State of Illinois
90th General Assembly
Legislation

   [ Search ]   [ Legislation ]   [ Bill Summary ]
[ Home ]   [ Back ]   [ Bottom ]


[ House Amendment 001 ]

90_HB3229

      215 ILCS 5/409            from Ch. 73, par. 1021
      215 ILCS 5/444            from Ch. 73, par. 1056
      215 ILCS 5/444.1          from Ch. 73, par. 1056.1
      215 ILCS 5/531.13         from Ch. 73, par. 1065.80-13
      215 ILCS 5/408.1 rep.
      215 ILCS 110/43           from Ch. 32, par. 690.43
      215 ILCS 120/15           from Ch. 73, par. 1265
      215 ILCS 125/5-3          from Ch. 111 1/2, par. 1411.2
      215 ILCS 130/4003         from Ch. 73, par. 1504-3
          Amends  the  Illinois  Insurance  Code.   Imposes  as  of
      January 1, 1998 a  privilege tax  on  any  insurance  company
      doing  any  form of business, other than accident and health,
      in this State of 0.5% of the company's  net  taxable  premium
      written.   Imposes  as  of  July  1,  1998 a privilege tax on
      health insurance business at the rate of 0.4% of net  taxable
      premium  written.   Amends various other insurance regulatory
      Acts to provide that the privilege taxes  are  applicable  to
      insurers organized under those Acts. Effective immediately.
                                                    LRB9011168JSgcA
                                              LRB9011168JSgcA
 1        AN  ACT  concerning  insurance  company  privilege taxes,
 2    amending named Acts.
 3        Be it enacted by the People of  the  State  of  Illinois,
 4    represented in the General Assembly:
 5        Section  5.  The  Illinois  Insurance  Code is amended by
 6    changing Sections 409, 444, 444.1, and 531.13 as follows:
 7        (215 ILCS 5/409) (from Ch. 73, par. 1021)
 8        Sec. 409.  Annual privilege tax  payable  by  foreign  or
 9    alien companies.
10        (1)  As   of   July  1,  1998  every  health  maintenance
11    organization and limited health service organization  and  as
12    of January 1, 1998 every other foreign or alien company doing
13    any  form  of an insurance business in this State, including,
14    but not limited to, risk retention groups, and excluding  all
15    except   fraternal  benefit  societies  and  residual  market
16    entities whether incorporated or otherwise,  shall  pay,  for
17    the  privilege of doing business in this State, by renewal of
18    certificate of authority as provided in Section 114,  pay  to
19    the  Director for deposit into the State treasury a State tax
20    equal to 0.5% 2 per cent of the net taxable  premium  written
21    income,  together  with  any  amounts  due under Section 444,
22    except that the tax to be paid on any  premium  derived  from
23    accident  and   health  indemnity  insurance  or on insurance
24    business  written  by  any  company  operating  as  a  health
25    maintenance  organization,  voluntary  health  service  plan,
26    dental service plan, or limited health service   organization
27    shall  be  equal  to  0.4% of the net taxable premium written
28    together with  any  amounts  due  under  Section  444.  Every
29    domestic   insurance  company,  except  a  fraternal  benefit
30    society, which fails to comply with all the  requirements  of
31    subsection  (4)  of this Section must pay to the Director for
                            -2-               LRB9011168JSgcA
 1    payment into the State Treasury a State tax equal  to  2  per
 2    cent  of  the net taxable premium income and Upon the failure
 3    of any company to pay any such tax  when  due,  the  Director
 4    may, by order, revoke or suspend the company's certificate of
 5    authority  after giving 20 days written notice to the company
 6    or commence proceedings for the  suspension  of  business  in
 7    this State under the procedures set forth by Section 401.1 of
 8    this Code.  The gross taxable premium written income shall be
 9    the  gross  amount  of  premiums  received on direct business
10    during the preceding  calendar  year  on  contracts  covering
11    risks  in  this State, except premiums on annuities, premiums
12    on Medicare Part C coverage written by a certified Medicare +
13    Choice organization within the meaning of Sections  1853  and
14    1854  of  the federal Balanced Budget Act of 1997, Public Law
15    105-33, premiums paid by the State for health  care  coverage
16    for  Medicaid eligible insureds as described in Section 5-1.2
17    of the Illinois Public Aid Code, premiums on  crop  insurance
18    guaranteed  by the federal government as provided by 7 U.S.C.
19    Section 1511, premiums on group accident and health insurance
20    written to cover only federal employees and their dependents,
21    and except premiums  on  group  insurance  contracts  awarded
22    after the effective date of this amendatory Act of 1976 under
23    the  State  Employees Group Insurance Act of 1971, and except
24    premiums for deferred compensation plans for employees of the
25    State, units of local government or  school  districts.   The
26    net taxable premium written income shall be the gross taxable
27    premium written income reduced only by the following:
28             (a)  the  amount  of premiums returned thereon which
29        shall  be  limited  to  premiums  returned   during   the
30        preceding  calendar year and shall not include the return
31        of cash  surrender  values  or  death  benefits  on  life
32        policies;
33             (b)  dividends  on  such  direct  business that have
34        been paid in cash, applied in reduction  of  premiums  or
                            -3-               LRB9011168JSgcA
 1        left  to  accumulate  to  the  credit of policyholders or
 2        annuitants.  In the case of life insurance, no  deduction
 3        shall  be made for the payment of deferred dividends paid
 4        in cash to policyholders on maturing policies;  dividends
 5        left  to  accumulate  to  the  credit of policyholders or
 6        annuitants shall be included  as  gross  taxable  premium
 7        written  income  when  such  dividend  accumulations  are
 8        applied  to  purchase paid-up insurance or to shorten the
 9        endowment or premium paying period.
10        (2)  The annual privilege tax payment due from a  company
11    under  subsection (4) of this Section shall be reduced by the
12    excess amount, if any, by which the  aggregate  income  taxes
13    paid  by the company during the preceding calendar year under
14    subsections (a), (b), and (c) of Section 201 of the  Illinois
15    Income  Tax  Act  exceed  1.5%  of  the company's net taxable
16    premium written for that prior calendar year,  as  determined
17    under  subsection  (1)  of  this Section.  No refund, credit,
18    carry forward, deduction, or other offset shall be  permitted
19    for  the  amount,  if  any,  by  which  the  excess amount so
20    determined exceeds the company's liability for the  privilege
21    tax determined solely under subsection (1).
22        (2)  There  shall be deducted from the tax thus computed,
23    but only to the extent thereof,  the  amount,  if  any,  paid
24    during  the  preceding  calendar year: (a) for the benefit of
25    organized fire departments, to cities, villages, incorporated
26    towns and fire protection districts of this State as a tax on
27    premiums received by such company in such  cities,  villages,
28    incorporated  towns and fire protection districts, and (b) as
29    a tax to this State or any subdivision thereof on or measured
30    by net income, and  (c)  as  a  tax  to  this  State  or  any
31    subdivision  thereof  on  or  measured  by  the  value of the
32    company in excess of the value of its tangible property,  and
33    (d)  as  a  fee or charge for the valuation of life insurance
34    policies, and (e) if the company is not an Illinois  domestic
                            -4-               LRB9011168JSgcA
 1    company,  as  a financial regulation fee under subsection (7)
 2    of Section 408 of this Code for the examination and  analysis
 3    of  financial  condition,  and the remainder shall be paid by
 4    such company as its annual privilege tax, and  (f)  for  fees
 5    paid pursuant to Section 408 (1) (jj).
 6        (3)  If  a  company  survives  or was formed by a merger,
 7    consolidation,  reorganization,   or   reincorporation,   the
 8    premiums  received,  and  amounts  returned  or  paid, by all
 9    foreign or alien companies  party  parties  to  such  merger,
10    consolidation, reorganization, or reincorporation, shall, for
11    the  purposes of determining the amount of the tax imposed by
12    this Section, be regarded as received, returned, or  paid  by
13    such surviving or new company.
14        (4)  A  domestic  company  must  pay  the  State  tax  in
15    subsection (1) of this Section unless:
16             (a)  it maintains its principal place of business in
17        this State; and
18             (b)  it   maintains   in  this  State  officers  and
19        personnel  knowledgeable  of  and  responsible  for   the
20        company's  operation, books, records, administration, and
21        annual statement; and
22             (c)  it conducts in this State substantially all  of
23        its  underwriting, policy issuing, and serving operations
24        relating  to  Illinois  policyholders   and   certificate
25        holders; and
26             (d)  it  complies with the provisions of Section 133
27        (2) of this Code.
28        (4)  All companies subject  to  the  provisions  of  this
29    Section  Payments  shall be due on an estimated basis for all
30    of calendar  year  1969  on  or  before  September  1,  1969.
31    Effective  January  1,  1970,  a company shall make an annual
32    return for the preceding calendar year on or before March 1st
33    setting forth such information on such forms as the  Director
34    may  reasonably  require.  Payments of quarterly installments
                            -5-               LRB9011168JSgcA
 1    of  the  taxpayer's  total  estimated  tax  for  the  current
 2    calendar year shall be due on  or  before  April  15th,  June
 3    15th,  September 15th, and December 15th of such year, except
 4    that all companies unless for the  calendar  year  1971,  and
 5    each calendar year thereafter, insurers transacting insurance
 6    in  this State whose annual tax for the immediately preceding
 7    calendar year was less than $5,000, shall then make  only  an
 8    annual  return.   Failure  of  a  company  to make the annual
 9    payment, or to make the quarterly payments, if  required,  of
10    at  least  one-fourth of either (a) the total tax paid during
11    the previous calendar year or (b) 80% of the actual  tax  for
12    the  current  calendar  year  shall subject it to the penalty
13    provisions set forth in Section 412 of this Act. For the year
14    1998, health maintenance  organizations  and  limited  health
15    service  organizations  shall have estimated tax installments
16    due only on September 15th and December 15th for the  tax  on
17    business  written  after June 30, 1998, and for the year 1999
18    and  thereafter,  such   companies   shall   make   quarterly
19    installments  of  their estimated tax on the same schedule as
20    all other companies.
21        (5)  In addition to the  authority  specifically  granted
22    under  Article XXV of this Code, the Director shall have such
23    authority to promulgate rules and establish forms as  may  be
24    reasonably   necessary   for   purposes  of  determining  the
25    allocation of Illinois  corporate  income  taxes  paid  under
26    subsections  (a), (b), and (c) of Section 201 of the Illinois
27    Income Tax Act amongst members of a  unitary  business  group
28    that  files  an  Illinois  corporate  income  tax return on a
29    unitary basis, for purposes of regulating  the  amendment  of
30    tax  returns, and for purposes of enforcing the provisions of
31    Article XXV of this  Code.   The  Director  shall  also  have
32    authority  to  waive or abate the tax imposed by this Section
33    if in his opinion the company's solvency and ability to  meet
34    its  insured  obligations  would be immediately threatened by
                            -6-               LRB9011168JSgcA
 1    payment of the tax due.
 2    (Source: P.A. 86-753; 87-108.)
 3        (215 ILCS 5/444) (from Ch. 73, par. 1056)
 4        Sec. 444.  Retaliation.
 5        (1)  Whenever the existing or future laws  of  any  other
 6    state  or  country shall require of companies incorporated or
 7    organized under  the  laws  of  this  State  as  a  condition
 8    precedent  to  their  doing  business  in such other state or
 9    country,  compliance  with  laws,  rules,   regulations   and
10    prohibitions  more  onerous  or burdensome than the rules and
11    regulations  imposed  by  this  State  on  foreign  or  alien
12    companies, or shall require  any  deposit  of  securities  or
13    other   obligations   in  such  state  or  country,  for  the
14    protection of policyholders or otherwise or require  of  such
15    companies  or  agents  thereof  or  brokers  the  payment  of
16    penalties, fees, charges or taxes greater than the penalties,
17    fees,  charges  or  taxes  required in the aggregate for like
18    purposes by this Code or any other  law  of  this  State,  of
19    foreign  or  alien companies, agents thereof or brokers, then
20    such laws, rules, regulations and prohibitions of said  other
21    state  or  country  shall  apply to companies incorporated or
22    organized under the laws  of  such  state  or  country  doing
23    business  in  this  State,  and  all  such  companies, agents
24    thereof, or brokers doing business in this  State,  shall  be
25    required  to  make deposits, pay penalties, fees, charges and
26    taxes, in amounts equal to those required  in  the  aggregate
27    for  like  purposes  of  Illinois companies doing business in
28    such state or country, agents thereof  or  brokers.  Whenever
29    any  other  state  or  country  shall  refuse  to  permit any
30    insurance company incorporated or organized under the laws of
31    this State to transact business according to its  usual  plan
32    in  such  other  state  or  country,  the  director  may,  if
33    satisfied  that  such  company  of  this  State  is  solvent,
                            -7-               LRB9011168JSgcA
 1    properly  managed,  and can operate legally under the laws of
 2    such other state or country, forthwith suspend or cancel  the
 3    license  of  every  insurance  company doing business in this
 4    State which is incorporated or organized under  the  laws  of
 5    such  other state or country to the extent that it insures in
 6    this State against any of the  risks  or  hazards  which  are
 7    sought  to be insured against by the company of this State in
 8    such other state or country.
 9        (2)  The term "taxes, fees, and  charges"  used  in  this
10    Section  shall  not  include  any assessments of the Illinois
11    Life  and  Health   Insurance   Guaranty   Association,   any
12    assessments  of  the  Illinois  Insurance  Guaranty Fund, any
13    assessments of the Illinois Health  Maintenance  Organization
14    Guaranty  Association,  any  assessments,  fees,  charges, or
15    taxes under any Illinois laws effecting workers' compensation
16    insurance or occupational  disease  insurance,  the  Illinois
17    Automobile   Plan,  the  Illinois  FAIR  Plan,  the  Illinois
18    Comprehensive Health Insurance Plan,  or  the  Illinois  Mine
19    Subsidence  Insurance  Fund.   No such assessments, payments,
20    fees, taxes, or charges and no  such  assessments,  payments,
21    fees,  taxes,  or  charges  enacted  by  this  or  any  other
22    jurisdiction   for  like  or  comparable  purposes  shall  be
23    included in the calculation of the  retaliatory  tax  of  any
24    company;  except  that  for the period through March 1, 2002,
25    any tax offset allowed under Section 531.13 of this Code, but
26    not applied to reduce a taxpayer's liability for the Illinois
27    corporate income tax, may be included in the  calculation  of
28    the  retaliatory tax, and after March 1, 2002, no such offset
29    shall be included in the calculation of retaliatory taxes.
30        (3)  The term "taxes, fees, or charges" in subsection (1)
31    of this Section shall include: the taxes,  fees,  or  charges
32    collected  under State law and referenced within Article XXV,
33    exclusive of any item referenced by subsection  (2)  of  this
34    Section;  the  Illinois  corporate income taxes imposed under
                            -8-               LRB9011168JSgcA
 1    subsections (a), (b), and (c) of Section 201 of the  Illinois
 2    Income  Tax  Act; taxes, fees, and charges of other states or
 3    countries imposed for purposes like those of the taxes, fees,
 4    and charges specified in Article XXV of this  Code;  and  any
 5    tax,  fee,  or  charge  required as a sales, ad valorem, use,
 6    occupation,  franchise,  privilege,  or  licensing  tax   for
 7    conducting the business of insurance, whether calculated as a
 8    percentage of income, gross receipts, premium, or otherwise.
 9        (4)  Nothing  contained in this Section or Section 409 or
10    Section 444.1 is intended to authorize or expand any power of
11    local governmental units or municipalities to  impose  taxes,
12    fees, or charges.
13    (Source: Laws 1941, vol. 1, p. 837.)
14        (215 ILCS 5/444.1) (from Ch. 73, par. 1056.1)
15        Sec. 444.1.  Payment of retaliatory taxes.
16        (1)  Every  foreign  or  alien  company  doing  insurance
17    business in this State shall pay the Director the retaliatory
18    tax determined in accordance with Section 444.
19        (2)  The  Director  may  order  that Payments of such tax
20    shall be due on an estimated basis for the 1982 calendar year
21    as provided in Section 409 on or before April  15,  June  15,
22    September  15,  and December 15.  For the 1983 calendar year,
23    and each calendar year thereafter,  the  Director  may  order
24    that   payments   of  quarterly  installments  of  the  total
25    estimated tax shall be due and payable on or before April 15,
26    June 15, September  15  and  December  15  pursuant  to  this
27    Section,  and  such  payments shall be in lieu of retaliatory
28    tax payments otherwise required by Section 409.  For the 1983
29    calendar  year,  and  each  calendar  year  thereafter,   The
30    taxpayer  shall make only an annual return on or before March
31    1st each year, if the annual retaliatory and privilege tax of
32    the company for the preceding calendar  year  was  less  than
33    $5,000.   Effective  January 1, 1983, a company shall make an
                            -9-               LRB9011168JSgcA
 1    annual return for the preceding calendar year  on  or  before
 2    March  1  setting forth such information on such forms as the
 3    Director may reasonably require.
 4        (3)  Any tax payment made under this Section and any  tax
 5    returns  prepared  in  compliance with Section 410 shall give
 6    full consideration to the impact of any future  reduction  in
 7    or  elimination  of a taxpayer's liability under Section 409,
 8    whether such reduction or elimination is due to an  operation
 9    of law or an Act of the General Assembly.
10        (4)  Any  foreign  or  alien  taxpayer  who  makes, under
11    protest, a tax payment required by Section 409 shall, at  the
12    time  of payment, file a retaliatory tax return sufficient to
13    disclose the full amount of retaliatory taxes which would  be
14    due  and  owing for the tax period in question if the protest
15    were upheld.  Notwithstanding the  provisions  of  the  State
16    Officers  and  Employees  Money  Disposition  Act  "An Act in
17    relation to the payment and disposition of moneys received by
18    officers and employees of the State of Illinois by virtue  of
19    their office or employment", approved June 9, 1911, as now or
20    hereafter  amended,  or  any  other  laws  of this State, the
21    protested payment, to the extent of the  retaliatory  tax  so
22    disclosed, shall be deposited directly in the General Revenue
23    Fund;  and  the  balance  of  the  payment,  if any, shall be
24    deposited in a protest account pursuant to the provisions  of
25    the aforesaid Act, as now or hereafter amended.
26        (5)  The failure of a company to make quarterly payments,
27    if required, equal to at least one-fourth of either the total
28    tax  paid  during  the  preceding calendar year or 80% of the
29    actual tax  for  the  current  calendar  year,  whichever  is
30    greater, shall subject it to the penalty provisions set forth
31    in Section 412 of this Code.
32    (Source: P.A. 82-767.)
33        (215 ILCS 5/531.13) (from Ch. 73, par. 1065.80-13)
                            -10-              LRB9011168JSgcA
 1        Sec.  531.13.  Tax  offset.  In  the  event the aggregate
 2    Class A, B and C assessments for all member insurers  do  not
 3    exceed $3,000,000 in any one calendar year, no member insurer
 4    shall receive a tax offset.  However, for in any one calendar
 5    year  beginning  on  or  before  January 1, 1997 in which the
 6    total of such assessments exceeds $3,000,000, the  amount  in
 7    excess  of $3,000,000 shall be subject to a tax offset to the
 8    extent of 20% of the amount of such assessment  for  each  of
 9    the  five  calendar  years  following  the year in which such
10    assessment was paid and each member insurer  may  offset  the
11    proportionate  amount  of  such  excess  paid  by the insurer
12    against its liabilities for the tax  imposed  by  subsections
13    (a)  and  (b) of Section 201 of the "Illinois Income Tax Act.
14    The provisions of this Section shall expire and be  given  no
15    effect  on and after January 1, 2002", for the tax imposed by
16    Section 409 of the "Illinois Insurance  Code",  and  for  the
17    fees  imposed  by  Section  408.1  of the "Illinois Insurance
18    Code".
19    (Source: P.A. 84-221.)
20        (215 ILCS 5/408.1 rep.)
21        Section 10.  The Illinois Insurance Code  is  amended  by
22    repealing Section 408.1.
23        Section  15.  The  Dental  Service Plan Act is amended by
24    changing Section 43 as follows:
25        (215 ILCS 110/43) (from Ch. 32, par. 690.43)
26        Sec. 43.  Every dental service plan corporation organized
27    hereunder shall be operated and conducted not-for-profit  and
28    shall  be deemed a charitable and benevolent corporation, and
29    all of its funds and property  shall  be  exempt  from  every
30    State,   county,   district,  municipal  and  school  tax  or
31    assessment, and all other taxes and license  fees,  from  the
                            -11-              LRB9011168JSgcA
 1    payment  of  which  charitable and benevolent corporations or
 2    institutions  are  now  or  may  hereafter  be  exempt.  This
 3    exemption shall not prevail against fees and charges  imposed
 4    by  Sections  408,  and  408.2,  409,  444,  and 444.1 of the
 5    Illinois Insurance Code. The laws of this state applicable to
 6    the  merger,  dissolution   and   liquidation   of   domestic
 7    not-for-profit  corporations  and  in  respect to the rights,
 8    classification  and  meetings  of  members,  the   selection,
 9    change,  duties  and  powers  of  corporate officers, and the
10    filing  of  annual   reports   by   domestic   not-for-profit
11    corporations  shall  be  applicable to corporations organized
12    under this act to the extent the same  are  not  inconsistent
13    with  the  provisions  of this act. Wherever in any such laws
14    reference is  made  to  "Directors"  of  such  not-for-profit
15    corporations,  such  statutory  provisions shall be deemed to
16    apply to the trustees of corporations  organized  under  this
17    act,  and  wherever  the  office of the Secretary of State is
18    mentioned in such an act, such provisions shall be deemed  to
19    refer to and designate the Director of Insurance when applied
20    to corporations organized hereunder.
21    (Source: P.A. 84-989.)
22        Section  20.  The  Farm  Mutual  Insurance Company Act of
23    1986 is amended by changing Section 15 as follows:
24        (215 ILCS 120/15) (from Ch. 73, par. 1265)
25        Sec. 15.  Application of law. Companies subject  to  this
26    Act  shall be subject to the provisions of Article X (Merger)
27    and Article XXV of the Illinois Insurance Code but shall  not
28    be  subject to any other provisions of the Illinois Insurance
29    Code unless specifically enumerated therein.
30    (Source: P.A. 84-1431.)
31        Section 25.  The Health Maintenance Organization  Act  is
                            -12-              LRB9011168JSgcA
 1    amended by changing Section 5-3 as follows:
 2        (215 ILCS 125/5-3) (from Ch. 111 1/2, par. 1411.2)
 3        (Text of Section before amendment by P.A. 90-372)
 4        Sec. 5-3.  Insurance Code provisions.
 5        (a)  Health Maintenance Organizations shall be subject to
 6    the  provisions of Sections 133, 134, 137, 140, 141.1, 141.2,
 7    141.3, 143, 143c, 147, 148, 149, 151, 152, 153,  154,  154.5,
 8    154.6,  154.7,  154.8, 155.04, 355.2, 356m, 356v, 356t, 367i,
 9    401, 401.1, 402, 403, 403A, 408, 408.2, 409,  and  412,  444,
10    and  444.1,  paragraph  (c) of subsection (2) of Section 367,
11    and Articles VIII 1/2, XII, XII 1/2, XIII, XIII 1/2, XXV, and
12    XXVI of the Illinois Insurance Code.
13        (b)  For purposes of the Illinois Insurance Code,  except
14    for  Sections  444  and 444.1 and Articles XIII and XIII 1/2,
15    Health Maintenance Organizations in the following  categories
16    are deemed to be "domestic companies":
17             (1)  a  corporation  authorized  under  the  Medical
18        Service  Plan  Act,  the  Dental  Service  Plan  Act, the
19        Pharmaceutical Service Plan Act, or the Voluntary  Health
20        Services  Plans  Plan  Act,  or the Nonprofit Health Care
21        Service Plan Act;
22             (2)  a corporation organized under the laws of  this
23        State; or
24             (3)  a  corporation  organized  under  the  laws  of
25        another  state, 30% or more of the enrollees of which are
26        residents of this State, except a corporation subject  to
27        substantially  the  same  requirements  in  its  state of
28        organization as is a  "domestic  company"  under  Article
29        VIII 1/2 of the Illinois Insurance Code.
30        (c)  In  considering  the merger, consolidation, or other
31    acquisition of control of a Health  Maintenance  Organization
32    pursuant to Article VIII 1/2 of the Illinois Insurance Code,
33             (1)  the  Director  shall give primary consideration
                            -13-              LRB9011168JSgcA
 1        to the continuation of  benefits  to  enrollees  and  the
 2        financial  conditions  of the acquired Health Maintenance
 3        Organization after the merger,  consolidation,  or  other
 4        acquisition of control takes effect;
 5             (2)(i)  the  criteria specified in subsection (1)(b)
 6        of Section 131.8 of the Illinois Insurance Code shall not
 7        apply and (ii) the Director, in making his  determination
 8        with  respect  to  the  merger,  consolidation,  or other
 9        acquisition of control, need not take  into  account  the
10        effect  on  competition  of the merger, consolidation, or
11        other acquisition of control;
12             (3)  the Director shall have the  power  to  require
13        the following information:
14                  (A)  certification by an independent actuary of
15             the   adequacy   of   the  reserves  of  the  Health
16             Maintenance Organization sought to be acquired;
17                  (B)  pro forma financial statements  reflecting
18             the combined balance sheets of the acquiring company
19             and the Health Maintenance Organization sought to be
20             acquired  as of the end of the preceding year and as
21             of a date 90 days prior to the acquisition, as  well
22             as   pro   forma   financial  statements  reflecting
23             projected combined  operation  for  a  period  of  2
24             years;
25                  (C)  a  pro  forma  business  plan detailing an
26             acquiring  party's  plans  with   respect   to   the
27             operation  of  the  Health  Maintenance Organization
28             sought to be acquired for a period of not less  than
29             3 years; and
30                  (D)  such  other  information  as  the Director
31             shall require.
32        (d)  The provisions of Article VIII 1/2 of  the  Illinois
33    Insurance  Code  and this Section 5-3 shall apply to the sale
34    by any health maintenance organization of greater than 10% of
                            -14-              LRB9011168JSgcA
 1    its enrollee population  (including  without  limitation  the
 2    health  maintenance organization's right, title, and interest
 3    in and to its health care certificates).
 4        (e)  In considering any management  contract  or  service
 5    agreement  subject to Section 141.1 of the Illinois Insurance
 6    Code, the Director (i) shall, in  addition  to  the  criteria
 7    specified  in  Section  141.2 of the Illinois Insurance Code,
 8    take into account the effect of the  management  contract  or
 9    service   agreement   on  the  continuation  of  benefits  to
10    enrollees  and  the  financial  condition   of   the   health
11    maintenance  organization to be managed or serviced, and (ii)
12    need not take into  account  the  effect  of  the  management
13    contract or service agreement on competition.
14        (f)  Except  for  small employer groups as defined in the
15    Small Employer Rating, Renewability  and  Portability  Health
16    Insurance  Act and except for medicare supplement policies as
17    defined in Section 363 of  the  Illinois  Insurance  Code,  a
18    Health  Maintenance Organization may by contract agree with a
19    group or other enrollment unit to effect  refunds  or  charge
20    additional premiums under the following terms and conditions:
21             (i)  the  amount  of, and other terms and conditions
22        with respect to, the refund or additional premium are set
23        forth in the group or enrollment unit contract agreed  in
24        advance of the period for which a refund is to be paid or
25        additional  premium  is to be charged (which period shall
26        not be less than one year); and
27             (ii)  the amount of the refund or additional premium
28        shall  not  exceed  20%   of   the   Health   Maintenance
29        Organization's profitable or unprofitable experience with
30        respect  to  the  group  or other enrollment unit for the
31        period (and, for  purposes  of  a  refund  or  additional
32        premium,  the profitable or unprofitable experience shall
33        be calculated taking into account a pro rata share of the
34        Health  Maintenance  Organization's  administrative   and
                            -15-              LRB9011168JSgcA
 1        marketing  expenses,  but shall not include any refund to
 2        be made or additional premium to be paid pursuant to this
 3        subsection (f)).  The Health Maintenance Organization and
 4        the  group  or  enrollment  unit  may  agree   that   the
 5        profitable  or  unprofitable experience may be calculated
 6        taking into account the refund period and the immediately
 7        preceding 2 plan years.
 8        The  Health  Maintenance  Organization  shall  include  a
 9    statement in the evidence of coverage issued to each enrollee
10    describing the possibility of a refund or additional premium,
11    and upon request of any group or enrollment unit, provide  to
12    the group or enrollment unit a description of the method used
13    to   calculate  (1)  the  Health  Maintenance  Organization's
14    profitable experience with respect to the group or enrollment
15    unit and the resulting refund to the group or enrollment unit
16    or (2) the  Health  Maintenance  Organization's  unprofitable
17    experience  with  respect to the group or enrollment unit and
18    the resulting additional premium to be paid by the  group  or
19    enrollment unit.
20        In   no  event  shall  the  Illinois  Health  Maintenance
21    Organization  Guaranty  Association  be  liable  to  pay  any
22    contractual obligation of an insolvent  organization  to  pay
23    any refund authorized under this Section.
24    (Source: P.A.   89-90,  eff.  6-30-95;  90-25,  eff.  1-1-98;
25    90-177, eff. 7-23-97; revised 11-21-97.)
26        (Text of Section after amendment by P.A. 90-372)
27        Sec. 5-3.  Insurance Code provisions.
28        (a)  Health Maintenance Organizations shall be subject to
29    the provisions of Sections 133, 134, 137, 140, 141.1,  141.2,
30    141.3,  143,  143c, 147, 148, 149, 151, 152, 153, 154, 154.5,
31    154.6, 154.7, 154.8, 155.04, 355.2, 356m, 356v,  356t,  367i,
32    401,  401.1,  402,  403, 403A, 408, 408.2, 409, and 412, 444,
33    and 444.1, paragraph (c) of subsection (2)  of  Section  367,
34    and Articles VIII 1/2, XII, XII 1/2, XIII, XIII 1/2, XXV, and
                            -16-              LRB9011168JSgcA
 1    XXVI of the Illinois Insurance Code.
 2        (b)  For  purposes of the Illinois Insurance Code, except
 3    for Sections 444 and 444.1 and Articles XIII  and  XIII  1/2,
 4    Health  Maintenance Organizations in the following categories
 5    are deemed to be "domestic companies":
 6             (1)  a  corporation  authorized  under  the  Medical
 7        Service Plan Act, the Dental Service  Plan  Act  or,  the
 8        Voluntary   Health   Services  Plans  Plan  Act,  or  the
 9        Nonprofit Health Care Service Plan Act;
10             (2)  a corporation organized under the laws of  this
11        State; or
12             (3)  a  corporation  organized  under  the  laws  of
13        another  state, 30% or more of the enrollees of which are
14        residents of this State, except a corporation subject  to
15        substantially  the  same  requirements  in  its  state of
16        organization as is a  "domestic  company"  under  Article
17        VIII 1/2 of the Illinois Insurance Code.
18        (c)  In  considering  the merger, consolidation, or other
19    acquisition of control of a Health  Maintenance  Organization
20    pursuant to Article VIII 1/2 of the Illinois Insurance Code,
21             (1)  the  Director  shall give primary consideration
22        to the continuation of  benefits  to  enrollees  and  the
23        financial  conditions  of the acquired Health Maintenance
24        Organization after the merger,  consolidation,  or  other
25        acquisition of control takes effect;
26             (2)(i)  the  criteria specified in subsection (1)(b)
27        of Section 131.8 of the Illinois Insurance Code shall not
28        apply and (ii) the Director, in making his  determination
29        with  respect  to  the  merger,  consolidation,  or other
30        acquisition of control, need not take  into  account  the
31        effect  on  competition  of the merger, consolidation, or
32        other acquisition of control;
33             (3)  the Director shall have the  power  to  require
34        the following information:
                            -17-              LRB9011168JSgcA
 1                  (A)  certification by an independent actuary of
 2             the   adequacy   of   the  reserves  of  the  Health
 3             Maintenance Organization sought to be acquired;
 4                  (B)  pro forma financial statements  reflecting
 5             the combined balance sheets of the acquiring company
 6             and the Health Maintenance Organization sought to be
 7             acquired  as of the end of the preceding year and as
 8             of a date 90 days prior to the acquisition, as  well
 9             as   pro   forma   financial  statements  reflecting
10             projected combined  operation  for  a  period  of  2
11             years;
12                  (C)  a  pro  forma  business  plan detailing an
13             acquiring  party's  plans  with   respect   to   the
14             operation  of  the  Health  Maintenance Organization
15             sought to be acquired for a period of not less  than
16             3 years; and
17                  (D)  such  other  information  as  the Director
18             shall require.
19        (d)  The provisions of Article VIII 1/2 of  the  Illinois
20    Insurance  Code  and this Section 5-3 shall apply to the sale
21    by any health maintenance organization of greater than 10% of
22    its enrollee population  (including  without  limitation  the
23    health  maintenance organization's right, title, and interest
24    in and to its health care certificates).
25        (e)  In considering any management  contract  or  service
26    agreement  subject to Section 141.1 of the Illinois Insurance
27    Code, the Director (i) shall, in  addition  to  the  criteria
28    specified  in  Section  141.2 of the Illinois Insurance Code,
29    take into account the effect of the  management  contract  or
30    service   agreement   on  the  continuation  of  benefits  to
31    enrollees  and  the  financial  condition   of   the   health
32    maintenance  organization to be managed or serviced, and (ii)
33    need not take into  account  the  effect  of  the  management
34    contract or service agreement on competition.
                            -18-              LRB9011168JSgcA
 1        (f)  Except  for  small employer groups as defined in the
 2    Small Employer Rating, Renewability  and  Portability  Health
 3    Insurance  Act and except for medicare supplement policies as
 4    defined in Section 363 of  the  Illinois  Insurance  Code,  a
 5    Health  Maintenance Organization may by contract agree with a
 6    group or other enrollment unit to effect  refunds  or  charge
 7    additional premiums under the following terms and conditions:
 8             (i)  the  amount  of, and other terms and conditions
 9        with respect to, the refund or additional premium are set
10        forth in the group or enrollment unit contract agreed  in
11        advance of the period for which a refund is to be paid or
12        additional  premium  is to be charged (which period shall
13        not be less than one year); and
14             (ii)  the amount of the refund or additional premium
15        shall  not  exceed  20%   of   the   Health   Maintenance
16        Organization's profitable or unprofitable experience with
17        respect  to  the  group  or other enrollment unit for the
18        period (and, for  purposes  of  a  refund  or  additional
19        premium,  the profitable or unprofitable experience shall
20        be calculated taking into account a pro rata share of the
21        Health  Maintenance  Organization's  administrative   and
22        marketing  expenses,  but shall not include any refund to
23        be made or additional premium to be paid pursuant to this
24        subsection (f)).  The Health Maintenance Organization and
25        the  group  or  enrollment  unit  may  agree   that   the
26        profitable  or  unprofitable experience may be calculated
27        taking into account the refund period and the immediately
28        preceding 2 plan years.
29        The  Health  Maintenance  Organization  shall  include  a
30    statement in the evidence of coverage issued to each enrollee
31    describing the possibility of a refund or additional premium,
32    and upon request of any group or enrollment unit, provide  to
33    the group or enrollment unit a description of the method used
34    to   calculate  (1)  the  Health  Maintenance  Organization's
                            -19-              LRB9011168JSgcA
 1    profitable experience with respect to the group or enrollment
 2    unit and the resulting refund to the group or enrollment unit
 3    or (2) the  Health  Maintenance  Organization's  unprofitable
 4    experience  with  respect to the group or enrollment unit and
 5    the resulting additional premium to be paid by the  group  or
 6    enrollment unit.
 7        In   no  event  shall  the  Illinois  Health  Maintenance
 8    Organization  Guaranty  Association  be  liable  to  pay  any
 9    contractual obligation of an insolvent  organization  to  pay
10    any refund authorized under this Section.
11    (Source: P.A.   89-90,  eff.  6-30-95;  90-25,  eff.  1-1-98;
12    90-177, eff. 7-23-97; 90-372, eff. 7-1-98; revised 11-21-97.)
13        Section 30.  The Limited Health Service Organization  Act
14    is amended by changing Section 4003 as follows:
15        (215 ILCS 130/4003) (from Ch. 73, par. 1504-3)
16        Sec.  4003.  Illinois Insurance Code provisions.  Limited
17    health  service  organizations  shall  be  subject   to   the
18    provisions  of  Sections  133,  134,  137, 140, 141.1, 141.2,
19    141.3, 143, 143c, 147, 148, 149, 151, 152, 153,  154,  154.5,
20    154.6,  154.7,  154.8, 155.04, 355.2, 356v, 356t, 401, 401.1,
21    402, 403, 403A, 408, 408.2, 409, and 412, 444, and 444.1  and
22    Articles  VIII  1/2,  XII,  XII 1/2, XIII, XIII 1/2, XXV, and
23    XXVI of the Illinois Insurance Code.   For  purposes  of  the
24    Illinois  Insurance  Code, except for Sections 444 and 444.1,
25    and Articles  XIII  and  XIII  1/2,  limited  health  service
26    organizations  in  the  following categories are deemed to be
27    domestic companies:
28             (1)  a corporation under the laws of this State; or
29             (2)  a  corporation  organized  under  the  laws  of
30        another state, 30% of more of the enrollees of which  are
31        residents  of this State, except a corporation subject to
32        substantially the  same  requirements  in  its  state  of
                            -20-              LRB9011168JSgcA
 1        organization  as is a domestic company under Article VIII
 2        1/2 of the Illinois Insurance Code.
 3    (Source: P.A. 90-25, eff. 1-1-98; revised 10-14-97.)
 4        Section 95.  No acceleration or delay.   Where  this  Act
 5    makes changes in a statute that is represented in this Act by
 6    text  that  is not yet or no longer in effect (for example, a
 7    Section represented by multiple versions), the  use  of  that
 8    text  does  not  accelerate or delay the taking effect of (i)
 9    the changes made by this Act or (ii) provisions derived  from
10    any other Public Act.
11        Section  99.  Effective date.  This Act takes effect upon
12    becoming law.

[ Top ]