HB2470 93rd General Assembly


                                     LRB093 05247 JLS 05334 b

 1        AN ACT concerning health maintenance organizations.

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

 4        Section 5.  The Health Maintenance  Organization  Act  is
 5    amended  by  changing Sections 6-2, 6-4, 6-5, 6-8, 6-9, 6-10,
 6    6-11, 6-12, 6-14, and 6-17 as follows:

 7        (215 ILCS 125/6-2) (from Ch. 111 1/2, par. 1418.2)
 8        Sec. 6-2. Purpose. The purpose  of  this  Article  is  to
 9    protect  enrollees  of  health  care plans who reside in this
10    State, and their beneficiaries, payees and assignees, subject
11    to certain limitations, against failure in the performance of
12    contractual obligations due to the impairment  or  insolvency
13    of   the  organization  operating  such  health  care  plans.
14    Nonresident enrollees of such  health  care  plans  shall  be
15    protected  by this Association if:  (1) they reside in states
16    which have associations similar to the Association created by
17    this Article; (2) they are not eligible for coverage by  such
18    associations; (3) the organization which operates such health
19    care plan never held a license or certificate of authority in
20    such  states; and (4) such organization was domiciled in this
21    State.  To provide this protection,  (1)  an  association  of
22    health  maintenance  organizations  is  created to enable the
23    guaranty of  payment  of  benefits  and  of  continuation  of
24    coverages,  either  on  a  prepaid  or  indemnity  basis, (2)
25    members of the  Association  are  subject  to  assessment  to
26    provide  funds  to carry out the purpose of this Article, and
27    (3) the Association is authorized to assist the Director,  in
28    the  prescribed  manner,  in  the detection and prevention of
29    health care plan impairments or insolvencies.
30    (Source: P.A. 86-620.)
                            -2-      LRB093 05247 JLS 05334 b
 1        (215 ILCS 125/6-4) (from Ch. 111 1/2, par. 1418.4)
 2        Sec. 6-4.  Construction.  This Article is to be liberally
 3    construed to be for the benefit of the member  organizations'
 4    enrollees  and  to effect the purpose under Section 6-2 which
 5    constitutes an aid and guide to interpretation.
 6    (Source: P.A. 85-20.)

 7        (215 ILCS 125/6-5) (from Ch. 111 1/2, par. 1418.5)
 8        Sec. 6-5.  Definitions.  As used in this Act:
 9        (1)  "Association" means the Illinois Health  Maintenance
10    Organization Guaranty Association created under Section 6-6.
11        (2)  "Director"  means  the Director of Insurance of this
12    State.
13        (3)  "Contractual obligation" means any obligation of the
14    member  organization   under   covered   health   care   plan
15    certificates.
16        (4)  "Covered  person" means any enrollee who is entitled
17    to the protection of the Association as described in  Section
18    6-2.
19        (5)  "Covered  health  care  plan  certificate" means any
20    health care plan certificate, contract or other  evidence  of
21    coverage within the scope of this Article under Section 6-3.
22        (6)  "Fund" means the fund created under Section 6-6.
23        (7)  "Impaired  organization" means a member organization
24    determined deemed by the Director in a written notice to  the
25    Association  after  the  effective date of this Article to be
26    potentially unable to fulfill its contractual obligations and
27    not an insolvent organization.
28        (8)  "Insolvent organization" means a member organization
29    that is found to be which becomes  insolvent  and  is  placed
30    under  a  final  order  of liquidation or rehabilitation by a
31    court of competent jurisdiction.
32        (9)  "Member organization" means any person  licensed  or
33    who  holds  a  certificate  of  authority to transact in this
                            -3-      LRB093 05247 JLS 05334 b
 1    State any kind of business  to  which  this  Article  applies
 2    under  Section  6-3.  For  purposes  of  this Article "member
 3    organization"  includes  any  person  whose  certificate   of
 4    authority  may have been suspended pursuant to Section 5-5 of
 5    this Act.
 6        (10)  "Premiums"   means   direct   gross   premiums   or
 7    subscriptions  received   on   covered   health   care   plan
 8    certificates.
 9        (11)  "Person"  means any individual, corporation, trust,
10    limited   liability   company,   partnership,    association,
11    governmental body or entity, or voluntary organization.
12        (12)  "Resident"  means  any  person  who resides in this
13    State at the time the organization  is  issued  a  Notice  of
14    Impairment  by  the  Director  or at the time a complaint for
15    liquidation  or  rehabilitation  is   filed   and   to   whom
16    contractual  obligations are owed. A person may be a resident
17    of only one state which, in the case of a person other than a
18    natural person, shall be its principal place of business.
19    (Source: P.A. 88-297.)

20        (215 ILCS 125/6-8) (from Ch. 111 1/2, par. 1418.8)
21        Sec. 6-8.  Powers and  duties  of  the  Association.   In
22    addition  to  the  powers  and  duties  enumerated  in  other
23    Sections  of  this  Article,  the  Association shall have the
24    powers set forth in this Section.
25        (1)  If  a   domestic   organization   is   an   impaired
26    organization,  the Association may, subject to any conditions
27    imposed by the Association other than those which impair  the
28    contractual  obligations  of  the  impaired organization, and
29    approved by the impaired organization and the Director:
30             (a)  guarantee  or  reinsure,   or   cause   to   be
31        guaranteed,  assumed  or  reinsured,  any  or  all of the
32        covered health care plan certificates of covered  persons
33        of the impaired organization; and
                            -4-      LRB093 05247 JLS 05334 b
 1             (b)  provide    such    monies,    pledges,   notes,
 2        guarantees, or other means as are  proper  to  effectuate
 3        paragraph  (a),  and  assure  payment  of the contractual
 4        obligations of the impaired organization  pending  action
 5        under paragraph (a).; and
 6             (c)  loan money to the impaired organization.
 7        (2)  If  a domestic, foreign, or alien organization is an
 8    insolvent organization, the Association shall, subject to the
 9    approval of the Director:
10             (a)  guarantee, assume,  indemnify  or  reinsure  or
11        cause to be guaranteed, assumed, indemnified or reinsured
12        the  covered health care plan benefits of covered persons
13        of the insolvent organization; however, in the event that
14        the Director of the  Department  of  Public  Aid  assigns
15        individuals  that  are  recipients  of public aid from an
16        insolvent  organization  to  another  organization,   the
17        Director  of  the  Department of Public Aid shall, before
18        fixing the rates to be paid by the Department  of  Public
19        Aid  to  the  transferee  organization on account of such
20        individuals, consult with the Director of the  Department
21        of  Insurance  as  to the reasonableness of such rates in
22        light of the health care needs of  such  individuals  and
23        the  costs  of  providing  health  care  services to such
24        individuals;
25             (b)  assure payment of the  contractual  obligations
26        of the insolvent organization to covered persons;
27             (c)  make  payments  to providers of health care, or
28        indemnity payments to covered persons, so  as  to  assure
29        the  continued  payment of benefits substantially similar
30        to those provided for  under  covered  health  care  plan
31        certificate  issued  by  the  insolvent  organization  to
32        covered persons; and
33             (d)  provide    such    monies,    pledges,   notes,
34        guaranties, or other means as are reasonably necessary to
                            -5-      LRB093 05247 JLS 05334 b
 1        discharge such duties.
 2        This subsection (2) shall not apply when the Director has
 3    determined  that  the   foreign   or   alien   organization's
 4    domiciliary  jurisdiction  or  state  of  entry  provides, by
 5    statute, protection substantially similar to that provided by
 6    this Article for residents of this State and such  protection
 7    will be provided in a timely manner.
 8        (3)  There  shall  be  no liability on the part of and no
 9    cause of  action  shall  arise  against  the  Association  or
10    against  any  transferee  from  the Association in connection
11    with the transfer by reinsurance or otherwise of all  or  any
12    part  of  an impaired or insolvent organization's business by
13    reason of any action taken or any failure to take any  action
14    by the impaired or insolvent organization at any time.
15        (4)  If  the Association fails to act within a reasonable
16    period of time as provided in subsection (2) of this  Section
17    with  respect  to an insolvent organization, the Director may
18    assume shall have the powers and duties  of  the  Association
19    under   this   Article   with   regard   to   such  insolvent
20    organization.
21        (5)  The Association or  its  designated  representatives
22    may  render  assistance  and advice to the Director, upon his
23    request,  concerning  rehabilitation,  payment   of   claims,
24    continuations  of  coverage,  or  the  performance  of  other
25    contractual   obligations   of   any  impaired  or  insolvent
26    organization.
27        (6)  The Association has standing to appear or  intervene
28    before  any court or agency concerning all matters germane to
29    the powers and duties of the Association, including, but  not
30    limited  to,  proposals  for  reinsuring  or guaranteeing the
31    covered health care plan  certificates  of  the  impaired  or
32    insolvent  organization  and the determination of the covered
33    health care plan certificates and contractual obligations.
34        (7) (a)  Any person receiving benefits under this Article
                            -6-      LRB093 05247 JLS 05334 b
 1    is deemed to have assigned  to  the  Association  the  rights
 2    under  the  covered  health  care  plan certificates, and any
 3    causes of action against any person for losses arising under,
 4    resulting from, or otherwise relating to, the covered  health
 5    care  plan  certificates,  in  each  case  Association to the
 6    extent of the  benefits  received  because  of  this  Article
 7    (whether the benefits are payments of contractual obligations
 8    or continuation of coverage).  The Association may require an
 9    assignment  to  it  of  such rights by any payee, enrollee or
10    beneficiary as a condition precedent to the  receipt  of  any
11    rights  or  benefits  conferred  by  this  Article  upon such
12    person.   The  Association  is  subrogated  to  these  rights
13    against the assets of any insolvent organization and  against
14    any  other party who may be liable to such payee, enrollee or
15    beneficiary.
16        (b)  The subrogation rights of the Association under this
17    subsection have the same priority against the assets  of  the
18    insolvent  organization  as  that  possessed  by  the  person
19    entitled to receive benefits under this Article.
20        (c)  In  addition  to  paragraphs  (a)  and  (b)  of this
21    subsection, the Association shall have all common law  rights
22    of  subrogation  and any other equitable or legal remedy that
23    would have  been  available  to  the  impaired  or  insolvent
24    organization  or  owner  or beneficiary or payee of a covered
25    health care plan certificate  with  respect  to  the  covered
26    health care plan certificate.
27        (d)  If   the  Association  has  provided  benefits  with
28    respect to a covered  health  care  plan  certificate  and  a
29    person  recovers  amounts  as  to  which  the Association has
30    rights as described in paragraphs (a), (b), or  (c)  of  this
31    subsection,  the  person  shall  pay  to  the Association the
32    portion of the recovery attributable to the health care  plan
33    certificate (or portion thereof) covered by the Association.
34        (8) (a)  The  contractual  obligations  of  the insolvent
                            -7-      LRB093 05247 JLS 05334 b
 1    organization for which the Association becomes or may  become
 2    liable  are  as  great as but no greater than the contractual
 3    obligations of the insolvent organization would have been  in
 4    the  absence  of  an  insolvency  unless such obligations are
 5    reduced as permitted  by subsection (3),  but  the  aggregate
 6    liability  of  the Association shall not exceed $300,000 with
 7    respect to any one natural person.
 8        (b)  Furthermore, the Association shall not  be  required
 9    to  pay,  and  shall  have  no  liability to, any provider of
10    health care services to an enrollee:
11             (i)  if such provider, or his or its  affiliates  or
12        members  of  his immediate family, at any time within the
13        one year prior to the date of the issuance of  the  first
14        order,   by   a   court  of  competent  jurisdiction,  of
15        conservation, rehabilitation or liquidation pertaining to
16        the health maintenance organization:
17                  (A)  was a securityholder of such  organization
18             (but  excluding any securityholder holding an equity
19             interest of 5% or less);
20                  (B)  exercised control over the organization by
21             means such as serving as  an  officer  or  director,
22             through  a  management  agreement  or as a principal
23             member member of a not-for-profit organization;
24                  (C)  had a representative serving by virtue  or
25             his  or her official position as a representative of
26             such provider on  the  board  of  any  entity  which
27             exercised control over the organization;
28                  (D)  received  provider  payments  made by such
29             organization pursuant to a contract which was not  a
30             product of arms-length bargaining; or
31                  (E)  received   distributions  other  than  for
32             physician    services    from    a    not-for-profit
33             organization on account of such provider's status as
34             a member of such organization.
                            -8-      LRB093 05247 JLS 05334 b
 1             For purposes of this  subparagraph  (i),  the  terms
 2        "affiliate,"  "person,"  "control"  and  "securityholder"
 3        shall have the meanings ascribed to such terms in Section
 4        131.1 of the Illinois Insurance Code; or
 5             (ii)  if  and  to  the  extent  such  a provider has
 6        agreed by contract not to seek payment from the  enrollee
 7        for  services provided to such enrollee or if, and to the
 8        extent, as a matter of law such  provider  may  not  seek
 9        payment  from  the enrollee for services provided to such
10        enrollee.
11        (c)  Furthermore, the Association shall not  be  required
12    to pay, and shall have no liability for any of the following:
13             (i)  Any  claim  under  a  covered  health care plan
14        certificate to  the  extent  that  the  assessments  with
15        respect to the certificate are prohibited or preempted by
16        federal or State law.
17             (ii)  Any  claim  that  does  not  arise  under  the
18        express  written terms of a health care plan certificate,
19        contract, or other evidence of  coverage  issued  by  the
20        insolvent organization, including without limitation:
21                  (A)  claims based on marketing materials;
22                  (B)  claims  based  on side letters, riders, or
23             other documents that were issued  by  the  insolvent
24             organization  without meeting applicable form filing
25             or approval requirements;
26                  (C)  misrepresentations of or regarding  health
27             care plan benefits;
28                  (D)  bad faith claims; or
29                  (E)  claims  for  penalties or consequential or
30             incidental damages.
31             (iii)  Any claim  that  was  not  submitted  to  the
32        insolvent  organization  prior  to  the date of its final
33        order of liquidation and which is not  submitted  to  the
34        Association  within  one year after the date of the final
                            -9-      LRB093 05247 JLS 05334 b
 1        order of liquidation.
 2             (iv)  Any claim that had been  previously  submitted
 3        to  and denied by the insolvent organization prior to the
 4        date  on  which  the  organization  became  an  insolvent
 5        organization, if not re-submitted to the Association  for
 6        its  review and determination within one year of the date
 7        of the final order of liquidation.
 8             (v)  Any claim for services provided by  a  provider
 9        or  other  person more than one year prior to the date of
10        the final order of liquidation.
11             (vi)  Any claim of any provider to the  extent  that
12        any other provider or person has, under an agreement with
13        the  insolvent organization, agreed to pay, reimburse, or
14        otherwise accept responsibility for the claim.
15             (vii)  Any claim to the extent covered by a  policy,
16        program, contract, or health care plan certificate issued
17        by  an  insurer,  another  organization,  or  employer. A
18        person who has a claim against any such  entity  under  a
19        provision  in  a  policy, contract, or certificate (other
20        than  one   issued   by   the   impaired   or   insolvent
21        organization),  that  also  is  a  contractual obligation
22        under this Article must first  exhaust  his  right  under
23        that  policy,  contract, or certificate. The amount of an
24        approved claim under this Article shall be reduced by the
25        policy  limits  of  or  amount  paid  under  that  policy
26        contract or certificate, whichever amount is greater.  If
27        a  claimant  exhausts his right under a policy, contract,
28        or certificate (other than one issued by the impaired  or
29        insolvent  organization),  the  insurer, organization, or
30        employer issuing that policy, contract, or certificate is
31        not entitled to  sue  or  continue  a  suit  against  the
32        enrollee  of  the  impaired  or insolvent organization to
33        recover an amount paid the claimant  under  that  policy,
34        contract, or certificate.
                            -10-     LRB093 05247 JLS 05334 b
 1        (d) (i)  The Association shall have no obligation under a
 2    covered  health  care plan certificate to convert coverage to
 3    an individual or group HMO contract or to any other  form  of
 4    health  care  coverage  or  to  offer  any  other  conversion
 5    product.
 6             (ii)  In  the  event that the insolvent organization
 7        acted  with   an   insurer   in   the   issuance   of   a
 8        point-of-service  product  offered  by both the insolvent
 9        organization and an insurer  (i.e.,  a  product  offering
10        both   health  care  plan  services  from  the  insolvent
11        organization and indemnity by the insurer for out-of-plan
12        health  care  services),   the   Association   shall   be
13        responsible  only  for  those  covered  health  care plan
14        services obtained from providers at that time employed by
15        or under contract with the insolvent organization or  the
16        Association  (or  providers  to  whom  the  enrollee  was
17        properly  referred  by  such  providers)  and for covered
18        health care plan emergency services.
19        (e) (i) (c)  In  no  event  shall  the   Association   be
20    required  to  pay any provider participating in the insolvent
21    organization any amount for in-plan services rendered by such
22    provider prior to  the  insolvency  of  the  organization  in
23    excess  of  (1)  the amount provided by a capitation or other
24    contract between the a physician provider and  the  insolvent
25    organization  for  such services; or (2) the amounts provided
26    by  contract  between  the  a  hospital  provider   and   the
27    Department  of  Public Aid for similar services to recipients
28    of public aid; or (3) in the event neither (1) nor (2)  above
29    is  applicable, then the amounts paid under the Medicare area
30    prevailing  rate  for  the  area  where  the  services   were
31    provided,  or  if  no  such  rate exists with respect to such
32    services,  then  80%  of  the  usual  and   customary   rates
33    established  by  the Health Insurance Association of America.
34    The payments required to be made  by  the  Association  under
                            -11-     LRB093 05247 JLS 05334 b
 1    this  Section  shall constitute full and complete payment for
 2    such provider services to the enrollee.
 3        (ii)  Any provider  whose  contract  with  the  insolvent
 4    organization  remains  in-force  on  the date of the order of
 5    liquidation (or on the date of the order of  conservation  or
 6    rehabilitation,  if  any  such  order  was  entered) shall be
 7    obliged, at the request of (d) the Association shall  not  be
 8    required  to  pay  more than an aggregate of $300,000 and for
 9    and  on  behalf  of  the   Association,   to   continue   any
10    organization  which  is declared to provide the same services
11    required under the contract for a period after the  order  of
12    liquidation  specified  by  the  Association  (which  may not
13    exceed 4 months after the order of liquidation) with  respect
14    be  insolvent  prior  to  those  July 1, 1987, and such funds
15    shall be distributed first to enrollees that remain from time
16    to time covered who are not public aid recipients pursuant to
17    a plan recommended by the Association  and  approved  by  the
18    Association during such period Director and that are assigned
19    by   the  Association  to  such  provider  the  court  having
20    jurisdiction  over  the  liquidation.  If   the   Association
21    requests  such  services,  the  Association  will be obliged,
22    notwithstanding the  limitations  of  subdivision  (8)(b)  of
23    Section 6-8, to pay for such post-liquidation services during
24    such  period,  on the basis of the payment provisions of such
25    contracts, with respect to the enrollees that are  from  time
26    to  time  covered  by  the Association during such period and
27    assigned to such provider.
28        (f)  The payments required to be made by the  Association
29    under this Section shall constitute full and complete payment
30    for  such  provider  services  to  the enrollee. The enrollee
31    shall have no liability, and the provider may  not  seek  any
32    payment from the enrollee, for or with respect to any amounts
33    not  paid  to  the  provider  on account of the exclusions or
34    limitations  on  the  liability   or   obligations   of   the
                            -12-     LRB093 05247 JLS 05334 b
 1    Association under this Article.
 2        (9)  The Association may:
 3             (a)  Enter  into  such contracts as are necessary or
 4        proper to carry out the provisions and purposes  of  this
 5        Article.
 6             (b)  Sue  or  be  sued,  including  taking any legal
 7        actions necessary or proper for recovery  of  any  unpaid
 8        assessments   under   Section   6-9  and  to  settle  any
 9        litigation, threatened or potential litigation, claims or
10        potential claims by  or  against  the  Association.   The
11        Association shall not be liable for punitive or exemplary
12        damages.
13             (c)  Borrow  money  to  effect  the purposes of this
14        Article.  Any notes or other evidence of indebtedness  of
15        the  Association not in default are legal investments for
16        domestic organizations and may  be  carried  as  admitted
17        assets.
18             (d)  Employ  or retain such persons as are necessary
19        or appropriate to handle the  financial  transactions  of
20        the  Association,  and to perform such other functions as
21        become necessary or proper under this Article.
22             (e)  Negotiate and  contract  with  any  liquidator,
23        rehabilitator,  conservator,  or  ancillary  receiver  to
24        carry out the powers and duties of the Association.
25             (f)  Take  such  legal action as may be necessary or
26        appropriate to  avoid  or  recover  payment  of  improper
27        claims.
28             (g)  Exercise,  for the purposes of this Article and
29        to the extent approved by the Director, the powers  of  a
30        domestic organization, but in no case may the Association
31        issue  evidence  of  coverage  other  than that issued to
32        perform the contractual obligations of  the  impaired  or
33        insolvent organization.
34             (h)  Exercise  all  the rights of the Director under
                            -13-     LRB093 05247 JLS 05334 b
 1        Section  193(4)  of  the  Illinois  Insurance  Code  with
 2        respect to covered health care  plan  certificates  after
 3        the association becomes obligated by statute.
 4             (i)  Request   information  from  a  person  seeking
 5        coverage or provider seeking payment from the Association
 6        in order  to  aid  the  Association  in  determining  its
 7        obligations  under  this  Article. The person or provider
 8        shall promptly comply with the  request  as  a  condition
 9        precedent  to  the  receipt  of  any  rights  or benefits
10        conferred by this Article.
11             (j)  Take other necessary or appropriate  action  to
12        discharge  its  duties and obligations under this Article
13        or to exercise its powers under this Article.
14        (10)  The  obligations  of  the  Association  under  this
15    Article shall not relieve any  reinsurer,  insurer  or  other
16    person  of  its obligations to the insolvent organization (or
17    its  conservator,  rehabilitator,   liquidator   or   similar
18    official)  or its enrollees, including without limitation any
19    reinsurer, insurer or other person liable  to  the  insolvent
20    insurer  (or  its  conservator,  rehabilitator, liquidator or
21    similar official) or its  enrollees  under  any  contract  of
22    reinsurance,  any  contract  providing  stop loss coverage or
23    similar coverage or any health care contract. With respect to
24    covered  health  care  plan  certificates   for   which   the
25    Association  becomes  obligated after an entry of an order of
26    liquidation or rehabilitation, the Association may  elect  to
27    succeed  to  the rights of the insolvent organization arising
28    after the date of the order of liquidation or  rehabilitation
29    under  any  contract  of  reinsurance, any contract providing
30    stop loss coverage or similar coverages or  any  health  care
31    service  contract  to  which the insolvent organization was a
32    party, on the terms set forth under  such  contract,  to  the
33    extent  that  such contract provides coverage for health care
34    services provided after the date of the order of  liquidation
                            -14-     LRB093 05247 JLS 05334 b
 1    or  rehabilitation.   As a condition to making this election,
 2    the Association must pay premiums for  coverage  relating  to
 3    periods  after  the  date  of  the  order  of  liquidation or
 4    rehabilitation.
 5        (11)  The  Association  shall  be  entitled  to   collect
 6    premiums  due  under  or  with respect to covered health care
 7    certificates  for  a  period  from  the  date  on  which  the
 8    domestic, foreign, or alien organization became an  insolvent
 9    organization  until the Association no longer has obligations
10    under subsection (2) of this Section  with  respect  to  such
11    certificates.  The Association's obligations under subsection
12    (2)  of  this Section with respect to any covered health care
13    plan certificates shall terminate in the event that all  such
14    premiums  due  under  or  with respect to such covered health
15    care plan certificates are not paid to  the  Association  (i)
16    within  30 days of the Association's demand therefor, or (ii)
17    in the event that such  certificates  provide  for  a  longer
18    grace   period  for  payment  of  premiums  after  notice  of
19    non-payment or demand therefor, within the lesser of (A)  the
20    period provided for in such certificates or (B) 60 days.
21        (12)  The   Association   may   take   all  necessary  or
22    appropriate action to non-renew any covered health care  plan
23    certificate  on  the  earliest  date after the final order of
24    liquidation on which the certificate may  be  non-renewed  by
25    the  insolvent  organization,  provided  that the Association
26    provides  notice  of  non-renewal  on  or  before  the   date
27    specified  in the certificate (or, if no date is specified in
28    the certificate, at least 90 days prior to the effective date
29    of non-renewal).
30        (13)  The Board of Directors  of  the  Association  shall
31    have discretion and may exercise reasonable business judgment
32    to determine the means by which the Association is to provide
33    the  benefits  of this Article in an economical and efficient
34    manner.
                            -15-     LRB093 05247 JLS 05334 b
 1        (14)  Where the Association has arranged  or  offered  to
 2    provide  the  benefits  of  this  Article to a covered person
 3    under a plan or arrangement that fulfills  the  Association's
 4    obligations  under  this  Article,  the  person  shall not be
 5    entitled to benefits from the Association in addition  to  or
 6    other than those provided under the plan or arrangement.
 7        (15)  Venue  in  a  suit  against the Association arising
 8    under this Article shall be in Cook County.  The  Association
 9    shall  not  be required to give an appeal bond in any case or
10    proceeding that arises from or is based in whole or  in  part
11    on claims or other rights asserted under this Article.
12    (Source: P.A. 90-655, eff. 7-30-98.)

13        (215 ILCS 125/6-9) (from Ch. 111 1/2, par. 1418.9)
14        Sec.   6-9.    Assessments.   (1)   For  the  purpose  of
15    providing the funds necessary to carry  out  the  powers  and
16    duties  of  the  Association,  the  board  of directors shall
17    assess the member organizations, at such times and  for  such
18    amounts  as  the board finds necessary.  Assessments shall be
19    due not less than 30 days after written notice to the  member
20    organizations  and shall accrue interest from the due date at
21    such adjusted rate as is established under Section 531.09  of
22    the  Illinois  Insurance  Code  and  such  interest  shall be
23    compounded daily.
24        (2)  There shall be 2 classes of assessments, as follows:
25        (a)  Class A assessments shall be made for the purpose of
26    meeting administrative costs and other general  expenses  and
27    examinations  conducted  under  the authority of the Director
28    under subsection (5) of Section 6-12.
29        (b)  Class B assessments shall  be  made  to  the  extent
30    necessary   to  carry  out  the  powers  and  duties  of  the
31    Association under Section 6-8 with regard to an  impaired  or
32    insolvent domestic organization or insolvent foreign or alien
33    organizations.
                            -16-     LRB093 05247 JLS 05334 b
 1        (3)  (a) The  amount  of  any Class A assessment shall be
 2    determined by the Board and may be made  on  a  non-pro  rata
 3    basis.
 4        (b)  Class  B  assessments  against  member organizations
 5    shall be in the proportion  that  the  premiums  received  on
 6    health  maintenance  organization  business  in this State by
 7    each assessed member organization on covered health care plan
 8    certificates for the calendar year preceding  the  assessment
 9    bears   to  such  premiums  received  on  health  maintenance
10    organization business in this State  for  the  calendar  year
11    preceding    the    assessment   by   all   assessed   member
12    organizations.
13        (c)  Assessments  to  meet  the   requirements   of   the
14    Association   with   respect  to  an  impaired  or  insolvent
15    organization shall not be made until necessary  to  implement
16    the  purposes of this Article.  Classification of assessments
17    under subsection (2) and computations  of  assessments  under
18    this  subsection  shall  be  made with a reasonable degree of
19    accuracy,  recognizing  that  exact  determinations  may  not
20    always be possible.
21        (4)  (a) The Association may abate or defer, in whole  or
22    in  part,  the assessment of a member organization if, in the
23    opinion  of  the  board,  payment  of  the  assessment  would
24    endanger the ability of the member  organization  to  fulfill
25    its contractual obligations.
26        (b)  The   total   of   all  assessments  upon  a  member
27    organization may not in any one calendar year  exceed  2%  of
28    such   organization's  premiums  in  this  State  during  the
29    calendar year preceding the assessment on the covered  health
30    care plan certificates.
31        (5)  In   the   event  an  assessment  against  a  member
32    organization is abated, or deferred, in  whole  or  in  part,
33    because  of  the  limitations  set forth in subsection (4) of
34    this Section, the amount by which such assessment  is  abated
                            -17-     LRB093 05247 JLS 05334 b
 1    or  deferred,  may  be  assessed  against  the  other  member
 2    organizations  in  a  manner  consistent  with  the basis for
 3    assessments set  forth  in  this  Section.   If  the  maximum
 4    assessment,   together   with   the   other   assets  of  the
 5    Association, does not provide  in  any  one  year  an  amount
 6    sufficient   to   carry   out  the  responsibilities  of  the
 7    Association, the necessary additional funds may  be  assessed
 8    as soon thereafter as permitted by this Article.
 9        (6)  The board may, by an equitable method as established
10    in  the plan of operation, refund to member organizations, in
11    proportion to the  contribution  of  each  organization,  the
12    amount  by which the assets of the fund exceed the amount the
13    board finds is necessary to carry out during the coming  year
14    the obligations of the Association, including assets accruing
15    from  net  realized  gains  and  income  from investments.  A
16    reasonable amount may be retained  in  the  fund  to  provide
17    moneys for the continuing expenses of the Association and for
18    future claims losses if refunds are impractical.
19        (7)  An  assessment  is  deemed to occur on the date upon
20    which the board votes such assessment.  The board  may  defer
21    calling the payment of the assessment or may call for payment
22    in one or more installments.
23        (8)  It   is  proper  for  any  member  organization,  in
24    determining its  rates  to  consider  the  amount  reasonably
25    necessary  to  meet  its  assessment  obligations  under this
26    Article.
27        (9)  The Association  must  issue  to  each  organization
28    paying  a Class B assessment under this Article a certificate
29    of contribution, in a form prescribed by  the  Director,  for
30    the  amount  of  the  assessment  so  paid.   All outstanding
31    certificates  are  of  equal  dignity  and  priority  without
32    reference to amounts or dates of  issue.   A  certificate  of
33    contribution   may  be  shown  by  the  organization  in  its
34    financial statement as an admitted asset in such form and for
                            -18-     LRB093 05247 JLS 05334 b
 1    such amount, if any, and period of time as the  Director  may
 2    approve,  provided the organization shall in any event at its
 3    option have the right to show a certificate  of  contribution
 4    as  an  asset  at percentages of the original face amount for
 5    calendar years as follows:
 6        100% for the calendar year after the year of issuance;
 7        80% for the  second  calendar  year  after  the  year  of
 8    issuance;
 9        60%  for  the  third  calendar  year  after  the  year of
10    issuance;
11        40% for the  fourth  calendar  year  after  the  year  of
12    issuance;
13        20%  for  the  fifth  calendar  year  after  the  year of
14    issuance.
15    (Source: P.A. 85-20.)

16        (215 ILCS 125/6-10) (from Ch. 111 1/2, par. 1418.10)
17        Sec. 6-10.  Plan of Operation.  (1) (a)  The  Association
18    must  submit  to  the  Director  a  plan of operation and any
19    amendments thereto necessary or suitable to assure the  fair,
20    reasonable,  and equitable administration of the Association.
21    The plan of  operation  and  any  amendments  thereto  become
22    effective upon approval in writing by the Director.
23        (b)  If  the  Association fails to submit a suitable plan
24    of operation within 90 days following the effective  date  of
25    this  Article  or  if  at any time thereafter the Association
26    fails to submit suitable amendments to the plan, the Director
27    may, after notice and  hearing,  adopt  and  promulgate  such
28    reasonable  rules as are necessary or advisable to effectuate
29    the provisions of this Article. Such rules are in force until
30    modified by the Director or superseded by a plan submitted by
31    the Association and approved by the Director.
32        (2)  All member organizations must comply with  the  plan
33    of operation.
                            -19-     LRB093 05247 JLS 05334 b
 1        (3)  The   plan   of   operation  must,  in  addition  to
 2    requirements enumerated elsewhere in this Article:
 3        (a)  Establish procedures for handling the assets of  the
 4    Association;
 5        (b)  Establish  the  amount  and  method  of  reimbursing
 6    members of the board of directors under Section 6-7;
 7        (c)  Establish  regular  places  and  times  for meetings
 8    including  telephone  conference  calls  of  the   board   of
 9    directors;
10        (d)  Establish  procedures  for records to be kept of all
11    financial transactions of the Association,  its  agents,  and
12    the board of directors;
13        (e)  Establish  the procedures whereby selections for the
14    board  of  directors  will  be  made  and  submitted  to  the
15    Director;
16        (f)  Establish any additional procedures for  assessments
17    under Section 6-9; and
18        (g)  Contain  additional  provisions  necessary or proper
19    for  the  execution  of  the  powers  and   duties   of   the
20    Association.
21        (4)  The  plan  of  operation shall establish a procedure
22    for protest by any member organization of assessments made by
23    the Association pursuant to  Section  6-9.   Such  procedures
24    shall require that:
25        (a)  Any  member  organization that wishes to protest all
26    or any part of an assessment for any year shall first pay the
27    full amount of the assessment as  set  forth  in  the  notice
28    provided  by  the  Association;  provided,  however, that the
29    Association and the protesting member HMO may agree that  (A)
30    the member HMO need pay, at the time of the protest, only the
31    portion of the entire assessment that is under protest by the
32    member  HMO,  (B)  the  member HMO waives any further protest
33    with respect to the assessment, and (C) the member  HMO  must
34    pay  any  balance  of the assessment not under protest at the
                            -20-     LRB093 05247 JLS 05334 b
 1    time or times specified by the  Association  for  payment  of
 2    non-protested  amounts.  Any such payments shall be available
 3    and may be used to meet Association  obligations  during  the
 4    pendency  of  the  protest  and  any  subsequent appeal. Such
 5    payments shall be accompanied by a statement in writing  that
 6    the  payment  is  made  under  protest, setting forth a brief
 7    statement of the ground for  the  protest.   The  Association
 8    shall  hold  such  payments  in  a  separate interest bearing
 9    account.
10        (b)  Within  30  days  following  the   payment   of   an
11    assessment   under   protest   by   any   protesting   member
12    organization,   the   Association   must  notify  the  member
13    organization in writing of its determination with respect  to
14    the  protest  unless the Association notifies the member that
15    additional time is required to resolve the issues  raised  by
16    the protest.
17        (c)  In  the  event  the  Association determines that the
18    protesting member organization is entitled to a refund,  such
19    refund  shall  be made within 30 days following the date upon
20    which the Association makes its determination.
21        (d)  The decision of the Association with  respect  to  a
22    protest   may   be  appealed  to  the  Director  pursuant  to
23    subsection (3) of Section 6-11.
24        (e)  In the alternative  to  rendering  a  decision  with
25    respect  to  any  protest  based  on a question regarding the
26    assessment base, the Association may refer such  protests  to
27    the   Director   for   final  decision,  with  or  without  a
28    recommendation from the Association.
29        (f)  Interest on  any  refund  due  a  protesting  member
30    organization  shall  be  paid at a rate equal to the Treasury
31    bill rate in effect from time to time during the time at  the
32    rate  actually  earned by the Association held on the amounts
33    under protest separate account.
34        (5)  The plan of operation may provide that  any  or  all
                            -21-     LRB093 05247 JLS 05334 b
 1    powers  and  duties  of  the  Association, except those under
 2    paragraph (c) of subsection (10) of Section 6-8  and  Section
 3    6-9  are  delegated  to  a corporation, association  or other
 4    organization which performs or will perform functions similar
 5    to those of this Association, or its equivalent, in 2 or more
 6    states.  Such  a  corporation,  association  or  organization
 7    shall  be  reimbursed  for any payments made on behalf of the
 8    Association and shall be paid  for  its  performance  of  any
 9    function   of  the  Association.   A  delegation  under  this
10    subsection shall take effect only with the approval  of  both
11    the Board of Directors and the Director, and may be made only
12    to  a  corporation, association or organization which extends
13    protection not substantially  less  favorable  and  effective
14    than that provided by this Article.
15    (Source: P.A. 85-20.)

16        (215 ILCS 125/6-11) (from Ch. 111 1/2, par. 1418.11)
17        Sec.  6-11.   Duties  and  Powers  of  the  Director.  In
18    addition to the duties and  powers  enumerated  elsewhere  in
19    this Article, the Director shall have the powers set forth in
20    this Section.
21        (1)  The Director must:
22             (a)  Upon request of the board of directors, provide
23        the  Association  with a statement of the premiums in the
24        appropriate states for each member organization.
25             (b)  Notify the board of directors of the  existence
26        of an impaired or insolvent organization not later than 3
27        days after a determination of impairment or insolvency is
28        made  or  when the Director receives notice of impairment
29        or insolvency.
30             (c)  Give notice  to  an  impaired  organization  as
31        required  by  Section  2-4  of  this  Act.  Notice to the
32        impaired organization  shall  constitute  notice  to  its
33        shareholders, if any.
                            -22-     LRB093 05247 JLS 05334 b
 1             (d)  In any liquidation or rehabilitation proceeding
 2        involving  a  domestic  organization, be appointed as the
 3        liquidator or  rehabilitator.   If  a  foreign  or  alien
 4        member   organization   is   subject   to  a  liquidation
 5        proceeding in its domiciliary jurisdiction  or  state  of
 6        entry, the Director may be appointed conservator.
 7        (2)  The Director may suspend or revoke, after notice and
 8    hearing, the certificate of authority to transact business in
 9    this  State  of any member organization which fails to pay an
10    assessment when due or fails  to  comply  with  the  plan  of
11    operation.   As  an  alternative  the  Director  may  levy  a
12    forfeiture  on  any member organization which fails to pay an
13    assessment when due.  Such forfeiture may not  exceed  5%  of
14    the  unpaid  assessment  per  month, but no forfeiture may be
15    less than $100 per month.
16        (3)  Any  final  decision  or  action  of  the  board  of
17    directors or the Association may be appealed to the  Director
18    by  any  member  organization  or  any other person adversely
19    affected by such action if such appeal  is  taken  within  30
20    days of the action being appealed.  Any final action or order
21    of  the  Director is subject to judicial review in a court of
22    competent jurisdiction.  An action or order of  the  Director
23    may  be  final  and  subject  to  judicial review even if the
24    aggrieved  party  seeking  judicial  review  has  not  sought
25    reconsideration or rehearing by the Director.
26        (4)  The liquidator, rehabilitator, or conservator of any
27    impaired organization may notify all  interested  persons  of
28    the effect of this Article.
29        (5)  The  Director  shall require any member organization
30    whose RBC level (as determined pursuant to Article IIA of the
31    Illinois Insurance Code) is  less  than  its  company  action
32    level  RBC  (as  determined  pursuant  to  Article IIA of the
33    Illinois Insurance Code) to maintain current information,  on
34    a readily accessible basis, relating to its members, members'
                            -23-     LRB093 05247 JLS 05334 b
 1    premium   payments,   benefits  to  members,  providers,  and
 2    payments to providers.
 3        (6)  The  Director  shall  share  with  the   Association
 4    information   in   his   possession   respecting  any  member
 5    organization if and when either (a) such organization becomes
 6    an impaired  organization  under  this  Article  or  (b)  the
 7    Director    initiates    conservation,   rehabilitation,   or
 8    liquidation proceedings with respect to such organization.
 9    (Source: P.A. 86-620.)

10        (215 ILCS 125/6-12) (from Ch. 111 1/2, par. 1418.12)
11        Sec. 6-12.  Prevention of Insolvencies.  To  aid  in  the
12    detection  and  prevention  of  organization  insolvencies or
13    impairments:
14        (1)  It shall be the duty of the Director:
15        (a)  To notify the appropriate  regulatory  authority  of
16    all  other  states, territories of the United States, and the
17    District of Columbia when  he  takes  any  of  the  following
18    actions against a member organization:
19        (i)  revocation of license;
20        (ii)  suspension of license;
21        (iii)  makes any formal order, except for an order issued
22    pursuant  to  Article XII 1/2 of the Illinois Insurance Code,
23    that  such  company  restrict   its   subscriptions,   obtain
24    additional contributions to surplus, withdraw from the State,
25    reinsure  all  or  any  part  of  its  business,  or increase
26    capital, surplus or any other account  for  the  security  of
27    enrollees or creditors.
28        Such  notice  shall  be  transmitted  to  all  regulatory
29    authorities  within 30 days following the action taken or the
30    date on which the action occurs.
31        (b)  To report to the board  of  directors  when  he  has
32    taken  any  of  the  actions set forth in subparagraph (a) of
33    this paragraph or  has  received  a  report  from  any  other
                            -24-     LRB093 05247 JLS 05334 b
 1    regulatory authority indicating that any such action has been
 2    taken  in  another  state.   Such  report  to  the  board  of
 3    directors shall contain all significant details of the action
 4    taken   or   the  report  received  from  another  regulatory
 5    authority.
 6        (2)  The Director may seek the advice and recommendations
 7    of the board of directors concerning any matter affecting his
 8    duties and responsibilities regarding the financial condition
 9    of member organizations and organizations  seeking  admission
10    to transact business in this State.
11        (3)  The board of directors may, upon majority vote, make
12    reports  and  recommendations to the Director upon any matter
13    germane to the liquidation, rehabilitation or conservation of
14    any member organization.  Such  reports  and  recommendations
15    shall not be considered public documents.
16        (4)  The board of directors may, upon majority vote, make
17    recommendations   to  the  Director  for  the  detection  and
18    prevention of health maintenance organization insolvencies.
19        (5)  The board of directors may shall, at the  conclusion
20    of  any  health  maintenance organization insolvency in which
21    the Association was obligated to  make  payments,  prepare  a
22    report  to the Director containing such information as it may
23    have in its possession bearing on the history and  causes  of
24    such  insolvency.   The board shall cooperate with the boards
25    of directors of guaranty  associations  in  other  states  in
26    preparing  a  report on the history and causes for insolvency
27    of a particular organization, and may adopt by reference  any
28    report prepared by such other associations.
29    (Source: P.A. 86-620.)

30        (215 ILCS 125/6-14) (from Ch. 111 1/2, par. 1418.14)
31        Sec. 6-14.  Miscellaneous Provisions. (1) Records must be
32    kept  of  all  negotiations  and  meetings  of  the  Board of
33    Directors in which the Association or its representatives are
                            -25-     LRB093 05247 JLS 05334 b
 1    involved to discuss the  activities  of  the  Association  in
 2    carrying  out  its  powers  and  duties  under  Section  6-8.
 3    Records  of  the Association with respect to an impaired such
 4    negotiations or insolvent organization meetings may  be  made
 5    public  only (a) upon the order of the Director or a court of
 6    competent jurisdiction or upon a determination by  the  Board
 7    of  Directors  of the Association and (b) during the pendency
 8    termination of a liquidation, rehabilitation, or conservation
 9    proceeding involving the impaired or insolvent  organization,
10    upon  the  termination of the impairment or insolvency of the
11    organization, or  upon  the  order  of  a  court  showing  of
12    compelling  competent circumstances jurisdiction.  Nothing in
13    this subsection (1) limits the duty  of  the  Association  to
14    submit a report of its activities under Section 6-15.
15        (2)  For  the  purpose  of  carrying  out its obligations
16    under this  Article,  the  Association  is  deemed  to  be  a
17    creditor  of  the  impaired  or insolvent organization to the
18    extent of assets attributable to  covered  health  care  plan
19    certificates  reduced by any amounts to which the Association
20    is entitled as subrogee  (under  subsection  (7)  of  Section
21    6-8).  All  assets  of the impaired or insolvent organization
22    attributable to covered health care plan certificates must be
23    used to continue all covered health  care  plan  certificates
24    and   pay   all   contractual  obligations  of  the  impaired
25    organization   as   required   by   this   Article.   "Assets
26    attributable to covered health care  plan  certificates",  as
27    used in this subsection (2), is that proportion of the assets
28    which the reserves that should have been established for such
29    health care plan certificates bear to the reserve that should
30    have  been  established for all health care plan certificates
31    of the impaired or insolvent organization.
32        (3) (a)  Prior to the  termination  of  any  liquidation,
33    rehabilitation,  or  conservation  proceeding,  the court may
34    take into consideration the contributions of  the  respective
                            -26-     LRB093 05247 JLS 05334 b
 1    parties,  including  the Association, the shareholders of the
 2    impaired or insolvent organization, and any other party  with
 3    a  bona fide interest, in making an equitable distribution of
 4    the  ownership  rights  of   such   impaired   or   insolvent
 5    organization.  In such a determination, consideration must be
 6    given  to  the  welfare of the enrollees of the continuing or
 7    successor organization.
 8        (b)  No distribution  to  stockholders,  if  any,  of  an
 9    impaired  or  insolvent  organization  may  be made until and
10    unless the total amount of valid claims  of  the  Association
11    for  funds  expended  in  carrying  out its powers and duties
12    under Section 6-8, with respect  to  such  organization  have
13    been fully recovered by the Association.
14        (4) (a)  If an order for liquidation or rehabilitation of
15    an organization domiciled in this State has been entered, the
16    receiver appointed under such order has a right to recover on
17    behalf   of   the   organization,  from  any  affiliate  that
18    controlled it, the amount of distributions, other than  stock
19    dividends paid by the organization on its capital stock, made
20    at  any  time  during  the 5 years preceding the petition for
21    liquidation or rehabilitation subject to the  limitations  of
22    paragraphs (b) to (d).
23        (b)  No   such   distribution   is   recoverable  if  the
24    organization shows that when paid the distribution was lawful
25    and reasonable, and that the organization did  not  know  and
26    could  not  reasonably have known that the distribution might
27    adversely affect the ability of the organization  to  fulfill
28    its contractual obligations.
29        (c)  Any  person who was an affiliate that controlled the
30    organization at the  time  the  distributions  were  paid  is
31    liable  up  to  the amount of distributions he received.  Any
32    person who was an affiliate that controlled the  organization
33    at  the time the distributions were declared, is liable up to
34    the amount of distributions he would have  received  if  they
                            -27-     LRB093 05247 JLS 05334 b
 1    had  been  paid  immediately.   If  2 persons are liable with
 2    respect to the  same  distributions,  they  are  jointly  and
 3    severally liable.
 4        (d)  The  maximum amount recoverable under subsection (4)
 5    of this Section is the amount needed in excess of  all  other
 6    available  assets  of  the  insolvent organization to pay the
 7    contractual obligations of the insolvent organization.
 8        (e)  If  any  person  liable  under  paragraph   (c)   of
 9    subsection   (4)  of  this  Section  is  insolvent,  all  its
10    affiliates that controlled it at the  time  the  distribution
11    was  paid  are jointly and severally liable for any resulting
12    deficiency  in  the  amount  recovered  from  the   insolvent
13    affiliate.
14        (5)  No member organization may voluntarily withdraw from
15    this  State or liquidate its property, business, and affairs,
16    and no such voluntary  withdrawal  or  voluntary  liquidation
17    shall  be  effective, until such member organization has paid
18    all authorized assessments, whether called or  uncalled,  for
19    which it is liable under this Article.
20    (Source: P.A. 86-620.)

21        (215 ILCS 125/6-17) (from Ch. 111 1/2, par. 1418.17)
22        Sec.  6-17.  Immunity.  There is no liability on the part
23    of and no cause of action of any nature may arise against any
24    member  organization  or  its  agents   or   employees,   the
25    Association  or its agents or employees, members of the board
26    of directors, or the Director or his representatives, for any
27    action or omission taken by them in the performance of  their
28    powers and duties under this Article. Without limitation, the
29    Association  shall be immune from any claim that any omission
30    of the Association or any action of  the  Association,  taken
31    separately  or  in concert with the Director in any of his or
32    her capacities, has caused loss or any other  injury  to  any
33    impaired organization or any insolvent organization.
                            -28-     LRB093 05247 JLS 05334 b
 1    (Source: P.A. 85-20.)