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


Sen. William R. Haine

Filed: 1/5/2011





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2    AMENDMENT NO. ______. Amend House Bill 5018 by replacing
3everything after the enacting clause with the following:
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



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



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1    individuals and the costs of providing health care services
2    to such individuals;
3        (b) assure payment of the contractual obligations of
4    the insolvent organization to covered persons;
5        (c) make payments to providers of health care, or
6    indemnity payments to covered persons, so as to assure the
7    continued payment of benefits substantially similar to
8    those provided for under covered health care plan
9    certificate issued by the insolvent organization to
10    covered persons; and
11        (d) provide such monies, pledges, notes, guaranties,
12    or other means as are reasonably necessary to discharge
13    such duties.
14    This subsection (2) shall not apply when the Director has
15determined that the foreign or alien organization's
16domiciliary jurisdiction or state of entry provides, by
17statute, protection substantially similar to that provided by
18this Article for residents of this State and such protection
19will be provided in a timely manner.
20    (3) There shall be no liability on the part of and no cause
21of action shall arise against the Association or against any
22transferee from the Association in connection with the transfer
23by reinsurance or otherwise of all or any part of an impaired
24or insolvent organization's business by reason of any action
25taken or any failure to take any action by the impaired or
26insolvent organization at any time.



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1    (4) If the Association fails to act within a reasonable
2period of time as provided in subsection (2) of this Section
3with respect to an insolvent organization, the Director shall
4have the powers and duties of the Association under this
5Article with regard to such insolvent organization.
6    (5) The Association or its designated representatives may
7render assistance and advice to the Director, upon his request,
8concerning rehabilitation, payment of claims, continuations of
9coverage, or the performance of other contractual obligations
10of any impaired or insolvent organization.
11    (6) The Association has standing to appear before any court
12concerning all matters germane to the powers and duties of the
13Association, including, but not limited to, proposals for
14reinsuring or guaranteeing the covered health care plan
15certificates of the impaired or insolvent organization and the
16determination of the covered health care plan certificates and
17contractual obligations.
18    (7) (a) Any person receiving benefits under this Article is
19deemed to have assigned the rights under the covered health
20care plan certificates to the Association to the extent of the
21benefits received because of this Article whether the benefits
22are payments of contractual obligations or continuation of
23coverage. The Association may require an assignment to it of
24such rights by any payee, enrollee or beneficiary as a
25condition precedent to the receipt of any rights or benefits
26conferred by this Article upon such person. The Association is



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1subrogated to these rights against the assets of any insolvent
2organization and against any other party who may be liable to
3such payee, enrollee or beneficiary.
4    (b) The subrogation rights of the Association under this
5subsection have the same priority against the assets of the
6insolvent organization as that possessed by the person entitled
7to receive benefits under this Article.
8    (8) (a) The contractual obligations of the insolvent
9organization for which the Association becomes or may become
10liable are as great as but no greater than the contractual
11obligations of the insolvent organization would have been in
12the absence of an insolvency unless such obligations are
13reduced as permitted by subsection (3), but the aggregate
14liability of the Association shall not exceed $500,000 $300,000
15with respect to any one natural person.
16    (b) Furthermore, the Association shall not be required to
17pay, and shall have no liability to, any provider of health
18care services to an enrollee:
19        (i) if such provider, or his or its affiliates or
20    members of his immediate family, at any time within the one
21    year prior to the date of the issuance of the first order,
22    by a court of competent jurisdiction, of conservation,
23    rehabilitation or liquidation pertaining to the health
24    maintenance organization:
25            (A) was a securityholder of such organization (but
26        excluding any securityholder holding an equity



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1        interest of 5% or less);
2            (B) exercised control over the organization by
3        means such as serving as an officer or director,
4        through a management agreement or as a principal member
5        of a not-for-profit organization;
6            (C) had a representative serving by virtue of or
7        his or her official position as a representative of
8        such provider on the board of any entity which
9        exercised control over the organization;
10            (D) received provider payments made by such
11        organization pursuant to a contract which was not a
12        product of arms-length bargaining; or
13            (E) received distributions other than for
14        physician services from a not-for-profit organization
15        on account of such provider's status as a member of
16        such organization.
17        For purposes of this subparagraph (i), the terms
18    "affiliate," "person," "control" and "securityholder"
19    shall have the meanings ascribed to such terms in Section
20    131.1 of the Illinois Insurance Code; or
21        (ii) if and to the extent such a provider has agreed by
22    contract not to seek payment from the enrollee for services
23    provided to such enrollee or if, and to the extent, as a
24    matter of law such provider may not seek payment from the
25    enrollee for services provided to such enrollee; or .
26        (iii) related to any policy, contract, or certificate



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1    providing any hospital, medical, prescription drug, or
2    other health care benefits pursuant to Part C or Part D of
3    Subchapter XVIII, Chapter 7 of Title 42 of the United
4    States Code (commonly known as Medicare Part C & D) or any
5    regulations issued pursuant thereto; or
6        (iv) for any portion of a policy, contract, or
7    certificate to the extent that the assessments required by
8    this Article with respect to the policy or contract are
9    preempted or otherwise not permitted by federal or State
10    law; or
11        (v) for any obligation that does not arise under the
12    express written terms of the policy or contract issued by
13    the organization to the contract owner or policy owner,
14    including without limitation:
15            (A) claims based on marketing materials;
16            (B) claims based on side letters, riders, or other
17        documents that were issued by the insurer without
18        meeting applicable policy form filing or approval
19        requirements;
20            (C) misrepresentations of or regarding policy
21        benefits;
22            (D) extra-contractual claims; or
23            (E) claims for penalties or consequential or
24        incidental damages.
25    (c) In no event shall the Association be required to pay
26any provider participating in the insolvent organization any



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1amount for in-plan services rendered by such provider prior to
2the insolvency of the organization in excess of (1) the amount
3provided by a capitation contract between a physician provider
4and the insolvent organization for such services; or (2) the
5amounts provided by contract between a hospital provider and
6the Department of Healthcare and Family Services (formerly
7Department of Public Aid) for similar services to recipients of
8public aid; or (3) in the event neither (1) nor (2) above is
9applicable, then the amounts paid under the Medicare area
10prevailing rate for the area where the services were provided,
11or if no such rate exists with respect to such services, then
1280% of the usual and customary rates established by the Health
13Insurance Association of America. The payments required to be
14made by the Association under this Section shall constitute
15full and complete payment for such provider services to the
17    (d) The Association shall not be required to pay more than
18an aggregate of $300,000 for any organization which is declared
19to be insolvent prior to July 1, 1987, and such funds shall be
20distributed first to enrollees who are not public aid
21recipients pursuant to a plan recommended by the Association
22and approved by the Director and the court having jurisdiction
23over the liquidation.
24    (9) The Association may:
25        (a) Enter into such contracts as are necessary or
26    proper to carry out the provisions and purposes of this



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1    Article.
2        (b) Sue or be sued, including taking any legal actions
3    necessary or proper for recovery of any unpaid assessments
4    under Section 6-9. The Association shall not be liable for
5    punitive or exemplary damages.
6        (c) Borrow money to effect the purposes of this
7    Article. Any notes or other evidence of indebtedness of the
8    Association not in default are legal investments for
9    domestic organizations and may be carried as admitted
10    assets.
11        (d) Employ or retain such persons as are necessary to
12    handle the financial transactions of the Association, and
13    to perform such other functions as become necessary or
14    proper under this Article.
15        (e) Negotiate and contract with any liquidator,
16    rehabilitator, conservator, or ancillary receiver to carry
17    out the powers and duties of the Association.
18        (f) Take such legal action as may be necessary to avoid
19    payment of improper claims.
20        (g) Exercise, for the purposes of this Article and to
21    the extent approved by the Director, the powers of a
22    domestic organization, but in no case may the Association
23    issue evidence of coverage other than that issued to
24    perform the contractual obligations of the impaired or
25    insolvent organization.
26        (h) Exercise all the rights of the Director under



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1    Section 193(4) of the Illinois Insurance Code with respect
2    to covered health care plan certificates after the
3    association becomes obligated by statute.
4        (i) Request information from a person seeking coverage
5    from the Association in order to aid the Association in
6    determining its obligations under this Article with
7    respect to the person and the person shall promptly comply
8    with the request.
9        (j) Take other necessary or appropriate action to
10    discharge its duties and obligations under this Article or
11    to exercise its powers under this Article.
12    (10) The obligations of the Association under this Article
13shall not relieve any reinsurer, insurer or other person of its
14obligations to the insolvent organization (or its conservator,
15rehabilitator, liquidator or similar official) or its
16enrollees, including without limitation any reinsurer, insurer
17or other person liable to the insolvent insurer (or its
18conservator, rehabilitator, liquidator or similar official) or
19its enrollees under any contract of reinsurance, any contract
20providing stop loss coverage or similar coverage or any health
21care contract. With respect to covered health care plan
22certificates for which the Association becomes obligated after
23an entry of an order of liquidation or rehabilitation, the
24Association may elect to succeed to the rights of the insolvent
25organization arising after the date of the order of liquidation
26or rehabilitation under any contract of reinsurance, any



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1contract providing stop loss coverage or similar coverages or
2any health care service contract to which the insolvent
3organization was a party, on the terms set forth under such
4contract, to the extent that such contract provides coverage
5for health care services provided after the date of the order
6of liquidation or rehabilitation. As a condition to making this
7election, the Association must pay premiums for coverage
8relating to periods after the date of the order of liquidation
9or rehabilitation.
10    (11) The Association shall be entitled to collect premiums
11due under or with respect to covered health care certificates
12for a period from the date on which the domestic, foreign, or
13alien organization became an insolvent organization until the
14Association no longer has obligations under subsection (2) of
15this Section with respect to such certificates. The
16Association's obligations under subsection (2) of this Section
17with respect to any covered health care plan certificates shall
18terminate in the event that all such premiums due under or with
19respect to such covered health care plan certificates are not
20paid to the Association (i) within 30 days of the Association's
21demand therefor, or (ii) in the event that such certificates
22provide for a longer grace period for payment of premiums after
23notice of non-payment or demand therefor, within the lesser of
24(A) the period provided for in such certificates or (B) 60
26    (12) The Board of Directors of the Association shall have



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1discretion and may exercise reasonable business judgment to
2determine the means by which the Association is to provide the
3benefits of this Article in an economical and efficient manner.
4    (13) Where the Association has arranged or offered to
5provide the benefits of this Article to a covered person under
6a plan or arrangement that fulfills the Association's
7obligations under this Article, the person shall not be
8entitled to benefits from the Association in addition to or
9other than those provided under the plan or arrangement.
10    (14) Venue in a suit against the Association arising under
11the Article shall be in Cook County. The Association shall not
12be required to give any appeal bond in an appeal that relates
13to a cause of action arising under this Article.
14(Source: P.A. 95-331, eff. 8-21-07; 96-1450, eff. 8-20-10;
15revised 9-16-10.)
16    Section 99. Effective date. This Act takes effect upon
17becoming law.".