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| [ Introduced ] | [ Enrolled ] | [ House Amendment 001 ] |
| [ House Amendment 002 ] |
92_HB1040eng HB1040 Engrossed 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, 2-4, and 2-6 and adding 6 Article 4.5 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 HB1040 Engrossed -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) health maintenance organization point-of-service benefits 10 as authorized under Article 4.5. 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 HB1040 Engrossed -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) will require (1) filing with 16 the Director a plan for correction of the deficiency, 17 acceptable to the Director and (2) correction of the 18 deficiency within a reasonable time, not to exceed 60 days 19 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 HB1040 Engrossed -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 maintain minimum net worth of 12 not less than: 13 (1) the greater of 300% of the "authorized control 14 level" as defined by Article IIA of the Illinois 15 Insurance Code; or 16 (2) $3,500,000 if the health maintenance 17 organization's annual projected out-of-plan claims are 18 less than $500,000; or 19 (3) $4,500,000 if the health maintenance 20 organization's annual projected out-of-plan claims are 21 equal to or greater than $500,000 but less than 22 $1,000,000; or 23 (4) $6,000,000 if the health maintenance 24 organization's annual projected out-of-plan claims are 25 $1,000,000 or greater. 26 (e) Unless allowed by the Director, no health 27 maintenance organization, officer, director, trustee, 28 producer, or employee of such organization may renew, issue, 29 or deliver, or cause to be renewed, issued or delivered, any 30 certificate, agreement, or contract of coverage in this 31 State, for which a premium is charged or collected, when the 32 organization writing such coverage is insolvent or impaired, 33 and the fact of such insolvency or impairment is known to the 34 organization, officer, director, trustee, producer, or HB1040 Engrossed -5- LRB9206171JSpc 1 employee of such organization. An organization is impaired 2 when a deficiency exists in meeting the amounts required in 3 subsections(a), (b), and (d) of Section 2-4. 4 However, the existence of an impairment does not prevent 5 the issuance or renewal of a certificate, agreement or 6 contract when the enrollee exercises an option granted under 7 the plan to obtain new, renewed or converted coverage. 8 Any organization, officer, director, trustee, producer, 9 or employee of such organization violating this subsection 10 shall be guilty of a Class A misdemeanor. 11 (Source: P.A. 85-20.) 12 (215 ILCS 125/2-6) (from Ch. 111 1/2, par. 1406.2) 13 Sec. 2-6. Statutory deposits. 14 (a) Every organization subject to the provisions of this 15 Act shall make and maintain with the Director through 16 December 30, 1993, for the protection of enrollees of the 17 organization, a deposit of securities which are authorized 18 investments under paragraphs (1) and (2) of subsection (h) of 19 Section 3-1 having a fair market value equal to at least 20 $100,000. Effective December 31, 1993 and through December 21 30, 1994, the deposit shall have a fair market value at least 22 equal to $200,000. Effective December 31, 1994 and 23 thereafter, the deposit shall have a fair market value at 24 least equal to $300,000. An organization issued a 25 certificate of authority on or after the effective date of 26 this Amendatory Act of 1993, shall make and maintain with the 27 Director; for the protection of enrollees of the 28 organization, a deposit of securities which are authorized 29 investments under paragraphs (1) and (2) of subsection (h) of 30 Section 3-1 having a fair market value equal to at least 31 $300,000. The amount on deposit shall remain as an admitted 32 asset of the organization in the determination of its net 33 worth. HB1040 Engrossed -6- LRB9206171JSpc 1 (b) An organization that offers a point-of-service 2 product, as permitted by Article 4.5, must maintain an 3 additional deposit in an amount that is not less than the 4 greater of 125% of the organization's annual projected 5 point-of-service claims or $300,000. 6 (Source: P.A. 88-364.) 7 (215 ILCS 125/Art. 4.5, heading new) 8 ARTICLE 4.5. POINT-OF-SERVICE 9 PRODUCTS 10 (215 ILCS 125/4.5-1 new) 11 Sec. 4.5-1. Point-of-service health service contracts. 12 (a) A health maintenance organization that offers a 13 point-of-service contract: 14 (1) must include as in-plan covered services all 15 services required by law to be provided by a health 16 maintenance organization; 17 (2) must provide incentives, which shall include 18 financial incentives, for enrollees to use in-plan 19 covered services; 20 (3) may not offer services out-of-plan without 21 providing those services on an in-plan basis; 22 (4) may include annual out-of-pocket limits and 23 lifetime maximum benefits allowances for out-of-plan 24 services that are separate from any limits or allowances 25 applied to in-plan services; 26 (5) may not consider emergency services, authorized 27 referral services, or non-routine services obtained out 28 of the service area to be point-of-service services; and 29 (6) may treat as out-of-plan services those 30 services that an enrollee obtains from a participating 31 provider, but for which the proper authorization was not 32 given by the health maintenance organization. HB1040 Engrossed -7- LRB9206171JSpc 1 (b) A health maintenance organization offering a 2 point-of-service contract is subject to all of the following 3 limitations: 4 (1) The health maintenance organization may not 5 expend in any calendar quarter more than 20% of its total 6 expenditures for all its members for out-of-plan covered 7 services. 8 (2) If the amount specified in item (1) of this 9 subsection is exceeded by 2% in a quarter, the health 10 maintenance organization must effect compliance with item 11 (1) of this subsection by the end of the following 12 quarter. 13 (3) If compliance with the amount specified in item 14 (1) of this subsection is not demonstrated in the health 15 maintenance organization's next quarterly report, the 16 health maintenance organization may not offer the 17 point-of-service contract to new groups or include the 18 point-of-service option in the renewal of an existing 19 group until compliance with the amount specified in item 20 (1) of this subsection is demonstrated or until otherwise 21 allowed by the Director. 22 (4) A health maintenance organization failing, 23 without just cause, to comply with the provisions of this 24 subsection shall be required, after notice and hearing, 25 to pay a penalty of $250 for each day out of compliance, 26 to be recovered by the Director. Any penalty recovered 27 shall be paid into the General Revenue Fund. The Director 28 may reduce the penalty if the health maintenance 29 organization demonstrates to the Director that the 30 imposition of the penalty would constitute a financial 31 hardship to the health maintenance organization. 32 (c) A health maintenance organization that offers a 33 point-of-service product must do all of the following: 34 (1) File a quarterly financial statement detailing HB1040 Engrossed -8- LRB9206171JSpc 1 compliance with the requirements of subsection (b). 2 (2) Track out-of-plan, point-of-service utilization 3 separately from in-plan or non-point-of-service, 4 out-of-plan emergency care, referral care, and urgent 5 care out of the service area utilization. 6 (3) Record out-of-plan utilization in a manner that 7 will permit such utilization and cost reporting as the 8 Director may, by rule, require. 9 (4) Demonstrate to the Director's satisfaction that 10 the health maintenance organization has the fiscal, 11 administrative, and marketing capacity to control its 12 point-of-service enrollment, utilization, and costs so as 13 not to jeopardize the financial security of the health 14 maintenance organization. 15 (5) Maintain, in addition to any other deposit 16 required under this Act, the deposit required by Section 17 2-6. 18 (6) Maintain cash and cash equivalents of 19 sufficient amount to fully liquidate 10 days' average 20 claim payments, subject to review by the Director. 21 (7) Maintain and file with the Director, 22 reinsurance coverage protecting against catastrophic 23 losses on out of network point-of-service services. 24 Deductibles may not exceed $100,000 per covered life per 25 year, and the portion of risk retained by the health 26 maintenance organization once deductibles have been 27 satisfied may not exceed 20%. Reinsurance must be placed 28 with licensed authorized reinsurers qualified to do 29 business in this State. 30 (d) A health maintenance organization may not issue a 31 point-of-service contract until it has filed and had approved 32 by the Director a plan to comply with the provisions of this 33 Section. The compliance plan must, at a minimum, include 34 provisions demonstrating that the health maintenance HB1040 Engrossed -9- LRB9206171JSpc 1 organization will do all of the following: 2 (1) Design the benefit levels and conditions of 3 coverage for in-plan covered services and out-of-plan 4 covered services as required by this Article. 5 (2) Provide or arrange for the provision of 6 adequate systems to: 7 (A) process and pay claims for all out-of-plan 8 covered services; 9 (B) meet the requirements for point-of-service 10 contracts set forth in this Section and any 11 additional requirements that may be set forth by the 12 Director; and 13 (C) generate accurate data and financial and 14 regulatory reports on a timely basis so that the 15 Department of Insurance can evaluate the health 16 maintenance organization's experience with the 17 point-of-service contract and monitor compliance 18 with point-of-service contract provisions. 19 (3) Comply with the requirements of subsections (b) 20 and (c).