ENROLLED
COMMITTEE SUBSTITUTE
FOR
Senate Bill No. 427
(Senator Minard, original sponsor)
____________
[Passed April 9, 2005; in effect ninety days from passage.]
____________
AN ACT to repeal §33-25A-24a, §33-25A-24b, §33-25A-29 and
§33-25A-30 of the Code of West Virginia, 1931, as amended; to
amend and reenact §33-25A-3a, §33-25A-12, §33-25A-14,
§33-25A-17, §33-25A-22, §33-25A-23 and §33-25A-24 of said
code; to amend said code by adding thereto a new section,
designated §33-25A-14a; and to amend and reenact §33-40-1,
§33-40-2, §33-40-3, §33-40-6 and §33-40-7 of said code, all
relating to health maintenance organizations; eliminating the
requirement that a health maintenance organization be
incorporated in this state in order to obtain a certificate of
authority; eliminating the requirement of annual application
for renewal of certificates of authority; increasing the time
copies of grievances must be retained; permitting health
status to be a basis for underwriting individual policies;
changing the period in which examinations must be performed by the Commissioner from three to five years; increasing the
filing fee for annual reports; correcting a reference;
clarifying scope of Commissioner's powers in performing
examinations; clarifying that Insurance Fraud Prevention Act
applies to health maintenance organizations; defining terms;
and subjecting health maintenance organizations to risk-based
capital requirements.
Be it enacted by the Legislature of West Virginia:
That §33-25A-24a, §33-25A-24b, §33-25A-29 and §33-25A-30 of
the Code of West Virginia, 1931, as amended, be repealed; that
§33-25A-3a, §33-25A-12, §33-25A-14, §33-25A-17, §33-25A-22,
§33-25A-23 and §33-25A-24 of said code be amended and reenacted;
that said code be amended by adding thereto a new section,
designated §33-25A-14a; and that §33-40-1, §33-40-2, §33-40-3,
§33-40-6 and §33-40-7 of said code be amended and reenacted, all to
read as follows:
ARTICLE 25A. HEALTH MAINTENANCE ORGANIZATION ACT.
§33-25A-3a. Conditions precedent to issuance or maintenance of a
certificate of authority; renewal of certificate of
authority; effect of bankruptcy proceedings.
(a) As a condition precedent to the issuance or maintenance of
a certificate of authority, a health maintenance organization shall
file or have on file with the Commissioner:
(1) An acknowledgment that a delinquency proceeding pursuant to article ten of this chapter, or supervision by the Commissioner
pursuant to article thirty-four of this chapter, constitute the
exclusive methods for the liquidation, rehabilitation,
reorganization or conservation of a health maintenance
organization;
(2) A waiver of any right to file or be subject to a
bankruptcy proceeding;
(3) Within thirty days of any change in the membership of the
governing body of the organization or in the officers or persons
holding five percent or more of the common stock of the
organization, or as otherwise required by the Commissioner:
(A) An amended list of the names, addresses and official
positions of each member of the governing body and a full
disclosure of any financial interest by a member of the governing
body or any provider or any organization or corporation owned or
controlled by that person and the health maintenance organization
and the extent and nature of any contract or financial arrangements
between that person and the health maintenance organization; and
(B) A complete biographical statement on forms prescribed by
the Commissioner and an independent investigation report on each
person for whom a biographical statement and independent
investigation report have not previously been submitted; and
(4)
For health maintenance organizations that have been
operating in this state for at least three years, a
copy of the current quality assurance report submitted to the health
maintenance organization by a nationally recognized accreditation
and review organization approved by the Commissioner, or in the
case of the issuance of an initial certificate of authority to a
health maintenance organization, a determination by the
Commissioner as to the feasibility of the health maintenance
organization's proposed quality assurance program: Provided, That
if a health maintenance organization files proof found in the
Commissioner's discretion to be sufficient to demonstrate that the
health maintenance organization has timely applied for and
reasonably pursued a review of its quality assurance program, but
a quality report has not been issued by the accreditation and
review organization, the health maintenance organization shall be
considered to have complied with this subdivision.
(b) All certificates of authority issued to health maintenance
organizations expire at midnight on the thirty-first day of May of
each year. The Commissioner shall renew annually the certificates
of authority of all health maintenance organizations that continue
to meet all requirements of this section and subsection (2),
section four of this article: Provided, That a health maintenance
organization shall not qualify for renewal of its certificate of
authority if the organization has no subscribers in this state
within twelve months after issuance of the certificate of
authority: Provided, however, That an organization not qualifying for renewal may apply for a new certificate of authority under
section three of this article.
(c) The commencement of a bankruptcy proceeding either by or
against a health maintenance organization shall, by operation of
law;
Terminate the health maintenance organization's certificate of
authority; and
Vest in the Commissioner for the use and benefit of the
subscribers of the health maintenance organization the title to any
deposits of the health maintenance organization held by the
Commissioner: Provided, That if the bankruptcy proceeding is
initiated by a party other than the health maintenance
organization, the operation of this subsection shall be stayed for
a period of sixty days following the date of commencement of the
proceeding.
§33-25A-12. Grievance procedure.
(a) A health maintenance organization shall establish and
maintain a grievance procedure, which has been approved by the
Commissioner, to provide adequate and reasonable procedures for the
expeditious resolution of written grievances initiated by enrollees
concerning any matter relating to any provisions of the
organization's health maintenance contracts, including, but not
limited to, claims regarding the scope of coverage for health care
services; denials, cancellations or nonrenewals of enrollee coverage; observance of an enrollee's rights as a patient; and the
quality of the health care services rendered.
(b) A detailed description of the HMO's subscriber grievance
procedure shall be included in all group and individual contracts
as well as any certificate or member handbook provided to
subscribers. This procedure shall be administered at no cost to
the subscriber. An HMO subscriber grievance procedure shall
include the following:
(1) Both informal and formal steps shall be available to
resolve the grievance. A grievance is not considered formal until
a written grievance is executed by the subscriber or completed on
forms prescribed and received by the HMO;
(2) Each HMO shall designate at least one grievance
coordinator who is responsible for the implementation of the HMO's
grievance procedure;
(3) Phone numbers shall be specified by the HMO for the
subscriber to call to present an informal grievance or to contact
the grievance coordinator. Each phone number shall be toll free
within the subscriber's geographic area and provide reasonable
access to the HMO without undue delays. There must be an adequate
number of phone lines to handle incoming grievances;
(4) An address shall be included for written grievances;
(5) Each level of the grievance procedure shall have some
person with problem-solving authority to participate in each step of the grievance procedure;
(6) The HMO shall process the formal written subscriber
grievance through all phases of the grievance procedure in a
reasonable length of time not to exceed sixty days, unless the
subscriber and HMO mutually agree to extend the time frame. If the
complaint involves the collection of information outside the
service area, the HMO has thirty additional days to process the
subscriber complaint through all phases of the grievance procedure.
The time limitations prescribed in this subdivision requiring
completion of the grievance process within sixty days shall be
tolled after the HMO has notified the subscriber, in writing, that
additional information is required in order to properly complete
review of the grievance. Upon receipt by the HMO of the additional
information requested, the time for completion of the grievance
process set forth in this subdivision shall resume;
(7) The subscriber grievance procedure shall state that the
subscriber has the right to appeal to the Commissioner. There
shall be the additional requirement that subscribers under a group
contract between the HMO and a department or division of the state
shall first appeal to the state agency responsible for
administering the relevant program, and if either of the two
parties are not satisfied with the outcome of the appeal, they may
then appeal to the Commissioner. The HMO shall provide to the
subscriber written notice of the right to appeal upon completion of the full grievance procedure and supply the Commissioner with a
copy of the final decision letter;
(8) The HMO shall have physician involvement in reviewing
medically related grievances. Physician involvement in the
grievance process should not be limited to the subscriber's primary
care physician, but may include at least one other physician;
(9) The HMO shall offer to meet with the subscriber during the
formal grievance process. The location of the meeting shall be at
the administrative offices of the HMO within the service area or at
a location within the service area which is convenient to the
subscriber;
(10) The HMO may not establish time limits of less than one
year from the date of occurrence for the subscriber to file a
formal grievance;
(11) Each HMO shall maintain an accurate record of each formal
grievance. Each record shall include the following: A complete
description of the grievance, the subscriber's name and address,
the provider's name and address and the HMO's name and address; a
complete description of the HMO's factual findings and conclusions
after completion of the full formal grievance procedure; a complete
description of the HMO's conclusions pertaining to the grievance as
well as the HMO's final disposition of the grievance; and a
statement as to which levels of the grievance procedure the
grievance has been processed and how many more levels of the grievance procedure are remaining before the grievance has been
processed through the HMO's entire grievance procedure.
(c) Copies of the grievances and the responses to the
grievances shall be available to the Commissioner and, subject to
state and federal privacy laws, to the public for inspection for
five years.
(d) Any subscriber grievance in which time is of the essence
shall be handled on an expedited basis, such that a reasonable
person would believe that a prevailing subscriber would be able to
realize the full benefit of a decision in his or her favor.
(e) Each health maintenance organization shall submit to the
Commissioner an annual report in a form prescribed by the
Commissioner which describes the grievance procedure and contains
a compilation and analysis of the grievances filed, their
disposition, and their underlying causes.
§33-25A-14. Prohibited advertising practices.
(a) No health maintenance organization, or representative of
a health maintenance organization, may cause or knowingly permit
the use of advertising which is untrue or misleading, solicitation
which is untrue or misleading, or any form of evidence of coverage
which is deceptive. No advertising may be used until it has been
approved by the Commissioner. Advertising which has not been
disapproved by the Commissioner within sixty days of filing shall
be considered approved. For purposes of this article:
(1) A statement or item of information shall be considered to
be untrue if it does not conform to fact in any respect which is or
may be significant to an enrollee of, or person considering
enrollment in, a health maintenance organization;
(2) A statement or item of information shall be considered to
be misleading, whether or not it may be literally untrue if, in the
total context in which the statement is made or the item of
information is communicated, the statement or item of information
may be reasonably understood by a reasonable person, not possessing
special knowledge regarding health care coverage, as indicating any
benefit or advantage or the absence of any exclusion, limitation,
or disadvantage of possible significance to an enrollee of, or
person considering enrollment in, a health maintenance
organization, if the benefit or advantage or absence of limitation,
exclusion or disadvantage does not in fact exist;
(3) An evidence of coverage shall be considered to be
deceptive if the evidence of coverage taken as a whole, and with
consideration given to typography and format, as well as language,
is such as to cause a reasonable person, not possessing special
knowledge regarding health maintenance organizations, and evidences
of coverage therefor, to expect benefits, services or other
advantages which the evidence of coverage does not provide or which
the health maintenance organization issuing the evidence of
coverage does not regularly make available for enrollees covered under the evidence of coverage; and
(4) The Commissioner may propose rules for legislative
approval in accordance with article three, chapter twenty-nine-a of
this code to further define practices which are untrue, misleading
or deceptive.
(b) (1) No health maintenance organization may use in its
name, contracts, logo or literature any of the words "insurance",
"casualty", "surety", "mutual" or any other words which are
descriptive of the insurance, casualty or surety business or
deceptively similar to the name or description of any insurance or
surety corporation doing business in this state: Provided, That
when a health maintenance organization has contracted with an
insurance company for any coverage permitted by this article, it
may so state; and
(2) Only a person that has been issued a certificate of
authority under this article may use the words "health maintenance
organization" or the initials "HMO" in its name, contracts, logo or
literature to imply, directly or indirectly, that it is a health
maintenance organization or hold itself out to be a health
maintenance organization.
(c) (1) No agent of a health maintenance organization or
person selling enrollments in a health maintenance organization
shall sell an enrollment in a health maintenance organization
unless the agent or person shall first disclose in writing to the prospective purchaser the following information using the following
exact terms in bold print: "Services offered", including any
exclusions or limitations; "full cost", including copayments;
"facilities available"; "transportation services"; "disenrollment
rate"; and "staff", including the names of all full-time staff
physicians, consulting specialists, hospitals and pharmacies
associated with the health maintenance organization. In any home
solicitation, any three-day cooling-off period applicable to
consumer transactions generally applies in the same manner as
consumer transactions.
(2) The form disclosure statement shall not be used in sales
until it has been approved by the Commissioner or submitted to the
Commissioner for sixty days without disapproval.
(d) No contract with an enrollee shall prohibit an enrollee
from canceling his or her enrollment at any time for any reason
except that the contract may require thirty days' notice to the
health maintenance organization.
(e) Any person who, in connection with an enrollment, violates
any provision of this section may be held liable for an amount
equivalent to one year's subscription rate, plus costs and a
reasonable attorney's fee.
§33-25A-14a. Other prohibited practices.
(a) No health maintenance organization may cancel or fail to
renew the coverage of an enrollee except for: (1) Failure to pay the charge for health care coverage; (2) termination of the health
maintenance organization; (3) termination of the group plan; (4)
enrollee moving out of the area served; (5) enrollee moving out of
an eligible group; or (6) other reasons established in rules
promulgated by the Commissioner. No health maintenance
organization shall use any technique of rating or grouping to
cancel or fail to renew the coverage of an enrollee. An enrollee
shall be given thirty days' notice of any cancellation or
nonrenewal and the notice shall include the reasons for the
cancellation or nonrenewal: Provided, That each enrollee moving
out of an eligible group shall be granted the opportunity to enroll
in the health maintenance organization on an individual basis. A
health maintenance organization may not disenroll an enrollee for
nonpayment of copayments unless the enrollee has failed to make
payment in at least three instances over any twelve-month period:
Provided, however, That the enrollee may not be disenrolled if the
disenrollment would constitute abandonment of a patient. Any
enrollee wrongfully disenrolled shall be reenrolled.
(b) The providers of a health maintenance organization who
provide health care services and the health maintenance
organization shall not have recourse against enrollees for amounts
above those specified in the evidence of coverage as the periodic
prepayment or copayment for health care services.
(c) No health maintenance organization shall enroll more than three hundred thousand persons in this state: Provided, That a
health maintenance organization may petition the Commissioner to
exceed an enrollment of three hundred thousand persons and, upon
notice and hearing, good cause being shown and a determination made
that an increase would be beneficial to the subscribers, creditors
and stockholders of the organization or would otherwise increase
the availability of coverage to consumers within the state, the
Commissioner may, by written order only, allow the petitioning
organization to exceed an enrollment of three hundred thousand
persons.
(d) No health maintenance organization shall discriminate in
enrollment policies or quality of services against any person on
the basis of race, sex, age, religion, place of residence, source
of payment or, with respect to enrollment in group policies, health
status: Provided, That differences in rates based on valid
actuarial distinctions, including distinctions relating to age and
sex, shall not be considered discrimination in enrollment policies.
(e) Any person who, in connection with an enrollment, violates
any provision of this section may be held liable for an amount
equivalent to one year's subscription rate, plus costs and a
reasonable attorney's fee.
§33-25A-17. Examinations.
(a) The Commissioner may make an examination of the affairs of
any health maintenance organization and providers with whom the organization has contracts, agreements or other arrangements as
often as he or she considers it necessary for the protection of the
interests of the people of this state but not less frequently than
once every five years.
(b) The Commissioner may contract with the Department of
Health and Human Resources, any entity which has been accredited by
a nationally recognized accrediting organization and has been
approved by the Commissioner to make examinations concerning the
quality of health care services of any health maintenance
organization and providers with whom the organization has
contracts, agreements or other arrangements, or any entity
contracted with by the Department of Health and Human Resources, as
often as it considers necessary for the protection of the interests
of the people of this state, but not less frequently than once
every three years: Provided, That in making the examination, the
Department of Health and Human Resources or the accredited entity
shall use the services of persons or organizations with
demonstrable expertise in assessing quality of health care.
(c) Every health maintenance organization and affiliated
provider shall submit its books and records to the examinations and
in every way facilitate them. For the purpose of examinations, the
Commissioner and the Department of Health and Human Resources have
all powers necessary to conduct the examinations, including, but
not limited to, the power to issue subpoenas, the power to administer oaths to and examine the officers and agents of the
health maintenance organization and the principals of the providers
concerning their business.
(d) The health maintenance organization and any other entity
subject to examination pursuant to this article are subject to the
provisions of sections four, five, six, seven, eight and nine,
article two of this chapter in regard to the expense and conduct of
examinations.
(e) In lieu of the examination, the Commissioner may accept
the report of an examination made by other states.
(f) The expenses of an examination assessing quality of health
care under subsection (b) of this section and section seventeen-a
of this article shall be reimbursed pursuant to subsection (n),
section nine, article two of this chapter.
§33-25A-22. Fees.
Every health maintenance organization subject to this article
shall pay to the Commissioner the following fees: For filing an
application for a certificate of authority or amendment to the
application, two hundred dollars; for each renewal of a certificate
of authority, the annual fee as provided in section thirteen,
article three of this chapter; for each form filing and for each
rate filing, the fee, as provided in section thirty-four, article
six of this chapter; and for filing each annual report, one hundred
dollars. Fees charged under this section shall be for the purposes set forth in section thirteen, article three of this chapter.
§33-25A-23. Penalties and enforcement.
(1) The Commissioner may, in lieu of suspension or revocation
of a certificate of authority under section eighteen of this
article, levy an administrative penalty in an amount not less than
one hundred dollars nor more than five thousand dollars, if
reasonable notice in writing is given of the intent to levy the
penalty and the health maintenance organization has a reasonable
time within which to remedy the defect in its operations which gave
rise to the penalty citation. The Commissioner may augment this
penalty by an amount equal to the sum that he or she calculates to
be the damages suffered by enrollees or other members of the
public.
(2) Any person who violates any provision of this article
shall be guilty of a misdemeanor and, upon conviction thereof,
shall be fined not less than one thousand dollars nor more than ten
thousand dollars, or imprisoned in jail not more than one year, or
both fined and imprisoned.
(3) (a) If the Commissioner has cause to believe that any
violation of this article or rules promulgated pursuant to this
article has occurred or is threatened, prior to the levy of a
penalty or suspension or revocation of a certificate of authority,
the Commissioner shall give notice to the health maintenance
organization and to the representatives, or other persons who appear to be involved in the suspected violation, to arrange a
conference with the alleged violators or their authorized
representatives for the purpose of attempting to ascertain the
facts relating to the suspected violation and, in the event it
appears that any violation has occurred or is threatened, to arrive
at an adequate and effective means of correcting or preventing the
violation.
(b) Proceedings under this subsection shall not be governed by
any formal procedural requirements and may be conducted in a manner
the Commissioner determines appropriate under the circumstances.
Enrollees shall be afforded notice by publication of proceedings
under this subsection and shall be afforded the opportunity to
intervene.
(4) (a) The Commissioner may issue an order directing a health
maintenance organization or a representative of a health
maintenance organization to cease and desist from engaging in any
act or practice in violation of the provisions of this article or
regulations promulgated pursuant to this article.
(b) Within ten days after service of the order of cease and
desist, the respondent may request a hearing on the question of
whether acts or practices in violation of this article have
occurred. The hearings shall be conducted pursuant to chapter
twenty-nine-a of this code and judicial review shall be available
as provided by chapter twenty-nine-a of this code.
(5) In the case of any violation of the provisions of this
article or rules promulgated pursuant to this article, if the
Commissioner elects not to issue a cease and desist order, or in
the event of noncompliance with a cease and desist order issued
pursuant to subsection (4) of this section, the Commissioner may
institute a proceeding to obtain injunctive relief, or seek other
appropriate relief, in the circuit court of the county of the
principal place of business of the health maintenance organization.
(6) Any enrollee of or resident of the service area of the
health maintenance organization may bring an action to enforce any
provision, standard or rule enforceable by the Commissioner. In
the case of any successful action to enforce this article, or
accompanying standards or rules the individual shall be awarded the
costs of the action together with a reasonable attorney's fee as
determined by the court.
§33-25A-24. Scope of provisions; applicability of other laws.
(a) Except as otherwise provided in this article, provisions
of the insurance laws and provisions of hospital or medical service
corporation laws are not applicable to any health maintenance
organization granted a certificate of authority under this article.
The provisions of this article shall not apply to an insurer or
hospital or medical service corporation licensed and regulated
pursuant to the insurance laws or the hospital or medical service
corporation laws of this state except with respect to its health maintenance corporation activities authorized and regulated
pursuant to this article. The provisions of this article may not
apply to an entity properly licensed by a reciprocal state to
provide health care services to employer groups, where residents of
West Virginia are members of an employer group, and the employer
group contract is entered into in the reciprocal state. For
purposes of this subsection, a "reciprocal state" means a state
which physically borders West Virginia and which has subscriber or
enrollee hold harmless requirements substantially similar to those
set out in section seven-a of this article.
(b) Factually accurate advertising or solicitation regarding
the range of services provided, the premiums and copayments
charged, the sites of services and hours of operation and any other
quantifiable, nonprofessional aspects of its operation by a health
maintenance organization granted a certificate of authority or its
representative may not be construed to violate any provision of law
relating to solicitation or advertising by health professions:
Provided, That nothing contained in this subsection shall be
construed as authorizing any solicitation or advertising which
identifies or refers to any individual provider or makes any
qualitative judgment concerning any provider.
(c) Any health maintenance organization authorized under this
article may not be considered to be practicing medicine and is
exempt from the provisions of chapter thirty of this code relating to the practice of medicine.
(d) The following provisions of this chapter shall be
applicable to any health maintenance organization granted a
certificate of authority under this article or which is otherwise
subject to the provisions of this article: The provisions of
sections four, five, six, seven, eight, nine and nine-a, article
two (Insurance Commissioner); sections fifteen and twenty, article
four (general provisions); section twenty, article five (borrowing
by insurers); section seventeen, article six (validity of
noncomplying forms); article six-c (guaranteed loss ratios as
applied to individual sickness and accident insurance policies);
article seven (assets and liabilities); article eight
(investments); article eight-a (use of clearing corporations and
federal reserve book-entry system); article nine (administration of
deposits); article ten (rehabilitation and liquidation); article
twelve ( insurance producers and solicitors); section fourteen,
article fifteen ( policies discriminating among health care
providers); section sixteen, article fifteen ( policies not to
exclude insured's children from coverage; required services;
coordination with other insurance); section eighteen, article
fifteen (equal treatment of state agency); section nineteen,
article fifteen (coordination of benefits with Medicaid); article
fifteen-b (Uniform Health Care Administration Act); section three,
article sixteen (required policy provisions); section three-f, article sixteen (required policy provisions - treatment of
temporomandibular joint disorder and craniomandibular disorder);
section eleven, article sixteen ( group policies not to exclude
insured's children from coverage; required services; coordination
with other insurance); section thirteen, article sixteen (equal
treatment of state agency); section fourteen, article sixteen
(coordination of benefits with Medicaid); article sixteen-a (group
health insurance conversion); article sixteen-d (marketing and rate
practices for small employer accident and sickness insurance
policies); article twenty-five-c (Health Maintenance Organization
Patient Bill of Rights); article twenty-five-f (coverage for
patient cost of clinical trials); article twenty-seven (insurance
holding company systems); article thirty-three (annual audited
financial report); article thirty-four (administrative
supervision); article thirty-four-a (standards and Commissioner's
authority for companies considered to be in hazardous financial
condition); article thirty-five (criminal sanctions for failure to
report impairment); article thirty-seven (managing general agents);
article thirty-nine (disclosure of material transactions); article
forty (risk-based capital for insurers); article forty-one (
Insurance Fraud Prevention Act); and article forty-two (Women's
Access to Health Care Act). In circumstances where the code
provisions made applicable to health maintenance organizations by
this subsection refer to the "insurer", the "corporation" or words of similar import, the language shall be construed to include
health maintenance organizations.
(e) Any long-term care insurance policy delivered or issued
for delivery in this state by a health maintenance organization
shall comply with the provisions of article fifteen-a of this
chapter.
ARTICLE 40. RISK-BASED CAPITAL (RBC) FOR INSURERS.
§33-40-1. Definitions.
As used in this article, these terms have the following
meanings:
(a) "Adjusted RBC report" means an RBC report which has been
adjusted by the Commissioner in accordance with subsection (e),
section two of this article.
(b) "Corrective order" means an order issued by the
Commissioner specifying corrective actions which the Commissioner
has determined are required.
(c) "HMO" means the same as defined in subsection (11),
section two, article twenty-five-a of this chapter; as used in
sections one, three, four, five, seven, eight and twelve of this
article, the term "insurer" includes HMO.
(d) "Domestic insurer" means any insurance company, farmers'
mutual fire insurance company or HMO domiciled in this state.
(e) "Foreign insurer" means any insurance company which is
licensed to do business in this state under article three of this chapter but is not domiciled in this state or any HMO that has been
issued a certificate of authority under article twenty-five-a of
this chapter but that is not domiciled in this state.
(f) "NAIC" means the National Association of Insurance
Commissioners.
(g) "Life and/or health insurer" means any insurance company
licensed under article three of this chapter or a licensed property
and casualty insurer writing only accident and health insurance.
(h) "Property and casualty insurer" means any insurance
company licensed under article three of this chapter or any
farmers' mutual fire insurance company licensed under article
twenty-two of this chapter, but shall not include monoline mortgage
guaranty insurers, financial guaranty insurers and title insurers.
(i) "Negative trend" means, with respect to a life and/or
health insurer, negative trend over a period of time, as determined
in accordance with the trend test calculation included in the RBC
instructions.
(j) "RBC instructions" means the RBC report, including
risk-based capital instructions adopted by the NAIC, as the RBC
instructions may be amended by the NAIC, from time to time, in
accordance with the procedures adopted by the NAIC.
(k) "RBC level" means an insurer's or HMO's company action
level RBC, regulatory action level RBC, authorized control level
RBC, or mandatory control level RBC where:
(1) "Company action level RBC" means, with respect to any
insurer, the product of two and its authorized control level RBC;
(2) "Regulatory action level RBC" means the product of one and
one-half and its authorized control level RBC;
(3) "Authorized control level RBC" means the number determined
under the risk-based capital formula in accordance with the RBC
instructions;
(4) "Mandatory control level RBC" means the product of seven-
tenths and the authorized control level RBC.
(l) "RBC plan" means a comprehensive financial plan containing
the elements specified in subsection (b), section three of this
article. If the Commissioner rejects the RBC plan and it is
revised by the insurer or HMO, with or without the Commissioner's
recommendation, the plan shall be called the revised RBC plan.
(m) "RBC report" means the report required in section two of
this article.
(n) "Total adjusted capital" means the sum of:
(1) An insurer's or HMO's statutory capital and surplus as
determined in accordance with the statutory accounting applicable
to the financial statements required to be filed under section
fourteen, article four of this chapter; and
(2) Any other items required by the RBC instructions.
§33-40-2. RBC reports.
(a) Every domestic insurer shall, on or prior to each first day of March (the "filing date"), prepare and submit to the
Commissioner a report of its RBC levels as of the end of the
calendar year just ended, in a form and containing the information
required by the RBC instructions. In addition, every domestic
insurer shall file its RBC report:
(1) With the NAIC in accordance with the RBC instructions; and
(2) With the Insurance Commissioner in any state in which the
insurer is authorized to do business, if the Insurance Commissioner
has notified the insurer of its request in writing, in which case
the insurer shall file its RBC report not later than the later of:
(A) Fifteen days from the receipt of notice to file its RBC
report with that state; or
(B) The filing date.
(b) A life and health insurer's RBC shall be determined in
accordance with the formula set forth in the RBC instructions. The
formula shall take into account (and may adjust for the covariance
between):
(1) The risk with respect to the insurer's assets;
(2) The risk of adverse insurance experience with respect to
the insurer's liabilities and obligations;
(3) The interest rate risk with respect to the insurer's
business; and
(4) All other business risks and any other relevant risks set
forth in the RBC instructions determined in each case by applying the factors in the manner set forth in the RBC instructions.
(c) A property and casualty insurer's RBC and an HMO's RBC
shall be determined in accordance with the applicable formula set
forth in the RBC instructions. The formula shall take into account
(and may adjust for the covariance between), determined in each
case by applying the factors in the manner set forth in the RBC
instructions:
(1) Asset risk;
(2) Credit risk;
(3) Underwriting risk; and
(4) All other business risks and any other relevant risks as
are set forth in the RBC instructions.(d) An excess of capital
over the amount produced by the risk-based capital requirements
contained in this article and the formulas, schedules and
instructions referenced in this article is desirable in the
business of insurance. Accordingly, insurers and HMOs should seek
to maintain capital above the RBC levels required by this article.
Additional capital is used and useful in the insurance business and
helps to secure insurers and HMOs against various risks inherent
in, or affecting, the business of insurance and not accounted for
or only partially measured by the risk-based capital requirements
contained in this article.
(e) If a domestic insurer files an RBC report which, in the
judgment of the Commissioner is inaccurate, then the Commissioner shall adjust the RBC report to correct the inaccuracy and shall
notify the insurer of the adjustment. The notice shall contain a
statement of the reason for the adjustment. An RBC report that is
adjusted is referred to as an "Adjusted RBC Report".
§33-40-3. Company action level event.
(a) "Company action level event" means any of the following
events:
(1) The filing of an RBC report by an insurer which indicates
that:
(A) The insurer's total adjusted capital is greater than or
equal to its regulatory action level RBC, but less than its company
action level RBC; or
(B) If a life and/or health insurer, the insurer has total
adjusted capital which is greater than or equal to its company
action level RBC, but less than the product of its authorized
control level RBC and two and one-half and has a negative trend;
(2) The notification by the Commissioner to the insurer of an
adjusted RBC report that indicates an event in subdivision (1) of
this subsection, provided the insurer does not challenge the
adjusted RBC report under section seven of this article; or
(3) If, pursuant to section seven of this article, an insurer
challenges an adjusted RBC report that indicates the event in
subdivision (1) of this subsection, the notification by the
Commissioner to the insurer that the Commissioner has, after a hearing, rejected the insurer's challenge.
(b) In the event of a company action level event, the insurer
shall prepare and submit to the Commissioner an RBC plan which
shall:
(1) Identify the conditions which contribute to the company
action level event;
(2) Contain proposals of corrective actions which the insurer
intends to take and would be expected to result in the elimination
of the company action level event;
(3) Provide projections of the insurer's financial results in
the current year and at least the four succeeding years or, in the
case of an HMO, in the current year and at least the two succeeding
years, both in the absence of proposed corrective actions and
giving effect to the proposed corrective actions, including
projections of statutory operating income, net income, capital
and/or surplus. (The projections for both new and renewal business
may include separate projections for each major line of business
and separately identify each significant income, expense and
benefit component);
(4) Identify the key assumptions impacting the insurer's
projections and the sensitivity of the projections to the
assumptions; and
(5) Identify the quality of, and problems associated with, the
insurer's business, including, but not limited to, its assets, anticipated business growth and associated surplus strain,
extraordinary exposure to risk, mix of business and use of
reinsurance, if any, in each case.
(c) The RBC plan shall be submitted:
(1) Within forty-five days of the company action level event;
or
(2) If the insurer challenges an adjusted RBC report pursuant
to section seven of this article, within forty-five days after
notification to the insurer that the Commissioner has, after a
hearing, rejected the insurer's challenge.
(d) Within sixty days after the submission by an insurer of an
RBC plan to the Commissioner, the Commissioner shall notify the
insurer whether the RBC plan may be implemented or is, in the
judgment of the Commissioner, unsatisfactory. If the Commissioner
determines the RBC plan is unsatisfactory, the notification to the
insurer shall set forth the reasons for the determination and may
set forth proposed revisions which will render the RBC plan
satisfactory in the judgment of the Commissioner. Upon
notification from the Commissioner, the insurer shall prepare a
revised RBC plan, which may incorporate by reference any revisions
proposed by the Commissioner, and shall submit the revised RBC plan
to the Commissioner:
(1) Within forty-five days after the notification from the
Commissioner; or
(2) If the insurer challenges the notification from the
Commissioner under section seven of this article, within forty-five
days after a notification to the insurer that the Commissioner has,
after a hearing, rejected the insurer's challenge.
(e) In the event of a notification by the Commissioner to an
insurer that the insurer's RBC plan or revised RBC plan is
unsatisfactory, the Commissioner may, at the Commissioner's
discretion, subject to the insurer's right to a hearing under
section seven of this article, specify in the notification that the
notification constitutes a regulatory action level event.
(f) Every domestic insurer that files an RBC plan or revised
RBC plan with the Commissioner shall file a copy of the RBC plan or
revised RBC plan with the Insurance Commissioner in any state in
which the insurer is authorized to do business if:
(1) The state has an RBC provision substantially similar to
subsection (a), section eight of this article; and
(2) The Insurance Commissioner of that state has notified the
insurer of its request for the filing in writing, in which case the
insurer shall file a copy of the RBC plan or revised RBC plan in
that state no later than the later of:
(i) Fifteen days after the receipt of notice to file a copy of
its RBC plan or revised RBC plan with the state; or
(ii) The date on which the RBC plan or revised RBC plan is
filed under subsections (c) and (d) of this section.§33-40-6. Mandatory control level event.
(a) "Mandatory control level event" means any of the following
events:
(1) The filing of an RBC report which indicates that the
insurer's or HMO's total adjusted capital is less than its
mandatory control level RBC;
(2) Notification by the Commissioner to the insurer or HMO of
an adjusted RBC report that indicates the event in subdivision (1)
of this subsection, provided the insurer or HMO does not challenge
the adjusted RBC report under section seven of this article; or
(3) If, pursuant to section seven of this article, the insurer
or HMO challenges an adjusted RBC report that indicates the event
in subdivision (1) of this subsection, notification by the
Commissioner to the insurer or HMO that the Commissioner has, after
a hearing, rejected the insurer's or HMO's challenge.
(b) In the event of a mandatory control level event:
(1) With respect to a life insurer, the Commissioner shall
take any actions that are necessary to place the insurer under
regulatory control under article ten of this chapter. In that
event, the mandatory control level event shall be considered
sufficient grounds for the Commissioner to take action under said
article, and the Commissioner has the rights, powers and duties
with respect to the insurer that are set forth in said article. If
the Commissioner takes actions pursuant to an adjusted RBC report, the insurer is entitled to the protections of said article
pertaining to summary proceedings. Notwithstanding any of the
provisions of this subdivision, the Commissioner may forego action
for up to ninety days after the mandatory control level event if
the Commissioner finds there is a reasonable expectation that the
mandatory control level event may be eliminated within the
ninety-day period.
(2) With respect to a property and casualty insurer, the
Commissioner shall take any actions that are necessary to place the
insurer under regulatory control under article ten of this chapter
or, in the case of an insurer which is writing no business and
which is running-off its existing business, may allow the insurer
to continue its run-off under the supervision of the Commissioner.
In either event, the mandatory control level event shall be
considered sufficient grounds for the Commissioner to take action
under said article and the Commissioner has the rights, powers and
duties with respect to the insurer that are set forth in said
article. If the Commissioner takes actions pursuant to an adjusted
RBC report, the insurer is entitled to the protections of said
article pertaining to summary proceedings. Notwithstanding any of
the provisions of this subdivision, the Commissioner may forego
action for up to ninety days after the mandatory control level
event if the Commissioner finds there is a reasonable expectation
that the mandatory control level event may be eliminated within the ninety-day period.
(3) With respect to HMO's, the Commissioner shall take any
actions that are necessary to place the HMO under regulatory
control in accordance with the provisions of article ten and
section nineteen, article twenty-five of this chapter. In that
event, the mandatory control level event shall be considered
sufficient grounds for the Commissioner to take action under said
section and the Commissioner has the rights, powers and duties with
respect to the HMO as are set forth in said section. If the
Commissioner takes actions pursuant to an adjusted RBC report, the
HMO is entitled to the protections of said article pertaining to
summary proceedings. Notwithstanding any of the provisions of this
subdivision, the Commissioner may forego action for up to ninety
days after the mandatory control level event if the Commissioner
finds there is a reasonable expectation that the mandatory control
level event may be eliminated within the ninety-day period.
§33-40-7. Hearings.
Insurers have the right to a confidential departmental
hearing, on the record, at which the insurer may challenge any
determination or action by the Commissioner made pursuant to the
provisions of this article. The insurer shall notify the
Commissioner of its request for a hearing within ten days after
receiving notification from the Commissioner.
(a) Notification to an insurer by the Commissioner of an adjusted RBC report; or
(b) Notification to an insurer by the Commissioner that:
(1) The insurer's RBC plan or revised RBC plan is
unsatisfactory; and
(2) The notification constitutes a regulatory action level
event with respect to the insurer; or
(c) Notification to any insurer by the Commissioner that the
insurer has failed to adhere to its RBC plan or revised RBC plan
and that the failure has a substantial adverse effect on the
ability of the insurer to eliminate the company action level event
with respect to the insurer in accordance with its RBC plan or
revised RBC plan; or
(d) Notification to an insurer by the Commissioner of a
corrective order with respect to the insurer.
(e) Upon receipt of the insurer's request for a hearing, the
Commissioner shall set a date for the hearing, which shall be no
less than fifteen nor more than forty-five days after the date of
the insurer's request.
(f) To the extent that the provisions of this section conflict
with any other provisions applicable to HMO's, the provisions of
this section apply.