AN
ACT Relating to the financial and reporting requirements of health care service
contractors and health maintenance organizations; amending RCW 48.44.035,
48.44.037, 48.44.095, 48.46.080, and 48.46.235; adding a new section to chapter
48.44 RCW; and adding a new section to chapter 48.46 RCW.
BE IT ENACTED BY THE
LEGISLATURE OF THE STATE OF WASHINGTON:
Sec.
1. RCW
48.44.035 and 1990 c 120 s 3 are each amended to read as follows:
(1)
For purposes of this section only, "limited health care service"
means dental care services, vision care services, mental health services,
chemical dependency services, pharmaceutical services, podiatric care services,
and such other services as may be determined by the commissioner to be limited
health services, but does not include hospital, medical, surgical, emergency,
or out-of-area services except as those services are provided incidentally to
the limited health services set forth in this subsection.
(2)
For purposes of this section only, a "limited health care service
contractor" means a health care service contractor that offers one and
only one limited health care service.
(3)
Except as provided in subsection (4) of this section, every limited health
care service contractor must have and maintain a minimum net worth of three
hundred thousand dollars.
(4)
A limited health care service contractor registered before the effective date
of this act that, on the effective date of this act, has a minimum net worth
equal to or greater than that required by subsection (3) of this section must
continue to have and maintain the minimum net worth required by subsection (3)
of this section. A limited health care service contractor registered before the
effective date of this act that, on the effective date of this act, does not
have the minimum net worth required by subsection (3) of this section must have
and maintain a minimum net worth of:
(a)
Thirty-five percent of the amount required by subsection (3) of this section by
December 31, 1997;
(b)
Seventy percent of the amount required by subsection (3) of this section by
December 31, 1998; and
(c)
One hundred percent of the amount required by subsection (3) of this section by
December 31, 1999.
(5)
For all limited health care service contractors that have had a certificate of
registration for less than three years, their uncovered expenditures shall be
either insured or guaranteed by a foreign or domestic carrier admitted in the
state of Washington or by another carrier acceptable to the commissioner. All
such contractors shall also deposit with the commissioner one-half of one
percent of their projected premium for the next year in cash, approved surety
bond, securities, or other form acceptable to the commissioner.
(((4)))
(6) For all limited health care service contractors that have had a
certificate of registration for three years or more, their uncovered
expenditures shall be assured by depositing with the insurance commissioner
twenty-five percent of their last year's uncovered expenditures as reported to
the commissioner and adjusted to reflect any anticipated increases or decreases
during the ensuing year plus an amount for unearned prepayments; in cash,
approved surety bond, securities, or other form acceptable to the
commissioner. Compliance with subsection (((3))) (5) of this
section shall also constitute compliance with this requirement.
(((5)))
(7) Limited health service contractors need not comply with RCW
48.44.030 or 48.44.037.
Sec.
2. RCW
48.44.037 and 1990 c 120 s 4 are each amended to read as follows:
(1)(((a)))
Except as provided in subsection (2) of this section, every health care service
contractor must have ((a)) and maintain a minimum net worth ((of
one million five hundred thousand dollars at the time of initial registration
under this chapter and a net worth of one million dollars thereafter. The
commissioner is authorized to establish standards for reviewing a health care
service contractor's financial integrity when, for any reason, its net worth is
reduced below one million dollars. When satisfied that such a health care
service contractor is financially stable and not hazardous to its enrolled
participants, the commissioner may waive compliance with the one million dollar
net worth standard otherwise required by this subsection. When such a health
care service contractor's net worth falls below five hundred thousand dollars,
the commissioner shall require that net worth be increased to one million
dollars.
(b)
A health care service contractor who fails to maintain the required net worth
must cure that defect in compliance with an order of the commissioner rendered
in conformity with rules adopted under chapter 34.05 RCW. The commissioner may
take appropriate action to assure that the continued operation of the health
care service contractor will not be hazardous to its enrolled participants)) equal
to the greater of:
(a)
Three million dollars; or
(b)
Two percent of the annual premium earned, as reported on the most recent annual
financial statement filed with the commissioner, on the first one hundred fifty
million dollars of premium and one percent of the annual premium on the premium
in excess of one hundred fifty million dollars.
(2)
A health care service contractor registered before ((June 7, 1990,)) the
effective date of this act that, on the effective date of this act, has a
minimum net worth equal to or greater than that required by subsection (1) of
this section must continue to have and maintain the minimum net worth required
by subsection (1) of this section. A health care service contractor registered
before the effective date of this act that, on the effective date of this act,
does not have the minimum net worth required by subsection (1) of this section
must have and maintain a minimum net worth of:
(a)
((Twenty-five percent of the amount required by subsection (1) of this
section by December 31, 1990)) The amount required immediately prior to
the effective date of this act until December 31, 1997;
(b)
Fifty percent of the amount required by subsection (1) of this section by
December 31, ((1991)) 1997;
(c)
Seventy-five percent of the amount required by subsection (1) of this section
by December 31, ((1992)) 1998; and
(d)
One hundred percent of the amount required by subsection (1) of this section by
December 31, ((1993)) 1999.
(3)(a)
In determining net worth, no debt shall be considered fully subordinated unless
the subordination is in a form acceptable to the commissioner. An interest
obligation relating to the repayment of a subordinated debt must be similarly
subordinated.
(b)
The interest expenses relating to the repayment of a fully subordinated debt
shall not be considered uncovered expenditures.
(c)
A subordinated debt incurred by a note meeting the requirement of this section,
and otherwise acceptable to the commissioner, shall not be considered a liability
and shall be recorded as equity.
(4)
Every health care service contractor shall, when determining liabilities,
include an amount estimated in the aggregate to provide for any unearned
premium and for the payment of all claims for health care expenditures which
have been incurred, whether reported or unreported, which are unpaid and for
which the organization is or may be liable, and to provide for the expense of
adjustment or settlement of the claims.
Liabilities
shall be computed in accordance with regulations adopted by the commissioner
upon reasonable consideration of the ascertained experience and character of
the health care service contractor.
(5)
All income from reserves on deposit with the commissioner shall belong to the
depositing health care service contractor and shall be paid to it as it becomes
available.
(6)
Any funded reserve required by this chapter shall be considered an asset of the
health care service contractor in determining the organization's net worth.
(7)
A health care service contractor that has made a securities deposit with the
commissioner may, at its option, withdraw the securities deposit or any part
thereof after first having deposited or provided in lieu thereof an approved
surety bond, a deposit of cash or securities, or any combination of these or
other deposits of equal amount and value to that withdrawn. Any securities and
surety bond shall be subject to approval by the commissioner before being
substituted.
NEW
SECTION. Sec. 3. A
new section is added to chapter 48.44 RCW to read as follows:
(1)
For purposes of this section:
(a)
"Domestic health care service contractor" means a health care service
contractor formed under the laws of this state; and
(b)
"Foreign health care service contractor" means a health care service
contractor formed under the laws of the United States, of a state or territory
of the United States other than this state, or of the District of Columbia.
(2)
If the minimum net worth of a domestic health care service contractor falls
below the minimum net worth required by this chapter, the commissioner shall at
once ascertain the amount of the deficiency and serve notice upon the domestic
health care service contractor to cure the deficiency within ninety days after
that service of notice.
(3)
If the deficiency is not cured, and proof thereof filed with the commissioner
within the ninety‑day period, the domestic health care service contractor
shall be declared insolvent and shall be proceeded against as authorized by
this code, or the commissioner shall, consistent with chapters 48.04 and 34.05
RCW, suspend or revoke the registration of the domestic health care service
contractor as being hazardous to its subscribers and the people in this state.
(4)
If the deficiency is not cured the domestic health care service contractor
shall not issue or deliver any individual or group contract after the
expiration of the ninety‑day period.
(5)
If the minimum net worth of a foreign health care service contractor falls below
the minimum net worth required by this chapter, the commissioner shall,
consistent with chapters 48.04 and 34.05 RCW, suspend or revoke the foreign
health care service contractor's registration as being hazardous to its
subscribers or the people in this state.
Sec.
4. RCW
48.44.095 and 1993 c 492 s 295 are each amended to read as follows:
(1)
Every health care service contractor shall annually, before the first day of
March, file with the commissioner a statement verified by at least two of the
principal officers of the health care service contractor showing its financial
condition as of the last day of the preceding calendar year. The statement
shall be in such form as is furnished or prescribed by the commissioner. The
commissioner may for good reason allow a reasonable extension of the time
within which such annual statement shall be filed.
(2)
In addition to the requirements of subsection (1) of this section, every
health care service contractor that is registered in this state shall annually,
on or before March 1st of each year, file with the national association of
insurance commissioners a copy of its annual statement, along with those
additional schedules as prescribed by the commissioner for the preceding year.
The information filed with the national association of insurance commissioners
shall be in the same format and scope as that required by the commissioner and
shall include the signed jurate page and the actuarial certification. Any
amendments and addendums to the annual statement filing subsequently filed with
the commissioner shall also be filed with the national association of insurance
commissioners.
(3)
Coincident with the filing of its annual statement and other schedules, each
health care service contractor shall pay a reasonable fee directly to the
national association of insurance commissioners in an amount approved by the
commissioner to cover the costs associated with the analysis of the annual
statement.
(4)
Foreign health care service contractors that are domiciled in a state that has
a law substantially similar to subsection (2) of this section are considered to
be in compliance with this section.
(5)
In the absence of actual malice, members of the national association of
insurance commissioners, their duly authorized committees, subcommittees, and
task forces, their delegates, national association of insurance commissioners
employees, and all other persons charged with the responsibility of collecting,
reviewing, analyzing, and dissimilating the information developed from the
filing of the annual statement shall be acting as agents of the commissioner
under the authority of this section and shall not be subject to civil liability
for libel, slander, or any other cause of action by virtue of their collection,
review, analysis, or dissimilation of the data and information collected for
the filings required under this section.
(6)
The commissioner may suspend or revoke the certificate of registration of any
health care service contractor failing to file its annual statement or pay
the fees when due or during any extension of time therefor which the
commissioner, for good cause, may grant.
Sec.
5. RCW
48.46.080 and 1993 c 492 s 296 are each amended to read as follows:
(1)
Every health maintenance organization shall annually, before the first day of
March, file with the commissioner a statement verified by at least two of the
principal officers of the health maintenance organization showing its financial
condition as of the last day of the preceding calendar year.
(2)
Such annual report shall be in such form as the commissioner shall prescribe
and shall include:
(a)
A financial statement of such organization, including its balance sheet and
receipts and disbursements for the preceding year, which reflects at a minimum;
(i)
All prepayments and other payments received for health care services
rendered pursuant to health maintenance agreements;
(ii)
Expenditures to all categories of health care facilities, providers,
insurance companies, or hospital or medical service plan corporations with
which such organization has contracted to fulfill obligations to enrolled
participants arising out of its health maintenance agreements, together with
all other direct expenses including depreciation, enrollment, and commission;
and
(iii)
Expenditures for capital improvements, or additions thereto, including
but not limited to construction, renovation, or purchase of facilities and
capital equipment;
(b)
The number of participants enrolled and terminated during the report period.
Every employer offering health care benefits to their employees through a group
contract with a health maintenance organization shall furnish said health
maintenance organization with a list of their employees enrolled under such
plan;
(c)
The number of doctors by type of practice who, under contract with or as an
employee of the health maintenance organization, furnished health care services
to consumers during the past year;
(d)
A report of the names and addresses of all officers, directors, or trustees of
the health maintenance organization during the preceding year, and the amount
of wages, expense reimbursements, or other payments to such individuals for
services to such organization. For partnership and professional service
corporations, a report shall be made for partners or shareholders as to any
compensation or expense reimbursement received by them for services, other than
for services and expenses relating directly for patient care;
(e)
Such other information relating to the performance of the health maintenance
organization or the health care facilities or providers with which it has
contracted as reasonably necessary to the proper and effective administration
of this chapter, in accordance with rules and regulations; and
(f)
Disclosure of any financial interests held by officers and directors in any
providers associated with the health maintenance organization or any provider
of the health maintenance organization.
(3)
The commissioner may for good reason allow a reasonable extension of the time
within which such annual statement shall be filed.
(4)
In addition to the requirements of subsections (1) and (2) of this section,
every health maintenance organization that is registered in this state shall
annually, on or before March 1st of each year, file with the national
association of insurance commissioners a copy of its annual statement, along
with those additional schedules as prescribed by the commissioner for the
preceding year. The information filed with the national association of
insurance commissioners shall be in the same format and scope as that required
by the commissioner and shall include the signed jurate page and the actuarial
certification. Any amendments and addendums to the annual statement filing
subsequently filed with the commissioner shall also be filed with the national
association of insurance commissioners.
(5)
Coincident with the filing of its annual statement and other schedules, each
health maintenance organization shall pay a reasonable fee directly to the
national association of insurance commissioners in an amount approved by the
commissioner to cover the costs associated with the analysis of the annual
statement.
(6)
Foreign health maintenance organizations that are domiciled in a state that has
a law substantially similar to subsection (4) of this section are considered to
be in compliance with this section.
(7)
In the absence of actual malice, members of the national association of
insurance commissioners, their duly authorized committees, subcommittees, and
task forces, their delegates, national association of insurance commissioners
employees, and all other persons charged with the responsibility of collecting,
reviewing, analyzing, and dissimilating the information developed from the
filing of the annual statement shall be acting as agents of the commissioner
under the authority of this section and shall not be subject to civil liability
for libel, slander, or any other cause of action by virtue of their collection,
review, analysis, or dissimilation of the data and information collected for
the filings required under this section.
(8)
The commissioner may suspend or revoke the certificate of registration of any
health maintenance organization failing to file its annual statement or pay
the fees when due or during any extension of time therefor which the
commissioner, for good cause, may grant.
(((5)))
(9) No person shall knowingly file with any public official or knowingly
make, publish, or disseminate any financial statement of a health maintenance
organization which does not accurately state the health maintenance
organization's financial condition.
Sec.
6. RCW
48.46.235 and 1990 c 119 s 5 are each amended to read as follows:
(1)
Except as provided in subsection (2) of this section, every health maintenance
organization must have and maintain a minimum net worth equal to the
greater of:
(a)
((One)) Three million dollars; or
(b)
Two percent of annual premium ((revenues)) earned as reported on
the most recent annual financial statement filed with the commissioner on the
first one hundred fifty million dollars of premium and one percent of annual
premium on the premium in excess of one hundred fifty million dollars; or
(c)
An amount equal to the sum of three months' uncovered expenditures as reported
on the most recent financial statement filed with the commissioner.
(2)
A health maintenance organization registered before ((June 7, 1990,)) the
effective date of this act that, on the effective date of this act, has a
minimum net worth equal to or greater than that required by subsection (1) of
this section must continue to have and maintain the minimum net worth required
by subsection (1) of this section. A health maintenance organization
registered before the effective date of this act that, on the effective date of
this act, does not have the minimum net worth required by subsection (1) of
this section must have and maintain a minimum net worth of:
(a)
((Twenty-five percent of the amount required by subsection (1) of this
section by December 31, 1990)) The amount required immediately prior to
the effective date of this act until December 31, 1997;
(b)
Fifty percent of the amount required by subsection (1) of this section by
December 31, ((1991)) 1997;
(c)
Seventy-five percent of the amount required by subsection (1) of this section
by December 31, ((1992)) 1998; and
(d)
One hundred percent of the amount required by subsection (1) of this section by
December 31, ((1993)) 1999.
(3)(a)
In determining net worth, no debt shall be considered fully subordinated unless
the subordination clause is in a form acceptable to the commissioner. An
interest obligation relating to the repayment of a subordinated debt must be
similarly subordinated.
(b)
The interest expenses relating to the repayment of a fully subordinated debt
shall not be considered uncovered expenditures.
(c)
A subordinated debt incurred by a note meeting the requirement of this section,
and otherwise acceptable to the commissioner, shall not be considered a
liability and shall be recorded as equity.
(4)
Every health maintenance organization shall, when determining liabilities,
include an amount estimated in the aggregate to provide for any unearned
premium and for the payment of all claims for health care expenditures that
have been incurred, whether reported or unreported, which are unpaid and for
which such organization is or may be liable, and to provide for the expense of
adjustment or settlement of such claims.
Such
liabilities shall be computed in accordance with rules promulgated by the
commissioner upon reasonable consideration of the ascertained experience and
character of the health maintenance organization.
NEW
SECTION. Sec. 7. A
new section is added to chapter 48.46 RCW to read as follows:
(1)
For purposes of this section:
(a)
"Domestic health maintenance organization" means a health maintenance
organization formed under the laws of this state; and
(b)
"Foreign health maintenance organization" means a health maintenance
organization formed under the laws of the United States, of a state or
territory of the United States other than this state, or of the District of
Columbia.
(2)
If the minimum net worth of a domestic health maintenance organization falls
below the minimum net worth required by this chapter, the commissioner shall at
once ascertain the amount of the deficiency and serve notice upon the domestic
health maintenance organization to cure the deficiency within ninety days after
that service of notice.
(3)
If the deficiency is not cured, and proof thereof filed with the commissioner
within the ninety‑day period, the domestic health maintenance
organization shall be declared insolvent and shall be proceeded against as
authorized by this code or the commissioner shall, consistent with chapters
48.04 and 34.05 RCW, suspend or revoke the registration of the domestic health
maintenance organization as being hazardous to its subscribers and the people
in this state.
(4)
If the deficiency is not cured the domestic health maintenance organization
shall not issue or deliver any health maintenance agreement after the
expiration of the ninety‑day period.
(5) If the minimum net worth of a foreign health maintenance
organization falls below the minimum net worth required by this chapter, the
commissioner shall, consistent with chapters 48.04 and 34.05 RCW, suspend or
revoke the foreign health maintenance organization's registration as being
hazardous to its subscribers, enrollees, or the people in this state.
