Illinois General Assembly - Full Text of HB5018
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Full Text of HB5018  96th General Assembly




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1    AN ACT concerning insurance.
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
4    Section 5. The Health Maintenance Organization Act is
5amended by changing Section 6-8 as follows:
6    (215 ILCS 125/6-8)  (from Ch. 111 1/2, par. 1418.8)
7    Sec. 6-8. Powers and duties of the Association. In addition
8to the powers and duties enumerated in other Sections of this
9Article, the Association shall have the powers set forth in
10this Section.
11    (1) If a domestic organization is an impaired organization,
12the Association may, subject to any conditions imposed by the
13Association other than those which impair the contractual
14obligations of the impaired organization, and approved by the
15impaired organization and the Director:
16        (a) guarantee, assume, or reinsure, or cause to be
17    guaranteed, assumed or reinsured, any or all of the covered
18    health care plan certificates of covered persons of the
19    impaired organization;
20        (b) provide such monies, pledges, notes, guarantees,
21    or other means as are proper to effectuate paragraph (a),
22    and assure payment of the contractual obligations of the
23    impaired organization pending action under paragraph (a);



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1    and
2        (c) loan money to the impaired organization.
3    (2) If a domestic, foreign, or alien organization is an
4insolvent organization, the Association shall, subject to the
5approval of the Director:
6        (a) guarantee, assume, indemnify or reinsure or cause
7    to be guaranteed, assumed, indemnified or reinsured the
8    covered health care plan benefits of covered persons of the
9    insolvent organization; however, in the event that the
10    Director of Healthcare and Family Services (formerly
11    Director of the Department of Public Aid) assigns
12    individuals that are recipients of public aid from an
13    insolvent organization to another organization, the
14    Director of Healthcare and Family Services shall, before
15    fixing the rates to be paid by the Department of Healthcare
16    and Family Services to the transferee organization on
17    account of such individuals, consult with the Director of
18    the Department of Insurance as to the reasonableness of
19    such rates in light of the health care needs of such
20    individuals and the costs of providing health care services
21    to such individuals;
22        (b) assure payment of the contractual obligations of
23    the insolvent organization to covered persons;
24        (c) make payments to providers of health care, or
25    indemnity payments to covered persons, so as to assure the
26    continued payment of benefits substantially similar to



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1    those provided for under covered health care plan
2    certificate issued by the insolvent organization to
3    covered persons; and
4        (d) provide such monies, pledges, notes, guaranties,
5    or other means as are reasonably necessary to discharge
6    such duties.
7    This subsection (2) shall not apply when the Director has
8determined that the foreign or alien organization's
9domiciliary jurisdiction or state of entry provides, by
10statute, protection substantially similar to that provided by
11this Article for residents of this State and such protection
12will be provided in a timely manner.
13    (3) There shall be no liability on the part of and no cause
14of action shall arise against the Association or against any
15transferee from the Association in connection with the transfer
16by reinsurance or otherwise of all or any part of an impaired
17or insolvent organization's business by reason of any action
18taken or any failure to take any action by the impaired or
19insolvent organization at any time.
20    (4) If the Association fails to act within a reasonable
21period of time as provided in subsection (2) of this Section
22with respect to an insolvent organization, the Director shall
23have the powers and duties of the Association under this
24Article with regard to such insolvent organization.
25    (5) The Association or its designated representatives may
26render assistance and advice to the Director, upon his request,



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1concerning rehabilitation, payment of claims, continuations of
2coverage, or the performance of other contractual obligations
3of any impaired or insolvent organization.
4    (6) The Association has standing to appear before any court
5concerning all matters germane to the powers and duties of the
6Association, including, but not limited to, proposals for
7reinsuring or guaranteeing the covered health care plan
8certificates of the impaired or insolvent organization and the
9determination of the covered health care plan certificates and
10contractual obligations.
11    (7) (a) Any person receiving benefits under this Article is
12deemed to have assigned the rights under the covered health
13care plan certificates to the Association to the extent of the
14benefits received because of this Article whether the benefits
15are payments of contractual obligations or continuation of
16coverage. The Association may require an assignment to it of
17such rights by any payee, enrollee or beneficiary as a
18condition precedent to the receipt of any rights or benefits
19conferred by this Article upon such person. The Association is
20subrogated to these rights against the assets of any insolvent
21organization and against any other party who may be liable to
22such payee, enrollee or beneficiary.
23    (b) The subrogation rights of the Association under this
24subsection have the same priority against the assets of the
25insolvent organization as that possessed by the person entitled
26to receive benefits under this Article.



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1    (8) (a) The contractual obligations of the insolvent
2organization for which the Association becomes or may become
3liable are as great as but no greater than the contractual
4obligations of the insolvent organization would have been in
5the absence of an insolvency unless such obligations are
6reduced as permitted by subsection (3), but the aggregate
7liability of the Association shall not exceed $500,000 $300,000
8with respect to any one natural person.
9    (b) Furthermore, the Association shall not be required to
10pay, and shall have no liability to, any provider of health
11care services to an enrollee:
12        (i) if such provider, or his or its affiliates or
13    members of his immediate family, at any time within the one
14    year prior to the date of the issuance of the first order,
15    by a court of competent jurisdiction, of conservation,
16    rehabilitation or liquidation pertaining to the health
17    maintenance organization:
18            (A) was a securityholder of such organization (but
19        excluding any securityholder holding an equity
20        interest of 5% or less);
21            (B) exercised control over the organization by
22        means such as serving as an officer or director,
23        through a management agreement or as a principal member
24        of a not-for-profit organization;
25            (C) had a representative serving by virtue of or
26        his or her official position as a representative of



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1        such provider on the board of any entity which
2        exercised control over the organization;
3            (D) received provider payments made by such
4        organization pursuant to a contract which was not a
5        product of arms-length bargaining; or
6            (E) received distributions other than for
7        physician services from a not-for-profit organization
8        on account of such provider's status as a member of
9        such organization.
10        For purposes of this subparagraph (i), the terms
11    "affiliate," "person," "control" and "securityholder"
12    shall have the meanings ascribed to such terms in Section
13    131.1 of the Illinois Insurance Code; or
14        (ii) if and to the extent such a provider has agreed by
15    contract not to seek payment from the enrollee for services
16    provided to such enrollee or if, and to the extent, as a
17    matter of law such provider may not seek payment from the
18    enrollee for services provided to such enrollee; or .
19        (iii) related to any policy, contract, or certificate
20    providing any hospital, medical, prescription drug, or
21    other health care benefits pursuant to Part C or Part D of
22    Subchapter XVIII, Chapter 7 of Title 42 of the United
23    States Code (commonly known as Medicare Part C & D) or any
24    regulations issued pursuant thereto; or
25        (iv) for any portion of a policy, contract, or
26    certificate to the extent that the assessments required by



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1    this Article with respect to the policy or contract are
2    preempted or otherwise not permitted by federal or State
3    law; or
4        (v) for any obligation that does not arise under the
5    express written terms of the policy or contract issued by
6    the organization to the contract owner or policy owner,
7    including without limitation:
8            (A) claims based on marketing materials;
9            (B) claims based on side letters, riders, or other
10        documents that were issued by the insurer without
11        meeting applicable policy form filing or approval
12        requirements;
13            (C) misrepresentations of or regarding policy
14        benefits;
15            (D) extra-contractual claims; or
16            (E) claims for penalties or consequential or
17        incidental damages.
18    (c) In no event shall the Association be required to pay
19any provider participating in the insolvent organization any
20amount for in-plan services rendered by such provider prior to
21the insolvency of the organization in excess of (1) the amount
22provided by a capitation contract between a physician provider
23and the insolvent organization for such services; or (2) the
24amounts provided by contract between a hospital provider and
25the Department of Healthcare and Family Services (formerly
26Department of Public Aid) for similar services to recipients of



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1public aid; or (3) in the event neither (1) nor (2) above is
2applicable, then the amounts paid under the Medicare area
3prevailing rate for the area where the services were provided,
4or if no such rate exists with respect to such services, then
580% of the usual and customary rates established by the Health
6Insurance Association of America. The payments required to be
7made by the Association under this Section shall constitute
8full and complete payment for such provider services to the
10    (d) The Association shall not be required to pay more than
11an aggregate of $300,000 for any organization which is declared
12to be insolvent prior to July 1, 1987, and such funds shall be
13distributed first to enrollees who are not public aid
14recipients pursuant to a plan recommended by the Association
15and approved by the Director and the court having jurisdiction
16over the liquidation.
17    (9) The Association may:
18        (a) Enter into such contracts as are necessary or
19    proper to carry out the provisions and purposes of this
20    Article.
21        (b) Sue or be sued, including taking any legal actions
22    necessary or proper for recovery of any unpaid assessments
23    under Section 6-9. The Association shall not be liable for
24    punitive or exemplary damages.
25        (c) Borrow money to effect the purposes of this
26    Article. Any notes or other evidence of indebtedness of the



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1    Association not in default are legal investments for
2    domestic organizations and may be carried as admitted
3    assets.
4        (d) Employ or retain such persons as are necessary to
5    handle the financial transactions of the Association, and
6    to perform such other functions as become necessary or
7    proper under this Article.
8        (e) Negotiate and contract with any liquidator,
9    rehabilitator, conservator, or ancillary receiver to carry
10    out the powers and duties of the Association.
11        (f) Take such legal action as may be necessary to avoid
12    payment of improper claims.
13        (g) Exercise, for the purposes of this Article and to
14    the extent approved by the Director, the powers of a
15    domestic organization, but in no case may the Association
16    issue evidence of coverage other than that issued to
17    perform the contractual obligations of the impaired or
18    insolvent organization.
19        (h) Exercise all the rights of the Director under
20    Section 193(4) of the Illinois Insurance Code with respect
21    to covered health care plan certificates after the
22    association becomes obligated by statute.
23        (i) Request information from a person seeking coverage
24    from the Association in order to aid the Association in
25    determining its obligations under this Article with
26    respect to the person and the person shall promptly comply



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1    with the request.
2        (j) Take other necessary or appropriate action to
3    discharge its duties and obligations under this Article or
4    to exercise its powers under this Article.
5    (10) The obligations of the Association under this Article
6shall not relieve any reinsurer, insurer or other person of its
7obligations to the insolvent organization (or its conservator,
8rehabilitator, liquidator or similar official) or its
9enrollees, including without limitation any reinsurer, insurer
10or other person liable to the insolvent insurer (or its
11conservator, rehabilitator, liquidator or similar official) or
12its enrollees under any contract of reinsurance, any contract
13providing stop loss coverage or similar coverage or any health
14care contract. With respect to covered health care plan
15certificates for which the Association becomes obligated after
16an entry of an order of liquidation or rehabilitation, the
17Association may elect to succeed to the rights of the insolvent
18organization arising after the date of the order of liquidation
19or rehabilitation under any contract of reinsurance, any
20contract providing stop loss coverage or similar coverages or
21any health care service contract to which the insolvent
22organization was a party, on the terms set forth under such
23contract, to the extent that such contract provides coverage
24for health care services provided after the date of the order
25of liquidation or rehabilitation. As a condition to making this
26election, the Association must pay premiums for coverage



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1relating to periods after the date of the order of liquidation
2or rehabilitation.
3    (11) The Association shall be entitled to collect premiums
4due under or with respect to covered health care certificates
5for a period from the date on which the domestic, foreign, or
6alien organization became an insolvent organization until the
7Association no longer has obligations under subsection (2) of
8this Section with respect to such certificates. The
9Association's obligations under subsection (2) of this Section
10with respect to any covered health care plan certificates shall
11terminate in the event that all such premiums due under or with
12respect to such covered health care plan certificates are not
13paid to the Association (i) within 30 days of the Association's
14demand therefor, or (ii) in the event that such certificates
15provide for a longer grace period for payment of premiums after
16notice of non-payment or demand therefor, within the lesser of
17(A) the period provided for in such certificates or (B) 60
19    (12) The Board of Directors of the Association shall have
20discretion and may exercise reasonable business judgment to
21determine the means by which the Association is to provide the
22benefits of this Article in an economical and efficient manner.
23    (13) Where the Association has arranged or offered to
24provide the benefits of this Article to a covered person under
25a plan or arrangement that fulfills the Association's
26obligations under this Article, the person shall not be



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1entitled to benefits from the Association in addition to or
2other than those provided under the plan or arrangement.
3    (14) Venue in a suit against the Association arising under
4the Article shall be in Cook County. The Association shall not
5be required to give any appeal bond in an appeal that relates
6to a cause of action arising under this Article.
7(Source: P.A. 95-331, eff. 8-21-07; 96-1450, eff. 8-20-10;
8revised 9-16-10.)
9    Section 99. Effective date. This Act takes effect upon
10becoming law.