,
140, 141.1, 141.2, 141.3, 143, 143c, 
5
147, 148, 149, 151, 152, 153, 154, 154.5,
154.6, 154.7, 154.8, 
6
155.04, 155.37, 354.1, 355.2, 356v, 356z.10
356z.9, 368a, 401, 
7
401.1,
402,
403, 403A, 408,
408.2, 409, 412, 444, and 444.1 and 
8
Articles IIA, VIII 1/2, XII, XII 1/2,
XIII,
XIII 1/2, XXV, and 
9
XXVI of the Illinois Insurance Code.  For purposes of the

10
Illinois Insurance Code, except for Sections 444 and 444.1 and 
11
Articles XIII
and XIII 1/2, limited health service 
12
organizations in the following categories
are deemed to be 
13
domestic companies:


14
        (1) a corporation under the laws of this State; or


15
        (2) a corporation organized under the laws of another 
16
    state, 30% of more
of the enrollees of which are residents 
17
    of this State, except a corporation
subject to 
18
    substantially the same requirements in its state of 
19
    organization as
is a domestic company under Article VIII 
20
    1/2 of the Illinois Insurance Code.

21
(Source: P.A. 95-520, eff. 8-28-07; revised 12-5-07.)

 
22
    Section 20. The Voluntary Health Services Plans Act is 
23
amended  by changing Section 10 as follows:
 



 


 






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    (215 ILCS 165/10)  (from Ch. 32, par. 604)


2
    Sec. 10. Application of Insurance Code provisions. Health 
3
services
plan corporations and all persons interested therein 
4
or dealing therewith
shall be subject to the provisions of 
5
Articles IIA and XII 1/2 and Sections
3.1, 133, 140, 143, 143c, 
6
149, 155.37, 354, 354.1, 355.2, 356g.5, 356r, 356t, 356u, 356v,

7
356w, 356x, 356y, 356z.1, 356z.2, 356z.4, 356z.5, 356z.6, 
8
356z.8, 356z.9,
356z.10
356z.9, 364.01, 367.2, 368a, 401, 
9
401.1,
402,
403, 403A, 408,
408.2, and 412, and paragraphs (7) 
10
and (15) of Section 367 of the Illinois
Insurance Code.

11
(Source: P.A. 94-1076, eff. 12-29-06; 95-189, eff. 8-16-07; 
12
95-331, eff. 8-21-07; 95-422, eff. 8-24-07; 95-520, eff. 
13
8-28-07; revised 12-5-07.)

 

14
    Section 99. Effective date. This Act takes effect January 
15
1, 2009.