§ 36-6932. Insolvency - Assessment on other health maintenance organizations - Use of funds - Claims - Subrogation rights of Insurance Commissioner - Distribution of unspent assessed funds - Maximum coverage of uncovered expenditures - Penalty for failure to pay assessment - Offset against tax liability.

A.  When a health maintenance organization in this state is declared insolvent by a court of competent jurisdiction, the Insurance Commissioner shall, after exhausting all other insolvency measures as provided in the Health Maintenance Organization Act of 2003, levy an assessment on other health maintenance organizations doing business in this state to pay claims for uncovered expenditures for enrollees who are residents of this state and to provide continuation of coverage for subscribers or enrollees not covered under the provisions of Section 15 of this act.  The Insurance Commissioner may not assess in any one calendar year more than two percent (2%) of the aggregate premium written by each health maintenance organization in this state the prior calendar year.  The Insurance Commissioner may waive an assessment of a health maintenance organization if the HMO is or would be impaired or placed in a financially hazardous condition.

B.  The Insurance Commissioner may use funds obtained under the provisions of subsection A of this section to:

1.  Pay claims for uncovered expenditures for subscribers or enrollees of an insolvent health maintenance organization who are residents of this state;

2.  Provide for continuation of coverage for subscribers or enrollees who are residents of this state and are not covered under the provisions of Section 15 of this act; and

3.  Pay administrative costs.

C.  The Insurance Commissioner may by rule prescribe the time, manner and form for filing claims under this section or may require claims to be allowed by an ancillary receiver or the domestic liquidator or receiver.

D.  1.  A receiver or liquidator of an insolvent health maintenance organization shall allow a claim in the proceeding in an amount equal to administrative and uncovered expenditures paid under this section.

2.  Any person receiving benefits under this section for uncovered expenditures is deemed to have assigned the rights under the covered health care plan certificates to the Insurance Commissioner to the extent of the benefits received.  The Insurance Commissioner may require an assignment to the Insurance Commissioner of such rights by any payee, enrollee, or beneficiary as a condition precedent to the receipt of any rights or benefits conferred by this section upon that person.  The Insurance Commissioner is subrogated to these rights against the assets of an insolvent health maintenance organization held by a receiver or liquidator of another jurisdiction.

3.  The assignment of subrogation rights of the Insurance Commissioner and allowed claims under this subsection have the same priority against the assets of the insolvent health maintenance organization as those possessed by the person entitled to receive benefits under this section or for similar expenses in the receivership or liquidation.

E.  When assessed funds are unused following the completion of the liquidation of a health maintenance organization, the Insurance Commissioner shall distribute on a pro rata basis any amounts received under subsection A of this section that are not de minimis to the health maintenance organizations that have been assessed under this section.

F.  The aggregate coverage of uncovered expenditures under this section shall not exceed Three Hundred Thousand Dollars ($300,000.00) for one individual.  Continuation of coverage shall not continue for more than the lesser of one (1) year after the health maintenance organization coverage is terminated by insolvency, or the remaining term of the contract.  The Insurance Commissioner may provide continuation of coverage on any reasonable basis including, but not limited to, continuation of the health maintenance organization contract or substitution of indemnity coverage in a form determined by the Insurance Commissioner.

G.  A health maintenance organization that fails to pay an assessment within thirty (30) days after notice shall be subject to a civil forfeiture of not more than One Thousand Dollars ($1,000.00) per day and suspension or revocation of its certificate of authority.  An action taken by the Insurance Commissioner in enforcing the provisions of this section may be appealed by the health maintenance organization in accordance with the Administrative Procedures Act.

H.  The Insurance Commissioner shall issue to each HMO paying an assessment under this act a certificate of contribution in a form prescribed by the Insurance Commissioner for the amount of the assessment so paid.  All outstanding certificates shall be of equal priority without reference to amounts or dates of issue.  A certificate of contribution may be shown by the HMO in its financial statement as an asset in such form and for such amount, if any, and period of time as the Insurance Commissioner may approve.

I.  An HMO may offset against its premium, franchise or income tax liability to this state, an assessment described in subsection A of this section, excluding administrative costs pursuant to the provisions of paragraph 3 of subsection B of this section, to the extent of twenty percent (20%) of the amount of such assessment for each of the five (5) calendar years following the year in which such assessment was paid.  In the event an HMO ceases doing business, all uncredited assessments may be credited against its premium, franchise or income tax liability for the year it ceases doing business.

J.  Any unused funds distributed by the Insurance Commissioner pursuant to the provisions of subsection E of this section, that have previously been written off by contributing insurers and offset against premium, franchise or income taxes as provided in subsection I of this section, and are not then needed for purposes of this act, shall be dispensed by the Commissioner in accordance with the statutes regarding disbursement of such taxes.

Added by Laws 2003, c. 197, § 32, eff. Nov. 1, 2003.