SB2766 99TH GENERAL ASSEMBLY

LRB099 16157 EGJ 43559 b

99TH GENERAL ASSEMBLY
State of Illinois
2015 and 2016
SB2766

Introduced 2/17/2016, by Sen. William R. Haine

SYNOPSIS AS INTRODUCED:

215 ILCS 125/1-2	from Ch. 111 1/2, par. 1402
215 ILCS 125/1-3	from Ch. 111 1/2, par. 1402.1
215 ILCS 125/2-1	from Ch. 111 1/2, par. 1403
215 ILCS 125/2-4	from Ch. 111 1/2, par. 1406
215 ILCS 125/2-6	from Ch. 111 1/2, par. 1406.2
215 ILCS 125/3-1	from Ch. 111 1/2, par. 1407.3
215 ILCS 125/5-3	from Ch. 111 1/2, par. 1411.2

Amends the Health Maintenance Organization Act. Makes changes to the definition of "organization" and "admitted assets". Removes language providing that a foreign corporation may qualify for a certification of authority to establish and operate a Health Maintenance Organization under the Act and makes conforming changes. Removes language concerning allocations of net worth and contingent reserves for certain companies. Removes obsolete and duplicative language concerning statutory deposits for certain organizations. Provides that Health Maintenance Organizations are subject to certain financial examination provisions of the Illinois Insurance Code. Makes technical changes. Effective immediately.

A BILL FOR

AN ACT concerning regulation.

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 Sections 1-2, 1-3, 2-1, 2-4, 2-6, 3-1, and 5-3 as follows:

(215 ILCS 125/1-2) (from Ch. 111 1/2, par. 1402)

Sec. 1-2. Definitions. As used in this Act, unless the context otherwise requires, the following terms shall have the meanings ascribed to them:

(1) "Advertisement" means any printed or published material, audiovisual material and descriptive literature of the health care plan used in direct mail, newspapers, magazines, radio scripts, television scripts, billboards and similar displays; and any descriptive literature or sales aids of all kinds disseminated by a representative of the health care plan for presentation to the public including, but not limited to, circulars, leaflets, booklets, depictions, illustrations, form letters and prepared sales presentations.

(2) "Director" means the Director of Insurance.

(3) "Basic health care services" means emergency care, and inpatient hospital and physician care, outpatient medical services, mental health services and care for alcohol and drug abuse, including any reasonable deductibles and co-payments, all of which are subject to the limitations described in Section 4-20 of this Act and as determined by the Director pursuant to rule.

(4) "Enrollee" means an individual who has been enrolled in a health care plan.

(5) "Evidence of coverage" means any certificate, agreement, or contract issued to an enrollee setting out the coverage to which he is entitled in exchange for a per capita prepaid sum.

(6) "Group contract" means a contract for health care services which by its terms limits eligibility to members of a specified group.

(7) "Health care plan" means any arrangement whereby an any organization undertakes to provide or arrange for and pay for or reimburse the cost of basic health care services, excluding any reasonable deductibles and copayments, from providers selected by the Health Maintenance Organization and such arrangement consists of arranging for or the provision of such health care services, as distinguished from mere indemnification against the cost of such services, except as otherwise authorized by Section 2-3 of this Act, on a per capita prepaid basis, through insurance or otherwise. A "health care plan" also includes any arrangement whereby an organization undertakes to provide or arrange for or pay for or reimburse the cost of any health care service for persons who are enrolled under Article V of the Illinois Public Aid Code or under the Children's Health Insurance Program Act through providers selected by the organization and the arrangement consists of making provision for the delivery of health care services, as distinguished from mere indemnification. A "health care plan" also includes any arrangement pursuant to Section 4-17. Nothing in this definition, however, affects the total medical services available to persons eligible for medical assistance under the Illinois Public Aid Code.

(8) "Health care services" means any services included in the furnishing to any individual of medical or dental care, or the hospitalization or incident to the furnishing of such care or hospitalization as well as the furnishing to any person of any and all other services for the purpose of preventing, alleviating, curing or healing human illness or injury.

(9) "Health Maintenance Organization" means an any organization formed under the laws of this or another state to provide or arrange for one or more health care plans under a system which causes any part of the risk of health care delivery to be borne by the organization or its providers.

(10) "Net worth" means admitted assets, as defined in Section 1-3 of this Act, minus liabilities.

(11) "Organization" means a domestic any insurance company, a nonprofit corporation authorized under the Dental Service Plan Act or the Voluntary Health Services Plans Act, or a corporation organized under the laws of this or another state for the purpose of operating one or more health care plans and doing no business other than that of a Health Maintenance Organization or an insurance company. "Organization" shall also mean the University of Illinois Hospital as defined in the University of Illinois Hospital Act or a unit of local government health system operating within a county with a population of 3,000,000 or more.

(12) "Provider" means any physician, hospital facility, facility licensed under the Nursing Home Care Act, or facility or long-term care facility as those terms are defined in the Nursing Home Care Act or other person which is licensed or otherwise authorized to furnish health care services and also includes any other entity that arranges for the delivery or furnishing of health care service.

(13) "Producer" means a person directly or indirectly associated with a health care plan who engages in solicitation or enrollment.

(14) "Per capita prepaid" means a basis of prepayment by which a fixed amount of money is prepaid per individual or any other enrollment unit to the Health Maintenance Organization or for health care services which are provided during a definite time period regardless of the frequency or extent of the services rendered by the Health Maintenance Organization, except for copayments and deductibles and except as provided in subsection (f) of Section 5-3 of this Act.

(15) "Subscriber" means a person who has entered into a contractual relationship with the Health Maintenance Organization for the provision of or arrangement of at least basic health care services to the beneficiaries of such contract.

(Source: P.A. 98-651, eff. 6-16-14; 98-841, eff. 8-1-14; 99-78, eff. 7-20-15.)

(215 ILCS 125/1-3) (from Ch. 111 1/2, par. 1402.1)

Sec. 1-3. Definitions of admitted assets. "Admitted assets Assets" includes the investments authorized or permitted by Section 3-1 of this Act and, in addition thereto, only the following:

(1) Amounts due from affiliates pursuant to management contracts or service agreements which meet the requirements of Section 141.1 of the Illinois Insurance Code to the extent that the affiliate has liquid assets with which to pay the balance and maintain its accounts on a current basis; provided that the aggregate amount due from affiliates may not exceed the lesser of 10% of the organization's admitted assets or 25% of the organization's net worth as defined in Section 3-1. Any amount outstanding more than 3 months shall be deemed not current. For purpose of this subsection "affiliates" are as defined in Article VIII 1/2 of the Illinois Insurance Code.

(2) Amounts advanced to providers under contract to the organization for services to be rendered to enrollees pursuant to the contract. Amounts advanced must be for period of not more than 3 months and must be based on historical or estimated utilization patterns with the provider and must be reconciled against actual incurred claims at least semi-annually. Amounts due in the aggregate may not exceed 50% of the organization's net worth as defined in Section 3-1. Amounts due from a single provider may not exceed the lesser of 5% of the organization's admitted assets or 10% of the organization's net worth.

(3) Amounts permitted under Section 2-7.

(Source: P.A. 91-357, eff. 7-29-99; 91-549, eff. 8-14-99; 92-16, eff. 6-28-01.)

(215 ILCS 125/2-1) (from Ch. 111 1/2, par. 1403)

Sec. 2-1. Certificate of authority - Exception for corporate employee programs - Applications - Material modification of operation.

(a) No organization shall establish or operate a Health Maintenance Organization in this State without obtaining a certificate of authority under this Act. No person other than an organization may lawfully establish or operate a Health Maintenance Organization in this State. This Act shall not apply to the establishment and operation of a Health Maintenance Organization exclusively providing or arranging for health care services to employees of a corporate affiliate of such Health Maintenance Organization. This exclusion shall be available only to those Health Maintenance Organizations which require employee contributions which equal less than 50% of the total cost of the health care plan, with the remainder of the cost being paid by the corporate affiliate which is the employer of the participants in the plan. This Act shall not apply to the establishment and operation of a Health Maintenance Organization exclusively providing or arranging health care services under contract with the State to persons committed to the custody of the Illinois Department of Corrections.

This Act does not apply to the establishment and operation of managed care community networks that are certified as risk-bearing entities under Section 5-11 of the Illinois Public Aid Code and that contract with the Department of Healthcare and Family Services (formerly Illinois Department of Public Aid) pursuant to that Section.

(b) Any organization may apply to the Director for and obtain a certificate of authority to establish and operate a Health Maintenance Organization in compliance with this Act. A foreign corporation may qualify under this Act, subject to its registration to do business in this State as a foreign corporation.

(c) Each application for a certificate of authority shall be filed in triplicate and verified by an officer or authorized representative of the applicant, shall be in a form prescribed by the Director, and shall set forth, without limiting what may be required by the Director, the following:

(1) A copy of the organizational document;

(2) A copy of the bylaws, rules and regulations, or similar document regulating the conduct of the internal affairs of the applicant, which shall include a mechanism to afford the enrollees an opportunity to participate in an advisory capacity in matters of policy and operations;

(3) A list of the names, addresses, and official positions of the persons who are to be responsible for the conduct of the affairs of the applicant; including, but not limited to, all members of the board of directors, executive committee, the principal officers, and any person or entity owning or having the right to acquire 10% or more of the voting securities or subordinated debt of the applicant;

(4) A statement generally describing the applicant, geographic area to be served, its facilities, personnel and the health care services to be offered;

(5) A copy of the form of any contract made or to be made between the applicant and any providers regarding the provision of health care services to enrollees;

(6) A copy of the form of any contract made or to be made between the applicant and any person listed in paragraph (3) of this subsection;

(7) A copy of the form of any contract made or to be made between the applicant and any person, corporation, partnership or other entity for the performance on the applicant's behalf of any functions including, but not limited to, marketing, administration, enrollment, investment management and subcontracting for the provision of health services to enrollees;

(8) A copy of the form of any group contract which is to be issued to employers, unions, trustees, or other organizations and a copy of any form of evidence of coverage to be issued to any enrollee or subscriber and any advertising material;

(9) Descriptions of the applicant's procedures for resolving enrollee grievances which must include procedures providing for enrollees participation in the resolution of grievances;

(10) A copy of the applicant's most recent financial statements audited by an independent certified public accountant. If the financial affairs of the applicant's parent company are audited by an independent certified public accountant but those of the applicant are not, then a copy of the most recent audited financial statement of the applicant's parent, attached to which shall be consolidating financial statements of the parent including separate unaudited financial statements of the applicant, unless the Director determines that additional or more recent financial information is required for the proper administration of this Act;

(11) A copy of the applicant's financial plan, including a three-year projection of anticipated operating results, a statement of the sources of working capital, and any other sources of funding and provisions for contingencies;

(12) A description of rate methodology;

(13) A description of the proposed method of marketing;

(14) A copy of every filing made with the Illinois Secretary of State which relates to the applicant's registered agent or registered office;

(15) A description of the complaint procedures to be established and maintained as required under Section 4-6 of this Act;

(16) A description, in accordance with regulations promulgated by the Illinois Department of Public Health, of the quality assessment and utilization review procedures to be utilized by the applicant;

(17) The fee for filing an application for issuance of a certificate of authority provided in Section 408 of the Illinois Insurance Code, as now or hereafter amended; and

(18) Such other information as the Director may reasonably require to make the determinations required by this Act.

(Source: P.A. 95-331, eff. 8-21-07.)

(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) (Blank). 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-5) (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) (Blank). 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-5) (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.)

(215 ILCS 125/2-6) (from Ch. 111 1/2, par. 1406.2)

Sec. 2-6. Statutory deposits.

(a) An organization subject to the provisions of this Act shall make and maintain with the Director through December 30, 1993, for the protection of enrollees of the organization, a deposit of securities which are authorized investments under paragraphs (1) and (2) of subsection (h) of Section 3-1 having a fair market value equal to at least $100,000. Effective December 31, 1993 and through December 30, 1994, the deposit shall have a fair market value at least equal to $200,000. Effective December 31, 1994 and thereafter, the deposit shall have a fair market value at least equal to $300,000. An organization issued a certificate of authority on or after the effective date of this Amendatory Act of 1993, shall make and maintain with the Director; for the protection of enrollees of the organization, a deposit of securities which are authorized investments under paragraphs (1) and (2) of subsection (h) of Section 3-1 having a fair market value equal to at least $300,000. The amount on deposit shall remain as an admitted asset of the organization in the determination of its net worth. The Director may release the required deposit of securities upon receipt of an order of a court having proper jurisdiction or upon: (i) certification by the organization that it has no outstanding enrollee creditors, enrollees, certificate holders, or enrollee obligations in effect and no plans to engage in the business of insurance as a health maintenance organization; (ii) receipt of a lawful resolution of the organization's governing body effecting the surrender of its certificate of authority, articles of incorporation, or other organizational documents to their issuing governmental officer for voluntary or administrative dissolution; and (iii) receipt of the name and forwarding address for each of the final officers and directors of the organization, together with a plan of dissolution approved by the Director.

(b) An organization that offers a point-of-service product, as permitted by Article 4.5, must maintain an additional deposit in an amount that is not less than the greater of 125% of the organization's annual projected point-of-service claims or $300,000.

(Source: P.A. 92-75, eff. 7-12-01; 92-135, eff. 1-1-02; 92-651, eff. 7-11-02.)

(215 ILCS 125/3-1) (from Ch. 111 1/2, par. 1407.3)

Sec. 3-1. Investment Regulations.

(a) Any health maintenance organization may invest its funds as provided in this Section and not otherwise. A health maintenance organization that is organized as a domestic an insurance company may also acquire the investment assets authorized for an Illinois-domiciled insurance company insurance company pursuant to the laws applicable to an insurance company in the organization's state of domicile. Notwithstanding the provisions of this Section, the Director may, after notice and hearing, order an organization to limit or withdraw from certain investments, or discontinue certain investment practices, to the extent the Director finds that such investments or investment practices are hazardous to the financial condition of the organization.

(b) No investment or loan shall be made or engaged in by any health maintenance organization unless the same have been authorized or ratified by the board of directors or by a committee thereof charged with the duty of supervising investments and loans. Nothing contained in this subsection shall prevent the board of directors of any such organization from depositing any of its securities with a committee appointed for the purpose of protecting the interest of security holders or with the authorities of any state where it is necessary to do so in order to secure permission to transact its appropriate business therein, and nothing contained in this subsection shall prevent the board of directors of such organization from depositing any securities as collateral for the securing of any bond required for the business of the organization.

(c) No health maintenance organization shall pay any commission or brokerage for the purchase or sale of property whether real or personal, in excess of that usual and customary at the time and in the locality where such purchases or sales are made, and information regarding payments of commissions and brokerage shall be maintained.

(d) A health maintenance organization may not directly or indirectly, unless it has notified the Director in writing of its intention to enter into the transaction at least 30 days prior thereto, or any shorter period as the Director may permit, and the Director has not disapproved it within that period:

(1) make a loan to or other investment in an officer or director of the organization or a person in which the officer or director has any direct or indirect financial interest;

(2) make a guarantee for the benefit of or in favor of an officer or director of the organization or a person in which the officer or director has any direct or indirect financial interest; or

(3) enter into an agreement for the purchase or sale of property from or to an officer or director of the organization or a person in which the officer or director has any direct or indirect financial interest.

For the purposes of this Section, an officer or director shall not be deemed to have a financial interest by reason of an interest that is held directly or indirectly through the ownership of equity interests representing less than 2% of all outstanding equity interests issued by a person that is a party to the transaction, or solely by reason of that individual's position as a director or officer of a person that is a party to the transaction.

This subsection does not apply to a transaction between an organization and any of its subsidiaries or affiliates that is entered into in compliance with Section 131.20a of the Illinois Insurance Code, other than a transaction between an insurer and its officer or director.

(e) In applying the percentage limitations imposed by this Section there shall be used as a base the total of all assets which would be admitted by this Section without regard to percentage limitations. All legal measurements used as a base in the determination of all investment qualifications shall consist of the amounts determined at the most recent year end adjusted for subsequent acquisition and disposition of investments.

(f) Valuation of investments. Investments shall be valued in accordance with the published valuation standards of the National Association of Insurance Commissioners. Securities investments as to which the National Association of Insurance Commissioners has not published valuation standards in its Valuations of Securities manual or its successor publication shall be valued as follows:

(1) All obligations having a fixed term and rate shall, if not in default as to principal or interest, be valued as follows: if purchased at par, at the par value; if purchased above or below par, on the basis of the purchase price adjusted so as to bring the value to par at maturity and so as to yield in the meantime the effective rate of interest at which the purchase was made;

(2) Common, preferred or guaranteed stocks shall be valued at market value.

(3) Other security investments shall be valued in accordance with regulations promulgated by the Director pursuant to paragraph (6) of this subsection.

(4) Other investments, including real property, shall be valued in accordance with regulations promulgated by the Director pursuant to paragraph (6) of this subsection, but in no event shall such other investments be valued at more than the purchase price. The purchase price for real property includes capitalized permanent improvements, less depreciation spread evenly over the life of the property or, at the option of the company, less depreciation computed on any basis permitted under the Internal Revenue Code and regulations thereunder. Such investments that have been affected by permanent declines in value shall be valued at not more than market value.

(5) Any investment, including real property, not purchased by the Health Maintenance Organization but acquired in satisfaction of a debt or otherwise shall be valued in accordance with the applicable procedures for that type of investment contained in this subsection. For purposes of applying the valuation procedures, the purchase price shall be deemed to be the market value at the time the investment is acquired or, in the case of any investment acquired in satisfaction of debt, the amount of the debt, including interest, taxes and expenses, whichever amount is less.

(6) The Director shall promulgate rules and regulations for determining and calculating values to be used in financial statements submitted to the Department for investments.

(g) Definitions. As used in this Section, unless the context otherwise requires.

(1) "Business Corporation" means corporations organized for other than not for profit purposes.

(2) "Business Entity" includes sole proprietorships, corporations, associations, partnerships and business trusts.

(3) "Bank or Trust Company" means any bank or trust company organized under the laws of the United States or any State thereof if said bank or trust company is regularly examined pursuant to such laws and said bank or trust company has the insurance protection afforded by an agency of the United States government.

(4) "Capital" means capital stock paid-up, if any, and its use in a provision does not imply that a non-profit Health Maintenance Organization without stated capital stock is excluded from the provision. The capital of such an organization will be zero.

(5) "Direct" when used in connection with "obligation" means that the designated obligor shall be primarily liable on the instrument representing the obligation.

(6) "Facility" means and includes real estate and any and all forms of tangible personal property and services used constituting an operating unit.

(7) "Guaranteed or insured" means that the guarantor or insurer will perform or insure the obligation of the obligor or will purchase the obligation to the extent of the guaranty or insurance.

(8) "Mortgage" shall include a trust deed or other lien on real property securing an obligation for the payment of money.

(9) "Servicer" means a business entity that has a contractual obligation to service a pool of mortgage loans. The service provided shall include, but is not limited to, collection of principal and interest, keeping the accounts current, maintaining or confirming in force hazard insurance and tax status and providing supportive accounting services.

(10) "Single credit risk" means the direct, guaranteed or insured obligations of any one business entity including affiliates thereof.

(11) "Surplus" means the amount properly shown as total net worth on a company's balance sheet, plus all voluntary reserves, but not including capital paid-up.

(12) "Tangible net worth" means the par value of all issued and outstanding capital stock of a corporation (or in the case of shares having no par value, the stated value) and the amounts of all surplus accounts less the sum of (a) such intangible assets as deferred charges, organization and development expense, discount and expense incurred in securing capital, good will, trade-marks, trade-names and patents, (b) leasehold improvements, and (c) any reserves carried by the corporation and not otherwise deducted from assets.

(13) "Unconditional" when used in connection with "obligation" means that nothing remains to be done or to occur to make the designated obligor liable on the instrument, and that the legal holder shall have the status at least equal to that of general creditor of the obligor.

(h) Authorized investments. Any Health Maintenance Organization, except those organized as a domestic an insurance company, may acquire the assets set forth in paragraphs 1 through 17, inclusive. A Health Maintenance Organization that is organized as an insurance company may acquire the investment assets authorized for an insurance company pursuant to the laws applicable to an Illinois-domiciled insurance company in the organization's state of domicile. Any restriction, exclusion or provision appearing in any paragraph shall apply only with respect to the authorization of the particular paragraph in which it appears and shall not constitute a general prohibition and shall not be applicable to any other paragraph. The qualifications or disqualifications of an investment under one paragraph shall not prevent its qualification in whole or in part under another paragraph, and an investment authorized by more than one paragraph may be held under whichever authorizing paragraph the organization elects. An investment which qualified under any paragraph at the time it was acquired or entered into by an organization shall continue to be qualified under that paragraph. An investment in whole or in part may be transferred from time to time, at the election of the organization, to the authority of any paragraph under which it qualifies, whether originally qualifying thereunder or not.

(1) Direct obligations of the United States for the payment of money, or obligations for the payment of money to the extent guaranteed or insured as to the payment of principal and interest by the United States.

(2) Direct obligations for the payment of money, issued by an agency or instrumentality of the United States, or obligations for the payment of money to the extent guaranteed or insured as to the payment of principal and interest by an agency or instrumentality of the United States.

(3) Direct, general obligations of any state of the United States for the payment of money, or obligations for the payment of money to the extent guaranteed or insured as to the payment of principal and interest by any state of the United States, on the following conditions:

(i) Such state has the power to levy taxes for the prompt payment of the principal and interest of such obligations; and

(ii) Such state shall not be in default in the payment of principal or interest on any of its direct, guaranteed or insured obligations at the date of such investment.

(4) Direct, general obligations of any political subdivision of any state of the United States for the payment of money, or obligations for the payment of money to the extent guaranteed as to the payment of principal and interest by any political subdivision of any state of the United States, on the following conditions:

(i) The obligations are payable or guaranteed from ad valorem taxes;

(ii) Such political subdivision is not in default in the payment of principal or interest on any of its direct or guaranteed obligations;

(iii) No investment shall be made under this paragraph in obligations which are secured only by special assessments for local improvements; and

(iv) An organization shall not invest under this paragraph more than 2% of its admitted assets in obligations issued or guaranteed by any one such political subdivision.

(5) Anticipation obligations of any political subdivision of any state of the United States, including but not limited to bond anticipation notes, tax anticipation notes and construction anticipation notes, for the payment of money within 12 months from the issuance of the obligation, on the following conditions:

(i) Such anticipation notes must be a direct obligation of the issuer under conditions set forth in paragraph 4;

(ii) Such political subdivision is not in default in the payment of the principal or interest on any of its direct general obligations or any obligation guaranteed by such political subdivision;

(iii) The anticipated funds must be specifically pledged to secure the obligation;

(iv) An organization shall not invest under this paragraph more than 2% of its admitted assets in the anticipation obligations issued by any one such political subdivision.

(6) Obligations of any state of the United States, a political subdivision thereof, or a public instrumentality of any one or more of the foregoing, for the payment of money, on the following conditions:

(i) The obligations are payable from revenues or earnings of a public utility of such state, political subdivision, or public instrumentality which are specifically pledged therefor;

(ii) The law under which the obligations are issued requires such rates for service shall be charged and collected at all times that they will produce sufficient revenue or earnings together with any other revenues or moneys pledged to pay all operating and maintenance charges of the public utility and all principal and interest on such obligations;

(iii) No prior or parity obligations payable from the revenues or earnings of that public utility are in default at the date of such investment;

(iv) An organization shall not invest more than 20% of its admitted assets under this paragraph; and

(v) An organization shall not invest under this Section more than 2% of its admitted assets in the revenue obligations issued in connection with any one facility.

(7) Obligations of any state of the United States, a political subdivision thereof, or a public instrumentality of any of the foregoing, for the payment of money, on the following conditions:

(i) The obligations are payable from revenues or earnings, excluding revenues or earnings from public utilities, specifically pledged therefor by such state, political subdivision or public instrumentality;

(ii) No prior or parity obligation of the same issuer payable from revenues or earnings from the same source has been in default as to principal or interest during the 5 years next preceding the date of such investment, but such issuer need not have been in existence for that period, and obligations acquired under this paragraph may be newly issued;

(iii) An organization shall not invest in excess of 20% of its admitted assets under this paragraph;

(iv) An organization shall not invest under this paragraph more than 2% of its admitted assets in the revenue obligations issued in connection with any one facility; and

(v) An organization shall not invest under this paragraph more than 2% of its admitted assets in revenue obligations payable from revenue or earning sources which are the contractual responsibility of any one single credit risk.

(8) Direct, unconditional obligations of a solvent business corporation for the payment of money, including obligations to pay rent for equipment used in its business or obligations for the payment of money to the extent guaranteed or insured as to the payment of principal and interest by any solvent business corporation, on the following conditions:

(i) The corporation shall be incorporated under the laws of the United States or any state of the United States;

(ii) The corporation shall have tangible net worth of not less than $1,000,000;

(iii) No such obligation, guarantee or insurance of the corporation has been in default as to principal or interest during the 5 years preceding the date of investment, but the corporation need not have had obligations guarantees or insurance outstanding during that period and need not have been in existence for that period, and obligations acquired under this paragraph may be newly issued;

(iv) An organization shall not invest more than 2% of its admitted assets in obligations issued, guaranteed or insured by any one such corporation;

(v) An organization may invest under this paragraph up to an additional 2% of its admitted assets in obligations which (i) are issued, guaranteed or insured by any one or more such corporations, each having a tangible net worth of not less than $25,000,000 and (ii) mature within 12 months from the date of acquisition;

(vi) An organization may invest not more than 1/2 of 1% of its admitted assets in such obligations of corporations which do not meet the condition of subparagraph (ii) of this paragraph; and

(vii) An organization shall not invest more than 75% of its admitted assets under this paragraph.

(9) Direct, unconditional obligations for the payment of money issued or obligations for the payment of money to the extent guaranteed as to principal and interest by a solvent not for profit corporation, on the following conditions:

(i) The corporation shall be incorporated under the laws of the United States or of any state of the United States;

(ii) The corporation shall have been in existence for at least 5 years and shall have assets of at least $2,000,000;

(iii) Revenues or other income from such assets and the services or commodities dispensed by the corporation shall be pledged for the payment of the obligations or guarantees;

(iv) No such obligation or guarantee of the corporation has been in default as to principal or interest during the 5 years next preceding the date of such investment, but the corporation need not have had obligations or guarantees outstanding during that period and obligations which are acquired under this paragraph may be newly issued;

(v) An organization shall not invest more than 15% of its admitted assets under this paragraph; and

(vi) An organization shall not invest under this paragraph more than 2% of its admitted assets in the obligations issued or guaranteed by any one such corporation.

(10) Direct, unconditional nondemand obligations for the payment of money issued by a solvent bank, mutual savings bank or trust company on the following conditions:

(i) The bank, mutual savings bank or trust company shall be incorporated under the laws of the United States, or of any state of the United States;

(ii) The bank, mutual savings bank or trust company shall have tangible net worth of not less than $1,000,000;

(iii) Such obligations must be of the type which are insured by an agency of the United States or have a maturity of no more than 1 day;

(iv) An organization shall not invest under this paragraph more than the amount which is fully insured by an agency of the United States plus 2% of its admitted assets in nondemand obligations issued by any one such financial institution; and

(v) An organization may invest under this paragraph up to an additional 8% of its admitted assets in nondemand obligations which (1) are issued by any such banks, mutual savings banks or trust companies, each having a tangible net worth of not less than $25,000,000 and (2) mature within 12 months from the date of acquisition.

(11) Preferred or guaranteed stocks issued or guaranteed by a solvent business corporation incorporated under the laws of the United States or any state of the United States, on the following conditions:

(i) The corporation shall have tangible net worth of not less than $1,000,000;

(ii) If such stocks have been outstanding prior to purchase, an organization shall not invest under this paragraph in such stock if prescribed current or cumulative dividends are in arrears;

(iii) An organization shall not invest more than 33 1/3% of its admitted assets under this paragraph and an organization shall not invest more than 15% of its admitted assets under this paragraph in stocks which, at the time of purchase, are not Sinking Fund Stocks. An issue of preferred or guaranteed stock shall be a Sinking Fund Stock when (1) such issue is subject to a 100% mandatory sinking fund or similar arrangement which will provide for the redemption of the entire issue over a period not longer than 40 years from the date of purchase; (2) annual mandatory sinking fund installments on each issue commence not more than 10 years from the date of issue; and (3) each annual sinking fund installment provides for the purchase or redemption of at least 2 1/2% of the original number of shares of such issue; and

(iv) An organization shall not invest under this paragraph more than 2% of its admitted assets in the preferred or guaranteed stocks of any one such corporation.

(12) Common stock issued by any solvent business corporation incorporated under the laws of the United States, or of any state of the United States, on the following conditions:

(i) The issuing corporation must have tangible net worth of $1,000,000 or more;

(ii) An organization may not invest more than an amount equal to its net worth under this paragraph; and

(iii) An organization may not invest under this paragraph an amount equal to more than 10% of its net worth in the common stock of any one corporation.

(13) Shares of common stock or units of beneficial interest issued by any solvent business corporation or trust incorporated or organized under the laws of the United States, or of any state of the United States, on the following conditions:

(i) If the issuing corporation or trust is advised by an investment advisor which is the organization or an affiliate of the organization, the issuing corporation or trust shall have net assets of $100,000 or more, or if the issuing corporation or trust has an unaffiliated investment advisor, the issuing corporation or trust shall have net assets of $10,000,000 or more;

(ii) The issuing corporation or trust is registered as an investment company with the Securities and Exchange Commission under the Investment Company Act of 1940, as amended;

(iii) An organization shall not invest under this paragraph more than the greater of $100,000 or 10% of its admitted assets in any one bond fund, municipal bond fund or money market fund;

(iv) An organization shall not invest under this paragraph more than 10% of its net worth in any one common stock fund, balanced fund or income fund;

(v) An organization shall not invest more than 50% of its admitted assets in bond funds, municipal bond funds and money market funds under this paragraph; and

(vi) An organization's investments in common stock funds, balanced funds or income funds when combined with its investments in common stocks made under paragraph (12) shall not exceed the aggregate limitation provided by subparagraph (ii) of paragraph (12).

(14) Shares of, or accounts or deposits with savings and loan associations or building and loan associations, on the following conditions:

(i) The shares, accounts, or deposits, or investments in any form legally issuable shall be of a withdrawable type and issued by an association which has the insurance protection afforded by the Federal Savings and Loan Insurance Corporation; but nonwithdrawable accounts which are not eligible for insurance by the Federal Savings and Loan Insurance Corporation shall not be eligible for investment under this paragraph;

(ii) The association shall have tangible net worth of not less than $1,000,000;

(iii) The investment shall be in the name of and owned by the organization, unless the account is under a trusteeship with the organization named as the beneficiary;

(iv) An organization shall not invest more than 50% of its admitted assets under this paragraph; and

(v) Under this paragraph, an organization shall not invest in any one such association an amount in excess of 2% of its admitted assets or an amount which is fully insured by the Federal Savings and Loan Insurance Corporation, whichever is greater.

(15) Direct, unconditional obligations for the payment of money secured by the pledge of any investment which is authorized by any of the preceding paragraphs, on the following conditions:

(i) The investment pledged shall by its terms be legally assignable and shall be validly assigned to the organization;

(ii) The investment pledged shall have a fair market value which is at least 25% greater than the amount invested under this paragraph, except that a loan may be made up to 100% of the full fair market value of collateral that would qualify as an investment under paragraph (1) provided it qualifies under condition (i) of this paragraph; and

(iii) An organization's investment under this paragraph when added to its investment of the category of the collateral pledged shall not cause the sum to exceed the limits provided by the paragraph authorizing that category of investments.

(16) Real estate (including leasehold estates and leasehold improvements) for the convenient accommodation of the organization's business operations, including home office, branch office, medical facilities and field office operations, on the following conditions:

(i) Any parcel of real estate acquired under this paragraph may include excess space for rent to others, if it is reasonably anticipated that such excess will be required by the organization for expansion or if the excess is reasonably required in order to have one or more buildings that will function as an economic unit;

(ii) Such real estate may be subject to a mortgage; and

(iii) The greater of the admitted value of the asset as determined by subsection (f) or the organization's equity plus all encumbrances on such real estate owned by a company under this paragraph shall not exceed 20% of its admitted assets, except with the permission of the Director if he finds that such percentage of its admitted assets is insufficient to provide convenient accommodation for the company's business; provided, however, an organization that directly provides medical services may invest an additional 20% of its admitted assets in such real estate, not requiring the permission of the Director.

(17) Any investments of any kind, in the complete discretion of the organization, without regard to any condition of, restriction in, or exclusion from paragraphs (1) to (16), inclusive, and regardless of whether the same or a similar type of investment has been included in or omitted from any such paragraph, on the following condition: An organization shall not invest under this paragraph more than the lesser of (i) 10% of its admitted assets, or (ii) 50% of the amount by which its net worth exceeds the minimum requirements of a new health maintenance organization to qualify for a certificate of authority.

(Source: P.A. 92-140, eff. 7-24-01; 92-651, eff. 7-11-02.)

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

Sec. 5-3. Insurance Code provisions.

(a) Health Maintenance Organizations shall be subject to the provisions of Sections 132, 132.1, 132.2, 132.3, 132.4, 132.5, 132.6, 132.7, 133, 134, 136, 137, 139, 140, 141.1, 141.2, 141.3, 143, 143c, 147, 148, 149, 151, 152, 153, 154, 154.5, 154.6, 154.7, 154.8, 155.04, 155.22a, 355.2, 355.3, 355b, 356g.5-1, 356m, 356v, 356w, 356x, 356y, 356z.2, 356z.4, 356z.5, 356z.6, 356z.8, 356z.9, 356z.10, 356z.11, 356z.12, 356z.13, 356z.14, 356z.15, 356z.17, 356z.18, 356z.19, 356z.21, 356z.22, 364.01, 367.2, 367.2-5, 367i, 368a, 368b, 368c, 368d, 368e, 370c, 370c.1, 401, 401.1, 402, 403, 403A, 408, 408.2, 409, 412, 444, and 444.1, paragraph (c) of subsection (2) of Section 367, and Articles IIA, VIII 1/2, XII, XII 1/2, XIII, XIII 1/2, XXV, and XXVI of the Illinois Insurance Code.

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

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

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

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

(c) In considering the merger, consolidation, or other acquisition of control of a Health Maintenance Organization pursuant to Article VIII 1/2 of the Illinois Insurance Code,

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

(2)(i) the criteria specified in subsection (1)(b) of Section 131.8 of the Illinois Insurance Code shall not apply and (ii) the Director, in making his determination with respect to the merger, consolidation, or other acquisition of control, need not take into account the effect on competition of the merger, consolidation, or other acquisition of control;

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

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

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

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

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

(d) The provisions of Article VIII 1/2 of the Illinois Insurance Code and this Section 5-3 shall apply to the sale by any health maintenance organization of greater than 10% of its enrollee population (including without limitation the health maintenance organization's right, title, and interest in and to its health care certificates).

(e) In considering any management contract or service agreement subject to Section 141.1 of the Illinois Insurance Code, the Director (i) shall, in addition to the criteria specified in Section 141.2 of the Illinois Insurance Code, take into account the effect of the management contract or service agreement on the continuation of benefits to enrollees and the financial condition of the health maintenance organization to be managed or serviced, and (ii) need not take into account the effect of the management contract or service agreement on competition.

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

(i) the amount of, and other terms and conditions with respect to, the refund or additional premium are set forth in the group or enrollment unit contract agreed in advance of the period for which a refund is to be paid or additional premium is to be charged (which period shall not be less than one year); and

(ii) the amount of the refund or additional premium shall not exceed 20% of the Health Maintenance Organization's profitable or unprofitable experience with respect to the group or other enrollment unit for the period (and, for purposes of a refund or additional premium, the profitable or unprofitable experience shall be calculated taking into account a pro rata share of the Health Maintenance Organization's administrative and marketing expenses, but shall not include any refund to be made or additional premium to be paid pursuant to this subsection (f)). The Health Maintenance Organization and the group or enrollment unit may agree that the profitable or unprofitable experience may be calculated taking into account the refund period and the immediately preceding 2 plan years.

The Health Maintenance Organization shall include a statement in the evidence of coverage issued to each enrollee describing the possibility of a refund or additional premium, and upon request of any group or enrollment unit, provide to the group or enrollment unit a description of the method used to calculate (1) the Health Maintenance Organization's profitable experience with respect to the group or enrollment unit and the resulting refund to the group or enrollment unit or (2) the Health Maintenance Organization's unprofitable experience with respect to the group or enrollment unit and the resulting additional premium to be paid by the group or enrollment unit.

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

(g) Rulemaking authority to implement Public Act 95-1045, if any, is conditioned on the rules being adopted in accordance with all provisions of the Illinois Administrative Procedure Act and all rules and procedures of the Joint Committee on Administrative Rules; any purported rule not so adopted, for whatever reason, is unauthorized.

(Source: P.A. 97-282, eff. 8-9-11; 97-343, eff. 1-1-12; 97-437, eff. 8-18-11; 97-486, eff. 1-1-12; 97-592, eff. 1-1-12; 97-805, eff. 1-1-13; 97-813, eff. 7-13-12; 98-189, eff. 1-1-14; 98-1091, eff. 1-1-15.)

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