State of Illinois
92nd General Assembly
Legislation

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[ House Amendment 002 ]


92_HB1040

 
                                               LRB9206171JSpc

 1        AN ACT relating to insurance.

 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 2-3 and 2-4 and  adding  Section
 6    5-3.7 as follows:

 7        (215 ILCS 125/2-3) (from Ch. 111 1/2, par. 1405)
 8        Sec.  2-3.   Powers  of health maintenance organizations.
 9    The powers of a health maintenance organization include,  but
10    are not limited to the following:
11        (a)  The   purchase,   lease,  construction,  renovation,
12    operation, or maintenance of hospitals, medical facilities or
13    both, and their ancillary equipment, and such property as may
14    reasonably be required for its principal office or  for  such
15    other  purposes as may be necessary in the transaction of the
16    business of the organization.
17        (b)  The  making  of  loans  to  a  medical  group  under
18    contract with it and in furtherance of  its  program  or  the
19    making  of  loans  to a corporation or corporations under its
20    control for the purpose of acquiring or constructing  medical
21    facilities  at  hospitals  or  in  furtherance  of  a program
22    providing health care services for enrollees.
23        (c)  The  furnishing  of  health  care  services  through
24    providers which are under contract with or  employed  by  the
25    health maintenance organization.
26        (d)  The  contracting with any person for the performance
27    on  its  behalf  of  certain  functions  such  as  marketing,
28    enrollment and administration.
29        (e)  The contracting with an insurance  company  licensed
30    in this State, or with a hospital, medical, dental, vision or
31    pharmaceutical  service corporation authorized to do business
 
                            -2-                LRB9206171JSpc
 1    in this State, for the provision of insurance, indemnity,  or
 2    reimbursement   against  the  cost  of  health  care  service
 3    provided by the health maintenance organization.
 4        (f)  The offering,  in  addition  to  basic  health  care
 5    services, of (1) health care services, (2) indemnity benefits
 6    covering out of area or emergency services, and (3) indemnity
 7    benefits  provided  through  insurers  or  hospital, medical,
 8    dental, vision, or pharmaceutical service  corporations,  and
 9    (4)  point-of-service benefits as permitted under the Limited
10    Health Service Organization Act.
11        (g)  Rendering services related to the functions involved
12    in the  operating  of  its  health  maintenance  organization
13    business  including  but  not  limited  to  providing  health
14    services, data processing, accounting, or claims.
15        (g-5)  Indemnification  for  services provided to a child
16    as required under subdivision (e)(3) of Section 4-2.
17        (h)  Any other business activity reasonably complementary
18    or  supplementary  to  its  health  maintenance  organization
19    business to the extent approved by the Director.
20    (Source: P.A. 89-183, eff. 1-1-96.)

21        (215 ILCS 125/2-4) (from Ch. 111 1/2, par. 1406)
22        Sec. 2-4. Required minimum net  worth-Special  contingent
23    reserve-Deficiency-Impairment.
24        (a)  A   health   maintenance   organization   issued   a
25    certificate  of  authority  on or after the effective date of
26    this amendatory Act of 1987  shall  have  and  at  all  times
27    maintain  net  worth  of  not  less  than  $1,500,000.  As an
28    allocation of net worth, organizations certified prior to the
29    effective date of this amendatory Act of 1987 shall  maintain
30    a  special contingent reserve. The special contingent reserve
31    for an organization certified between January 1, 1986 and the
32    effective date of this amendatory Act of 1987 shall be  equal
33    to  5% of its net earned subscription revenue for health care
 
                            -3-                LRB9206171JSpc
 1    services  through  December  31st  of  the  year   in   which
 2    certified.   In  subsequent  years  such  organization  shall
 3    accumulate  additions  to the contingent reserve in an amount
 4    which is equal to 2% of its net earned  subscription  revenue
 5    for  each  calendar  year.  For purposes of this Section, net
 6    earned subscription revenue means premium  minus  reinsurance
 7    expenses.   Maintenance  of  the  contingent reserve requires
 8    that net worth equals or exceeds the  contingent  reserve  at
 9    any balance sheet date.
10        (b)  Additional  accumulations  under subsection (a) will
11    no longer be required at such time  that  the  total  special
12    contingent  reserve  required  by  subsection (a) is equal to
13    $1,500,000.
14        (c)  A  deficiency  in  meeting   amounts   required   in
15    subsections  (a),   (b),  and (d), and (d-5) will require (1)
16    filing with  the  Director  a  plan  for  correction  of  the
17    deficiency,  acceptable to the Director and (2) correction of
18    the deficiency within a reasonable time,  not  to  exceed  60
19    days unless an extension of time, not to exceed 60 additional
20    days,  is  granted by the Director. Such a deficiency will be
21    deemed an impairment, and failure to correct  the  deficiency
22    in  the  prescribed  time  shall be grounds for suspension or
23    revocation pursuant to subsection (h) of Section 5-5.
24        (d)  All  health  maintenance  organizations   issued   a
25    certificate of authority on or prior to December 31, 1985 and
26    regulated under this Act must have and at all times maintain,
27    prior  to  December  31,  1988,  the  net  worth  and special
28    contingent reserve that  was  required  for  that  particular
29    organization   at  the  time  it  was  certified.   All  such
30    organizations must have by December 31, 1988  and  thereafter
31    maintain  at  all  times, net worth of not less than $300,000
32    and a special contingent reserve calculated  and  accumulated
33    in  the  same  manner  as  required  of  a health maintenance
34    organization issued a certificate of authority on or  between
 
                            -4-                LRB9206171JSpc
 1    January 1, 1986 and the effective date of this amendatory Act
 2    of  1987.  Such calculation shall commence with the financial
 3    reporting period first following certification.
 4        All  organizations  issued  a  certificate  of  authority
 5    between January 1,  1986  and  the  effective  date  of  this
 6    amendatory  Act  of  1987 must have and at all times maintain
 7    the  net  worth  and  special  contingent  reserve  that  was
 8    required for that particular organization at the time it  was
 9    certified.
10        (d-5)  A  health  maintenance  organization that offers a
11    point-of-service product must:
12             (1)  maintain capital and surplus of not  less  than
13        300%  of  the  "authorized  control  level" as determined
14        using Model HMO Risk-Based Capital calculations;
15             (2)  post and maintain a surety bond in favor of the
16        Director in an amount that is not less than 125%  of  the
17        health  maintenance  organization's annual out-of-network
18        point-of-service claims;
19             (3)  maintain cash and cash equivalents in an amount
20        sufficient to fully  liquidate  10  days'  average  claim
21        payments; and
22             (4)  maintain    reinsurance   coverage   protecting
23        against    catastrophic    loses    on     out-of-network
24        point-of-service services.
25        Deductibles  may not exceed $100,000 per covered enrollee
26    per year, and the portion of  risk  retained  by  the  health
27    maintenance   organization   after   deductibles   have  been
28    satisfied may not exceed 20%. Reinsurance must be placed with
29    licensed, authorized insurers qualified  to  do  business  in
30    this State.
31        (e)  Unless   allowed   by   the   Director,   no  health
32    maintenance   organization,   officer,   director,   trustee,
33    producer, or employee of such organization may renew,  issue,
34    or  deliver, or cause to be renewed, issued or delivered, any
 
                            -5-                LRB9206171JSpc
 1    certificate, agreement,  or  contract  of  coverage  in  this
 2    State,  for which a premium is charged or collected, when the
 3    organization writing such coverage is insolvent or  impaired,
 4    and the fact of such insolvency or impairment is known to the
 5    organization,   officer,   director,  trustee,  producer,  or
 6    employee of such organization.  An organization  is  impaired
 7    when  a  deficiency exists in meeting the amounts required in
 8    subsections(a), (b), and (d), and (d-5) of Section 2-4.
 9        However, the existence of an impairment does not  prevent
10    the  issuance  or  renewal  of  a  certificate,  agreement or
11    contract when the enrollee exercises an option granted  under
12    the plan to obtain new, renewed or converted coverage.
13        Any  organization,  officer, director, trustee, producer,
14    or employee of such organization  violating  this  subsection
15    shall be guilty of a Class A misdemeanor.
16    (Source: P.A. 85-20.)

17        (215 ILCS 125/5-3.7 new)
18        Sec.   5-3.7.  Point   of   service   products;   benefit
19    allowance.   A  health maintenance organization that offers a
20    point-of-service  product  may  include  an  annual   maximum
21    benefit  allowance  different  than  that specified under the
22    Limited Health Service Organization Act that is separate from
23    any limits or allowances applied to in-plan services.

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