Title 27
Insurance

Chapter 41
Health Maintenance Organizations

§ 27-41-13. Protection against insolvency.

(a) Unless otherwise provided, each health maintenance organization shall deposit with the general treasurer of the state of Rhode Island securities having a market value at all times of at least the amount set forth in this section, which are to be held for the benefit and protection of all the enrollees of the health maintenance organization.

(b)(1) The amount for an organization that is applying for initial licensure shall be the greater of:

(i) Five percent (5%) of its estimated expenditures for healthcare services for its first year of operation;

(ii) Twice its estimated average monthly uncovered expenditures for its first year of operation; or

(iii) One hundred thousand dollars ($100,000).

(2) At the beginning of each succeeding year, unless not applicable, that organization shall deposit with the general treasurer securities in an amount equal to four percent (4%) of its estimated annual uncovered expenditures for that year.

(c)(1) An organization that is licensed as a health maintenance organization on May 17, 1983, shall make a deposit equal to the larger of:

(i) One percent (1%) of the preceding twelve (12) months of uncovered expenditures; or

(ii) One hundred thousand dollars ($100,000), within six (6) months of May 17, 1983.

(2) On the first day of the organization’s first fiscal year beginning six (6) months or more after May 17, 1983, the organization shall make an additional deposit equal to two percent (2%) of its estimated annual uncovered expenditures. In the second fiscal year, if applicable, the additional deposit shall be equal to three percent (3%) of its estimated annual uncovered expenditures for that year, and in the third fiscal year and subsequent years, if applicable, the additional deposit shall be equal to four percent (4%) of its estimated annual uncovered expenditures for each year. Each year’s estimate, after the first year of operation, shall reasonably reflect the prior year’s operating experience and delivery arrangements.

(d) The director may waive any of the deposit requirements as set forth in subsections (b) and (c) of this section whenever satisfied that the organization has sufficient net worth and an adequate history of generating net income to assure its financial viability for the next year, or its performance and obligations are guaranteed by an organization with sufficient net worth and an adequate history of generating net income, or the assets of the organization or its contracts with insurers, hospital or medical service corporations, governments, or other organizations are sufficient to reasonably assure the performance of its obligations.

(e)(1) When an organization has achieved a net worth not including land, buildings, and equipment of at least one million dollars ($1,000,000), or has achieved a net worth including plan-related land, buildings, and equipment of at least five million dollars ($5,000,000), the annual deposit requirement shall not apply.

(2) The annual deposit requirement shall not apply to an organization if the total amount of the deposit of securities is equal to twelve percent (12%) of the health maintenance organization’s estimated annual uncovered expenditures for the next calendar year, or the capital and surplus requirements for the formation and admittance of an accident and health insurer in this state, whichever is less.

(3) If the organization has a guaranteeing organization that has been in operation for at least five (5) years and has a net worth not including land, buildings, and equipment of at least one million dollars ($1,000,000), or has been in operation for at least ten (10) years and has a net worth including plan-related land, buildings, and equipment of at least five million dollars ($5,000,000), the annual deposit requirement shall not apply; provided, that if the guaranteeing organization is sponsoring more than the one organization, the net worth requirement shall be increased by a multiple equal to the number of organizations. This requirement to maintain a deposit in excess of the deposit required of an accident and health insurer shall not apply during any time that the guaranteeing organization maintains a net worth at least equal to the capital and surplus requirements for an accident and health insurer.

(f) All income from the deposit with the general treasurer shall belong to the depositing organization and shall be paid to it as it becomes available. A health maintenance organization that has made a securities deposit with the general treasurer may, at its option, withdraw the securities deposit or any part of the deposit, first having deposited, in lieu of it, a deposit of securities of equal amount and value to that withdrawn.

(g) In any year in which an annual deposit is not required of an organization, at its request, the director shall lower its required deposit by one hundred thousand dollars ($100,000) for each two hundred fifty thousand dollars ($250,000) of net worth not including land, buildings, and equipment, if it, or a guaranteeing organization on its behalf and not for another organization, has in excess of one million dollars ($1,000,000) or in excess of five million dollars ($5,000,000) of net worth, including only health maintenance organization-related land, buildings, and equipment contributing to the delivery of healthcare services; provided, that the reductions never bring the required deposit below one hundred thousand dollars ($100,000). If the net worth of an organization or guaranteeing organization no longer supports a reduction of its required deposit, the organization shall immediately redeposit one hundred thousand dollars ($100,000) for each two hundred fifty thousand dollars ($250,000) of reduction, provided that its total deposit does not exceed the maximum required under this section.

(h) Each health maintenance organization shall maintain written contracts or other arrangements satisfactory to the director with providers of services, insurers, hospital or medical service corporations, governments, or other organizations to satisfy the director that in the event of insolvency enrollees will not be liable for charges for covered health services received before the time of insolvency and those contracts and other arrangements shall ensure that:

(1) Benefits, including professional services, for all enrollees who are confined at the time of insolvency in hospitals, skilled nursing facilities, intermediate care facilities, or home health agencies receiving services covered by the health maintenance organization shall continue to be paid without interruption until the earlier of discharge or ninety (90) days, or in the alternative, for federally qualified health maintenance organizations licensed pursuant to this chapter, confinement coverage shall be provided that meets federal standards for federally qualified health maintenance organization plans;

(2) All enrollees will be covered without interruption by the lesser of their current coverage or a fully qualified program as defined in § 42-62-10, or its equivalent as approved by the director, for a period of thirty (30) days following the insolvency, unless enrollees are afforded an opportunity to enroll in another insurance plan as defined in subsection (h)(3) of this section without waiting periods or exclusions or limitations based on health status; and

(3) Enrollees and enrolled groups will be afforded the opportunity within thirty (30) days to purchase other health insurance equivalent to the lesser of their current coverage or a fully qualified program as defined in § 42-62-10 on a group basis if they are enrolled in the health maintenance organization on a group basis and on a direct pay basis otherwise, with full credit for all prepaid premiums without waiting periods or exclusions or limitations based on health status. In the event that a contract providing for coverage commensurate with the lesser of current coverage or a fully qualified program as defined in § 42-62-10 is not reasonably available, the health maintenance organization shall maintain the best insolvency conversion insurance reasonably available in the marketplace. The director, upon application of the health maintenance organization, must be satisfied before approving any alternate coverage that the alternate coverage reasonably protects enrollees and is in the public interest. The term “insurance” as used in this section means an insurance policy or a contract of insurance with an entity acceptable to the director other than the health maintenance organization, which other entity is available to cover the enrollees of the health maintenance organization in the event of its insolvency. If insolvency conversion protection commensurate with the lesser of current coverage or a fully qualified program as defined in § 42-62-10 becomes available, the lesser shall be obtained by the health maintenance organization within a reasonable time.

(i) All insurance contracts, and other arrangements to satisfy the conditions in this section, shall be evidenced by copies of the insurance contracts and arrangements and by a certificate from the insurers and other parties to the contracts or arrangements submitted to the director, which certificate must contain provisions requiring the insurer, and all other parties to the contracts, to notify the director and the health maintenance organization ninety (90) days in advance of any revocation or cancellation or of any significant change in status giving the reason of the action. All insurance contracts shall remain in full force and effect for at least ninety (90) days following written notice by registered mail of cancellation by either party to the director. Each health maintenance organization must present the director with evidence of premium payment in a form and manner acceptable to the director for each premium payment for any insurance arrangement certifying that all premiums are prepaid ninety (90) days in advance and subsequently the health maintenance organization must follow up within a time period acceptable to the director with other evidence of premium payment satisfactory to the director.